NOTE

—

LOANS

Major classifications of loans were as follows as of

June

30:

	2021			2020
Commercial	$	112,337		$	158,667
Commercial real estate:
Construction		10,525			16,235
Other		269,679			229,029
1 – 4 Family residential real estate:
Owner occupied		118,269			90,494
Non-owner occupied		19,151			19,370
Construction		9,073			9,344
Consumer		29,646			21,334
Subtotal		568,680			544,473
Net deferred loan fees and costs		(2,253	)		(1,612	)
Allowance for loan losses		(6,471	)		(5,678	)
Net loans	$	559,956		$	537,183

The commercial loan category in the above table includes PPP loans of

$50,686

as of

June 30, 2021

and

$66,606

as of

June 30, 2020

and a mortgage loan warehouse line of credit to another financial institution with a

zero

outstanding balance as of

June 30, 2021

and

$32,869

as of

June 30, 2020.

The outstanding balance of the warehouse line of credit can fluctuate significantly based on the other financial institution's funding needs.

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended

June 30, 2021:

						1-4 Family
				Commercial		Residential
				Real		Real
	Commercial			Estate		Estate			Consumer			Total
Allowance for loan losses:
Beginning balance	$	947		$	3,623	$	989		$	119		$	5,678
Provision for loan losses		(21	)		322		319			230			850
Loans charged-off		(22	)		—		(4	)		(122	)		(148	)
Recoveries		—			4		3			84			91
Total ending allowance balance	$	904		$	3,949	$	1,307		$	311		$	6,471

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended

June 30, 2020:

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate			Consumer			Total
Allowance for loan losses:
Beginning balance	$	660	$	2,575	$	494		$	59		$	3,788
Provision for loan losses		287		1,044		497			152			1,980
Loans charged-off		—		—		(6	)		(140	)		(146	)
Recoveries		—		4		4			48			56
Total ending allowance balance	$	947	$	3,623	$	989		$	119		$	5,678

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

June 30, 2021.

Included in the recorded investment in loans is

$1,184

of accrued interest receivable.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1	$	—	$	3	$	—	$	4
Acquired loans collectively evaluated for impairment		—		83		77		—		160
Originated loans collectively evaluated for impairment		903		3,866		1,227		311		6,307
Total ending allowance balance	$	904	$	3,949	$	1,307	$	311	$	6,471

Recorded investment in loans:
Loans individually evaluated for impairment	$	437	$	921	$	596	$	—	$	1,954
Acquired loans collectively evaluated for impairment		834		6,542		21,363		6,488		35,227
Originated loans collectively evaluated for impairment		109,016		272,563		125,689		23,162		530,430
Total ending loans balance	$	110,287	$	280,026	$	147,648	$	29,650	$	567,611

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

June 30, 2020.

Included in the recorded investment in loans is

$1,936

of accrued interest receivable.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	28	$	6	$	—	$	—	$	34
Acquired loans collectively evaluated for impairment		—		103		94		—		197
Originated loans collectively evaluated for impairment		919		3,514		895		119		5,447
Total ending allowance balance	$	947	$	3,623	$	989	$	119	$	5,678

Recorded investment in loans:
Loans individually evaluated for impairment	$	179	$	1,045	$	699	$	—	$	1,923
Acquired loans collectively evaluated for impairment		1,095		8,072		27,252		12,550		48,969
Originated loans collectively evaluated for impairment		156,054		236,840		92,168		8,843		493,905
Total ending loans balance	$	157,328	$	245,957	$	120,119	$	21,393	$	544,797

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended

June 30, 2021:

	Unpaid				Allowance for		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	421	$	303	$	—	$	153	$	—	$	—
Commercial real estate:
Other		1,062		921		—		902		7		7
1-4 Family residential real estate:
Owner occupied		409		367		—		539		20		20
Non-owner occupied		267		202		—		216		—		—
With an allowance recorded:
Commercial		133		134		1		150		8		8
Commercial real estate:
Other		—		—		—		120		7		7
1-4 Family residential real estate:
Owner occupied		28		27		3		16		—		—
Total	$	2,320	$	1,954	$	4	$	2,096	$	42	$	42

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended

June 30, 2020:

	Unpaid				Allowance for		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized

With no related allowance recorded:
Commercial	$	—	$	—	$	—	$	4	$	—	$	—
Commercial real estate:
Other		922		836		—		521		88		88
1-4 Family residential real estate:
Owner occupied		604		463		—		117		12		12
Non-owner occupied		284		236		—		247		—		—
With an allowance recorded:
Commercial		176		179		28		168		9		9
Commercial real estate:
Other		209		209		6		217		13		13
Total	$	2,195	$	1,923	$	34	$	1,274	$	122	$	122

The following table presents the recorded investment in non-accrual and loans past due over

days still on accrual by class of loans as of

June 30, 2021

and

2020:

	June 30, 2021				June 30, 2020
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	303	$	—	$	21	$	—
Commercial real estate:
Other		874		—		785		—
1 – 4 Family residential:
Owner occupied		392		—		143		29
Non-owner occupied		202		—		236		—
Consumer		—		—		—		12
Total	$	1,771	$	—	$	1,185	$	41

Non-accrual loans and loans past due

days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of

June 30, 2021

by class of loans:

	Days Past Due
	30 –59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	—	$	—	$	—	$	—	$	110,287	$	110,287
Commercial real estate:
Construction		—		—		—		—		10,478		10,478
Other		—		175		629		804		268,744		269,548
1-4 Family residential:
Owner occupied		29		—		365		394		118,937		119,331
Non-owner occupied		—		—		—		—		19,148		19,148
Construction		—		—		—		—		9,169		9,169
Consumer		95		11		—		106		29,544		29,650
Total	$	124	$	186	$	994	$	1,304	$	566,307	$	567,611

The above table of past due loans includes the recorded investment in non-accrual loans of

$994

in the

days or greater category and

$777

in the loans

not

past due category.

