Loans and Allowance for Loan Losses

6 Months Ended

Dec. 31, 2021

Loans and Allowance for Loan Losses

Loans and Allowance for Loan Losses

NOTE 7 – Loans and Allowance for Loan Losses

Major classifications of loans are as follows:

	December 31, 2021		June 30, 2021
Construction, land, development	$	9,760,179	$	2,458,461
1-4 family owner occupied		72,853,855		72,011,570
1-4 family non-owner occupied		25,508,136		22,368,557
Multifamily		100,199,616		91,876,323
Commercial owner occupied		6,135,242		6,405,226
Commercial non-owner occupied		14,046,851		14,182,106
Consumer and installment loans		6,998,578		7,530,197
Total loans		235,502,457		216,832,440
Less:
Allowance for loan losses		(1,487,823)		(1,412,489)
Loans, net	$	234,014,634	$	215,419,951

In the table above, outstanding loan balances are presented net of deferred loan origination fees of $131,000 at December 31, 2021 and $99,000 at June 30, 2021.

Impaired loans are as follows:

	December 31, 2021		June 30, 2021
Nonaccrual loans	$	756,272	$	793,141
Total non-performing loans	$	756,272	$	793,141
Restructured loans, accruing	$	—	$	—
Total impaired loans	$	756,272	$	793,141

Impaired loans are as follows as of and for the following periods ended:

	December 31, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
With related allowance recorded
Recorded investment	$	—	$	—	$	—	$	—	$	180,579	$	—	$	12,520	$	193,099
Unpaid principal balance		—		—		—		—		180,579		—		12,520		193,099
Related allowance		—		—		—		—		71,927		—		12,520		84,447
With no related allowance recorded		—
Recorded investment	$	—	$	557,688	$	—	$	—	$	—	$	—	$	5,485	$	563,173
Unpaid principal balance		—		557,688		—		—		—		—		5,485		563,173
Related allowance		—		—		—		—		—		—		—		—
Total
Recorded investment	$	—	$	557,688	$	—	$	—	$	180,579	$	—	$	18,005	$	756,272
Unpaid principal balance		—		557,688		—		—		180,579		—		18,005		756,272
Related allowance		—		—		—		—		71,927		—		12,520		84,447
	Three Months Ended December 31, 2021
Average recorded balance	$	—	$	501,535	$	—	$	—	$	181,092	$	—	$	19,287	$	701,914
Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		5,678		—		—		—		—		—		5,678
Total interest on impaired loans	$	—	$	5,678	$	—	$	—	$	—	$	—	$	—	$	5,678
	Six Months Ended December 31, 2021
Average recorded balance	$	—	$	496,253	$	—	$	—	$	181,621	$	—	$	20,691	$	698,565
Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		7,401		—		—		—		—		—		7,401
Total interest on impaired loans	$	—	$	7,401	$	—	$	—	$	—	$	—	$	—	$	7,401

	June 30, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
With related allowance recorded
Recorded investment	$	—	$	—	$	—	$	—	$	182,532	$	—	$	23,133	$	205,665
Unpaid principal balance		—		—		—		—		182,532		—		23,133		205,665
Related allowance		—		—		—		—		65,626		—		23,133		88,759
With no related allowance recorded
Recorded investment	$	—	$	587,476	$	—	$	—	$	—	$	—	$	—	$	587,476
Unpaid principal balance		—		587,476		—		—		—		—		—		587,476
Related allowance		—		—		—		—		—		—		—		—
Total
Recorded investment	$	—	$	587,476	$	—	$	—	$	182,532	$	—	$	23,133	$	793,141
Unpaid principal balance		—		587,476		—		—		182,532		—		23,133		793,141
Related allowance		—		—		—		—		65,626		—		23,133		88,759
Average recorded balance	$	—	$	780,405	$	41,013	$	—	$	181,950	$	—	$	109,214	$	1,112,582
Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		20,084		—		—		—		—		—		20,084
Total interest on impaired loans	$	—	$	20,084	$	—	$	—	$	—	$	—	$	—	$	20,084

