Financing Receivables [Text Block] | 4. Loans, Allowance for Loan Losses and Credit Quality Loans are carried at the principal amounts outstanding, or amortized acquired fair value in the case of acquired loans, adjusted by partial charge-offs and net of deferred loan costs or fees. Loan fees and certain direct origination costs are deferred and amortized into interest income over the expected term of the loan using the level-yield method. When a loan is paid off in full, the unamortized portion is recognized in interest income. Interest income is accrued based upon the daily principal amount outstanding, except for loans on nonaccrual status. Loans purchased by the Company are accounted for under ASC 310 30, Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality 310 30" not 310 30 may Loans are generally placed on nonaccrual status when they are past due 90 310 30 not In cases where a borrower experiences financial difficulties and the Company makes certain concessionary modifications to contractual terms, the loan is classified as a troubled debt restructuring ("TDR"), and therefore by definition is an impaired loan. Concessionary modifications may 310 30, 310 30 not six not The composition of the Company’s loan portfolio is as follows on the dates indicated. September 30, 2018 June 30, 2018 Originated Purchased Total Originated Purchased Total (Dollars in thousands) Residential real estate $ 69,776 $ 14,398 $ 84,174 $ 75,873 $ 13,926 $ 89,799 Home equity 9,134 - 9,134 10,457 - 10,457 Commercial real estate 314,394 285,230 599,624 303,399 276,051 579,450 Commercial and industrial 190,366 920 191,286 187,857 995 188,852 Consumer 2,978 - 2,978 3,244 - 3,244 Total loans $ 586,648 $ 300,548 $ 887,196 $ 580,830 $ 290,972 $ 871,802 Total loans include deferred loan origination costs, net, of $339 $223 September 30, 2018 June 30, 2018, Past Due and Nonaccrual Loans The following is a summary of past due and nonaccrual loans: September 30, 2018 Past Due Past Due Past Due Past Due 90 Days or 90 Days or 30-59 60-89 More-Still More- Total Past Total Total Nonaccrual Days Days Accruing Nonaccrual Due Current Loans Loans (Dollars in thousands) Originated portfolio: Residential real estate $ 351 $ 220 $ - $ 1,536 $ 2,107 $ 67,669 $ 69,776 $ 2,633 Home equity - - - 10 10 9,124 9,134 152 Commercial real estate 854 - - 1,244 2,098 312,296 314,394 1,703 Commercial and industrial 100 - - 807 907 189,459 190,366 1,453 Consumer 53 - - 100 153 2,825 2,978 185 Total originated portfolio 1,358 220 - 3,697 5,275 581,373 586,648 6,126 Purchased portfolio: Residential real estate 421 - - 202 623 13,775 14,398 202 Commercial real estate 1,074 16 - 2,395 3,485 281,745 285,230 4,815 Commercial and industrial 149 5 - 104 258 662 920 358 Total purchased portfolio 1,644 21 - 2,701 4,366 296,182 300,548 5,375 Total loans $ 3,002 $ 241 $ - $ 6,398 $ 9,641 $ 877,555 $ 887,196 $ 11,501 June 30, 2018 Past Due Past Due Past Due Past Due 90 Days or 90 Days or 30-59 60-89 More-Still More- Total Past Total Total Nonaccrual Days Days Accruing Nonaccrual Due Current Loans Loans (Dollars in thousands) Originated portfolio: Residential real estate $ 404 $ 181 $ - $ 1,201 $ 1,786 $ 74,087 $ 75,873 $ 2,914 Home equity 89 - - 154 243 10,214 10,457 298 Commercial real estate 27 210 - 169 406 302,993 303,399 1,499 Commercial and industrial - - - 792 792 187,065 187,857 1,368 Consumer 77 82 - 19 178 3,066 3,244 134 Total originated portfolio 597 473 - 2,335 3,405 577,425 580,830 6,213 Purchased portfolio: Residential real estate - - - 202 202 13,724 13,926 202 Commercial real estate 659 274 - 3,086 4,019 272,032 276,051 5,180 Commercial and industrial 17 - - 91 108 887 995 363 Total purchased portfolio 676 274 - 3,379 4,329 286,643 290,972 5,745 Total loans $ 1,273 $ 747 $ - $ 5,714 $ 7,734 $ 864,068 $ 871,802 $ 11,958 Allowance for Loan Losses and Impaired Loans The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. For residential and consumer loans, a charge-off is recorded no 180 The allowance for loan losses consists of general, specific, and unallocated