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Loans and Allowance for Loan Losses | 12 Months Ended
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Jun. 30, 2022
Receivables [Abstract] |
Loans and Allowance for Loan Losses |
Note 3: | Loans and Allowance for Loan Losses
Classes of loans at June 30, include:
|  | 2022 |  |  | 2021 |
Real estate loans |  |  |  |  |  |  |  |
One- to four-family, including home equity loans |  | $ | 132,474 |  |  | $ | 117,435 |
Multi-family |  |  | 88,247 |  |  |  | 104,433 |
Commercial |  |  | 167,375 |  |  |  | 155,884 |
Home equity lines of credit |  |  | 6,987 |  |  |  | 6,688 |
Construction |  |  | 41,254 |  |  |  | 25,345 |
Commercial |  |  | 80,418 |  |  |  | 103,088 |
Consumer |  |  | 8,981 |  |  |  | 7,653 |
|  |  | 525,736 |  |  |  | 520,526 |
Less |  |  |  |  |  |  |  |
Unearned fees and discounts, net |  |  | (247 | ) |  |  | 556 |
Allowance for loan losses |  |  | 7,052 |  |  |  | 6,599 |
Loans, net |  | $ | 518,931 |  |  | $ | 513,371 |
The Company had loans held for sale included in one- to four-family real estate loans totaling $227,000 and $632,000 as of June 30, 2022 and 2021, respectively. The Company believes that sound loans are a necessary and desirable means of employing funds available for investment. Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords. The Company maintains lending policies and procedures in place designed to focus our lending efforts on the types, locations, and duration of loans most appropriate for our business model and markets. The Company’s lending activity includes the origination of one- to four-family residential mortgage loans, multi-family loans, commercial real estate loans, home equity lines of credits, commercial business loans, consumer (consisting primarily of automobile loans), and construction loans. The primary lending market includes the Illinois counties of Vermilion, Iroquois, Champaign and Kankakee, as well as the adjacent counties in Illinois and Indiana within 30 miles of a branch or loan production office. The Company also has a loan production and wealth management office in Osage Beach, Missouri, which serves the Missouri counties of Camden, Miller, and Morgan. Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals. The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers. The Company’s lending can be summarized into six primary areas; one- to four-family residential mortgage loans, commercial real estate and multi-family real estate loans, home equity lines of credits, real estate construction, commercial business loans, and consumer loans.​​​​​​​ One- to four-family Residential Mortgage Loans The Company offers one- to four-family residential mortgage loans that conform to Fannie Mae and Freddie Mac underwriting standards (conforming loans) as well as non-conforming loans. In recent years there has been an increased demand for long-term fixed-rate loans, as market rates have dropped and remained near historic lows. As a result, the Company has sold a substantial portion of the fixed-rate one- to four-family residential mortgage loans with terms of 15 years or greater. Generally, the Company retains fixed-rate one- to four-family residential mortgage loans with terms of less than 15 years, although this has represented a small percentage of the fixed-rate loans originated in recent years due to the favorable long-term rates for borrower. The Company also offers USDA (USDA Rural Development), FHA and VA loans that are originated through a nationwide wholesale lender. In addition, the Company also offers home equity loans that are secured by a second mortgage on the borrower’s primary or secondary residence. Home equity loans are generally underwritten using the same criteria used to underwrite one- to four-family residential mortgage loans. As one- to four-family residential mortgage and home equity loan underwriting are subject to specific regulations, the Company typically underwrites its one- to four-family residential mortgage and home equity loans to conform to widely accepted standards. Several factors are considered in underwriting including the value of the underlying real estate and the debt to income and credit history of the borrower. Commercial Real Estate and Multi-Family Real Estate Loans Commercial real estate mortgage loans are primarily secured by office buildings, owner-occupied businesses, strip mall centers, churches, and farm loans secured by real estate. In underwriting commercial real estate and multi-family real estate loans, the Company considers a number of