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Loans Receivable

3 Months Ended

Sep. 30, 2019

4. Loans receivable

The composition of the loan portfolio was as follows:

	September 30,			June 30,
(in thousands)	2019			2019

Residential real estate
One- to four-family	$	215,384		$	216,066
Multi-family		15,545			15,928
Construction		3,927			3,757
Land		1,099			852
Farm		3,135			3,157
Nonresidential real estate		30,513			30,419
Commercial nonmortgage		1,942			2,075
Consumer and other:
Loans on deposits		1,259			1,415
Home equity		7,644			8,214
Automobile		95			91
Unsecured		539			451
		281,083			282,425
Allowance for loan losses		(1,450	)		(1,456	)
	$	279,633		$	280,969

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2019:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off		Recoveries		Ending balance

Residential real estate:
One- to four-family	$	685	$	66		$	65	$	--	$	686
Multi-family		200		(7	)		--		--		193
Construction		6		--			--		--		6
Land		1		--			--		--		1
Farm		6		--			--		--		6
Nonresidential real estate		336		3			--		--		339
Commercial nonmortgage		5		--			--		--		5
Consumer and other:
Loans on deposits		3		(1	)		--		--		2
Home equity		14		(2	)		--		--		12
Automobile		--		--			--		--		--
Unsecured		--		--			--		--		--
Unallocated		200		--			--		--		200
Totals	$	1,456	$	59		$	65	$	--	$	1,450

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2018:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off			Recoveries		Ending balance

Residential real estate:
One- to four-family	$	795	$	22		$	(59	)	$	23	$	781
Multi-family		225		7			--			--		232
Construction		8		(4	)		--			--		4
Land		1		--			--			--		1
Farm		6		--			--			--		6
Nonresidential real estate		321		2			--			--		323
Commercial nonmortgage		3		1			--			--		4
Consumer and other:
Loans on deposits		3		--			--			--		3
Home equity		13		3			--			--		16
Automobile		--		--			--			--		--
Unsecured		1		(20	)		--			20		1
Unallocated		200		--			--			--		200
Totals	$	1,576	$	11		$	(59	)	$	43	$	1,571

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of September 30, 2019. The recorded investment in loans excludes accrued interest receivable due to immateriality.

September 30, 2019:

(in thousands)	Loans individually evaluated		Loans acquired with deteriorated credit quality		Unpaid principal balance and recorded investment		Ending allowance attributed to loans		Unallocated allowance		Total allowance
Loans individually evaluated for impairment:
Residential real estate:
One- to four-family	$	3,553	$	902	$	4,455	$	--	$	--	$	--
Multi-family		681		--		681		--		--		--
Farm		310		--		310		--		--		--
Nonresidential real estate		727		--		727		--		--		--
		5,271		902		6,173		--		--		--

Loans collectively evaluated for impairment:
Residential real estate:
One- to four-family					$	210,929	$	686	$	--	$	686
Multi-family						14,864		193		--		193
Construction						3,927		6		--		6
Land						1,099		1		--		1
Farm						2,825		6		--		6
Nonresidential real estate						29,786		339		--		339
Commercial nonmortgage						1,942		5		--		5
Consumer:
Loans on deposits						1,259		2		--		2
Home equity						7,644		12		--		12
Automobile						95		--		--		--
Unsecured						539		--		--		--
Unallocated						--		--		200		200
						274,910		1,250		200		1,450
					$	281,083	$	1,250	$	200	$	1,450

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of June 30, 2019.

June 30, 2019:

(in thousands)	Loans individually evaluated		Loans acquired with deteriorated credit quality		Unpaid principal balance and recorded investment		Ending allowance attributed to loans		Unallocated allowance		Total allowance
Loans individually evaluated for impairment:
Residential real estate:
One- to four-family	$	3,837	$	949	$	4,786	$	--	$	--	$	--
Multi-family		685		--		685
Farm		309		--		309
Nonresidential real estate		683		--		683		--		--		--
		5,514		949		6,463		--		--		--

Loans collectively evaluated for impairment:
Residential real estate:
One- to four-family					$	210,595	$	685	$	--	$	685
Multi-family						15,928		200		--		200
Construction						3,757		6		--		6
Land						852		1		--		1
Farm						2,848		6		--		6
Nonresidential real estate						29,736		336		--		336
Commercial nonmortgage						2,075		5		--		5
Consumer:
Loans on deposits						1,415		3		--		3
Home equity						8,214		14		--		14
Automobile						91		--		--		--
Unsecured						451		--		--		--
Unallocated						--		--		200		200
						275,962		1,256		200		1,456
					$	282,425	$	1,256	$	200	$	1,456

The following table presents interest income on loans individually evaluated for impairment by class of loans for the three months ended September 30:

(in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	2019						2018
With no related allowance recorded:
One- to four-family	$	3,694	$	34	$	34	$	3,605	$	16	$	16
Multi-family		683		11		11		--		--		--
Farm		310		--		--		310		--		--
Nonresidential real estate		705		7		7		411		--		--
Purchased credit-impaired loans		926		18		18		1,055		8		8
		6,318		70		70		5,380		24		24
With an allowance recorded:
One- to four-family		--		--		--		--		--		--
	$	6,318	$	70	$	70	$	5,380	$	24	$	24

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of September 30, 2019 and June 30, 2019:

	September 30, 2019				June 30, 2019
(in thousands)	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Nonaccrual		Loans Past Due Over 90 Days Still Accruing

Residential real estate:
One- to four-family residential real estate	$	4,145	$	1,607	$	4,545	$	1,747
Multifamily		681		--		685		--
Farm		310		--		309		--
Nonresidential real estate and land		727		--		683		49
Commercial and industrial		1		--		1		--
Consumer		5		8		9		--
	$	5,869	$	1,615	$	6,232	$	1,796

Troubled Debt Restructurings:

A Troubled Debt Restructuring ("TDR") is the situation where the Bank grants a concession to the borrower that the Banks would not otherwise have considered due to the borrower's financial difficulties. All TDRs are considered "impaired."

At September 30, 2019 and June 30, 2019, the Company had $1.5 million and $1.6 million of loans classified as TDRs, respectively. Of the TDRs at September 30, 2019, approximately 27.0% were related to the borrower's completion of Chapter 7 bankruptcy proceedings with no reaffirmation of the debt to the Banks.

During the three months ended September 30, 2019, the Company had one loan restructured as a TDR. A borrower refinanced a piece of one- to four-family, non-owner occupied, residential property to bring to current amounts owed on other loans with the Bank. Because the borrower's financial condition had deteriorated, it was unlikely that the borrower could have secured financing elsewhere. The restructured loan is collateralized and cross-collateralized by real estate.

During the three months ended September 30, 2018, a secondary mortgage loan of $219,000 was renewed and an additional $30,000 was loaned to a borrower to finish construction of an 8-plex. The construction project had experienced cost overruns. The Company carries the first mortgage on this project and both the primary and secondary loans are secured by the 8-plex and additional real estate collateral.

The Company had no allocated specific reserves to customers whose loan terms had been modified in troubled debt restructurings as of September 30, 2019 or at June 30, 2019. The Company had no commitments to lend on loans classified as TDRs at September 30, 2019 or June 30, 2019.

The following table summarizes TDR loan modifications that occurred during the three months ended September 30, 2019 and 2018, and their performance, by modification type:

(in thousands)	Troubled Debt Restructurings Performing to Modified Terms		Troubled Debt Restructurings Not Performing to Modified Terms		Total Troubled Debt Restructurings

Three months ended September 30, 2019
Residential real estate:
Terms extended and additional funds advanced	$	120	$	--	$	120

Three months ended September 30, 2018
Residential real estate:
Terms extended	$	249	$	--	$	249

No TDRs defaulted during the three-month periods ended September 30, 2019 or 2018.

