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NET LOANS RECEIVABLE

6 Months Ended

Dec. 31, 2023

NET LOANS RECEIVABLE

NET LOANS RECEIVABLE

5.NET LOANS RECEIVABLE

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


		December 31, 2023			June 30, 2023
Commercial:
Real estate		$	411,242		$	411,165
Commercial and industrial			91,659			97,307
Construction			106,647			92,714
Total commercial			609,548			601,186
Residential mortgages			568,516			463,196
Home equity loans and lines			92,426			85,477
Consumer			14,659			16,779
			1,285,149			1,166,638
Allowance for credit losses			(21,362)			(22,469)
Net loans receivable		$	1,263,787		$	1,144,169

Accrued interest receivable on loans totaled $5.7 million at December 31, 2023 and is excluded from the estimate of credit losses.

Net deferred cost totaled $8.7 million at December 31, 2023 and is included in net loans receivable.

The Company’s July 1, 2023 adoption of CECL resulted in a significant change to our methodology for estimating the allowance for credit losses. The allowance for credit losses on loans is established through a provision for credit losses based on the results of life of loan quantitative models, reserves associated with collateral-dependent loans evaluated individually and adjustments for the impact of current economic conditions not accounted for in the quantitative models. The discounted cash flow methodology is used to calculate the CECL reserve for the commercial, residential mortgages, and home equity loans and lines of credit segments. The Company uses a four-quarter reasonable and supportable forecast period based on economic forecast from the Federal Open Market Committee (“FOMC”) of the Federal Reserve's projections of civilian unemployment and year-over-year U.S. GDP growth. The forecast will revert to long-term economic conditions over a four quarter reversion period on a straight-line basis. The remaining life method is used to determine the CECL reserve for the consumer loan segment. A qualitative factor framework has been developed to adjust the quantitative loss rates for asset-specific risk characteristics or current conditions at the reporting date.

The Company established a reserve for off-balance sheet credit exposures in conjunction with its adoption of the CECL guidance. The allowance for credit losses on off-balance sheet credit exposures is recognized as a liability (classified as a component of other liabilities in the consolidated statements of condition), with adjustments to the reserve recognized in the provision for credit losses on the consolidated statements of operations.

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


		For the Three Months Ended December 31, 2023
		Beginning												Ending
		Balance			Provisions			Charge-offs			Recoveries			Balance
Commercial		$	13,181		$	(178)		$	(345)		$	16		$	12,674
Residential mortgages			6,191			779			—			—			6,970
Home equity loans and lines of credit			1,282			56			—			1			1,339
Consumer			415			2			(46)			8			379
Allowance for credit losses - loans			21,069			659			(391)			25			21,362
Allowance for credit losses - off-balance sheet credit exposures			1,458			223			—			—			1,681
Total allowance for credit losses		$	22,527		$	882		$	(391)		$	25		$	23,043


		For the Three Months Ended December 31, 2022
					Residential
		Commercial			Mortgages			Home Equity			Consumer			Total
Allowance for loan losses at beginning of period		$	17,053		$	3,737		$	1,358		$	422		$	22,570
Provisions charged to operations			(1,353)			765			101			87			(400)
Loans charged off			(7)			—			—			(30)			(37)
Recoveries on loans charged off			10			31			14			4			59
Allowance for loan losses at end of period		$	15,703		$	4,533		$	1,473		$	483		$	22,192


		For the Six Months Ended December 31, 2023
					Cumulative Effect
		Beginning			Adjustment for the												Ending
		Balance			Adoption of ASU 2016-13			Provisions			Charge-offs			Recoveries			Balance
Commercial		$	14,288		$	(1,307)		$	(5)		$	(345)		$	43		$	12,674
Residential mortgages			6,222			(670)			1,418			—			—			6,970
Home equity loans and lines of credit			1,470			(265)			145			(12)			1			1,339
Consumer			489			(69)			17			(69)			11			379
Allowance for credit losses - loans			22,469			(2,311)			1,575			(426)			55			21,362
Allowance for credit losses - off-balance sheet credit exposures			—			1,624			57			—			—			1,681
Total allowance for credit losses		$	22,469		$	(687)		$	1,632		$	(426)		$	55		$	23,043


		For the Six Months Ended December 31, 2022
					Residential
		Commercial			Mortgages			Home Equity			Consumer			Total
Allowance for loan losses at beginning of period		$	17,818		$	2,899		$	1,388		$	419		$	22,524
Provisions charged to operations			(2,126)			1,616			71			159			(280)
Loans charged off			(42)			(24)			—			(101)			(167)
Recoveries on loans charged off			53			42			14			6			115
Allowance for loan losses at end of period		$	15,703		$	4,533		$	1,473		$	483		$	22,192

