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Loans Receivable
 6 Months Ended
Dec. 31, 2021
Receivables [Abstract]  
Loans receivable

4. Loans receivable

 

The composition of the loan portfolio was as follows:

 

   December 31,   June 30, 
(in thousands)  2021   2021 
Residential real estate        
One- to four-family  $217,244   $224,125 
Multi-family   11,865    19,781 
Construction   2,877    5,433 
Land   315    1,308 
Farm   2,274    2,234 
Nonresidential real estate   33,483    35,492 
Commercial nonmortgage   1,148    2,259 
Consumer and other:          
Loans on deposits   997    1,129 
Home equity   7,431    7,135 
Automobile   94    75 
Unsecured   559    553 
    278,287    299,524 
Allowance for loan losses   (1,603)   (1,622)
   $276,684   $297,902 

 

The amounts above include net deferred loan costs of $270,000 and $167,000 as of December 31, 2021 and June 30, 2021, respectively.

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

 

(in thousands)  Beginning
balance		   Provision
for loan
losses		   Loans
charged
off		   Recoveries   Ending
balance		 
Residential real estate:                    
One- to four-family  $794   $54   $(17)  $
–
   $831 
Multi-family   291    (79)   
–
    
–
    212 
Construction   12    (6)   
–
    
–
    6 
Land   3    (3)   
–
    
–
    – 
Farm   5    1    
–
    
–
    6 
Nonresidential real estate   494    32    
–
    
–
    526 
Commercial nonmortgage   5    (2)   
–
    
–
    3 
Consumer and other:                         
Loans on deposits   2    (1)   
–
    
–
    1 
Home equity   15    2    
–
    
–
    17 
Automobile   
–
    
–
    
–
    
–
    
–
 
Unsecured   1    2    (3)   1    1 
Totals  $1,622   $
--
   $(20)  $1   $1,603 

 

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

 

(in thousands)  Beginning
balance		   Provision
for loan
losses		   Loans
charged
off		   Recoveries   Ending
balance		 
Residential real estate:                    
One- to four-family  $754   $85   $(8)  $
–
   $831 
Multi-family   290    (78)   
–
    
–
    212 
Construction   13    (7)   
–
    
–
    6 
Land   
–
    
–
    
–
    
–
    
--
 
Farm   6    
–
    
–
    
–
    6 
Nonresidential real estate   526    --    
–
    
–
    526 
Commercial nonmortgage   3    
–
    
–
    
–
    3 
Consumer and other:                         
Loans on deposits   2    (1)   
–
    
–
    1 
Home equity   16    1    
–
    
–
    17 
Automobile   
–
    
–
    
–
    
–
    
–
 
Unsecured   
–
    
–
    
–
    1    1 
Totals  $1,610   $–   $(8)  $1   $1,603 

 

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

 

(in thousands)  Beginning
balance		   Provision
for loan
losses		   Loans
charged
off		   Recoveries   Ending
balance		 
Residential real estate:                    
One- to four-family  $671   $(1)  $(23)  $
         –
   $647 
Multi-family   184    93    
–
    
–
    277 
Construction   6    
–
    
–
    
–
    6 
Land   1    1    
–
    
–
    2 
Farm   4    1    
–
    
–
    5 
Nonresidential real estate   405    64    
–
    
–
    469 
Commercial nonmortgage   3    (1)   
–
    
–
    2 
Consumer and other:                         
Loans on deposits   2    
–
    
–
    
–
    2 
Home equity   11    38    (45)   7    11 
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 December 31, 2020:

 

(in thousands)  Beginning
balance		   Provision
for loan
losses		   Loans
charged
off		   Recoveries   Ending
balance		 
Residential real estate:                    
One- to four-family  $670   $
–
   $(23)  $
          –
   $647 
Multi-family   217    60    
–
    
–
    277 
Construction   7    (1)   
–
    
–
    6 
Land   1    1    
–
    
–
    2 
Farm   5    
–
    
–
    
–
    5 
Nonresidential real estate   418    51    
–
    
–
    469 
Commercial nonmortgage   4    (2)   
–
    
–
    2 
Consumer and other:                         
Loans on deposits   2    
–
    
–
    
–
    2 
Home equity   11    
–
    
–
    
–
    11 
Automobile   
–
    
–
    
–
    
–
    
–
 
Unsecured   1    (1)   
–
    1    1 
Unallocated   200    
–
    
–
    
–
    200 
Totals  $1,536   $108   $(23)  $1   $1,622 

 

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

 

December 31, 2021:

 