reserves and reflects management’s estimate of probable loan losses inherent in the loan portfolio at the balance sheet date. Management uses a consistent and systematic process and methodology to evaluate the appropriateness of the allowance for loan losses on a quarterly basis. The calculation of the allowance for loan losses is segregated by portfolio segments, which include: residential real estate, commercial real estate, commercial and industrial, consumer, purchased loans, and SBA loans. Risk characteristics relevant to each portfolio segment are as follows: Residential real estate: All loans in this segment are collateralized by residential real estate and repayment is primarily dependent on the credit quality, loan-to-value ratio and income of the individual borrower. The overall health of the economy, particularly unemployment rates and housing prices, has a significant effect on the credit quality in this segment. For purposes of the Company’s allowance for loan loss calculation, home equity loans and lines of credit are included in residential real estate. Commercial real estate: Loans in this segment are primarily income-producing properties. For owner-occupied properties, the cash flows are derived from an operating business, and the underlying cash flows may may Commercial and industrial: Loans in this segment are made to businesses and are generally secured by the assets of the business. Repayment is expected from the cash flows of the business. This segment also includes loans to non-bank lenders, which are generally secured by a collateral assignment of the notes and mortgages on loans originated by the non-bank lenders. Weakness in national or regional economic conditions, and a corresponding weakness in consumer or business spending, will have an adverse effect on the credit quality of this segment. Consumer: Loans in this segment are generally secured, and repayment is dependent on the credit quality of the individual borrower. Repayment of consumer loans is generally based on the earnings of individual borrowers, which may Purchased: Loans in this segment are typically secured by commercial real estate, multi-family residential real estate, or business assets and have been acquired by the Bank’s Loan Acquisition and Servicing Group (“LASG”). Loans acquired by the LASG are, with limited exceptions, performing loans at the date of purchase. Repayment of loans in this segment is largely dependent on cash flow from the successful operation of the property, in the case of non-owner occupied property, or operating business, in the case of owner-occupied property. Loan performance may 310 30. SBA: Loans in this segment are comprised of both commercial real estate and commercial and industrial loans to small businesses, underwritten and originated by the Bank’s national SBA group (“SBA Division”). Loans are underwritten and originated primarily in accordance with SBA 7 The general component of the allowance for loan losses for originated loans is based on historical loss experience adjusted for qualitative factors stratified by loan segment. The Company does not ● Levels and trends in delinquencies; ● Trends in the volume and nature of loans; ● Trends in credit terms and policies, including underwriting standards, procedures and practices, and the experience and ability of lending management and staff; ● Trends in portfolio concentration; ● National and local economic trends and conditions; ● Effects of changes or trends in internal risk ratings; and ● Other effects resulting from trends in the valuation of underlying collateral. The allocated component of the allowance for loan losses relates to loans that are classified as impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows or collateral value of the impaired loan is lower than the carrying value of the loan. For all portfolio segments, except loans accounted for under ASC 310 30, not 310 30 The following table sets forth activity in the Company’s allowance for loan losses. Three Months Ended September 30, 2018 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased