Allowance for Losses on Loans

6 Months Ended

Mar. 31, 2023

For a detailed discussion of loans and credit quality, including accounting policies and the CECL methodology used to estimate the allowance for credit losses, see Note A "Summary of Significant Accounting Policies."

The following tables summarize the activity in the allowance for loan losses by loan portfolio segment and class.


Three Months Ended March 31, 2023	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	12,324	$	—	$	—	$	714	$	13,038
Commercial real estate	27,380		—		1		422		27,803
Commercial & industrial	63,873		(6,054)		42		5,440		63,301
Construction	26,133		—		—		(106)		26,027
Land - acquisition & development	8,572		—		14		(1,090)		7,496
Total commercial loans	138,282		(6,054)		57		5,380		137,665
Consumer loans
Single-family residential	25,475		(34)		104		1,371		26,916
Construction - custom	3,500		—		—		(44)		3,456
Land - consumer lot loans	4,142		—		5		(202)		3,945
HELOC	2,588		—		—		74		2,662
Consumer	2,810		(38)		83		(79)		2,776
Total consumer loans	38,515		(72)		192		1,120		39,755
Total loans	$	176,797	$	(6,126)	$	249	$	6,500	$	177,420

(1) Provision & transfer amounts within the table do not include the recapture of provision for unfunded commitments of $3.0 million. The total provision recognized for the three months ended March 31, 2023 was $3.5 million.


Three Months Ended March 31, 2022	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	15,993	$	—	$	—	$	(1,530)	$	14,463
Commercial real estate	25,722		—		753		(1,793)		24,682
Commercial & industrial	47,231		(873)		2		7,543		53,903
Construction	24,766		—		179		(2,238)		22,707
Land - acquisition & development	14,125		—		20		(460)		13,685
Total commercial loans	127,837		(873)		954		1,522		129,440
Consumer loans
Single-family residential	30,106		—		147		(1,261)		28,992
Construction - custom	3,719		—		—		(590)		3,129
Land - consumer lot loans	4,984		—		40		81		5,105
HELOC	2,365		—		100		10		2,475
Consumer	2,400		(39)		144		(262)		2,243
Total consumer loans	43,574		(39)		431		(2,022)		41,944
Total loans	$	171,411	$	(912)	$	1,385	$	(500)	$	171,384

(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments. There was no such provision in the above quarter. The total provision recapture recognized for the three months ended March 31, 2022 was $0.5 million


Six Months Ended March 31, 2023	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	12,013	$	—	$	—	$	1,025	$	13,038
Commercial real estate	25,814		—		5		1,984		27,803
Commercial & industrial	57,210		(6,136)		74		12,153		63,301
Construction	26,161		—		—		(134)		26,027
Land - acquisition & development	12,278		—		30		(4,812)		7,496
Total commercial loans	133,476		(6,136)		109		10,216		137,665
Consumer loans
Single-family residential	25,518		(34)		534		898		26,916
Construction - custom	3,410		—		—		46		3,456
Land - consumer lot loans	5,047		—		5		(1,107)		3,945
HELOC	2,482		—		1		179		2,662
Consumer	2,875		(184)		317		(232)		2,776
Total consumer loans	39,332		(218)		857		(216)		39,755
Total loans	$	172,808	$	(6,354)	$	966	$	10,000	$	177,420

(1) Provision & transfer amounts within the table do not include the recapture of provision for unfunded commitments of $4.0 million. The total provision for the six months ended March 31, 2023 was $6.0 million.


Six Months Ended March 31, 2022	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	16,949	$	—	$	—	$	(2,486)	$	14,463
Commercial real estate	23,437		(529)		797		977		24,682
Commercial & industrial	45,957		(916)		64		8,798		53,903
Construction	25,585		—		2,179		(5,057)		22,707
Land - acquisition & development	13,447		(2)		40		200		13,685
Total commercial loans	125,375		(1,447)		3,080		2,432		129,440
Consumer loans
Single-family residential	30,978		—		552		(2,538)		28,992
Construction - custom	4,907		—		—		(1,778)		3,129
Land - consumer lot loans	4,939		(27)		45		148		5,105
HELOC	2,390		—		101		(16)		2,475
Consumer	2,711		(115)		395		(748)		2,243
Total consumer loans	45,925		(142)		1,093		(4,932)		41,944
Total loans	$	171,300	$	(1,589)	$	4,173	$	(2,500)	$	171,384

(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments of $2.5 million. As such there was no provision recognized for the six months ended March 31, 2022.

The Company recorded a $3,500,000 provision for credit losses for the three months ended March 31, 2023, compared to a $500,000 release of allowance for credit losses for the three months ended March 31, 2022. The provision in the three months ended March 31, 2023 was primarily due to growth in net loans receivable combined with the changing economic outlook amid concerns around a looming recession and recent macro-economic events. The release for the three months ended March 31, 2022 was primarily due to improvements in the credit quality of certain loan portfolios related to strong real estate markets and collateral conditions, mostly offset by growth in loans receivable. The Company recorded a $6,000,000 provision for credit losses for the six months ended March 31, 2023, compared with no provision for credit losses for the six months ended March 31, 2022. Charge-offs, net of recoveries, totaled $5,877,000 for the three months ended March 31, 2023, compared to net recoveries of $473,000 during the three months ended March 31, 2022. Charge-offs, net of recoveries, totaled $5,388,000 for the six months ended March 31, 2023, compared to net recoveries of $2,584,000 during the six months ended March 31, 2022. No allowance was recorded as of March 31, 2023 or as of September 30, 2022 for the $2,781,000 and $10,141,399 of PPP loans in the portfolio on each date, respectively, which are included in the commercial & industrial loan category, due to the government guarantee.

