XML 29 R18.htm IDEA: XBRL DOCUMENT

LOANS RECEIVABLE, NET AND RELATED ALLOWANCE FOR CREDIT LOSSES

6 Months Ended

Mar. 31, 2024

Loans Receivable, Net and Related Allowance for Credit Losses [Abstract]

LOANS RECEIVABLE, NET AND RELATED ALLOWANCE FOR CREDIT LOSSES

NOTE J – LOANS RECEIVABLE, NET AND RELATED ALLOWANCE FOR CREDIT LOSSES

Loans receivable, net were comprised of the following:

		March 31,				September 30,
		2024				2023
		(In thousands)

One-to-four family residential		$	231,945			$	237,683
Commercial real estate			429,133				389,134
Construction and land			29,199				21,853
Home equity loans and lines of credit			22,937				16,983
Commercial business			26,956				30,194
Other			2,516				2,359
Total loans receivable			742,686				698,206
Net deferred loan costs			(974	)			(806	)
Total loans receivable, net		$	741,712			$	697,400

The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The residential mortgage loan segment is further disaggregated into two classes: first lien, amortizing term loans, and the combination of second lien amortizing term loans and home equity lines of credit. The commercial loan segment is further disaggregated into three classes: loans secured by multifamily structures, loans secured by owner-occupied commercial structures, and loans secured by non-owner occupied nonresidential properties. The construction loan segment consists primarily of developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures and to a lesser extent one-to-four family residential construction loans made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. Construction loans to developers and investors have a higher risk profile because the ultimate buyer, once development is completed, is generally not known at the time of the loan. The commercial business loan segment consists of loans made for the purpose of financing the activities of commercial customers and consists of revolving lines of credit and loans partially guaranteed by the U.S. Small Business Administration. The consumer loan segment consists primarily of stock-secured installment loans, but also includes unsecured personal loans and overdraft lines of credit connected with customer deposit accounts.

Management uses a ten point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. All loans greater than three months past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as severe delinquency, bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. The Company’s Asset Review Committee performs monthly reviews of all commercial relationships internally rated 6 (“Watch”) or worse. Confirmation of the appropriate risk grade is performed by an external loan review company that semi-annually reviews and assesses loans within the portfolio. Generally, the external consultant reviews commercial relationships greater than $500 thousand and/or criticized relationships greater than $250 thousand. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a monthly basis.

The following table presents the classes of the loan portfolio by origination year summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful for loans subject to the Company’s internal risk rating system and by performing status for all other loans as of March 31, 2024.

																										Revolving Loans
		March 31, 2024																								Amortized				Converted
		Term Loans Amortized Cost Basis by Origination Fiscal Year																								Cost Basis				to Term				Total
		2024				2023				2022				2021				2020				Prior
		(In thousands)
One-to-four family residential
Performing		$	10,883			$	42,985			$	32,288			$	27,245			$	30,901			$	87,129			$	84			$	—			$	231,515
Non-performing			—				—				282				—				23				125				—				—				430
Total		$	10,883			$	42,985			$	32,570			$	27,245			$	30,924			$	87,254			$	84			$	—			$	231,945
Current period gross charge-offs			—				—				—				—				—				—				—				—				—

Commercial real estate
Pass		$	44,337			$	83,625			$	68,461			$	65,616			$	30,241			$	128,962			$	5,219			$	—			$	426,461
Special Mention			—				—				201				—				—				247				—				—				448
Substandard			—				—				2,224				—				—				—				—				—				2,224
Doubtful			—				—				—				—				—				—				—				—				—
Total		$	44,337			$	83,625			$	70,886			$	65,616			$	30,241			$	129,209			$	5,219			$	—			$	429,133
Current period gross charge-offs			—				—				—				—				—				—				—				—				—

Construction and land
Pass		$	4,564			$	13,330			$	2,074			$	300			$	1,756			$	4,753			$	725			$	—			$	27,502
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				1,697				—				—				1,697
Doubtful			—				—				—				—				—				—				—				—				—
Total		$	4,564			$	13,330			$	2,074			$	300			$	1,756			$	6,450			$	725			$	—			$	29,199
Current period gross charge-offs			—				—				—				—				—				—				—				—				—

