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Loans Receivable and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Loans Receivable and Allowance for Credit Losses Loans Receivable and Allowance for Credit Losses
Loans receivable are summarized as follows at the dates indicated: 
 September 30, 2023December 31, 2022
 (In thousands)
One-to-four family residential:   
Permanent owner occupied$260,970 $232,869 
Permanent non-owner occupied232,238 241,311 
493,208 474,180 
 
Multifamily140,022 126,866 
 
Commercial real estate394,691 407,904 
 
Construction/land: 
One-to-four family residential43,532 52,492 
Multifamily 2,043 15,393 
Land9,766 9,759 
 55,341 77,644 
Business27,975 31,363 
Consumer72,148 64,353 
Total loans receivable, gross1,183,385 1,182,310 
Less: 
ACL(1)
15,306 15,227 
Total loans receivable, net$1,168,079 $1,167,083 
(1) ACL on loans at December 31, 2022 was reported under the incurred loss method.

    At September 30, 2023, loans totaling $655.7 million were pledged to secure borrowings from the FHLB compared to $605.0 million at December 31, 2022. In addition, loans totaling $81.1 million and $87.7 million were pledged to FRB to secure a line of credit at September 30, 2023 and December 31, 2022, respectively.
    
Credit Quality Indicators. The Company assigns a risk rating to all credit exposures based on a risk rating system designed to define the basic characteristics and identify risk elements of each credit extension. The Company utilizes a nine point risk rating system. A description of the general characteristics of the risk grades is as follows:

•Grades 1 through 5: These grades are considered to be “pass” credits. These include assets where there is virtually no credit risk, such as cash secured loans with funds on deposit with the Company. Pass credits also include credits that are on the Company’s watch list (grade 5), where the borrower exhibits potential weaknesses, which may, if not checked or corrected, negatively affect the borrower’s financial capacity and threaten their ability to fulfill debt obligations in the future.

•Grade 6: These credits, classified as “special mention”, possess weaknesses that deserve management’s close attention. Special mention assets do not expose the Company to sufficient risk to warrant adverse classification in the substandard, doubtful or loss categories. If left uncorrected, these potential weaknesses may result in deterioration in the Company’s credit position at a future date.
•Grade 7: These credits, classified as “substandard”, present a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These credits have well-defined weaknesses which jeopardize the orderly liquidation of the debt and are inadequately protected by the current net worth and payment capacity of the borrower or of any collateral pledged.

•Grade 8: These credits are classified as “doubtful” and possess well defined weaknesses which make the full collection or liquidation of the loan highly questionable and improbable. This classification is used where significant risk exposures are perceived but the exact amount of the loss cannot yet be determined due to pending events.

•Grade 9: Assets classified as “loss” are considered uncollectible and cannot be justified as a viable asset for the Company. There is little or no prospect of near-term recovery and no realistic strengthening action of significance is pending.

The grades for watch and special mention loans are used by the Company to identify and track potential problem loans which do not rise to the levels described for substandard, doubtful, or loss. These are loans which have been criticized based upon known characteristics such as periodic payment delinquency, failure to comply with contractual terms of the loan or stale financial information from the borrower and/or guarantors. Loans identified as criticized (watch and special mention) or classified (substandard, doubtful or loss) are subject to problem loan reporting every three months.