Non-performing assets were $46,785,000, or 0.21% of total assets, at March 31, 2023, compared to $44,554,000, or 0.21% of total assets, at September 30, 2022. Non-accrual loans were $34,606,000 at March 31, 2023, compared to $34,534,000 at September 30, 2022. Delinquencies, as a percent of total loans, were 0.16% at March 31, 2023, compared to 0.17% at September 30, 2022.

The Company has an asset quality review function that analyzes its loan portfolio and reports the results of the review to its Board of Directors on a quarterly basis. The single-family residential, HELOC and consumer portfolios are evaluated based on their performance as a pool of loans, since no single loan is individually significant or judged by its risk rating, size or potential risk of loss. The construction, land, multi-family, commercial real estate and commercial and industrial loans are risk rated on a loan by loan basis to determine the relative risk inherent in specific borrowers or loans. Based on that risk rating, the loans are assigned a grade and classified as described in Note D "Loans Receivable."

The following tables provide the amortized cost of loans receivable based on risk rating categories as previously defined.


March 31, 2023	Internally Assigned Grade
	Pass			Special mention			Substandard			Doubtful			Loss			Total
	(In thousands, except ratio data)
Loan type
Commercial loans
Multi-family	$	2,745,834		$	94,503		$	19,657		$	—		$	—		$	2,859,994
Commercial real estate	3,169,372			500			88,432			—			—			3,258,304
Commercial & industrial	2,415,335			1,558			161,366			6,937			—			2,585,196
Construction	1,576,999			31,514			—			—			—			1,608,513
Land - acquisition & development	166,811			269			—			—			—			167,080
Total commercial loans	10,074,351			128,344			269,455			6,937			—			10,479,087
Consumer loans
Single-family residential	6,114,358			—			19,663			—			—			6,134,021
Construction - custom	403,783			—			—			—			—			403,783
Land - consumer lot loans	140,134			—			6			—			—			140,140
HELOC	221,031			—			128			—			—			221,159
Consumer	71,124			—			12			—			—			71,136
Total consumer loans	6,950,430			—			19,809			—			—			6,970,239
Total	$	17,024,781		$	128,344		$	289,264		$	6,937		$	—		$	17,449,326

Total grade as a % of total loans	97.57		%	0.74		%	1.66		%	0.04		%	—		%


September 30, 2022	Internally Assigned Grade
	Pass			Special mention			Substandard			Doubtful			Loss			Total
	(In thousands, except ratio data)
Loan type
Commercial loans
Multi-family	$	2,612,669		$	—		$	13,810		$	—		$	—		$	2,626,479
Commercial real estate	3,054,241			1,594			55,277			—			—			3,111,112
Commercial & industrial	2,196,767			31,656			114,980			—			—			2,343,403
Construction	1,421,634			—			2,257			—			—			1,423,891
Land - acquisition & development	223,616			—			—			—			—			223,616
Total commercial loans	9,508,927			33,250			186,324			—			—			9,728,501
Consumer loans
Single-family residential	5,706,199			—			20,780			—			—			5,726,979
Construction - custom	396,908			—			435			—			—			397,343
Land - consumer lot loans	151,723			—			222			—			—			151,945
HELOC	205,800			—			233			—			—			206,033
Consumer	75,570			—			1			—			—			75,571
Total consumer loans	6,536,200			—			21,671			—			—			6,557,871
Total loans	$	16,045,127		$	33,250		$	207,995		$	—		$	—		$	16,286,372

Total grade as a % of total loans	98.52		%	0.20		%	1.28		%	—		%	—		%

The following tables provide information on amortized cost of loans receivable based on borrower payment activity.


March 31, 2023	Performing Loans				Non-Performing Loans
	Amount		% of Total Loans		Amount		% of Total Loans
	(In thousands, except ratio data)
Commercial loans
Multi-family	$	2,854,150	99.8	%	$	5,844	0.2	%
Commercial real estate	3,253,785		99.9		4,519		0.1
Commercial & industrial	2,577,515		99.7		7,681		0.3
Construction	1,608,513		100.0		—		0.0
Land - acquisition & development	167,080		100.0		—		—
Total commercial loans	10,461,043		99.8		18,044		0.2
Consumer loans
Single-family residential	6,117,625		99.7		16,396		0.3
Construction - custom	403,783		100.0		—		—
Land - consumer lot loans	140,134		100.0		6		0.0
HELOC	221,031		99.9		128		0.1
Consumer	71,104		100.0		32		0.0
Total consumer loans	6,953,677		99.8		16,562		0.2
Total loans	$	17,414,720	99.8	%	$	34,606	0.2	%


September 30, 2022	Performing Loans				Non-Performing Loans
	Amount		% of Total Loans		Amount		% of Total Loans
	(In thousands, except ratio data)
Commercial loans
Multi-family	$	2,620,567	99.8	%	$	5,912	0.2	%
Commercial real estate	3,106,421		99.8		4,691		0.2
Commercial & industrial	2,337,710		99.8		5,693		0.2
Construction	1,423,891		100.0		—		—
Land - acquisition & development	223,616		100.0		—		—
Total commercial loans	9,712,205		99.9		16,296		0.1
Consumer loans
Single-family residential	5,709,529		99.7		17,450		0.3
Construction - custom	396,908		99.9		435		0.1
Land - consumer lot loans	151,861		99.9		84		0.1
HELOC	205,800		99.9		233		0.1
Consumer	75,535		100.0		36		0.0
Total consumer loans	6,539,633		99.7		18,238		0.4
Total loans	$	16,251,838	99.8	%	$	34,534	0.2	%