Major classifications of loans at March 31, 2022 and June 30, 2021 are summarized as follows:

As of March 31, 2022 and June 30, 2021, the Bank had $21 thousand and $1.5 million of outstanding Paycheck Protection Program (PPP) loans to one and 44 new and existing customers, respectively, that are included in commercial loans in the above table and are guaranteed by the Small Business Administration and mature in two years.

Mortgage loans serviced for others are not included in the accompanying Consolidated Statements of Financial Condition. The total amount of loans serviced for the benefit of others was approximately $14.8 million and $18.6 million at March 31, 2022 and June 30, 2021, respectively. The Bank retained the related servicing rights for the loans that were sold and receives a 25 basis point servicing fee from the purchasers of the loans. Custodial escrow balances maintained in connection with the foregoing loan servicing are included in advances from borrowers for taxes and insurance.

Allowance for Loan Losses. The following tables set forth the allocation of the Bank’s allowance for loan losses by loan category at the dates indicated. The portion of the loan loss allowance allocated to each loan category does not represent the total available for future

losses which may occur within the loan category since the total loan loss allowance is a valuation allocation applicable to the entire loan portfolio. The Company generally charges-off the collateral or discounted cash flow deficiency on all loans at 90 days past due.

The provision for loan losses was determined by management to be an amount necessary to maintain a balance of allowance for loan losses at a level that considers all known and current losses in the loan portfolio as well as potential losses due to unknown factors such as the economic environment. Changes in the provision were based on management’s analysis of various factors such as: estimated fair value of underlying collateral, recent loss experience in particular segments of the portfolio, levels and trends in delinquent loans, and changes in general economic and business conditions. The Company considers the allowance for loan losses of $3.5 million and $3.6 million adequate to cover loan losses inherent in the loan portfolio at both March 31, 2022 and June 30, 2021, respectively.

The following table presents by portfolio segment, the changes in the allowance for loan losses for the three months ended March 31, 2022 and 2021:

The following table presents by portfolio segment, the changes in the allowance for loan losses for the nine months ended March 31, 2022 and 2021:

The following tables present the allowance for loan losses and recorded investment by loan portfolio classification as March 31, 2022 and June 30, 2021:

(1)	Acquired non-credit impaired loans are evaluated collectively, excluding loans that have subsequently moved to non-accrual status which are individually evaluated for impairment.

(2)	Acquired credit impaired loans are evaluated on an individual basis.


June 30, 2021	Residential real estate:						Commercial real estate:
			Home Equity		Construction-		1 - 4 family		Multi-family		Commercial		Construction
(Dollar amounts in thousands)	1 - 4 family		and HELOCs		residential		investor		(five or more)		non-residential		and Land		Commercial		Consumer		Total
Allowance ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		709		133		487		843		159		854		362		51		15		3,613
Total allowance	$	709	$	133	$	487	$	843	$	159	$	854	$	362	$	51	$	15	$	3,613

Loans receivable ending balance:
Individually evaluated for impairment	$	1,907	$	578	$	—	$	433	$	176	$	892	$	—	$	—	$	—	$	3,986
Collectively evaluated for impairment		87,540		14,617		8,582		98,043		12,008		68,530		6,377		4,151		535		300,383
Acquired non-credit impaired loans ⁽¹⁾		83,721		22,004		2,259		22,105		131		27,190		—		994		2,695		161,099
Acquired credit impaired loans ⁽²⁾		138		23		—		—		—		—		—		—		—		161
Total portfolio	$	173,306	$	37,222	$	10,841	$	120,581	$	12,315	$	96,612	$	6,377	$	5,145	$	3,230	$	465,629

(1)	Acquired non-credit impaired loans are evaluated collectively, excluding loans that have subsequently moved to non-accrual status which are individually evaluated for impairment.

(2)	Acquired credit impaired loans are evaluated on an individual basis.