factors, which include the projected net cash flow to the loan’s debt service requirement, the age and condition of the collateral, the financial resources and income level of the borrower and the borrower’s experience in owning or managing similar properties. Personal guarantees are typically obtained from commercial real estate and multi-family real estate borrowers. In addition, the borrower’s financial information on such loans is monitored on an ongoing basis by requiring periodic financial statement updates. The repayment of these loans is primarily dependent on the cash flows of the underlying property. However, the commercial real estate loan generally must be supported by an adequate underlying collateral value. The performance and the value of the underlying property may be adversely affected by economic factors or geographical and/or industry specific factors. These loans are subject to other industry guidelines that are closely monitored by the Company. Management reviews and approves the Company’s lending policies and procedures on a routine basis. Management routinely (at least quarterly) reviews our allowance for loan losses and reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. Our underwriting standards are designed to encourage relationship banking rather than transactional banking. Relationship banking implies a primary banking relationship with the borrower that includes, at a minimum, an active deposit banking relationship in addition to the lending relationship. The integrity and character of the borrower are significant factors in our loan underwriting. As a part of underwriting, tangible positive or negative evidence of the borrower’s integrity and character are sought out. Additional significant underwriting factors beyond location, duration, the sound and profitable cash flow basis underlying the loan and the borrower’s character are the quality of the borrower’s financial history, the liquidity of the underlying collateral and the reliability of the valuation of the underlying collateral. The Company’s policies and loan approval limits are established by the Board of Directors. The loan officers generally have authority to approve one- to four-family residential mortgage loans up to $100,000, other secured loans up to $50,000, and unsecured loans up to $10,000. Managing Officers (those with designated loan approval authority), generally have authority to approve one- to four-family residential mortgage loans up to $375,000, other secured loans up to $375,000, and unsecured loans up to $100,000. In addition, any two individual officers may combine their loan authority limits to approve a loan. Our Loan Committee may approve one- to four-family residential mortgage loans, commercial real estate loans, multi-family real estate loans and land loans up to $2,000,000 and unsecured loans up to $500,000. All loans above these limits must be approved by the Operating Committee, consisting of the Chairman, and up to four other Board members. At no time is a borrower’s total borrowing relationship to exceed our regulatory lending limit. Loans to related parties, including executive officers and the Company’s directors, are reviewed for compliance with regulatory guidelines and the Board of Directors at least annually. The Company conducts internal loan reviews that validate the loans against the Company’s loan policy quarterly for mortgage, consumer, and small commercial loans on a sample basis, and all larger commercial loans on an annual basis. The Company also receives independent loan reviews performed by a third party on larger commercial loans to be performed annually. In addition to compliance with our policy, the third party loan review process reviews the risk assessments made by our credit department, lenders and loan committees. Results of these reviews are presented to management, Audit Committee and the Board of Directors. Home Equity Lines of Credit In addition to traditional one- to four-family residential mortgage loans and home equity loans, the Company offers home equity lines of credit that are secured by the borrower’s primary or secondary residence. Home equity lines of credit are generally underwritten using the same criteria used to underwrite one- to four-family residential mortgage loans. As home equity lines of credit underwriting are subject to specific regulations, the Company typically underwrites its home equity lines of credit to conform to widely accepted standards. Several factors are considered in underwriting including the value of the underlying real estate