(in thousands)  Loans
individually
evaluated		   Loans
acquired
with
deteriorated
credit
quality		   Unpaid
principal
balance
and recorded investment		   Ending
allowance
attributed
to loans		 
Loans individually evaluated for impairment:                
Residential real estate:                
One- to four-family  $3,408   $476   $3,884   $
–
 
Multi-family   580    
–
    580    
–
 
Farm   274    
–
    274    
–
 
Nonresidential real estate   1,339    
–
    1,339    
–
 
Consumer:                    
Home equity   16    
--
    16    
 
 
Unsecured   5    
--
    5    
 
 
    5,622    476    6,098    
–
 
                     
Loans collectively evaluated for impairment:                    
Residential real estate:                    
One- to four-family            $213,360   $831 
Multi-family             11,285    212 
Construction             2,877    6 
Land             315    
--
 
Farm             2,000    6 
Nonresidential real estate             32,144    526 
Commercial nonmortgage             1,148    3 
Consumer:                    
Loans on deposits             997    1 
Home equity             7,415    17 
Automobile             94    
–
 
Unsecured             554    1 
              272,189    1,603 
             $278,287   $1,603 

 

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, 2021.

 

June 30, 2021:

(in thousands)  Loans
individually
evaluated		   Loans
acquired with
deteriorated
credit quality		   Unpaid
principal
balance
and recorded
investment		   Ending
allowance
attributed to
loans		 
Loans individually evaluated for impairment:                
Residential real estate:                
One- to four-family  $3,738   $595   $4,333   $
–
 
Multi-family   646    
–
    646    
–
 
Farm   274    
–
    274    
–
 
Nonresidential real estate   1,367    
–
    1,367    
–
 
Consumer and other:                    
Unsecured   16    
–
    16    
–
 
    6,041    595    6,636    
–
 
                     
Loans collectively evaluated for impairment:                    
Residential real estate:                    
One- to four-family            $219,792   $794 
Multi-family             19,135    291 
Construction             5,433    12 
Land             1,308    3 
Farm             1,960    5 
Nonresidential real estate             34,125    494 
Commercial nonmortgage             2,259    5 
Consumer:                    
Loans on deposits             1,129    2 
Home equity             7,135    15 
Automobile             75    
–
 
Unsecured             537    1 
              292,888    1,622 
             $299,524   $1,622 

 

The following table presents interest income on loans individually evaluated for impairment by class of loans for the six months ended December 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  $3,572   $67   $67   $4,011   $84   $84 
Multi-family   613    11    11    665    12    12 
Construction   --    
–
    
–
    32    
–
    
–
 
Farm   274    
--
    
--
    300    23    23 
Nonresidential real estate   1,353    30    30    653    7    7 
Consumer   19    1    1                
Purchased credit-impaired loans   536    15    15    718    24    24 
    6,169    124    124    6,379    150    150 
With an allowance recorded:                              
One- to four-family   
–
    
–
    
–
    
–
    
–
    
–
 
   $6,367   $124   $124   $6,379   $150   $150 

 

The following table presents interest income on loans individually evaluated for impairment by class of loans for the three months ended December 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  $3,476   $33   $33   $3,965   $39   $39 
Multi-family   584    5    5    662    6    6 
Construction   
--
              32    
--
    
--
 
Farm   273    
--
    
--
    292    
--
    
--
 
Nonresidential real estate   1,344    14    14    650    3    3 
Consumer   24    1    1    
 
    
 
    
 
 
Purchased credit-impaired loans   468    7    7    711    10    10 
    6,169    60    60    6,312    58    58 
With an allowance recorded:                              
One- to four-family   
–
    
–
    
–
    
–
    
–
    
–
 
   $6,169   $60   $60   $6,312   $58   $58 

 

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 December 31, 2021 and June 30, 2021:

 

   December 31, 2021   June 30, 2021 
(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  $3,787   $371   $4,104   $243 
Multifamily   580    
–
    646    
–
 
Construction   --    –    --    – 
Farm   274    
–
    274    
–
 
Nonresidential real estate and land   1,339    
–
    1,367    
–
 
Consumer   20    71    21    
–
 
   $6,000   $442   $6,412   $243 

 

One- to four-family loans in process of foreclosure totaled $479,000 and $577,000 at December 31, 2021 and June 30, 2021, 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.”

 

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 the TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the 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. The Company elected to adopt these provisions of the CARES Act. In response to the COVID-19 pandemic and the widespread economic downturn that immediately resulted, the Company adopted a loan forbearance plan in which then-current affected borrowers could request deferral of their loan payments for a period of three months. A total of $815,000 in loans were accepted into the plan for the twelve months ended June 30, 2021. At June 30, 2021 all of those loans had reached the end of their three-month deferral data period and returned to regular payment status.

