Loans and Allowance for Credit Losses on Loans

9 Months Ended

Mar. 31, 2025

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 March 31, 2025 and June 30, 2024 are summarized as follows:

(In thousands)		March 31, 2025			June 30, 2024
Residential real estate	$	419,609		$	417,589
Commercial real estate		1,048,572			936,640
Home equity		32,380			29,166
Consumer		4,496			4,771
Commercial		114,321			111,307
Total gross loans(1)(2)		1,619,378			1,499,473
Allowance for credit losses on loans		(21,196	)		(19,244	)
Loans receivable, net	$	1,598,182		$	1,480,229

(1)

Loan balances include net deferred fees/costs of ($217,000) and ($42,000) at March 31, 2025 and June 30, 2024, respectively.

(2)

Loan balances exclude accrued interest receivable of $7.2 million and $6.2 million at March 31, 2025 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 $2.9 million at March 31, 2025, of which there were two residential real estate loans totaling $297,000 and three commercial real estate loans totaling $1.1 million that were in the process of foreclosure. Included in non-accrual loans were $1.4 million of loans which were less than 90 days past due at March 31, 2025, 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 $2.3 million in loan repayments, $128,000 in charge-offs or transfers to foreclosure, $67,000 in loans returning to performing status, and $1.7 million of loans placed into nonperforming status.

The following table sets forth information regarding delinquent and/or non-accrual loans at March 31, 2025:

(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	$	2,995	$	505	$	1,093	$	4,593	$	415,016	$	419,609	$	2,169
Commercial real estate		4,086		-		315		4,401		1,044,171		1,048,572		584
Home equity		224		-		-		224		32,156		32,380		31
Consumer		20		5		-		25		4,471		4,496		-
Commercial loans		110		13		77		200		114,121		114,321		141
Total gross loans	$	7,435	$	523	$	1,485	$	9,443	$	1,609,935	$	1,619,378	$	2,925

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 March 31, 2025 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 March 31, 2025
(In thousands)		Residential real estate		Commercial real estate		Home equity		Consumer			Commercial			Total
Balance at December 31, 2024	$	4,531	$	12,933	$	234	$	414		$	2,079		$	20,191
Charge-offs		-		-		-		(93	)		(44	)		(137	)
Recoveries		-		1		-		31			9			41
Provision		65		865		6		53			112			1,101
Balance at March 31, 2025	$	4,596	$	13,799	$	240	$	405		$	2,156		$	21,196

	Activity for the three months ended March 31, 2024
(In thousands)		Residential real estate		Commercial real estate			Home equity		Consumer			Commercial			Total
Balance at December 31, 2023	$	4,010	$	12,523		$	192	$	486		$	3,098		$	20,309
Charge-offs		-		-			-		(117	)		(143	)		(260	)
Recoveries		-		1			-		46			9			56
Provision		128		(28	)		7		87			83			277
Balance at March 31, 2024	$	4,138	$	12,496		$	199	$	502		$	3,047		$	20,382

	Activity for the nine months ended March 31, 2025
(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	)		(293	)		(57	)		(412	)
Recoveries		2			3			-			75			27			107
Provision		401			1,583			41			123			109			2,257
Balance at March 31, 2025	$	4,596		$	13,799		$	240		$	405		$	2,156		$	21,196

	Activity for the nine months ended March 31, 2024
(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		-		-			-		(393	)		(156	)		(549	)
Recoveries		-		2			-		100			27			129
Provision		162		544			36		326			(146	)		922
Balance at March 31, 2024	$	4,138	$	12,496		$	199	$	502		$	3,047		$	20,382

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 nine months ended March 31, 2025:

	At March 31, 2025
	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	$	31,481	$	57,075	$	60,544	$	86,760	$	73,429	$	108,151	$	-	$	-	$	417,440
Non-performing		-		-		-		58		-		2,111		-		-		2,169
Total residential real estate		31,481		57,075		60,544		86,818		73,429		110,262		-		-		419,609
Current period gross charge-offs		-		-		-		-		44		-		-		-		44
Commercial real estate
By internally assigned grade:
Pass		164,656		118,404		184,471		231,874		120,144		189,181		3,709		5,060		1,017,499
Special mention		-		-		507		662		271		4,517		-		-		5,957
Substandard		-		323		9,147		-		369		15,066		-		211		25,116
Total commercial real estate		164,656		118,727		194,125		232,536		120,784		208,764		3,709		5,271		1,048,572
Current period gross charge-offs		-		-		-		-		-		5		-		-		5
Home equity
By payment activity status:
Performing		1,924		4,998		2,501		269		350		872		21,340		95		32,349
Non-performing		-		-		-		-		-		-		31		-		31
Total home equity		1,924		4,998		2,501		269		350		872		21,371		95		32,380
Current period gross charge-offs		-		-		-		-		-		-		13		-		13
Consumer
By payment activity status:
Performing		1,435		1,514		824		422		173		60		68		-		4,496
Non-performing		-		-		-		-		-		-		-		-		-
Total Consumer		1,435		1,514		824		422		173		60		68		-		4,496
Current period gross charge-offs		242		41		-		9		1		-		-		-		293
Commercial
By internally assigned grade:
Pass		9,051		11,458		8,838		5,606		13,175		16,252		41,532		116		106,028
Special mention		-		-		-		59		-		119		145		188		511
Substandard		-		-		-		6,498		31		617		636		-		7,782
Total Commercial	$	9,051	$	11,458	$	8,838	$	12,163	$	13,206	$	16,988	$	42,313	$	304	$	114,321
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	38	$	19	$	-	$	57

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

There were no loans were classified as doubtful or loss at March 31, 2025 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 March 31, 2025 was $1.8 million as compared to $1.3 million at June 30, 2024.

Individually Evaluated Loans

As of March 31, 2025, loans evaluated individually had an amortized cost basis of $759,000 with an allowance for credit losses on loans of $557,000, as compared to $1.4 million with an allowance for credit losses on loans of $662,000 at June 30, 2024. At March 31, 2025, the amortized cost basis of collateral dependent loans was $759,000 for commercial real estate loans. 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 $202,000 and $662,000 at March 31, 2025 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 months ended March 31, 2025
	Term extension				Term extension and interest rate reduction
(Dollars in thousands)		Amortized cost	Percentage of total class			Amortized cost	Percentage of total class
Commercial real estate	$	299	0.03	%	$	-	-	%
Total	$	299			$	-

	For the three months ended March 31, 2024
	Term extension				Term extension and interest rate reduction
(Dollars in thousands)		Amortized cost	Percentage of total class			Amortized cost	Percentage of total class
Commercial real estate	$	3,948	0.43	%	$	130	0.01	%
Total	$	3,948			$	130

	For the nine months ended March 31, 2025
	Term extension				Interest rate reduction
(Dollars in thousands)		Amortized cost	Percentage of total class			Amortized cost	Percentage of total class
Commercial real estate	$	299	0.03	%	$	2,545	0.24	%
Total	$	299			$	2,545

	For the nine months ended March 31, 2024
	Term extension				Term extension and interest rate reduction
(Dollars in thousands)		Amortized cost	Percentage of total class			Amortized cost	Percentage of total class
Commercial real estate	$	3,948	0.43	%	$	130	0.01	%
Total	$	3,948			$	130

The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty:

	For the three months ended March 31, 2025
Loan type	Term extension	Interest rate reduction
Commercial real estate	12 month term extension	-

	For the three months ended March 31, 2024
Loan type	Term extension	Interest rate reduction
Commercial real estate	Added a weighted-average 9 months to the life of the loan	Interest rates were reduced by an average of 1.75%

	For the nine months ended March 31, 2025
Loan type	Term extension	Interest rate reduction
Commercial real estate	12 month term extension	Interest rates were reduced by an average of 1.45%

	For the nine months ended March 31, 2024
Loan type	Term extension	Interest rate reduction
Commercial real estate	Added a weighted-average 9 months to the life of the loan	Interest rates were reduced by an average of 1.75%

The Company closely monitors the performance of loans that have been modified in accordance with ASU 2022-02. The loans that were modified during the prior twelve months ended March 31, 2025, one commercial real estate loan of $299,000 and one consumer loan of $16,000, are in payment default. Three commercial real estate loans of $6.6 million, 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 March 31, 2025
(In thousands)		Current		30-59 days past due		60-89 days past due		90 days or more past due		Total
Commercial real estate	$	6,606	$	299	$	-	$	-	$	6,905
Consumer		-		16		-		-		16
Total	$	6,606	$	315	$	-	$	-	$	6,921

For the nine months ended March 31, 2024, there were no payment defaults for loans that were 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 March 31, 2025 and June 30, 2024, the Company had no foreclosed real estate.