| Loans Receivable and Allowance for Loan Losses | Loans Receivable and Allowance for Credit Losses Loans receivable by portfolio segment consisted of the following at September 30, 2024 and 2023 (dollars in thousands): 2024 2023 Mortgage loans: One- to four-family $ 299,123 $ 253,227 Multi-family 177,350 127,176 Commercial 599,219 568,265 Construction – custom and owner/builder 132,101 129,699 Construction – speculative one- to four-family 11,495 17,099 Construction – commercial 29,463 51,064 Construction – multi-family 28,401 57,140 Construction – land development 17,741 18,841 Land 29,366 26,726 Total mortgage loans 1,324,259 1,249,237 Consumer loans: Home equity and second mortgage 47,913 38,281 Other 3,129 2,772 Total consumer loans 51,042 41,053 Commercial loans: Commercial business 138,743 135,802 SBA Paycheck Protection Program ("PPP") 260 466 Total commercial loans 139,003 136,268 Total loans receivable 1,514,304 1,426,558 Less: Undisbursed portion of construction loans in process 69,878 103,194 Deferred loan origination fees, net 5,425 5,242 Allowance for credit losses 17,478 15,817 92,781 124,253 Loans receivable, net $ 1,421,523 $ 1,302,305 Loans receivable at September 30, 2024 and 2023 are reported net of unamortized discounts totaling $155,000 and $192,000, respectively. Significant Concentrations of Credit Risk Most of the Company’s lending activity is with customers located in the state of Washington and involves real estate. At September 30, 2024, the Company had $1,372,172,000 (including $69,878,000 of undisbursed construction loans in process) in loans secured by real estate, which represented 90.69% of total loans receivable. The real estate loan portfolio is primarily secured by one- to four-family properties, multi-family properties, land, and a variety of commercial real estate property types. At September 30, 2024, there were no concentrations of real estate loans to a specific industry or secured by a specific collateral type that equaled or exceeded 20% of the Company’s total loan portfolio, other than loans secured by one-to four-family properties. The ultimate collectability of a substantial portion of the loan portfolio is susceptible to changes in economic and market conditions in the region and the impact of those changes on the real estate market. The Company typically originates real estate loans with loan-to-value ratios of no greater than 85%. Collateral and/or guarantees are required for all loans. Related Party Loans Certain related parties of the Company, principally Bank directors and officers, are loan customers of the Bank in the ordinary course of business. Such related party loans were performing according to their repayment terms at September 30, 2024 and 2023. Activity in related party loans during the years ended September 30, 2024, 2023 and 2022 was as follows (dollars in thousands): 2024 2023 2022 Balance, beginning of year $ 102 $ 50 $ 466 New loans or borrowings 623 61 40 Repayments and reclassifications (198) (9) (456) Balance, end of year $ 527 $ 102 $ 50 Loan Segment Risk Characteristics The Company believes that its loan classes are the same as its loan segments. One- To Four-Family Residential Lending: The Company originates both fixed-rate and adjustable-rate loans secured by one- to four-family residences. A portion of the fixed-rate one- to four-family loans are sold in the secondary market for asset/liability management purposes and to generate non-interest income. The Company’s lending policies generally limit the maximum loan-to-value on one- to four-family loans to 85% of the lesser of the appraised value or the purchase price. However, the Company usually obtains private mortgage insurance on the portion of the principal amount that exceeds 80% of the appraised value of the property. Multi-Family Lending : The Company originates loans secured by multi-family dwelling units (more than four units). Multi-family lending generally affords the Company an opportunity to receive interest at rates higher than those generally available from one- to four-family residential lending. However, loans secured by multi-family properties usually are greater in amount, more difficult to evaluate and monitor and, therefore, involve a greater degree of risk than one- to four-family residential mortgage loans. Because payments on loans secured by multi-family properties are often dependent on the successful operation and management of the properties, repayment of such loans may be affected by adverse conditions in the real estate market or economy. The Company attempts to minimize these risks by scrutinizing the financial condition of the borrower, the quality of the collateral and the management of the property securing the loan. Commercial Mortgage Lending : The Company originates commercial real estate loans secured by properties such as office buildings, retail/wholesale facilities, motels, restaurants, mini-storage facilities and other commercial properties. Commercial real estate lending generally affords the Company an opportunity to receive interest at higher rates than those available from one- to