LOANS RECEIVABLE, NET

12 Months Ended

Sep. 30, 2023

Loans Receivable, Net [Abstract]

LOANS RECEIVABLE, NET

NOTE E - LOANS RECEIVABLE, NET

Loans receivable are comprised of the following:

	September 30,
	2023			2022
	(In thousands)
One-to four-family residential	$	237,683		$	214,377
Commercial real estate		389,134			342,791
Construction		21,853			15,230
Home equity lines of credit		16,983			18,704
Commercial business		30,194			34,672
Other		2,359			3,130
Total loans receivable		698,206			628,904
Net deferred loan costs		(806	)		(628	)
Allowance for loan losses		(8,330	)		(8,433	)
Total loans receivable, net	$	689,070		$	619,843

Certain directors and executive officers of the Company have loans with the Bank. Such loans were made in the ordinary course of business at the Bank’s normal credit terms, including interest rate and collateralization, and do not represent more than a normal risk of collection. Total loans receivable from directors and executive officers, and affiliates thereof, were approximately $5.1 million at September 30, 2023 and $2.3 million at September 30, 2022. There were $2.9 million and $738,000 in new loans or advances on existing lines of credit during the year ended September 30, 2023 and 2022, respectively. Total principal repayments were approximately $142,000 and $731,000 for the year ended September 30, 2023 and 2022, respectively.

At September 30, 2023 and 2022, the Company was servicing loans for others amounting to approximately $48.1 million and $43.6 million, respectively. The Company held mortgage servicing rights in the amount of $28,000 and $0 at September 30, 2023 and 2022, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, and foreclosure processing. Loan servicing income is recorded on the cash basis and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees. In connection with loans serviced for others, the Company held borrowers’ escrow balances of approximately $27,000 at September 30, 2023 and 2022.

The segments of the Bank’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 primarily of revolving lines of credit. 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 evaluates individual loans in all segments for possible impairment if the loan either is in nonaccrual status, or is risk rated Substandard and is 90 days or more past due.  Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  

Once the determination has been made that a loan is impaired, the recorded investment in the loan is compared to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s current observable market price; or (c) the fair value of the collateral securing the loan, less anticipated selling and disposition costs. The method is selected on a loan-by loan basis, with management primarily utilizing the fair value of collateral method. If there is a shortfall between the fair value of the loan and the recorded investment in the loan, the Company charges the difference to the allowance for loan loss as a charge-off and carries the impaired loan on its books at fair value. It is the Company’s policy to evaluate impaired loans on an annual basis to ensure the recorded investment in a loan does not exceed its fair value.

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 for the periods presented:

					Impaired Loans
	Impaired Loans with				with No Specific
	Specific Allowance				Allowance		Total Impaired Loans
									Unpaid
At and for the year ended	Recorded		Related		Recorded		Recorded		Principal
September 30, 2023	Investment		Allowance		Investment		Investment		Balance
	(In thousands)
One-to four-family residential	$	—	$	—	$	2,031	$	2,031	$	2,031
Commercial real estate		—		—		2,969		2,969		2,969
Construction		—		—		2,474		2,474		2,539
Commercial business		—		—		147		147		147
Total impaired loans	$	—	$	—	$	7,621	$	7,621	$	7,686
At and for the year ended
September 30, 2022
One-to four-family residential	$	—	$	—	$	1,512	$	1,512	$	1,512
Commercial real estate		—		—		1,159		1,159		1,159
Construction		2,835		114		—		2,835		2,900
Commercial business		—		—		153		153		153
Total impaired loans	$	2,835	$	114	$	2,824	$	5,659	$	5,724

The average recorded investment in impaired loans was $5.9 million and $8.1 million for the years ended September 30, 2023 and 2022, respectively. During the years ended September 30, 2023 and 2022, interest income of $96,000 and $135,000, respectively, was recognized for performing TDR loans while no interest income was recognized for delinquent non-accrual loans.

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. 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 Bank 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 Bank’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 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 $500,000 and/or criticized relationships greater than $250,000. 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 summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the Bank’s internal risk rating system for the periods presented:

			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		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
September 30, 2022
One-to four-family residential	$	213,173	$	980	$	224	$	—	$	214,377
Commercial real estate		342,593		198		—		—		342,791
Construction		10,652		—		4,578		—		15,230
Home equity lines of credit		18,704		—		—		—		18,704
Commercial business		34,672		—		—		—		34,672
Other		3,130		—		—		—		3,130
Total	$	622,924	$	1,178	$	4,802	$	—	$	628,904

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 following tables present 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		Non-		Total
	Current		Past Due		Past Due		Past Due		Past Due		Accrual		Loans
	(In  thousands)
September 30, 2023
One-to four-family residential	$	236,729	$	—	$	568	$	386	$	954	$	386	$	237,683
Commercial real estate		386,794		—		116		2,224		2,340		2,224		389,134
Construction		19,379		—		—		2,474		2,474		2,474		21,853
Home equity lines of credit		16,983		—		—		—		—		—		16,983
Commercial business		30,047		147		—		—		147		—		30,194
Other		2,359		—		—		—		—		—		2,359
Total	$	692,291	$	147	$	684	$	5,084	$	5,915	$	5,084	$	698,206

