NOTE 3. LOANS RECEIVABLE

Loans receivable consist of the following:

 

Within the commercial real estate loan category above, $21,477,000 and $21,610,000 was guaranteed by the United States Department of Agriculture Rural Development, at September 30, 2012 and June 30, 2012, respectively.

The following is a summary of changes in the allowance for loan losses:

 

Non-Performing Assets – The following table sets forth information regarding non-performing assets as of the dates indicated.

 

		September 30,				June 30,
		2012				2012
		(Unaudited)				(Audited)
		(Dollars in Thousands)
Non-accrual loans		$	1,491			$	1,814
Accruing loans delinquent 90 days or more			-				-
Restructured loans, net			803				1,404
Total nonperforming loans			2,294				3,218
Real estate owned and other repossessed assets, net			1,937				2,361
Total		$	4,231			$	5,579
Total non-performing assets as a percentage of total assets			1.32	%			1.70	%
Allowance for loan losses		$	1,800			$	1,625
Percent of allowance for loan losses to non-performing loans			78.5	%			50.5	%
Percent of allowance for loan losses to non-performing assets			42.5	%			29.1	%

 

 

Loans rated Pass: these are loans that are considered to be protected by the current net worth and paying capacity of the obligor, or by the value of the asset or the underlying collateral.

Loans rated Special Mention: these loans have potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset at some future date.

Loans rated Substandard: these loans are inadequately protected by the current net worth and paying capacity of the obligor of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses.  They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Loans rated Doubtful: these loans have all the weaknesses inherent in those classified 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 rated Loss: these loans are considered uncollectible and of such little value that their continuance as assets without establishment of a specific reserve is not warranted.  This classification does not mean that an asset has absolutely no recovery or salvage value, but, rather, that it is not practical or desirable to defer writing off a basically worthless asset even though practical recovery may be effected in the future.

On an annual basis, or more often if needed, the Company formally reviews the ratings of all commercial real estate, construction, and commercial business loans that have a principal balance of $500,000 or more. Quarterly, the Company reviews the rating of any consumer loan, broadly defined, that is delinquent 90 days or more.  Likewise, quarterly, the Company reviews the rating of any commercial loan, broadly defined, that is delinquent 60 days or more.  Annually, the Company engages an independent third-party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process.

The following tables set forth information regarding the internal classification of the loan portfolio as of the dates indicated (dollars in thousands):

 

The following tables set forth information regarding the delinquencies within the loan portfolio as indicated (dollars in thousands):