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Loans and Allowance for Credit Losses on Loans
 3 Months Ended
Sep. 30, 2024
Loans and Allowance for Credit Losses on Loans [Abstract]  
Loans and Allowance for Credit Losses on Loans
(4)          Loans and Allowance for Credit Losses on Loans

Loan segments at September 30, 2024 and June 30, 2024 are summarized as follows:

(In thousands)
  
September 30, 2024
     June 30, 2024
  
Residential real estate
  
$
413,810
     $ 417,589  
Commercial real estate
    
951,928
       936,640  
Home equity
    
30,854
       29,166  
Consumer
   
4,836
       4,771  
Commercial
   
99,784
       111,307  
Total gross loans(1)(2)
    
1,501,212
       1,499,473  
Allowance for credit losses on loans
    
(19,781
)
     (19,244 )
Loans receivable, net
  
$
1,481,431
     $
 1,480,229  

(1)
Loan balances include net deferred fees/costs of ($181,000) and ($42,000) at September 30, 2024 and June 30, 2024, respectively.
(2)
Loan balances exclude accrued interest receivable of $6.5 million and $6.2 million at September 30, 2024 and June 30, 2024, respectively, which is included in accrued interest receivable in the consolidated statement of financial condition.

Non-accrual Loans
Management places loans on non-accrual status once the loans have become 90 days or more delinquent. A non-accrual loan is defined as a loan in which collectability is questionable and therefore interest on the loan will no longer be recognized on an accrual basis. A loan is not placed back on accrual status until the borrower has demonstrated the ability and willingness to make timely payments on the loan.  A loan does not have to be 90 days delinquent in order to be classified as non-accrual. Loans on non-accrual status totaled $3.6 million at September 30, 2024, of which there were three residential loans totaling $395,000 and four commercial real estate loans totaling $1.7 million that were in process of foreclosure. Included in non-accrual loans were $1.4 million of loans which were less than 90 days past due at September 30, 2024, but have a recent history of delinquency greater than 90 days past due. These loans will be returned to accrual status once they have demonstrated a history of timely payments. Loans on non-accrual status totaled $3.7 million at June 30, 2024, of which four residential real estate loans totaling $686,000 and three commercial real estate loans totaling $1.6 million in the process of foreclosure. Included in non-accrual loans were $1.5 million of loans which were less than 90 days past due at June 30, 2024, but have a recent history of delinquency greater than 90 days past due. The activity in non-performing loans during the period included $410,000 in loan repayments, $57,000 in charge-offs or transfers to foreclosure, $56,000 in loans returning to performing status, and $441,000 of loans placed into non-performing status.
 

The following table sets forth information regarding delinquent and/or non-accrual loans at September 30, 2024:

(In thousands)
  
30-59
days
past due
    
60-89
days
past due
    
90 days
or more
past due
    
Total
past due
    
Current
    
Total loans
    
Loans
on non-
accrual
  
Residential real estate
  
$
-
    
$
563
    
$
1,232
    
$
1,795
    
$
412,015
    
$
413,810
    
$
2,277
  
Commercial real estate
    
-
      
214
      
947
      
1,161
      
950,767
      
951,928
      
1,233
  
Home equity
    
13
      
32
      
-
      
45
      
30,809
      
30,854
      
35
  
Consumer
    
3
      
31
      
-
      
34
      
4,802
      
4,836
      
-
  
Commercial loans
    
-
      
-
      
102
      
102
      
99,682
      
99,784
      
102
  
Total gross loans
  
$
16
    
$
840
    
$
2,281
    
$
3,137
    
$
1,498,075
    
$
1,501,212
    
$
3,647
  



The following table sets forth information regarding delinquent and/or non-accrual loans at June 30, 2024:


(In thousands)
  
30-59 days
past due
    
60-89
days
past due
    
90 days
or more past due
    
Total
past due
    
Current
    
Total loans
    
Loans
on non-
accrual
  
Residential real estate
  
$
-
    
$
838
    
$
1,414
    
$
2,252
    
$
415,337
    
$
417,589
    
$
2,518
  
Commercial real estate
    
-
      
-
      
806
      
806
      
935,834
      
936,640
      
1,163
  
Home equity
    
14
      
-
      
47
      
61
      
29,105
      
29,166
      
47
  
Consumer
    
47
      
6
      
-
      
53
      
4,718
      
4,771
      
-
  
Commercial
    
-
      
-
      
-
      
-
      
111,307
      
111,307
      
-
  
Total gross loans
  
$
61
    
$
844
    
$
2,267
    
$
3,172
    
$
1,496,301
    
$
1,499,473
    
$
3,728
  

At September 30, 2024 and June 30, 2024, the Company had no accruing loans delinquent 90 days or more.


