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Loans Receivable and Allowance for Loan Losses
 9 Months Ended
Sep. 30, 2022
Loans Receivable and Allowance for Loan Losses [Abstract]  
Loans Receivable and Allowance for Loan Losses Note 7 - Loans Receivable and Allowance for Loan Losses

The following tables present the recorded investment in loans receivable as of September 30, 2022 and December 31, 2021 by segment and class:

September 30, 2022

December 31, 2021

(In Thousands)

Residential one-to-four family

$

242,238

$

224,534 

Commercial and multi-family

2,164,320

1,720,174 

Construction

153,103

153,904 

Commercial business(1)

205,661

191,139 

Home equity(2)

56,064

50,469 

Consumer

2,545

3,717 

2,823,931

2,343,937 

Less:

Deferred loan fees, net

(3,721)

(1,876)

Allowance for loan losses

(33,195)

(37,119)

Total Loans, net

$

2,787,015

$

2,304,942 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


‎

Note 7 – Loans Receivable and Allowance for Loan Losses (Continued)

Allowance for Loan Losses

The allowance for loan loss is evaluated regularly by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements. These elements include a general allocated reserve for performing loans, a specific reserve for impaired loans and an unallocated portion.  

The Company consistently applies the following comprehensive methodology. During the quarterly review of the allowance for loan losses, the Company considers a variety of qualitative factors that include:

Lending policies and procedures;

Personnel responsible for the particular portfolio - relative to experience and ability of staff;

Trend for past due, criticized and classified loans;

Relevant economic factors;

Quality of the loan review system;

Value of collateral for collateral dependent loans;

The effect of any concentrations of credit and the changes in the level of such concentrations; and

Other external factors.

The methodology includes the segregation of the loan portfolio into two divisions: performing loans and loans determined to be impaired. Loans which are performing are evaluated homogeneously by loan class or loan type. The allowance for performing loans is evaluated based on historical loan loss experience with an adjustment for the qualitative factors listed above. Impaired loans can be loans which are more than 90 days delinquent, troubled debt restructurings, in the process of foreclosure, or a forced bankruptcy plan. These loans are individually evaluated for loan loss either by current appraisal, or net present value of expected cash flows. Management reviews the overall estimate for feasibility and bases the loan loss provision accordingly. During 2022 and 2021, additional stress tests were performed to model a potential collateral deficiency on those loans that are in sectors that have demonstrated a weakness in the current COVID environment.

The Bank also maintains an unallocated allowance to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio. Management must make estimates using assumptions and information that is often subjective and subject to change.

The loan portfolio is segmented into the following loan segments, where the risk level for each class is analyzed when determining the allowance for loan losses:

Residential one-to-four family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential real estate loans decrease the interest rate risk to the Bank that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default. At the same time, the marketability of the underlying properties may be adversely affected by higher interest rates. Repayment risk may be affected by a number of factors including, but not necessarily limited to, job loss, divorce, illness and personal bankruptcy of the borrower.

Commercial and multi-family real estate lending entails additional risks as compared with residential family property lending. Such loans typically involve large loan balances to single borrowers or groups of related borrowers. The payment experience on such loans is typically dependent on the successful operation of the real estate project. The success of such projects is sensitive to changes in supply and demand conditions in the market for commercial real estate as well as general economic conditions.

Construction lending is generally considered to involve a high risk due to the concentration of principal in a limited number of loans and borrowers and the effects of the general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor. In addition, speculative construction loans to a builder are not necessarily pre-sold and thus pose a greater potential risk to the Bank than construction loans to individuals on their personal residence.

Commercial business lending, including lines of credit, is generally considered higher risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on the business. Commercial business loans are primarily secured by inventories and other business assets. In many cases, any repossessed collateral for a defaulted commercial business loans will not provide an adequate source of repayment of the outstanding loan balance.

