Note 3 - Loans

3 Months Ended

Sep. 30, 2016

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 3 – Loans

Major classifications of loans were as follows:

	September 30,			June 30,
	2016			2016
Commercial	$	44,855		$	43,156
Commercial real estate:
Construction		7,170			7,755
Other		153,375			152,766
1 – 4 Family residential real estate:
Owner occupied		32,150			31,091
Non-owner occupied		15,093			14,438
Construction		2,348			1,269
Consumer		5,496			5,803
Subtotal		260,487			256,278
Allowance for loan losses		(3,684	)		(3,566	)
Net Loans	$	256,803		$	252,712

Loans presented above are net of deferred loan fees and costs of $342 and $360 for September 30, 2016 and June 30, 2016, respectively.

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2016:

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate			Consumer			Total

Allowance for loan losses:
Beginning balance	$	505	$	2,518	$	402		$	141		$	3,566
Provision for loan losses		5		125		27			(21	)		136
Loans charged-off		—		—		(21	)		(4	)		(25	)
Recoveries		—		—		3			4			7
Total ending allowance balance	$	510	$	2,643	$	411		$	120		$	3,684

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2015:

						1-4 Family
			Commercial			Residential
			Real			Real
	Commercial		Estate			Estate			Consumer			Total

Allowance for loan losses:
Beginning balance	$	316	$	1,660		$	289		$	167		$	2,432
Provision for loan losses		71		70			(11	)		(38	)		92
Loans charged-off		—		(3	)		—			(18	)		(21	)
Recoveries		—		—			—			11			11
Total ending allowance balance	$	387	$	1,727		$	278		$	122		$	2,514

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2016. Included in the recorded investment in loans is $578 of accrued interest receivable.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	895	$	6	$	—	$	901
Collectively evaluated for impairment		510		1,748		405		120		2,783
Total ending allowance balance	$	510	$	2,643	$	411	$	120	$	3,684

Recorded investment in loans:
Loans individually evaluated for impairment	$	—	$	2,612	$	510	$	—	$	3,122
Loans collectively evaluated for impairment		44,953		158,277		49,206		5,507		257,943
Total ending loans balance	$	44,953	$	160,889	$	49,716	$	5,507	$	261,065

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2016. Included in the recorded investment in loans is $549 of accrued interest receivable net of deferred loans fees and cost of $360.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	868	$	6	$	—	$	874
Collectively evaluated for impairment		505		1,650		396		141		2,692
Total ending allowance balance	$	505	$	2,518	$	402	$	141	$	3,566

Recorded investment in loans:
Loans individually evaluated for impairment	$	1,029	$	5,105	$	758	$	—	$	6,892
Loans collectively evaluated for impairment		42,219		155,734		46,166		5,816		249,935
Total ending loans balance	$	43,248	$	160,839	$	46,924	$	5,816	$	256,827

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of September 30, 2016 and for the three months ended September 30, 2016:

	As of September 30, 2016						Three Months ended September 30, 2016
	Unpaid				Allowance for		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	—	$	—	$	—	$	660	$	80	$	80
Commercial real estate:
Construction		16		16		—		329		6		6
Other		62		62		—		1,555		105		105
1-4 Family residential real estate:
Owner occupied		127		127		—		127		—		—
Non-owner occupied		207		206		—		208		—		—
With an allowance recorded:
Commercial real estate:
Other		2,728		2,534		895		2,449		8		8
1-4 Family residential real estate:
Owner occupied		176		177		6		177		2		2
Total	$	3,316	$	3,122	$	901	$	5,505	$	201	$	201

The following table presents information related to loans individually evaluated for impairment by class of loans as of June 30, 2016 and for the three months ended September 30, 2015:

	As of June 30, 2016						Three Months ended September 30, 2015
	Unpaid				Allowance for		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	1,033	$	1,029	$	—	$	—	$	—	$	—
Commercial real estate:
Construction		386		384		—		12		—		—
Other		2,121		2,106		—		2,059		—		—
1-4 Family residential real estate:
Owner occupied		175		174		—		267		—		—
Non-owner occupied		722		407		—		77		—		—
With an allowance recorded:
Commercial real estate:
Other		2,802		2,615		868		894		9		9
1-4 Family residential real estate:
Owner occupied		177		177		6		122		2		2
Non-owner occupied		—		—		—		458		4		4
Total	$	7,416	$	6,892	$	874	$	3,889	$	15	$	15

