Note 5: Loans Held for Investment

Loans held for investment, net of fair value adjustments, consisted of the following:


	March 31,		June 30,
(In Thousands)	2020		2019
Mortgage loans:
Single-family	$	326,686	$	324,952
Multi-family		475,941		439,041
Commercial real estate		105,691		111,928
Construction (1)		6,346		4,638
Other		—		167
Commercial business loans (2)		502		478
Consumer loans (3)		122		134
Total loans held for investment, gross		915,288		881,338

Advance payments of escrows		193		53
Deferred loan costs, net		6,636		5,610
Allowance for loan losses		(7,810)		(7,076)
Total loans held for investment, net	$	914,307	$	879,925

⁽¹⁾

Net of $5.5 million and $6.6 million of undisbursed loan funds as of March 31, 2020 and June 30, 2019, respectively

⁽²⁾

Net of $0.9 million and $1.0 million of undisbursed lines of credit as of March 31, 2020 and June 30, 2019, respectively.

⁽³⁾

Net of $0.5 million and $0.5 million of undisbursed lines of credit as of March 31, 2020 and June 30, 2019, respectively.

The following table sets forth information at March 31, 2020 regarding the dollar amount of loans held for investment that are contractually repricing during the periods indicated, segregated between adjustable rate loans and fixed rate loans. Fixed-rate loans comprised one percent and two percent of loans held for investment at March 31, 2020 and June 30, 2019, respectively. Adjustable rate loans having no stated repricing dates that reprice when the index they are tied to reprices (e.g. prime rate index) and checking account overdrafts are reported as repricing within one year. The table does not include any estimate of prepayments which may cause the Corporation’s actual repricing experience to differ materially from that shown.


	Adjustable Rate
			After		After		After
			One Year		3 Years		5 Years
	Within One		Through 3		Through 5		Through 10
(In Thousands)	Year		Years		Years		Years		Fixed Rate		Total
Mortgage loans:
Single-family	$	86,557	$	44,427	$	110,309	$	75,117	$	10,276	$	326,686
Multi-family		149,627		160,236		154,391		11,523		164		475,941
Commercial real estate		42,513		30,600		32,210		—		368		105,691
Construction		4,902		—		—		—		1,444		6,346
Commercial business loans		100		—		—		—		402		502
Consumer loans		122		—		—		—		—		122
Total loans held for investment, gross	$	283,821	$	235,263	$	296,910	$	86,640	$	12,654	$	915,288

The Corporation has developed an internal loan grading system to evaluate and quantify the Bank’s loans held for investment portfolio with respect to quality and risk. Management continually evaluates the credit quality of the Corporation’s loan portfolio and conducts a quarterly review of the adequacy of the allowance for loan losses using quantitative and qualitative methods. The Corporation has adopted an internal risk rating policy in which each loan is rated for credit quality with a rating of pass, special mention, substandard, doubtful or loss. The two primary components that are used during the loan review process to determine the proper allowance levels are individually evaluated allowances and collectively evaluated allowances. Quantitative loan loss factors are developed by determining the historical loss experience, expected future cash flows, discount rates and collateral fair values, among others. Qualitative loan loss factors are developed by assessing general economic indicators such as gross domestic product, retail sales, unemployment rates, employment growth, California home sales and median California home prices. The Corporation assigns individual factors for the quantitative and qualitative methods for each loan category and each internal risk rating.

The Corporation categorizes all of the loans held for investment into risk categories based on relevant information about the ability of the borrower to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. A description of the general characteristics of the risk grades is as follows:

Pass - These loans range from minimal credit risk to average, but still acceptable, credit risk. The likelihood of loss is considered remote.

Special Mention - A special mention loan has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss. While concerns exist, the bank is currently protected and loss is considered unlikely and not imminent.

Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful - A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.

Loss - A loss loan is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted.

The following tables summarize gross loans held for investment, net of fair value adjustments, by loan types and risk category at the dates indicated:


	March 31, 2020
	Single-		Multi-		Commercial				Commercial
(In Thousands)	family		family		Real Estate		Construction		Business		Consumer		Total
Pass	$	316,974	$	472,142	$	105,691	$	4,675	$	462	$	122	$	900,066
Special Mention		5,890		3,799		—		1,671		—		—		11,360
Substandard		3,822		—		—		—		40		—		3,862
Total loans held for investment, gross	$	326,686	$	475,941	$	105,691	$	6,346	$	502	$	122	$	915,288


	June 30, 2019
	Single-		Multi-		Commercial				Other		Commercial
(In Thousands)	family		family		Real Estate		Construction		Mortgage		Business		Consumer		Total
Pass	$	314,036	$	435,177	$	111,001	$	3,667	$	167	$	429	$	134	$	864,611
Special Mention		3,795		3,864		927		—		—		—		—		8,586
Substandard		7,121		—		—		971		—		49		—		8,141
Total loans held for investment, gross	$	324,952	$	439,041	$	111,928	$	4,638	$	167	$	478	$	134	$	881,338

The allowance for loan losses is maintained at a level sufficient to provide for estimated losses based on evaluating known and inherent risks in the loans held for investment and upon management’s continuing analysis of the factors underlying the quality of the loans held for investment. These factors include changes in the size and composition of the loans held for investment, actual loan loss experience, current economic conditions, detailed analysis of individual loans for which full collectability may not be assured, and determination of the realizable value of the collateral securing the loans. The provision (recovery) for (from) the allowance for loan losses is charged (credited) against operations on a quarterly basis, as necessary, to maintain the allowance at appropriate levels. Although management believes it uses the best information available to make such determinations, there can be no assurance that regulators, in reviewing the Corporation’s loans held for investment, will not request a significant increase in its allowance for loan losses. Future adjustments to the allowance for loan losses may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory, and other conditions beyond the Corporation’s control. In response to the novel corona virus of 2019 ("COVID-19") pandemic, which has negatively impacted the current economic environment, a qualitative component was established in the allowance for loan losses methodology.

Non-performing loans are charged-off to their fair market values in the period the loans, or portion thereof, are deemed uncollectible, generally after the loan becomes 150 days delinquent for real estate secured first trust deed loans and 120 days delinquent for commercial business or real estate secured second trust deed loans. For loans that were modified from their original terms, were re-underwritten and identified in the Corporation’s asset quality reports as troubled debt restructurings ("restructured loans"), the charge-off occurs when the loan becomes 90 days delinquent; and where borrowers file bankruptcy, the charge-off occurs when the loan becomes 60 days delinquent. The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the allowance for loan losses. The allowance for loan losses for non-performing loans is determined by applying ASC 310, "Receivables." For restructured loans that are less than 90 days delinquent, the allowance for loan losses are segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their restructuring period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method. For non-performing loans less than 60 days delinquent where the borrower has filed bankruptcy, the collectively evaluated allowances are assigned based on the aggregated pooling method. For non-performing commercial real estate loans, an individually evaluated allowance is derived based on the loan’s discounted cash flow fair value (for restructured loans) or collateral fair value less estimated selling costs and if the fair value is higher than the loan balance, no allowance is required.

The following table is provided to disclose additional details for the periods indicated on the Corporation’s allowance for loan losses:


	For the Quarter Ended						For the Nine Months Ended
	March 31,						March 31,
(Dollars in Thousands)	2020			2019			2020			2019
Allowance at beginning of period	$	6,921		$	7,061		$	7,076		$	7,385

Provision (recovery) for loan losses		874			4			671			(450)

Recoveries:
Mortgage loans:
Single-family		14			22			63			177
Consumer loans		1			1			2			2
Total recoveries		15			23			65			179

Charge-offs:
Mortgage loans:
Single-family		—			(6)			(1)			(31)
Consumer loans		—			(2)			(1)			(3)
Total charge-offs		—			(8)			(2)			(34)

Net recoveries (charge-offs)		15			15			63			145
Balance at end of period	$	7,810		$	7,080		$	7,810		$	7,080

Allowance for loan losses as a percentage of gross loans held for investment at the end of the period		0.85	%		0.79	%		0.85	%		0.79	%
Net (recoveries) charge-offs as a percentage of average loans receivable, net, during the period (annualized)		(0.01)	%		(0.01)	%		(0.01)	%		(0.02)	%

The following tables denote the past due status of the Corporation’s gross loans held for investment, net of fair value adjustments, at the dates indicated.


	March 31, 2020
			30‑89 Days				Total Loans Held for
(In Thousands)	Current		Past Due		Non-Accrual (1)		Investment, Gross
Mortgage loans:
Single-family	$	320,104	$	2,760	$	3,822	$	326,686
Multi-family		475,941		—		—		475,941
Commercial real estate		105,691		—		—		105,691
Construction		6,346		—		—		6,346
Commercial business loans		462		—		40		502
Consumer loans		118		4		—		122
Total loans held for investment, gross	$	908,662	$	2,764	$	3,862	$	915,288

⁽¹⁾

All loans 90 days or greater past due are placed on non-accrual status.


	June 30, 2019
			30‑89 Days				Total Loans Held for
(In Thousands)	Current		Past Due		Non-Accrual (1)		Investment, Gross
Mortgage loans:
Single-family	$	318,671	$	660	$	5,621	$	324,952
Multi-family		439,041		—		—		439,041
Commercial real estate		111,928		—		—		111,928
Construction		3,667		—		971		4,638
Other		167		—		—		167
Commercial business loans		429		—		49		478
Consumer loans		129		5		—		134
Total loans held for investment, gross	$	874,032	$	665	$	6,641	$	881,338

⁽¹⁾

All loans 90 days or greater past due are placed on non-accrual status.

The following tables summarize the Corporation’s allowance for loan losses and recorded investment in gross loans, by portfolio type, at the dates and for the periods indicated.


	Quarter Ended March 31, 2020
	Single-			Multi-			Commercial						Commercial
(In Thousands)	family			family			Real Estate			Construction			Business			Consumer			Total
Allowance for loan losses:
Allowance at beginning of period	$	2,157		$	3,502		$	1,058		$	168		$	28		$	8		$	6,921
Provision (recovery) for loan losses		431			456			3			(12)			(2)			(2)			874
Recoveries		14			—			—			—			—			1			15
Charge-offs		—			—			—			—			—			—			—
Allowance for loan losses, end of period	$	2,602		$	3,958		$	1,061		$	156		$	26		$	7		$	7,810

Allowance for loan losses:
Individually evaluated for impairment	$	45		$	—		$	—		$	—		$	6		$	—		$	51
Collectively evaluated for impairment		2,557			3,958			1,061			156			20			7			7,759
Allowance for loan losses, end of period	$	2,602		$	3,958		$	1,061		$	156		$	26		$	7		$	7,810

Loans held for investment:
Individually evaluated for impairment	$	2,698		$	—		$	—		$	—		$	40		$	—		$	2,738
Collectively evaluated for impairment		323,988			475,941			105,691			6,346			462			122			912,550
Total loans held for investment, gross	$	326,686		$	475,941		$	105,691		$	6,346		$	502		$	122		$	915,288
Allowance for loan losses as a percentage of gross loans held for investment		0.80	%		0.83	%		1.00	%		2.46	%		5.18	%		5.74	%		0.85	%


	Quarter Ended March 31, 2019
	Single-			Multi-			Commercial									Commercial
(In Thousands)	family			family			Real Estate			Construction			Other			Business			Consumer			Total
Allowance for loan losses:
Allowance at beginning of period	$	2,679		$	3,280		$	1,019		$	48		$	3		$	26		$	6		$	7,061
Provision (recovery) for loan losses		(58)			20			23			15			—			1			3			4
Recoveries		22			—			—			—			—			—			1			23
Charge-offs		(6)			—			—			—			—			—			(2)			(8)
Allowance for loan losses, end of period	$	2,637		$	3,300		$	1,042		$	63		$	3		$	27		$	8		$	7,080

