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: March 31, 2019 June 30, 2018 Originated Purchased Total Originated Purchased Total (Dollars in thousands) Commercial real estate $ 278,750 $ 304,843 $ 583,593 $ 249,428 $ 276,051 $ 525,479 Commercial and industrial 224,332 757 225,089 181,800 995 182,795 SBA 63,653 - 63,653 60,156 - 60,156 Residential real estate 72,026 14,726 86,752 86,202 13,926 100,128 Consumer 2,566 - 2,566 3,244 - 3,244 Total loans $ 641,327 $ 320,326 $ 961,653 $ 580,830 $ 290,972 $ 871,802 Total loans include deferred loan origination costs, net, of $79 $223 March 31, 2019 June 30, 2018, Past Due and Nonaccrual Loans The following is a summary of past due and nonaccrual loans: March 31, 2019 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: Commercial real estate $ 368 $ 136 $ - $ 2,522 $ 3,026 $ 275,724 $ 278,750 $ 2,643 Commercial and industrial 247 - - 16 263 224,069 224,332 16 SBA 2,128 354 - 1,614 4,096 59,557 63,653 2,172 Residential real estate 1,504 1,143 - 1,138 3,785 68,241 72,026 2,317 Consumer 26 38 - 158 222 2,344 2,566 236 Total originated portfolio 4,273 1,671 - 5,448 11,392 629,935 641,327 7,384 Purchased portfolio: Commercial real estate 5,651 648 - 2,291 8,590 296,253 304,843 4,795 Commercial and industrial - - - 138 138 619 757 369 Residential real estate 430 - - 202 632 14,094 14,726 202 Total purchased portfolio 6,081 648 - 2,631 9,360 310,966 320,326 5,366 Total loans $ 10,354 $ 2,319 $ - $ 8,079 $ 20,752 $ 940,901 $ 961,653 $ 12,750 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: Commercial real estate $ 27 $ 210 $ - $ 98 $ 335 $ 249,093 $ 249,428 $ 1,428 Commercial and industrial - - - 32 32 181,768 181,800 34 SBA - - - 831 831 59,325 60,156 1,405 Residential real estate 493 181 - 1,355 2,029 84,173 86,202 3,212 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: Commercial real estate 659 274 - 3,086 4,019 272,032 276,051 5,180 Commercial and industrial 17 - - 91 108 887 995 363 Residential real estate - - - 202 202 13,724 13,926 202 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: 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. 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 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. 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 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 March 31, 2019 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased SBA Total (Dollars in thousands) Beginning balance $ 585 $ 1,551 $ 874 $ 16 $ 599 $ 1,683 $ 5,308 Provision (credit) (38 ) 287 (166 ) 18 38 275 414 Recoveries 12 - 2 3 - - 17 Charge-offs (68 ) - 0 (13 ) - - (81 ) Ending balance $ 491 $ 1,838 $ 710 $ 24 $ 637 $ 1,958 $ 5,658 Three Months Ended March 31, 2018 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased SBA Total (Dollars in thousands) Beginning balance $ 573 $ 1,312 $ 561 $ 50 $ 520 $ 1,339 $ 4,355 Provision (credit) 33 156 (154 ) (1 ) 169 161 364 Recoveries 2 - 2 3 - - 7 Charge-offs (28 ) - - (7 ) - - (35 ) Ending balance $ 580 $ 1,468 $ 409 $ 45 $ 689 $ 1,500 $ 4,691 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased SBA Total (Dollars in thousands) Beginning balance $ 605 $ 1,414 $ 620 $ 39 $ 587 $ 1,542 $ 4,807 Provision (credit) 101 417 81 (18 ) 50 416 1,047 Recoveries 15 7 11 24 - - 57 Charge-offs (230 ) - (2 ) (21 ) - - (253 ) Ending balance $ 491 $ 1,838 $ 710 $ 24 $ 637 $ 1,958 $ 5,658 Nine Months Ended March 31, 2018 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) 251 249 (10 ) 4 386 276 1,156 Recoveries 10 - 25 34 - - 69 Charge-offs (153 ) - - (46 ) - - (199 ) Ending balance $ 580 $ 1,468 $ 409 $ 45 $ 689 $ 1,500 $ 4,691 The following table sets forth information regarding the allowance for loan losses by portfolio segment and impairment methodology. March 31, 2019 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased SBA Total (Dollars in thousands) Allowance for loan losses: Individually evaluated $ 184 $ 129 $ 4 $ 7 $ - $ 341 $ 665 Collectively evaluated 307 1,709 706 17 - 1,617 4,356 ASC 310-30 - - - - 637 - 637 Total $ 491 $ 1,838 $ 710 $ 24 $ 637 $ 1,958 $ 5,658 Loans: Individually evaluated $ 4,546 $ 3,765 $ 6,916 $ 286 $ - $ 