four-family residential lending. However, loans secured by such properties usually are greater in amount, more difficult to evaluate and monitor and, therefore, involve a greater degree of risk than one- to four-family residential mortgage loans. Because payments on loans secured by commercial properties are often dependent on the successful operation and management of the properties, repayment of these loans may be affected by adverse conditions in the real estate market or economy. The Company attempts to mitigate these risks by generally limiting the maximum loan-to-value ratio to 80% and scrutinizing the financial condition of the borrower, the quality of the collateral and the management of the property securing the loan. Construction Lending : The Company currently originates the following types of construction loans: custom construction loans, owner/builder construction loans, speculative construction loans, commercial real estate construction loans, multi-family construction loans and land development loans. Construction lending affords the Company the opportunity to achieve higher interest rates and fees with shorter terms to maturity than does its single-family permanent mortgage lending. Construction lending, however, is generally considered to involve a higher degree of risk than one- to four family residential lending because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost of the project. The nature of these loans is such that they are generally more difficult to evaluate and monitor. If the estimated cost of construction proves to be inaccurate, the Company may be required to advance funds beyond the amount originally committed to complete the project. If the estimate of value upon completion proves to be inaccurate, the Company may be confronted with a project whose value is insufficient to assure full repayment, and the Company may incur a loss. Projects may also be jeopardized by disagreements between borrowers and builders and by the failure of builders to pay subcontractors. Loans to construct homes for which no purchaser has been identified carry more risk, because the payoff for the loan depends on the builder’s ability to sell the property prior to the time that the construction loan is due. The Company attempts to mitigate these risks by adhering to its underwriting policies, disbursement procedures and monitoring practices. Construction Lending – Custom and Owner/Builder: Custom construction and owner/builder construction loans are originated to home owners and are typically refinanced into permanent loans at the completion of construction. Construction Lending – Speculative One- To Four-Family: Speculative one-to four-family construction loans are made to home builders and are termed “speculative,” because the home builder does not have, at the time of the loan origination, a signed contract with a home buyer who has a commitment for permanent financing with the Company or another lender for the finished home. The home buyer may be identified either during or after the construction period. Construction Lending – Commercial: Commercial construction loans are originated to construct properties such as office buildings, hotels, retail rental space and mini-storage facilities. Construction Lending – Multi-Family: Multi-family construction loans are originated to construct apartment buildings and condominium projects. Construction Lending – Land Development: Land development loans are originated to real estate developers for the purpose of developing residential subdivisions. The Company is currently originating land development loans on a limited basis. Land Lending : The Company originates loans for the acquisition of land upon which the purchaser can then build or make improvements necessary to build or to sell as improved lots. Loans secured by undeveloped land or improved lots involve greater risks than one- to four-family residential mortgage loans because these loans are more difficult to evaluate. If the estimate of value proves to be inaccurate, in the event of default or foreclosure, the Company may be confronted with a property value which is insufficient to assure full repayment. The Company attempts to minimize this risk by generally limiting the maximum loan-to-value ratio on land loans to 65%. Consumer Lending – Home Equity and Second Mortgage: The Company originates home equity lines of credit and second mortgage loans. Home equity lines of credit and second mortgage loans have a greater credit risk than one- to four-family residential mortgage loans because they are secured by mortgages subordinated to the existing first mortgage on the property, which may or may not be held by the Company. The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the collateral and the credit-worthiness of the borrower. Consumer Lending – Other: The Company originates other consumer loans, which include automobile loans, boat loans, motorcycle loans, recreational vehicle loans, savings account loans and unsecured loans. Other consumer loans generally have shorter terms to maturity than mortgage loans. Other consumer loans generally