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Loans Receivable

9 Months Ended

Mar. 31, 2021

4. Loans receivable

The composition of the loan portfolio was as follows:

	March 31,			June 30,
(in thousands)	2021			2020
Residential real estate
One- to four-family	$	222,878		$	222,489
Multi-family		19,773			12,373
Construction		5,959			4,045
Land		1,286			765
Farm		2,217			2,354
Nonresidential real estate		37,884			33,503
Commercial nonmortgage		2,082			2,214
Consumer and other:
Loans on deposits		1,126			1,245
Home equity		7,004			7,645
Automobile		75			67
Unsecured		528			675
		300,812			287,375
Allowance for loan losses		(1,622	)		(1,488	)
	$	299,190		$	285,887

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2021:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off			Recoveries		Ending balance
Residential real estate:
One- to four-family	$	671	$	(3	)	$	(23	)	$	–	$	645
Multi-family		184		96			–			–		280
Construction		6		3			–			–		9
Land		1		1			–			–		2
Farm		4		--			–			–		4
Nonresidential real estate		405		61			–			–		466
Commercial nonmortgage		3		--			–			–		3
Consumer and other:
Loans on deposits		2		–			–			–		2
Home equity		11		37			(45	)		7		10
Automobile		–		–			–			–		–
Unsecured		1		(3	)		–			3		1
Unallocated		200		–			–			–		200
Totals	$	1,488	$	192		$	(68	)	$	10	$	1,622

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2021:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off		Recoveries		Ending balance
Residential real estate:
One- to four-family	$	647	$	(2	)	$	--	$	–	$	645
Multi-family		277		3			–		–		280
Construction		6		3			–		–		9
Land		2		--			–		–		2
Farm		5		(1	)		–		–		4
Nonresidential real estate		469		(3	)		–		–		466
Commercial nonmortgage		2		1			–		–		3
Consumer and other:
Loans on deposits		2		--			–		–		2
Home equity		11		(1	)		–		–		10
Automobile		–		–			–		–		–
Unsecured		1		--			–		--		1
Unallocated		200		–			–		–		200
Totals	$	1,622	$	--		$	--	$	--	$	1,622

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2020:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off			Recoveries		Ending balance
Residential real estate:
One- to four-family	$	685	$	59		$	(65	)	$	1	$	680
Multi-family		200		(31	)		–			–		169
Construction		6		1			–			–		7
Land		1		1			–			–		2
Farm		6		(2	)		–			–		4
Nonresidential real estate		336		32			–			–		368
Commercial nonmortgage		5		(2	)		–			–		3
Consumer and other:
Loans on deposits		3		(1	)		–			–		2
Home equity		14		(2	)		–			–		12
Automobile		–		8			(8	)		–		–
Unsecured		–		1			–			–		1
Unallocated		200		–			–			–		200
Totals	$	1,456	$	64		$	(73	)	$	1	$	1,448

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2020:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off		Recoveries		Ending balance
Residential real estate:
One- to four-family	$	684	$	(5	)	$	–	$	1	$	680
Multi-family		172		(3	)		–		–		169
Construction		6		1			–		–		7
Land		2		--			–		–		2
Farm		4		--			–		–		4
Nonresidential real estate		361		7			–		–		368
Commercial nonmortgage		4		(1	)		–		–		3
Consumer and other:
Loans on deposits		2		–			–		–		2
Home equity		11		1			–		–		12
Automobile		–		--			--		–		–
Unsecured		1		--			–		–		1
Unallocated		200		–			–		–		200
Totals	$	1,447	$	--		$	--	$	1	$	1,448

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 March 31, 2021. The recorded investment in loans excludes accrued interest receivable due to immateriality.

March 31, 2021:

(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	$	3,903	$	667	$	4,570	$	–	$	–	$	–
Multi-family		652		–		652		–		–		–
Farm		290		–		290		–		–		–
Nonresidential real estate		636		–		636		–		–		–
Consumer:
Unsecured		17		--		17		--		--		--
		5,498		667		6,165		–		–		–

Loans collectively evaluated for impairment:
Residential real estate:
One- to four-family					$	218,308	$	645	$	–	$	645
Multi-family						19,121		280		–		280
Construction						5,959		9		–		9
Land						1,286		2		–		2
Farm						1,927		4		–		4
Nonresidential real estate						37,248		466		–		466
Commercial nonmortgage						2,082		3		–		3
Consumer:
Loans on deposits						1,126		2		–		2
Home equity						7,004		10		–		10
Automobile						75		–		–		–
Unsecured						511		1		–		1
Unallocated						–		–		200		200
						294,647		1,422		200		1,622
					$	300,812	$	1,422	$	200	$	1,622

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, 2020.

June 30, 2020:

(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	$	3,983	$	751	$	4,734	$	–	$	–	$	–
Multi-family		671		–		671		–		–		–
Construction		63		–		63		–		–		–
Farm		309		–		309		–		–		–
Nonresidential real estate		660		–		660		–		–		–
		5,686		751		6,437		–		–		–

Loans collectively evaluated for impairment:
Residential real estate:
One- to four-family					$	217,755	$	671	$	–	$	671
Multi-family						11,702		184		–		184
Construction						3,982		6		–		6
Land						765		1		–		1
Farm						2,045		4		–		4
Nonresidential real estate						32,843		405		–		405
Commercial nonmortgage						2,214		3		–		3
Consumer:
Loans on deposits						1,245		2		–		2
Home equity						7,645		11		–		11
Automobile						67		–		–		–
Unsecured						675		1		–		1
Unallocated						–		–		200		200
						280,938		1,288		200		1,488
					$	287,375	$	1,288	$	200	$	1,488

The following table presents interest income on loans individually evaluated for impairment by class of loans for the nine months ended March 31:

(in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	2021						2020
With no related allowance recorded:
One- to four-family	$	3,941	$	120	$	120	$	3,866	$	74	$	74
Multi-family		662		18		18		681		25		25
Construction		32		–		–		–		–		–
Farm		300		23		23		310		11		11
Nonresidential real estate		648		24		24		698		23		23
Consumer and other		9		--		--		--		--		--
Purchased credit-impaired loans		709		40		40		859		60		60
		6,301		225		225		6,413		193		193
With an allowance recorded:
One- to four-family		–		–		–		–		–		–
	$	6,301	$	225	$	225	$	6,413	$	193	$	193

The following table presents interest income on loans individually evaluated for impairment by class of loans for the three months ended March 31:

(in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	2021						2020
With no related allowance recorded:
Residential real estate:
One- to four-family	$	3,971	$	36	$	36	$	3,951	$	12	$	12
Multi-family		655		6		6		680		8		8
Farm		291		--		--		310		6		6
Nonresidential real estate		641		17		17		717		9		9
Consumer and other		9		--		--		--		--		--
Purchased credit-impaired loans		676		16		16		846		25		25
		6,243		75		75		6,503		60		60
With an allowance recorded:
One- to four-family		–		–		–		–		–		–
	$	6,243	$	75	$	75	$	6,503	$	60	$	60

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 March 31, 2021 and June 30, 2020:

	March 31, 2021				June 30, 2020
(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	$	4,339	$	248	$	4,458	$	1,135
Multifamily		652		–		671		–
Construction		--		–		63		–
Farm		290		–		309		–
Nonresidential real estate and land		636		–		660		–
Commercial and industrial		–		–		4		–
Consumer		22		19		95		–
	$	5,939	$	267	$	6,260	$	1,135

One- to four-family loans in process of foreclosure totaled $649,000 and $694,000 at March 31, 2021 and June 30, 2020, respectively.

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.”

The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) March 31, 2021 or (ii) 60 days after the end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. In December 2020, Congress amended the CARES Act through the Consolidated Appropriation Act of 2021, which provided additional COVID-19 relief to American families and businesses, including extending TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the national emergency. The Company elected to adopt these provisions of the CARES Act. As of March 31, 2021, the Banks had granted deferrals to 101 loans totaling $18.4 million. One borrower who owed $859,000 at March 31, 2021, had been granted an additional extension and returned to normal payment status in April 2021. All other borrowers granted a deferral, composed of 100 loans totaling $17.5 million in principal had resumed regular payments at March 31, 2021.

At March 31, 2021 and June 30, 2020, the Company had $1.9 million and $1.9 million of loans classified as TDRs, respectively. Of the TDRs at March 31, 2021, approximately 29.4% were related to the borrower’s completion of Chapter 7 bankruptcy proceedings with no reaffirmation of the debt to the Banks.

During the nine months ended March 31, 2021, the Company had two loans, which were associated with a single borrower and were both secured by a single-family residence, restructured as TDRs. The loans were classified as TDRs pursuant to court action under Chapter 7 bankruptcy proceedings without the borrower reaffirming the debt personally, and totaled $143,000 at March 31, 2021, and were current on payments as of that date.