and the debt to income and credit history of the borrower. Commercial Business Loans The Company originates commercial non-mortgage business (term) loans and adjustable lines of credit. These loans are generally originated to small- and medium-sized companies in the Company’s primary market area. Commercial business loans are generally used for working capital purposes or for acquiring equipment, inventory or furniture, and are primarily secured by business assets other than real estate, such as business equipment and inventory, accounts receivable or stock. The Company also offers agriculture loans that are not secured by real estate. The commercial business loan portfolio consists primarily of secured loans. When making commercial business loans, the Company considers the financial statements, lending history and debt service capabilities of the borrower, the projected cash flows of the business and the value of the collateral, if any. The cash flows of the underlying borrower, however, may not perform consistent with historical or projected information. Further, the collateral securing loans may fluctuate in value due to individual economic or other factors. Loans are typically guaranteed by the principals of the borrower. The Company has established minimum standards and underwriting guidelines for all commercial loan types. Commercial business loans also include Small Business Administration (SBA) Paycheck Protection Program (PPP) loans which are covered by a 100% government guaranty. As of June 30, 2022, the Company had no PPP loans, compared to 364 loans totaling $20.6 million at June 30, 2021. Real Estate Construction Loans The Company originates construction loans for one- to four-family residential properties and commercial real estate properties, including multi-family properties. The Company generally requires that a commitment for permanent financing be in place prior to closing the construction loan. The repayment of these loans is typically through permanent financing following completion of the construction. Real estate construction loans are inherently more risky than loans on completed properties as the unimproved nature and the financial risks of construction significantly enhance the risks of commercial real estate loans. These loans are closely monitored and subject to other industry guidelines. Consumer Loans Consumer loans consist of installment loans to individuals, primarily automotive loans. These loans are underwritten utilizing the borrower’s financial history, including the Fair Isaac Corporation (“FICO”) credit scoring and information as to the underlying collateral. Repayment is expected from the cash flow of the borrower. Consumer loans may be underwritten with terms up to seven years, fully amortized. Unsecured loans are limited to twelve months. Loan-to-value ratios vary based on the type of collateral. The Company has established minimum standards and underwriting guidelines for all consumer loan collateral types. Loan Concentrations The loan portfolio includes a concentration of loans secured by commercial real estate properties, including commercial real estate construction loans, amounting to $290,972,000 and $274,892,000 as of June 30, 2022 and 2021, respectively. Generally, these loans are collateralized by multi-family and nonresidential properties. The loans are expected to be repaid from cash flows or from proceeds from the sale of the properties of the borrower. Purchased Loans and Loan Participations The Company’s loans receivable included purchased loans of $1,570,000 and $3,578,000 at June 30, 2022 and 2021, respectively. All of these purchased loans are secured by single family homes located out of our primary market area primarily in the Midwest. The Company’s loans receivable also include commercial loan participations of $29,972,000 and $26,870,000 at June 30, 2022 and 2021, respectively, of which $13,234,000 and $9,718,000, at June 30, 2022 and 2021 were outside of our primary market area. These participation loans are secured by real estate and other business assets. The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2022 and 2021:
|  | 2022 |
|  | Real Estate Loans |
|  | One- to four- family |  |  | Multi-family |  |  | Commercial |  |  | Home Equity Lines of Credit |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of year |  | $ | 967 |  |  | $ | 1,674 |  |  | $ | 1,831 |  |  | $ | 67 |
Provision charged to expense |  |  | 100 |  |  |  | (299 | ) |  |  | 154 |  |  |  | 3 |
Losses charged off |  |  | (40 | ) |  |  | — |  |  |  | — |  |  |  | — |