4,019 $ 19,532 Collectively evaluated 67,480 274,985 217,416 2,280 - 59,634 621,795 ASC 310-30 - - - - 320,326 - 320,326 Total $ 72,026 $ 278,750 $ 224,332 $ 2,566 $ 320,326 $ 63,653 $ 961,653 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 1,275 612 33 - 1,430 3,633 ASC 310-30 - - - - 587 - 587 Total $ 605 $ 1,414 $ 620 $ 39 $ 587 $ 1,542 $ 4,807 Loans: Individually evaluated $ 5,682 $ 2,687 $ 33 $ 292 $ - $ 3,170 $ 11,864 Collectively evaluated 80,520 246,741 181,767 2,952 - 56,986 568,966 ASC 310-30 - - - - 290,972 - 290,972 Total $ 86,202 $ 249,428 $ 181,800 $ 3,244 $ 290,972 $ 60,156 $ 871,802 The following table sets forth information regarding impaired loans. Loans accounted for under ASC 310 30 not March 31, 2019 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: Commercial real estate $ 2,707 $ 2,697 $ - $ 1,445 $ 1,438 $ - Commercial and industrial 13 13 - - - - SBA 2,272 2,272 - 2,597 2,597 - Residential real estate 2,688 2,669 - 3,162 3,154 - Consumer 264 288 - 271 296 - Purchased: Commercial real estate 7,949 10,545 - 6,601 9,330 - Commercial and industrial 79 157 - 108 186 - Residential real estate 202 217 - 202 217 - Total 16,174 18,858 - 14,386 17,218 - Impaired loans with a valuation allowance: Originated: Commercial real estate 1,058 1,050 129 1,242 1,234 139 Commercial and industrial 6,903 6,904 4 33 33 8 SBA 1,747 1,747 340 573 573 112 Residential real estate 1,858 1,843 185 2,520 2,497 322 Consumer 22 23 7 21 22 6 Purchased: Commercial real estate 3,411 3,817 245 4,748 5,362 280 Commercial and industrial 383 443 338 349 407 307 Total 15,382 15,827 1,248 9,486 10,128 1,174 Total impaired loans $ 31,556 $ 34,685 $ 1,248 $ 23,872 $ 27,346 $ 1,174 The following tables set forth information regarding interest income recognized on impaired loans. Three Months Ended March 31, 2019 2018 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 $ 2,735 $ 2 $ 3,567 $ 11 Commercial real estate 2,538 (2 ) 2,887 86 Commercial and industrial 13 - - - Consumer 258 (2 ) 270 2 SBA 2,096 11 1,746 1 Purchased: Residential real estate 202 - 54 - Commercial real estate 7,203 83 9,717 21 Commercial and industrial 82 - 22 - Total 15,127 92 18,263 121 Impaired loans with a valuation allowance: Originated: Residential real estate 1,966 10 2,427 60 Commercial real estate 1,062 16 1,369 14 Commercial and industrial 3,466 137 38 - Consumer 20 - 38 - SBA 1,735 (15 ) 759 8 Purchased: Residential real estate - - 166 - Commercial real estate 3,499 51 4,756 84 Commercial and industrial 394 - 359 - Total 12,142 199 9,912 166 Total impaired loans $ 27,269 $ 291 $ 28,175 $ 287 Nine Months Ended March 31, 2019 2018 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 $ 2,833 $ 33 $ 3,830 $ 85 Commercial real estate 2,113 (2 ) 2,140 180 Commercial and industrial 14 - - - Consumer 265 1 271 15 SBA 2,009 100 1,798 40 Purchased: Residential real estate 202 - 561 - Commercial real estate 6,929 210 9,292 203 Commercial and industrial 86 - 26 - Total 14,451 342 17,918 523 Impaired loans with a valuation allowance: Originated: Residential real estate 2,013 64 2,020 123 Commercial real estate 1,134 57 1,382 63 Commercial and industrial 2,320 137 31 3 Consumer 34 - 37 2 SBA 1,739 (8 ) 790 11 Purchased: Residential real estate - - 83 1 Commercial real estate 3,800 106 4,145 149 Commercial and industrial 381 1 227 3 Total 11,421 357 8,715 355 Total impaired loans $ 25,872 $ 699 $ 26,633 $ 878 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. March 31, 2019 Commercial Commercial Purchased Real Estate and Industrial SBA Residential (1) Portfolio Total (Dollars in thousands) Loans rated 1- 6 $ 274,791 $ 217,162 $ 56,188 $ 14,434 $ 311,716 $ 874,291 Loans rated 7 1,237 6,902 5,244 37 2,943 16,363 Loans rated 8 2,722 268 2,221 711 5,667 11,589 Loans rated 9 - - - - - - Loans rated 10 - - - - - - Total $ 278,750 $ 224,332 $ 63,653 $ 15,182 $ 320,326 $ 902,243 June 30, 2018 Commercial Commercial Purchased Real Estate and Industrial SBA Residential (1) Portfolio Total (Dollars in thousands) Loans rated 1- 6 $ 246,107 $ 181,515 $ 54,730 $ 13,403 $ 279,111 $ 774,866 Loans rated 7 1,821 - 3,882 100 5,899 11,702 Loans rated 8 1,500 285 