During the three and nine months ended March 31, 2022, the changes in the provision for loan losses for each portfolio of loans were primarily due to fluctuations in the outstanding balance of each portfolio of loans collectively evaluated for impairment. Specifically, we experienced significant growth in our commercial non-residential real estate portfolio and a corresponding increase in the provision for loan losses for this portfolio. The overall decrease in the allowance and provision credit during the nine months ended March 31, 2022 can be primarily attributed to an improving economic outlook.

During the year ended June 30, 2021, the changes in the provision for loan losses related to one- to four-family residential real estate loans, residential real estate construction loans and commercial real estate land loans were primarily due to concerns with the risk profile of these portfolios in the then-current economic environment as impacted by the COVID-19 pandemic. The increase in reserves due to the COVID-19 pandemic was limited by the Bank making enhancements to its credit management function by adding new experienced team members and implementing an enhanced internal credit measurement and monitoring processes.

Credit Quality Information

The following tables represent credit exposures by internally assigned grades as of March 31, 2022 and June 30, 2021. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

The following tables set forth the amounts of the portfolio of classified asset categories for the commercial loan portfolios at March 31, 2022 and June 30, 2021:


March 31, 2022
	Commercial Real Estate
	1 - 4 family						Construction
	investor		Multi-family		Non-residential		and land		Commercial		Total
Pass	$	101,185	$	11,947	$	137,040	$	4,979	$	5,291	$	260,442
Special Mention		1,561		—		311		—		—		1,872
Substandard		111		470		929		—		—		1,510
Doubtful		—		—		—		—		—		—
Loss		—		—		—		—		—		—
Ending Balance	$	102,857	$	12,417	$	138,280	$	4,979	$	5,291	$	263,824


June 30, 2021
	Commercial Real Estate
	1 - 4 family						Construction
	investor		Multi-family		Non-residential		and land		Commercial		Total
Pass	$	118,175	$	12,139	$	95,720	$	6,377	$	5,145	$	237,556
Special Mention		2,054		—		356		—		—		2,410
Substandard		352		176		536		—		—		1,064
Doubtful		—		—		—		—		—		—
Loss		—		—		—		—		—		—
Ending Balance	$	120,581	$	12,315	$	96,612	$	6,377	$	5,145	$	241,030

The following tables set forth the amounts of the portfolio that are not rated by class of loans for the residential and consumer loan portfolios at March 31, 2022 and June 30, 2021:


Residential Real Estate and Consumer Loans
Credit Risk Internally Assigned
(Dollars in thousands)
March 31, 2022
	Residential Real Estate
			Home equity &
	1 - 4 family		HELOCs		Construction		Consumer		Total
Performing	$	146,813	$	32,570	$	10,917	$	2,239	$	192,539
Non-performing		4,622		316		—		123		5,061
	$	151,435	$	32,886	$	10,917	$	2,362	$	197,600


June 30, 2021
	Residential Real Estate
			Home equity &
	1 - 4 family		HELOCs		Construction		Consumer		Total
Performing	$	169,532	$	36,877	$	10,841	$	3,112	$	220,362
Non-performing		3,774		345		—		118		4,237
	$	173,306	$	37,222	$	10,841	$	3,230	$	224,599

Loans Acquired with Deteriorated Credit Quality

The outstanding principal and related carrying amount of loans acquired with deteriorated credit quality, for which the Company applies the provisions of ASC 310-30, as of March 31, 2022 and June 30, 2021, are as follows:


(Dollars in thousands)	March 31, 2022		June 30, 2021
Outstanding principal balance	$	236	$	247
Carrying amount		162		161

The following table presents changes in the accretable discount on loans acquired with deteriorated credit quality, for which the Company applies the provisions of ASC 310-30, for the period presented:


(Dollars in thousands)	Accretable Discount
Balance, May 1, 2020	$	57
Accretion		(4)
Balance, June 30, 2020	$	53
Accretion		(40)
Balance, June 30, 2021	$	13
Accretion		(12)
Balance, March 31, 2022	$	1

Loan Delinquencies and Non-accrual Loans

Following are tables which include an aging analysis of the recorded investment of past due loans as of March 31, 2022 and June 30, 2021.


