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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Sep. 30, 2024
Summary of Significant Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Financial Statement Presentation The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“US GAAP”) and predominant practices within the banking industry. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank, and its wholly-owned subsidiaries Magyar Investment Company, Magyar Service Corporation, and Hungaria Urban Renewal, LLC. All intercompany balances and transactions have been eliminated in the consolidated financial statements. The Company has evaluated subsequent events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2024, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were available to be issued. In preparing financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The principal estimates that are particularly susceptible to significant change in the near term relate to the allowance for credit losses and the deferred tax asset. The evaluation of the adequacy of the allowance for loan losses includes an analysis of the individual loans and overall risk characteristics and size of the different loan portfolios, and takes into consideration current economic and market conditions, the capability of specific borrowers to pay specific loan obligations, as well as current loan collateral values. However, actual losses on specific loans, which also are encompassed in the analysis, may vary from estimated losses. The Company records income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns; (ii) are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases; and (iii) are measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled. Where applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period of enactment. The valuation allowance is adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant. 2. Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, time deposits with original maturities less than three months and overnight deposits. 3. Investment Securities and Allowance for Credit Losses The Company classifies its investment securities into one of two portfolios: held to maturity or available for sale. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost. Debt securities not classified as held to maturity securities are classified as available for sale securities and reported at fair value, with unrealized holding gains or losses, net of deferred income taxes, reported in the accumulated other comprehensive income (“AOCI”) component of stockholders’ equity. Equity securities, with certain exceptions, are measured at fair value with changes in fair value recognized in net income. If the fair value of a security is less than its amortized cost, the security is deemed to be impaired. Management evaluates all securities with unrealized losses quarterly to determine if such impairments are “temporary” or “other-than-temporary” in accordance with applicable accounting guidance. The Company accounts for temporary impairments based upon security classification as either available for sale or held to maturity. Temporary impairments on “available for sale” securities are recognized, on a tax-effected basis, through AOCI with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes. Conversely, the Company does not adjust the carrying value of “held to maturity” securities for temporary impairments, although information concerning the amount and duration of impairments on held to maturity securities is generally disclosed in periodic consolidated financial statements. The Company accounts for other-than-temporary impairments based upon several considerations. First, other-than-temporary impairments on securities that the Company has decided to sell as of the close of a fiscal period, or will, more likely than not, be required to sell prior to the full recovery of their fair value to a level equal to their amortized cost, are recognized in operations. If neither of these criteria apply, then the other-than-temporary impairment is separated into credit-related and noncredit-related components. The credit-related impairment generally represents the amount by which the present value of the cash flows that are expected to be collected on an other-than-temporarily impaired security fall below its amortized cost while the noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related. The Company recognizes credit-related, other-than-temporary impairments in earnings, while noncredit-related, other-than-temporary impairments on debt securities are recognized, net of deferred taxes, in AOCI. Premiums and discounts on all securities are amortized or accreted to maturity by use of the level-yield method considering the impact of principal amortization and prepayments on mortgage-backed securities. Gain or loss on sales of securities is recognized on the specific identification method. Allowance for Credit Losses on Held-to-Maturity Securities The Company accounts for its held-to-maturity securities in accordance with Accounting Standards Codification 326-20, Financial Instruments – Credit Loss – Measured at Amortized Cost, which requires that the Company measure expected credit losses on held-to-maturity securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current economic conditions and reasonable and supportable forecasts. The Company classifies its held-to-maturity debt securities into the following major security types: obligations of U.S. government agencies, obligations of U.S. government-sponsored enterprises, private label mortgage-backed securities, obligations of state and political subdivisions and corporate securities. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis. Based on the credit ratings of our held-to-maturity securities and our historical experience of no losses, the Company determined that the expected credit losses on its held-to-maturity portfolio is not significant. Accrued interest receivable on held-to-maturity securities totaled $225 thousand as of September 30, 2024 and is included within accrued interest receivable on the Company’s Consolidated Balance Sheets. This amount is excluded from the estimate of expected credit losses. Generally, held-to-maturity securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held-to-maturity securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income. Allowance for Credit Losses on Available-for-Sale Securities The Company measures expected credit losses on available-for-sale securities when the Bank intends to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the amortized cost basis of the security is written down to fair value through income. For available-for-sale securities that do not meet the previously mentioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. The allowance for credit loss on available-for-sale securities is included within the recorded balance of securities available-for-sale on the Consolidated Balance Sheets. Changes in the allowance for credit losses are recorded within provision for credit losses on the Consolidated Statements of Income. Losses are charged against the allowance when the Company believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met. Accrued interest receivable on available-for-sale securities totaled $162 thousand as of September 30, 2024 and is included within accrued interest receivable on the Company’s Consolidated Balance Sheets. This amount is excluded from the estimate of expected credit losses. Generally, available-for-sale securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income. 4. Regulatory Stock, at Cost Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to purchase and hold restricted stock of its district FHLB according to a predetermined formula. The Company invests in Federal Home Loan Bank of New York stock as required to support borrowing activities, as detailed in Note J to these consolidated financial statements. Although FHLB stock is an equity interest in a FHLB, it does not have a readily determinable fair value because its ownership is restricted and it lacks a market. FHLB stock can be sold back only at its par value of $100 per share and only to the FHLBs or to another member institution. Accordingly, the FHLB restricted stock is carried at cost, less any applicable impairment charges. 5. Loans and Allowance for Credit Losses Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal, adjusted for net deferred loan fees and costs, and reduced by an allowance for credit losses. Interest on loans is accrued and credited to operations based upon the principal amounts outstanding. The allowance for credit losses is established through a provision for possible loan losses charged to operations. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Income recognition of interest is discontinued when, in the opinion of management, the collectability of such interest becomes doubtful. A loan is generally classified as non-accrual when the scheduled payment(s) due on the loan is delinquent for more than 90 days. When a loan is placed on non-accrual, all previously accrued and unpaid interest is reversed. Loan origination fees and certain direct origination costs are deferred and amortized over the life of the related loans as an adjustment to the yield on loans receivable using the effective interest method. Allowance for Credit Losses on Loans The Company maintains its allowance for credit loss on loans (“ACL”) at a level that management believes to be appropriate to absorb estimated credit losses as of the date of the Consolidated Balance Sheet. The Company established its allowance in accordance with the guidance included in Accounting Standards Codification 326, Financial Instruments – Credit Losses (“ASC 326”). The ACL is a valuation reserve established and maintained by charges against income. Loans, or portions thereof, are charged-off against the ACL when they are deemed uncollectible. The ACL is an estimate of expected credit losses that considers our historical loss experience, the weighted average expected lives of loans, current economic conditions and forecasts of future economic conditions. The determination of an appropriate ACL is inherently subjective and may have significant changes from period to period. The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans. The ACL is measured on a collective (pool) basis when similar characteristics exist. The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during economic cycles. Historical credit loss experience is the basis for the estimate of expected credit losses. We apply our historical loss rates to pools of loans with similar risk characteristics using the Weighted-Average Remaining Maturity (“WARM”) method. The remaining contractual life of the pools of loans with similar risk characteristics is adjusted by expected scheduled payments and prepayments. After consideration