1,544 823 5,962 10,114 Loans rated 9 - - - - - - Loans rated 10 - - - - - - Total $ 249,428 $ 181,800 $ 60,156 $ 14,326 $ 290,972 $ 796,682 ( 1 Certain of the Company’s loans made for commercial purposes, but secured by residential collateral, are rated under the Company’s risk-rating system. Troubled Debt Restructurings The following table shows the Company’s post-modification balance of TDRs by type of modification. Three Months Ended March 31, Nine Months Ended March 31, 2019 2018 2019 2018 Number of Recorded Number of Recorded Number of Recorded Number of Recorded Contracts Investment Contracts Investment Contracts Investment Contracts Investment (Dollars in thousands) Extended maturity 2 $ 174 1 $ 16 4 $ 194 2 $ 34 Adjusted interest rate - - - - - - 1 15 Rate and maturity - - - - 4 170 3 2,263 Principal deferment - - 4 2,418 - - 7 3,356 Court ordered concession - - 1 94 - - 1 94 2 $ 174 6 $ 2,528 8 $ 364 14 $ 5,762 The following table shows loans modified in a TDR and the change in the recorded investment subsequent to the modifications occurring. Three Months Ended March 31, 2019 2018 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 - $ - $ - 2 $ 577 $ 577 Commercial real estate 2 174 174 3 1,224 1,230 Commercial and industrial - - - - - - Consumer - - - - - - Total originated portfolio 2 174 174 5 1,801 1,807 Purchased portfolio: Residential real estate - - - - - - Commercial real estate - - - 1 696 721 Commercial and industrial - - - - - - Total purchased portfolio - - - 1 696 721 Total 2 $ 174 $ 174 6 $ 2,497 $ 2,528 Nine Months Ended March 31, 2019 2018 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 5 $ 624 $ 625 Commercial real estate 2 174 174 5 3,303 3,370 Commercial and industrial - - - 1 655 655 Consumer - - - - - - Total originated portfolio 5 344 344 11 4,582 4,650 Purchased portfolio: Residential real estate - - - - - - Commercial real estate - - - 2 820 844 Commercial and industrial 3 20 20 1 268 268 Total purchased portfolio 3 20 20 3 1,088 1,112 Total 8 $ 364 $ 364 14 $ 5,670 $ 5,762 The Company considers TDRs past due 90 Two twelve $ 1.5 three nine March 31, 2019. March 31, 2019, no ASC 310 30 The following tables present a summary of loans accounted for under ASC 310 30 Three Months Ended March 31, 2019 Three Months Ended March 31, 2018 (Dollars in thousands) Contractually required payments receivable $ 5,491 $ 51,602 Nonaccretable difference (25 ) (841 ) Cash flows expected to be collected 5,466 50,761 Accretable yield (862 ) (17,740 ) Fair value of loans acquired $ 4,604 $ 33,021 Nine Months Ended March 31, 2019 Nine Months Ended March 31, 2018 (Dollars in thousands) Contractually required payments receivable $ 127,059 $ 106,922 Nonaccretable difference (1,074 ) (2,665 ) Cash flows expected to be collected 125,985 104,257 Accretable yield (37,244 ) (32,783 ) Fair value of loans acquired $ 88,741 $ 71,474 Certain loans accounted for under ASC 310 30 not As of and for the Three Months Ended March 31, 2019 As of and for the Nine Months Ended March 31, 2019 (Dollars in thousands) Loans acquired during the period $ - $ - Loans at end of period 4,950 4,950 The following tables summarize the activity in the accretable yield for loans accounted for under ASC 310 30. Three Months Ended March 31, 2019 Three Months Ended March 31, 2018 (Dollars in thousands) Beginning balance $ 152,835 $ 124,903 Acquisitions 862 17,740 Accretion (6,017 ) (4,476 ) Reclassifications from non-accretable difference to accretable yield 256 790 Disposals and other changes (4,848 ) (7,750 ) Ending balance $ 143,088 $ 131,207 Nine Months Ended March 31, 2019 Nine Months Ended March 31, 2018 (Dollars in thousands) Beginning balance $ 138,178 $ 131,197 Acquisitions 37,244 32,783 Accretion (17,198 ) (13,145 ) Reclassifications from non-accretable difference to accretable yield 1,244 5,313 Disposals and other changes (16,380 ) (24,941 ) Ending balance $ 143,088 $ 131,207 The following table provides information related to the unpaid principal balance and carrying amounts of ASC 310 30 March 31, 2019 June 30, 2018 (Dollars in thousands) Unpaid principal balance $ 347,432 $ 318,876 Carrying amount 313,886 284,317 |