	Aged Analysis of Past Due and Non-accrual Loans
	As of March 31, 2022
															Recorded		Recorded
									Acquired						Investment		Investment
	30 - 59 Days		60 - 89 Days		90 Days		Total Past		Credit				Total Loans		>90 Days and		Loans on
(Dollar amounts in thousands)	Past Due		Past Due		Or Greater		Due		Impaired		Current		Receivable		Accruing		Non-Accrual
Residential real estate:
1 - 4 family	$	1,098	$	197	$	2,601	$	3,896	$	139	$	147,400	$	151,435	$	—	$	4,622
Home equity and HELOCs		95		16		205		316		23		32,547		32,886		—		316
Construction - residential		—		—		—		—		—		10,917		10,917		—		—
Commercial real estate:
1 - 4 family investor		—		—		—		—		—		102,857		102,857		—		111
Multi-family		—		—		165		165		—		12,252		12,417		—		470
Commercial non-residential		1,145		—		—		1,145		—		137,135		138,280		—		894
Construction and land		—		—		—		—		—		4,979		4,979		—		—
Commercial		—		—		—		—		—		5,291		5,291		—		—
Consumer		—		32		6		38		—		2,324		2,362		—		123
Total	$	2,338	$	245	$	2,977	$	5,560	$	162	$	455,702	$	461,424	$	—	$	6,536


	Aged Analysis of Past Due and Non-accrual Loans
	As of June 30, 2021
															Recorded		Recorded
									Acquired						Investment		Investment
	30 - 59 Days		60 - 89 Days		90 Days		Total Past		Credit				Total Loans		>90 Days and		Loans on
(Dollar amounts in thousands)	Past Due		Past Due		Or Greater		Due		Impaired		Current		Receivable		Accruing		Non-Accrual
Residential real estate:
1 - 4 family	$	1,658	$	561	$	989	$	3,208	$	138	$	169,960	$	173,306	$	—	$	3,774
Home equity and HELOCs		58		150		80		288		23		36,911		37,222		—		345
Construction - residential		—		—		—		—		—		10,841		10,841		—		—
Commercial real estate:
1 - 4 family investor		81		—		271		352		—		120,229		120,581		—		352
Multi-family		—		344		176		520		—		11,795		12,315		—		176
Commercial non-residential		92		491		—		583		—		96,029		96,612		—		536
Construction and land		—		—		—		—		—		6,377		6,377		—		—
Commercial		—		—		—		—		—		5,145		5,145		—		—
Consumer		64		—		—		64		—		3,166		3,230		—		118
Total	$	1,953	$	1,546	$	1,516	$	5,015	$	161	$	460,453	$	465,629	$	—	$	5,301

Interest income on non-accrual loans that would have been recorded if these loans had performed in accordance with their terms was approximately $76 thousand, $229 thousand, $8 thousand, and $71 thousand, respectively, during the three and nine months ended March 31, 2022 and 2021, respectively.

Impaired Loans

Management considers commercial loans and commercial real estate loans which are 90 days or more past due to be impaired. Larger commercial loans and commercial real estate loans which are 60 days or more past due are selected for impairment testing in accordance with GAAP. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance for loan losses.

The following tables include the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, at March 31, 2022 and June 30, 2021.


March 31, 2022
			Unpaid
	Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance
With no related allowance recorded:
1 - 4 family residential real estate	$	3,435	$	3,598	$	—
Home equity and HELOCs		451		451		—
Construction residential		—		—		—
1 - 4 family investor commercial real estate		183		192		—
Multi-family		470		492		—
Commercial non-residential		1,239		1,287		—
Construction and land		—		—		—
Commercial		—		—		—
Consumer		—		—		—

