| Loans | Note 6 – Loans Major classifications of loans, net of deferred loan fees (costs) of $545 thousand and $653 thousand at June 30, 2024 and 2023, respectively, are summarized as follows: June 30, June 30, 2024 2023 (Dollars in thousands) Amount Percent Amount Percent Residential real estate: 1 - 4 family $ 127,911 27.00 % $ 135,046 28.08 % Home equity and HELOCs 30,767 6.50 32,684 6.79 Construction -residential 8,802 1.86 9,113 1.90 Commercial real estate: 1 - 4 family investor 92,284 19.49 98,160 20.41 Multi-family (five or more) 15,619 3.30 15,281 3.18 Commercial non-residential 158,481 33.46 157,555 32.77 Construction and land 22,687 4.79 15,584 3.24 Commercial 15,090 3.19 15,433 3.21 Consumer loans 1,920 0.41 2,000 0.42 Total Loans 473,561 100.00 % 480,856 100.00 % Allowance for credit losses (2,989) (3,313) Net Loans $ 470,572 $ 477,543 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 $11.2 million and $12.5 million at, June 30, 2024 and 2023, 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. Commercial non-residential loans include shared national credits, which are participations in loans or loan commitments of at least $20.0 million that are shared by three or more banks. As of June 30, 2023, the Company had one shared national credit loan commitment for $12.5 million with no balance outstanding and that is a purchased participation classified as pass rated and all payments are current and the loan is performing in accordance with its contractual terms. This shared national credit loan commitment was closed during the three months ended December 31, 2023. The Company’s accounting policies for shared national credits, including our charge off and reserve policy, are consistent with the significant accounting policies disclosed in our financial statements for the Company’s total loan portfolio. Shared national credits are subject to the same underwriting guidelines as loans originated by the Company and are subject to annual reviews where the risk rating of the loan is evaluated. Additionally, the Company obtains quarterly financial information and performs a financial analysis on a regular basis to ensure that the borrower can comply with the financial terms of the loan. The information used in the analysis is provided by the borrower through the agent bank. Allowance for Credit Losses. Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) The following tables set forth the allocation of the Bank’s allowance for credit losses by loan category at the dates indicated. The portion of the credit 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 credit 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 and all loans rated substandard or worse that are 90 days past due. The following table presents by portfolio segment, the changes in the allowance for credit losses and the recorded investment in loans for the years ended June 30, 2024 and 2023, respectively: June 30, 2024 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 for credit losses: Beginning balance $ 486 $ 113 $ 214 $ 569 $ 89 $ 1,420 $ 281 $ 82 $ 59 $ 3,313 Impact of adopting ASU 2016-13 (67) 19 (174) (241) (30) 379 (93) 254 196 243 Charge-offs — — — — — — — — (13) (13) Recoveries — — — — — — — — 29 29 Provision (94) (32) (9) (60) (27) (266) (41) (32) (22) (583) Ending Balance $ 325 $ 100 $ 31 $ 268 $ 32 $ 1,533 $ 147 $ 304 $ 249 $ 2,989 Allowance ending balance: Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for impairment 325 100 31 268 32 1,533 147 304 249 2,989 Total allowance $ 325 $ 100 $ 31 $ 268 $ 32 $ 1,533 $ 147 $ 304 $ 249 $ 2,989 Loans receivable ending balance: Individually evaluated for impairment $ 1,221 $ 426 $ — $ 1,007 $ 194 $ 337 $ — $ — $ 126 $ 3,311 Collectively evaluated for impairment 126,690 30,341 8,802 91,277 15,425 158,144 22,687 15,090 1,794 470,250 Total portfolio $ 127,911 $ 30,767 $ 8,802 $ 92,284 $ 15,619 $ 158,481 $ 22,687 $ 15,090 $ 1,920 $ 473,561 June 30, 2023 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 for credit losses: Beginning balance $ 506 $ 113 $ 386 $ 527 $ 110 $ 1,451 $ 166 $ 100 $ 50 $ 3,409 Charge-offs (79) — — — — — — — (32) (111) Recoveries — — — — — — — — 15 15 Provision 59 — (172) 42 (21) (31) 115 (18) 26 — Ending Balance $ 486 $ 113 $ 214 $ 569 $ 89 $ 1,420 $ 281 $ 82 $ 59 $ 3,313 Allowance ending balance: Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for impairment 486 113 214 569 