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LOANS
 3 Months Ended
Dec. 31, 2021
LOANS [Abstract]  
LOANS
5. LOANS
 
The following table sets forth the classification of the Company’s loans by loan portfolio segment for the periods presented.
   
December 31, 2021
    
September 30, 2021
  
(in thousands)
            
Residential real estate
  
$
436,348
    
$
444,011
  
Multi-family
    
358,456
      
266,294
  
Commercial real estate
    
360,610
      
348,641
  
Commercial and industrial
    
109,562
      
172,274
  
Construction and land development
    
11,444
      
15,374
  
Consumer
    
29
      
11
  
Gross loans
    
1,276,449
      
1,246,605
  
Net deferred costs (fees)
    
985
      
520
  
Total loans
    
1,277,434
      
1,247,125
  
Allowance for loan losses
    
(9,386
)
    
(8,552
)
Total loans, net
  
$
1,268,048
    
$
1,238,573
  
 
The Company is a participant in the Paycheck Protection Program (“PPP”), administered by the Small Business Administration under the CARES Act, to provide guaranteed loans to qualifying businesses and organizations. These loans carry a fixed rate of 1.00% and a term of two years (loans made before June 5, 2020, subject to extension to five years with the consent of the lender) or five years (loans made on or after June 5, 2020), if not forgiven, in whole or in part. As of December 31, 2021, borrowers had applied for and received forgiveness on  $293.2 million in PPP loans. The Company’s PPP loans outstanding, included in commercial and industrial loans in the table above, totaled $72.9 million and $140.4 million at December 31, 2021 and September 30, 2021, respectively.
 
At December 31, 2021 and September 30, 2021, the Company was servicing approximately $241.2 million and $233.2 million, respectively, of loans for others. The Company had no loans held for sale at December 31, 2021 and September 30, 2021.
 
Purchased Credit Impaired Loans
The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount for those loans is as follows:
   
December 31,
2021
  
(in thousands)
      
Commercial real estate
  
$
3,590
  
Commercial and industrial
    
1,899
  
Total recorded investment
  
$
5,489
  

The Company has not recorded an allowance for loan losses related to these loans at December 31, 2021.
The following table presents a summary of changes in accretable difference on purchased loans accounted for under ASC 310-30:
(in thousands)
  
Three Months
Ended
December 31,
2021
  
Balance at beginning of period
  
$
346
  
Accretable differences acquired
    
-
  
Accretion
    
(1,035
)
Adjustments to accretable difference due to changes in expected cash flows
    
363
  
Other changes, net
    
416
  
Ending balance
  
$
90
  

For the three months ended December 31, 2021 and 2020, the Company sold loans totaling approximately $35.2 million and $8.4 million, respectively, recognizing net gains of $1.5 million and $181 thousand, respectively.

The following summarizes the activity in the allowance for loan losses by portfolio segment for the periods indicated:
   
Three Months Ended December 31, 2021
  
   
Residential
Real Estate
Loans
    
Multi-
Family
Loans
    
Commercial
Real Estate
Loans
    
Commercial
and
Industrial
Loans
    
Construction
and Land
Development
Loans
    
Consumer
Loans
    
Total
  
(in thousands)
      
Allowance for loan losses:
                                          
Beginning Balance
  
$
4,155
    
$
2,433
    
$
1,884
    
$
79
    
$
-
    
$
1
    
$
8,552
  
Charge-offs
    
-
      
(66
)
    
-
      
-
      
-
      
-
      
(66
)
Recoveries
    
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Provision (credit) for
                                                        
loan losses
    
(40
)
    
201
      
634
      
105
      
-
      
-
      
900
  
Ending Balance
  
$
4,115
    
$
2,568
    
$
2,518
    
$
184
    
$
-
    
$
1
    
$
9,386
  

   
Three Months Ended December 31, 2020
  
   
Residential
Real Estate
Loans
    
Multi-
Family
Loans
    
Commercial
Real Estate
Loans
    
Commercial
and
Industrial
Loans
    
Construction
and Land
Development
Loans
    
Consumer
Loans
    
Total
  
(in thousands)
      
Allowance for loan losses:
                                          
Beginning Balance
  
$
5,103
    
$
1,506
    
$
1,221
    
$
38
    
$
-
    
$
1
    
$
7,869
  
Charge-offs
    
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Recoveries
    
-
      
-
      
-
      
10
      
-
      
-
      
10
  
Provision (credit) for
                                                        
loan losses
    
(9
)
    
113
      
-
      
(4
)
    
-
      
-
      
100
  
Ending Balance
  
$
5,094
    
$
1,619
    
$
1,221
    
$
44
    
$
-
    
$
1
    
$
7,979
  

The following table represents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment evaluation method. The recorded investment in loans excludes accrued interest receivable due to immateriality.
   
