Loans Receivable

12 Months Ended

Jun. 30, 2022

Loans Receivable [Abstract]

Loans Receivable

Note 3. Loans Receivable

Loans receivable at June 30, 2022 and 2021, are summarized as follows:

	2022			2021
	(In Thousands)
Loans Secured by Mortgages on Real Estate
One-to-Four Family Residential	$	120,014		$	97,607
Commercial		127,589			96,180
Multi-Family Residential		30,411			31,015
Land		22,127			16,260
Construction		27,884			15,337
Equity and Second Mortgage		1,587			1,267
Equity Lines of Credit		17,831			12,788
Total Mortgage Loans		347,443			270,454
Commercial Loans		44,487			69,891
Consumer Loans
Loans on Savings Accounts		266			430
Other Consumer Loans		439			485
Total Consumer Other Loans		705			915
Total Loans		392,635			341,260
Less:  Allowance for Loan Losses		(4,451	)		(4,122	)
Unamortized Loan Fees		(311	)		(744	)
Net Loans Receivable	$	387,873		$	336,394

An analysis of the allowance for loan losses follows:

	2022			2021
	(In Thousands)
Balance - Beginning of Year	$	4,122		$	4,081
Provision for Loan Losses		336			1,800
Recoveries		24			202
Loan Charge-Offs		(31	)		(1,961	)
Balance – End of Year	$	4,451		$	4,122

Fixed rate loans receivable, as of June 30, 2022, are scheduled to mature and adjustable rate loans are scheduled to re-price as follows (in thousands):

	Under		Over One		Over Five		Over
	One		to Five		to Ten		Ten
	Year		Years		Years		Years		Total
Loans Secured by One-to-Four			(In Thousands)
Family Residential
Fixed Rate	$	6,619	$	46,745	$	18,985	$	25,855	$	98,204
Adjustable Rate		2,932		5,685		8,874		4,319		21,810
Other Loans Secured by Real Estate
Fixed Rate		34,619		75,311		64,282		14,338		188,550
Adjustable Rate		38,879		-		-		-		38,879
All Other Loans
Fixed Rate		2,284		16,378		9,301		4,577		32,540
Adjustable Rate		12,652		-		-		-		12,652
Total	$	97,985	$	144,119	$	101,442	$	49,089	$	392,635

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.  Loans classified as substandard or identified as special mention are reviewed quarterly by management to evaluate the level of deterioration, improvement, and impairment, if any, as well as assign the appropriate risk category.

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 a 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.

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 June 30, 2022 and 2021:

June 30, 2022	Pass and Pass Watch		Special Mention		Substandard		Doubtful		Total
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	117,464	$	352	$	2,198	$	-	$	120,014
Commercial		123,292		2,548		1,749		-		127,589
Multi-Family Residential		30,411		-		-		-		30,411
Land		22,127		-		-		-		22,127
Construction		27,884		-		-		-		27,884
Equity and Second Mortgage		1,587		-		-		-		1,587
Equity Lines of Credit		17,831		-		-		-		17,831
Commercial Loans		44,275		212		-		-		44,487
Consumer Loans		705		-		-		-		705
Total	$	385,576	$	3,112	$	3,947	$	-	$	392,635

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.

An aging analysis of past due loans, segregated by class of loans, as of June 30, 2022 and 2021, is as follows:

June 30, 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	$	-	$	1,923	$	387	$	2,310	$	117,704	$	120,014	$	26
Commercial		-		-		-		-		127,589		127,589		-
Multi-Family Residential		-		-		-		-		30,411		30,411		-
Land		-		-		-		-		22,127		22,127		-
Construction		-		-		-		-		27,884		27,884		-
Equity and Second Mortgage		-		-		-		-		1,587		1,587		-
Equity Lines of Credit		24		-		-		24		17,807		17,831		-
Commercial Loans		-		-		-		-		44,487		44,487		-
Consumer Loans		-		-		-		-		705		705		-
Total	$	24	$	1,923	$	387	$	2,334	$	390,301	$	392,635	$	26

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

The allowance for loan losses and recorded investment in loans for the year ended June 30, 2022 and 2021 was as follows:

	Real Estate Loans
June 30, 2022	Residential			Commercial			Multi- Family		Land			Construction		Other			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		4			-			-		-			-		20			-		-			24
Current Provision		477			(329	)		11		(102	)		122		1			157		(1	)		336
Ending Balances	$	1,367		$	1,295		$	357	$	305		$	282	$	197		$	646	$	2		$	4,451
Evaluated for Impairment:
Individually		106			129			-		-			-		-			38		-			273
Collectively		1,261			1,166			357		305			282		197			608		2			4,178
Loans Receivable:
Ending Balances – Total	$	120,014		$	127,589		$	30,411	$	22,127		$	27,884	$	19,418		$	44,487	$	705		$	392,635
Ending Balances:
Evaluated for Impairment:
Individually		2,550			1,749			-		-			-		-			2,760		-			7,059
Collectively	$	117,464		$	125,840		$	30,411	$	22,127		$	27,884	$	19,418		$	41,727	$	705		$	385,576

	Real Estate Loans
June 30, 2021	Residential			Commercial		Multi- Family			Land			Construction		Other		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 table’s present loans individually evaluated for impairment, segregated by class of loans, as of June 30, 2022 and 2021:

June 30, 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	$	2,550	$	163	$	2,387	$	2,550	$	106	$	3,032
Commercial		1,749		-		1,749		1,749		129		1,811
Multi-Family Residential		-		-		-		-		-		-
Land		-		-		-		-		-		-
Construction		-		-		-		-		-		-
Equity and Second Mortgage		-		-		-		-		-		-
Equity Lines of Credit		-		-		-		-		-		-
Commercial Loans		2,760		212		2,548		2,760		38		2,880
Consumer Loans		-		-		-		-		-		-
Total	$	7,059	$	375	$	6,684	$	7,059	$	273	$	7,723

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

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):

	June 30, 2022
	Current		Past Due Greater Than 30 Days		Nonaccrual TDRs		Total TDRs
One-to-Four Family	$	-	$	1,818	$	1,818		1,818
Commercial Loans	$	212	$	-	$	212	$	212
	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 June 30, 2022, there were no commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs.

For each of the years ended June 30, 2022 and 2021, approximately $54,000 and $63,000, respectively, of interest was foregone on non-accrual loans.  Impaired loans consisted of non-accruing loans at June 30, 2022 and 2021, and TDRs at June 30, 2022 and 2021.  Impaired loans, segregated by class of loans, were as follows:

	2022		2021
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	2,194	$	134
Commercial		-		2,712
Multi-Family Residential		-		-
Land		-		-
Construction		-		-
Equity and Second Mortgage		-		-
Equity Lines of Credit		-		-
Commercial Loans		212		-
Consumer Loans		-		-
Total	$	2,406	$	2,846

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 December 31, 2020 or the 60^th 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.