Allowance for Credit Losses on Loans



The allowance for credit losses for the loan portfolio is established through a provision for credit losses based on the results of life of loan quantitative models, reserves associated with collateral-dependent loans evaluated individually and adjustments for current conditions not accounted for in the quantitative models. The discounted cash flow methodology is used to calculate the CECL reserve for the residential real estate, commercial real estate, home equity and commercial loan segments. The Company uses a four-quarter reasonable and supportable forecast period based on the one year percent change in national GDP and the national unemployment rate, as economic variables. The forecast will revert to long-term economic conditions over a four-quarter reversion period on a straight-line basis. The remaining life method will be utilized to determine the CECL reserve for the consumer loan segment. A qualitative factor framework has been developed to adjust the quantitative loss rates for asset-specific risk characteristics or current conditions at the reporting date. The Company elected to use the practical expedient to evaluate loans individually, if they are collateral dependent loans that are on nonaccrual status with a balance of $250,000 or greater, which is consistent with regulatory requirements. The fair value of the collateral dependent loan less selling expenses will be compared to the loan balance to determine if a CECL reserve is required.



In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses.  Such agencies may require the Company to recognize additions to the allowance based on their judgment about information available to them at the time of their examination. The Company charges loans off against the allowance for credit losses when it becomes evident that a loan cannot be collected within a reasonable amount of time, or that it will cost the Company more than it will receive and all possible avenues of repayment have been analyzed, including the potential of future cash flow, the value of the underlying collateral, and strength of any guarantors or co-borrowers.  Generally, consumer loans and smaller business loans (not secured by real estate) in excess of 90 days are charged-off against the allowance for credit losses, unless equitable arrangements are made. Included within consumer loan charge-offs and recoveries are deposit accounts that have been overdrawn in excess of 60 days. For loans secured by real estate, a charge-off is recorded when it is determined that the collection of all or a portion of a loan may not be collected and the amount of that loss can be reasonably estimated. The allowance for credit losses is increased by a provision for credit losses (which results in a charge to expense) and recoveries of loans previously charged off and is reduced by charge-offs.



The following tables set forth the activity and allocation of the allowance for credit losses on loans by segment:



   
Activity for the three months ended September 30, 2024
  
(In thousands)
  
Residential
real estate
    
Commercial
real estate
    
Home equity
    
Consumer
    
Commercial
    
Total
  
Balance at June 30, 2024
  
$
4,237
    
$
12,218
    
$
212
    
$
500
    
$
2,077
    
$
19,244
  
Charge-offs
    
(44
)
    
(5
)
    
(13
)
    
(77
)
    
(6
)
    
(145
)
Recoveries
    
2
      
1
      
-
      
19
      
9
      
31
  
Provision
    
280
      
434
      
33
      
12
      
(108
)
    
651
  
Balance at September 30, 2024
  
$
4,475
    
$
12,648
    
$
232
    
$
454
    
$
1,972
    
$
19,781
  

   
Activity for the three months ended September 30, 2023
  
(In thousands)
  
Residential
real estate
    
Commercial
real estate
    
Home equity
    
Consumer
    
Commercial
    
Total
  
Balance at June 30, 2023
  
$
2,794
    
$
14,839
    
$
46
    
$
332
    
$
3,201
    
$
21,212
  
Adoption of ASU No. 2016-13
    
1,182
      
(2,889
)
    
117
      
137
      
121
      
(1,332
)
Charge-offs
    
-
      
-
      
-
      
(122
)
    
(7
)
    
