Note

– Loans

Major classifications of loans were as follows:

	September 30, 2020			June 30, 2020
Commercial	$	176,838		$	158,667
Commercial real estate:
Construction		8,809			16,235
Other		239,613			229,029
1 – 4 Family residential real estate:
Owner occupied		90,311			90,494
Non-owner occupied		19,907			19,370
Construction		5,860			9,344
Consumer		21,765			21,334
Subtotal		563,103			544,473
Net Deferred loan fees and costs		(965	)		(1,612	)
Allowance for loan losses		(5,767	)		(5,678	)
Net Loans	$	556,371		$	537,183

The above table includes PPP loans of

$68,788

as of

September 30, 2020

and

$66,606

as of

June 30, 2020

in the commercial loan category.

The following table presents the activity in the allowance for loan losses by portfolio segment for the

three

months ended

September 30, 2020:

						1-4 Family
				Commercial		Residential
				Real		Real
	Commercial			Estate		Estate		Consumer			Total

Allowance for loan losses:
Beginning balance	$	947		$	3,623	$	989	$	119		$	5,678
Provision for loan losses		15			70		8		37			130
Loans charged-off		(22	)		—		—		(44	)		(66	)
Recoveries		—			1		—		24			25
Total ending allowance balance	$	940		$	3,694	$	997	$	136		$	5,767

The following table presents the activity in the allowance for loan losses by portfolio segment for the

three

months ended

September 30, 2019:

						1-4 Family
				Commercial		Residential
				Real		Real
	Commercial			Estate		Estate		Consumer			Total

Allowance for loan losses:
Beginning balance	$	660		$	2,575	$	494	$	59		$	3,788
Provision for loan losses		(11	)		69		56		16			130
Loans charged-off		—			—		—		(16	)		(16	)
Recoveries		—			1		—		6			7
Total ending allowance balance	$	649		$	2,645	$	550	$	65		$	3,909

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of

September 30, 2020.

Included in the recorded investment in loans is

$1,759

of accrued interest receivable.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3	$	5	$	—	$	—	$	8
Acquired loans collectively evaluated for impairment		—		103		89		—		192
Originated loans collectively evaluated for impairment		937		3,586		908		136		5,567
Total ending allowance balance	$	940	$	3,694	$	997	$	136	$	5,767

Recorded investment in loans:
Loans individually evaluated for impairment	$	154	$	1,031	$	914	$	—	$	2,099
Acquired loans collectively evaluated for impairment		882		8,097		25,553		10,892		45,424
Originated loans collectively evaluated for impairment		175,283		239,667		90,513		10,911		516,374
Total ending loans balance	$	176,319	$	248,795	$	116,980	$	21,803	$	563,897

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of

June 30, 2020.

Included in the recorded investment in loans is

$1,936

of accrued interest receivable.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	28	$	6	$	—	$	—	$	34
Acquired loans collectively evaluated for impairment		—		103		94		—		197
Originated loans collectively evaluated for impairment		919		3,514		895		119		5,447
Total ending allowance balance	$	947	$	3,623	$	989	$	119	$	5,678

Recorded investment in loans:
Loans individually evaluated for impairment	$	179	$	1,045	$	699	$	—	$	1,923
Acquired loans collectively evaluated for impairment		1,095		8,072		27,252		12,550		48,969
Originated loans collectively evaluated for impairment		156,054		236,840		92,168		8,843		493,905
Total ending loans balance	$	157,328	$	245,957	$	120,119	$	21,393	$	544,797

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of

September 30, 2020

and for the

three

months ended

September 30, 2020:

	As of September 30, 2020						Three Months ended September 30, 2020
	Unpaid				Allowance for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial real estate:
Other	$	913	$	825	$	—	$	826	$	1	$	1
1-4 Family residential real estate:
Owner occupied		830		689		—		539		6		6
Non-owner occupied		279		225		—		229		—		—
With an allowance recorded:
Commercial		152		154		3		171		2		2
Commercial real estate:
Other		205		206		5		206		3		3
Total	$	2,379	$	2,099	$	8	$	1,971	$	12	$	12

June 30, 2020

and for the

three

months ended

September 30, 2019:

	As of June 30, 2020						Three Months ended September 30, 2019
	Unpaid				Allowance for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial real estate:
Other	$	922	$	836	$	—	$	362	$	86	$	86
1-4 Family residential real estate:
Owner occupied		604		463		—		39		7		7
Non-owner occupied		284		236		—		257		—		—
With an allowance recorded:
Commercial		176		179		28		170		3		3
Commercial real estate:
Other		209		209		6		220		3		3
Total	$	2,195	$	1,923	$	34	$	1,048	$	99	$	99

The following table presents the recorded investment in non-accrual and loans past due over

days still on accrual by class of loans as of

September 30, 2020

and

June 30, 2020:

	September 30, 2020				June 30, 2020
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	—	$	—	$	21	$	—
Commercial real estate:
Other		774		—		785		—
1 – 4 Family residential:
Owner occupied		369		—		143		29
Non-owner occupied		226		—		236		—
Consumer		—		—		—		12
Total	$	1,369	$	—	$	1,185	$	41

Non-accrual loans and loans past due

days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of

September 30, 2020

by class of loans:

	Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	—	$	—	$	—	$	—	$	176,319	$	176,319
Commercial real estate:
Construction		—		—		—		—		8,810		8,810
Other		—		—		629		629		239,356		239,985
1-4 Family residential:
Owner occupied		234		—		369		603		90,498		91,101
Non-owner occupied		—		—		—		—		19,934		19,934
Construction		—		—		—		—		5,945		5,945
Consumer		105		16		—		121		21,682		21,803
Total	$	339	$	16	$	998	$	1,353	$	562,544	$	563,897

The above table of past due loans includes the recorded investment in non-accrual loans of

$998

in the

days or greater category and

$371

in the loans

not

past due category.