Home equity lending entails certain risks such as interest rate risk and risk of non-repayment. The marketability of the underlying property may be adversely affected by higher interest rates, decreasing the collateral value securing the loan. Repayment risk can be affected by job loss, divorce, illness and personal bankruptcy of the borrower. Home equity line of credit lending entails securing an equity interest in the borrower’s home. In many cases, the Bank’s position in these loans is as a junior lien holder to another institution’s superior lien. This type of lending is often priced on an adjustable rate basis with the rate set at or above a predefined index. Adjustable-rate loans decrease the interest rate risk to the Bank that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default.

Other consumer loans generally have more credit risk because of the type and nature of the collateral and, in certain cases, the absence of collateral. Consumer loans generally have shorter terms and higher interest rates than other lending. In addition, consumer lending collections are dependent on the borrower’s continuing financial

stability, and thus are more likely to be adversely affected by job loss, divorce, illness and personal bankruptcy. In many cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three and nine months ended September 30, 2022, and the related portion of the allowances for loan losses that is allocated to each loan class, as of September 30, 2022 (in thousands):

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Beginning Balance, July 1, 2022

$

2,565

$

21,157

$

2,348

$

7,639

$

387

$

17

-

$

34,113

Charge-offs:

-

-

-

(931)

 

-

-

(931)

Recoveries:

7

-

-

2

4

-

-

13

(Credit) Provisions:

(374)

390

96

(993)

75

3

803

-

Ending Balance, September 30, 2022

2,198

21,547

2,444

5,717

466

20

803

33,195

Ending Balance attributable to loans:

Individually evaluated for impairment

204

-

519

3,509

6

-

-

4,238

Collectively evaluated for impairment

1,994

21,547

1,925

2,208

460

20

803

28,957

Ending Balance, September 30, 2022

2,198

21,547

2,444

5,717

466

20

803

33,195

Loans Receivables:

Individually evaluated for impairment

4,914

27,090

3,180

4,607

733

-

-

40,524

Collectively evaluated for impairment

237,324

2,137,230

149,923

201,054

55,331

2,545

-

2,783,407

Total Gross Loans:

$

242,238

$

2,164,320

$

153,103

$

205,661

$

56,064

$

2,545

$

-

$

2,823,931

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Beginning Balance, January 1, 2022

$

4,094 

$

22,065 

$

2,231 

$

8,000 

$

533 

$

14 

$

182 

$

37,119 

Charge-offs:

-

-

-

(1,703)

-

-

-

(1,703)

Recoveries:

9

-

-

138

9

198

-

354

(Credit) Provisions:

(1,905)

(518)

213

(718)

(76)

(192)

621

(2,575)

Ending Balance, September 30, 2022

$

2,198

$

21,547

$

2,444

$

5,717

$

466

$

20

$

803

$

33,195

_____________________________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three and nine months ended September 30, 2021, and the related portion of the allowances for loan losses that is allocated to each loan class, as of September 30, 2021 (in thousands): 

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Beginning Balance, July 1, 2021

$

2,911

$

24,438

$

2,341

$

6,852

$

294

-

$

3

$

633

$

37,472

Charge-offs:

-

-

-

-

-

-

-

-

Recovery:

-

-

-

1 

3 

-

-

4 

(Credit) Provisions:

(75)

370

(307)

879

19

20

(226)

680

Ending Balance September 30, 2021

$

2,836

$

24,808

$

2,034

$

7,732

$

316

$

23

$

407

$

38,156

Ending Balance attributable to loans:

Individually evaluated for impairment

$

276

$

1,469

$

150 

$

5,770

$

16

$

-

$

-

$

7,681

Collectively evaluated for impairment

2,560

23,339

1,884

1,962

300

23

407

30,475

Ending Balance September 30, 2021

$

2,836

$

24,808

$

2,034

$

7,732

$

316

$

23

$

407

$

38,156

Loans Receivables:

Individually evaluated for impairment

$

5,104

$

39,356

$

2,787 

$

10,343

$

1,273

$

-

$

-

$

58,863

Collectively evaluated for impairment

219,226

1,700,620

146,289

151,073

50,836

2,730

-

2,270,774

Total Gross Loans:

$

224,330

$

1,739,976

$

149,076

$

161,416

$

52,109

$

2,730

$

-

$

2,329,637

_____________________________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Beginning Balance, January 1, 2021

$

3,293 

$

21,772 

$

1,977 

$

6,306 

$

286 

$

-

$

5 

$

33,639 

Charge-offs:

(60)

-

-

(103)

-

(198)

-

(361)

Recovery:

27 

-

-

2

-

9

-

38

(Credit) Provisions:

(424)

3,036

57

1,527

30

212

402

4,840

Ending Balance, September 30, 2021

$

2,836

$

24,808

$

2,034

$

7,732

$

316

$

23

$

407

$

38,156

_____________________________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The following table sets forth the amount recorded in loans receivable at December 31, 2021. The table also details the amount of total loans receivable that are evaluated individually, and collectively, for impairment and the related portion of the allowance for loan losses that is allocated to each loan class (in thousands):

 

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for credit losses:

Ending Balance attributable to loans:

Individually evaluated for impairment

$

265 

$

1,690 

$

210 

$

5,650 

$

13 

$

-

$

-

$

7,828 

Collectively evaluated for impairment

3,829 

20,375 

2,021 

2,350 

520 

14 

182 

29,291 

Ending Balance, December 31, 2021

$

4,094 

$

22,065 

$

2,231 

$

8,000 

$

533 

$

14 

$

182 

$

37,119 

Loans Receivables:

Individually evaluated for impairment

$

4,961 

$

31,745 

$

2,847 

$

8,746 

$

1,083 

$

-

$

-

$

49,382 

Collectively evaluated for impairment

219,573 

1,688,429 

151,057 

182,393 

49,386 

3,717 

-

2,294,555 

Total Gross Loans:

$

224,534 

$

1,720,174 

$

153,904 

$

191,139 

$

50,469 

$

3,717 

$

-

$

2,343,937 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the average recorded investment and interest income recognized on impaired loans with no related allowance recorded by portfolio class for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2022

2021

2021

2022

2022

2021

2021

Average

Interest

Average

Interest

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

Recorded

Income

Recorded

Income

Investment

Recognized

Investment

Recognized

Investment

Recognized

Investment

Recognized

Loans with no related allowance recorded:

Residential one-to-four family

$

2,862

$

36

$

3,050

$

37 

$

2,881

$

109

$

2,973

$

108

Commercial and Multi-family

27,360

315

29,742

271

25,415

901

30,614

830

Construction

-

-

-

-

-

-

929 

36 

Commercial business(1)

828

3

2,465

65

1,149

73

3,143

104

Home equity(2)

488

7

938

12 

474

17

1,048

35

Consumer

-

-

-

-

-

-

-

-

Total Impaired Loans with no allowance recorded:

$

31,538

$

361

$

36,195

$

385

$

29,919

$

1,100

$

38,707

$

1,113

-

-

Loans with an allowance recorded:

Residential one-to-four family

$

1,989

24

$

2,110

$

66

$

1,964

$

61

$

2,302

$

165

Commercial and Multi-family

 

-

10,942

100

1,125

266

11,204

331

Construction

3,112

-

2,787

3 

3,059

22

1,858

6

Commercial business(1)

4,567

-

8,197

24 

4,953

65

8,388

141

Home equity(2)

264

-

340

-

276

5

368

2 

Consumer

-

-

-

-

-

-

-

-

Total Impaired Loans with an allowance recorded:

$

9,932

$

24

$

24,376

$

193

$

11,377

$

419

$

24,120

$

645

-

-

Total Impaired Loans:

$

41,470

$

385

$

60,571

$

578

$

41,296

$

1,519

$

62,827

$

1,758

__________

(1)Includes business lines of credit.

(2)Includes home equity lines of credit.

