HVBC 2016 Annual Report

16 Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. At June 30, 2017 2016 Amount Percent of Allowance to Total Allowance Percent of Loans in Category to Total Loans Amount Percent of Allowance to Total Allowance Percent of Loans in Category to Total Loans (Dollars in thousands) Residential: One- to four-family $ 399 67.28% 79.06% $ 314 64.48% 76.75% Home equity & HELOCs 38 6.41 4.88 18 3.70 6.87 Commercial real estate 89 15.01 10.88 131 26.90 12.39 Commercial business 58 9.78 3.39 23 4.72 0.59 Construction 9 1.52 1.79 1 0.20 3.39 Consumer — — — — — 0.01 Total allocated allowance 593 487 Unallocated allowance — — — — — — Total allowance for loan losses $ 593 100.00% 100.00% $ 487 100.00% 100.00% At June 30, 2015 Amount Percent of Allowance to Total Allowance Percent of Loans in Category to Total Loans (Dollars in thousands) Residential: One- to four-family $ 219 42.61% 75.70% Home equity & HELOCs 19 3.70 7.95 Commercial real estate 230 44.75 15.11 Commercial business 45 8.75 0.76 Construction — — 0.44 Consumer — — 0.04 Total allocated allowance 513 Unallocated allowance 1 0.19 0.00 Total allowance for loan losses $ 514 100.00% 100.00% At June 30, 2017, our allowance for loan losses represented 0.53% of total loans and 42.15% of non- performing loans. There were $95,000 in net loan charge-offs during the year ended June 30, 2017. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for loan losses may not be adequate and management may determine that increases in the allowance are necessary if the quality of any portion of our loan portfolio deteriorates as a result. Furthermore, as an integral part of its examination process, the FDIC and the Pennsylvania Department of Banking will periodically review our allowance for loan losses. The FDIC and the Pennsylvania Department of Banking may require that we increase our allowance based on its judgments of information available to it at the time of its examination. Any material increase in the allowance for loan losses will adversely affect our financial condition and results of operations.