Loans Receivable | Note 4. Loans Receivable Loans receivable are summarized as follows (in thousands): September 30, June 30, 2022 2022 Mortgage loans: Residential $ 214,586 $ 214,167 Commercial 953,539 942,130 Construction 25,307 20,896 Net deferred loan origination fees ( 145 ) ( 100 ) Total mortgage loans 1,193,287 1,177,093 Commercial and consumer loans: Commercial loans 141,902 136,304 Home equity lines of credit 22,955 23,688 Consumer and overdrafts 508 594 Net deferred loan origination costs 593 620 Total commercial and consumer loans 165,958 161,206 Total loans receivable 1,359,245 1,338,299 Allowance for loan losses ( 9,048 ) ( 8,927 ) Loans receivable, net $ 1,350,197 $ 1,329,372 The following tables present the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2022 and 2021 (in thousands): Three Months Ended September 30, 2022 Beginning Provision Charge-offs Recoveries Ending Residential mortgages $ 323 $ ( 3 ) $ - $ 2 $ 322 Commercial mortgages 7,351 5 - - 7,356 Construction 209 25 - - 234 Commercial loans 982 32 ( 15 ) 74 1,073 Home equity lines of credit 51 ( 9 ) - 1 43 Consumer and overdrafts 11 32 ( 24 ) 1 20 Total $ 8,927 $ 82 $ ( 39 ) $ 78 $ 9,048 Three Months Ended September 30, 2021 Beginning Provision Charge-offs Recoveries Ending Residential mortgages $ 337 $ ( 13 ) $ - $ 2 $ 326 Commercial mortgages 6,435 134 - - 6,569 Construction 102 25 - - 127 Commercial loans 948 ( 143 ) ( 100 ) 367 1,072 Home equity lines of credit 54 ( 3 ) - 2 53 Consumer and overdrafts 5 13 ( 7 ) 1 12 Total $ 7,881 $ 13 $ ( 107 ) $ 372 $ 8,159 The following tables present the balance in the allowance for loan losses and the recorded investment in loans, excluding net deferred fees and accrued interest, by portfolio segment, and based on impairment method as of September 30, 2022 and June 30, 2022 (in thousands): September 30, 2022 Loans Allowance for Loan Losses Individually Collectively Acquired With Total Individually Collectively Acquired With Total Residential mortgages $ 1,664 $ 212,704 $ 218 $ 214,586 $ 109 $ 213 $ - $ 322 Commercial mortgages 3,504 949,185 850 953,539 - 7,356 - 7,356 Construction 2,792 22,515 - 25,307 - 234 - 234 Commercial loans 781 141,121 - 141,902 - 1,073 - 1,073 Home equity lines of credit 400 22,469 86 22,955 2 41 - 43 Consumer and overdrafts - 508 - 508 - 20 - 20 Total $ 9,141 $ 1,348,502 $ 1,154 $ 1,358,797 $ 111 $ 8,937 $ - $ 9,048 June 30, 2022 Loans Allowance for Loan Losses Individually Collectively Acquired With Total Individually Collectively Acquired With Total Residential mortgages $ 1,613 $ 212,333 $ 221 $ 214,167 $ 110 $ 213 $ - $ 323 Commercial mortgages 4,778 936,493 859 942,130 - 7,351 - 7,351 Construction 2,792 18,104 - 20,896 - 209 - 209 Commercial loans 783 135,521 - 136,304 - 982 - 982 Home equity lines of credit 452 23,147 89 23,688 9 42 - 51 Consumer and overdrafts - 594 - 594 - 11 - 11 Total $ 10,418 $ 1,326,192 $ 1,169 $ 1,337,779 $ 119 $ 8,808 $ - $ 8,927 The following tables present information related to loans individually evaluated for impairment (excluding loans acquired with deteriorated credit quality) by portfolio segment as of September 30, 2022 and June 30, 2022 (in thousands): September 30, 2022 June 30, 2022 Unpaid Recorded Investment Allowance for Loan Losses Unpaid Recorded Investment Allowance for Loan Losses With no related allowance recorded: Residential mortgages $ 1,382 $ 1,313 $ - $ 1,262 $ 1,197 $ - Commercial mortgages 3,582 3,504 - 4,789 4,778 - Construction 2,792 2,792 - 2,792 2,792 - Commercial loans 793 781 - 795 783 - Home equity lines of credit 383 376 - 379 399 - With an allowance recorded: Residential mortgages 351 351 109 353 416 110 Home equity lines of credit 31 24 2 60 53 9 Total $ 9,314 $ 9,141 $ 111 $ 10,430 $ 10,418 $ 119 The tables below present the average recorded investment and interest income