    Management considers the guidance in Accounting Standards Codification (“ASC”) 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. As of September 30, 2023, and December 31, 2022, the Company had no loans rated as doubtful or loss. The following tables represent a summary of loans at September 30, 2023, and December 31, 2022 by type and risk category:
 September 30, 2023
 Term Loans by Year of Origination
 20232022202120202019PriorTotal Loans
 (In thousands)
One-to-four family residential     
Pass$56,489 $147,961 $95,279 $63,685 $32,015 $96,667 $492,096 
Watch— — — — — 711 711 
Special mention— — — — — 401 401 
Substandard— — — — — — — 
Total one-to-four family residential$56,489 $147,961 $95,279 $63,685 $32,015 $97,779 $493,208 
Current year-to-date (“YTD”) gross charge-offs$— $— $— $— $— $— $— 
Multifamily
Pass$3,335 $8,363 $22,892 $43,492 $26,079 $32,003 $136,164 
Watch— — — — — 2,257 2,257 
Special mention— — — — — — — 
Substandard— — — — — 1,601 1,601 
Total multifamily$3,335 $8,363 $22,892 $43,492 $26,079 $35,861 $140,022 
Current YTD gross charge-offs$— $— $— $— $— $— $— 
(Continued)
September 30, 2023
Term Loans by Year of Origination
20232022202120202019PriorTotal Loans
(In thousands)
Commercial
Pass$19,548 $35,248 $81,622 $78,694 $21,206 $106,640 $342,958 
Watch— — 4,134 — — 3,350 7,484 
Special mention— — — — — — — 
Substandard— — — 527 1,295 42,427 44,249 
Total commercial real estate$19,548 $35,248 $85,756 $79,221 $22,501 $152,417 $394,691 
Current YTD gross charge-offs $— $— $— $— $— $— $— 
Construction/land
Pass$6,786 $28,395 $20,160 $— $— $— $55,341 
Watch— — — — — — — 
Special mention— — — — — — — 
Substandard— — — — — — — 
Total construction/land$6,786 $28,395 $20,160 $— $— $— $55,341 
Current YTD gross charge-offs$— $— $— $— $— $— $— 
Business
Pass$1,463 $4,525 $410 $1,385 $1,676 $18,516 $27,975 
Watch— — — — — — — 
Special mention— — — — — — — 
Substandard— — — — — — — 
Total business$1,463 $4,525 $410 $1,385 $1,676 $18,516 $27,975 
Current YTD gross charge-offs$— $— $— $— $— $— $— 
Consumer
Pass$21,630 $25,371 $11,273 $5,747 $5,073 $2,825 $71,919 
Watch— 28 — — — 28 
Special mention— — — — — — — 
Substandard— — 201 — — — 201 
Total consumer$21,630 $25,399 $11,474 $5,747 $5,073 $2,825 $72,148 
Current YTD gross charge-offs$— $— $— $— $22 $— $22 
Total loans receivable, gross
Pass$109,251 $249,863 $231,636 $193,003 $86,049 $256,651 $1,126,453 
Watch— 28 4,134 — — 6,318 10,480 
Special mention— — — — — 401 401 
Substandard— — 201 527 1,295 44,028 46,051 
Total loans$109,251 $249,891 $235,971 $193,530 $87,344 $307,398 $1,183,385 
Current YTD gross charge-offs$— $— $— $— $22 $— $22 
 December 31, 2022
 One-to-Four
Family
Residential		MultifamilyCommercial
Real Estate		Construction/
Land		BusinessConsumer
Total (1)
 (In thousands)
Risk Rating:       
   Pass, grade 1-4$473,700 $122,972 $342,827 $78,120 $31,371 $61,632 $1,110,622 
Pass, grade 5 (watch)1,113 2,291 14,845 — — 27 18,276 
   Special mention1,023 — 4,668 — — 203 5,894 
   Substandard— 1,632 45,542 — — 193 47,367 
Total loans$475,836 $126,895 $407,882 $78,120 $31,371 $62,055 $1,182,159 
(1) Deferred loan fees (costs) of $151,000 were excluded.

ACL. ACL is a valuation account that is deducted from the loans amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the ACL when management believes the non-collectability of a loan balance is confirmed. Expected recoveries may not exceed the aggregate amounts previously charged-off and expected to be charged-off. The ACL, as reported in our consolidated balance sheets, is adjusted by a provision for credit losses, which is reported in earnings, and reduced by the charge-offs of loan amounts, net of recoveries.

