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Loans and Allowance for Credit Losses on Loans
 6 Months Ended
Dec. 31, 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 December 31, 2024 and June 30, 2024 are summarized as follows:
 
(In thousands)
 December 31, 2024   June 30, 2024 
Residential real estate
 
$
418,968
  
$
417,589
 
Commercial real estate
  
983,072
   
936,640
 
Home equity
  
31,780
   
29,166
 
Consumer
  
4,672
   
4,771
 
Commercial
  
112,908
   
111,307
 
Total gross loans(1)(2)
  
1,551,400
   
1,499,473
 
Allowance for credit losses on loans
  
(20,191
)
  
(19,244
)
Loans receivable, net
 
$
1,531,209
  
$
1,480,229
 
 
(1)
Loan balances include net deferred fees/costs of ($188,000) and ($42,000) at December 31, 2024 and June 30, 2024, respectively.
(2)
Loan balances exclude accrued interest receivable of $6.9 million and $6.2 million at December 31, 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 $4.1 million at December 31, 2024, of which there were three residential real estate loans totaling $478,000 and three commercial real estate loans totaling $1.1 million that were in the process of foreclosure. Included in non-accrual loans were $1.3 million of loans which were less than 90 days past due at December 31, 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 were 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 $723,000 in loan repayments, $30,000 in charge-offs or transfers to foreclosure, and $1.2 million of loans placed into non-performing status.
 
The following table sets forth information regarding delinquent and/or non-accrual loans at December 31, 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
 
$
2,289
  
$
983
  
$
1,920
  
$
5,192
  
$
413,776
  
$
418,968
  
$
2,937
 
Commercial real estate
  
110
   
-
   
658
   
768
   
982,304
   
983,072
   
936
 
Home equity
  
51
   
-
   
33
   
84
   
31,696
   
31,780
   
34
 
Consumer
  
1
   
26
   
-
   
27
   
4,645
   
4,672
   
-
 
Commercial loans
  
32
   
68
   
148
   
248
   
112,660
   
112,908
   
148
 
Total gross loans
 
$
2,483
  
$
1,077
  
$
2,759
  
$
6,319
  
$
1,545,081
  
$
1,551,400
  
$
4,055
 
 
 
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 December 31, 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 non-accrual 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 December 31, 2024
 
(In thousands)
 
Residential
real estate
  
Commercial
real estate
  
Home equity
  
Consumer
  
Commercial
  
Total
 
Balance at September 30, 2024
 
$
4,475
  
$
12,648
  
$
232
  
$
454
  
$
1,972
  
$
19,781
 
Charge-offs
  
-
   
-
   
-
   
(123
)
  
(7
)
  
(130
)
Recoveries
  
-
   
1
   
-
   
25
   
9
   
35
 
Provision
  
56
   
284
   
2
   
58
   
105
   
505
 
Balance at December 31, 2024
 
$
4,531
  
$
12,933
  
$
234
  
$
414
  
$
2,079
  
$
20,191
 
 
  
Activity for the three months ended December 31, 2023
 
(In thousands)
 
Residential
real estate
  
Commercial
real estate
  
Home equity
  
Consumer
  
Commercial
  
Total
 
Balance at September 30, 2023
 
$
3,869
  
$
12,356
  
$
188
  
$
490
  
$
3,346
  
$
20,249
 
Charge-offs
  
-
   
-
   
-
   
(154
)
  
(6
)
  
(160
)
Recoveries
  
-
   
-
   
-
   
28
   
9
   
37
 
Provision
  
141
   
167
   
4
   
122
   
(251
)
  
183
 
Balance at December 31, 2023
 
$
4,010
  
$
12,523
  
$
192
  
$
486
  
$
3,098
  
$
20,309
 
 
  
Activity for the six months ended December 31, 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
)
  
(200
)
  
(13
)
  
(275
)
Recoveries
  
2
   
2
   
-
   
44
   
18
   
66
 
Provision
  
336
   
718
   
35
   
70
   
(3
)
  
1,156
 
Balance at December 31, 2024
 
$
4,531
  
$
12,933
  
$
234
  
$
414
  
$
2,079
  
$
20,191
 
 
  
Activity for the six months ended December 31, 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
  
-
   
-
   
-
   
(276
)
  
(13
)
  
(289
)
Recoveries
  
-
   
1
   
-
   
54
   
18
   
73
 
Provision
  
34
   
572
   
29
   
239
   
(229
)
  
645
 
Balance at December 31, 2023
 
$
4,010
  
$
12,523
  
$
192
  
$
486
  
$
3,098
  
$
20,309
 
 
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 six months ended December 31, 2024:
 
  
At December 31, 2024
 
  
Term loans amortized cost basis by origination year
  
Revolving
loans
amortized
cost basis
  
Revolving
loans
converted
to term
  
Total
 
(In thousands)
 
2025
  
2024
  
2023
  
2022
  
2021
  
Prior
 
Residential real estate
                        
By payment activity status:
                           
Performing
 
$
20,573
  
$
56,299
  
$
61,329
  
$
88,973
  
$
75,098
  
$
113,759
  
$
-
  
$
-
  
$
416,031
 
Non-performing
  
-
   
-
   
-
   
60
   
-
   
2,877
   
-
   
-
   
2,937
 
Total residential real estate
  
20,573
   
56,299
   
61,329
   
89,033
   
75,098
   
116,636
   
-
   
-
   
418,968
 
Current period gross charge-offs
  
-
   
-
   
-
   
-
   
44
   
-
   
-
   
-
   
44
 
                                     
Commercial real estate
                                    
By internally assigned grade:
                                    