Allowance for loan losses:
Individually evaluated for impairment	$	123		$	—		$	—		$	—		$	—		$	9		$	—		$	132
Collectively evaluated for impairment		2,514			3,300			1,042			63			3			18			8			6,948
Allowance for loan losses, end of period	$	2,637		$	3,300		$	1,042		$	63		$	3		$	27		$	8		$	7,080

Loans held for investment:
Individually evaluated for impairment	$	6,004		$	—		$	—		$	745		$	—		$	53		$	—		$	6,802
Collectively evaluated for impairment		308,820			449,812			115,355			3,394			167			430			133			878,111
Total loans held for investment, gross	$	314,824		$	449,812		$	115,355		$	4,139		$	167		$	483		$	133		$	884,913
Allowance for loan losses as a percentage of gross loans held for investment		0.84	%		0.73	%		0.90	%		1.52	%		1.80	%		5.59	%		6.02	%		0.79	%


	Nine Months Ended March 31, 2020
	Single-			Multi-			Commercial									Commercial
(In Thousands)	family			family			Real Estate			Construction			Other			Business			Consumer			Total
Allowance for loan losses:
Allowance at beginning of period	$	2,709		$	3,219		$	1,050		$	61		$	3		$	26		$	8		$	7,076
Provision (recovery) for loan losses		(169)			739			11			95			(3)			—			(2)			671
Recoveries		63			—			—			—			—			—			2			65
Charge-offs		(1)			—			—			—			—			—			(1)			(2)
Allowance for loan losses, end of period	$	2,602		$	3,958		$	1,061		$	156		$	—		$	26		$	7		$	7,810

Allowance for loan losses:
Individually evaluated for impairment	$	45		$	—		$	—		$	—		$	—		$	6		$	—		$	51
Collectively evaluated for impairment		2,557			3,958			1,061			156			—			20			7			7,759
Allowance for loan losses, end of period	$	2,602		$	3,958		$	1,061		$	156		$	—		$	26		$	7		$	7,810

Loans held for investment:
Individually evaluated for impairment	$	2,698		$	—		$	—		$	—		$	—		$	40		$	—		$	2,738
Collectively evaluated for impairment		323,988			475,941			105,691			6,346			—			462			122			912,550
Total loans held for investment, gross	$	326,686		$	475,941		$	105,691		$	6,346		$	—		$	502		$	122		$	915,288
Allowance for loan losses as a percentage of gross loans held for investment		0.80	%		0.8	%		1.00	%		2.46	%		—	%		5.18	%		5.74	%		0.85	%


	Nine Months Ended March 31, 2019
	Single-			Multi-			Commercial									Commercial
(In Thousands)	family			family			Real Estate			Construction			Other			Business			Consumer			Total
Allowance for loan losses:
Allowance at beginning of period	$	2,783		$	3,492		$	1,030		$	47		$	3		$	24		$	6		$	7,385
Provision (recovery) for loan losses		(292)			(192)			12			16			—			3			3			(450)
Recoveries		177			—			—			—			—			—			2			179
Charge-offs		(31)			—			—			—			—			—			(3)			(34)
Allowance for loan losses, end of period	$	2,637		$	3,300		$	1,042		$	63		$	3		$	27		$	8		$	7,080

Allowance for loan losses:
Individually evaluated for impairment	$	123		$	—		$	—		$	—		$	—		$	9		$	—		$	132
Collectively evaluated for impairment		2,514			3,300			1,042			63			3			18			8			6,948
Allowance for loan losses, end of period	$	2,637		$	3,300		$	1,042		$	63		$	3		$	27		$	8		$	7,080