The following table presents the recorded investment in non-accrual and loans past due over 90 days still on accrual by class of loans as of September 30, 2016 and June 30, 2016:

	September 30, 2016				June 30, 2016
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	—	$	—	$	1,009	$	—
Commercial real estate:
Construction		16		—		384		—
Other		1,945		—		4,000		—
1 – 4 Family residential:
Owner occupied		187		—		234		—
Non-owner occupied		206		—		407		—
Consumer		—		—		—		—
Total	$	2,354	$	—	$	6,034	$	—

Non-accrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of September 30, 2016 by class of loans:

	Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	—	$	—	$	—	$	—	$	44,953	$	44,953
Commercial real estate:
Construction		—		—		—		—		7,182		7,182
Other		—		—		1,578		1,578		152,129		153,707
1-4 Family residential:
Owner occupied		11		—		187		198		32,035		32,233
Non-owner occupied		—		—		—		—		15,132		15,132
Construction		—		—		—		—		2,351		2,351
Consumer		5		9		—		14		5,493		5,507
Total	$	16	$	9	$	1,765	$	1,790	$	259,275	$	261,065

The above table of past due loans includes the recorded investment in non-accrual loans of $1,765 in the 90 days or greater category and $589 in the loans not past due category.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2016 by class of loans:

	Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	123	$	—	$	—	$	123	$	43,125	$	43,248
Commercial real estate:
Construction		—		—		—		—		7,764		7,764
Other		59		—		2,110		2,169		150,906		153,075
1-4 Family residential:
Owner occupied		15		—		218		233		30,947		31,180
Non-owner occupied		—		—		196		196		14,278		14,474
Construction		—		—		—		—		1,270		1,270
Consumer		7		—		—		7		5,809		5,816
Total	$	204	$	—	$	2,524	$	2,728	$	254,099	$	256,827

The above table of past due loans includes the recorded investment in non-accrual loans of $2,524 in the 90 days or greater category and $3,510 in the loans not past due category.

Troubled Debt Restructurings:

As of September 30, 2016, the recorded investment of loans classified as troubled debt restructurings was $768 with $38 of specific reserves allocated to these loans. As of September 30, 2016, the Corporation had not committed to lend any additional amounts to customers with outstanding loans that are classified as troubled debt restructurings. As of June 30, 2016, the recorded investment of loans classified as troubled debt restructurings was $3,529 with $43 of specific reserves allocated to these loans.

As of June 30, 2016, the Corporation had committed to lend any additional $207 to customers with outstanding loans that were classified as troubled debt restructurings.

During the three months ended September 30, 2016 and 2015 there were no loan modifications completed that were classified as troubled debt restructurings. There were no charge offs from troubled debt restructurings that were completed during the three month periods ended September 30, 2016 and 2015.

There were no loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the three month periods ended September 30, 2016 and 2015. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, current economic trends and other relevant information. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with a total outstanding loan relationship greater than $100 and non-homogeneous loans, such as commercial and commercial real estate loans. Management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt and affirm the risk ratings for the loans and leases in their respective portfolio on an annual basis. The Corporation uses the following definitions for risk ratings:

Special Mention.

Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard.

Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful.

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are either less than $100 or are included in groups of homogeneous loans. These loans are evaluated based on delinquency status, which are disclosed in the previous table within this footnote. Based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans was as follows:

	As of September 30, 2016
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	37,910	$	6,461	$	74	$	—	$	508
Commercial real estate:
Construction		7,118		—		—		16		48
Other		147,315		2,377		1,827		1,945		243
1-4 Family residential real estate:
Owner occupied		3,357		71		346		47		28,412
Non-owner occupied		14,111		182		272		206		361
Construction		760		—		—		—		1,591
Consumer		161		—		5		—		5,341
Total	$	210,732	$	9,091	$	2,524	$	2,214	$	36,504

	As of June 30, 2016
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	35,243	$	6,190	$	1,162	$	—	$	653
Commercial real estate:
Construction		7,305		—		384		—		75
Other		144,101		2,482		4,026		2,150		316
1-4 Family residential real estate:
Owner occupied		3,506		72		349		47		27,206
Non-owner occupied		12,999		406		486		196		387
Construction		235		—		—		—		1,035
Consumer		210		—		6		—		5,600
Total	$	203,599	$	9,150	$	6,413	$	2,393	$	35,272

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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