The following table presents the aging of the recorded investment in past due loans as of

June 30, 2020

by class of loans:

	Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	—	$	—	$	21	$	21	$	157,307	$	157,328
Commercial real estate:
Construction		—		—		—		—		16,241		16,241
Other		—		2		628		630		229,086		229,716
1-4 Family residential:
Owner occupied		—		—		172		172		91,102		91,274
Non-owner occupied		—		—		—		—		19,410		19,410
Construction		—		—		—		—		9,435		9,435
Consumer		127		49		12		188		21,205		21,393
Total	$	127	$	51	$	833	$	1,011	$	543,786	$	544,797

The above table of past due loans includes the recorded investment in non-accrual loans of

in the

days,

$792

in the

days or greater category and

$391

in the loans

not

past due category.

Troubled Debt Restructurings

(TDR)

The Corporation has certain loans that have been modified in order to maximize collection of loan balances that are classified as TDRs. A modified loan is usually classified as a TDR if, for economic reasons, management grants a concession to the original terms and conditions of the loan to a borrower who is experiencing financial difficulties that it would

not

have otherwise considered. In response to COVID-

19,

March 22, 2020

the Corporation adopted a loan modification program to assist borrowers impacted by the virus. The program is available to most borrowers whose loan was

not

past due on

March 22, 2020,

the date this loan modification program was adopted. The program offers principal and interest payment deferrals for up to

days or interest only payments for up to

days. Interest will be deferred but will continue to accrue during the deferment period and the maturity date on amortizing loans will be extended by the number of months the payment was deferred. Consistent with issued regulatory guidance, modifications made under this program in response to COVID-

will

not

be classified as TDRs. As of

September 30, 2020,

payment deferrals under the loan modification program that was adopted in response to COVID-

were granted on

438

loans which totaled

$79,961

and are

not

classified as TDRs. As of

October 31, 2020,

loans with an outstanding principal balance of

$473

remain in payment deferral status.

As of

September 30, 2020

and

June 30, 2020,

the Corporation had

$956

and

$974,

respectively, of loans classified as TDRs which are included in impaired loans above. As of

September 30, 2020

and

2019,

the Corporation had

not

committed to lend any additional funds to customers with outstanding loans that were classified as troubled debt restructurings. As of

September 30, 2020

and

June 30, 2020,

the Corporation had

and

$12,

respectively, of specific reserve allocated to these loans.

During the

three

-month periods ended

September 30, 2020

and

2019,

there were

loan modifications completed that were classified as troubled debt restructurings. There were

charge offs from troubled debt restructurings that were completed during the

three

-month periods ended

September 30, 2020

and

2019.

There were

loans classified as troubled debt restructurings for which there was a payment default within

months following the modification during the

three

-month periods ended

September 30, 2020

and

2019.

A loan is considered in payment default once it is

days contractually past due under the modified terms.

Credit Quality Indicators:

The Corporation 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, current economic trends and other relevant information. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with a total outstanding loan relationship greater than

$100

and non-homogeneous loans, such as commercial and commercial real estate loans. Management monitors the loans on an ongoing basis for any changes in the borrower's ability to service their debt and affirms the risk ratings for the loans and leases in their respective portfolio on an annual basis. The Corporation 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 pass rated loans. Loans listed as

not

rated are either less than

$100

or are included in groups of homogeneous loans. Generally,

Family Residential and Consumer loans are

not

risk rated, except when collateral is used for a business purpose. These loans are evaluated based on delinquency status, which are disclosed in the previous table within this footnote. Based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans was as follows:

	As of September 30, 2020
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	171,905	$	140	$	3,992	$	—	$	282
Commercial real estate:
Construction		8,810		—		—		—		—
Other		230,260		2,052		5,292		774		1,607
1-4 Family residential real estate:
Owner occupied		2,307		—		334		—		88,460
Non-owner occupied		18,959		178		217		226		354
Construction		1,378		—		—		—		4,567
Consumer		119		—		—		—		21,684
Total	$	433,738	$	2,370	$	9,835	$	1,000	$	116,954

As of

June 30, 2020,

and based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans is as follows:

	As of June 30, 2020
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	152,911	$	143	$	3,979	$	21	$	274
Commercial real estate:
Construction		16,241		—		—		—		—
Other		220,311		1,469		5,378		785		1,773
1-4 Family residential real estate:
Owner occupied		2,419		—		334		—		88,521
Non-owner occupied		18,435		186		223		236		330
Construction		3,234		—		—		—		6,201
Consumer		153		—		—		—		21,240
Total	$	413,704	$	1,798	$	9,914	$	1,042	$	118,339