Recoveries |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |
Balance, end of period |  | $ | 1,028 |  |  | $ | 1,375 |  |  | $ | 1,985 |  |  | $ | 70 |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Ending balance: collectively evaluated for impairment |  | $ | 1,028 |  |  | $ | 1,375 |  |  | $ | 1,985 |  |  | $ | 70 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 132,474 |  |  | $ | 88,247 |  |  | $ | 167,375 |  |  | $ | 6,987 |
Ending balance: individually evaluated for impairment |  | $ | 1,350 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Ending balance: collectively evaluated for impairment |  | $ | 131,124 |  |  | $ | 88,247 |  |  | $ | 167,375 |  |  | $ | 6,987 |
|  | 2022 (Continued) |
|  | Construction |  |  | Commercial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of year |  | $ | 258 |  |  | $ | 1,740 |  |  | $ | 62 |  |  | $ | 6,599 |
Provision charged to expense |  |  | 231 |  |  |  | 265 |  |  |  | 38 |  |  |  | 492 |
Losses charged off |  |  | — |  |  |  | — |  |  |  | (27 | ) |  |  | (67 | )
Recoveries |  |  | — |  |  |  | 20 |  |  |  | 7 |  |  |  | 28 |
Balance, end of year |  | $ | 489 |  |  | $ | 2,025 |  |  | $ | 80 |  |  | $ | 7,052 |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Ending balance: collectively evaluated for impairment |  | $ | 489 |  |  | $ | 2,025 |  |  | $ | 80 |  |  | $ | 7,052 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 41,254 |  |  | $ | 80,418 |  |  | $ | 8,981 |  |  | $ | 525,736 |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 35 |  |  | $ | — |  |  | $ | 1,385 |
Ending balance: collectively evaluated for impairment |  | $ | 41,254 |  |  | $ | 80,383 |  |  | $ | 8,981 |  |  | $ | 524,351 |
|  | 2021 |
|  | Real Estate Loans |
|  | One- to four- family |  |  | Multi-family |  |  | Commercial |  |  | Home Equity Lines of Credit |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of year |  | $ | 1,044 |  |  | $ | 1,514 |  |  | $ | 1,706 |  |  | $ | 87 |
Provision charged to expense |  |  | (64 | ) |  |  | 160 |  |  |  | 125 |  |  |  | (20 | )
Losses charged off |  |  | (15 | ) |  |  | — |  |  |  | — |  |  |  | — |
Recoveries |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | — |
Balance, end of period |  | $ | 967 |  |  | $ | 1,674 |  |  | $ | 1,831 |  |  | $ | 67 |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Ending balance: collectively evaluated for impairment |  | $ | 967 |  |  | $ | 1,674 |  |  | $ | 1,831 |  |  | $ | 67 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 117,435 |  |  | $ | 104,433 |  |  | $ | 155,884 |  |  | $ | 6,688 |
Ending balance: individually evaluated for impairment |  | $ | 1,252 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Ending balance: collectively evaluated for impairment |  | $ | 116,183 |  |  | $ | 104,433 |  |  | $ | 155,884 |  |  | $ | 6,688 |
|  | 2021 (Continued) |
|  | Construction |  |  | Commercial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of year |  | $ | 240 |  |  | $ | 1,583 |  |  | $ | 60 |  |  | $ | 6,234 |
Provision charged to expense |  |  | 18 |  |  |  | 611 |  |  |  | 14 |  |  |  | 844 |
Losses charged off |  |  | — |  |  |  | (473 | ) |  |  | (25 | ) |  |  | (513 | )
Recoveries |  |  | — |  |  |  | 19 |  |  |  | 13 |  |  |  | 34 |
Balance, end of year |  | $ | 258 |  |  | $ | 1,740 |  |  | $ | 62 |  |  | $ | 6,599 |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Ending balance: collectively evaluated for impairment |  | $ | 258 |  |  | $ | 1,740 |  |  | $ | 62 |  |  | $ | 6,599 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 25,345 |  |  | $ | 103,088 |  |  | $ | 7,653 |  |  | $ | 520,526 |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 46 |  |  | $ | — |  |  | $ | 1,298 |
Ending balance: collectively evaluated for impairment |  | $ | 25,345 |  |  | $ | 103,042 |  |  | $ | 7,653 |  |  | $ | 519,228 |
Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers. Allowance for Loan Losses The allowance for loan losses represents an estimate of the amount of losses believed inherent in our loan portfolio at the balance sheet date. The allowance calculation involves a high degree of estimation that management attempts to mitigate through the use of objective historical data where available. Loan losses are charged against the allowance for loan losses when management believes that the loan balance is confirmed as uncollectible. Subsequent recoveries, if any, are credited to the allowance. Overall, we believe the reserve to be consistent with prior periods and adequate to cover the estimated losses in our loan