of the historical loss calculation, management applies qualitative adjustments to reflect qualitative changes not already reflected in the historical loss information. Our reasonable and supportable forecast adjustment is based on a regional economic indicator obtained from the United States Government Publishing Office. The Company selected eight qualitative metrics which were correlated with the Bank and its peer group’s historical loss patterns. The eight qualitative metrics include: changes in lending policies and procedures, changes in national and local economic conditions as well as business conditions, changes in the nature, complexity, and volume of the portfolio, changes in the experience, ability, and depth of lenders and lending management, changes in the volume and severity of past due and classified loans, changes in the value of collateral securing loans, changes in or the existence of credit concentrations, and changes in the legal and/or regulatory landscape. The adjustments are weighted for relevance before applying to each pool of loans. Each quarter, management reviews the recommended adjustment factors and applies any additional adjustments based on current conditions. The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and, therefore, should be individually assessed. We individually evaluate loans that meet the following criteria: (1) when it is determined that foreclosure is probable, (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, or (3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Credit loss estimates are calculated based on the following three acceptable methods for measuring the ACL: (1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are reduced to consider expected disposition costs when appropriate. A charge-off is recorded when the estimated fair value of the loan is less than the loan balance. The Company has elected to exclude $4.6 million of accrued interest receivable on loans as of September 30, 2024 from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income. Accrued interest on loans is reported in the accrued interest receivable line on the Consolidated Statements of Balance Sheet. Allowance for Credit Losses on Unfunded Loan Commitments The Company estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Bank. The allowance for credit losses on unfunded loan commitments is included in accounts payable and other liabilities in the Company’s Consolidated Balance Sheets and is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur, the amount of funding that will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. 6. Premises and Equipment Premises and equipment are carried at cost less accumulated depreciation, and include capitalized expenditures for new facilities, major betterments and renewals. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method based upon the estimated useful lives of the related assets for financial reporting purposes and using the mandated methods by asset type for income tax purposes. Leasehold improvements are depreciated using the straight-line method based upon the initial term of the lease. The Company accounts for the impairment of long-lived assets in accordance with US GAAP, which requires recognition and measurement for the impairment of long-lived assets to be held and used or to be disposed of by sale. The Company had no impaired long-lived assets at September 30, 2024 and 2023. 7. Revenue Recognition The Company recognizes revenue in the Consolidated Statements of Income as it is earned and when collectability is reasonably assured. The primary source of revenue is interest income from interest earning assets, which is recognized on the accrual basis of accounting using the effective interest method. The recognition of revenues from interest earning assets is based upon formulas from underlying loan agreements, securities contracts, or other similar contracts. Non-interest income is recognized on the accrual basis of accounting as services are provided or as transactions occur. Non-interest income includes earnings on bank-owned life insurance, deposit accounts, merchant services, ATM and debit card fees, mortgage banking activities, commercial loan prepayment penalties and other miscellaneous services and transactions. The Company’s contracts with customers in the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” are contracts for deposit accounts and contracts for non-deposit investment accounts through a third party service provider. Both types of contracts result in non-interest income being recognized. The revenue resulting from deposit accounts, which includes fees such as insufficient funds fees, wire transfer fees and out-of-network ATM transaction fees, is included as a component of service charges on the Consolidated Statements of Income. The revenue resulting from non-deposit investment accounts is included as a component of other operating income on the Consolidated Statements of Income. Revenue from contracts with customers included in service charges was $1.1 million and $1.6 million for the years ended September 30, 2024 and 2023, respectively. Revenue from contracts with customers included in other operating income was $81 thousand and $89 thousand for the years ended September 30, 2024 and 2023, respectively. For our contracts with customers, we satisfy our performance obligations each day as services are rendered. For our deposit account revenue, we receive payment on a daily basis as services are rendered and for our non-deposit investment account revenue, we receive payment on a monthly basis from our third-party service provider as services are rendered. 