Home equity loans and lines of credit
Performing		$	870			$	1,385			$	502			$	274			$	226			$	2,904			$	16,234			$	306			$	22,701
Non-performing			—				—				—				—				—				—				236				—				236
Total		$	870			$	1,385			$	502			$	274			$	226			$	2,904			$	16,470			$	306			$	22,937
Current period gross charge-offs			—				—				—				—				—				—				—				—				—

Commercial business
Pass		$	1,401			$	533			$	2,631			$	1,688			$	914			$	2,887			$	16,603			$	299			$	26,956
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—				—
Total		$	1,401			$	533			$	2,631			$	1,688			$	914			$	2,887			$	16,603			$	299			$	26,956
Current period gross charge-offs			—				—				—				—				—				—				—				—				—

Other
Performing		$	318			$	—			$	60			$	1			$	12			$	1,783			$	342			$	—			$	2,516
Non-performing			—				—				—				—				—				—				—				—				—
Total		$	318			$	—			$	60			$	1			$	12			$	1,783			$	342			$	—			$	2,516
Current period gross charge-offs			—				—				—				—				—				—				—				—				—

Information presented in the table above is not required for periods prior to the adoption of ASU 2016-13. The following table presents more comparable information of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the Bank’s internal risk rating system as of September 30, 2023.

						Special
		Pass				Mention				Substandard				Doubtful				Total

		(In thousands)
September 30, 2023
One-to-four family residential		$	236,876			$	—			$	807			$	—			$	237,683
Commercial real estate			386,794				116				2,224				—				389,134
Construction and land			19,379				—				2,474				—				21,853
Home equity lines of credit			16,983				—				—				—				16,983
Commercial business			30,194				—				—				—				30,194
Other			2,359				—				—				—				2,359
Total		$	692,585			$	116			$	5,505			$	—			$	698,206

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The Bank was not accruing interest on any loans delinquent greater than 90 days as of March 31, 2024 or September 30, 2023. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans for the periods presented:

						30-59				60-89
						Days				Days				90 Days +				Total
		Current				Past Due				Past Due				Past Due				Loans
		(In thousands)
March 31, 2024
One-to-four family residential		$	230,780			$	735			$	—			$	430			$	231,945
Commercial real estate			425,250				1,211				448				2,224				429,133
Construction and land			27,502				—				—				1,697				29,199
Home equity lines of credit			22,701				—				—				236				22,937
Commercial business			26,044				912				—				—				26,956
Other			2,516				—				—				—				2,516
Total		$	734,793			$	2,858			$	448			$	4,587			$	742,686

						30-59				60-89
						Days				Days				90 Days +				Total
		Current				Past Due				Past Due				Past Due				Loans
		(Iin thousands)
September 30, 2023
One-to four-family residential		$	236,729			$	—			$	568			$	386			$	237,683
Commercial real estate			386,794				—				116				2,224				389,134
Construction and land			19,379				—				—				2,474				21,853
Home equity lines of credit			16,983				—				—				—				16,983
Commercial business			30,047				147				—				—				30,194
Other			2,359				—				—				—				2,359
Total		$	692,291			$	147			$	684			$	5,084			$	698,206

The following tables present our non-accrual loans and the related allowance for credit loss by loan type as of March 31, 2024 and the non-accrual loans and specific reserves by loan type as of September 30, 2023.