Pass
  
76,133
   
116,089
   
188,886
   
238,533
   
122,362
   
196,346
   
3,675
   
2,464
   
944,488
 
Special mention
  
-
   
-
   
7,985
   
667
   
279
   
5,947
   
-
   
-
   
14,878
 
Substandard
  
-
   
325
   
2,654
   
3,450
   
158
   
17,119
   
-
   
-
   
23,706
 
Total commercial real estate
  
76,133
   
116,414
   
199,525
   
242,650
   
122,799
   
219,412
   
3,675
   
2,464
   
983,072
 
Current period gross charge-offs
  
-
   
-
   
-
   
-
   
-
   
5
   
-
   
-
   
5
 
                                     
Home equity
                                    
By payment activity status:
                                    
Performing
  
1,649
   
5,394
   
2,652
   
282
   
376
   
1,013
   
20,380
   
-
   
31,746
 
Non-performing
  
-
   
-
   
-
   
-
   
-
   
2
   
32
   
-
   
34
 
Total home equity
  
1,649
   
5,394
   
2,652
   
282
   
376
   
1,015
   
20,412
   
-
   
31,780
 
Current period gross charge-offs
  
-
   
-
   
-
   
-
   
-
   
-
   
13
   
-
   
13
 
                                     
Consumer
                                    
By payment activity status:
                                    
Performing
  
1,139
   
1,697
   
947
   
503
   
215
   
83
   
88
   
-
   
4,672
 
Non-performing
  
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Total Consumer
  
1,139
   
1,697
   
947
   
503
   
215
   
83
   
88
   
-
   
4,672
 
Current period gross charge-offs
  
158
   
36
   
-
   
5
   
1
   
-
   
-
   
-
   
200
 
                                     
Commercial
                                    
By internally assigned grade:
                                    
Pass
  
6,059
   
11,766
   
8,921
   
5,995
   
13,607
   
17,314
   
39,596
   
-
   
103,258
 
Special mention
  
-
   
-
   
-
   
5,504
   
-
   
147
   
421
   
192
   
6,264
 
Substandard
  
-
   
-
   
-
   
1,687
   
32
   
649
   
1,018
   
-
   
3,386
 
Total Commercial
 
$
6,059
  
$
11,766
  
$
8,921
  
$
13,186
  
$
13,639
  
$
18,110
  
$
41,035
  
$
192
  
$
112,908
 
Current period gross charge-offs
 
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
$
13
  
$
-
  
$
13
 
 
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
 
  
Term loans amortized cost basis by origination year
  
Revolving
loans
amortized
cost basis
  
Revolving
loans
converted
to term
  
Total
 
(In thousands)
 
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 December 31, 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 December 31, 2024 was $1.7 million as compared to $1.3 million at June 30, 2024.
 
Individually Evaluated Loans
 
As of December 31, 2024, loans evaluated individually had an amortized cost basis of $1.6 million, with an allowance for credit losses on loans of $548,000, as compared to $1.4 million, with an allowance for credit losses on loans of $662,000 at June 30, 2024. At December 31, 2024, the amortized cost basis of collateral dependent loans was $343,000 and $1.3 million for commercial and residential real estate loans, respectively. At June 30, 2024, the amortized cost basis of collateral dependent loans was $631,000 and $774,000 for commercial and residential real estate 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 $1.1 million and $662,000 at December 31, 2024 and June 30, 2024, respectively.
 
Loan Modifications to Borrowers Experiencing Financial Difficulties
 
The following tables present the amortized cost basis of the loans modified to borrowers experiencing financial difficulty by type of concession granted:
 
  
For the three and six months ended
December 31, 2024
 
  
Interest rate reduction
 
(Dollars in thousands)
 
Amortized cost
  
Percentage of total
class
 
Commercial real estate
 
$
2,569
   
0.26
%
Total
 
$
2,569
     
 
The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty:
 
  
For the three and six months ended
December 31, 2024
       
Loan type
  
Interest rate reduction
Commercial real estate
  
Interest rates were reduced by an average of 1.45%
 
For the three and six months ended December 31, 2023, there were no loans modified to borrowers experiencing financial difficulty.
 
The Company closely monitors the performance of loans that have been modified in accordance with ASU 2022-02. There was one consumer loan of $18,000, which was modified during the prior twelve months ended December 31, 2024 and was in payment default. There were three commercial real estate loans of $6.6 million, that were modified during the prior twelve months ended December 31, 2024 and 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 December 31, 2024
 
(In thousands)
 
Current
  
30-59 days
past due
  
60-89 days
past due
  
90 days
or more past
due
  
Total
 
Commercial real estate
 
$
6,645
  
$
-
  
$
-
  
$
-
  
$
6,645
 
Consumer
  
-
   
-
   
18
   
-
   
18
 
Total
 
$
6,645
  
$
-
  
$
18
  
$
-
  
$
6,663
 
 
The Company adopted ASU 2022-02 on July 1, 2023 and as of the six months ended December 31, 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 December 31, 2024 and June 30, 2024, the Company had no foreclosed real estate.