portfolio. The Company’s methodology for assessing the appropriateness of the allowance for loan losses consists of two key elements: (1) specific allowances for estimated credit losses on individual loans that are determined to be impaired through the Company’s review for identified problem loans; and (2) a general allowance based on estimated credit losses inherent in the remainder of the loan portfolio. The specific allowance is measured by determining the present value of expected cash flows, the loan’s observable market value, or for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expense. Factors used in identifying a specific problem loan include: (1) the strength of the customer’s personal or business cash flows; (2) the availability of other sources of repayment; (3) the amount due or past due; (4) the type and value of collateral; (5) the strength of the collateral position; (6) the estimated cost to sell the collateral; and (7) the borrower’s effort to cure the delinquency. In addition for loans secured by real estate, the Company also considers the extent of any past due and unpaid property taxes applicable to the property serving as collateral on the mortgage. The Company establishes a general allowance for loans that are not deemed impaired to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, has not been allocated to particular problem assets. The general valuation allowance is determined by segregating the loans by loan category and assigning allowance percentages based on the Company’s historical loss experience, delinquency trends, and management’s evaluation of the collectability of the loan portfolio. In certain instances, the historical loss experience could be adjusted if similar risks are not inherent in the remaining portfolio. The allowance is then adjusted for qualitative factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These qualitative factors may include: (1) Management’s assumptions regarding the minimal level of risk for a given loan category; (2) changes in lending policies and procedures, including changes in underwriting standards, and charge-off and recovery practices not considered elsewhere in estimating credit losses; (3) changes in international, national, regional and local economics and business conditions and developments that affect the collectability of the portfolio, including the conditions of various market segments; (4) changes in the nature and volume of the portfolio and in the terms of loans; (5) changes in the experience, ability, and depth of the lending officers and other relevant staff; (6) changes in the volume and severity of past due loans, the volume of non-accrual loans, the volume of troubled debt restructured and other loan modifications, and the volume and severity of adversely classified loans; (7) changes in the quality of the loan review system; (8) changes in the value of the underlying collateral for collateral-dependent loans; (9) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (10) the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. The applied loss factors are re-evaluated quarterly to ensure their relevance in the current environment. Although the Company’s policy allows for a general valuation allowance on certain smaller-balance, homogenous pools of loans classified as substandard, the Company has historically evaluated every loan classified as substandard, regardless of size, for impairment as part of the review for establishing specific allowances. The Company’s policy also allows for general valuation allowance on certain smaller-balance, homogenous pools of loans which are loans criticized as special mention or watch. A separate general allowance calculation is made on these loans based on historical measured weakness, and which is no less than twice the amount of the general allowance calculated on the non-classified loans. There have been no changes to the Company’s accounting policies or methodology from the prior periods. Credit Quality Indicators The Company categorizes 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. All loans are graded at inception of the loan. Subsequently, analyses are performed on an annual basis and grade changes are made as necessary. Interim grade reviews may take place if circumstances of the borrower warrant a more timely review. The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company’s risk rating system, the Company classifies problem and potential problem loans as “Watch,” “Substandard,” “Doubtful,” and “Loss.” The Company uses the following definitions for risk