During the nine months ended March 31, 2020, the Company had three loans restructured as TDRs. One 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. Another single-family residential borrower filed for Chapter 7 bankruptcy protection and did not reaffirm the debt personally, although the Company’s collateral position remains intact. Finally, a first and second mortgage on an 8-plex were refinanced into a single loan with a slightly extended maturity term and a lower interest rate, which was consistent with similarly-priced comparable loans at the time of refinance.

The following table summarizes TDR loan modifications that occurred during the nine months ended March 31, 2021 and 2020, 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
Nine months ended March 31, 2021
Residential real estate:
Chapter 7 bankruptcy	$	143	$	–	$	143

Nine months ended March 31, 2020
Residential real estate:
Terms extended	$	677	$	–	$	677
Terms extended and additional funds advanced	$	119	$	–	$	119
Chapter 7 bankruptcy	$	21	$	–	$	21

No TDRs defaulted during the nine-month periods ended March 31, 2021 or 2020.

There were no TDR loan modifications that occurred during the three months ended March 31, 2021 and 2020.

The following table presents the aging of the principal balance outstanding in past due loans as of March 31, 2021, 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	$	2,162	$	1,582	$	3,744	$	219,134	$	222,878
Multi-family		–		–		–		19,773		19,773
Construction		--		--		--		5,959		5,959
Land		–		–		–		1,286		1,286
Farm		102		–		102		2,115		2,217
Nonresidential real estate		99		245		344		37,540		37,884
Commercial non-mortgage		–		–		–		2,082		2,082
Consumer and other:
Loans on deposits		–		–		–		1,126		1,126
Home equity		176		19		195		6,809		7,004
Automobile		--		–		--		75		75
Unsecured		76		–		76		452		528
Total	$	2,615	$	1,846	$	4,461	$	296,351	$	300,812

The following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2020, 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	$	2,546	$	2,670	$	5,216	$	217,273	$	222,489
Multi-family		–		–		–		12,373		12,373
Construction		192		63		255		3,790		4,045
Land		–		–		–		765		765
Farm		107		309		416		1,938		2,354
Nonresidential real estate		57		253		310		33,193		33,503
Commercial nonmortgage		–		–		–		2,214		2,214
Consumer:
Loans on deposits		–		–		–		1,245		1,245
Home equity		255		90		345		7,300		7,645
Automobile		–		–		–		67		67
Unsecured		–		–		–		675		675
Total	$	3,157	$	3,385	$	6,542	$	280,833	$	287,375

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. Loans listed that are not rated are included in groups of homogeneous loans and are evaluated for credit quality based on performing status. See the aging of past due loan table above. As of March 31, 2021, 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	$	215,885	$	677	$	6,316	$	–
Multi-family		19,121		–		652		–
Construction		5,959		–		--		–
Land		1,286		–		–		–
Farm		1,927		–		290		–
Nonresidential real estate		35,861		931		1,092		–
Commercial nonmortgage		2,082		–		–		–
Consumer:
Loans on deposits		1,126		–		–		–
Home equity		6,929		40		35		–
Automobile		75		–		–		–
Unsecured		522		–		6		–
	$	290,773	$	1,648	$	8,391	$	–

At June 30, 2020, 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	$	215,010	$	742	$	6,737	$	–
Multi-family		11,702		–		671		–
Construction		3,982		–		63		–
Land		765		–		–		–
Farm		2,045		–		309		–
Nonresidential real estate		31,529		939		1,035		–
Commercial nonmortgage		2,188		–		26		–
Consumer:
Loans on deposits		1,245		–		–		–
Home equity		7,505		39		101		–
Automobile		67		–		–		–
Unsecured		670		–		5		–
	$	276,708	$	1,720	$	8,947	$	–

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 March 31, 2021 and June 30, 2020, respectively, is as follows:

(in thousands)	March 31, 2021		June 30, 2020
One- to four-family residential real estate	$	667	$	751

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

(in thousands)	Nine months ended March 31, 2021			Twelve months ended June 30, 2020
Balance at beginning of period	$	447		$	544
Accretion of income		(43	)		(97	)
Disposals, net of recoveries		–			–
Balance at end of period	$	404		$	447

For those purchased loans disclosed above, the Company made no increase in allowance for loan losses for the year ended June 30, 2020, nor for the nine-month period ended March 31, 2021. Neither were any allowance for loan losses reversed during those periods.