When the Company classifies problem assets as either substandard or doubtful, pursuant to Federal regulations, or identifies a loan where it is uncertain if the Company will be able to collect all amounts due according to the contractual terms of the loan, it may establish a specific allowance in an amount deemed prudent to address the risk specifically. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been specifically allocated to the particular problem assets. When an insured institution classifies problem assets as a loss, pursuant to Federal regulations, it is required to charge off such assets in the period in which they are deemed uncollectible. The determination as to the classification of the Company’s assets and the amount of valuation allowance is subject to review by bank regulators, who can require the establishment of additional allowances for credit losses.

At September 30, 2023, total loans receivable included $551,000 of loans originated under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) compared to $784,000 at December 31, 2022. Although these loans were included in the population of loans collectively evaluated for impairment, no general allowance was allocated to them as these loans are 100% guaranteed by the SBA.
Activity in the ACL for loans and the allowance for unfunded commitments was as follows:

Three Months Ended September 30,Nine Months Ended September 30,
20232023
ACL - loans:
Beginning balance$15,606 $15,227 
Adjustment for adoption of Topic 326— 500 
Charge-offs— (22)
Recoveries— 1 
Recapture of provision for credit losses(300)(400)
Ending balance$15,306 $15,306 
Allowance for unfunded commitments:
Beginning balance$439 $247 
Provision for credit losses— 192 
Ending balance$439 $439 
Provision for credit losses:
ACL - loans$(300)$(400)
Allowance for unfunded commitments— 192 
Total$(300)$(208)
The following tables detail activity in the ACL on loans at or for the three and nine months ended September 30, 2023, and in the allowance for loan and lease losses (“ALLL”) under the incurred loss methodology for the three and nine months ended September 30, 2022, by loan category:
At or For the Three Months Ended September 30, 2023
One-to-Four
Family
Residential		MultifamilyCommercial Real EstateConstruction/
Land		BusinessConsumerTotal
(In thousands)
ACL:
Beginning balance$5,574 $1,582 $4,367 $1,664 $347 $2,072 $15,606 
Provision (recapture)172 (15)(430)(24)10 (13)(300)
Ending balance$5,746 $1,567 $3,937 $1,640 $357 $2,059 $15,306 
 At or For the Nine Months Ended September 30, 2023
 One-to-Four
Family
Residential		MultifamilyCommercial Real EstateConstruction/
Land		BusinessConsumerTotal
(In thousands)
ACL:
Beginning balance$4,043 $1,210 $5,397 $1,717 $948 $1,912 $15,227 
Adjustment for adoption of Topic 3261,520 83 (970)408 (510)(31)500 
   Charge-offs— — — — — (22)(22)
   Recoveries1 — — — — — 1 
   Provision (recapture) 182 274 (490)(485)(81)200 (400)
Ending balance$5,746 $1,567 $3,937 $1,640 $357 $2,059 $15,306 
At or For the Three Months Ended September 30, 2022
One-to-Four
Family
Residential		MultifamilyCommercial Real EstateConstruction/
Land		BusinessConsumerTotal
(In thousands)
ALLL:
Beginning balance$3,692 $1,296 $6,187 $1,357 $998 $1,595 $15,125 
Recoveries1 — — — — — 1 
Provision (recapture) 109 (30)(789)176 (41)175 (400)
Ending balance$3,802 $1,266 $5,398 $1,533 $957 $1,770 $14,726 
 At or For the Nine Months Ended September 30, 2022
 One-to-Four
Family
Residential		MultifamilyCommercial Real EstateConstruction/
Land		BusinessConsumerTotal
(In thousands)
ALLL:
Beginning balance$3,214 $1,279 $6,615 $2,064 $1,112 $1,373 $15,657 
  Charge-offs— — — — — (37)(37)
   Recoveries6 — — — — — 6 
   Provision (recapture) 582 (13)(1,217)(531)(155)434 (900)
Ending balance$3,802 $1,266 $5,398 $1,533 $957 $1,770 $14,726 
ALLL by category:
General allowance$3,787 $1,266 $5,398 $1,533 $957 $1,770 $14,711 
Specific allowance15 — — — — — 15 
Loans: 
Total loans$449,435 $132,755 $413,486 $72,624 $32,054 $57,619 $1,157,973 
Loans collectively evaluated for impairment447,571 131,113 367,673 72,624 32,054 57,619 1,108,654 
Loans individually evaluated for impairment1,864 1,642 45,813 — — — 49,319 

