Note 4 - Loans

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4 – Loans

Major classifications of loans were as follows:

	March 31, 2022			June 30, 2021
Commercial	$	91,429		$	112,337
Commercial real estate:
Construction		13,436			10,525
Other		291,726			269,679
1 – 4 Family residential real estate:
Owner occupied		137,923			118,269
Non-owner occupied		21,879			19,151
Construction		6,431			9,073
Consumer		40,773			29,646
Subtotal		603,597			568,680
Net deferred loan fees and costs		(2	)		(2,253	)
Allowance for loan losses		(6,997	)		(6,471	)
Net Loans	$	596,598		$	559,956

The commercial loan category in the above table includes PPP loans of $5,238 as of March 31, 2022 and $50,686 as of June 30, 2021.

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

						1-4 Family
			Commercial			Residential
			Real			Real
	Commercial		Estate			Estate			Consumer			Total
Allowance for loan losses:
Beginning balance	$	976	$	4,049		$	1,490		$	417		$	6,932
Provision for loan losses		48		(58	)		(16	)		111			85
Loans charged-off		—		—			(1	)		(30	)		(31	)
Recoveries		2		—			—			9			11
Total ending allowance balance	$	1,026	$	3,991		$	1,473		$	507		$	6,997

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

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate			Consumer			Total
Allowance for loan losses:
Beginning balance	$	904	$	3,949	$	1,307		$	311		$	6,471
Provision for loan losses		99		40		191			215			545
Loans charged-off		—		—		(41	)		(77	)		(118	)
Recoveries		23		2		16			58			99
Total ending allowance balance	$	1,026	$	3,991	$	1,473		$	507		$	6,997

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

						1-4 Family
			Commercial			Residential
			Real			Real
	Commercial		Estate			Estate			Consumer			Total
Allowance for loan losses:
Beginning balance	$	858	$	3,817		$	1,028		$	209		$	5,912
Provision for loan losses		79		(109	)		166			49			185
Loans charged-off		—		—			(4	)		(39	)		(43	)
Recoveries		—		1			1			20			22
Total ending allowance balance	$	937	$	3,709		$	1,191		$	239		$	6,076

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 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		12			83		205			145			445
Loans charged-off		(22	)		—		(4	)		(95	)		(121	)
Recoveries		—			3		1			70			74
Total ending allowance balance	$	937		$	3,709	$	1,191		$	239		$	6,076

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 March 31, 2022. Included in the recorded investment in loans is $1,241 of accrued interest receivable.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Ending allowance for loan losses balance attributable to loans:
Individually evaluated for impairment	$	1	$	—	$	—	$	—	$	1
Acquired loans collectively evaluated for impairment		1		63		87		—		151
Originated loans collectively evaluated for impairment		1,024		3,928		1,386		507		6,845
Total ending allowance balance	$	1,026	$	3,991	$	1,473	$	507	$	6,997
Recorded investment in loans:
Loans individually evaluated for impairment	$	405	$	250	$	50	$	—	$	705
Acquired loans collectively evaluated for impairment		434		11,202		27,828		3,786		43,250
Originated loans collectively evaluated for impairment		90,642		293,656		139,612		36,971		560,881
Total ending loans balance	$	91,481	$	305,108	$	167,490	$	40,757	$	604,836

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 information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of March 31, 2022 and for the nine months ended March 31, 2022:

	As of March 31, 2022						Nine Months ended March 31, 2022
	Unpaid				Allowance for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	421	$	289	$	—	$	294	$	—	$	—
Commercial real estate:
Other		401		250		—		620		104		104
1-4 Family residential real estate:
Owner occupied		51		23		—		242		4		4
Non-owner occupied		27		27		—		114		75		75
With an allowance recorded:
Commercial		116		116		1		126		6		6
Total	$	1,016	$	705	$	1	$	1,396	$	189	$	189

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the three months ended March 31, 2022:

	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	289	$	—	$	—
Commercial real estate:
Other		255		2		2
1-4 Family residential real estate:
Owner occupied		91		1		1
Non-owner occupied		13		—		—
With an allowance recorded:
Commercial		120		2		2
Total	$	768	$	5	$	5

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of June 30, 2021 and for the nine months ended March 31, 2021:

	As of June 30, 2021						Nine Months ended March 31, 2021
	Unpaid				Allowance for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	421	$	303	$	—	$	77	$	—	$	—
Commercial real estate:
Other		1,062		921		—		893		6		6
1-4 Family residential real estate:
Owner occupied		409		367		—		577		11		11
Non-owner occupied		267		202		—		220		—		—
With an allowance recorded:
Commercial		133		134		1		154		6		6
Commercial real estate:
Other		—		—		—		160		7		7
1-4 Family residential real estate:
Owner occupied		28		27		3		13		—		—
Total	$	2,320	$	1,954	$	4	$	2,094	$	30	$	30

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the three months ended March 31, 2021:

	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	308	$	—	$	—
Commercial real estate:
Other		941		2		2
1-4 Family residential real estate:
Owner occupied		473		—		—
Non-owner occupied		211		—		—
With an allowance recorded:
Commercial		142		2		2
Commercial real estate:
Other		68		1		1
1-4 Family residential real estate:
Owner occupied		29		—		—
Total	$	2,172	$	5	$	5

The following table presents the recorded investment in non-accrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2022 and June 30, 2021:

	March 31, 2022				June 30, 2021
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	289	$	—	$	303	$	—
Commercial real estate:
Other		206		—		874		—
1 – 4 Family residential:
Owner occupied		22		—		392		—
Non-owner occupied		27		—		202		—
Consumer		—		—		—		—
Total	$	544	$	—	$	1,771	$	—

Non-accrual loans and loans past due 90 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 March 31, 2022 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	$	—	$	—	$	—	$	—	$	91,481	$	91,481
Commercial real estate:
Construction		—		—		—		—		13,396		13,396
Other		—		—		—		—		291,712		291,712
1-4 Family residential:
Owner occupied		53		—		—		53		139,040		139,093
Non-owner occupied		—		—		27		27		21,869		21,896
Construction		1		—		—		1		6,500		6,501
Consumer		308		31		—		339		40,418		40,757
Total	$	362	$	31	$	27	$	420	$	604,416	$	604,836

The above table of past due loans includes the recorded investment in non-accrual loans of $27 in the 90 days or greater category and $517 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, 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 90 days or greater category and $777 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, on March 22, 2020 the Corporation adopted a loan modification program to assist borrowers impacted by the virus. The program was available to most borrowers whose loan was not past due on March 22, 2020, the date this loan modification program was adopted. The program offered principal and interest payment deferrals for up to 90 days or interest only payments for up to 90 days. Borrowers were eligible for an additional 90 days of payment deferrals if situations warranted a need for an extension. Interest was deferred but continued to accrue during the deferment period and the maturity date on amortizing loans was extended by the number of months the payment was deferred. Consistent with issued regulatory guidance, modifications made under this program in response to COVID-19 were not classified as TDRs. As of March 31, 2022, two borrowers with an aggregate outstanding balance of $38 were in payment deferral status under this loan modification program. This modification program was ended effective April 26, 2022.

As of March 31, 2022 and June 30, 2021, the Corporation had $448 and $688, respectively, of loans classified as TDRs which are included in impaired loans above. As of March 31, 2022 and June 30, 2021, the Corporation had not committed to lend any additional funds to customers with outstanding loans that were classified as troubled debt restructurings. As of March 31, 2022 and June 30, 2021, the Corporation had $1 and $4, respectively, of specific reserve allocated to these loans.

During the three- and nine-month periods ended March 31, 2022 and 2021, there were no loan modifications completed that were classified as troubled debt restructurings. There were no charge-offs from troubled debt restructurings that were completed during the three- and nine-month periods ended March 31, 2022 and 2021.

There were no loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the three- and nine-month periods ended March 31, 2022 and 2021. A loan is considered in payment default once it is 90 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, current economic trends and other relevant information. 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. Management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt and affirms the risk ratings for the loans and leases in their respective portfolio on an annual basis. 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, 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 are considered pass rated loans. Loans listed as not rated are either less than $100 or are included in groups of homogeneous loans. Generally, 1-4 Family Residential and Consumer loans are not risk rated, except when collateral is used for a business purpose. These loans are evaluated based on delinquency status, which are disclosed in the previous table within this footnote. Based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans was as follows:

	As of March 31, 2022
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	90,101	$	781	$	116	$	289	$	194
Commercial real estate:
Construction		13,396		—		—		—		—
Other		283,308		2,077		5,458		206		663
1-4 Family residential real estate:
Owner occupied		1,167		—		—		22		137,904
Non-owner occupied		21,345		146		75		27		303
Construction		1,789		—		—		—		4,712
Consumer		690		—		—		—		40,067
Total	$	411,796	$	3,004	$	5,649	$	544	$	183,843

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:

	As of June 30, 2021
			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