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


		December 31, 2023
					Residential
		Commercial			Mortgages			Home Equity			Consumer			Total
Allowance for credit losses:
Related to loans individually evaluated		$	332		$	—		$	—		$	—		$	332
Related to loans collectively evaluated			12,342			6,970			1,339			379			21,030
Ending balance		$	12,674		$	6,970		$	1,339		$	379		$	21,362

Loans:
Individually evaluated		$	9,381		$	—		$	—		$	—		$	9,381
Loans collectively evaluated			600,167			568,516			92,426			14,659			1,275,768
Ending balance		$	609,548		$	568,516		$	92,426		$	14,659		$	1,285,149


		June 30, 2023
					Residential
		Commercial			Mortgages				Home Equity		Consumer			Total
Allowance for loan losses:
Related to loans individually evaluated for impairment		$	792		$	—		$	—		$	—		$	792
Related to loans collectively evaluated for impairment			13,496			6,222			1,470			489			21,677
Ending balance		$	14,288		$	6,222		$	1,470		$	489		$	22,469

Loans:
Individually evaluated for impairment		$	11,544		$	—		$	—		$	—		$	11,544
Loans collectively evaluated for impairment			589,642			463,196			85,477			16,779			1,155,094
Ending balance		$	601,186		$	463,196		$	85,477		$	16,779		$	1,166,638

The following table presents information related to impaired loans by class (dollars in thousands):


											For the Year Ended
		June 30, 2023									June 30, 2023
		Unpaid						Allowance for			Average			Interest
		Principal			Recorded			Loan Losses			Recorded			Income
		Balance			Investment			Allocated			Investment			Recognized
With no related allowance recorded:
Commercial:
Real estate		$	10,241		$	10,213		$	—		$	10,538		$	133
Commercial and industrial			—			—			—			—			—
Construction			—			—			—			—			—
Subtotal			10,241			10,213			—			10,538			133
With an allowance recorded:
Commercial:
Real estate			681			681			142			699			35
Commercial and industrial			650			650			650			575			—
Construction			—			—			—			—			—
Subtotal			1,331			1,331			792			1,274			35
Total		$	11,572		$	11,544		$	792		$	11,812		$	168

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 year ended June 30, 2023 was nominal.

At various times, certain loan modifications are executed for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan. 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.

As previously noted in Note 2 – Summary of Significant Accounting Policies, effective July 1, 2023, the Company adopted ASU 2022-02, Financial Instruments-Credit Losses (Topic 326)-Troubled Debt Restructurings. The Company may occasionally make modifications to loans where the borrower is considered to be experiencing financial difficulty. Types of modifications considered under ASU 2022-02 include principal reductions, interest rate reductions, term extensions, or a combination. There were no modifications to loans where the borrower is considered to be experiencing financial difficulty for the three and six months ended December 31, 2023.

There were no loans modified as troubled debt restructurings during the three and six months ended December 31, 2022. There were no loans that had been modified as a troubled debt restructuring during the twelve months prior to December 31, 2022 which subsequently defaulted during the three or six months ended December 31, 2022.

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


		December 31, 2023
					Nonaccrual			Past Due
					Loans With			90 Days
					No Related			Still on			Recognized
		Nonaccrual			Allowance			Accrual			Interest Income
Commercial:
Real estate		$	6,338		$	6,338		$	4		$	—
Commercial and industrial			199			—			—			—
Construction			—			—			—			—
Residential mortgages			3,877			—			—			—
Home equity loans and lines			1,565			—			—			—
Consumer			—			—			—			—
		$	11,979		$	6,338		$	4		$	—


		June 30,
		2023
					Past Due
					90 Days
					Still on
		Nonaccrual			Accrual
Commercial:
Real estate		$	8,025		$	174
Commercial and industrial			650			—
Construction			—			3,237
Residential mortgages			4,000			120
Home equity loans and lines			1,560			—
Consumer			—			—
		$	14,235		$	3,531

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 loans.

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans (dollars in thousands):


		December 31, 2023
		Amortized Cost			Collateral Type
Commercial:
Real estate		$	9,182		Commercial Real Estate Property
Commercial and industrial			199		Business Assets
Construction			—
Residential mortgages			—
Home equity loans and lines			—
Consumer			—
		$	9,381

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


		December 31, 2023
		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		$	254		$	2,323		$	638		$	3,215		$	408,027		$	411,242
Commercial and industrial			23			—			—			23			91,636			91,659
Construction			—			—			—			—			106,647			106,647
Residential mortgages			1,560			584			718			2,862			565,654			568,516
Home equity loans and lines			1,204			303			586			2,093			90,333			92,426
Consumer			25			7			—			32			14,627			14,659
Total		$	3,066		$	3,217		$	1,942		$	8,225		$	1,276,924		$	1,285,149


		June 30, 2023
		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		$	4,798		$	—		$	4,458		$	9,256		$	401,909		$	411,165
Commercial and industrial			678			100			352			1,130			96,177			97,307
Construction			—			—			3,237			3,237			89,477			92,714
Residential mortgages			1,257			1,327			762			3,346			459,850			463,196
Home equity loans and lines			1,340			64			540			1,944			83,533			85,477
Consumer			18			22			—			40			16,739			16,779
Total		$	8,091		$	1,513		$	9,349		$	18,953		$	1,147,685		$	1,166,638

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 Company grades residential mortgages, home equity loans and lines of credit and consumer loans as either non-performing or performing.