involve a greater degree of risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by rapidly depreciating assets such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the credit-worthiness of the borrower. Commercial Business Lending: The Company originates commercial business loans which, excluding SBA PPP loans, are generally secured by business equipment, accounts receivable, inventory and/or other property. The Company also generally obtains personal guarantees from the business owners based on a review of personal financial statements. Commercial business lending generally involves risks that are different from those associated with residential and commercial real estate lending. Real estate lending is generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral values, and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable and/or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment, because accounts receivable may be uncollectible and inventories and equipment may be obsolete or of limited use. Accordingly, the repayment of a commercial business loan depends primarily on the credit-worthiness of the borrower (and any guarantors), while the liquidation of collateral is a secondary and potentially insufficient source of repayment. The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the management of the business and the credit-worthiness of the borrowers and the guarantors. Credit Quality Indicators The Company uses credit risk grades which reflect the Company’s assessment of a loan’s risk or loss potential. The Company categorizes loans into risk grade 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 such as the estimated fair value of the collateral. The Company uses the following definitions for credit risk ratings as part of the on-going monitoring of the credit quality of its loan portfolio: Pass: Pass loans are defined as those loans that meet acceptable quality underwriting standards. Watch: Watch loans are defined as those loans that still exhibit acceptable quality but have some concerns that justify greater attention. If these concerns are not corrected, a potential for further adverse categorization exists. These concerns could relate to a specific condition peculiar to the borrower, its industry segment or the general economic environment. Special Mention: Special mention loans are defined as those loans deemed by management to have some potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the payment prospects of the loan. Substandard : Substandard loans are defined as those loans that are inadequately protected by the current net worth and paying capacity of the obligor, or of the collateral pledged. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. If the weakness or weaknesses are not corrected, there is the distinct possibility that some loss will be sustained. Doubtful: Loans in this classification have the weaknesses of substandard loans with the additional characteristic that the weaknesses make the collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. At September 30, 2024, one loan was classified as doubtful. At September 30, 2023, there were no loans classified as doubtful. Loss: Loans in this classification are considered uncollectible and of such little value that continuance as an asset is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this loan even though partial recovery may be realized in the future. At September 30, 2024 and 2023, there were no loans classified as loss. The following table sets forth the Company's loan portfolio at September 30, 2024 by risk attribute and year of origination as well as current period gross charge-offs (dollars in thousands): Term Loans Amortized Cost Basis by Origination Fiscal Year Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable One-to four-family Risk Rating Pass $ 12,941 $ 66,671 $ 113,834 $ 48,120 $ 19,053 $ 36,659 $ — $ 297,278 Watch — 1,796 — — — — — 1,796 Substandard — — — — — 49 — 49 Total one- to four-family $ 12,941 $ 68,467 $ 113,834 $ 48,120 $ 19,053 $ 36,708 $ — $ 299,123 Multi-family Risk Rating Pass $ 13,136 $ 19,440 $ 39,673 $ 33,144 $ 27,029 $ 43,759 $ 1,169 $ 177,350 Total multi-family $ 13,136 $ 19,440 $ 39,673 $ 33,144 $ 27,029 $ 43,759 $ 1,169 $ 177,350 Commercial real estate Risk Rating Pass $ 23,758 $ 73,005 $ 126,939 $ 91,035 $ 55,498 $ 194,273 $ 8,799 $ 573,307 Watch — 944 — — 4,201 10,548 — 15,693 Special Mention — — — — — 4,401 — 4,401 Substandard — — — — — 5,818 — 5,818 Total commercial real estate $ 23,758 $ 73,949 $ 126,939 $ 91,035 $ 59,699 $ 215,040 $ 8,799 $ 599,219 Construction-custom & owner/builder Risk Rating Pass $ 38,303 $ 29,159 $ 778 $ — $ — $ — $ — $ 68,240 Watch 221 3,239 5,848 2,861 429 436 — 13,034 Total construction-customer & owner/builder $ 38,524 $ 32,398 $ 6,626 $ 2,861 $ 429 $ 436 $ — $ 81,274 Construction-speculative one-to four-family Risk Rating Pass $ 5,039 $ 2,412 $ — $ — $ — $ — $ — $ 7,451 Total construction-speculative one-to four-family $ 5,039 $ 2,412 $ — $ — $ — $ — $ — $ 7,451 Construction-commercial Risk Rating Pass $ 6,006 $ 16,349 $ 1,457 $ — $ — $ — $ — $ 23,812 Total