ratings: Pass – Loans classified as pass are well protected by the ability of the borrower to pay or by the value of the asset or underlying collateral. Watch – Loans classified as watch 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 Company’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. Loss – Loans classified as loss are the portion of the loan that is considered uncollectible so that its continuance as an asset is not warranted. The amount of the loss determined will be charged-off. Risk characteristics applicable to each segment of the loan portfolio are described as follows. Residential One- to four-family and Equity Lines of Credit Real Estate: The residential one- to four-family real estate loans are generally secured by owner-occupied one- to four-family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Company’s market areas that might impact either property values or a borrower’s personal income. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers. Commercial and Multi-family Real Estate: Commercial and multi-family real estate loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Company’s market areas. Construction Real Estate: Construction real estate loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Company’s market areas. Commercial: The commercial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. Consumer: The consumer loan portfolio consists of various term loans such as automobile loans and loans for other personal purposes. Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Company’s market area) and the creditworthiness of a borrower. The following tables present the credit risk profile of the Company’s loan portfolio, as of June 30, 2022 and 2021, based on rating category and payment activity:
|  | Real Estate Loans |  |  |  |
June 30, 2022 |  | One- to four-family |  |  | Multi-family |  |  | Commercial |  |  | Home Equity Lines of Credit |  |  | Construction |
Pass |  | $ | 130,950 |  |  | $ | 87,993 |  |  | $ | 164,424 |  |  | $ | 6,987 |  |  | $ | 41,254 |
Watch |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Substandard |  |  | 1,524 |  |  |  | 254 |  |  |  | 2,951 |  |  |  | — |  |  |  | — |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 132,474 |  |  | $ | 88,247 |  |  | $ | 167,375 |  |  | $ | 6,987 |  |  | $ | 41,254 |
June 30, 2022, (Continued) |  | Commercial |  |  | Consumer |  |  | Total |  |  |  |  |  |  |
Pass |  | $ | 73,226 |  |  | $ | 8,970 |  |  | $ | 513,804 |
Watch |  |  | — |  |  |  | — |  |  |  | — |
Substandard |  |  | 7,192 |  |  |  | 11 |  |  |  | 11,932 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |
Loss |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 80,418 |  |  | $ | 8,981 |  |  | $ | 525,736 |
|  | Real Estate Loans |  |  |  |
June 30, 2021 |  | One- to four-family |  |  | Multi- family |  |  | Commercial |  |  | Home Equity Lines of Credit |  |  | Construction |
Pass |  | $ | 116,980 |  |  | $ | 104,170 |  |  | $ | 154,833 |  |  | $ | 6,688 |  |  | $ | 25,345 |
Watch |  |  | — |  |  |  | — |  |  |  | 954 |  |  |  | — |  |  |  | — |
Substandard |  |  | 455 |  |  |  | 263 |  |  |  | 97 |  |  |  | — |  |  |  | — |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 117,435 |  |  | $ | 104,433 |  |  | $ | 155,884 |  |  | $ | 6,688 |  |  | $ | 25,345 |
June 30, 2021, (Continued) |  | Commercial |  |  | Consumer |  |  | Total |  |  |  |  |  |  |
Pass |  | $ | 97,078 |  |  | $ | 7,652 |  |  | $ | 512,746 |
Watch |  |  | 5,964 |  |  |  | 1 |  |  |  | 6,919 |
Substandard |  |  | 46 |  |  |  | — |  |  |  | 861 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |
Loss |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 103,088 |  |  | $ | 7,653 |  |  | $ | 520,526 |
The following tables present the Company’s loan portfolio aging analysis as of June 30, 2022 and 2021:
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater Than 90 Days |  |  | Total Past Due |  |  | Current |  |  | Total Loans Receivable |  |  | Total Loans > 90 Days & Accruing |
June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One- to four-family |  | $ | 374 |  |  | $ | 144 |  |  | $ | 1,174 |  |  | $ | 1,692 |  |  | $ | 130,782 |  |  | $ | 132,474 |  |  | $ | 47 |
Multi-family |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 88,247 |  |  |  | 88,247 |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 167,375 |  |  |  | 167,375 |  |  |  | — |
Home equity lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,987 |  |  |  | 6,987 |  |  |  | — |
