Loans Receivable

9 Months Ended

Mar. 31, 2022

Loans Receivable [Abstract]

Loans Receivable

3. Loans Receivable

Loans receivable are summarized as follows:

	March 31, 2022			June 30, 2021
	(In Thousands)
Loans Secured by Mortgages on Real Estate
One-to-Four Family Residential	$	113,616		$	97,607
Commercial		120,175			96,180
Multi-Family Residential		29,890			31,015
Land		17,705			16,260
Construction		21,659			15,337
Equity and Second Mortgage		1,271			1,267
Equity Lines of Credit		14,965			12,788
Total Mortgage Loans		319,281			270,454
Commercial Loans		47,194			69,891
Consumer Loans
Loans on Savings Accounts		301			430
Other Consumer Loans		456			485
Total Consumer Other Loans		757			915
Total Loans		367,232			341,260
Less:  Allowance for Loan Losses		(4,174	)		(4,122	)
Unamortized Loan Fees		(259	)		(744	)
Net Loans Receivable	$	362,799		$	336,394

Following is a summary of changes in the allowance for loan losses:

	Nine Months Ended March 31,
	2022			2021
	(In Thousands)
Balance - Beginning of Period	$	4,122		$	4,081
Provision for Loan Losses		61			1,750
Loan Charge-Offs		(31	)		(1,646	)
Recoveries		22			202
Balance - End of Period	$	4,174		$	4,387

Credit Quality Indicators

The Company segregates loans into risk categories based on the pertinent 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 according to credit risk. Once a loan has been classified as substandard or identified as special mention, management will conduct a quarterly review to evaluate the level of deterioration, improvement, and impairment, if any, as well as assign the appropriate risk category. The delinquent loan report is monitored monthly to determine if any loan needs to be evaluated for classification or impairment.

Loans excluded from the scope of the quarterly review process above are generally identified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification.  In these circumstances, the loan is specifically evaluated for potential classification and the need to allocate reserves or charge-off. All loans greater than 90 days past due are generally placed on nonaccrual status. The Company uses the following definitions for risk ratings:

Pass - Loans classified as pass are well protected by the current net worth or paying capacity of the obligor or by the fair value, less cost to acquire and sell the underlying collateral in a timely manner.

Pass Watch - Loans are considered marginal, meaning some weakness has been identified which could cause future impairment of repayment. However, these relationships are currently protected from any apparent loss by collateral.

Special Mention - Loans identified 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 payment 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.

Loss - This classification includes those loans which are considered uncollectible and of such little value that their continuance as loans is not warranted.  Even though partial recovery may be possible in the future, it is not practical or desirable to defer writing off these basically worthless loans.  Accordingly, these loans are charged-off before period end.

The following tables present the grading of loans, segregated by class of loans, as of March 31, 2022 and June 30, 2021:

March 31, 2022	Pass and Pass Watch		Special Mention		Substandard		Doubtful		Total
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	110,652	$	2,634	$	330	$	-	$	113,616
Commercial		118,398		-		1,777		-		120,175
Multi-Family Residential		29,890		-		-		-		29,890
Land		17,705		-		-		-		17,705
Construction		21,659		-		-		-		21,659
Equity and Second Mortgage		1,271		-		-		-		1,271
Equity Lines of Credit		14,965		-		-		-		14,965
Commercial Loans		44,573		2,621		-		-		47,194
Consumer Loans		757		-		-		-		757
Total	$	359,870	$	5,255	$	2,107	$	-	$	367,232

June 30, 2021	Pass and Pass Watch		Special Mention		Substandard		Doubtful		Total
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	97,115	$	358	$	134	$	-	$	97,607
Commercial		93,468		-		2,712		-		96,180
Multi-Family Residential		31,015		-		-		-		31,015
Land		16,260		-		-		-		16,260
Construction		15,337		-		-		-		15,337
Equity and Second Mortgage		1,267		-		-		-		1,267
Equity Lines of Credit		12,788		-		-		-		12,788
Commercial Loans		67,087		2,804		-		-		69,891
Consumer Loans		915		-		-		-		915
Total	$	335,252	$	3,162	$	2,846	$	-	$	341,260