recognized on loans individually evaluated for impairment, by portfolio segment, for the three months ended September 30, 2022 and 2021 (in thousands): September 30, 2022 September 30, 2021 Average Interest Average Interest With no related allowance recorded: Residential mortgages $ 1,318 $ 9 $ 1,936 $ 7 Commercial mortgages 3,543 - 3,582 - Construction 2,792 - - - Commercial loans 782 4 980 191 Home equity lines of credit 378 - 350 2 With an allowance recorded: Residential mortgages 352 3 424 3 Home equity lines of credit 27 - 33 - Total $ 9,192 $ 16 $ 7,305 $ 203 The following table presents the recorded investment in nonaccrual loans and in loans past due over 90 days and still on accrual status, by portfolio segment, as of September 30, 2022 and June 30, 2022 (in thousands): Loans Past Due Over 90 Days Nonaccrual and Still Accruing September 30, June 30, September 30, June 30, 2022 2022 2022 2022 Residential mortgages $ 791 $ 671 $ - $ - Commercial mortgages 3,504 4,778 - - Construction 2,792 2,792 - - Commercial loans 534 539 - - Home equity lines of credit 368 416 - - Consumer and overdrafts - - - 39 Total $ 7,989 $ 9,196 $ - $ 39 Nonperforming loans include both smaller-balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. The table above excludes acquired loans that are accounted for as purchased credit impaired loans totaling $ 133,000 and $ 137,000 as of September 30, 2022 and June 30, 2022, respectively. Such loans are excluded because the loans are in pools that are considered performing. The discounts arising from recording these loans at fair value upon acquisition were due in part to credit quality and the accretable yield is being recognized as interest income over the life of the loans based on expected cash flows. The following tables present the aging of the recorded investment in past due loans by portfolio segment as of September 30, 2022 and June 30, 2022 (in thousands): September 30, 2022 30-59 60-89 90 Days or Days Past Days Past More Past Total Past Due Due Due Due Current Total Residential mortgages $ - $ 104 $ 427 $ 531 $ 214,055 $ 214,586 Commercial mortgages - - - - 953,539 953,539 Construction - - 2,792 2,792 22,515 25,307 Commercial loans - 51 533 584 141,318 141,902 Home equity lines of credit - - 296 296 22,659 22,955 Consumer and overdrafts - - - - 508 508 Total $ - $ 155 $ 4,048 $ 4,203 $ 1,354,594 $ 1,358,797 June 30, 2022 30-59 60-89 90 Days or Days Past Days Past More Past Total Past Due Due Due Due Current Total Residential mortgages $ - $ - $ 367 $ 367 $ 213,800 $ 214,167 Commercial mortgages - - 1,197 1,197 940,933 942,130 Construction - - 1,113 1,113 19,783 20,896 Commercial loans - 16 400 416 135,888 136,304 Home equity lines of credit - - 399 399 23,289 23,688 Consumer and overdrafts - - 39 39 555 594 Total $ - $ 16 $ 3,515 $ 3,531 $ 1,334,248 $ 1,337,779 Troubled Debt Restructurings The terms of certain loans have been modified as troubled debt restructurings (“TDRs”). The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. All TDRs are considered impaired loans. As of both September 30, 2022 and June 30, 2022, the Company had 9 loans, classified as TDRs totaling $ 1.4 million, including $ 1.2 million of loans still accruing interest. The Company has allocated $ 111,000 and $ 119,000 , respectively, of specific reserves to customers whose loan terms have been modified in TDRs as of September 30, 2022 and June 30, 2022. As of September 30, 2022, the Company has no commitments to lend additional funds to customers with outstanding loans that are classified as TDRs. The Company did no t modify any loans during the three months ended September 30, 2022 or 2021 that were classified as TDRs. There were no defaults of TDRs occurring in the three months ended September 30, 2022 or 2021 that were modified in the twelve months prior to default. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” provides banks the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. On December 27, 2020, the Consolidated Appropriations Act 2021 was signed into law. Section 541 of this legislation, “Extension of Temporary Relief From Troubled Debt Restructurings and Insurer Clarification,” extends Section 4013 of the CARES Act to the earlier of January 1, 2022 or 60 days after the termination of the national emergency declared relating to COVID-19. This extension expired as of January 1, 2022 . Additionally, on April 7, 2020, the banking agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, issued a statement, “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)” (“Interagency Statement”), to encourage banks to work prudently with borrowers and to describe the agencies’ interpretation of how accounting rules under ASC 310-40, “Troubled Debt Restructurings by Creditors,” apply to certain COVID-19-related modifications. During the three months ended September 30, 2022, no loan payment deferrals were granted or extended by the Company. During the three months ended September 30, 2021, the Company granted or extended loan payment deferrals for 5 residential mortgage, construction and commercial loans totaling $ 3.7 million. In accordance with either the CARES Act (as amended) or Interagency Statement, these modifications are not considered TDRs. The Company had no loans on loan payment deferral as of September 30, 2022 nor June 30, 2022. 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, 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 includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a monthly basis. The Company utilizes the same grading process for acquired loans as it does for originated loans. The Company uses the following definitions for risk ratings: Special Mention – Loans classified 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 paying 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. Loans not meeting the criteria above that are analyzed individually as part of the above-described process and loans in groups of homogenous loans are considered to be pass rated loans. These loans are monitored based on delinquency and performance. Based on the most recent analysis performed, the risk category of loans by portfolio segment is as follows (in thousands): September 30, 2022 Pass Special Substandard Total Residential mortgages $ 213,581 $ 383 $ 622 $ 214,586 Commercial mortgages 944,482 1,538 7,519 953,539 Construction 22,515 1,679 1,113 25,307 Commercial loans 141,295 145 462 141,902 Home equity lines of credit 22,587 - 368 22,955 Consumer and overdrafts 508 - - 508 Total $ 1,344,968 $ 3,745 $ 10,084 $ 1,358,797 June 30, 2022 Pass Special Substandard Total Residential mortgages $ 212,810 $ 154 $ 1,203 $ 214,167 Commercial mortgages 931,178 1,548 9,404 942,130 Construction 18,104 1,679 1,113 20,896 Commercial loans 135,725 156 423 136,304 Home equity lines of credit 23,220 43 425 23,688 Consumer and overdrafts 594 - - 594 Total $ 1,321,631 $ 3,580 $ 12,568 $ 1,337,779 Purchased Credit Impaired Loans The Company has acquired loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans as of September 30, 2022 and June 30, 2022 is as follows (in thousands): September 30, June 30, 2022 2022 Residential mortgages $ 218 $ 221 Commercial mortgages 850 859 Home equity lines of credit 86 89 Carrying amount, net of allowance of $ 0 $ 1,154 $ 1,169 There was no provision for loan losses on purchased credit impaired loans during the three months ended September 30, 2022 or 2021. Accretable yield, or income expected to be collected, for acquired loans is as follows (in thousands): Three Months Ended September 30, 2022 2021 Beginning balance $ 89 $ 130 Accretion income ( 3 ) ( 10 ) Ending balance $ 86 $ 120 |