Note 4 - Loans

9 Months Ended

Mar. 31, 2023

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, 2023			June 30, 2022
Commercial	$	99,203		$	87,008
Commercial real estate:
Construction		18,340			15,158
Other		319,955			291,847
1 – 4 Family residential real estate:
Owner occupied		153,760			142,244
Non-owner occupied		24,254			26,029
Construction		7,264			4,317
Consumer		66,290			44,964
Subtotal		689,066			611,567
Net deferred loan fees and costs		226			276
Allowance for loan losses		(7,823	)		(7,160	)
Net Loans	$	681,469		$	604,683

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2023:

						1-4 Family
			Commercial			Residential
			Real			Real
	Commercial		Estate			Estate		Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,006	$	4,084		$	1,677	$	908		$	7,675
Provision for loan losses		132		(103	)		70		61			160
Loans charged-off		—		—			—		(56	)		(56	)
Recoveries		—		—			—		44			44
Total ending allowance balance	$	1,138	$	3,981		$	1,747	$	957		$	7,823

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2023:

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate			Consumer			Total
Allowance for loan losses:
Beginning balance	$	960	$	3,927	$	1,645		$	628		$	7,160
Provision for loan losses		178		53		106			458			795
Loans charged-off		—		—		(6	)		(247	)		(253	)
Recoveries		—		1		2			118			121
Total ending allowance balance	$	1,138	$	3,981	$	1,747		$	957		$	7,823

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 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, 2023. Included in the recorded investment in loans is $1,561 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	$	—	$	—	$	—	$	—	$	—
Acquired loans collectively evaluated for impairment		—		42		75		—		117
Originated loans collectively evaluated for impairment		1,138		3,939		1,672		957		7,706
Total ending allowance balance	$	1,138	$	3,981	$	1,747	$	957	$	7,823
Recorded investment in loans:
Loans individually evaluated for impairment	$	315	$	38	$	45	$	—	$	398
Acquired loans collectively evaluated for impairment		650		7,443		23,778		1,605		33,476
Originated loans collectively evaluated for impairment		98,501		330,864		162,953		64,661		656,979
Total ending loans balance	$	99,466	$	338,345	$	186,776	$	66,266	$	690,853

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 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, 2023 and for the nine months ended March 31, 2023:

	As of March 31, 2023						Nine Months ended March 31, 2023
	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	$	407	$	315	$	—	$	303	$	27	$	27
Commercial real estate:
Other		78		38		—		40		5		5
1-4 Family residential real estate:
Owner occupied		44		18		—		20		2		2
Non-owner occupied		27		27		—		42		—		—
Total	$	556	$	398	$	—	$	405	$	34	$	34

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, 2023:

	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	315	$	9	$	9
Commercial real estate:
Other		39		1		1
1-4 Family residential real estate:
Owner occupied		18		—		—
Non-owner occupied		27		—		—
Total	$	399	$	10	$	10

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, 2022 and for the nine months ended March 31, 2022:

	As of June 30, 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	$	414	$	276	$	—	$	294	$	—	$	—
Commercial real estate:
Other		83		42		—		620		104		104
1-4 Family residential real estate:
Owner occupied		48		22		—		242		4		4
Non-owner occupied		193		133		—		114		75		75
With an allowance recorded:
Commercial		—		—		—		126		6		6
Total	$	738	$	473	$	—	$	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 the recorded investment in non-accrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2023 and June 30, 2022:

	March 31, 2023				June 30, 2022
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	—	$	—	$	276	$	9
Commercial Real Estate:
Other		—		53		—		—
1 – 4 Family residential:
Owner occupied		18		—		22		—
Non-owner occupied		27		—		133		—
Consumer		—		100		—		—
Total	$	45	$	153	$	431	$	9

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, 2023 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	$	—	$	—	$	—	$	—	$	99,466	$	99,466
Commercial real estate:
Construction		—		—		—		—		18,361		18,361
Other		—		—		53		53		319,931		319,984
1-4 Family residential:
Owner occupied		522		127		—		649		154,527		155,176
Non-owner occupied		3		—		27		30		24,235		24,265
Construction		—		—		—		—		7,335		7,335
Consumer		352		99		100		551		65,715		66,266
Total	$	877	$	226	$	180	$	1,283	$	689,570	$	690,853

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 $18 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, 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.

Troubled Debt Restructurings:

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.

As of March 31, 2023 and June 30, 2022, the Corporation had $354 and $318, respectively, of loans classified as TDRs which are included in impaired loans above. As of March 31, 2023 and June 30, 2022, 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, 2023 and June 30, 2022 there were no specific reserves allocated to these loans.

During the three- and nine-month periods ended March 31, 2023 and 2022, 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, 2023 and 2022.

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, 2023 and 2022. 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, 2023
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	97,687	$	1,059	$	556	$	—	$	164
Commercial real estate:
Construction		18,361		—		—		—		—
Other		311,540		3,452		4,352		—		640
1-4 Family residential real estate:
Owner occupied		2,272		—		18		18		152,868
Non-owner occupied		23,818		53		109		27		258
Construction		2,860		—		—		—		4,475
Consumer		1,646		—		—		—		64,620
Total	$	458,184	$	4,564	$	5,035	$	45	$	223,025

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:

	As of June 30, 2022
			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