6.NET LOANS RECEIVABLE

A summary of net loans receivable is as follows (dollars in thousands):


	December 31, 2020		June 30, 2020
Commercial:
Real estate	$	452,468	$	450,452
Commercial and industrial		192,393		237,223
Construction		94,817		91,805
Total commercial		739,678		779,480
Residential mortgages		287,176		279,960
Home equity loans and lines		77,068		80,345
Consumer		29,222		30,860
		1,133,144		1,170,645
Net deferred loan costs		1,726		605
Allowance for loan losses		(23,393)		(22,851)
Net loans receivable	$	1,111,477	$	1,148,399

The following tables present the activity in the allowance for loan losses by portfolio segment (dollars in thousands):


	For the Three Months Ended December 31, 2020
			Residential
	Commercial		Mortgages			Home Equity	Consumer		Total
Allowance for loan losses at beginning of period	$	18,334	$	3,475	$	1,313	$	487	$	23,609
Provisions charged to operations		1,272		177		25		76		1,550
Loans charged off		(1,558)		(108)		(51)		(84)		(1,801)
Recoveries on loans charged off		26		—		—		9		35
Allowance for loan losses at end of period	$	18,074	$	3,544	$	1,287	$	488	$	23,393


	For the Three Months Ended December 31, 2019
			Residential
	Commercial		Mortgages		Home Equity		Consumer		Total
Allowance for loan losses at beginning of period	$	11,408	$	2,379	$	850	$	362	$	14,999
Provisions charged to operations		1,353		73		18		76		1,520
Loans charged off		(1)		—		—		(33)		(34)
Recoveries on loans charged off		—		—		—		8		8
Allowance for loan losses at end of period	$	12,760	$	2,452	$	868	$	413	$	16,493


	For the Six Months Ended December 31, 2020
			Residential
	Commercial		Mortgages		Home Equity		Consumer		Total
Allowance for loan losses at beginning of period	$	17,570	$	3,484	$	1,303	$	494	$	22,851
Provisions charged to operations		2,003		168		35		94		2,300
Loans charged off		(1,558)		(108)		(51)		(110)		(1,827)
Recoveries on loans charged off		59		—		—		10		69
Allowance for loan losses at end of period	$	18,074	$	3,544	$	1,287	$	488	$	23,393


	For the Six Months Ended December 31, 2019
	(As Restated)
			Residential
	Commercial		Mortgages		Home Equity		Consumer		Total
Allowance for loan losses at beginning of period	$	11,057	$	2,360	$	813	$	269	$	14,499
Provisions charged to operations		1,708		111		54		217		2,090
Loans charged off		(5)		(19)		—		(90)		(114)
Recoveries on loans charged off		—		—		1		17		18
Allowance for loan losses at end of period	$	12,760	$	2,452	$	868	$	413	$	16,493

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method (dollars in thousands):


	December 31, 2020
			Residential
	Commercial		Mortgages		Home Equity		Consumer		Total
Allowance for loan losses:
Related to loans individually evaluated for impairment	$	1,679	$	—	$	—	$	—	$	1,679
Related to loans collectively evaluated for impairment		16,395		3,544	$	1,287	$	488		21,714
Ending balance	$	18,074	$	3,544	$	1,287	$	488	$	23,393

Loans:
Individually evaluated for impairment	$	8,260	$	—	$	—	$	—	$	8,260
Loans collectively evaluated for impairment		731,418		287,176		77,068		29,222		1,124,884
Ending balance	$	739,678	$	287,176	$	77,068	$	29,222	$	1,133,144


	June 30, 2020
			Residential
	Commercial		Mortgages			Home Equity	Consumer		Total
Allowance for loan losses:
Related to loans individually evaluated for impairment	$	929	$	—	$	—	$	—	$	929
Related to loans collectively evaluated for impairment		16,641		3,484		1,303		494		21,922
Ending balance	$	17,570	$	3,484	$	1,303	$	494	$	22,851

Loans:
Individually evaluated for impairment	$	8,407	$	—	$	—	$	—	$	8,407
Loans collectively evaluated for impairment		771,073		279,960		80,345		30,860		1,162,238
Ending balance	$	779,480	$	279,960	$	80,345	$	30,860	$	1,170,645

The following tables present information related to impaired loans by class as of (dollars in thousands):


							For the Six Months Ended
	December 31, 2020						December 31, 2020
	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income
	Balance		Investment		Allocated		Investment		Recognized
With no related allowance recorded:
Commercial:
Real estate	$	5,387	$	5,271	$	—	$	5,387	$	50
Commercial and industrial		46		42		—		46		—
Construction		—		—		—		—		—
Subtotal		5,433		5,313		—		5,433		50
With an allowance recorded:
Commercial:
Real estate		235		209		13		235		—
Commercial and industrial		1,434		1,419		836		1,434		35
Construction		1,319		1,319		830		1,319		—
Subtotal		2,988		2,947		1,679		2,988		35
Total	$	8,421	$	8,260	$	1,679	$	8,421	$	85


							For the Year Ended
	June 30, 2020						June 30, 2020
	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income
	Balance		Investment		Allocated		Investment		Recognized
With no related allowance recorded:
Commercial:
Real estate	$	5,417	$	5,342	$	—	$	5,203	$	265
Commercial and industrial		46		42		—		46		—
Construction		1,319		1,319		—		1,320		—
Subtotal		6,782		6,703		—		6,569		265

With an allowance recorded:
Commercial:
Real estate		233		221		25		234		—
Commercial and industrial		1,494		1,483		904		1,513		88
Subtotal		1,727		1,704		929		1,747		88
Total	$	8,509	$	8,407	$	929	$	8,316	$	353

Interest income on nonaccrual loans is recognized using the cost recovery method. Interest income on impaired loans that were on nonaccrual status and cash-basis interest income for the three and six months ended December 31, 2020, and the year ended June 30, 2020 was nominal.

