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Loans
 6 Months Ended
Jun. 30, 2017
Loans and Leases Receivable Disclosure [Abstract]  
Loans

Note 5: Loans

 

Major classifications of loans at the indicated dates are as follows:

 

  June 30,  December 31, 
(In thousands) 2017  2016 
Real estate loans:        
Secured by one-to-four family residences $196,680  $188,573 
Secured by multi-family residences  6,217   5,103 
Construction  9,807   6,134 
Commercial real estate  10,608   8,440 
Home equity lines of credit  17,244   16,797 
Total real estate loans  240,556   225,047 
Commercial and industrial loans  2,518   1,947 
Other loans  73   75 
Total loans  243,147   227,069 
Net deferred loan origination costs  25   113 
Less allowance for loan losses  (1,102)  (990)
Loans receivable, net $242,070  $226,192 

 

The Company originates residential mortgage, commercial, and consumer loans largely to customers throughout Monroe county and the surrounding western New York counties of Erie, Livingston, Ontario, Orleans, Jefferson and Wayne. Although the Company has a diversified loan portfolio, a substantial portion of its borrowers’ abilities to honor their loan contracts is dependent upon the counties’ employment and economic conditions.

 

As of June 30, 2017 and December 31, 2016, residential mortgage loans with a carrying value of $179.8 million and $165.5 million, respectively, have been pledged by the Company to the Federal Home Loan Bank of New York (“FHLBNY”) under a blanket collateral agreement to secure the Company’s line of credit and term borrowings. The Company retains the servicing on most fixed-rate mortgage loans sold and receives a fee based on the principal balance outstanding. Loans serviced for others totaled $128.1 million and $118.6 million at June 30, 2017 and December 31, 2016, respectively. Loan servicing rights are recorded at fair value when loans are sold with servicing rights retained. The fair value of the mortgage servicing rights (“MSRs”) is determined using a method which utilizes servicing income, discount rates, and prepayment speeds relative to the Bank’s portfolio for MSRs and are amortized over the life of the loan. MSRs amounted to $891,000 and $804,000 at June 30, 2017 and December 31, 2016, respectively, and are included in other assets on the consolidated balance sheets.

 

Loan Origination / Risk Management

 

The Company’s lending policies and procedures are presented in Note 3 to the consolidated financial statements included in FSB Bancorp’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2017 and have not changed.

 

To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into two portfolio segments, each with different risk characteristics but with similar methodologies for assessing risk.  Each portfolio segment is broken down into loan classes where appropriate.  Loan classes contain unique measurement attributes, risk characteristics, and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses. Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class.

 

The following table illustrates the portfolio segments and classes for the Company’s loan portfolio:

 

Portfolio SegmentClass
  
Real Estate LoansSecured by one-to-four family residences
 Secured by multi-family residences
 

Construction

Commercial real estate

Home equity lines of credit

  
Other LoansCommercial and industrial
 Other loans
  

 

The following tables present the classes of the loan portfolio, not including net deferred loan fees, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated:

 

  As of June 30, 2017 
     Special          
(In thousands) Pass  Mention  Substandard  Doubtful  Total 
Real estate loans:                    
Secured by one-to-four family residences $194,685  $-  $1,995  $-  $196,680 
Secured by multi-family residences  6,217   -   -   -   6,217 
Construction  9,807   -   -   -   9,807 
Commercial real estate  10,608   -   -   -   10,608 
Home equity lines of credit  17,002   -   242   -   17,244 
Total real estate loans  238,319   -   2,237   -   240,556 
Commercial & industrial loans  2,450   -   68   -   2,518 
Other loans  73   -   -   -   73 
Total loans $240,842  $-  $2,305  $-  $243,147 

 

  As of December 31, 2016 
     Special          
(In thousands) Pass  Mention  Substandard  Doubtful  Total 
Real estate loans:                    
Secured by one-to-four family residences $187,079  $-  $1,494  $-  $188,573 
Secured by multi-family residences  5,103   -   -   -   5,103 
Construction  6,134   -   -   -   6,134 
Commercial real estate  8,440   -   -   -   8,440 
Home equity lines of credit  16,498   -   299   -   16,797 
Total real estate loans  223,254   -   1,793   -   225,047 
Commercial & industrial loans  1,900   -   47   -   1,947 
Other loans  75   -   -   -   75 
Total loans $225,229  $-  $1,840  $-  $227,069 

 

Management has reviewed its loan portfolio and determined that, to the best of its knowledge, no exposure exists to sub-prime or other high-risk residential mortgages. The Company is not in the practice of originating these types of loans.

 

Nonaccrual and Past Due Loans

 

Loans are placed on nonaccrual when the contractual payment of principal and interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan may be currently performing.

 

Loans are considered past due if the required principal and interest payments have not been received within thirty days of the payment due date. An age analysis of past due loans, segregated by portfolio segment and class of loans, as of June 30, 2017 and December 31, 2016, are detailed in the following tables:

 

  As of June 30, 2017 
  30-59 Days  60-89 Days             
  Past Due  Past Due  90 Days  Total     Total Loans 
(In thousands) And Accruing  And Accruing  and Over  Past Due  Current  Receivable 
Real estate loans:                        
Secured by one-to-four family residences $405  $40  $37  $482  $196,198  $196,680 
Secured by multi-family residences  -   -   -   -   6,217   6,217 
Construction  -   -   -   -   9,807   9,807 
Commercial  -   -   -   -   10,608   10,608 
Home equity lines of credit  213   -   -   213   17,031   17,244 
Total real estate loans  618   40   37   695   239,861   240,556 
Commercial & industrial loans  -   68   -   68   2,450   2,518 
Other loans  -   -   -   -   73   73 
Total loans $618  $108  $37  $763  $242,384  $243,147 

 

  As of December 31, 2016 
  30-59 Days  60-89 Days             
  Past Due  Past Due  90 Days  Total     Total Loans 
(In thousands) And Accruing  And Accruing  and Over  Past Due  Current  Receivable 
Real estate loans:                        
Secured by one-to-four family residences $89  $-  $-  $89  $188,484  $188,573 
Secured by multi-family residences  -   -   -   -   5,103   5,103 
Construction  -   -   -   -   6,134   6,134 
Commercial  -   -   -   -   8,440   8,440 
Home equity lines of credit  -   -   -   -   16,797   16,797 
Total real estate loans  89   -   -   89   224,958   225,047 
Commercial & industrial loans  47   -   -   47   1,900   1,947 
Other loans  -   -   -   -   75   75 
Total loans $136  $-  $-  $136  $226,933  $227,069 

 

At June 30, 2017, the Company had one nonaccrual residential mortgage loan for $37,000. At December 31, 2016, the Company had no nonaccrual loans.

 

There were no loans that were past due 90 days or more and still accruing interest at June 30, 2017 or December 31, 2016. At June 30, 2017 and December 31, 2016, there were no loans considered to be impaired and no troubled debt restructurings.