The following table presents the aging of the principal balance outstanding in past due loans as of September 30, 2019, by class of loans:

(in thousands)	30-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans Not Past Due		Total

Residential real estate:
One-to four-family	$	2,648	$	2,720	$	5,368	$	210,016	$	215,384
Multi-family		--		248		248		15,297		15,545
Construction		--		--		--		3,927		3,927
Land		740		--		740		359		1,099
Farm		189		310		499		2,637		3,135
Nonresidential real estate		434		306		740		29,772		30,513
Commercial non-mortgage		--		--		--		1,942		1,942
Consumer and other:
Loans on deposits		--		--		--		1,259		1,259
Home equity		44		--		44		7,600		7,644
Automobile		--		8		8		87		95
Unsecured		2		--		2		537		539
Total	$	4,057	$	3,592	$	7,649	$	273,434	$	281,083

The following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2019, by class of loans:

(in thousands)	30-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans Not Past Due		Total

Residential real estate:
One-to four-family	$	4,201	$	3,479	$	7,500	$	208,566	$	216,066
Multi-family		--		248		248		15,680		15,928
Construction		753		--		753		3,004		3,757
Land		--		--		--		852		852
Farm		2		--		2		3,155		3,157
Nonresidential real estate		362		49		411		30,008		30,419
Commercial nonmortgage		--		--		--		2,075		2,075
Consumer:
Loans on deposits		--		--		--		1,415		1,415
Home equity		38		--		38		8,176		8,214
Automobile		8		--		8		83		91
Unsecured		--		--		--		451		451
Total	$	5,184	$	3,776	$	8,960	$	273,465	$	282,425

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. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on an annual basis. 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.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. See the aging of past due loan table above. As of September 30, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

(in thousands)	Pass		Special Mention		Substandard		Doubtful

Residential real estate:
One- to four-family	$	206,428	$	833	$	8,123	$	--
Multi-family		14,864		--		681		--
Construction		3,927		--		--		--
Land		1,099		--		--		--
Farm		2,826		--		310		--
Nonresidential real estate		29,043		742		727		--
Commercial nonmortgage		1,574		--		369		--
Consumer:
Loans on deposits		1,259		--		--		--
Home equity		7,417		207		20		--
Automobile		87		--		8		--
Unsecured		534		--		5		--
	$	269,058	$	1,782	$	10,243	$	--

At June 30, 2019, the risk category of loans by class of loans was as follows:

(in thousands)	Pass		Special Mention		Substandard		Doubtful

Residential real estate:
One- to four-family	$	206,489	$	894	$	8,683	$	--
Multi-family		15,243		--		685		--
Construction		3,757		--		--		--
Land		852		--		--		--
Farm		2,848		--		309		--
Nonresidential real estate		28,990		746		683		--
Commercial nonmortgage		1,584		--		491		--
Consumer:
Loans on deposits		1,415		--		--		--
Home equity		8,053		137		24		--
Automobile		91		--		--		--
Unsecured		446		--		5		--
	$	269,768	$	1,777	$	10,880	$	--

Purchased Credit Impaired Loans:

The Company purchased loans during fiscal year 2013 for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans, net of a purchase credit discount of $351,000 and $351,000 at September 30, 2019 and June 30, 2019, respectively, is as follows:

(in thousands)		September 30, 2019				June 30, 2019
One- to four-family residential real estate		$	902			$	949

Accretable yield, or income expected to be collected, is as follows

(in thousands)	Three months ended September 30, 2019			Twelve months ended June 30, 2019

Balance at beginning of period	$	544		$	634
Accretion of income		(28	)		(90	)
Disposals, net of recoveries		--			--
Balance at end of period	$	516		$	544

For those purchased loans disclosed above, the Company made no increase in allowance for loan losses for the year ended June 30, 2019, nor for the three-month period ended September 30, 2019. Neither were any allowance for loan losses reversed during those periods.