December 31, 2021
  
(in thousands)
  
Residential
Real Estate
    
Multi-
Family
    
Commercial
Real Estate
    
Commercial
and
Industrial
    
Construction
and Land
Development
    
Consumer
    
Total
  
Allowance for loan losses:
                                          
Individually evaluated for impairment
  
$
-
    
$
-
    
$
-
    
$
-
    
$
-
    
$
-
    
$
-
  
Collectively evaluated for impairment
    
4,115
      
2,568
      
2,518
      
184
      
-
      
1
      
9,386
  
Purchased-credit impaired
    
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total allowance for loan losses
  
$
4,115
    
$
2,568
    
$
2,518
    
$
184
    
$
-
    
$
1
    
$
9,386
  
                                                         
Loans:
                                                        
Individually evaluated for impairment
  
$
6,315
    
$
432
    
$
523
    
$
480
    
$
-
    
$
-
    
$
7,750
  
Collectively evaluated for impairment
    
430,254
      
358,399
      
356,685
      
107,339
      
11,487
      
31
      
1,264,195
  
Purchased-credit impaired
    
-
      
-
      
3,590
      
1,899
      
-
      
-
      
5,489
  
Total loans held for investment
  
$
436,569
    
$
358,831
    
$
360,798
    
$
109,718
    
$
11,487
    
$
31
    
$
1,277,434
  

   
September 30, 2021
  
(in thousands)
  
Residential
Real Estate
    
Multi-
Family
    
Commercial
Real Estate
    
Commercial
and
Industrial
    
Construction
and Land
Development
    
Consumer
    
Total
  
Allowance for loan losses:
                                                        
Individually evaluated for impairment
  
$
-
    
$
-
    
$
-
    
$
-
    
$
-
    
$
-
    
$
-
  
Collectively evaluated for impairment
    
4,155
      
2,433
      
1,884
      
79
      
-
      
1
      
8,552
  
Purchased-credit impaired
    
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total allowance for loan losses
  
$
4,155
    
$
2,433
    
$
1,884
    
$
79
    
$
-
    
$
1
    
$
8,552
  
                                                         
Loans:
                                                        
Individually evaluated for impairment
  
$
7,198
    
$
458
    
$
517
    
$
500
    
$
-
    
$
-
    
$
8,673
  
Collectively evaluated for impairment
    
436,942
      
266,256
      
339,966
      
169,660
      
15,374
      
13
      
1,228,211
  
Purchased-credit impaired
    
-
      
-
      
8,324
      
1,917
      
-
      
-
      
10,241
  
Total loans held for investment
  
$
444,140
    
$
266,714
    
$
348,807
    
$
172,077
    
$
15,374
    
$
13
    
$
1,247,125
  
 
 No allowance was recorded on purchased credit impaired loans.

The following presents information related to the Company’s impaired loans by portfolio segment for the periods shown.
   
December 31, 2021
    
September 30, 2021
  
(in thousands)
  
Unpaid
Principal
Balance
    
Recorded
Investment
    
Allowance
Allocated
    
Unpaid
Principal
Balance
    
Recorded
Investment
    
Allowance
Allocated
  
With no related allowance recorded:
                                    
Residential real estate
  
$
6,315
    
$
6,315
    
$
-
    
$
7,382
    
$
7,198
    
$
-
  
Multi-family
    
432
      
432
      
-
      
382
      
458
      
-
  
Commercial real estate
    
523
      
523
      
-
      
522
      
517
      
-
  
Commercial and industrial
    
480
      
480
      
-
      
535
      
500
      
-
  
Total
  
$
7,750
    
$
7,750
    
$
-
    
$
8,821
    
$
8,673
    
$
-
  

   
Three Months Ended December 31,
  
   
2021
    
2020
  
(in thousands)
  
Average
Recorded
Investment
    
Interest
Income
Recognized (1)
    
Average
Recorded
Investment
    
Interest
Income
Recognized (1)
  
Residential real estate
  
$
6,347
    
$
20
    
$
5,655
    
$
22
  
Multi-family
    
440
      
-
      
46
      
1
  
Commercial real estate
    
520
      
-
      
28
      
1
  
Commercial and industrial
    
481
      
-
      
-
      
-
  
Total
  
$
7,788
    
$
20
    
$
5,729
    
$
24
  
 
(1) Accrual basis interest income recognized approximates cash basis income.