The following table summarizes the recorded investment by portfolio class at September 30, 2022 and December 31, 2021. (in thousands):

As of September 30, 2022

As of December 31, 2021

Recorded

Unpaid Principal

Related

Recorded

Unpaid Principal

Related

Investment

Balance

Allowance

Investment

Balance

Allowance

Loans with no related allowance recorded:

Residential one-to-four family

$

2,845

$

3,209

$

-

$

2,950 

$

3,300 

$

-

Commercial and multi-family

27,090

28,266

-

20,915 

22,100 

-

Construction

-

-

-

-

-

-

Commercial business(1)

947

4,910

-

2,114 

6,905 

-

Home equity(2)

504

504

-

779 

780 

-

Total Impaired Loans with no related allowance recorded:

$

31,386

$

36,889

$

-

$

26,758 

$

33,085 

$

-

Loans with an allowance recorded:

Residential one-to-four family

$

2,069

$

2,090

$

204

$

2,011 

$

2,032 

$

265 

Commercial and Multi-family

-

-

-

10,830 

14,494 

1,690 

Construction

3,180

3,180

519

2,847 

2,847 

210 

Commercial business(1)

3,660

8,519

3,509

6,632 

17,514 

5,650 

Home equity(2)

229

229

6

304 

304 

13 

Total Impaired Loans with an allowance recorded:

$

9,138

$

14,018

$

4,238

$

22,624 

$

37,191 

$

7,828 

Total Impaired Loans:

$

40,524

$

50,907

$

4,238

$

49,382 

$

70,276 

$

7,828 

__________

(1) Includes business lines of credit.
‎(2) Includes home equity lines of credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

A troubled debt restructured loan (“TDR”) is a loan that has been modified whereby the Company has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Company to maximize the ultimate recovery of a loan. A TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a concession that would otherwise not be granted to the borrower. All TDRs were considered impaired and therefore were individually evaluated for impairment in the calculation of the allowance for loan losses. Prior to their classification as TDRs, certain of these loans had been collectively evaluated for impairment in the calculation of the allowance for loan losses.

At September 30, 2022

At December 31, 2021

(In thousands)

Recorded investment in TDRs:

Accrual status

$

10,503

$

12,402

Non-accrual status

483

3,570

Total recorded investment in TDRs

$

10,986

$

15,972

The Company granted one TDR loan of $180,078 and one TDR loan of $168,102 for the three months ended September 30, 2022 and September 30, 2021, respectively.

For the three months ended September 30, 2022 and September 30, 2021, TDRs, for which there was a payment default within twelve months of restructuring, totaled $0 and $232,072 for one loan, respectively.

The following table sets forth the delinquency status of total loans receivable as of September 30, 2022:

Loans Receivable

30-59 Days

60-90 Days

Greater Than

Total Past

Total Loans

>90 Days

Past Due

Past Due

90 Days

Due

Current

Receivable

and Accruing

(In Thousands)

Residential one-to-four family

$

615

$

187

$

230

$

1,032

$

241,206

$

242,238

$

230

Commercial and multi-family

2,245

356

757

3,358

2,160,962

2,164,320

-

Construction

-

-

3,180

3,180

149,923

153,103

-

Commercial business(1)

885

47

1,578

2,510

203,151

205,661

-

Home equity(2)

199

-

-

199

55,865

56,064

-

Consumer

 

-

-

-

2,545

2,545

-

Total

$

3,944

$

590

$

5,745

$

10,279

$

2,813,652

$

2,823,931

$

230

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The following table sets forth the delinquency status of total loans receivable at December 31, 2021:

Loans Receivable

30-59 Days

60-90 Days

Greater Than

Total Past

Total Loans

>90 Days

Past Due

Past Due

90 Days

Due

Current

Receivable

and Accruing

(In Thousands)

Residential one-to-four family

$

1,063

$

-

$

86

$

1,149

$

223,385

$

224,534

$

-

Commercial and multi-family

1,181

-

5,167

6,348

1,713,826

1,720,174

-

Construction

2,899

-

2,847

5,746

148,158

153,904

-

Commercial business(1)

405

166

6,775

7,346

183,793

191,139

3,124

Home equity(2)