 

At December 31, 2021 and June 30, 2021, the Company had $1.6 million and $1.7 million of loans classified as TDRs, respectively. Of the TDRs at December 31, 2021, approximately 27.2% were related to the borrower’s completion of Chapter 7 bankruptcy proceedings with no reaffirmation of the debt to the Banks.

 

During the six- and three-months ended December 31, 2021, the Company restructured no loans as TDRs. No TDRs defaulted during the six-month periods ended December 31, 2021 or 2020.

 

During the six months ended December 31, 2020, 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.

 

The following table summarizes TDR loan modifications that occurred during the six months ended December 31, 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		 
Six months ended December 31, 2020            
Residential real estate:            
Chapter 7 bankruptcy  $144   $
–
   $144 

 

The following table summarizes TDR loan modifications that occurred during the three months ended December 31, 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		 
Three months ended December 31, 2020            
Residential real estate:            
Chapter 7 bankruptcy  $144   $
–
   $144 

 

The following table presents the aging of the principal balance outstanding in past due loans as of December 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  $2,123   $1,292   $3,415   $213,829   $217,244 
Multi-family   
–
    
–
    
–
    11,865    11,865 
Construction   12    
--
    12    2,865    2,877 
Land   
–
    
–
    
–
    315    315 
Farm   98    
–
    98    2,176    2,274 
Nonresidential real estate   99    237    336    33,147    33,483 
Commercial non-mortgage   –    
–
    –    1,148    1,148 
Consumer and other:                         
Loans on deposits   
–
    
–
    
–
    997    997 
Home equity   76    71    147    7,284    7,431 
Automobile   
--
    
–
    
--
    94    94 
Unsecured   2    –    2    557    559 
Total  $2,410   $1,600   $4,010   $274,277   $278,287 

 

The following tables present the aging of the principal balance outstanding in past due loans as of June 30, 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  $2,392   $1,338   $3,730   $220,395   $224,125 
Multi-family   
–
    
–
    
–
    19,781    19,781 
Construction   80    
--
    80    5,353    5,433 
Land   
–
    
–
    
–
    1,308    1,308 
Farm   101    
--
    101    2,133    2,234 
Nonresidential real estate   
--
    241    241    35,251    35,492 
Commercial and industrial   6    
–
    6    2,253    2,259 
Consumer:                         
Loans on deposits   
–
    
–
    
–
    1,129    1,129 
Home equity   116    
--
    116    7,019    7,135 
Automobile   
–
    
–
    
–
    75    75 
Unsecured   4    
–
    4    549    553 
Total  $2,699   $1,579   $4,278   $295,246   $299,524 

 

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 December 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  $210,945   $573   $5,726   $
–
 
Multi-family   11,285    
–
    580    
–
 
Construction   2,877    
–
    
–
    
–
 
Land   315    
–
    
–
    
–
 
Farm   2,000    
–
    274    
–
 
Nonresidential real estate   31,232    912    1,339    
–
 
Commercial nonmortgage   1,148    
–
    
–
    
–
 
Consumer:                    
Loans on deposits   997    
–
    
–
    
–
 
Home equity   7,269    40    122    
–
 
Automobile   94    
–
    
–
    
–
 
Unsecured   553    
–
    6    
–
 
   $268,715   $1,525   $8,047   $
–
 

 

At June 30, 2021, 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  $217,485   $596   $6,044   $
–
 
Multi-family   19,135    
–
    646    
–
 
Construction   5,433    
–
    
–
    
–
 
Land   1,308    
–
    
–
    
–
 
Farm   1,960    
–
    274    
–
 
Nonresidential real estate   32,748    924    1,820    
–
 
Commercial nonmortgage   2,259    
–
    
–
    
–
 
Consumer:                    
Loans on deposits   1,129    
–
    
–
    
–
 
Home equity   7,044    39    52    
–
 
Automobile   75    
–
    
–
    
–
 
Unsecured   546    
–
    7    
–
 
   $289,122   $1,559   $8,843   $
–
 

 

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 $88,000 and $88,000 at December 31, 2021 and June 30, 2021, respectively, is as follows:

 

(in thousands)  December 31,
2021		   June 30,
2021		 
One- to four-family residential real estate  $434   $595 

 

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

 

(in thousands)  Six months
ended
December 31,
2021		   Twelve months
ended
June 30,
2021		 
Balance at beginning of period  $390   $447 
Accretion of income   (26)   (57)
Disposals, net of recoveries   
–
    
–
 
Balance at end of period  $364   $390 

 

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