Construction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 41,254 |  |  |  | 41,254 |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 80,418 |  |  |  | 80,418 |  |  |  | — |
Consumer |  |  | 78 |  |  |  | 21 |  |  |  | — |  |  |  | 99 |  |  |  | 8,882 |  |  |  | 8,981 |  |  |  | — |
Total |  | $ | 452 |  |  | $ | 165 |  |  | $ | 1,174 |  |  | $ | 1,791 |  |  | $ | 523,945 |  |  | $ | 525,736 |  |  | $ | 47 |
June 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One- to four-family |  | $ | 320 |  |  | $ | 52 |  |  | $ | 152 |  |  | $ | 524 |  |  | $ | 116,911 |  |  | $ | 117,435 |  |  | $ | 118 |
Multi-family |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 104,433 |  |  |  | 104,433 |  |  |  | — |
Commercial |  |  | 86 |  |  |  | — |  |  |  | — |  |  |  | 86 |  |  |  | 155,798 |  |  |  | 155,884 |  |  |  | — |
Home equity lines of credit |  |  | 55 |  |  |  | — |  |  |  | — |  |  |  | 55 |  |  |  | 6,633 |  |  |  | 6,688 |  |  |  | — |
Construction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 25,345 |  |  |  | 25,345 |  |  |  | — |
Commercial |  |  | 9 |  |  |  | — |  |  |  | — |  |  |  | 9 |  |  |  | 103,079 |  |  |  | 103,088 |  |  |  | — |
Consumer |  |  | 6 |  |  |  | — |  |  |  | — |  |  |  | 6 |  |  |  | 7,647 |  |  |  | 7,653 |  |  |  | — |
Total |  | $ | 476 |  |  | $ | 52 |  |  | $ | 152 |  |  | $ | 680 |  |  | $ | 519,846 |  |  | $ | 520,526 |  |  | $ | 118 |
A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses. The Company actively seeks to reduce its investment in impaired loans. The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring. Included in certain loan categories in the impaired loans are $998,000 in troubled debt restructurings that were classified as impaired. The following tables present impaired loans for year ended June 30, 2022 and 2021:
|  | June 30, 2022 |
|  | Recorded Balance |  |  | Unpaid Principal Balance |  |  | Specific Allowance |  |  | Average Investment in Impaired Loans |  |  | Interest Income Recognized |  |  | Interest on Cash Basis |
Loans without a specific allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One- to four-family |  | $ | 1,350 |  |  | $ | 1,350 |  |  | $ | — |  |  | $ | 1,361 |  |  | $ | 15 |  |  | $ | 13 |
Multi-family |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Home equity lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | 35 |  |  |  | 35 |  |  |  | — |  |  |  | 40 |  |  |  | 4 |  |  |  | 4 |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loans with a specific allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One- to four-family |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Multi-family |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Home equity lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One- to four-family |  | $ | 1,350 |  |  | $ | 1,350 |  |  | $ | — |  |  | $ | 1,361 |  |  | $ | 15 |  |  | $ | 13 |
Multi-family |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Home equity lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | 35 |  |  |  | 35 |  |  |  | — |  |  |  | 40 |  |  |  | 4 |  |  |  | 4 |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 1,385 |  |  | $ | 1,385 |  |  | $ | — |  |  | $ | 1,401 |  |  | $ | 19 |  |  | $ | 17 |
|  | June 30, 2021 |
|  | Recorded Balance |  |  | Unpaid Principal Balance |  |  | Specific Allowance |  |  | Average Investment in Impaired Loans |  |  | Interest Income Recognized |  |  | Interest on Cash Basis |
Loans without a specific allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One- to four-family |  | $ | 1,252 |  |  | $ | 1,252 |  |  | $ | — |  |  | $ | 1,271 |  |  | $ | 67 |  |  | $ | 50 |
Multi-family |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Home equity lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | 46 |  |  |  | 46 |  |  |  | — |  |  |  | 265 |  |  |  | 19 |  |  |  | 23 |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loans with a specific allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One- to four-family |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Multi-family |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Home equity lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One- to four-family |  | $ | 1,252 |  |  | $ | 1,252 |  |  | $ | — |  |  | $ | 1,271 |  |  | $ | 67 |  |  | $ | 50 |
Multi-family |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Home equity lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial |  |  | 46 |  |  |  | 46 |  |  |  | — |  |  |  | 265 |  |  |  | 19 |  |  |  | 23 |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 1,298 |  |  | $ | 1,298 |  |  | $ | — |  |  | $ | 1,536 |  |  | $ | 86 |  |  | $ | 73 |
