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LOANS RECEIVABLE, NET AND RELATED ALLOWANCE FOR CREDIT LOSSES
 3 Months Ended
Dec. 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:

 

   December 31,   September 30, 
   2024   2024 
   (In thousands) 
         
One-to-four family residential  $245,834   $246,201 
Commercial real estate   481,439    461,319 
Construction and land   25,992    22,722 
Home equity loans and lines of credit   27,273    24,728 
Commercial business   23,780    24,011 
Other   2,252    2,235 
Total loans receivable   806,570    781,216 
Net deferred loan costs   (1,081)   (1,054)
Total loans receivable, net   805,489    780,162 

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 types: 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 types: loans secured by multifamily structures, loans secured by owner-occupied commercial structures, and loans secured by non-owner occupied nonresidential properties. The construction and land 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 tables present 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 December 31, 2024 and September 30, 2024:

                           Revolving Loans     
   December 31, 2024   Amortized   Converted     
   Term Loans Amortized Cost Basis by Origination Fiscal Year   Cost Basis   to Term   Total 
   2025   2024   2023   2022   2021   Prior             
   (In thousands) 
One-to-four family residential                                             
Performing  $6,191   $32,205   $41,065   $31,565   $24,508   $110,020   $259   $
—
   $245,813 
Non-performing   
—
    
—
    
—
    
—
    
—
    21    
—
    
—
    21 
Total  $6,191   $32,205   $41,065   $31,565   $24,508   $110,041   $259   $
—
   $245,834 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Commercial real estate                                             
Pass  $27,362   $88,039   $84,241   $65,951   $63,277   $148,441   $3,079   $927   $481,317 
Special Mention   
—
    
—
    
—
    
—
    
—
    122    
—
    
—
    122 
Substandard   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Doubtful   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Total  $27,362   $88,039   $84,241   $65,951   $63,277   $148,563   $3,079   $927   $481,439 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Construction and land                                             
Pass  $150   $8,430   $11,374   $
—
   $
—
   $5,238   $800   $
—
   $25,992 
Special Mention   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Substandard   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Doubtful   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Total  $150   $8,430   $11,374   $
—
   $
—
   $5,238   $800   $
—
   $25,992 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Home equity loans and lines of credit                                             
Performing  $30   $1,563   $1,463   $1,581   $298   $1,289   $20,428   $303   $26,955 
Non-performing   
—
    
—
    82    
—
    
—
    236    
—
    
—
    318 
Total  $30   $1,563   $1,545   $1,581   $298   $1,525   $20,428   $303   $27,273 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Commercial business                                             
Pass  $
—
   $1,748   $497   $2,343   $1,783   $3,039   $13,772   $598   $23,780 
Special Mention   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Substandard   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Doubtful   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Total  $
—
   $1,748   $497   $2,343   $1,783   $3,039   $13,772   $598   $23,780 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Other                                             
Performing  $74   $21   $
—
   $42   $
—
   $1,773   $342   $
—
   $2,252 
Non-performing   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Total  $74   $21   $
—
   $42   $
—
   $1,773   $342   $
—
   $2,252 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
   September 30, 2024   Revolving Loans     
   Term Loans Amortized Cost Basis by Origination Fiscal Year   Amortized   Converted     
   2024   2023   2022   2021   2020   Prior   Cost Basis   to Term   Total 
   (In thousands) 
One-to-four family residential                                             
Performing  $32,624   $42,084   $31,711   $25,970   $29,976   $83,378   $342   $
—
   $246,085 
Non-performing   
—
    
—
    94    
—
    22    
—
    
—
    
—
    116 
Total  $32,624   $42,084   $31,805   $25,970   $29,998   $83,378   $342   $
—
   $246,201 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Commercial real estate                                             
Pass  $88,597   $84,674   $66,412   $64,573   $29,568   $122,605   $3,718   $932   $461,079 
Special Mention   
—
    
—
    
—
    
—
    
—
    124    
—
    
—
    124 
Substandard   
—
    
—
    
—
    
—
    
—
    116    
—
    
—
    116 
Doubtful   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Total  $88,597   $84,674   $66,412   $64,573   $29,568   $122,845   $3,718   $932   $461,319 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Construction and land                                             
Pass  $5,650   $10,061   $
—
   $
—
   $1,156   $4,069   $1,786   $
—
   $22,722 
Special Mention   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Substandard   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Doubtful   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Total  $5,650   $10,061   $
—
   $
—
   $1,156   $4,069   $1,786   $
—
   $22,722 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Home equity loans and lines of credit                                             
Performing  $1,585   $1,561   $1,600   $309   $247   $1,220   $17,902   $304   $24,728 
Non-performing   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Total  $1,585   $1,561   $1,600   $309   $247   $1,220   $17,902   $304   $24,728 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Commercial business                                             
Pass  $2,062   $507   $2,517   $2,298   $802   $2,565   $13,072   $188   $24,011 
Special Mention   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Substandard   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Doubtful   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Total  $2,062   $507   $2,517   $2,298   $802   $2,565   $13,072   $188   $24,011 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
                                              