89 1,420 281 82 59 3,313 Total allowance $ 486 $ 113 $ 214 $ 569 $ 89 $ 1,420 $ 281 $ 82 $ 59 $ 3,313 Loans receivable ending balance: Individually evaluated for impairment $ 1,209 $ 182 $ — $ 832 $ 251 $ 778 $ — $ — $ — $ 3,252 Collectively evaluated for impairment 78,237 19,689 9,113 84,891 14,781 142,098 15,584 14,976 643 380,012 Acquired non-credit impaired loans (1) 55,528 12,813 — 12,437 249 14,679 — 457 1,357 97,520 Acquired credit impaired loans (2) 72 — — — — — — — — 72 Total portfolio $ 135,046 $ 32,684 $ 9,113 $ 98,160 $ 15,281 $ 157,555 $ 15,584 $ 15,433 $ 2,000 $ 480,856 (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 year ended June 30, 2024, and exclusive of the impact of the adoption of ASU 2016-13, the changes in the provision for credit losses for each portfolio of loans were primarily due to fluctuations in the outstanding balance of each portfolio of loans collectively evaluated for impairment. The overall decrease in the allowance during the year ended June 30, 2024 can be primarily attributed to consistently low levels of net charge-offs, strong asset quality metrics and continued conservative lending practices. During the year ended June 30, 2023, the changes in the provision for credit 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 construction and land loan portfolio during the year ended June 30, 2023 and a corresponding increase in the provision for credit losses for this portfolio. The overall decrease in the allowance during the year ended June 30, 2023 can primarily be attributed to improved credit quality metrics, including continued low levels of net charge-offs and a decrease in non-performing assets. Under the provisions of ASU 2016-13, loans evaluated individually for impairment consist of non-accrual loans. Under the incurred loss model in effect prior to the adoption of ASU 2016-13, loans evaluated individually for impairment were referred to as impaired loans. Credit Quality Information The following tables represent credit exposures by internally assigned grades for the years ended June 30, 2024 and 2023, respectively, that management uses to monitor the credit quality of the overall loan portfolio. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. All loans greater than 90 days past due are considered Substandard. 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 Bank has a structured loan rating process with several layers of internal and external oversight to help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed. Generally, consumer and residential mortgage loans are included in the Pass category unless a specific action, such as nonperformance, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Credit Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis. Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration. The Credit Department also annually reviews commercial relationships of $500,000 or greater to assign or re-affirm risk ratings. The following tables set forth the amounts of the portfolio of classified asset categories for the commercial loan portfolios at June 30, 2024 and 2023: June 30, 2024 Term Loans Amortized Cost Basis by Origination Fiscal Year Revolving Loans Revolving Loans Amortized Converted 2024 2023 2022 2021 2020 Prior Cost Basis to Term Total 1 - 4 family investor Pass $ 3,852 $ 10,948 $ 6,228 $ 17,462 $ 11,855 $ 36,635 $ 2,702 $ 706 $ 90,388 Special Mention — — — — — 889 — — 889 Substandard — — 930 — — 77 — — 1,007 Doubtful — — — — — — — — — Loss — — — — — — — — — Total 1 - 4 family investor $ 3,852 $ 10,948 $ 7,158 $ 17,462 $ 11,855 $ 37,601 $ 2,702 $ 706 $ 92,284 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Multi-family (five or more) Pass $ 331 $ 1,307 $ 1,310 $ 4,072 $ 5,508 $ 2,897 $ — $ — $ 15,425 Special Mention — — — — — — — — — Substandard — — — — — 194 — — 194 Doubtful — — — — — — — — — Loss — — — — — — — — — Total Multi-family $ 331 $ 1,307 $ 1,310 $ 4,072 $ 5,508 $ 3,091 $ — $ — $ 15,619 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial non-residential Pass $ 11,970 $ 20,964 $ 59,973 $ 30,013 $ 15,668 $ 19,465 $ — $ 91 $ 158,144 Special Mention — — — — — — — — — Substandard — — — 319 — 18 — — 337 Doubtful — — — — — — — — — Loss — — — — — — — — — Total Commercial non-residential $ 11,970 $ 20,964 $ 59,973 $ 30,332 $ 15,668 $ 19,483 $ — $ 91 $ 158,481 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Construction and