At December 31, 2021 and September 30, 2021, past due and non-accrual loans disaggregated by portfolio segment were as follows:
(in thousands)
  
Past Due and Non-Accrual
                    
December 31, 2021
  
30 - 59 days
past due and
accruing
    
60 - 89 days
past due and
accruing
    
Greater than
89 days past
due and
accruing
    
Non-accrual
        
Total past
due and non-
accrual
    
Purchased
credit
impaired
    
Current
    
Total
  
Residential real estate
  
$
52
    
$
317
    
$
-
    
$
4,680
    
(1
)
  
$
5,049
    
$
-
    
$
431,520
    
$
436,569
  
Multi-family
    
-
      
-
      
-
      
432
    
(2
)
    
432
      
-
      
358,399
      
358,831
  
Commercial real estate
    
5,068
      
-
      
-
      
523
    
(3
)
    
5,591
      
3,590
      
351,617
      
360,798
  
Commercial and industrial
    
143
      
484
      
-
      
480
    
(4
)
    
1,107
      
1,899
      
106,712
      
109,718
  
Construction and land development
    
-
      
-
      
-
      
-
            
-
      
-
      
11,487
      
11,487
  
Consumer
    
-
      
-
      
-
      
-
            
-
      
-
      
31
      
31
  
Total
  
$
5,263
    
$
801
    
$
-
    
$
6,115
          
$
12,179
    
$
5,489
    
$
1,259,766
    
$
1,277,434
  

(1) Of the residential real estate non-accrual loans, $296 were 31 days past due, $996 were 61 days past due and $3,388 were greater than 89 days past due.
(2) Multi-family non-accrual loans at December 31, 2021 were greater than 89 days past due.
(3) Commercial real estate non-accrual loans at December 31, 2021 were greater than 89 days past due.
(4) Commercial and industrial non-accrual loans at December 31, 2021 were greater than 89 days past due.

(in thousands)
  
Past Due and Non-Accrual
                    
September 30, 2021
  
30 - 59 days
past due and
accruing
    
60 - 89 days
past due and
accruing
    
Greater than
89 days past
due and
accruing
    
Non-accrual
        
Total past
due and non-
accrual
    
Purchased
credit
impaired
    
Current
    
Total
  
Residential real estate
  
$
1,032
    
$
1,601
    
$
-
    
$
5,554
    
(1
)
  
$
8,187
    
$
-
    
$
435,953
    
$
444,140
  
Multi-family
    
-
      
-
      
-
      
458
    
(2
)
    
458
      
-
      
266,256
      
266,714
  
Commercial real estate
    
1,939
      
-
      
-
      
1,016
    
(3
)
    
2,955
      
8,324
      
337,528
      
348,807
  
Commercial and industrial
    
3,641
      
-
      
-
      
-
    


   
3,641
      
1,917
      
166,519
      
172,077
  
Construction and land development
    
-
      
-
      
-
      
-
            
-
      
-
      
15,374
      
15,374
  
Consumer
    
-
      
-
      
-
      
-
            
-
      
-
      
13
      
13
  
Total
  
$
6,612
    
$
1,601
    
$
-
    
$
7,028
          
$
15,241
    
$
10,241
    
$
1,221,643
    
$
1,247,125
  

(1) Of the residential real estate non-accrual loans, $1,026 were 61 days past due and $4,528 were greater than 89 days past due.
(2) Multi-family non-accrual loans at September 30, 2021 were greater than 89 days past due.
(3) Commercial real estate non-accrual loans at September 30, 2021 were greater than 89 days past due.

Troubled debt restructurings (“TDRs”) are loan modifications where the Company has granted a concession to a borrower in financial difficulty. To assess whether a borrower is experiencing financial difficulty, an evaluation is performed to determine if that borrower is currently in payment default under any of its obligations or whether there is a probability that the borrower will be in payment default in the foreseeable future without the modification. At both December 31, 2021 and September 30, 2021, the Company had a recorded investment in TDRs totaling $1.7 million, consisting solely of residential real estate loans with no specific reserves allocated to such loans and no commitment to lend additional funds under those loans, at either December 31, 2021 or September 30, 2021.
 