8. Other Real Estate Owned Real estate acquired through foreclosure, or a deed-in-lieu of foreclosure, is recorded at fair value less estimated selling costs at the date of acquisition or transfer, and subsequently at the lower of its net cost or fair value less estimated selling costs. Adjustments to the carrying value at the date of acquisition or transfer are charged to the allowance for loan losses. The carrying value of the individual properties is subsequently adjusted to the extent it exceeds estimated fair value less estimated selling costs, at which time a provision for losses on such real estate is charged to operations. The Company accounts for gains on sales of other real estate owned under ASC Topic 606 Revenue from Contracts with Customers, which uses a principles based methodology. As it pertains to the criteria for determining how a contract should be accounted for under the new guidance, judgment is required in evaluating if: (a) a commitment on the buyer’s part exists; (b) collection is probable in circumstances where the initial investment is minimal; and (c) the buyer has obtained control of the asset, including the significant risks and rewards of the ownership. If there is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control of the asset, then a gain cannot be recognized under the new guidance. Operating expenses of holding real estate, net of related income, are charged against income as incurred. Losses on the disposition of real estate, including expenses incurred in connection with the disposition, are charged to operations. 9. Pension and Postretirement Plans The Company sponsors a qualified defined benefit pension plan and a supplemental executive retirement plan (“SERP”). The qualified defined benefit pension plan is funded with trust assets invested in a diversified portfolio of debt and equity securities. Accounting for pensions and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works. This involves extensive use of assumptions about inflation, investment returns, mortality, turnover, and discount rates. Among other factors, changes in interest rates, investment returns and the market value of plan assets can (a) affect the level of plan funding; (b) cause volatility in the net periodic pension cost; and (c) increase our future contribution requirements. A significant decrease in investment returns or the market value of plan assets or a significant decrease in interest rates could increase our net periodic pension costs and adversely affect our results of operations. A significant increase in our contribution requirements with respect to our qualified defined benefit pension plan could have an adverse impact on our cash flow. Changes in the key actuarial assumptions would impact net periodic benefit expense and the projected benefit obligation for our defined benefit and other postretirement benefit plan. See Note L, “Pension Plan,” and Note M, “Non-Qualified Compensation Plan” for information on these plans and the assumptions used. 10. Income Taxes The Company and its subsidiaries file consolidated federal and state income tax returns. Income taxes are allocated based on the contribution of their respective income or loss to the consolidated income tax returns. The Company records income taxes on the basis of reported income using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. To the extent that current available evidence about the future raises doubt about the realization of a deferred tax asset, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company follows the provisions of FASB ASC Topic 740, which provides clarification on accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2024 and 2023, no significant income tax uncertainties have been included in the Company’s Consolidated Balance Sheets. The Company’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. No interest and penalties were recorded during the years ended September 30, 2024 and 2023. The tax years subject to examination by the taxing authorities are the years ended September 30, 2019 and forward. 11. Advertising Costs The Company expenses advertising costs as incurred. 12. Earnings Per Share (“EPS”) Basic income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. The weighted average common shares outstanding include shares allocated to the Employee Stock Ownership Plan. Diluted income per share is calculated by adjusting the weighted average common shares outstanding to reflect the potential dilution that could occur using the treasury stock method if securities or other contracts to issue common stock, such as stock options and unvested restricted stock, were exercised and converted into common stock. The resulting shares issued would share in the earnings of the Company. Shares issued and shares reacquired during the period are weighted for the portion of the period that they were outstanding. In periods of loss, dilution is not calculated and diluted loss per share is equal to basic loss per share. The following table presents a calculation of basic and diluted earnings per share (“EPS”) for the years ended September 30, 2024 and 2023. Basic and diluted earnings per share were calculated by dividing net income by the weighted-average number of shares outstanding for the periods.