land Pass $ 4,341 $ 5,797 $ 10,501 $ — $ — $ 2,048 $ — $ — $ 22,687 Special Mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Loss — — — — — — — — — Total Construction and land $ 4,341 $ 5,797 $ 10,501 $ — $ — $ 2,048 $ — $ — $ 22,687 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial Pass $ 593 $ 6,914 $ 7,367 $ — $ 14 $ 202 $ — $ — $ 15,090 Special Mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Loss — — — — — — — — — Total Commercial $ 593 $ 6,914 $ 7,367 $ — $ 14 $ 202 $ — $ — $ 15,090 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Information presented in the table above is not required for periods prior to the adoption of ASU 2016-13. The following table presents more comparable information from the prior period, including internal credit risk ratings by loan class segments. June 30, 2023 Commercial Real Estate 1 - 4 family Construction investor Multi-family Non-residential and land Commercial Total Pass $ 96,097 $ 15,030 $ 156,777 $ 15,584 $ 15,433 $ 298,921 Special Mention 1,231 — — — — 1,231 Substandard 832 251 778 — — 1,861 Doubtful — — — — — — Loss — — — — — — Ending Balance $ 98,160 $ 15,281 $ 157,555 $ 15,584 $ 15,433 $ 302,013 The Company monitors the credit risk profile by payment activity for residential and consumer loans. Generally, residential and consumer loans on nonaccrual status and 90 or more days past due and accruing are considered non-performing and are reviewed monthly. 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 June 30, 2024 and 2023: June 30, 2024 Term Loans Amortized Cost Basis by Origination Fiscal Year Revolving Loans Revolving Loans Amortized Converted 2024 2023 2022 2021 2020 Prior Cost Basis to Term Total 1 - 4 family residential Performing $ 11,987 $ 7,765 $ 13,307 $ 15,162 $ 8,412 $ 70,057 $ — $ — $ 126,690 Non-performing — — — — — 1,221 — — 1,221 Total 1 - 4 family residential $ 11,987 $ 7,765 $ 13,307 $ 15,162 $ 8,412 $ 71,278 $ — $ — $ 127,911 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Home equity & HELOCs Performing $ 1,685 $ 2,164 $ 474 $ 859 $ 576 $ 4,595 $ 18,333 $ 1,655 $ 30,341 Non-performing — — — — — — 381 45 426 Total Home equity & HELOCs $ 1,685 $ 2,164 $ 474 $ 859 $ 576 $ 4,595 $ 18,714 $ 1,700 $ 30,767 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Construction residential Performing $ 5,180 $ 2,510 $ 105 $ 1,007 $ — $ — $ — $ — $ 8,802 Non-performing — — — — — — — — — Total construction residential $ 5,180 $ 2,510 $ 105 $ 1,007 $ — $ — $ — $ — $ 8,802 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Consumer Performing $ 123 $ 116 $ 45 $ — $ 3 $ 1,507 $ — $ — $ 1,794 Non-performing — — — — — 126 — — 126 Total Consumer $ 123 $ 116 $ 45 $ — $ 3 $ 1,633 $ — $ — $ 1,920 Current period gross charge-offs $ — $ — $ — $ — $ — $ 13 $ — $ — $ 13 Information presented in the table above is not required for periods prior to the adoption of ASU 2016-13. The following table presents more comparable information from the prior period, including a disclosure of performing and non-performing loans by loan class segments. June 30, 2023 Residential Real Estate Home equity & 1 - 4 family HELOCs Construction Consumer Total Performing $ 132,956 $ 32,684 $ 9,113 $ 1,918 $ 176,671 Non-performing 2,090 — — 82 2,172 $ 135,046 $ 32,684 $ 9,113 $ 2,000 $ 178,843 Loan Delinquencies and Non-accrual Loans Management further monitors the performance and credit quality of the loan portfolio by analyzing the length of time a recorded payment is past due. The following are tables which include an aging analysis of the recorded investment of past due loans as of June 30, 2024 and 2023. All non-accrual loans included in the tables below do not have an associated allowance for credit losses because any impairment is charged-off at the time the loan moves to non-accrual status. As of June 30, 2024, $3.2 million of the non-accrual loans included in the table below are secured by real estate and $126 thousand are unsecured. Aged Analysis of Past Due and Non-accrual Loans As of June 30, 2024 Recorded Recorded Investment Investment 30 - 59 Days 60 - 89 Days 90 Days Total Past Total Loans >90 Days and Loans on (Dollar amounts in thousands) Past Due Past Due Or Greater Due Current Receivable Accruing Non-Accrual Residential real estate: 1 - 4 family $ 153 $ 539 $ 162 $ 854 $ 127,057 $ 127,911 $ — $ 1,221 Home equity and HELOCs 49 — — 49 30,718 30,767 — 426 Construction - residential — — — — 8,802 8,802 — — Commercial real estate: 1 - 4 family investor 85 930 — 1,015 91,269 92,284 — 1,007 Multi-family — — — — 15,619 15,619 — 194 Commercial non-residential 60 — 337 397 158,084 158,481 — 337 Construction and land — — — — 22,687 22,687 — — Commercial — — — — 15,090 15,090 — — Consumer — — 18 18 1,902 1,920 — 126 Total $ 347 $ 1,469 $ 517 $ 2,333 $ 471,228 $ 473,561 $ — $ 3,311 Aged Analysis of Past Due and Non-accrual Loans As of June 30, 2023 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 $ 290 $ 457 $ 567 $ 1,314 $ 72 $ 133,660 $ 135,046 $ — $ 2,090 Home equity and HELOCs — — — — — 32,684 32,684 — — Construction - residential — — — — — 9,113 9,113 — — Commercial real estate: 1 - 4 family investor — 752 — 752 — 97,408 98,160 — 832 Multi-family 251 — — 251 — 15,030 15,281 — 251 Commercial non-residential — 322 778 1,100 — 156,455 157,555 — 778 Construction and land — — — — — 15,584 15,584 — — Commercial — — — — — 15,433 15,433 — — Consumer — 13 — 13 — 1,987 2,000 — 82 Total $ 541 $ 1,544 $ 1,345 $ 3,430 $ 72 $ 477,354 $ 480,856 $ — $ 4,033 Interest income on non-accrual loans would have increased by approximately $167 thousand and $192 thousand during the years ended June 30, 2024 and 2023, respectively, if these loans had performed in accordance with their terms. Impaired Loans – Prior to the Adoption of ASU 2016-13 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 June 30, 2023. June 30, 2023 Unpaid Average Interest Recorded Principal Related Recorded Income (Dollars in thousands) Investment Balance Allowance Investment Recognized With no related allowance recorded: 1-4 family residential real estate $ 1,209 $ 1,302 $ — $ 1,780 $ — Home equity and HELOCs 182 182 — 325 20 Construction residential — — — — — 1 - 4 family investor commercial real estate 832 850 — 179 1 Multi-family 251 283 — 277 — Commercial non-residential 778 783 — 1,042 19 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 $ 1,209 $ 1,302 $ — $ 1,780 $ — Home equity and HELOCs 182 182 — 325 20 Construction residential — — — — — 1 - 4 family investor commercial real estate 832 850 — 179 1 Multi-family 251 283 — 277 — Commercial non-residential 778 783 — 1,042 19 Construction and land — — — — — Commercial — — — — — Consumer — — — — — The impaired loans table above includes accruing loans with terms that have been modified to borrowers experiencing financial difficulty in the amount of $182 thousand that are performing in accordance with their modified terms. The Company recognized $38 thousand of interest income on accruing loans with terms that have been modified to borrowers experiencing financial difficulty during the year ended June 30, 2023. The table above does not include $72 thousand of loans acquired with deteriorated credit quality, which have been recorded at their fair value at acquisition. 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 year ended June 30, 2023, had impaired loans been current according to their original terms, amounted to $104 thousand. Concentration of Credit Risk The Company’s primary business activity as of June 30, 2024 was with customers throughout the Delaware Valley through twelve full-service branch offices located in Bucks and Philadelphia Counties in Pennsylvania, as well as Burlington, Camden, and Mercer Counties in New Jersey. Accordingly, the Company has extended credit primarily to residential borrowers and commercial entities in this area whose ability to repay their loans is influenced by the region’s economy. As of June 30, 2024, the Company considered its concentration of credit risk to be acceptable. As of June 30, 2024, commercial real estate loans secured by retail space totaled approximately $61.9 million, or 13.1% of total loans, and were comprised of $50.9 million of non-owner-occupied properties and $11.0 million of owner-occupied properties. The Company’s non-owner occupied commercial real estate loans that are secured by retail space have high occupancy rates with longstanding tenants. Loans with Modified Terms to Borrowers Experiencing Financial Difficulty During the year ended June 30, 2024, there were no loans modified to borrowers experiencing financial difficulty. During the year ended June 30, 2023, there were no loans modified that were identified as a troubled debt restructuring (“TDR”) and there were no TDRs that subsequently defaulted within twelve months of modification. |