For the three months ended December 31, 2021 and 2020, there were no TDRs for which there was a payment default within twelve months of restructuring. A loan is considered to be in payment default once it is 90 days contractually past due under its modified terms. For the three months ended December 31, 2021 and 2020, the Company had no new TDRs.
 
In June 2020, New York’s then-Governor Andrew Cuomo signed SB 8243C and SB 8428 into law, which created Section 9-x of the New York Banking Law. Section 9-x requires New York regulated banking institutions and New York regulated mortgage servicers to make available applications for forbearance of any payment due on certain residential mortgages to qualified borrowers for their primary residence located in New York. In general, qualified borrowers will be granted forbearance of all monthly payments for a period of up to 180 days, to be extended for up to an additional 180 days provided that the borrower demonstrates continued financial hardship.
 
The Company has been prudently working with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing an appropriate allowance for loan losses. The Company modified 519 loans totaling $367.1 million under the CARES Act which are excluded from TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking agencies. As of December 31, 2021, 12 loans totaling $11.0 million were still in forbearance, of which 5 loans totaling $2.9 million were loans qualified under Section 9-x.

The Company continuously monitors the credit quality of its loan receivables. Credit quality is monitored by reviewing certain credit quality indicators. Management has determined that internally assigned credit risk ratings by loan segment are the key credit quality indicators that best assist management in monitoring the credit quality of the Company’s loan receivables.
The Company has adopted a credit risk rating system as part of the risk assessment of its loan portfolio. The Company’s lending officers are required to assign a credit risk rating to each loan in their portfolio at origination. When the lender learns of important financial developments, the risk rating is reviewed and adjusted if necessary. In addition, the Company engages a third-party independent loan reviewer that performs quarterly reviews of a sample of loans, validating the credit risk ratings assigned to such loans. The credit risk ratings play an important role in the establishment of the loan loss provision and to confirm the adequacy of the allowance for loan losses.
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. The Company uses the following definitions for risk ratings:
Special Mention: The loan has potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects for the asset or in the Company’s credit position at some future date.
Substandard: The loan is inadequately protected by current sound worth and paying capacity of the obligor or collateral pledged, if any. Loans classified as Substandard must have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful: The loan has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing factors, conditions, and values, highly questionable and improbable.
Loans not having a credit risk rating of Special Mention, Substandard or Doubtful are considered pass loans.
At December 31, 2021 and September 30, 2021, the Company’s loan portfolio by credit risk rating disaggregated by portfolio segment were as follows:
   
December 31, 2021
  
(in thousands)
  
Pass
    
Special
Mention
    
Substandard
    
Doubtful
    
Total
  
Real Estate:
                              
Residential
  
$
426,327
    
$
4,816
    
$
5,205
    
$
-
    
$
436,348
  
Multi-family
    
354,292
      
3,732
      
432
      
-
      
358,456
  
Commercial
    
338,852
      
15,109
      
6,649
      
-
      
360,610
  
Commercial and industrial
    
105,071
      
116
      
4,375
      
-
      
109,562
  
Construction and land development
    
9,446
      
1,998
      
-
      
-
      
11,444
  
Consumer
    
29
      
-
      
-
      
-
      
29
  
Total
  
$
1,234,017
    
$
25,771
    
$
16,661
    
$
-
    
$
1,276,449
  

   
September 30, 2021
  
(in thousands)
  
Pass
    
Special
Mention
    
Substandard
    
Doubtful
    
Total
  
Real Estate:
                                        
Residential
  
$
433,299
    
$
5,115
    
$
5,594
    
$
3
    
$
444,011
  
Multi-family
    
262,984
      
2,852
      
458
      
-
      
266,294
  
Commercial
    
316,727
      
16,274
      
15,640
      
-
      
348,641
  
Commercial and industrial
    
168,104
      
540
      
3,630
      
-
      
172,274
  
Construction and land development
    
13,607
      
1,767
      
-
      
-
      
15,374
  
Consumer
    
11
      
-
      
-
      
-
      
11
  
Total
  
$
1,194,732
    
$
26,548
    
$
25,322
    
$
3
    
$
1,246,605