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when contractually due.  Loans that experience insignificant payment delays or payment shortfalls are generally not classified as impaired.  On a case-by-case basis, management determines the significance of payment delays and payment shortfalls, taking into consideration all of the circumstances related to the loan, including the length of the payment delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The following tables present an aging analysis of past due loans, segregated by class of loans, as of March 31, 2022 and June 30, 2021:

March 31, 2022	30-59 Days Past Due		60-89 Days Past Due		90 Days or More		Total Past Due		Current		Total Loans Receivable		Recorded Investment >90 Days and Accruing
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	220	$	28	$	341	$	589	$	113,027	$	113,616	$	-
Commercial		-		-		-		-		120,175		120,175		-
Multi-Family Residential		-		-		-		-		29,890		29,890		-
Land		-		-		-		-		17,705		17,705		-
Construction		-		-		-		-		21,659		21,659		-
Equity and Second Mortgage		-		-		-		-		1,271		1,271		-
Equity Lines of Credit		-		-		-		-		14,965		14,965		-
Commercial Loans		-		-		-		-		47,194		47,194		-
Consumer Loans		-		-		-		-		757		757		-
Total	$	220	$	28	$	341	$	589	$	366,643	$	367,232	$	-

June 30, 2021	30-59 Days Past Due		60-89 Days Past Due		90 Days or More		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	-	$	30	$	176	$	206	$	97,401	$	97,607	$	33
Commercial		-		-		837		837		95,343		96,180		-
Multi-Family Residential		-		-		-		-		31,015		31,015		-
Land		-		-		-		-		16,260		16,260		-
Construction		-		-		-		-		15,337		15,337		-
Equity and Second Mortgage		-		-		-		-		1,267		1,267		-
Equity Lines of Credit		-		-		-		-		12,788		12,788		-
Commercial Loans		-		-		-		-		69,891		69,891		-
Consumer Loans		-		-		-		-		915		915		-
Total	$	-	$	30	$	1,013	$	1,043	$	340,217	$	341,260	$	33

There was no interest income recognized on non-accrual loans during the nine months ended March 31, 2022 or year ended June 30, 2021. If the non-accrual loans had been accruing interest at their original contracted rates, gross interest income that would have been recorded for the nine months ended March 31, 2022 and the year ended June 30, 2021 was approximately $43,000 and $63,000, respectively.

The change in the allowance for loan losses by loan portfolio class and recorded investment in loans for the nine months ended March 31, 2022 and year ended June 30, 2021 was as follows:

	Real Estate Loans
March 31, 2022	1-4 Family Residential			Commercial			Multi- Family			Land			Construction		Home Equity Loans and Lines of Credit			Commercial Loans		Consumer Loans			Total
										(In Thousands)
Allowance for loan losses:
Beginning Balances	$	894		$	1,630		$	346		$	407		$	160	$	193		$	489	$	3		$	4,122
Charge-Offs		(8	)		(6	)		-			-			-		(17	)		-		-			(31	)
Recoveries		3			-			-			-			-		19			-		-			22
Current Provision		472			(327	)		(67	)		(168	)		57		(33	)		128		(1	)		61
Ending Balances	$	1,361		$	1,297		$	279		$	239		$	217	$	162		$	617	$	2		$	4,174
Evaluated for Impairment:
Individually		207			131			-			-			-		-			39		-			377
Collectively		1,154			1,166			279			239			217		162			578		2			3,797
Loans Receivable:
Ending Balances – Total	$	113,616		$	120,175		$	29,890		$	17,705		$	21,659	$	16,236		$	47,194	$	757		$	367,232
Ending Balances:
Evaluated for Impairment:
Individually		3,006			1,776			-			-			-		-			2,621		-			7,403
Collectively	$	110,610		$	118,399		$	29,890		$	17,705		$	21,659	$	16,236		$	44,573	$	757		$	359,829