(129
)
Recoveries
    
-
      
1
      
-
      
26
      
9
      
36
  
Provision
    
317
      
405
      
25
      
117
      
(402
)
    
462
  
Balance at September 30, 2023
  
$
4,293
    
$
12,356
    
$
188
    
$
490
    
$
2,922
    
$
20,249
  

Credit monitoring process


Management closely monitors the quality of the loan portfolio and has established a loan review process designed to help monitor any change in borrower risk during the life cycle of their loan. The Company utilizes a credit quality grading system that is used at loan inception and updated as appropriate based on an annual review process. The credit quality grade helps management make a consistent assessment of each loan relationship’s credit risk and identify any portfolio trends that could impact profitability.  Consistent with regulatory guidelines, the Company provides for the classification of loans, such as “Pass,” “Special Mention,” “Substandard,” “Doubtful” and “Loss” classifications.

Commercial grading system

Loss

Loss ratings are loans that are considered uncollectible and of such little value that their continuance as active assets of the Company is not warranted.  Loss rating does not necessarily mean that the loan has no recovery or salvage value, however, it is not practical or desirable to defer charging off the loan.

Doubtful

Doubtful ratings are loans that have all the weakness inherent in loans classified as substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.  Doubtful ratings generally are non-performing and considered to have a high risk of default.

Substandard

Substandard ratings are loans that possess well-defined weaknesses that jeopardize the orderly liquidation of debt, and are characterized by the distinct possibility that the Company will sustain some loss, if the deficiencies are not corrected. Substandard ratings are inadequately protected by the current sound worth and paying capacity of the borrower or the collateral pledged, if any.

Special mention

Special mention ratings are loans that have potential weaknesses or emerging problems, which require close attention.  These weaknesses, if left uncorrected, could lead to deterioration in the repayment prospects for the loan or the Company’s collateral position in the future.  Special mention loans are less risky than substandard assets as no loss of principal or interest is anticipated unless, the potential problems continue for a prolonged basis.

Pass

Pass ratings are loans that do not encompass loans graded as Loss, Doubtful, Substandard, or Special mention.  Pass loans range from Pass/Watch, Acceptable, Average, Satisfactory, Good and Excellent. Pass loans demonstrate sufficient cash flow to ensure full repayment of the loan with Pass ratings being determined by the quality of the collateral and equity position, stability of operations or management, and the guarantors.

Residential and consumer grading system

Residential real estate, home equity and consumer loans are graded as either non-performing or performing.

Non-performing

Non-performing loans are loans in which the borrower has not made the scheduled payments of principal or interest, and are generally loans over 90 days past due and still accruing interest, and loans on non-accrual status.

Performing

Performing loans are those loans in which the borrower is making timely payments of both principal and interest as upon the agreed loan terms.

The following tables present the amortized cost basis of the Company’s loans by class and vintage and includes gross charge-offs by loan class and vintage as of the three months ended September 30, 2024:

   
At September 30, 2024
  
(In thousands)
   Term loans amortized cost basis by origination year
    
Revolving
loans
amortized
cost basis
    
Revolving
loans
converted
to term
    
Total
  
2025
    2024
     2023
     2022
     2021
     Prior
                                                       
Residential real estate
                                                      
By payment activity status:
                                                      
Performing
  
$
7,821
    
$
54,991
    
$
62,158
    
$
90,275
    
$
77,189
    
$
119,100
    
$
-
    
$
-
    
$
411,534
  
Non-performing
    
-
      
-
      
-
      
62
      
-
      
2,214
      
-
      
-
      
2,276
  
Total residential real estate
    
7,821
      
54,991
      
62,158
      
90,337
      
77,189
      
121,314
      
-
      
-
      
413,810
  
Current period gross charge-offs
    
-
      
-
      
-
      
-
      
44
      
-
      
-
      
-
      
44
  
 
                                                                        
Commercial real estate
                                                                        
By internally assigned grade:
                                                                        