Past Due Loans. Loans are considered past due if a scheduled principal or interest payment is due and unpaid for 30 days or more. At September 30, 2023, loans past due were $1.2 million, representing 0.10% of total loans receivable. In comparison, past due loans totaled $220,000, representing 0.02% of total loans receivable at December 31, 2022. The following tables present a summary of the aging of loans by type at the dates indicated:
 Loans Past Due as of September 30, 2023  
 30-59 Days60-89 Days90 Days
or More		Total Past
Due		Current
Total (1)
 (In thousands)
Real estate:      
One-to-four family residential:    
Owner occupied$40 $293 $— $333 $260,637 $260,970 
Non-owner occupied— 24 — 24 232,214 232,238 
Multifamily— — — — 140,022 140,022 
Commercial real estate— — — — 394,691 394,691 
Construction/land— — — 55,341 55,341 
Total real estate40 317 — 357 1,082,905 1,083,262 
Business— — — — 27,975 27,975 
Consumer680 — 201 881 71,267 72,148 
Total loans$720 $317 $201 $1,238 $1,182,147 $1,183,385 
 ________________ 

(1) There were no loans 90 days and or more past due and still accruing interest at September 30, 2023.
 Loans Past Due as of December 31, 2022  
 30-59 Days60-89 Days90 Days
or More		Total Past
Due		Current
Total (1)
 (In thousands)
Real estate:      
One-to-four family residential:      
Owner occupied$— $— $— $— $233,785 $233,785 
Non-owner occupied27 — — 27 242,024 242,051 
Multifamily— — — — 126,895 126,895 
Commercial real estate— — — — 407,882 407,882 
Construction/land— — — — 78,120 78,120 
Total real estate27 — — 27 1,088,706 1,088,733 
Business— — — — 31,371 31,371 
Consumer— — 193 193 61,862 62,055 
Total loans$27 $— $193 $220 $1,181,939 $1,182,159 
_________________ 

(1) There were no loans 90 days and or more past due and still accruing interest at December 31, 2022. Deferred loan fees (costs) of $151,000 were excluded.

Nonperforming Loans. When a loan becomes 90 days past due, the Company generally places the loan on nonaccrual status. Loans may be placed on nonaccrual status prior to being 90 days past due if there is an identified problem that indicates the borrower is unable to meet their scheduled payment obligations. Nonaccrual loans were $201,000 at September 30, 2023 and $193,000 at December 31, 2022.
The following tables summarize the loan portfolio by type and payment status at the dates indicated:

 September 30, 2023
 One-to-Four
Family
Residential		MultifamilyCommercial
Real Estate		Construction/
Land		BusinessConsumerTotal
 (In thousands)
Performing (1)
$493,208 $140,022 $394,691 $55,341 $27,975 $71,947 $1,183,184 
Nonperforming— — — — — 201 201 
Total loans$493,208 $140,022 $394,691 $55,341 $27,975 $72,148 $1,183,385 
_____________

(1) There were $261.0 million of owner-occupied one-to-four family residential loans and $232.2 million of non-owner occupied one-to-four family residential loans classified as performing.


 December 31, 2022
 One-to-Four
Family
Residential		MultifamilyCommercial
Real Estate		Construction/
Land		BusinessConsumer
Total (1)
 (In thousands)
Performing (2)
$475,836 $126,895 $407,882 $78,120 $31,371 $61,862 $1,181,966 
Nonperforming— — — — — 193 193 
Total loans$475,836 $126,895 $407,882 $78,120 $31,371 $62,055 $1,182,159 
_____________

(1) Deferred loan fees (costs) of $151,000 were excluded.
(2) There were $233.8 million of owner-occupied one-to-four family residential loans and $242.1 million of non-owner occupied one-to-four family residential loans classified as performing.