Loans held for investment:
Individually evaluated for impairment	$	6,004		$	—		$	—		$	745		$	—		$	53		$	—		$	6,802
Collectively evaluated for impairment		308,820			449,812			115,355			3,394			167			430			133			878,111
Total loans held for investment, gross	$	314,824		$	449,812		$	115,355		$	4,139		$	167		$	483		$	133		$	884,913
Allowance for loan losses as a percentage of gross loans held for investment		0.84	%		0.73	%		0.90	%		1.52	%		1.80	%		5.59	%		6.02	%		0.79	%

The following tables identify the Corporation’s total recorded investment in non-performing loans by type at the dates and for the periods indicated. Generally, a loan is placed on non-accrual status when it becomes 90 days past due as to principal or interest or if the loan is deemed impaired, after considering economic and business conditions and collection efforts, where the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. In addition, interest income is not recognized on any loan where management has determined that collection is not reasonably assured. A non-performing loan may be restored to accrual status when delinquent principal and interest payments are brought current, the borrower(s) has demonstrated sustained payment performance and future monthly principal and interest payments are expected to be collected on a timely basis. Loans with a related allowance reserve have been individually evaluated for impairment using either a discounted cash flow analysis or, for collateral dependent loans, current appraisals less costs to sell, to establish realizable value. This analysis may identify a specific impairment amount needed or may conclude that no reserve is needed. Loans that are not individually evaluated for impairment are included in pools of homogeneous loans for evaluation of related allowance reserves.


	At March 31, 2020
	Unpaid								Net
	Principal		Related		Recorded				Recorded
(In Thousands)	Balance		Charge-offs		Investment		Allowance (1)		Investment
Mortgage loans:
Single-family:
With a related allowance	$	1,802	$	—	$	1,802	$	(274)	$	1,528
Without a related allowance (2)		2,548		(475)		2,073		—		2,073
Total single-family		4,350		(475)		3,875		(274)		3,601

Commercial business loans:
With a related allowance		40		—		40		(6)		34
Total commercial business loans		40		—		40		(6)		34
Total non-performing loans	$	4,390	$	(475)	$	3,915	$	(280)	$	3,635

⁽¹⁾

Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan, and fair value credit adjustments.

⁽²⁾

There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.


	At June 30, 2019
	Unpaid								Net
	Principal		Related		Recorded				Recorded
(In Thousands)	Balance		Charge-offs		Investment		Allowance (1)		Investment
Mortgage loans:
Single-family:
With a related allowance	$	2,640	$	—	$	2,640	$	(434)	$	2,206
Without a related allowance (2)		3,518		(518)		3,000		—		3,000
Total single-family		6,158		(518)		5,640		(434)		5,206

Construction:
Without a related allowance(2)		971		—		971		—		971
Total construction		971		—		971		—		971

Commercial business loans:
With a related allowance		49		—		49		(8)		41
Total commercial business loans		49		—		49		(8)		41
Total non-performing loans	$	7,178	$	(518)	$	6,660	$	(442)	$	6,218

⁽¹⁾

Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan, and fair value credit adjustments.

⁽²⁾

There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.

At March 31, 2020, there were no commitments to lend additional funds to those borrowers whose loans were classified as non-performing . At June 30, 2019, there was one non-performing construction loan with undisbursed loan funds of $1.0 million, which was subsequently upgraded to the special mention category in November 2019.

For the quarter ended March 31, 2020 and 2019, the Corporation’s average recorded investment in non-performing loans was $3.9 million and $6.4 million, respectively. The Corporation records payments on non-performing loans utilizing the cash basis or cost recovery method of accounting during the periods when the loans are on non-performing status. For the quarter ended March 31, 2020, the Bank received $71,000 in interest payments from non-performing loans, of which $29,000 were recognized as interest income and the remaining $42,000 were applied to reduce the loan balances under the cost recovery method. In comparison, for the quarter ended March 31, 2019, the Bank received $63,000 in interest payments from non-performing loans, of which $30,000 were recognized as interest income and the remaining $33,000 were applied to reduce the loan balances under the cost recovery method.