|  | Years Ended |
|  | September 30, |
|  | 2024 |  |  | 2023 |
|  | (Dollars in thousands, except share and per share data) |
Income applicable to common shares |  | $ | 7,783 |  |  | $ | 7,709 |
Weighted average shares outstanding - basic |  |  | 6,341,610 |  |  |  | 6,424,796 |
Potential diliutive common stock equivalents |  |  | — |  |  |  | — |
Weighted average shares outstanding - diluted |  |  | 6,341,610 |  |  |  | 6,424,796 |
Earnings per share - basic |  | $ | 1.23 |  |  | $ | 1.20 |
Earnings per share - diluted |  | $ | 1.23 |  |  | $ | 1.20 |
All options were anti-dilutive at September 30, 2024 and 2023. 13. Comprehensive Income and Accumulated Other Comprehensive Loss Comprehensive income includes net income as well as certain other items which result in a change to equity during the period. The other items allocated to comprehensive income, as well as the related income tax effects, for the years ended September 30, 2024 and 2023 were as follows:
|  | September 30, |
|  | 2024 |  |  | 2023 |
|  |  |  |  |  |  |  | Net of |  |  |  |  |  |  |  |  | Net of |
|  | Before Tax |  |  | Tax |  |  | Tax |  |  | Before Tax |  |  | Tax |  |  | Tax |
|  | Amount |  |  | Expense |  |  | Amount |  |  | Amount |  |  | Expense |  |  | Amount |
|  | (In thousands) |
Unrealized holding gain (loss) arising during period on: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale investments |  | $ | 834 |  |  | $ | (205 | ) |  | $ | 629 |  |  | $ | (47 | ) |  | $ | 12 |  |  | $ | (35 | )
Defined benefit pension plan |  |  | 297 |  |  |  | (91 | ) |  |  | 206 |  |  |  | 394 |  |  |  | (122 | ) |  |  | 272 |
Total unrealized holding gain arising during period |  |  | 1,131 |  |  |  | (296 | ) |  |  | 835 |  |  |  | 347 |  |  |  | (110 | ) |  |  | 237 |
Reclassification of pension costs |  |  | 53 |  |  |  | (15 | ) |  |  | 38 |  |  |  | 122 |  |  |  | (34 | ) |  |  | 88 |
Other comprehensive income, net |  | $ | 1,184 |  |  | $ | (311 | ) |  | $ | 873 |  |  | $ | 469 |  |  | $ | (144 | ) |  | $ | 325 |
(a) | All amounts are net of tax. Related income tax expense or benefit calculated using an income tax rate approximating 25% for available-for-sale investments and 28% for pension plan.
Details about the reclassification of accumulated other comprehensive loss components and the affected line item in the Consolidated Statements of Income for the years ended September 30, 2024 and 2023 were as follows:
|  | Amount Reclassified From |  |  |
|  | Accumulated Other Comprehensive |  |  | Affected Line Item in the Consolidated
|  | Loss For the Year Ended September 30, |  |  | Statements of Income
|  | 2024 |  |  | 2023 |  |  |
|  | (In thousands) |  |  |
Defined benefit pension plan (1) |  |  |  |  |  |  |  |  |  |
Amortization of net gain and prior service costs |  | $ | 53 |  |  | $ | 122 |  |  | Other expenses
Related income tax benefit |  |  | (15 | ) |  |  | (34 | ) |  | Income taxes
Net effect on accumulated other comprehensive loss |  |  | 38 |  |  |  | 88 |  |  |
Total reclassification |  | $ | 38 |  |  | $ | 88 |  |  |
(1) For additional details related to the defined benefit pension plan, see Note L- Pension Plan. The components of accumulated other comprehensive loss at September 30, 2024 and 2023 were as follows:
|  | September 30, |
|  | 2024 |  |  | 2023 |
|  | (In thousands) |
Available-for-sale investments, net of tax |  | $ | (853 | ) |  | $ | (1,481 | )
Defined benefit pension plan, net of tax |  |  | (63 | ) |  |  | (308 | )
Total accumulated other comprehensive loss |  | $ | (916 | ) |  | $ | (1,789 | )
14. Bank-Owned Life Insurance The Company has purchased Bank-Owned Life Insurance (“BOLI”) policies. BOLI involves the purchasing of life insurance by the Company on directors and officers of the Bank. The proceeds are used to help defray the costs of non-qualified compensation plans. The Company is the owner and beneficiary of the policies. BOLI is recorded on the Consolidated Balance Sheets at its cash surrender value and changes in the cash surrender value are recorded in other income in the Consolidated Statements of Income. 