Pass
    
17,506
      
109,278
      
204,488
      
241,493
      
124,624
      
207,190
      
4,625
      
2,265
      
911,469
  
Special mention
    
-
      
-
      
8,318
      
2,446
      
287
      
4,832
      
-
      
-
      
15,883
  
Substandard
    
-
      
327
      
2,011
      
3,475
      
195
      
18,568
      
-
      
-
      
24,576
  
Total commercial real estate
    
17,506
      
109,605
      
214,817
      
247,414
      
125,106
      
230,590
      
4,625
      
2,265
      
951,928
  
Current period gross charge-offs
    
-
      
-
      
-
      
-
      
-
      
5
      
-
      
-
      
5
  
 
                                                                        
Home equity
                                                                        
By payment activity status:
                                                                        
Performing
    
777
      
5,649
      
2,774
      
321
      
401
      
1,230
      
19,666
      
-
      
30,818
  
Non-performing
    
-
      
-
      
-
      
-
      
-
      
3
      
33
      
-
      
36
  
Total home equity
    
777
      
5,649
      
2,774
      
321
      
401
      
1,233
      
19,699
      
-
      
30,854
  
Current period gross charge-offs
    
-
      
-
      
-
      
-
      
-
      
-
      
13
      
-
      
13
  
 
                                                                        
Consumer
                                                                        
By payment activity status:
                                                                        
Performing
    
829
      
1,884
      
1,087
      
613
      
244
      
102
      
77
      
-
      
4,836
  
Non-performing
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Consumer
    
829
      
1,884
      
1,087
      
613
      
244
      
102
      
77
      
-
      
4,836
  
Current period gross charge-offs
    
71
      
6
      
-
      
-
      
-
      
-
      
-
      
-
      
77
  
 
                                                                        
Commercial
                                                                        
By internally assigned grade:
                                                                        
Pass
    
1,432
      
12,495
      
8,911
      
6,394
      
14,170
      
18,004
      
25,836
      
198
      
87,440
  
Special mention
    
-
      
-
      
-
      
5,762
      
-
      
614
      
1,733
      
-
      
8,109
  
Substandard
    
-
      
-
      
-
      
1,726
      
33
      
753
      
1,723
      
-
      
4,235
  
Total Commercial
  
$
1,432
    
$
12,495
    
$
8,911
    
$
13,882
    
$
14,203
    
$
19,371
    
$
29,292
    
$
198
    
$
99,784
  
Current period gross charge-offs
  
$
-
    
$
-
    
$
-
    
$
-
    
$
-
    
$
-
    
$
6
    
$
-
    
$
6
  

The following tables present the amortized cost basis of the Company’s loans by class and vintage and includes gross charge-offs by loan class and vintage as of the twelve months ended June 30, 2024:

At June 30, 2024
  
(In thousands)
    Term loans amortized cost basis by origination year      
Revolving
loans
amortized
cost basis
      
Revolving
loans
converted to
term
      
Total
   
2024
    
2023
    
2022
    
2021
    
2020
    
Prior
Residential real estate
                                                      
By payment activity status:
                                                      
     Performing
  
$
55,070
    
$
62,643
    
$
92,995
    
$
79,815
    
$
32,588
    
$
91,936
    
$
-
    
$
24
    
$
415,071
  
     Non-performing
    
-
      
-
      
-
      
185
      
169
      
2,164
      
-
      
-
      
2,518
  
Total residential real estate
    
55,070
      
62,643
      
92,995
      
80,000
      
32,757
      
94,100
      
-
      
24
      
417,589
  
Current period gross charge-offs
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
                                                                         
Commercial real estate
                                                                        
By internally assigned grade:
                                                                        
     Pass
    
103,537
      
210,652
      
242,917
      
126,135
      
79,431
      
135,928
      
4,716
      
363
      
903,679
  
     Special mention
    
-
      
1,188
      
2,468
      
295
      
430
      
4,102
      
-
      
-
      
8,483
  
     Substandard
    
329
      
1,680
      
3,493
      
158
      
4,046
      
14,772
      
-
      
-
      
24,478
  
Total commercial real estate
    
103,866
      
213,520
      
248,878
      
126,588
      
83,907
      
154,802
      
4,716
      
363
      
936,640
  
Current period gross charge-offs
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
                                                                         
Home equity
                                                                        
By payment activity status:
                                                                        