The following table presents the amortized cost basis of collateral dependent loans by class as of September 30, 2023:


September 30, 2023
(In thousands)
Loans with related allowance:
Multifamily$1,601 
Commercial real estate44,249 
Total $45,850 


Impaired Loans and Allowance for Loan Losses - Prior to the implementation of Financial Instruments - Credit Losses (Topic 326) on January 1, 2023, a loan was considered impaired when, based on current information and circumstances, the Company determines it was probable that it would be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. Factors considered in determining impairment included, but were not limited to, the financial condition of the borrower, the value of the underlying collateral and the status of the economy. Impaired loans were comprised of loans on nonaccrual, TDRs that were performing under their restructured terms, and loans that were 90 days or more past due but were still on accrual.
The following table is a summary of information pertaining to impaired loans as of December 31, 2022:

 December 31, 2022
Recorded Investment (1)
Unpaid Principal Balance (2)
Related Allowance
 (In thousands)
Loans with no related allowance:   
  One-to-four family residential:   
      Owner occupied$174 $175 $— 
      Non-owner occupied188 188 — 
  Multifamily1,632 1,632 — 
   Commercial real estate45,542 45,542 — 
Total47,536 47,537 — 
Loans with an allowance:
  One-to-four family residential:
      Owner occupied486 533 12 
      Non-owner occupied512 512 1 
Total998 1,045 13 
Total impaired loans:
  One-to-four family residential:
      Owner occupied660 708 12 
      Non-owner occupied700 700 1 
   Multifamily1,632 1,632 — 
   Commercial real estate45,542 45,542 — 
Total$48,534 $48,582 $13 
_________________ 

(1) Represents the loan balance less charge-offs.
(2) Contractual loan principal balance.

The following table presents the amortized cost basis of loans on nonaccrual status and loans 90 days or more past due and still accruing as of September 30, 2023:

September 30, 2023
Nonaccrual with No ACLNonaccrual with ACLTotal Nonaccrual90 Days or More Past Due and Still Accruing
(In thousands)
Consumer Loans$201 $— $201 $— 
Total $201 $— $201 $— 
The following table presents loans on nonaccrual status and loans 90 days or more past due and still accruing as of December 31, 2022:

December 31, 2022
Nonaccrual with No ALLLNonaccrual with ALLLTotal Nonaccrual90 Days or More Past Due and Still Accruing
(In thousands)
Consumer Loans$193 $— $193 $— 
Total $193 $— $193 $— 


The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the three and nine months ended September 30, 2022:

Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Average Recorded InvestmentInterest Income RecognizedAverage Recorded InvestmentInterest Income Recognized
(In thousands)
Loans with no related allowance:
   One-to-four family residential:
      Owner occupied$195 $3 $186 $10 
      Non-owner occupied774 11 843 33 
Multifamily1,647 17 1,238 52 
Commercial real estate42,882 513 39,992 1,471 
Total45,498 544 42,259 1,566 
Loans with an allowance:
   One-to-four family residential:
      Owner occupied489 7 491 21 
      Non-owner occupied515 9 517 27 
Total1,004 16 1,008 48 
Total impaired loans:
   One-to-four family residential:
      Owner occupied684 10 677 31 
      Non-owner occupied1,289 20 1,360 60 
Multifamily1,647 17 1,238 52 
Commercial real estate42,882 513 39,992 1,471 
Total$46,502 $560 $43,267 $1,614 
TDRs. On January 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326) which eliminated the accounting guidance for TDR for creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty. No loans to borrowers experiencing financial difficulty were modified in the three and nine months ended September 30, 2023. At September 30, 2022, the Company had no TDRs. TDRs that default after they have been modified are typically evaluated individually on a collateral basis.