Note 10 - Credit Quality Of Financing Receivables And Allowance For Credit Losses

3 Months Ended

Sep. 30, 2013

Credit Quality Of Financing Receivables And Allowance For Credit Losses [Abstract]

Credit Quality Of Financing Receivables And Allowance For Credit Losses [Text Block]

NOTE 10 – CREDIT QUALITY OF FINANCING RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

The following tables provide information on the credit profile of the components of the portfolio and allowance for credit losses related to “financing receivables” as defined under ASC Topic 310, Receivables.  This disclosure on “financing receivables” covers the Company’s direct finance and sales-type leases and all commercial loans, but does not include operating leases and transactions in process.   The portfolio is disaggregated into segments and classifications appropriate for assessing and monitoring the portfolios’ risk and performance. This disclosure does not encompass all risk assets or the entire allowance for credit losses.

Portfolio segments identified by the Company include leases and loans.  These segments have been disaggregated into four classes: 1) commercial leases, 2) education, government and non-profit leases, 3) commercial and industrial loans and 4) commercial real estate loans.  Relevant risk characteristics for establishing these portfolio classes generally include the nature of the borrower, structure of the transaction and collateral type. The Company’s credit process includes a policy of classifying all leases and loans in accordance with a risk rating classification system consistent with regulatory models under which leases and loans may be rated as “pass”, “special mention”, “substandard”, or “doubtful”. These risk categories reflect an assessment of the ability of the borrowers to service their obligation based on current financial position, historical payment experience, and collateral adequacy, among other factors.  The Company uses the following definitions for risk ratings:

Pass – Includes credits of the highest quality as well as credits with positive primary repayment source but one or more characteristics that are of higher than average risk.

Special Mention – Have a potential weakness that if left uncorrected may result in deterioration of the repayment prospects for the lease or loan or of the Company’s credit position at some future date.

Substandard – Are inadequately protected by the paying capacity of the obligor or of the collateral, if any. Substandard credits have a well-defined weakness that jeopardize the liquidation of the debt or indicate the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – Based on current information and events, collection of all amounts due according to the contractual terms of the lease or loan agreement is considered highly questionable and improbable.

The risk classification of financing receivables by portfolio class is as follows:

(in thousands)	Commercial  Leases		Education Government Non-profit  Leases		Commercial & Industrial  Loans		Commercial Real Estate  Loans		Total Financing  Receivable
As of September 30, 2013:
Pass	$	252,001	$	78,407	$	60,677	$	3,577	$	394,662
Special Mention		4,281		143		2,189		-		6,613
Substandard		1,499		616		-		5,733		7,848
Doubtful		73		10		-		-		83
	$	257,854	$	79,176	$	62,866	$	9,310	$	409,206
Non-accrual	$	1,591	$	10	$	-	$	-	$	1,601
As of June 30, 2013:
Pass	$	256,360	$	81,730	$	64,366	$	3,616	$	406,072
Special Mention		5,264		200		2,182		-		7,646
Substandard		1,499		615		-		5,788		7,902
Doubtful		73		12		-		-		85
	$	263,196	$	82,557	$	66,548	$	9,404	$	421,705
Non-accrual	$	1,591	$	23	$	-	$	-	$	1,614

The accrual of interest income on leases and loans will be discontinued when the customer becomes ninety days or more past due on its lease or loan payments with the Company, unless the Company believes the investment is otherwise recoverable.  Leases and loans may be placed on non-accrual earlier if the Company has significant doubt about the ability of the customer to meet its lease or loan obligations, as evidenced by consistent delinquency, deterioration in the customer’s financial condition or other relevant factors. Payments received while on non-accrual are applied to reduce the Company’s recorded value.

The following table presents the aging of the financing receivables by portfolio class:

(in thousands)	30-89  Days		Greater Than  90 Days		Total  Past Due		Current		Total Financing  Receivable		Over 90 Days & Accruing
As of September 30, 2013:
Commercial Leases	$	442	$	105	$	547	$	257,307	$	257,854	$	105
Education, Government, Non-profit Leases		-		-		-		79,176		79,176		-
Commercial and Industrial Loans		-		-		-		62,866		62,866		-
Commercial Real Estate Loans		-		-		-		9,310		9,310		-
	$	442	$	105	$	547	$	408,659	$	409,206	$	-
As of June 30, 2013:
Commercial Leases	$	113	$	-	$	113	$	263,083	$	263,196	$	-
Education, Government, Non-profit Leases		-		-		-		82,557		82,557		-
Commercial and Industrial Loans		-		-		-		66,548		66,548		-
Commercial Real Estate Loans		-		-		-		9,404		9,404		-
	$	113	$	-	$	113	$	421,592	$	421,705	$	-

The commercial lease greater than 90 days past due and still accruing related to procedural issues with one lease schedule that was brought current in early October 2013.

The following table presents the allowance balances and activity in the allowance related to financing receivables, along with the recorded investment and allowance determined based on impairment method as of September 30, 2013 and June 30, 2013:

(in thousands)	Commercial  Leases			Education Government Non-profit  Leases			Commercial & Industrial  Loans		Commercial Real Estate  Loans			Total Financing  Receivable
As of September 30, 2013:
Allowance for lease and loan losses
Balance beginning of period	$	2,546		$	618		$	1,561	$	411		$	5,136
Charge-offs		(8	)		-			-		-			(8	)
Recoveries		14			-			-		-			14
Provision		-			-			-		-			-
Balance end of period	$	2,552		$	618		$	1,561	$	411		$	5,142
Individually evaluated for impairment	$	371		$	102		$	-	$	-		$	473
Collectively evaluated for impairment		2,181			516			1,561		411			4,669
Total ending allowance balance	$	2,552		$	618		$	1,561	$	411		$	5,142
Finance receivables
Individually evaluated for impairment	$	2,811		$	626		$	-	$	-		$	3,437
Collectively evaluated for impairment		255,043			78,550			62,866		9,310			405,769
	$	257,854		$	79,176		$	62,866	$	9,310		$	409,206
As of June 30, 2013:
Allowance for lease and loan losses
Balance beginning of period	$	2,236		$	897		$	1,561	$	511		$	5,205
Charge-offs		(71	)		(279	)		-		-			(350	)
Recoveries		6			-			-		-			6
Provision		375			-			-		(100	)		275
Balance end of period	$	2,546		$	618		$	1,561	$	411		$	5,136
Individually evaluated for impairment	$	330		$	111		$	-	$	-		$	441
Collectively evaluated for impairment		2,216			507			1,561		411			4,695
Total ending allowance balance	$	2,546		$	618		$	1,561	$	411		$	5,136
Finance receivables
Individually evaluated for impairment	$	1,926		$	627		$	-	$	-		$	2,553
Collectively evaluated for impairment		261,270			81,930			66,548		9,404			419,152
Total ending finance receivable balance	$	263,196		$	82,557		$	66,548	$	9,404		$	421,705