The Company was 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 September 30, 2022, borrowers had received forgiveness or had made payments on $355.9 million in PPP loans. The Company’s PPP loans outstanding, included in commercial and industrial loans in the table above, totaled $10.2 million and $140.4 million at September 30, 2022 and 2021, respectively.

As of September 30, 2022 and 2021, the Company was servicing approximately $246.0 million and $233.2 million, respectively, of loans for others. The Company had no loans held for sale as of September 30, 2022 and 2021. In the years ended September 30, 2022 and 2021, the Company sold approximately $80.3 million and $46.6 million, respectively, of loans and recognized gains on the sales of loans of $5.1 million and $1.3 million, respectively.

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 at September 30, 2022 and 2021 is as follows:

The Company has recorded an allowance for loan losses of $50 thousand and $0 related to these loans at September 30, 2022 and 2021, respectively.

The following table presents a summary of changes in accretable difference on purchased loans accounted for under ASC 310-30:

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 meeting the criteria above that are analyzed individually as part of the above described process are considered to be “pass” rated loans. Loans listed as “not rated” are homogenous residential and consumer type loans which are evaluated based on payment performance as previously disclosed in the aging of past due loans.

The following tables represent loans categorized by class and internally assigned risk grades.

The following table represents the aging of the recorded investment in past due and non-accrual loans as of September 30, 2022 and 2021 by portfolio segment:

(1)	Of the residential real estate non-accrual loans, $1,227 were not past due and $1,924 were greater than 89 days past due.

(2)	Multi-family non-accrual loans at September 30, 2022 were greater than 89 days past due.

(3)	Commercial real estate non-accrual loans at September 30, 2022 were greater than 89 days past due.

(4)	Commercial and industrial non-accrual loans at September 30, 2022 were greater than 89 days past due.

(5)	Purchased credit impaired loans at September 30, 2022 were greater than 89 days past due.


(in thousands)	Past Due and Non-Accrual
	30 - 59		60 - 89		Greater than					Total past		Purchased
	Days		Days		89 Days					due and		Credit				Total
September 30, 2021	Past Due		Past Due		Past Due		Non-accrual			Non-accrual		Impaired⁽⁴⁾		Current		Loans
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.

(4)	Of the total $10,241 purchased credit impaired loans, $2,519 were greater than 89 days past due.

The following table presents information related to impaired loans by portfolio segment as of and for the years ended September 30, 2022 and 2021:


	September 30, 2022
	Unpaid						Interest		Average
	Principal		Recorded		Allowance		Income		Recorded
(in thousands)	Balance		Investment		Allocated		Recognized		Investment
With no related allowance recorded:
Residential real estate	$	5,394	$	5,392	$	—	$	124	$	4,646
Multi-family		2,348		2,348		—		—		1,066
Commercial real estate		5,950		5,875		—		—		3,627
Commercial and industrial		908		907		—		77		389
Total	$	14,600	$	14,522	$	—	$	201	$	9,728


	September 30, 2021
	Unpaid						Interest		Average
	Principal		Recorded		Allowance for		Income		Recorded
(in thousands)	Balance		Investment		Loan Losses		Recognized		Investment
With no related allowance recorded:
Real estate:
Residential	$	7,382	$	7,198	$	—	$	103	$	4,994
Multi-family		382		458		—		7		177
Commercial		522		517		—		3		197
Commercial and industrial		535		500		—		—		173
Total	$	8,821	$	8,673	$	—	$	113	$	5,541

Accrual basis income recognized on impaired loans approximates cash basis income. The recorded investment in loans excludes accrued interest receivable due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs.

Troubled Debt Restructurings

A restructuring constitutes a troubled debt restructuring when the restructuring includes a concession by the Bank and the borrower is experiencing financial difficulty. In order to determine 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 on any of its debt in the foreseeable future without the modification. The Company has seven and six loans that are classified as a troubled debt restructuring at September 30, 2022 and 2021 with a total recorded investment of $2.3 million and $1.6 million, respectively.

The Company has not allocated any specific reserves for these loans at September 30, 2022 and 2021. The Company had no commitment to lend additional funds to these debtors at September 30, 2022 and 2021.

There are no troubled debt restructurings for which there was a payment default during 2022 and 2021 for loans that were modified during the twelve- month period prior to default. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

The following table presents loans modified as troubled debt restructurings that occurred during the year ending September 30, 2022:


		Pre-Modification		Post-Modification
		Outstanding		Outstanding
	Number of	Recorded		Recorded
(Dollars in thousands)	loans	Investment		Investment

Troubled Debt Restructurings:
Residential real estate	2	$	1,011	$	1,011

There was no increase in the allowance for loan losses and no charge-offs during the year ended September 30, 2022 for the troubled debt restructurings described above.

There were no new troubled debt restructurings recorded for the year ended September 30, 2021.

The following tables represent the activity in the allowance for loan losses by portfolio segment for the years ended September 30, 2022 and 2021:


	Year Ended September 30, 2022
							Commercial		Construction
	Residential		Multi-		Commercial		and		and Land
	Real Estate		Family		Real Estate		Industrial		Development		Consumer
	Loans		Loans		Loans		Loans		Loans		Loans		Total
(in thousands)
Allowance for loan losses:
Beginning Balance	$	4,155	$	2,433	$	1,884	$	79	$	—	$	1	$	8,552
Charge-offs		—		(66)		—		(92)		—		—		(158)
Recoveries		—		—		—		—		—		—		—
Provision (credit) for loan losses		(204)		1,941		1,823		774		115		1		4,450
Ending Balance	$	3,951	$	4,308	$	3,707	$	761	$	115	$	2	$	12,844


	Year Ended September 30, 2021
							Commercial		Construction
	Residential		Multi-		Commercial		and		and Land
	Real Estate		Family		Real Estate		Industrial		Development		Consumer
	Loans		Loans		Loans		Loans		Loans		Loans		Total
(in thousands)
Allowance for loan losses:
Beginning Balance	$	5,103	$	1,506	$	1,221	$	38	$	—	$	1	$	7,869
Charge-offs		(267)		(32)		(30)		—		—		—		(329)
Recoveries		—		—		—		12		—		—		12
Provision (credit) for loan losses		(681)		959		693		29		—		—		1,000
Ending Balance	$	4,155	$	2,433	$	1,884	$	79	$	—	$	1	$	8,552

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:


	September 30, 2022
							Commercial		Construction
	Residential		Multi-		Commercial		and		and Land
(in thousands)	Real Estate		Family		Real Estate		Industrial		Development		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		3,951		4,308		3,707		711		115		2		12,794
Purchased-credit impaired		—		—		—		50		—		—		50
Total allowance for loan losses	$	3,951	$	4,308	$	3,707	$	761	$	115	$	2	$	12,844
Loans:
Individually evaluated for impairment	$	5,392	$	2,348	$	5,875	$	907	$	—	$	—	$	14,522
Collectively evaluated for impairment		510,866		572,713		466,507		44,749		12,907		36		1,607,778
Purchased-credit impaired		—		—		602		629		—		—		1,231
Total loans held for investment	$	516,258	$	575,061	$	472,984	$	46,285	$	12,907	$	36	$	1,623,531


	September 30, 2021
							Commercial		Construction
	Residential		Multi-		Commercial		and			and Land
(in thousands)	Real Estate		Family		Real Estate		Industrial		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