		Total				Non-Accrual				Non-Accrual
		Non-Accrual				with ACL				without ACL
		(In thousands)
March 31, 2024
One-to-four family residential		$	430			$	—			$	430
Commercial real estate			2,224				—				2,224
Construction and land			1,697				—				1,697
Home loans and lines of credit			236				—				236
Total		$	4,587			$	—			$	4,587

		Total				Specific
		Non-Accrual				Reserve
		(In thousands)
September 30, 2023
One-to four-family residential		$	386			$	—
Commercial real estate			2,224				—
Construction and land			2,474				—
Total		$	5,084			$	—

The following table identifies our non-performing, collateral dependent loans by collateral type as of March 31, 2024:

		March 31,
		2024
		(In thousands)
One-to-four family residential		$	666
Commercial real estate			2,224
Construction and land			1,697
Total		$	4,587

The Company’s adoption of ASU 2016-13 eliminated the requirement to disclose impaired loans. The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2023:

										Impaired
										Loans with
		Impaired Loans with								No Specific
		Specific Allowance								Allowance				Total Impaired Loans
																		Unpaid
		Recorded				Related				Recorded				Recorded				Principal
		Investment				Allowance				Investment				Investment				Balance
September 30, 2023		(In thousands)

One-to four-family residential		$	—			$	—			$	2,031			$	2,031			$	2,031
Commercial real estate			—				—				2,969				2,969				2,969
Construction and land			—				—				2,474				2,474				2,539
Commercial business			—				—				147				147				147
Total impaired loans		$	—			$	—			$	7,621			$	7,621			$	7,686

The following table presents the average recorded investment in impaired loans and the interest income recognized on impaired loans for the three and six months ended March 31, 2023.

		Three Months Ended				Six Months Ended
		March 31, 2023				March 31, 2023
		(In thousands)

One-to-four family residential		$	1,574			$	1,553
Commercial real estate			1,262				1,227
Construction and land			2,835				2,835
Commercial business			395				314
Average investment in impaired loans		$	6,066			$	5,929

Interest income recognized on
an accrual basis on impaired loans		$	36			$	71
Interest income recognized on
a cash basis on impaired loans			—				—

An allowance for credit losses is maintained to absorb losses from the loan portfolio. Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ACL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ACL. Since loans individually evaluated for impairment are promptly written down to their fair value, typically there is no portion of the ACL for loans individually evaluated for impairment.

ASU 2016-13 requires estimated credit losses on loans to be determined based on an expected life of loan model, as compared to an incurred loss model (in effect for periods prior to October 1, 2023). Accordingly, the allowance for credit losses disclosures subsequent to October 1, 2023 are not always comparable to prior dates. In addition, certain new disclosures required under ASU 2016-13 are not applicable to prior periods. As a result, the following tables present disclosures separately for each period, where appropriate. New disclosures required under ASU 2016-13 are only shown for the current period. Please refer to Note B “Summary of Significant Accounting Policies” for a summary of the impact of adopting the provisions of ASU 2016-13 on October 1, 2023.

The following tables set forth the allocation of the Bank’s allowance for credit losses by loan category at the dates indicated. The portion of the credit loss allowance allocated to each loan category does not represent the total available for future losses which may occur within the loan category since the total credit loss allowance is a valuation allocation applicable to the entire loan portfolio. The Company generally charges-off the collateral or discounted cash flow deficiency on all loans at 90 days past due and all loans rated substandard or worse that are 90 days past due.

The following tables present, by loan category, the changes in the allowance for credit losses for the three and six months ended March 31, 2024 and the allowance for credit losses for the three and six months ended March 31, 2023.

		One-to-Four								Construction				Home Equity
		Family				Commercial				and				Lines of				Commercial
		Residential				Real Estate				Land				Credit				Business				Other				Unallocated				Total
		(In thousands)
Balance- September 30, 2023		$	1,259			$	5,277			$	472			$	207			$	939			$	2			$	174			$	8,330
Effect of adopting ASU 2016-13			7				(589	)			(55	)			(87	)			(133	)			(1	)			(174	)			(1,032	)
Charge-offs			—				—				—				—				—				—				—				—
Recoveries			—				—				—				—				—				—				—				—
Provision (credit)			(75	)			161				301				(40	)			39				(1	)			—				385
Balance- December 31, 2023		$	1,191			$	4,849			$	718			$	80			$	845			$	—			$	—			$	7,683
Charge-offs			—				—				—				—				—				—				—				—
Recoveries			—				—				65				—				—				—				—				65
Provision (credit)			(421	)			237				77				(28	)			78				3				—				(54	)
Balance- March 31, 2024		$	770			$	5,086			$	860			$	52			$	923			$	3			$	—			$	7,694