Interest income recognized on impaired loans includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on non-accruing impaired loans for which the ultimate collectability of principal is not uncertain. The following table presents the Company’s nonaccrual loans at June 30, 2022 and 2021:
|  | 2022 |  |  | 2021 |
Real estate loans |  |  |  |  |  |  |  |
One- to four-family, including home equity loans |  | $ | 1,127 |  |  | $ | 34 |
Multi-family |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |
Home equity lines of credit |  |  | — |  |  |  | — |
Construction |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |
Consumer |  |  | — |  |  |  | — |
Total |  | $ | 1,127 |  |  | $ | 34 |
At June 30, 2022 and 2021, the Company had a number of loans that were modified in troubled debt restructurings (TDR’s) and impaired. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan. The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of June 30, 2022 and 2021. All were performing according to the terms of the restructuring as of June 30, 2022, and with the exception of a single one- to four-family loan for $118,000, all loans were performing according to the terms of restructuring as of June 30, 2021. All loans listed as of both June 30, 2022 and 2021 were accruing.
|  | June 30, 2022 |  |  | June 30, 2021 |
Real estate loans |  |  |  |  |  |  |  |
One- to four-family |  | $ | 962 |  |  | $ | 1,218 |
Multi-family |  |  | — |  |  |  | — |
Commercial |  |  | — |  |  |  | — |
Home equity lines of credit |  |  | — |  |  |  | — |
Total real estate loans |  |  | 962 |  |  |  | 1,218 |
Construction |  |  | — |  |  |  | — |
Commercial |  |  | 36 |  |  |  | 46 |
Consumer |  |  | — |  |  |  | — |
Total |  | $ | 998 |  |  | $ | 1,264 |
2022 Modifications During the year ended June 30, 2022, one previously modified TDR was modified a second time to amortize for full payment by original maturity. 2021 Modifications During the year ended June 30, 2021, the Company did not modify any loans. COVID-19 Modifications Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was signed into law on March 27, 2020, certain COVID-19 loan modifications are not designated as TDRs. The CARES Act allows the Company to presume a loan modification is not a TDR if it is (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the National Emergency or (b) December 31, 2020. This relief was extended by the Economic Aid Act, which was included in the consolidated Appropriations Act, until the earlier of 60 days after the national emergency termination date or January 1, 2022. At June 30, 2022, we had outstanding a total of 93 loans with current balances of $48.3 million that received COVID-19 modifications at some point. These modifications allowed borrowers to pay interest only for up to six months. As of June 30, 2022, 90 of these loans totaling $45.2 million have returned to principal and interest payments. The remaining 3 loans totaling $3.1 million still under temporary modifications are all classified as substandard. TDRs with Defaults The Company had no TDRs in default and no restructured loans in foreclosure as of June 30, 2022. The Company had one TDR, a one- to four-family residential loan for $118,000 that was in default as of June 30, 2021, and was restructured in prior years. No restructured loans were in foreclosure at June 30, 2021. The Company defines a default as any loan that becomes 90 days or more past due. Specific loss allowances are included in the calculation of estimated future loss ratios, which are applied to the various loan portfolios for purposes of estimating future losses. Management considers the level of defaults within the various portfolios, as well as the current adverse economic environment and negative outlook in the real estate and collateral markets when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses. We believe the qualitative adjustments more accurately reflect collateral values in light of the sales and economic conditions that we have recently observed. We may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or in-substance repossession. As of June 30, 2022 and 2021, the carrying value of foreclosed residential real estate properties as a result of obtaining physical possession was $120,000 and $68,000, respectively. In addition, as of June 30, 2022 and 2021, we had residential mortgage loans and home equity loans with a carrying value of $0 and $34,000, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.

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