Other                                             
Performing  $61   $
—
   $47   $
—
   $9   $1,771   $347   $
—
   $2,235 
Non-performing   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Total  $61   $
—
   $47   $
—
   $9   $1,771   $347   $
—
   $2,235 
Current period gross charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 

 

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 90 days or greater as of December 31, 2024 or September 30, 2024. The following table presents the classes of the loan portfolio summarized by the aging categories of loans for the periods presented:

 

       30-59   60-89         
       Days   Days   90 Days +   Total 
   Current   Past Due   Past Due   Past Due   Loans 
   (In  thousands) 
December 31, 2024                         
One-to-four family residential  $243,541   $986   $1,286   $21   $245,834 
Commercial real estate   475,484    773    5,182    
—
    481,439 
Construction and land   25,992    
—
    
—
    
—
    25,992 
Home equity lines of credit   26,935    20    
—
    318    27,273 
Commercial business   22,480    550    750    
—
    23,780 
Other   2,252    
—
    
—
    
—
    2,252 
Total  $796,684   $2,329   $7,218   $339   $806,570 
       30-59   60-89         
       Days   Days   90 Days +   Total 
   Current   Past Due   Past Due   Past Due   Loans 
   (In  thousands) 
September 30, 2024                    
One-to four-family residential  $245,458   $
—
   $627   $116   $246,201 
Commercial real estate   461,203    
—
    
—
    116    461,319 
Construction and land   22,722    
—
    
—
    
—
    22,722 
Home equity lines of credit   24,492    
—
    236    
—
    24,728 
Commercial business   23,870    141    
—
    
—
    24,011 
Other   2,235    
—
    
—
    
—
    2,235 
Total  $779,980   $141   $863   $232   $781,216 

 

The following tables present our non-accrual loans and the related ACL by loan type as of December 31, 2024 and September 30, 2024.

 

   Total   Non-Accrual   Non-Accrual 
   Non-Accrual   with ACL   without ACL 
   (In  thousands) 
December 31, 2024            
One-to-four family residential  $21   $
—
   $21 
Home loans and lines of credit   318    
—
    318 
Total  $339   $
—
   $339 

  

   Total   Non-Accrual   Non-Accrual 
   Non-Accrual   with ACL   without ACL 
   (In  thousands) 
September 30, 2024            
One-to-four family residential  $116   $
—
   $116 
Commercial real estate   116    
—
    116 
Total  $232   $
—
   $232 

 

The following table identifies our non-performing, collateral dependent loans by collateral type as of December 31, 2024 and September 30, 2024:

 

   December 31,   September 30, 
   2024   2024 
Real-estate type:  (In thousands) 
One- to four-family residential  $21   $116 
Commercial real estate   
—
    116 
Home equity loans and lines of credit   318    
—
 
Total  $339   $232 

 

An ACL 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 individually evaluated loans.

 

The following tables set forth the allocation of the Bank’s ACL by loan category at the dates indicated. The portion of the ACL allocated to each loan category does not represent the total available for future losses which may occur within the loan category since the total allowance for credit losses 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.

   One-to-Four           Home Equity                 
   Family   Commercial   Construction   Lines of   Commercial             
   Residential   Real Estate   and Land   Credit   Business   Other   Unallocated   Total 
   (In  thousands) 
                                 
Balance- September 30, 2024  $755   $5,334   $624   $30   $805   $
—
   $
—
   $7,548 
Charge-offs   
—
    
—
    
—
    
—
    
—
    
—
    
—
    
—
 
Recoveries   
—
    
—
    
—
    
—
    103    
—
    
—
    103 
Provision (credit)   (1)   261    71    3    (125)   
—
    
—
    209 
Balance- December 31, 2024  $754   $5,595   $695   $33   $783   $
—
   $
—
   $7,860 

  

   One-to-Four           Home Equity                 
   Family   Commercial       Lines of   Commercial             
   Residential   Real Estate   Construction   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 

 

During the three months ended December 31, 2024, the changes in the ACL for each loan category 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 portfolio and, to a lesser extent, growth in our construction loan balances during the three months ended December 31, 2024.

 

The Company’s ACL increased $204 thousand to $8.2 million during the three months ended December 31, 2024. The ACL for on-balance sheet exposures increased to $7.9 million at December 31, 2024 from $7.5 million at September 30, 2024 resulting from additional net provisions for credit losses totaling $209 thousand and $103 thousand in loan recoveries. The Company’s ACL for off-balance sheet loan commitments decreased to $340 thousand at December 31, 2024 from $449 thousand at September 30, 2024 from lower unfunded construction lines of credit.

 

During the three months ended December 31, 2024, there were no loans modified to borrowers experiencing financial difficulty.

 

There was one residential loan and one home equity line of credit totaling $257 thousand that were in the process of foreclosure at December 31, 2024.