		One-to-Four								Construction				Home Equity
		Family				Commercial				and				Lines of				Commercial
		Residential				Real Estate				Land				Credit				Business				Other				Unallocated				Total
		(In thousands)
Balance- September 30, 2022		$	1,223			$	4,612			$	461			$	263			$	1,484			$	1			$	389			$	8,433
Charge-offs			—				—				—				—				—				—				—				—
Recoveries			—				—				—				—				—				—				—				—
Provision (credit)			12				518				65				(7	)			(109	)			—				(162	)			317
Balance- December 31, 2022		$	1,235			$	5,130			$	526			$	256			$	1,375			$	1			$	227			$	8,750
Charge-offs			—				—				—				—				(102	)			—				—				(102	)
Recoveries			1				—				—				—				—				—				—				1
Provision (credit)			34				280				(58	)			(10	)			62				—				(113	)			195
Balance- March 31, 2023		$	1,270			$	5,410			$	468			$	246			$	1,335			$	1			$	114			$	8,844

During the six months ended March 31, 2024 and exclusive of the impact of the adoption of ASU 2016-13, the changes in the provision for credit losses for each portfolio of loans were primarily due to fluctuations in the outstanding balance of each segment of loans collectively evaluated for impairment. Specifically, we experienced significant growth in our commercial real estate and construction and land loan portfolios during the six months ended March 31, 2024 and a corresponding increase in the provision for credit losses for these portfolios. An adjustment to the expected loss rate for one-to-four family residential loans for improving economic conditions, as measured by the U.S. unemployment rate, resulted in a reduction in the provision for credit losses for that loan category during the six months ended March 31, 2024.

The allowance for credit losses increased $69 thousand to $8.4 million during the six months ended March 31, 2024. Upon adoption of ASU 2016-13 on October 1, 2023, the Company’s allowance for credit losses decreased $492 thousand. Growth in loans receivable and loan commitments during the six months ended March 31, 2024 resulted in additional provisions for credit losses totaling $495 thousand and there were $66 thousand in loan recoveries. The Company’s allowance for on-balance sheet credit losses decreased to $7.7 million at March 31, 2024 from $8.3 million at September 30, 2023 while its reserve for off-balance sheet commitments increased to $705 thousand at March 31, 2024 from $0 at September 30, 2023.

The following table presents, by loan category, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of and September 30, 2023.

		One-to-Four												Home Equity
		Family				Commercial								Lines of				Commercial
		Residential				Real Estate				Construction				Credit				Business				Other				Unallocated				Total
		(In thousands)
Allowance for Loan Losses:
Balance - September 30, 2023		$	1,259			$	5,277			$	472			$	207			$	939			$	2			$	174			$	8,330
Individually evaluated
for impairment			—				—				—				—				—				—				—				—
Collectively evaluated
for impairment			1,259				5,277				472				207				939				2				174				8,330

Loans receivable:
Balance - September 30, 2023		$	237,683			$	389,134			$	21,853			$	16,983			$	30,194			$	2,359			$	—			$	698,206
Individually evaluated
for impairment			2,031				2,969				2,474				—				147				—				—				7,621
Collectively evaluated
for impairment			235,652				386,165				19,379				16,983				30,047				2,359				—				690,585

During the six months ended March 31, 2024, there were no loans modified to borrowers experiencing financial difficulty. During the six months ended March 31, 2023, there was one loan modified that was identified as a troubled debt restructuring (“TDR”) and there were no TDRs that subsequently defaulted within twelve months of modification. The following table presents information on TDRs:

		Six Months Ended March 31, 2023
		Number of				Investment Before				Investment After
		Loans				TDR Modification				TDR Modification
		(Dollars in thousands)
One-to four-family residential			1			$	97			$	107

Total			1			$	97			$	107

There were two residential loans totaling $304 thousand that were in the process of foreclosure at March 31, 2024.