	December 31, 2020
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
With related allowance recorded
Recorded investment	$	—	$	93,110	$	—	$	—	$	182,853	$	—	$	95,763	$	371,726
Unpaid principal balance		—		93,110		—		—		182,853		—		95,763		371,726
Related allowance		—		61,491		—		—		64,430		—		53,882		179,803
With no related allowance recorded
Recorded investment	$	—	$	799,428	$	79,265	$	—	$	—	$	—	$	30,374	$	909,067
Unpaid principal balance		—		799,428		79,265		—		—		—		30,374		909,067
Related allowance		—		—		—		—		—		—		—		—
Total
Recorded investment	$	—	$	892,538	$	79,265	$	—	$	182,853	$	—	$	126,137	$	1,280,793
Unpaid principal balance		—		892,538		79,265		—		182,853		—		126,137		1,280,793
Related allowance		—		61,491		—		—		64,430		—		53,882		179,803
	Three Months Ended December 31, 2020
Average recorded balance	$	—	$	911,182	$	19,816	$	—	$	180,387	$	—	$	130,024	$	1,241,409
Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		5,021		—		—		—		—		—		5,021
Total interest on impaired loans	$	—	$	5,021	$	—	$	—	$	—	$	—	$	—	$	5,021
	Six Months Ended December 31, 2020
Average recorded balance	$	—	$	934,319	$	19,548	$	—	$	181,222	$	—	$	129,846	$	1,264,935
Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		8,409		—		—		—		—		—		8,409
Total interest in impaired loans	$	—	$	8,409	$	—	$	—	$	—	$	—	$	—	$	8,409

Loans are individually evaluated for impairment once a weakness or adverse trend is identified that may jeopardize the repayment of the loan in accordance with the terms of the loan.

The following are the Company's risk rating definitions:

Pass: Loans in this category are to persons or entities that span from having financial characteristics of unquestioned strength to entities that have potential risks that if left uncorrected could at some point result in deterioration of the Bank’s credit position. Loans in this category are rated “1” through “4” with the lower risk being identified with a lower numerical rating. General characteristics that are monitored include borrower net worth, liquidity and entity profitability.

Special Mention: Loans in this category contain some weakness or potential weakness that if left uncorrected may result in the deterioration of the repayment capacity. Loans in this category are rated as a “5”.

Substandard: Loans in this category exhibit the same characteristics as “5” rated credits and are inadequately protected by the current net worth and paying capacity of the obligor and/or of the collateral pledged as security for the asset. Loans in this category are rated as a “6”.

Real Estate in Judgement: Loans in this category have been placed in non-accrual and the Bank has taken legal action to preserve its position. Loans in this category are rated as a “7”.

The following is a summary of loans by risk rating:

	December 31, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
			Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
1-4	$	9,760,179	$	72,296,167	$	25,508,136	$	100,199,616	$	4,796,787	$	10,825,775	$	6,980,573	$	230,367,233
5		—		—		—		—		1,157,876		3,221,076		—		4,378,952
6		—		557,688		—		—		—		—		18,005		575,693
7		—		—		—		—		180,579		—		—		180,579
Total	$	9,760,179	$	72,853,855	$	25,508,136	$	100,199,616	$	6,135,242	$	14,046,851	$	6,998,578	$	235,502,457

	June 30, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
1-4	$	2,458,461	$	71,319,957	$	22,368,557	$	91,876,323	$	5,064,818	$	10,917,142	$	7,507,064	$	211,512,322
5		—		104,137		—		—		1,157,876		3,264,964		—		4,526,977
6		—		587,476		—		—		182,532		—		23,133		793,141
7		—		—		—		—		—		—		—		—
Total	$	2,458,461	$	72,011,570	$	22,368,557	$	91,876,323	$	6,405,226	$	14,182,106	$	7,530,197	$	216,832,440

The following is a summary of past due loans:

	December 31, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
30‑59 days, accruing	$	—	$	250,352	$	—	$	—	$	—	$	—	$	—	$	250,352
60‑89 days, accruing		—		226,894		—		—		—		—		—		226,894
90 days & over or nonaccrual		—		557,688		—		—		180,579		—		18,005		756,272
Total	$	—	$	1,034,934	$	—	$	—	$	180,579	$	—	$	18,005	$	1,233,518

	June 30, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
30‑59 days, accruing	$	—	$	535,696	$	—	$	—	$	—	$	—	$	—	$	535,696
60‑89 days, accruing		—		—		—		—		—		—		—		—
90 days & over or nonaccrual		—		587,476		—		—		182,532		—		23,133		793,141
Total	$	—	$	1,123,172	$	—	$	—	$	182,532	$	—	$	23,133	$	1,328,837

TDRs involve the granting of some concession to a distressed borrower resulting in a loan modification such as; payment schedule changes, interest rate reductions, or principal charge-offs.There were no new TDRs during the six months ending December 31, 2021. There were also no TDRs that defaulted during the period that were modified within the previous six months as of December 31, 2021. Two TDRs were transferred out of TDR status during the six months ended December 31, 2021. There were no TDRs as of December 31, 2021 and two TDRs as of June 30, 2021. As discussed within Note 1, under Section 4013 of the CARES Act, a financial institution can suspend the requirements under U.S. GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a TDR and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Management has evaluated the loans and determined that based on the liquidation value of the collateral, no specific reserve is necessary.

