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Note 4 - Loans

12 Months Ended

Jun. 30, 2022

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

NOTE 4—LOANS

Major classifications of loans were as follows as of June 30:

	2022			2021
Commercial	$	87,008		$	112,337
Commercial real estate:
Construction		15,158			10,525
Other		291,847			269,679
1 – 4 Family residential real estate:
Owner occupied		142,244			118,269
Non-owner occupied		26,029			19,151
Construction		4,317			9,073
Consumer		44,964			29,646
Subtotal		611,567			568,680
Net deferred loan fees and costs		276			(2,253	)
Allowance for loan losses		(7,160	)		(6,471	)
Net loans	$	604,683		$	559,956

The commercial loan category in the above table includes PPP loans of $179 as of June 30, 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 year ended June 30, 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		33		(24	)		359			367			735
Loans charged-off		—		—			(41	)		(132	)		(173	)
Recoveries		23		2			20			82			127
Total ending allowance balance	$	960	$	3,927		$	1,645		$	628		$	7,160

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 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, 2022. Included in the recorded investment in loans is $1,214 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	$	—	$	—	$	—	$	—	$	—
Acquired loans collectively evaluated for impairment		1		62		85		—		148
Originated loans collectively evaluated for impairment		959		3,865		1,560		628		7,012
Total ending allowance balance	$	960	$	3,927	$	1,645	$	628	$	7,160

Recorded investment in loans:
Loans individually evaluated for impairment	$	276	$	42	$	155	$	—	$	473
Acquired loans collectively evaluated for impairment		665		10,095		27,731		3,051		41,542
Originated loans collectively evaluated for impairment		86,310		296,776		146,058		41,898		571,042
Total ending loans balance	$	87,251	$	306,913	$	173,944	$	44,949	$	613,057

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 loans individually evaluated for impairment by class of loans as of and for the year ended June 30, 2022:

	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	$	414	$	276	$	—	$	291	$	—	$	—
Commercial real estate:
Other		83		42		—		518		193		193
1-4 Family residential real estate:
Owner occupied		48		22		—		187		8		8
Non-owner occupied		193		133		—		93		75		75
With an allowance recorded:
Commercial		—		—		—		113		6		6
Total	$	738	$	473	$	—	$	1,202	$	282	$	282

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

	June 30, 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	$	276	$	9	$	303	$	—
Commercial real estate:
Other		—		—		874		—
1 – 4 Family residential:
Owner occupied		22		—		392		—
Non-owner occupied		133		—		202		—
Consumer		—		—		—		—
Total	$	431	$	9	$	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 June 30, 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	$	—	$	—	$	9	$	9	$	87,242	$	87,251
Commercial real estate:
Construction		—		—		—		—		15,138		15,138
Other		52		—		—		52		291,723		291,775
1-4 Family residential:
Owner occupied		125		—		—		125		143,381		143,506
Non-owner occupied		—		—		27		27		26,036		26,063
Construction		—		—		—		—		4,375		4,375
Consumer		381		79		—		460		44,489		44,949
Total	$	558	$	79	$	36	$	673	$	612,384	$	613,057

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 $404 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 June 30, 2022, there were no loans in payment deferral status under this loan modification program. This modification program ended April 26, 2022.

On June 30, 2022, the Corporation had $318 of loans classified as TDRs and there were no specific reserves allocated to these loans. On June 30, 2021, the Corporation had $688 of loans classified as TDRs with $4 of specific reserves allocated to these loans. TDRs are also included as impaired loans that are listed above. For the years ended June 30, 2022 and 2021, there were no loans modified that were classified as a troubled debt restructuring.

There were no loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the twelve-month periods ended June 30, 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, 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, 2022, 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	$	86,265	$	350	$	178	$	276	$	182
Commercial real estate:
Construction		15,138		—		—		—		—
Other		283,877		2,500		4,711		—		687
1-4 Family residential real estate:
Owner occupied		1,321		—		—		22		142,163
Non-owner occupied		25,606		59		—		133		265
Construction		1,234		—		—		—		3,141
Consumer		605		—		—		—		44,344
Total	$	414,046	$	2,909	$	4,889	$	431	$	190,782

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