			30-59		60-89
			Days		Days		90 Days +		Total		Non-		Total
	Current		Past Due		Past Due		Past Due		Past Due		Accrual		Loans
	(In  thousands)
September 30, 2022
One-to four-family residential	$	213,903	$	300	$	174	$	—	$	474	$	—	$	214,377
Commercial real estate		342,404		—		387		—		387		—		342,791
Construction		12,395		—		—		2,835		2,835		2,835		15,230
Home equity lines of credit		18,704		—		—		—		—		—		18,704
Commercial business		34,672		—		—		—		—		—		34,672
Other		3,130		—		—		—		—		—		3,130
Total	$	625,208	$	300	$	561	$	2,835	$	3,696	$	2,835	$	628,904

The amount of interest income not recognized on non-accrual loans was approximately $309,000 and $220,000 for the years ended September 30, 2023 and 2022, respectively. At September 30, 2023 and September 30, 2022, there were no commitments to lend additional funds to borrowers whose loans are classified as non-accrual.

An allowance for loan losses (“ALL”) is maintained to absorb losses from the loan portfolio.  The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

The Bank’s methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance.  

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative and economic factors.

The loans are segmented into classes based on their inherent varying degrees of risk, as described above. Management tracks the historical net charge-off activity by segment and utilizes this figure, as a percentage of the segment, as the general reserve percentage for pooled, homogenous loans that have not been deemed impaired. Typically, an average of losses incurred over five historical years is used.

Non-impaired credits are segregated for the application of qualitative factors. Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; levels of and trends in delinquency rates and non-accrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and/or geographic standpoint. Management maintained or increased several of these factors during the year ended September 30, 2023 due to the higher risk of credit loss resulting from the a higher likelihood of economic recession and its ongoing impact on borrowers.

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 ALL.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL. Since loans individually evaluated for impairment are promptly written down to their fair value, typically there is no portion of the ALL for loans individually evaluated for impairment.

The following tables summarize the activity in the allowance for loan losses by loan category for the years ended September 30, 2023 and 2022:

	One-to Four-						Home Equity
	Family		Commercial				Lines of			Commercial
	Residential		Real Estate		Construction		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		—		—		—		—			(488	)		—		—			(488	)
Recoveries		4		—		—		—			—			—		—			4
Provision (credit)		32		665		11		(56	)		(57	)		1		(215	)		381
Balance-September 30, 2023	$	1,259	$	5,277	$	472	$	207		$	939		$	2	$	174		$	8,330

	One-to Four-							Home Equity
	Family		Commercial					Lines of		Commercial
	Residential		Real Estate		Construction			Credit		Business			Other			Unallocated		Total
	(In  thousands)
Balance-September 30, 2021	$	1,136	$	3,744	$	594		$	232	$	2,046		$	15		$	308	$	8,075
Charge-offs		—		—		—			—		—			—			—		—
Recoveries		1		53		—			—		—			—			—		54
Provision (credit)		86		815		(133	)		31		(562	)		(14	)		81		304
Balance-September 30, 2022	$	1,223	$	4,612	$	461		$	263	$	1,484		$	1		$	389	$	8,433

The following tables summarize the allowance for loan loss 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 September 30, 2023 and September 30, 2022:

	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
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

	One-to- Four						Home Equity
	Family		Commercial				Lines of		Commercial
	Residential		Real Estate		Construction		Credit		Business		Other		Unallocated		Total
	(In  thousands)
Balance - September 30, 2022	$	1,223	$	4,612	$	461	$	263	$	1,484	$	1	$	389	$	8,433
Individually evaluated
for impairment		—		—		114		—		—		—		—		114
Collectively evaluated
for impairment		1,223		4,612		347		263		1,484		1		389		8,319
Loans receivable:
Balance - September 30, 2022	$	214,377	$	342,791	$	15,230	$	18,704	$	34,672	$	3,130	$	—	$	628,904
Individually evaluated
for impairment		1,512		1,159		2,835		—		153		—		—		5,659
Collectively evaluated
for impairment		212,865		341,632		12,395		18,704		34,519		3,130		—		623,245

The allowance for loan losses is based on estimates, and actual losses will vary from current estimates. Management believes that the segmentation of the loan portfolio into homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

A TDR is a loan that has been modified whereby the Bank has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Bank to maximize the ultimate recovery of a loan. TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a modification that would otherwise not be granted to the borrower. The types of concessions granted generally included, but are not limited to interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal.

A default on a troubled debt restructured loan for purposes of this disclosure occurs when a borrower is 90 days past due or a foreclosure or repossession of the applicable collateral has occurred. There was one TDR totaling $106,000 during the year ended September 30, 2023, compared with no TDR loans during the year ended September 30, 2022. All TDR loans were performing in accordance with their restructured terms as September 30, 2023. The following tables summarizes the TDRs during the years ended September 30, 2023 and 2022:

	Number of		Investment Before		Investment After
	Loans		TDR Modification		TDR Modification
	(Dollars in thousands)
September 30, 2023
One-to four-family residential		1	$	97	$	106
Total		1	$	97	$	106
September 30, 2022
Total		—	$	—	$	—

Total loans pledged as collateral against Federal Home Loan Bank of New York (“FHLBNY”) borrowings were $341.6 million and $181.2 million as of September 30, 2023 and 2022, respectively.