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SERVICING POLICY
 12 Months Ended
Sep. 30, 2025
Servicing Policy [Abstract]  
SERVICING POLICY

NOTE J - SERVICING POLICY

 

The Company originates and sells loans receivable secured by one-to four-family residential properties and commercial business loans guaranteed by the SBA. The Company has sold loans on a service-retained basis and on a servicing-released basis. Loans sold with servicing retained and servicing released during the year ended September 30, 2025 were $19.0 million and $0, respectively. Loans sold with servicing retained and servicing released during the year ended September 30, 2024 were $6.4 million and $0, respectively. The Company accounts for sales in accordance with ASC 860, Transfers and Servicing. Upon sale, the receivables are removed from the balance sheet, mortgage servicing rights are recorded as an asset for servicing rights retained, and a gain on sale, if applicable, is recognized for the difference between the carrying value of the receivables and the sales proceeds, net of origination costs.

 

Gains on sales of loans, representing the difference between the total sales price received for the loans and the allocated cost of the loans, are recognized when loans are sold and delivered to the purchasers. Loans are accounted for as sold when control of the loan is surrendered. Control over the loans is deemed surrendered when: (a) the loans have been isolated from the Company; (b) the buyer has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the loans; and (c) the Company does not maintain effective control over the loans through either: (a) an agreement that entitles and obligates the Company to repurchase or redeem the loans before maturity; or (b) the ability to unilaterally cause the buyer to return specific loans.

 

The Company services one-to-four family residential mortgage loans and SBA 7(a) loans for investors in the secondary market, which are not included in the Consolidated Balance Sheets. The Company’s fee is a percentage of the principal balance and is recognized as income when received. At September 30, 2025 and 2024, the Company was servicing mortgage loans sold in the amount of $1.1 million and $1.4 million, respectively, and SBA loans sold in the amount of $39.8 million and $38.4 million, respectively. Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent mortgagors, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans. Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing revenues and are included in other assets on the Consolidated Balance Sheets. Activity in loan servicing rights during the years ended September 30, 2025 and 2024 is summarized as follows:

 

   Years Ended September 30, 
   2025   2024 
   (In thousands) 
Beginning balance  $159   $28 
Origination of mortgage servicing rights   346    151 
Amortization   (73)   (20)
Ending balance  $432   $159 

 

Loan servicing rights are carried at the lower of amortized cost or fair value. Fair values are estimated using discounted cash flows based on the current market interest rate.