The recorded investment in loans excludes accrued interest receivable and deferred loan fees, net due to immateriality.

At various times, certain loan modifications are executed which are considered to be troubled debt restructurings. Substantially all of these modifications include one or a combination of the following: extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; temporary reduction in the interest rate; change in scheduled payment amount including interest only; or extensions of additional credit for payment of delinquent real estate taxes or other costs.

The Company has implemented customer payment deferral programs to assist both consumer and commercial borrowers that may be experiencing financial hardship due to COVID-19 related challenges, whereby short-term deferrals of payments (generally three to six months) will be provided. Commercial, residential mortgage, home equity loans and lines, and consumer loans in deferment status will continue to accrue interest on the deferred principal during the deferment period unless otherwise classified as nonaccrual. Consistent with the CARES Act and industry regulatory guidance, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals will continue to be reported as current loans throughout the agreed upon deferral period and therefore, not classified as troubled-debt restructured loans. Borrowers that are delinquent in their payments prior to requesting a COVID-19 related financial hardship payment deferral will be reviewed on a case by case basis for troubled debt restructure classification and non-performing loan status. At December 31, 2020, the Company had COVID-19 related financial hardship payment deferrals for consumer borrowers related to nine loans representing $2.6 million of the Company’s residential mortgage, home equity loans and lines of credit, and consumer loan balances, and for commercial borrowers related to 24 loans representing $40.6 million of the Company’s commercial loan balances.

There were no loans modified as troubled debt restructurings during the three and six months ended December 31, 2020, and 2019, respectively. There was one loan that had been modified as a troubled debt restructuring during the twelve months prior to December 31, 2020 which subsequently defaulted during the three and six months ended December 31, 2020. There were no loans that had been modified as a troubled debt restructuring during the twelve months prior to December 31,2019 which have subsequently defaulted during the three and six months ended December 31, 2019.

Loans subject to a troubled debt restructuring are evaluated as impaired loans for the purpose of determining the specific component of the allowance for loan losses.

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans (dollars in thousands):


	December 31,				June 30,
	2020				2020
			Past Due				Past Due
			90 Days				90 Days
			Still on				Still on
	Nonaccrual		Accrual		Nonaccrual		Accrual
Commercial:
Real estate	$	3,281	$	632	$	3,364	$	143
Commercial and industrial		1,261		30		95		1,455
Construction		1,319		—		1,319		—
Residential mortgages		5,104		—		4,807		—
Home equity loans and lines		2,177		14		1,865		—
Consumer		199		45		210		12
	$	13,341	$	721	$	11,660	$	1,610

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

The following tables present the aging of the recorded investment in loans by class of loans as of (dollars in thousands):


	December 31, 2020
	30 - 59		60 - 89		90 or more
	Days		Days		Days		Total		Loans Not
	Past Due		Past Due		Past Due		Past Due		Past Due		Total
Commercial:
Real estate	$	2,941	$	2,306	$	2,778	$	8,025	$	444,443	$	452,468
Commercial and industrial		5,818		1,649		72		7,539		184,854		192,393
Construction		169		617		1,319		2,105		92,712		94,817
Residential mortgages		989		522		2,531		4,042		283,134		287,176
Home equity loans and lines		892		337		1,691		2,920		74,148		77,068
Consumer		217		6		45		268		28,954		29,222
Total	$	11,026	$	5,437	$	8,436	$	24,899	$	1,108,245	$	1,133,144


	June 30, 2020
	30 - 59		60 - 89		90 or more
	Days		Days		Days		Total		Loans Not
	Past Due		Past Due		Past Due		Past Due		Past Due		Total
Commercial:
Real estate	$	23	$	211	$	2,270	$	2,504	$	447,948	$	450,452
Commercial and industrial		—		26		1,551		1,577		235,646		237,223
Construction		—		—		1,319		1,319		90,486		91,805
Residential mortgages		2,666		1,272		3,505		7,443		272,517		279,960
Home equity loans and lines		1,217		1,259		1,383		3,859		76,486		80,345
Consumer		39		4		12		55		30,805		30,860
Total	$	3,945	$	2,772	$	10,040	$	16,757	$	1,153,888	$	1,170,645

The Company categorizes commercial 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, and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. The Company 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.

Commercial loans not meeting the criteria above are considered to be pass rated loans.

The following tables present commercial loans summarized by class of loans and the risk category (dollars in thousands):


	December 31, 2020
			Special
	Pass		Mention		Substandard		Doubtful		Total
Commercial
Real estate	$	406,840	$	29,213	$	16,415	$	—	$	452,468
Commercial and industrial		174,798		6,258		11,337		—		192,393
Construction		92,881		—		1,936		—		94,817
	$	674,519	$	35,471	$	29,688	$	—	$	739,678


	June 30, 2020
			Special
	Pass		Mention		Substandard		Doubtful		Total
Commercial
Real estate	$	433,948	$	106	$	16,398	$	—	$	450,452
Commercial and industrial		222,777		6,393		8,000		53		237,223
Construction		89,869		—		1,936		—		91,805
	$	746,594	$	6,499	$	26,334	$	53	$	779,480

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.

As of December 31, 2020 and June 30, 2020, the Company had pledged $435.7 million and $449.5 million respectively, of residential mortgage, home equity and commercial loans as collateral for FHLBNY borrowings and stand-by letters of credit.