With an allowance recorded:
1 - 4 family residential real estate	$	—	$	—	$	—
Home equity and HELOCs		—		—		—
Construction residential		—		—		—
1 - 4 family investor commercial real estate		—		—		—
Multi-family		—		—		—
Commercial non-residential		—		—		—
Construction and land		—		—		—
Commercial		—		—		—
Consumer		—		—		—

Total:
1 - 4 family residential real estate	$	3,435	$	3,598	$	—
Home equity and HELOCs		451		451		—
Construction residential		—		—		—
1 - 4 family investor commercial real estate		183		192		—
Multi-family		470		492		—
Commercial non-residential		1,239		1,287		—
Construction and land		—		—		—
Commercial		—		—		—
Consumer		—		—		—

The impaired loans table above includes accruing troubled debt restructurings (“TDRs”) in the amount of $772 thousand that are performing in accordance with their modified terms. The Company recognized $10 thousand and $33 thousand of interest income on accruing TDRs during the three and nine months ended March 31, 2022, respectively. The table above does not include $162 thousand of loans acquired with deteriorated credit quality, which have been recorded at their fair value at acquisition.


June 30, 2021
			Unpaid
	Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance
With no related allowance recorded:
1-4 family residential real estate	$	1,907	$	1,943	$	—
Home equity and HELOCs		578		587		—
Construction residential		—		—		—
1 - 4 family investor commercial real estate		433		477		—
Multi-family		176		180		—
Commercial non-residential		892		900		—
Construction and land		—		—		—
Commercial		—		—		—
Consumer		—		—		—

With an allowance recorded:
1-4 family residential real estate	$	—	$	—	$	—
Home equity and HELOCs		—		—		—
Construction residential		—		—		—
1 - 4 family investor commercial real estate		—		—		—
Multi-family		—		—		—
Commercial non-residential		—		—		—
Construction and land		—		—		—
Commercial		—		—		—
Consumer		—		—		—

Total:
1-4 family residential real estate	$	1,907	$	1,943	$	—
Home equity and HELOCs		578		587		—
Construction residential		—		—		—
1 - 4 family investor commercial real estate		433		477		—
Multi-family		176		180		—
Commercial non-residential		892		900		—
Construction and land		—		—		—
Commercial		—		—		—
Consumer		—		—		—

The impaired loans table above includes accruing TDRs in the amount of $964 thousand that are performing in accordance with their modified terms. The table above does not include $161 thousand of loans acquired with deteriorated credit quality, which have been recorded at their fair value at acquisition.

The following tables include the average recorded investment balances for impaired loans and the interest income recognized for the three and nine months ended March 31, 2022 and 2021.


March 31, 2022	Three Months Ended				Nine Months Ended
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
1-4 family residential real estate	$	3,042	$	—	$	2,301	$	—
Home equity and HELOCs		445		4		491		13
Construction residential		—		—		—		—
1-4 family investor commercial real estate		207		1		340		3
Multi-family		474		—		394		—
Commercial non-residential		1,249		6		1,023		17
Construction and land		—		—		—		—
Commercial		5		—		2		—
Consumer		—		—		—		—

With an allowance recorded:
1-4 family residential real estate	$	—	$	—	$	—	$	—
Home equity and HELOCs		—		—		—		—
Construction residential		—		—		—		—
1-4 family investor commercial real estate
Multi-family		—		—		—		—
Commercial non-residential		—		—		—		—
Construction and land		—		—		—		—
Commercial		—		—		—		—
Consumer		—		—		—		—

Total:
1-4 family residential real estate	$	3,042	$	—	$	2,301	$	—
Home equity and HELOCs		445		4		491		13
Construction residential		—		—		—		—
1-4 family investor commercial real estate		207		1		340		3
Multi-family		474		—		394		—
Commercial non-residential		1,249		6		1,023		17
Construction and land		—		—		—		—
Commercial		5		—		2		—
Consumer		—		—		—		—


March 31, 2021	Three Months Ended				Nine Months Ended
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
1-4 family residential real estate	$	1,885	$	—	$	1,465	$	9
Home equity and HELOCs		626		5		643		15
Construction residential		—		—		—		—
1-4 family investor commercial real estate		324		1		324		4
Multi-family		182		—		183		—
Commercial non-residential		1,059		8		897		26
Construction and land		—		—		—		—
Commercial		—		—		—		—
Consumer		—		—		—		—

With an allowance recorded:
1-4 family residential real estate	$	—	$	—	$	—	$	—
Home equity and HELOCs		—		—		—		—
Construction residential		—		—		—		—
1-4 family investor commercial real estate
Multi-family		—		—		—		—
Commercial non-residential		—		—		—		—
Construction and land		—		—		—		—
Commercial		—		—		—		—
Consumer		—		—		—		—

Total:
1-4 family residential real estate	$	1,885	$	—	$	1,465	$	9
Home equity and HELOCs		626		5		643		15
Construction residential		—		—		—		—
1-4 family investor commercial real estate		324		1		324		4
Multi-family		182		—		183		—
Commercial non-residential		1,059		8		897		26
Construction and land		—		—		—		—
Commercial		—		—		—		—
Consumer		—		—		—		—

Generally, the Bank will charge-off the collateral or discounted cash flow deficiency on all impaired loans. Interest income that would have been recorded for the three and nine months ended March 31, 2022, had impaired loans been current according to their original terms, amounted to $55 thousand and $128 thousand, respectively. Interest income that would have been recorded for the three and nine months ended March 31, 2021, had impaired loans been current according to their original terms, amounted to $50 thousand and $150 thousand, respectively.

Troubled Debt Restructurings

The Bank determines whether a restructuring of debt constitutes a TDR in accordance with guidance under FASB ASC Topic 310 Receivables. The Bank considers a loan a TDR when the borrower is experiencing financial difficulty and the Bank grants a concession that they would not otherwise consider but for the borrower’s financial difficulties. A TDR includes a modification of debt terms or assets received in satisfaction of the debt (including a foreclosure or a deed in lieu of foreclosure) or a combination of types. The Bank evaluates selective criteria to determine if a borrower is experiencing financial difficulty, including the ability of the borrower to obtain funds from sources other than the Bank at market rates. The Bank considers all TDR loans as impaired loans and, generally, they are put on non-accrual status. The Bank will not consider the loan a TDR if the loan modification was made for customer retention purposes and the modification reflects prevailing market conditions. The Bank’s policy for returning a loan to accruing status requires the preparation of a well-documented credit evaluation which includes the following:

●

A review of the borrower’s current financial condition in which the borrower must demonstrate sufficient cash flow to support the repayment of all principal and interest including any amounts previously charged-off;

●

An updated appraisal or home valuation which must demonstrate sufficient collateral value to support the debt; and

●

Sustained performance based on the restructured terms for at least six consecutive months.

During the three months ended June 30, 2020, the Bank began providing customer relief programs, such as payment deferrals or interest only payments on loans, in accordance with the CARES Act. The Bank does not consider a modification to be a TDR if it occurred as a result of the loan forbearance program under the CARES Act. The CARES Act provides that a loan term modification does not automatically result in TDR status if the modification is made on a good-faith basis in response to COVID-19 to borrowers who were classified as current and not more than 30 days past due as of December 31, 2019, and executed between March 1, 2020 and the earlier of (a) 60 days after the date of termination of the COVID-19 pandemic national emergency, or (b) January 1, 2022. Following January 1, 2022, this provision of the CARES Act is no longer in effect. During the three months ended June 30, 2020, the Bank modified approximately $49.8 million of loans to provide its customers this monetary relief. Generally, these modifications included the deferral of principal and interest payments for a period of three months, although interest income continued to accrue. The three-month deferral period has ended on the loans on deferral and, as of March 31, 2022, no loans remain on deferral under the CARES Act.

During the nine months ended March 31, 2022 and 2021, there were no loans modified that were identified as a TDR. The Company did not experience any re-defaulted TDRs subsequent to the loan being modified during the nine months ended March 31, 2022 and 2021.