	Real Estate Loans
June 30, 2021	1-4 Family Residential			Commercial		Multi- Family			Land			Construction		Home Equity Loans And Lines of Credit		Commercial Loans			Consumer Loans			Total
									(In Thousands)
Allowance for loan losses:
Beginning Balances	$	966		$	568	$	364		$	1,024		$	80	$	126	$	949		$	4		$	4,081
Charge-Offs		(40	)		-		-			(907	)		-		-		(1,014	)		-			(1,961	)
Recoveries		3			-		-			120			-		5		74			-			202
Current Provision		(35	)		1,062		(18	)		170			80		62		480			(1	)		1,800
Ending Balances	$	894		$	1,630	$	346		$	407		$	160	$	193	$	489		$	3		$	4,122
Evaluated for Impairment:
Individually		-			317		-			-			-		-		251			-			568
Collectively		894			1,313		346			407			160		193		238			3			3,554
Loans Receivable:
Ending Balances – Total	$	97,607		$	96,180	$	31,015		$	16,260		$	15,337	$	14,055	$	69,891		$	915		$	341,260
Ending Balances:
Evaluated for Impairment:
Individually		492			2,712		-			-			-		-		2,804			-			6,008
Collectively	$	97,115		$	93,468	$	31,015		$	16,260		$	15,337	$	14,055	$	67,087		$	915		$	335,252

The following tables present loans individually evaluated for impairment, segregated by class of loans, as of March 31, 2022 and June 30, 2021:

March 31, 2022	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	3,006	$	163	$	2,843	$	3,006	$	207	$	2,854
Commercial		1,776		-		1,776		1,776		131		1,827
Multi-Family Residential		-		-		-		-		-		-
Land		-		-		-		-		-		-
Construction		-		-		-		-		-		-
Equity and Second Mortgage		-		-		-		-		-		-
Equity Lines of Credit		-		-		-		-		-		-
Commercial Loans		2,621		-		2,621		2,621		39		2,713
Consumer Loans		-		-		-		-		-		-
Total	$	7,403	$	163	$	7,240	$	7,403	$	377	$	7,394

June 30, 2021	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	492	$	492	$	-	$	492	$	-	$	530
Commercial		2,712		1,596		1,116		2,712		317		3,384
Multi-Family Residential		-		-		-		-		-		-
Land		-		-		-		-		-		-
Construction		-		-		-		-		-		-
Equity and Second Mortgage		-		-		-		-		-		-
Equity Lines of Credit		-		-		-		-		-		-
Commercial Loans		2,804		-		2,804		2,804		251		2,836
Consumer Loans		-		-		-		-		-		-
Total	$	6,008	$	2,088	$	3,920	$	6,008	$	568	$	6,750

The Bank has no commitments to loan additional funds to borrowers whose loans were previously in non-accrual status. As of March 31, 2022, there was one loan in the process of foreclosure.

A troubled debt restructuring (“TDR”) is a restructuring of a debt made by the Company to a debtor for economic or legal reasons related to the debtor’s financial difficulties that it would not otherwise consider.  The Company grants the concession in an attempt to protect as much of its investment as possible.

Information about the Company’s TDRs is as follows (in thousands):

	March 31, 2022
	Current		Past Due Greater Than 30 Days		Nonaccrual TDRs		Total TDRs
Commercial real estate	$	2,281	$	-	$	-	$	2,281
One-to-Four Family Residential		-		-		10		10

	June 30, 2021
	Current			Past Due Greater Than 30 Days			Nonaccrual TDRs			Total TDRs
Commercial real estate		$	-		$	837		$	837		$	837

For purposes of the determination of an allowance for loan losses on these TDRs, as an identified TDR, the Company considers a loss probable on the loan and, as a result, the loan is reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology.  If it is determined losses are probable on such TDRs, either because of delinquency or other credit quality indicator, the Company establishes specific reserves for these loans.  As of March 31, 2022, there were no commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs. The Company had no trouble debt restructuring that has subsequently defaulted in the last 12 months.

Loan Modifications/Troubled Debt Restructurings. Under the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. A financial institution can then suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring (“TDR”), and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Home Federal Bank has made that election. Similarly, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief will not be considered TDRs.

Prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act.

We have a one-to-four family loan that is in the process of foreclosure with a balance of $208,000.