For the nine months ended March 31, 2020 and 2019, the Corporation's average recorded investment in non-performing loans was $4.4 million and $6.7 million, respectively. For the nine months ended March 31, 2020, the Bank received $275,000 in interest payments from non-performing loans, of which $186,000 were recognized as interest income and the remaining $89,000 were applied to reduce the loan balances under the cost recovery method. In comparison, for the nine months ended March 31, 2019, the Bank received $458,000 in interest payments from non-performing loans, of which $321,000 were recognized as interest income and the remaining $137,000 were applied to reduce the loan balances under the cost recovery method.

The following tables present the average recorded investment in non-performing loans and the related interest income recognized for the quarter and nine months ended March 31, 2020 and 2019:


	Quarter Ended March 31,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(In Thousands)	Investment		Recognized		Investment		Recognized
Without related allowances:
Mortgage loans:
Single-family	$	2,282	$	8	$	2,785	$	—
Construction		—		—		745		—
		2,282		8		3,530		—

With related allowances:
Mortgage loans:
Single-family		1,569		20		2,841		29
Commercial business loans		40		1		54		1
		1,609		21		2,895		30

Total	$	3,891	$	29	$	6,425	$	30


	Nine Months Ended March 31,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(In Thousands)	Investment		Recognized		Investment		Recognized
Without related allowances:
Mortgage loans:
Single-family	$	2,747	$	119	$	3,570	$	229
Construction		361		20		579		—
		3,108		139		4,149		229

With related allowances:
Mortgage loans:
Single-family		1,291		44		2,466		89
Commercial business loans		43		3		61		3
		1,334		47		2,527		92

Total	$	4,442	$	186	$	6,676	$	321

For the quarter ended March 31, 2020, no new loans were restructured from their original terms and classified as restructured loans and no restructured loans were upgraded or downgraded. For the nine months ended March 31, 2020, no new loans were restructured from their original terms and classified as restructured loans, while two substandard restructured loans were paid off , one restructured loan was downgraded from pass to the substandard category and one restructured loan was upgraded from special mention to the pass category. For the quarter ended March 31, 2019, no new loans were restructured from their original terms and classified as restructured loans, while one restructured loan from the pass category was downgraded to special mention. For the nine months ended March 31, 2019, no new loans were restructured from their original terms and classified as restructured loans, while one restructured loan was upgraded to the pass category , one restructured loan from the pass category was downgraded to special mention and one restructured loan was paid off. During the quarter and nine months ended March 31, 2020 and 2019, no restructured loans were in default within a 12-month period subsequent to their original restructuring. Additionally, during the quarter and nine months ended March 31, 2020, there was no loan whose modification was extended beyond the initial maturity of the modification. During the nine months ended March 31, 2020, there was one restructured loan with a loan balance of $56,000 whose modification was extended. At both March 31, 2020 and June 30, 2019, there were no commitments to lend additional funds to those borrowers whose loans were restructured.

As of March 31, 2020, the Corporation held six restructured loans with a net outstanding balance of $1.8 million, all loans were classified as substandard and on non-accrual status. As of June 30, 2019, the Corporation held eight restructured loans with a net outstanding balance of $3.8 million: one loan was classified as special mention on accrual status ($437,000); one loan was classified as substandard on accrual status ($1.4 million); and six loans were classified as substandard on non-accrual status ($1.9 million). Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Assets that do not currently expose the Corporation to sufficient risk to warrant adverse classification but possess weaknesses are designated as special mention and are closely monitored by the Corporation. As of March 31, 2020 and June 30, 2019, $683,000 or 39%, and $2.4 million or 63%, respectively, of the restructured loans were current with respect to their modified payment terms.

The Corporation upgrades restructured single-family loans to the pass category if the borrower has demonstrated satisfactory contractual payments for at least six consecutive months; 12 months for those loans that were restructured more than once; and if the borrower has demonstrated satisfactory contractual payments beyond 12 consecutive months, the loan is no longer categorized as a restructured loan. In addition to the payment history described above, multi-family, commercial real estate, construction and commercial business loans must also demonstrate a combination of the following characteristics to be upgraded: satisfactory cash flow, satisfactory guarantor support, and additional collateral support, among others.