     Performing
    
5,929
      
2,888
      
336
      
429
      
266
      
1,128
      
18,143
      
-
      
29,119
  
     Non-performing
    
-
      
-
      
-
      
-
      
-
      
-
      
47
      
-
      
47
  
Total home equity
    
5,929
      
2,888
      
336
      
429
      
266
      
1,128
      
18,190
      
-
      
29,166
  
Current period gross charge-offs
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
                                                                         
Consumer
                                                                        
By payment activity status:
                                                                        
     Performing
    
2,363
      
1,217
      
689
      
277
      
83
      
65
      
77
      
-
      
4,771
  
     Non-performing
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Consumer
    
2,363
      
1,217
      
689
      
277
      
83
      
65
      
77
      
-
      
4,771
  
Current period gross charge-offs
    
393
      
22
      
49
      
7
      
1
      
-
      
9
      
-
      
481
  
                                                                         
Commercial
                                                                        
By internally assigned grade:
                                                                        
     Pass
    
12,761
      
8,919
      
12,845
      
14,587
      
4,934
      
15,280
      
32,001
      
636
      
101,963
  
     Special mention
    
-
      
-
      
78
      
-
      
35
      
834
      
3,893
      
-
      
4,840
  
 Substandard
     -       -       1,765       34       165       265       2,275       -       4,504  
Total Commercial
  
$
12,761
    
$
8,919
    
$
14,688
    
$
14,621
    
$
5,134
    
$
16,379
    
$
38,169
    
$
636
    
$
111,307
  
Current period gross charge-offs
  
$
-
    
$
-
    
$
-
    
$
989
    
$
-
    
$
137
    
$
26
    
$
-
    
$
1,152
  

No loans were classified as doubtful or loss at September 30, 2024 or June 30, 2024. Management continues to monitor classified loan relationships closely.

Allowance for Credit Losses on Unfunded Commitments

The allowance for credit losses on unfunded commitments at September 30, 2024 was $1.6 million as compared to $1.3 million at June 30, 2024.

Individually Evaluated Loans

As of September 30, 2024, loans evaluated individually had an amortized cost basis of $1.4 million, with an allowance for credit losses on loans of $793,000, as compared to $1.4 million, with an allowance for credit losses on loans of $662,000 at June 30, 2024. At September 30, 2024, the amortized cost basis of collateral dependent loans was $631,000 and $774,000 for commercial real estate and residential loans, respectively. At June 30, 2024, the amortized cost basis of collateral dependent loans was $631,000 and $774,000 for commercial real estate and residential loans, respectively. The allowance for credit loss for collateral dependent loans is individually assessed based on the fair value of the collateral less costs to sell at the reporting date. The collateral value associated with collateral dependent loans was $612,000 and $662,000 at September 30, 2024 and June 30, 2024, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulties

There were no loans during the three months ended September 30, 2024 and 2023 that were modified to borrowers experiencing financial difficulty.

The Company closely monitors the performance of loans that have been modified in accordance with ASU 2022-02. Loans modified during the twelve months ended September 30, 2024 are performing within their modified terms with no payment defaults.

The following table depicts the performance of loans that have been modified to borrowers experiencing financial difficulty that were modified in the prior twelve months at amortized cost basis:



   
At September 30, 2024
  
(In thousands)
  
Current
    
30-59 days
past due
    
60-89
days
past due
    
90 days
or more past due
    
Total
  
Commercial real estate
  
$
4,077
    
$
-
    
$
-
    
$
-
    
$
4,077
  
Consumer
    
18
      
-
      
-
      
-
      
18
  
Total
  
$
4,095
    
$
-
    
$
-
    
$
-
    
$
4,095
  

The Company adopted ASU 2022-02 on July 1, 2023 and as of the three months ended September 30, 2023, there were no loans modified to borrowers experiencing financial difficulty.

Foreclosed real estate

Foreclosed real estate (“FRE”) consists of properties acquired through mortgage loan foreclosure proceedings, deed in lieu of foreclosure or in full or partial satisfaction of loans. At September 30, 2024 and June 30, 2024, the Company had no foreclosed real estate.