Loans that have previously been restructured in a troubled debt restructuring and are no longer impaired based on the terms specified in their restructuring agreement and are now at a rate equal to or greater than a rate the Bank is willing to accept for a loan with comparable risk are transferred out of TDR status. Two loans were transferred out of TDR status during the six months ended December 31, 2021.

The following is a summary of TDRs as of December 31, 2021:

	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer &
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
Accruing
Beginning balance June 30, 2021	$	—	$	104,137	$	—	$	—	$	—	$	—	$	—	$	104,137
Transfer to other loan category		—		—		—		—		—		—		—		—
Principal payments		—		(610)		—		—		—		—		—		(610)
Charge-offs		—		—		—		—		—		—		—		—
Sales		—		—		—		—		—		—		—		—
New restructureds		—		—		—		—		—		—		—		—
Transfers out of TDR status		—		(48,217)		—		—		—		—		—		(48,217)
Transfers to foreclosed properties		—		—		—		—		—		—		—		—
Transfers to nonaccrual		—		(55,310)		—		—		—		—		—		(55,310)
Transfers out of nonaccrual		—		—		—		—		—		—		—		—
Ending balance	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Nonaccrual
Beginning balance	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Principal payments		—		—		—		—		—		—		—		—
Charge-offs		—		—		—		—		—		—		—		—
Sales		—		—		—		—		—		—		—		—
Transfers to foreclosed properties		—		—		—		—		—		—		—		—
Transfers from accrual		—		—		—		—		—		—		—		—
Transfers to accrual		—		—		—		—		—		—		—		—
Ending balance	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Totals
Beginning balance	$	—	$	104,137	$	—	$	—	$	—	$	—	$	—	$	104,137
Transfer to other loan category		—		—		—		—		—		—		—		—
Principal payments		—		(610)		—		—		—		—		—		(610)
Charge-offs		—		—		—		—		—		—		—		—
Sales		—		—		—		—		—		—		—		—
New restructureds		—		—		—		—		—		—		—		—
Transfers out of TDR status		—		(48,217)		—		—		—		—		—		(48,217)
Transfers to foreclosed properties		—		—		—		—		—		—		—		—
Transfers to nonaccrual		—		(55,310)		—		—		—		—		—		(55,310)
Transfers from accrual		—		—		—		—		—		—		—		—
Transfers out of nonaccrual		—		—		—		—		—		—		—		—
Ending balance	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

The allowance for loan losses reflected in the accompanying condensed consolidated financial statements represents the allowance available to absorb probable and inherent loan losses in the loan portfolio. An analysis of changes in the allowance is presented in the following tabulation for the three and six months ended December 31, 2021 and 2020 and the year ended June 30, 2021:

	Three Months Ended December 31, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 9/30/21	$	36,317	$	339,916	$	100,119	$	484,106	$	101,647	$	218,697	$	61,871	$	120,216	$	1,462,889
Charge-offs		—		—		—		—		—		—		(207)		—		(207)
Recoveries		—		—		—		—		—		—		141		—		141
Provision		10,044		14,335		27,422		41,942		4,519		(39,599)		(7,192)		(26,471)		25,000
Balance at 12/31/21	$	46,361	$	354,251	$	127,541	$	526,048	$	106,166	$	179,098	$	54,613	$	93,745	$	1,487,823
	Six Months Ended December 31, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner-		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 6/30/21	$	11,063	$	326,408	$	115,645	$	459,382	$	99,851	$	230,459	$	66,523	$	103,158	$	1,412,489
Charge-offs		—		—		—		—		—		—		(207)		—		(207)
Recoveries		—		—		—		—		—		—		541		—		541
Provision		35,298		27,843		11,896		66,666		6,315		(51,361)		(12,244)		(9,413)		75,000
Balance at 12/31/21	$	46,361	$	354,251	$	127,541	$	526,048	$	106,166	$	179,098	$	54,613	$	93,745	$	1,487,823
Allowance
Ending balance individually evaluated for impairment	$	—	$	—	$	—	$	—	$	71,927	$	—	$	12,520	$	—	$	84,447
Ending balance collectively evaluated for impairment		46,361		354,251		127,541		526,048		34,239		179,098		42,093		93,745		1,403,376
Ending balance	$	46,361	$	354,251	$	127,541	$	526,048	$	106,166	$	179,098	$	54,613	$	93,745	$	1,487,823
Loans
Ending balance individually evaluated for impairment	$	—	$	557,688	$	—	$	—	$	180,579	$	—	$	18,005	$	—	$	756,272
Ending balance collectively evaluated for impairment		9,760,179		72,296,167		25,508,136		100,199,616		5,954,663		14,046,851		6,980,573		—		234,746,185
Total loans	$	9,760,179	$	72,853,855	$	25,508,136	$	100,199,616	$	6,135,242	$	14,046,851	$	6,998,578	$	—	$	235,502,457
Less allowance	$	46,361	$	354,251	$	127,541	$	526,048	$	106,166	$	179,098	$	54,613	$	93,745	$	1,487,823
Total loans, net	$	9,713,818	$	72,499,604	$	25,380,595	$	99,673,568	$	6,029,076	$	13,867,753	$	6,943,965	$	(93,745)	$	234,014,634