To qualify for restructuring, a borrower must provide evidence of their creditworthiness such as, current financial statements, their most recent income tax returns, current paystubs, current W‑2s, and most recent bank statements, among other documents, which are then verified by the Corporation. The Corporation re-underwrites the loan with the borrower’s updated financial information, new credit report, current loan balance, new interest rate, remaining loan term, updated property value and modified payment schedule, among other considerations, to determine if the borrower qualifies.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 signed into law on March 27, 2020 ("CARES Act") provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers are considered current under the CARES Act if they are less than 30 days past due on their contractual payments at the time a modification program is implemented. At March 31, 2020 the Corporation had not made any short-term modifications as a result of the COVID-19 pandemic.

The following table summarizes at the dates indicated the restructured loan balances, net of allowance for loan losses, by loan type and non-accrual versus accrual status:


	At		At
(In Thousands)	March 31, 2020		June 30, 2019
Restructured loans on non-accrual status:
Mortgage loans:
Single-family	$	1,726	$	1,891
Commercial business loans		34		41
Total		1,760		1,932

Restructured loans on accrual status:
Mortgage loans:
Single-family		—		1,861
Total		—		1,861

Total restructured loans	$	1,760	$	3,793

The following tables identify the Corporation’s total recorded investment in restructured loans by type at the dates and for the periods indicated.


	At March 31, 2020
	Unpaid								Net
	Principal		Related		Recorded				Recorded
(In Thousands)	Balance		Charge-offs		Investment		Allowance (1)		Investment
Mortgage loans:
Single-family:
With a related allowance	$	677	$	—	$	677	$	(45)	$	632
Without a related allowance (2)		1,459		(365)		1,094		—		1,094
Total single-family		2,136		(365)		1,771		(45)		1,726

Commercial business loans:
With a related allowance		40		—		40		(6)		34
Total commercial business loans		40		—		40		(6)		34
Total restructured loans	$	2,176	$	(365)	$	1,811	$	(51)	$	1,760

⁽¹⁾

Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan.

⁽²⁾

There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.


	At June 30, 2019
	Unpaid								Net
	Principal		Related		Recorded				Recorded
(In Thousands)	Balance		Charge-offs		Investment		Allowance (1)		Investment
Mortgage loans:
Single-family:
With a related allowance	$	2,199	$	—	$	2,199	$	(122)	$	2,077
Without a related allowance (2)		2,040		(365)		1,675		—		1,675
Total single-family		4,239		(365)		3,874		(122)		3,752

Commercial business loans:
With a related allowance		49		—		49		(8)		41
Total commercial business loans		49		—		49		(8)		41
Total restructured loans	$	4,288	$	(365)	$	3,923	$	(130)	$	3,793

⁽¹⁾

Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan.

⁽²⁾

There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.

During the quarter ended March 31, 2020 and 2019, no properties were acquired in the settlement of loans and no previously foreclosed upon properties were sold. For the nine months ended March 31, 2020, no properties were acquired in the settlement of loans and no previously foreclosed upon properties were sold. This compares to the nine months ended March 31, 2019 when no property was acquired in the settlement of loans, while two previously foreclosed upon properties were sold. As of March 31, 2020 and June 30, 2019, there was no real estate owned property at both dates. A new appraisal is obtained on each of the properties at the time of foreclosure and fair value is derived by using the lower of the appraised value or the listing price of the property, net of selling costs. Any initial loss is recorded as a charge to the allowance for loan losses before being transferred to real estate owned. Subsequent to transfer to real estate owned, if there is further deterioration in real estate values, specific real estate owned loss reserves are established and charged to the condensed consolidated statements of operations. In addition, the Corporation records costs to carry real estate owned as real estate operating expenses as incurred.