190

-

27

217

50,252

50,469

-

Consumer

-

-

-

-

3,717

3,717

-

Total

$

5,738

$

166

$

14,902

$

20,806

$

2,323,131

$

2,343,937

$

3,124

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The table below sets forth the amounts and types of non-accrual loans in the Bank’s loan portfolio at September 30, 2022 and December 31, 2021, respectively. Loans are placed on non-accrual status when they become more than 90 days delinquent, or when the collection of principal and/or interest become doubtful. As of September 30, 2022, and December 31, 2021, non-accrual loans differed from the amount of total loans past due greater than 90 days due to troubled debt restructuring of loans, loans 90 days past due and still accruing, or loans that were previously 90 days past due which are maintained on non-accrual status for a minimum of six months until the borrower has demonstrated its ability to satisfy the terms of the loan. There were $230,000 at September 30, 2022 and $3.8 million at December 31, 2021 in nonaccrual loans that were less than ninety days past due. Nonaccrual loans do not include loans acquired with deteriorated credit quality which were recorded at their fair value at acquisition and totaled $0 at September 30, 2022 and $670,000 at December 31, 2021.

As of September 30, 2022

As of December 31, 2021

(In Thousands)

(In Thousands)

Non-Accruing Loans:

Residential one-to-four family

$

263

$

282

Commercial and multi-family

757

8,601

Construction

3,180

2,847

Commercial business(1)

4,305

3,132

Home equity(2)

-

27

Total

$

8,505

$

14,889

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Had non-accrual loans been performing in accordance with their original terms, the interest income recognized for the nine months ended September 30, 2022 and the twelve months ended December 31, 2021 would have been approximately $842,000 and $1.3 million, respectively.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

Criticized and Classified Assets

Company policies provide for a classification system for problem assets. Under this classification system, problem assets are classified as “substandard,” “doubtful,” or “loss.”

When the Company classifies problem assets, the Company may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. A portion of general loss allowances established to cover possible losses related to assets classified as substandard or doubtful may be included in determining the Company’s regulatory capital. Specific valuation allowances for loan losses generally do not qualify as regulatory capital. The loans classified as substandard are secured either by residential real estate, commercial real estate or heavy equipment. The loans that have been classified substandard were classified as such primarily due to payment status, because updated financial information has not been timely provided, or the collateral underlying the loan is in the process of being revalued.

The Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies. The grades assigned and definitions are as follows, and loans graded excellent, above average, good and watch list (risk ratings 1-5) are treated as “pass” for grading purposes. The “criticized” risk rating (6) and the “classified” risk ratings (7-9) are detailed below:

6 – Special Mention- Loans currently performing but with potential weaknesses including adverse trends in borrower’s operations, credit quality, financial strength, or possible collateral deficiency.

7 – Substandard- Loans that are inadequately protected by current sound worth, paying capacity, and collateral support. Loans on “nonaccrual” status. The loan needs special and corrective attention.

8 – Doubtful- Weaknesses in credit quality and collateral support make full collection improbable, but pending reasonable factors remain sufficient to defer the loss status.

9 – Loss- Continuance as a bankable asset is not warranted. However, this does not preclude future attempts at partial recovery.

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention and substandard within the Company’s internal risk rating system as of September 30, 2022 (in thousands). As of September 30, 2022, the Company had no loans with the classified rating of doubtful or loss.

Pass

Special Mention

Substandard

Total

Residential one-to-four family

$

241,324

$

485

$

429

$

242,238

Commercial and multi-family

2,122,215

20,064

22,041

2,164,320

Construction

149,923

-

3,180

153,103

Commercial business(1)

196,583

4,760

4,318

205,661

Home equity(2)

55,803

49

212

56,064

Consumer

2,545

-

-

2,545

Total Gross Loans

$

2,768,393

$

25,358

$

30,180

$

2,823,931

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention and substandard within the Company’s internal risk rating system as of December 31, 2021 (in thousands). As of December 31, 2021, the Company had no loans with the classified rating of doubtful or loss.

Pass

Special Mention

Substandard

Total

Residential one-to-four family

$

223,660

$

505

$

369

$

224,534

Commercial and multi-family

1,647,701

45,087

27,386

1,720,174

Construction

151,057

-

2,847

153,904

Commercial business(1)

178,056

4,767

8,316

191,139

Home equity(2)

50,230

-

239

50,469

Consumer

3,717

-

-

3,717

Total Gross Loans

$

2,254,421

$

50,359

$

39,157

$

2,343,937

________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.