SBA Total (Dollars in thousands) Beginning balance $ 605 $ 1,527 $ 620 $ 39 $ 587 $ 1,429 $ 4,807 Provision (credit) 99 93 164 (12 ) 10 178 532 Recoveries 2 7 7 18 - - 34 Charge-offs (81 ) - (2 ) (2 ) - - (85 ) Ending balance $ 625 $ 1,627 $ 789 $ 43 $ 597 $ 1,607 $ 5,288 Three Months Ended September 30, 2017 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased SBA Total (Dollars in thousands) Beginning balance $ 472 $ 1,219 $ 394 $ 53 $ 303 $ 1,224 $ 3,665 Provision (credit) 41 29 184 (14 ) 7 107 354 Recoveries 7 - 18 6 - - 31 Charge-offs (12 ) - - (4 ) - - (16 ) Ending balance $ 508 $ 1,248 $ 596 $ 41 $ 310 $ 1,331 $ 4,034 The following table sets forth information regarding the allowance for loan losses by portfolio segment and impairment methodology. September 30, 2018 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased SBA Total (Dollars in thousands) Allowance for loan losses: Individually evaluated $ 337 $ 128 $ 3 $ 22 $ - $ 342 $ 832 Collectively evaluated 288 1,499 786 21 - 1,265 3,859 ASC 310-30 - - - - 597 - 597 Total $ 625 $ 1,627 $ 789 $ 43 $ 597 $ 1,607 $ 5,288 Loans: Individually evaluated $ 5,137 $ 2,541 $ 47 $ 340 $ - $ 3,585 $ 11,650 Collectively evaluated 73,773 250,588 184,372 2,638 - 63,627 574,998 ASC 310-30 - - - - 300,548 - 300,548 Total $ 78,910 $ 253,129 $ 184,419 $ 2,978 $ 300,548 $ 67,212 $ 887,196 June 30, 2018 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased SBA Total (Dollars in thousands) Allowance for loan losses: Individually evaluated $ 322 $ 139 $ 8 $ 6 $ - $ 112 $ 587 Collectively evaluated 283 1,388 612 33 - 1,317 3,633 ASC 310-30 - - - - 587 - 587 Total $ 605 $ 1,527 $ 620 $ 39 $ 587 $ 1,429 $ 4,807 Loans: Individually evaluated $ 5,682 $ 2,687 $ 33 $ 292 $ - $ 3,170 $ 11,864 Collectively evaluated 80,520 246,742 181,767 2,952 - 56,985 568,966 ASC 310-30 - - - - 290,972 - 290,972 Total $ 86,202 $ 249,429 $ 181,800 $ 3,244 $ 290,972 $ 60,155 $ 871,802 The following table sets forth information regarding impaired loans. Loans accounted for under ASC 310 30 not September 30, 2018 June 30, 2018 Unpaid Unpaid Recorded Principal Related Recorded Principal Related Investment Balance Allowance Investment Balance Allowance (Dollars in thousands) Impaired loans without a valuation allowance: Originated: Residential real estate $ 3,031 $ 3,024 $ - $ 3,162 $ 3,154 $ - Commercial real estate 1,458 1,453 - 1,641 1,634 - Commercial and industrial 1,659 1,659 - 2,401 2,401 - Consumer 279 302 - 271 296 - Purchased: Residential real estate 202 217 - 202 217 - Commercial real estate 6,381 9,064 - 6,601 9,330 - Commercial and industrial 95 173 - 108 186 - Total 13,105 15,892 - 14,386 17,218 - Impaired loans with a valuation allowance: Originated: Residential real estate 2,106 2,086 337 2,520 2,497 322 Commercial real estate 1,621 1,612 191 1,241 1,233 139 Commercial and industrial 1,435 1,434 282 607 607 120 Consumer 61 62 22 21 22 6 Purchased: Residential real estate - - - - - - Commercial real estate 4,401 4,950 298 4,748 5,362 280 Commercial and industrial 357 415 299 349 407 307 Total 9,981 10,559 1,429 9,486 10,128 1,174 Total impaired loans $ 23,086 $ 26,451 $ 1,429 $ 23,872 $ 27,346 $ 1,174 The following tables set forth information regarding interest income recognized on impaired loans. Three Months Ended September 30, 2018 2017 Average Interest Average Interest Recorded Income Recorded Income Investment Recognized Investment Recognized (Dollars in thousands) Impaired loans without a valuation allowance: Originated: Residential real estate $ 3,097 $ 19 $ 4,095 $ 36 Commercial real estate 1,550 10 1,393 93 Commercial and industrial 2,030 33 1,850 37 Consumer 275 2 272 6 Purchased: Residential real estate 202 - 1,067 - Commercial real estate 6,491 59 8,868 80 Commercial and industrial 102 - 30 - Total 13,747 123 17,575 252 Impaired loans with a valuation allowance: Originated: Residential real estate 2,313 23 1,614 21 Commercial real estate 1,431 27 1,396 22 Commercial and industrial 1,021 1 845 4 Consumer 41 - 35 1 Purchased: Residential real estate - - - - Commercial real estate 4,575 31 3,534 27 Commercial and industrial 353 - 94 - Total 9,734 82 7,518 75 Total impaired loans $ 23,481 $ 205 $ 25,093 $ 327 Credit Quality The Company utilizes a ten Loans rated 1 6: 1 5 6 Loans rated 7: Loans rated 8: Loans rated 9: one 8 Loans rated 10: not On an annual basis, or more often if needed, the Company formally reviews the ratings of all loans subject to risk ratings. Annually, the Company engages an independent third may The following tables present the Company’s loans by risk rating. September 30, 2018 Originated Portfolio Commercial Commercial Purchased Real Estate and Industrial Residential (1) Portfolio Total (Dollars in thousands) Loans rated 1- 6 $ 307,933 $ 186,460 $ 14,543 $ 289,445 $ 798,381 Loans rated 7 4,620 2,212 96 5,505 12,433 Loans rated 8 1,841 1,694 815 5,598 9,948 Loans rated 9 - - - - - Loans rated 10 - - - - - Total $ 314,394 $ 190,366 $ 15,454 $ 300,548 $ 820,762 June 30, 2018 Originated Portfolio Commercial Commercial Purchased Real Estate and Industrial Residential (1) Portfolio Total (Dollars in thousands) Loans rated 1- 6 $ 298,200 $ 184,024 $ 13,531 $ 279,111 $ 774,866 Loans rated 7 3,505 2,198 100 5,899 11,702 Loans rated 8 1,694 1,635 823 5,962 10,114 Loans rated 9 - - - - - Loans rated 10 - - - - - Total $ 303,399 $ 187,857 $ 14,454 $ 290,972 $ 796,682 ( 1 T roubled Debt Restructurings The following table shows the Company’s post-modification balance of TDRs by type of modification. Three Months Ended September 30, 2018 2017 Number of Recorded Number of Recorded Contracts Investment Contracts Investment (Dollars in thousands) Extended maturity - $ - 1 $ 18 Adjusted interest rate - - - - Rate and maturity 3 170 - - Principal deferment - - 1 655 Court ordered concession - - - - Total 3 $ 170 2 $ 673 The following table shows loans modified in a TDR and the change in the recorded investment subsequent to the modifications occurring. Three Months Ended September 30, 2018 2017 Recorded Recorded Recorded Recorded Number of Investment Investment Number of Investment Investment Contracts Pre-Modification Post-Modification Contracts Pre-Modification Post-Modification (Dollars in thousands) Originated portfolio: Residential real estate 3 $ 170 $ 170 1 $ 18 $ 18 Home equity - - - - - - Commercial real estate - - - - - - Commercial and industrial - - - 1 655 655 Consumer - - - - - - Total originated portfolio 3 170 170 2 673 673 Purchased portfolio: Residential real estate - - - - - - Commercial real estate - - - - - - Total purchased portfolio - - - - - - Total 3 $ 170 $ 170 2 $ 673 $ 673 The Company considers TDRs past due 90 twelve $1.5 three September 30, 2018. September 30, 2018, no ASC 310 30 The following tables present a summary of loans accounted for under ASC 310 30 Three Months Ended September 30, 2018 Three Months Ended September 30, 2017 (Dollars in thousands) Contractually required payments receivable $ 61,540 $ 5,912 Nonaccretable difference (174 ) (157 ) Cash flows expected to be collected 61,366 5,755 Accretable yield (26,563 ) (2,104 ) Fair value of loans acquired $ 34,803 $ 3,651 Certain loans accounted for under ASC 310 30 not As of and for the Three Months Ended September 30, 2018 As of and for the Three Months Ended September 30, 2017 (Dollars in thousands) Loans acquired during the period $ - $ - Loans at end of period 4,915 6,032 The following tables summarize the activity in the accretable yield for loans accounted for under ASC 310 30. Three Months Ended September 30, 2018 Three Months Ended September 30, 2017 (Dollars in thousands) Beginning balance $ 138,178 $ 131,197 Acquisitions 26,563 2,104 Accretion (5,533 ) (4,425 ) Reclassifications from non-accretable difference to accretable yield 578 3,428 Disposals and other changes (6,992 ) (9,381 ) Ending balance $ 152,794 $ 122,923 The following table provides information related to the unpaid principal balance and carrying amounts of ASC 310 30 September 30, 2018 June 30, 2018 (Dollars in thousands) Unpaid principal balance $ 329,242 $ 318,876 Carrying amount 294,106 284,317 |