Non-performing – Loans that are over 90 days past due and still accruing interest or on nonaccrual.

Performing – Loans not meeting any of the above criteria are considered to be performing loans.

The following table presents loans summarized by segment and class, and the risk category (dollars in thousands):


																				Revolving			Revolving
																				Loans			Loans
			Term Loans Amortized Cost Basis by Origination Year																	Amortized			Converted
December 31, 2023		2024			2023			2022			2021			2020			Prior			Cost Basis			to Term			Total
Commercial real estate
Risk Rating
Pass		$	5,326		$	45,278		$	51,827		$	24,146		$	52,826		$	178,481		$	2,629		$	—		$	360,513
Special mention			—			—			—			—			16,641			8,045			—			—			24,686
Substandard			—			—			—			—			2,942			22,539			562			—			26,043
Doubtful			—			—			—			—			—			—			—			—			—
Total commercial real estate		$	5,326		$	45,278		$	51,827		$	24,146		$	72,409		$	209,065		$	3,191		$	—		$	411,242

Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Commercial and industrial
Risk Rating
Pass		$	7,042		$	8,111		$	5,434		$	3,444		$	4,680		$	8,831		$	47,370		$	—		$	84,912
Special mention			—			—			—			—			1,250			—			672			—			1,922
Substandard			—			—			1,234			152			78			3,132			—			—			4,596
Doubtful			—			—			—			—			—			30			199			—			229
Total commercial and industrial		$	7,042		$	8,111		$	6,668		$	3,596		$	6,008		$	11,993		$	48,241		$	—		$	91,659

Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	345		$	—		$	—		$	345

Commercial construction
Risk Rating
Pass		$	13,319		$	15,796		$	47,585		$	20,936		$	—		$	6,435		$	2,576		$	—		$	106,647
Special mention			—			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—			—
Doubtful			—			—			—			—			—			—			—			—			—
Total commercial construction		$	13,319		$	15,796		$	47,585		$	20,936		$	—		$	6,435		$	2,576		$	—		$	106,647

Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Residential mortgages
Performing		$	95,375		$	213,264		$	44,192		$	58,615		$	35,330		$	117,751		$	112		$	—		$	564,639
Non-performing			—			257			560			—			599			2,461			—			—			3,877
Total residential mortgages		$	95,375		$	213,521		$	44,752		$	58,615		$	35,929		$	120,212		$	112		$	—		$	568,516

Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Home equity loans and lines of credit
Performing		$	4,270		$	7,111		$	10,048		$	3,789		$	1,458		$	14,637		$	49,548		$	—		$	90,861
Non-performing			—			—			—			—			—			669			896			—			1,565
Total home equity loans and lines of credit		$	4,270		$	7,111		$	10,048		$	3,789		$	1,458		$	15,306		$	50,444		$	—		$	92,426

Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	12		$	—		$	12

Consumer
Performing		$	973		$	1,700		$	131		$	107		$	39		$	3,350		$	8,359		$	—		$	14,659
Non-performing			—			—			—			—			—			—			—			—			—
Total consumer		$	973		$	1,700		$	131		$	107		$	39		$	3,350		$	8,359		$	—		$	14,659

Current period gross charge-offs		$	47		$	—		$	21		$	—		$	1		$	—		$	—		$	—		$	69

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


		June 30, 2023
					Special
		Pass			Mention			Substandard			Doubtful			Total
Commercial
Real estate		$	352,874		$	1,977		$	56,196		$	118		$	411,165
Commercial and industrial			89,245			1,614			6,448			—			97,307
Construction			91,805			—			909			—			92,714
		$	533,924		$	3,591		$	63,553		$	118		$	601,186

The Company considered the performance of the loan portfolio and its impact on the allowance for loan losses. For residential mortgages, home equity loans and lines of credit and consumer loan classes, the Company also evaluated credit quality based on the aging status of the loan, which was previously presented, and by payment activity.

As of December 31, 2023 and June 30, 2023, the Company had pledged $548.6 million and $476.6 million respectively, of residential mortgage, home equity and commercial loans as collateral for FHLBNY borrowings and stand-by letters of credit.