15. Off-Balance Sheet Credit Related Financial Instruments In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under commercial lines of credit. Such financial instruments are recorded when they are funded. The Company does not engage in the use of derivative financial instruments. See Note P, “Financial Instruments With Off-Balance Risk.” 16. Segment Reporting The Company acts as an independent, community, financial services provider, and offers traditional banking and related financial services to individual, business and government customers. The Company offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and home equity loans; and the provision of other financial services. Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial and retail operations of the Company. As such, discrete financial information is not available and segment reporting would not be meaningful. 17. New Accounting Pronouncements In connection with the preparation of quarterly and annual reports in accordance with the Securities and Exchange Commission’s (“SEC”) Securities Exchange Act of 1934, SEC Staff Accounting Bulletin Topic 11.M requires the disclosure of the impact that recently issued accounting standards will have on financial statements when they are adopted in the future. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. The Company adopted ASU 2016-13 on October 1, 2023 using the modified retrospective approach. Results and disclosures for reporting periods beginning after October 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The impact of the change from the incurred loss model to the current expected credit loss model using ACL is included in the following table:
|  | October 1, 2023 |
|  |  |  |  | Adoption |  |  |  |
|  | Pre-adoption |  |  | Impact |  |  | As Reported |
|  | (In thousands) |
Assets |  |  |  |  |  |  |  |  |
ACL on debt securities held-to-maturity |  | $ | — |  |  | $ | — |  |  | $ | — |
ACL on loans |  |  |  |  |  |  |  |  |  |  |  |
One-to-four family residential |  |  | 1,259 |  |  |  | 7 |  |  |  | 1,266 |
Commercial real estate |  |  | 5,277 |  |  |  | (589 | ) |  |  | 4,688 |
Construction and land |  |  | 472 |  |  |  | (55 | ) |  |  | 417 |
Home equity loans and lines of credit |  |  | 207 |  |  |  | (87 | ) |  |  | 120 |
Commercial business |  |  | 939 |  |  |  | (133 | ) |  |  | 806 |
Other |  |  | 176 |  |  |  | (175 | ) |  |  | 1 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
ACL on unfunded commitments |  |  | — |  |  |  | 540 |  |  |  | 540 |
Total |  | $ | 8,330 |  |  | $ | (492 | ) |  | $ | 7,838 |
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Under the guidance, modifications of contracts due to reference rate reform will not require contract remeasurement or reassessment of a previous accounting determination. For hedge accounting, modification of critical terms of the hedge due to changes in reference rate reform will not affect hedge accounting or dedesignate the hedging relationship. The guidance also provides specific expedients for fair value hedges, cash flow hedges, and excluded components. Further, the guidance provides a none-time election to sell or transfer held to maturity debt securities that are affected by the reference rate change. The guidance is effective upon issuance through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the expiration date of Accounting Standards Codification (ASC) Topic 848 to December 31, 2024. ASU 2022-06 is effective for all reporting entities immediately upon issuance and must be applied on a prospective basis. These updates are not expected to have a significant impact on the Company’s financial statements. In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2022-02 and enhances the disclosure requirements for modifications of receivables made with borrowers experiencing financial difficulty. In addition, the amendments in this ASU require disclosure of current period gross write-offs by year of origination for financing receivables in the existing vintage disclosures. This ASU became effective on October 1, 2023 for the Company. The adoption of this ASU resulted in updated disclosures within our financial statements but otherwise did not have a material impact on the Company’s consolidated financial statements. 18. Subsequent Events On October 31, 2024, the Company announced that its Board of Directors has approved a quarterly cash dividend of $0.05 per common share to shareholders of record at the close of business on November 14, 2024, payable on November 27, 2024. On November 22, 2024, the Company declared a special dividend of $0.04 per common share, payable on December 20, 2024, to shareholders of record at the close of business on December 6, 2024.

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