The following table presents the aging of the recorded investment in past due loans as of

June 30, 2020

by class of loans:

	Days Past Due
	30 –59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	—	$	—	$	21	$	21	$	157,307	$	157,328
Commercial real estate:
Construction		—		—		—		—		16,241		16,241
Other		—		2		628		630		229,086		229,716
1-4 Family residential:
Owner occupied		—		—		172		172		91,102		91,274
Non-owner occupied		—		—		—		—		19,410		19,410
Construction		—		—		—		—		9,435		9,435
Consumer		127		49		12		188		21,205		21,393
Total	$	127	$	51	$	833	$	1,011	$	543,786	$	544,797

The above table of past due loans includes the recorded investment in non-accrual loans of

in the

days,

$792

in the

days or greater category and

$391

in the loans

not

past due category.

Troubled Debt Restructurings (TDR):

The Corporation has certain loans that have been modified in order to maximize collection of loan balances that are classified as TDRs. A modified loan is usually classified as a TDR if, for economic reasons, management grants a concession to the original terms and conditions of the loan to a borrower who is experiencing financial difficulties that it would

not

have otherwise considered. In response to COVID-

19,

March 22, 2020,

the Corporation adopted a loan modification program to assist borrowers impacted by the virus. The program is available to most borrowers whose loan was

not

past due on

March 22, 2020,

the date this loan modification program was adopted. The program offers principal and interest payment deferrals for up to

days or interest only payments for up to

days. Borrowers are eligible for an additional

days of payment deferrals if situations warrant a need for an extension. Interest will be deferred but will continue to accrue during the deferment period and the maturity date on amortizing loans will be extended by the number of months the payment was deferred. Consistent with issued regulatory guidance, modifications made under this program in response to COVID-

will

not

be classified as TDRs. As of

June 30, 2021,

eight

borrowers with an aggregate outstanding balance of

$198

are in payment deferral status under this loan modification program that are

not

classified as TDRs.

June 30, 2021

and

2020,

the Corporation had

$688

and

$974,

respectively, of loans classified as TDRs which are included in impaired loans above. On

June 30, 2021

and

2020,

the Corporation had

and

$12,

respectively, of specific reserves allocated to these loans. For the year ended

June 30, 2021,

there were

loans modified that were classified as a troubled debt restructuring.

During the fiscal year ended

June 30, 2020,

the terms of

one

loan was modified as a troubled debt restructuring by extending the maturity date. As of

June 30, 2020,

the Corporation had

not

committed to lend any additional funds to customers with outstanding loans that were classified as troubled debt restructurings. The following table presents loans by class modified as troubled debt restructurings that occurred during the year ended

June 30, 2020:

			Pre-Modification		Post-Modification
	Number of		Outstanding Recorded		Outstanding Recorded
	Loans		Investment		Investment
1-4 Family residential:
Owner occupied		1	$	314	$	314
Total		1	$	314	$	314

The troubled debt restructuring described above did

not

result in any charge-off nor did it increase the allowance for loan losses during the

twelve

months ended

June 30, 2020.

There were

loans classified as troubled debt restructurings for which there was a payment default within

months following the modification during the

twelve

-month periods ended

June 30, 2021

and

2020.

A loan is considered in payment default once it is

days contractually past due under the modified terms.

Credit Quality Indicators:

The Corporation 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 Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with a total outstanding loan relationship greater than

$100

and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed monthly. The Corporation 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, based on 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 are considered to be pass rated loans. Loans listed as

not

rated are either less than

$100

or are included in groups of homogeneous loans. These loans are evaluated based on delinquency status, which was discussed previously.

As of

June 30, 2021,

and based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans is as follows:

			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	109,118	$	280	$	309	$	303	$	277
Commercial real estate:
Construction		10,478		—		—		—		—
Other		259,327		3,700		4,718		874		929
1-4 Family residential real estate:
Owner occupied		1,715		—		6		392		117,218
Non-owner occupied		18,312		163		197		202		274
Construction		1,849		—		—		—		7,320
Consumer		694		—		—		—		28,956
Total	$	401,493	$	4,143	$	5,230	$	1,771	$	154,974

As of

June 30, 2020,

and based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans is as follows:

			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	152,911	$	143	$	3,979	$	21	$	274
Commercial real estate:
Construction		16,241		—		—		—		—
Other		220,311		1,469		5,378		785		1,773
1-4 Family residential real estate:
Owner occupied		2,419		—		334		—		88,521
Non-owner occupied		18,435		186		223		236		330
Construction		3,234		—		—		—		6,201
Consumer		153		—		—		—		21,240
Total	$	413,704	$	1,798	$	9,914	$	1,042	$	118,339