New Accounting Pronouncements (Policies)

6 Months Ended

Dec. 31, 2023

In June 2016, the FASB issued ASU

2016-13,

Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the ASU amends the accounting for credit losses on

available-for-sale

debt securities and purchased financial assets with credit deterioration. For public companies eligible to be smaller reporting companies (SRC), this update was effective for interim and annual periods beginning after December 15, 2022. In preparation for the adoption of ASU

2016-13,

we engaged a firm specializing in ALLL modeling and had been transition modeling prior to adoption. We also had our CECL model validated by an independent firm.

The Company early adopted ASU

2016-13

using the current expected credit loss (“CECL”) methodology for financial assets measured at amortized cost, effective July 1, 2022. Results for the periods beginning after July 1, 2022 are presented under ASU

2016-13,

while prior period amounts are reported in accordance with the previously applicable accounting standards. The Company recorded a reduction to retained earnings of approximately $388,000 upon adoption of ASU

2016-13.

The transition adjustment included an increase to the allowance for credit losses on loans of $47,000 and an increase to the allowance to credit losses on

off-balance

sheet credit exposure of $496,000. The transition adjustment included a corresponding increase in deferred tax assets.

The following table illustrates the impact of ASU

2016-13

adoption (in thousands):


	July 1, 2022
	Allowance for credit losses as reported under ASU 2016-13		Allowance pre-ASU 2016-13 Adoption		Impact on Allowance of ASU 2016-13 Adoption
Assets:
Real Estate Loans
One- to four-family	$	1,410	$	1,028	$	382
Multi-Family		1,235		1,375		(140	)
Commercial		2,370		1,985		385
HELOC		103		70		33
Construction		681		489		192
Commercial Business		1,207		2,025		(818	)
Consumer		93		80		13

Allowance for credit losses for all loans	$	7,099	$	7,052	$	47

Liabilities:
Allowance for credit losses on off-balance sheet exposures	$	496	$	—	$	496

In March 2022, FASB issued ASU

2022-02,

Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and

Vintage Disclosures

The amendments in this update eliminate the accounting guidance and related disclosures for TDRs by creditors in Subtopic

310-40,

Receivables—Troubled Debt Restructurings by Creditors

, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requiring an entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic

326-20,

Financial Instruments—Credit Losses—Measured at Amortized Cost

. The amendments in this update were effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and are applied prospectively, except with respect to the recognition and measurement of TDRs, where an entity has the option to apply a modified retrospective transition method. The Company adopted ASU

2022-02,

effective July 1, 2023, with changes applied prospectively, except with respect to the recognition and measurement of TDRs where a modified retrospective transition method was applied. The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements.