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Loans

9 Months Ended

Mar. 31, 2024

Note 4- Loans

On July 1, 2023, the Company adopted ASC 326. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables. All loan information presented as of March 31, 2024 is in accordance with ASC 326. All loan information presented as of June 30, 2023 or a prior date is presented in accordance with previously applicable GAAP (incurred loss method).

The Company’s loans are stated at their face amount, net of deferred fees and costs and discounts, and consist of the classes of loans included in the table below. The Company has elected to exclude accrued interest receivable, totaling $543,137 at March 31, 2024, from the amortized cost basis of loans.

A summary of loans by major category follows:


	Unaudited
	March 31, 2024		June 30, 2023

	(Dollars in thousands)
Commercial real estate	$	81,889	$	84,581
Commercial and industrial		5,448		6,878
Construction		1,315		1,905
One-to-four-family residential		58,189		59,563
Multi-family real estate		45,330		44,184
Consumer		1,575		2,825
Total loans		193,746		199,936
Deferred loan fees		(51)		(63)
Allowance for credit losses		(1,770)		(2,159)
Loans, net	$	191,925	$	197,714

The following table summarizes the activity in the allowance for credit losses - loans by loan class for the three and nine months ended March 31, 2024:


	Allowance for Credit Losses-Loans-Three Months Ended
	(Dollars in thousands)

										Provision for
										(Recovery of)
				Impact of						Credit
		Beginning		Adoption of						Losses-		Ending
		Balance		ASC 326		Charge-offs		Recoveries		Loans		Balance
		January 1, 2024										March 31, 2024
Commercial real estate	$	344	$	—	$	—	$	—	$	(41)	$	303
Commercial and industrial		21		—		—		—		(3)		18
Construction		6		—		—		—		(1)		5
One-to-four-family residential		1,295		—		—		—		(42)		1,253
Multi-family real estate		218		—		—		—		(32)		186
Consumer		7		—		—		1		(3)		5
Total loans	$	1,891	$	—	$	—	$	1	$	(122)	$	1,770


	Allowance for Credit Losses-Loans-Nine Months Ended
	(Dollars in thousands)

		Beginning								Provision for
		Balance								(Recovery of)
		Prior to		Impact of						Credit
		Adoption of		Adoption of						Losses-		Ending
		ASC 326		ASC 326		Charge-offs		Recoveries		Loans		Balance
		July 1, 2023										March 31, 2024
Commercial real estate	$	1,196	$	(818)	$	—	$	—	$	(75)	$	303
Commercial and industrial		18		5		—		—		(5)		18
Construction		6		2		—		—		(3)		5
One-to-four-family residential		207		1,137		—		—		(91)		1,253
Multi-family real estate		365		(147)		—		—		(32)		186
Consumer		2		11		—		2		(10)		5
Unallocated		365		(365)		—		—		—		—
Total loans	$	2,159	$	(175)	$	—	$	2	$	(216)	$	1,770

The following table summarizes the activity in the allowance for credit losses - loans by loan class for the three and nine months ended March 31, 2023:


	Commercial		Commercial				One-to-Four		Multi-Family
	Real Estate		and Industrial		Construction		Residential		Real Estate		Consumer		Unallocated		Total
Allowance for credit losses
Balance at beginning of period	$	1,591,644	$	32,701	$	55,029	$	263,951	$	233,371	$	601	$	17,753	$	2,195,050
Charge-offs		(136,753)		—		—		—		—		—		—		(136,753)
Recoveries		—		—		—		—		—		572		—		572
Provisions		109,130		(5,303)		(30,238)		(41,667)		(17,238)		(553)		(14,131)		—
Balance at September 30, 2022		1,564,021		27,398		24,791		222,284		216,133		620		3,622		2,058,869
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		602		—		602
Provisions		(279,012)		(6,060)		(7,185)		(13,998)		(20,376)		(619)		327,250		—
Balance at December 31, 2022		1,285,009		21,338		17,606		208,286		195,757		603		330,872		2,059,471
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		618		—		618
Provisions		(48,960)		(2,772)		(3,430)		1,822		62,340		(506)		(8,494)		—
Balance at end of period	$	1,236,049	$	18,566	$	14,176	$	210,108	$	258,097	$	715	$	322,378	$	2,060,089

Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,236,049		18,566		14,176		210,108		258,097		715		322,378		2,060,089
Balance at end of period	$	1,236,049	$	18,566	$	14,176	$	210,108	$	258,097	$	715	$	322,378	$	2,060,089
Loans
Individually evaluated for impairment	$	—	$	—	$	—	$	119,883	$	—	$	—	$	—	$	119,883
Collectively evaluated for impairment		84,944,122		7,210,087		7,520,505		60,452,863		40,805,841		3,143,433		—		204,076,851
Balance at end of period	$	84,944,122	$	7,210,087	$	7,520,505	$	60,572,746	$	40,805,841	$	3,143,433	$	—	$	204,196,734

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of June 30, 2023:


	Commercial		Commercial				One-to-Four		Multi-Family
	Real Estate		and Industrial		Construction		Residential		Real Estate		Consumer		Unallocated		Total
June 30, 2023
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,196,479		17,711		6,302		206,771		365,401		653		365,273		2,158,590
Balance at end of period	$	1,196,479	$	17,711	$	6,302	$	206,771	$	365,401	$	653	$	365,273	$	2,158,590
Loans
Individually evaluated for impairment	$	—	$	—	$	—	$	117,103	$	—	$	—	$	—	$	117,103
Collectively evaluated for impairment		84,580,946		6,878,209		1,905,255		59,445,715		44,183,871		2,824,747				199,818,743
Balance at end of period	$	84,580,946	$	6,878,209	$	1,905,255	$	59,562,818	$	44,183,871	$	2,824,747	$	—	$	199,935,846

The following table presents a breakdown of the provision for (recovery of) credit losses for the periods indicated:


	Three Months				Nine Months
	Ended				Ended
	March 31,				March 31,
	2024		2023		2024		2023
Provision for (recovery of) credit losses:
Provision for (recovery of) loans	$	(122,000)	$	—	$	(216,000)	$	—
Provision for unfunded commitments		—		—		—		—
Total provision for (recovery of) credit losses	$	(122,000)	$	—	$	(216,000)	$	—

Credit Quality Indicators

The Company 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, collateral adequacy, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as commercial and industrial and commercial real estate loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:

Pass – Loans classified as pass represent loans that are evaluated and are performing under the stated terms. Pass rated assets are analyzed by the paying capacity, the current net worth, and the value of the loan collateral of the obligor.

Special Mention/Watch – Loans classified as watch possess potential weaknesses that require management attention but do not yet warrant adverse classification. While the status of a loan put on this list may not technically trigger their classification as substandard or doubtful, it is considered a proactive way to identify potential issues and address them before the situation deteriorates further and does result in a loss for the Company.

Substandard – Loans classified as substandard are inadequately protected by the current net worth, paying capacity of the obligor, or by the collateral pledged. Substandard loans must have a well-defined weakness or weaknesses that jeopardize the repayment of the debt as originally contracted. They are characterized by the distinct possibility that the Company will sustain a loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have the weaknesses of 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 in this category are individually evaluated for impairment or charged-off if deemed uncollectible.

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of March 31, 2024 based on year of origination:


																	Revolving
																	Loans
															Revolving		Converted to
			2024		2023		2022		2021		2020		Prior		Loans		Term Loans		Total

		(Dollars in thousands)

Commercial real estate
	Pass	$	4,255	$	4,695	$	32,896	$	23,624	$	8,149	$	8,072	$	198	$	—	$	81,889
	Special Mention/Watch		—		—		—		—		—		—		—		—		—
	Substandard		—		—		—		—		—		—		—		—		—
	Nonaccrual		—		—		—		—		—		—		—		—		—
Total commercial real estate		$	4,255	$	4,695	$	32,896	$	23,624	$	8,149	$	8,072	$	198	$	—	$	81,889

Commercial and industrial
	Pass	$	34	$	877	$	1,703	$	2,272	$	85	$	451	$	26	$	—	$	5,448
	Special Mention/Watch		—		—		—		—		—		—		—		—		—
	Substandard		—		—		—		—		—		—		—		—		—
	Nonaccrual		—		—		—		—		—		—		—		—		—
Total commercial and industrial		$	34	$	877	$	1,703	$	2,272	$	85	$	451	$	26	$	—	$	5,448

Construction
	Pass	$	—	$	1,315	$	—	$	—	$	—	$	—	$	—	$	—	$	1,315
	Special Mention/Watch		—		—		—		—		—		—		—		—		—
	Substandard		—		—		—		—		—		—		—		—		—
	Nonaccrual		—		—		—		—		—		—		—		—		—
Total construction		$	—	$	1,315	$	—	$	—	$	—	$	—	$	—	$	—	$	1,315

One-to-four-family residential
	Performing	$	2,888	$	11,263	$	11,829	$	13,858	$	6,087	$	12,264	$	—	$	—	$	58,189
	Non-performing		—		—		—		—		—		—		—		—		—
Total one-to-four-family		$	2,888	$	11,263	$	11,829	$	13,858	$	6,087	$	12,264	$	—	$	—	$	58,189

Multi-family real estate
	Performing	$	1,836	$	8,761	$	16,760	$	13,416	$	1,867	$	2,634	$	—	$	—	$	45,274
	Non-performing		—		—		—		—		—		—		56		—		56
Total multi-family real estate		$	1,836	$	8,761	$	16,760	$	13,416	$	1,867	$	2,634	$	56	$	—	$	45,330

Consumer
	Performing	$	176	$	110	$	150	$	8	$	66	$	—	$	1,065	$	—	$	1,575
	Non-performing		—		—		—		—		—		—		—		—		—
Total consumer		$	176	$	110	$	150	$	8	$	66	$	—	$	1,065	$	—	$	1,575


Total loans		$	9,189	$	27,021	$	63,338	$	53,178	$	16,254	$	23,421	$	1,345	$	—	$	193,746

The risk category of loans by class of loans as of June 30, 2023, is as follows:


			Special Mention/
	Pass		Watch		Substandard		Doubtful		Total
June 30, 2023
Commercial real estate	$	84,580,946	$	—	$	—	$	—	$	84,580,946
Commercial and industrial		6,878,209		—		—		—		6,878,209
Construction		1,905,255		—		—		—		1,905,255
	$	93,364,410	$	—	$	—	$	—	$	93,364,410

Residential real estate, multi-family real estate and consumer loans are managed on a pool basis due to their homogeneous nature. Loans that are 90 days or more delinquent or are not accruing interest are considered nonperforming. The following table presents the recorded investments in residential real estate, multi-family real estate and consumer loans by class based on payment activity as of June 30, 2023:


	Performing		Nonperforming		Total
June 30, 2023
One-to-four-family residential	$	59,562,818	$	—	$	59,562,818
Multi-family real estate		44,183,871		—		44,183,871
Consumer		2,824,747		—		2,824,747
	$	106,571,436	$	—	$	106,571,436

The following tables summarize the aging of the past due loans by loan class within the portfolio segments as of March 31, 2024 and June 30, 2023:


	Still Accruing
	30-59 Days		60-89 Days		Over 90 Days		Nonaccrual
	Past Due		Past Due		Past Due		Balance
March 31, 2024
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial		—		—		—		—
Construction		—		—		—		—
One-to-four-family residential		—		68,323		—		—
Multi-family real estate		—		—		—		55,713
Consumer		—		—		—		—
Total	$	—	$	68,323	$	—	$	55,713


	Still Accruing
	30-59 Days		60-89 Days		Over 90 Days		Nonaccrual
	Past Due		Past Due		Past Due		Balance
June 30, 2023
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial		16,487		—		—		—
Construction		—		—		—		—
One-to-four-family residential		26,986		—		—		—
Multi-family real estate		—		—		—		—
Consumer		—		—		—		—
Total	$	43,473	$	—	$	—	$	—

There was one loan on nonaccrual status as of March 31, 2024 and none at June 30, 2023. The multi-family real estate loan for $56,000 was returned to accrual status in April 2024 upon renewal of the matured loan.

Set forth below is a summary of the amortized cost basis of loans on nonaccrual status and loans past due over 90 days and still accruing interest as of March 31, 2024.


		Nonaccrual loans	Loans Past Due
	Without an Allowance		Over 90 Days		Interest Income
	For Credit Loss		Still Accruing		Three Months Ended		Nine Months Ended
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial		—		—		—		—
Construction		—		—		—		—
One-to-four-family residential		—		—		—		—
Multi-family real estate		—		—		—		1,392
Consumer		—		—		—		—
Total loans	$	—	$	—	$	—	$	1,392

Impaired Loans

A loan was considered impaired when based on current information and events, it is probable that the Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.

The following tables summarize individually impaired loans by class of loans as of June 30, 2023 and for the year then ended:


							For the Year Ended
							June 30, 2023
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance (1)		Allowance		Investment		Recognized
June 30, 2023
With no related allowance recorded
One-to-four-family residential	$	117,103	$	117,103	$	—	$	123,307	$	6,967
	$	117,103	$	117,103	$	—	$	123,307	$	6,967

For the Year Ended

June 30, 2023

Unpaid

Average

Interest

Recorded

Principal

Related

Recorded

Income

Investment

Balance (1)

Allowance

Investment

Recognized

With an allowance recorded

One-to-four-family residential

—

(1) Represents the borrower's loan obligation, gross of any previously charged-off amounts.

The Company’s July 1, 2023 adoption of ASU 2022-02 eliminates the recognition and measurement of TDRs. Upon adoption of this guidance, the Company will no longer recognize an allowance for credit losses for the economic concession granted to a borrower for changes in the timing and amount of contractual cash flows when a loan is restructured. The adoption of ASU 2022-02 results in a change to reporting for loan modifications to borrowers experiencing financial difficulties. With the adoption of ASU 2022-02 these modifications require enhanced reporting on the type of modifications granted and the financial magnitude of the concessions granted. When the Company modifies a loan with financial difficulty, such modifications generally include one or a combination of the following: an extension

of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; a change in scheduled payment amount; or principal forgiveness.

There were no loans during the three and nine months ended March 31, 2024 that were modified to borrowers experiencing financial difficulty since the adoption of ASU 2022-02 effective July 1, 2023.

There were no loans modified as TDRs during the three and nine months ended March 31, 2023.

The Company maintains a collateral pledge agreement with the FHLB covering secured advances whereby the Company has agreed to retain, free of all other pledges, liens, and encumbrances, commercial and industrial, commercial real estate, and one-to-four family residential and multi-family real estate loans. The pledged loans are discounted at a factor of 24% to 38% when aggregating the amount of loans required by the pledge agreement. The amount of eligible collateral was $92,916,601 and $95,988,835 as of March 31, 2024 and June 30, 2023, respectively. There was also FHLB stock of $1,329,413 and $770,273 pledged as of March 31, 2024 and June 30, 2023.