Loans Receivable

12 Months Ended

Jun. 30, 2023

Loans Receivable [Abstract]

Loans Receivable

Note 3. Loans Receivable

Loans receivable at June 30, 2023 and 2022, are summarized as follows:

	2023			2022
	(In Thousands)
Loans Secured by Mortgages on Real Estate
One-to-Four Family Residential	$	179,579		$	120,014
Commercial		148,441			127,589
Multi-Family Residential		28,849			30,411
Land		26,841			22,127
Construction		28,035			27,884
Equity and Second Mortgage		2,450			1,587
Equity Lines of Credit		23,817			17,831
Total Mortgage Loans		438,012			347,443
Commercial Loans		55,364			44,487
Consumer Loans
Loans on Savings Accounts		372			266
Other Consumer Loans		1,082			439
Total Consumer Other Loans		1,454			705
Total Loans		494,830			392,635
Less:  Allowance for Loan Losses		(5,173	)		(4,451	)
Unamortized Loan Fees		(164	)		(311	)
Net Loans Receivable	$	489,493		$	387,873

An analysis of the allowance for loan losses follows:

	2023			2022
	(In Thousands)
Balance - Beginning of Year	$	4,451		$	4,122
Provision for Loan Losses		868			336
Recoveries		91			24
Loan Charge-Offs		(237	)		(31	)
Balance – End of Year	$	5,173		$	4,451

Fixed rate loans receivable, as of June 30, 2023, 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	$	14,694	$	84,704	$	15,845	$	27,217	$	142,460
Adjustable Rate		3,211		19,510		11,063		3,334		37,118
Other Loans Secured by Real Estate
Fixed Rate		44,514		108,402		56,926		16,236		226,078
Adjustable Rate		31,742		614		-		-		32,356
All Other Loans
Fixed Rate		5,638		24,607		10,183		2,859		43,287
Adjustable Rate		13,531		-		-		-		13,531
Total	$	113,331	$	237,837	$	94,016	$	49,646	$	494,830

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, 2023 and 2022:

June 30, 2023	Pass and Pass Watch		Special Mention		Substandard		Doubtful		Total
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	176,536	$	810	$	2,233	$	-	$	179,579
Commercial		146,787		-		1,654		-		148,441
Multi-Family Residential		28,849		-		-		-		28,849
Land		26,841		-		-		-		26,841
Construction		28,035		-		-		-		28,035
Equity and Second Mortgage		2,381		-		69		-		2,450
Equity Lines of Credit		23,817		-		-		-		23,817
Commercial Loans		53,025		2,339		-		-		55,364
Consumer Loans		1,432		1		21		-		1,454
Total	$	487,703	$	3,150	$	3,977	$	-	$	494,830

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

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, 2023 and 2022, is as follows:

June 30, 2023	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	$	177	$	750	$	1,174	$	2,101	$	177,478	$	179,579	$	-
Commercial		-		-		-		-		148,441		148,441		-
Multi-Family Residential		-		-		-		-		28,849		28,849		-
Land		36		-		-		36		26,805		26,841		-
Construction		-		-		-		-		28,035		28,035		-
Equity and Second Mortgage		54		-		-		54		2,396		2,450		-
Equity Lines of Credit		-		-		-		-		23,817		23,817		-
Commercial Loans		63		-		-		63		55,301		55,364		-
Consumer Loans		-		-		-		-		1,454		1,454		-
Total	$	330	$	750	$	1,174	$	2,254	$	492,576	$	494,830	$	-

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

The allowance for loan losses and recorded investment in loans for the year ended June 30, 2023 and 2022 was as follows:

	Real Estate Loans
June 30, 2023	Residential			Commercial		Multi- Family			Land			Construction			Other			Commercial Loans			Consumer Loans		Total
									(In Thousands)
Allowance for loan losses:
Beginning Balances	$	1,367		$	1,295	$	357		$	305		$	282		$	197		$	646		$	2	$	4,451
Charge-Offs		(41	)		-		-			-			-			(26	)		(170	)		-		(237	)
Recoveries		4			-		-			-			-			5			82			-		91
Current Provision		570			378		(129	)		(31	)		(28	)		75			30			3		868
Ending Balances	$	1,900		$	1,673	$	228		$	274		$	254		$	251		$	588		$	5	$	5,173
Evaluated for Impairment:
Individually		495			100		-			-			-			4			29			-		628
Collectively		1,405			1,573		228			274			254			247			559			5		4,545
Loans Receivable:
Ending Balances – Total	$	179,579		$	148,441	$	28,849		$	26,841		$	28,035		$	26,267		$	55,364		$	1,454	$	494,830
Ending Balances:
Evaluated for Impairment:
Individually		3,043			1,654		-			-			-			69			2,339			22		7,127
Collectively	$	176,536		$	146,787	$	28,849		$	26,841		$	28,035		$	26,198		$	53,025		$	1,432	$	487,703

	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			1,654			-		-			-		-			2,760		-			7,059
Collectively	$	117,464		$	125,840		$	30,411	$	22,127		$	27,884	$	19,418		$	41,727	$	705		$	385,576

The following table’s present loans individually evaluated for impairment, segregated by class of loans, as of June 30, 2023 and 2022:

June 30, 2023	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	$	2,559	$	156	$	2,403	$	2,559	$	495	$	3,644
Commercial		1,617		-		1,617		1,617		100		1,675
Multi-Family Residential		-		-		-		-		-		-
Land		-		-		-		-		-		-
Construction		-		-		-		-		-		-
Equity and Second Mortgage		-		-		-		-		-		63
Equity Lines of Credit		-		-		-		-		-		-
Commercial Loans		2,197		37		2,160		2,197		29		2,659
Consumer Loans		-		-		-		-		-		23
Purchased Credit Impaired		754		685		69		754		4		754
Total	$	7,127	$	878	$	6,249	$	7,127	$	628	$	8,818

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

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, 2023
	Current		Past Due Greater Than 30 Days		Nonaccrual TDRs		Total TDRs
One-to-Four Family	$	-	$	10	$	10	$	10
Commercial Loans	$	-	$	-	$	-	$	-
	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

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, 2023, 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, 2023 and 2022, approximately $182,000 and $54,000, respectively, of interest was foregone on non-accrual loans.  Impaired loans consisted of non-accruing loans at June 30, 2023 and 2022, and TDRs at June 30, 2023 and 2022.  Impaired loans, segregated by class of loans, were as follows:

	2023		2022
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	1,134	$	2,391
Commercial		-		-
Multi-Family Residential		-		-
Land		-		-
Construction		-		-
Equity and Second Mortgage		-		-
Equity Lines of Credit		-		-
Commercial Loans		-		-
Consumer Loans		-		-
Total	$	1,134	$	2,391

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.