	June 30, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner-		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 6/30/20	$	13,795	$	356,434	$	77,220	$	286,665	$	95,711	$	312,670	$	97,312	$	113,620	$	1,353,427
Charge-offs		—		(61,491)		—		—		—		—		(29,994)		—		(91,485)
Recoveries		—		—		—		—		—		—		547		—		547
Provision		(2,732)		31,465		38,425		172,717		4,140		(82,211)		(1,342)		(10,462)		150,000
Balance at 6/30/21	$	11,063	$	326,408	$	115,645	$	459,382	$	99,851	$	230,459	$	66,523	$	103,158	$	1,412,489
Allowance
Ending balance individually evaluated for impairment	$	—	$	—	$	—	$	—	$	65,626	$	—	$	23,133	$	—	$	88,759
Ending balance collectively evaluated for impairment		11,063		326,408		115,645		459,382		34,225		230,459		43,390		103,158		1,323,730
Ending balance	$	11,063	$	326,408	$	115,645	$	459,382	$	99,851	$	230,459	$	66,523	$	103,158	$	1,412,489
Loans
Ending balance individually evaluated for impairment	$	—	$	587,476	$	—	$	—	$	182,532	$	—	$	23,133	$	—	$	793,141
Ending balance collectively evaluated for impairment		2,458,461		71,424,094		22,368,557		91,876,323		6,222,694		14,182,106		7,507,064		—		216,039,299
Total loans	$	2,458,461	$	72,011,570	$	22,368,557	$	91,876,323	$	6,405,226	$	14,182,106	$	7,530,197	$	—	$	216,832,440
Less allowance	$	11,063	$	326,408	$	115,645	$	459,382	$	99,851	$	230,459	$	66,523	$	103,158	$	1,412,489
Total loans, net	$	2,447,398	$	71,685,162	$	22,252,912	$	91,416,941	$	6,305,375	$	13,951,647	$	7,463,674	$	(103,158)	$	215,419,951

	Three Months Ended December 31, 2020
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 9/30/20	$	10,859	$	335,391	$	75,827	$	350,641	$	75,184	$	328,902	$	89,941	$	86,739	$	1,353,484
Charge-offs		—		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		—		7		—		7
Provision		389		(16,619)		11,525		48,824		11,266		11,745		(3,096)		(14,034)		50,000
Balance at 12/31/20	$	11,248	$	318,772	$	87,352	$	399,465	$	86,450	$	340,647	$	86,852	$	72,705	$	1,403,491
	Six Months Ended December 31, 2020
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner-		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 6/30/20	$	13,795	$	356,434	$	77,220	$	286,665	$	95,711	$	312,670	$	97,312	$	113,620	$	1,353,427
Charge-offs		—		—		—		—		—		—		(325)		—		(325)
Recoveries		—		—		—		—		—		—		389		—		389
Provision		(2,547)		(37,662)		10,132		112,800		(9,261)		27,977		(10,524)		(40,915)		50,000
Balance at 12/31/20	$	11,248	$	318,772	$	87,352	$	399,465	$	86,450	$	340,647	$	86,852	$	72,705	$	1,403,491
Allowance
Ending balance individually evaluated for impairment	$	—	$	61,491	$	—	$	—	$	64,430	$	—	$	53,882	$	—	$	179,803
Ending balance collectively evaluated for impairment		11,248		257,281		87,352		399,465		22,020		340,647		32,970		72,705		1,223,688
Ending balance	$	11,248	$	318,772	$	87,352	$	399,465	$	86,450	$	340,647	$	86,852	$	72,705	$	1,403,491
Loans
Ending balance individually evaluated for impairment	$	—	$	892,538	$	79,265	$	—	$	182,853	$	—	$	126,137	$	—	$	1,280,793
Ending balance collectively evaluated for impairment		3,460,986		84,354,539		22,513,372		88,769,856		6,291,455		19,679,205		7,703,126		—		232,772,539
Total loans	$	3,460,986	$	85,247,077	$	22,592,637	$	88,769,856	$	6,474,308	$	19,679,205	$	7,829,263	$	—	$	234,053,332
Less allowance	$	11,248	$	318,772	$	87,352	$	399,465	$	86,450	$	340,647	$	86,852	$	72,705	$	1,403,491
Total loans, net	$	3,449,738	$	84,928,305	$	22,505,285	$	88,370,391	$	6,387,858	$	19,338,558	$	7,742,411	$	(72,705)	$	232,649,841