construction-commercial $ 6,006 $ 16,349 $ 1,457 $ — $ — $ — $ — $ 23,812 Term Loans Amortized Cost Basis by Origination Fiscal Year Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable Construction-multi-family Risk Rating Pass $ 588 $ 20,169 $ — $ — $ — $ — $ — $ 20,757 Total construction-multi-family $ 588 $ 20,169 $ — $ — $ — $ — $ — $ 20,757 Construction-land development Risk Rating Pass $ 1,673 $ 2,807 $ — $ — $ — $ — $ — $ 4,480 Watch $ — $ — $ 11,549 $ — $ — $ — $ — $ 11,549 Total construction-land development $ 1,673 $ 2,807 $ 11,549 $ — $ — $ — $ — $ 16,029 Land Risk Rating Pass $ 10,287 $ 4,828 $ 6,588 $ 4,004 $ 766 $ 1,954 $ 458 $ 28,885 Watch — — — — — 481 — 481 Total land $ 10,287 $ 4,828 $ 6,588 $ 4,004 $ 766 $ 2,435 $ 458 $ 29,366 Home equity Risk Rating Pass $ 5,820 $ 4,716 $ 1,990 $ 252 $ 573 $ 2,097 $ 31,766 $ 47,214 Substandard — — — — — 81 618 699 Total home equity $ 5,820 $ 4,716 $ 1,990 $ 252 $ 573 $ 2,178 $ 32,384 $ 47,913 Other consumer Risk Rating Pass $ 1,744 $ 441 $ 241 $ 57 $ 8 $ 501 $ 71 $ 3,063 Watch — — — — — 65 1 66 Total other consumer $ 1,744 $ 441 $ 241 $ 57 $ 8 $ 566 $ 72 $ 3,129 Current period gross write-offs $ 6 $ 1 $ — $ — $ — $ — $ 2 $ 9 Commercial business Risk Rating Pass $ 16,129 $ 19,910 $ 35,117 $ 8,588 $ 7,589 $ 4,775 $ 43,444 $ 135,552 Watch — — 202 36 696 6 180 1,120 Substandard — 1,352 — — — 517 — 1,869 Doubtful — 202 — — — — — 202 Total commercial business $ 16,129 $ 21,464 $ 35,319 $ 8,624 $ 8,285 $ 5,298 $ 43,624 $ 138,743 Current period gross write-offs $ — $ 79 $ — $ — $ — $ 13 $ — $ 92 SBA PPP Risk Rating Pass $ — $ — $ — $ 224 $ 36 $ — $ — $ 260 Total SBA PPP $ — $ — $ — $ 224 $ 36 $ — $ — $ 260 Term Loans Amortized Cost Basis by Origination Fiscal Year Type 2024 2023 2022 2021 2020 Prior Revolving Loans Total Loans Receivable Total loans receivable, gross (net of construction LIP) Risk Rating Pass $ 135,424 $ 259,907 $ 326,617 $ 185,424 $ 110,552 $ 284,018 $ 85,707 $ 1,387,649 Watch 221 5,979 17,599 2,897 5,326 11,536 181 43,739 Special Mention — — — — — 4,401 — 4,401 Substandard — 1,352 — — — 6,465 618 8,435 Doubtful — 202 — — — — — 202 Total loans receivable $ 135,645 $ 267,440 $ 344,216 $ 188,321 $ 115,878 $ 306,420 $ 86,506 $ 1,444,426 Current period gross charge-off $ 6 $ 80 $ — $ — $ — $ 13 $ 2 $ 101 Allowance for Credit Losses During the year ended September 30, 2024, the ACL on loans increased $1,661,000 due primarily to a provision for credit losses on loans of $1,254,000 and a $461,000 upward adjustment related to the adoption of ASU 2016-13. The provision for credit losses on loans recognized during the year ended September 30, 2024 was primarily due to growth in balances of collectively evaluated loans. The following table sets forth information for the year ended September 30, 2024 regarding activity in the ACL by portfolio segment (dollars in thousands): Beginning Impact of Adopting CECL (ASU 2016-13) Provision for (Recapture of) Credit Losses Charge- Recoveries Ending Mortgage loans: One- to four-family $ 2,417 $ (408) $ 580 $ — $ 43 $ 2,632 Multi-family 1,156 (120) 272 — — 1,308 Commercial 7,209 (494) 219 — — 6,934 Construction – custom and owner/builder 750 542 36 — — 1,328 Construction – speculative one- to four-family 148 (16) (4) — — 128 Construction – commercial 316 176 45 — — 537 Construction – multi-family 602 204 (350) — — 456 Construction – land development 274 25 36 — — 335 Land 406 318 69 — — 793 Consumer loans: Home equity and second mortgage 519 (243) 72 — — 348 Other 53 (7) 2 (9) — 39 Commercial business loans 1,967 484 277 (92) 4 2,640 Total $ 15,817 $ 461 $ 1,254 $ (101) $ 47 $ 17,478 The following table sets forth information for the year ended September 30, 2023 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands): Beginning Provision for (Recapture of) Loan Losses Charge- Recoveries Ending Mortgage loans: One- to four-family $ 1,658 $ 759 $ — $ — $ 2,417 Multi-family 855 301 — — 1,156 Commercial 6,682 527 — — 7,209 Construction – custom and owner/builder 675 75 — — 750 Construction – speculative one- to four-family 130 18 — — 148 Construction – commercial 343 (27) — — 316 Construction – multi-family 447 155 — — 602 Construction – land development 233 41 — — 274 Land 397 9 — — 406 Consumer loans: Home equity and second mortgage 440 79 — — 519 Other 42 14 (4) 1 53 Commercial business loans 1,801 181 (15) — 1,967 Total $ 13,703 $ 2,132 $ (19) $ 1 $ 15,817 The following table sets forth the information for the year ended September 30, 2022 regarding activity in the allowance for loan losses by portfolio (dollars in thousands): Beginning Provision for (Recapture of) Loan Losses Charge- Recoveries Ending Mortgage loans: One- to four-family $ 1,154 $ 504 $ — $ — $ 1,658 Multi-family 765 90 — — 855 Commercial 6,813 (131) — — 6,682 Construction – custom and owner/builder 644 31 — — 675 Construction – speculative one- to four-family 188 (58) — — 130 Construction – commercial 784 (441) — — 343 Construction – multi-family 436 11 — — 447 Construction – land development 124 109 — — 233 Land 470 (73) — — 397 Consumer loans: Home equity and second mortgage 528 (88) — — 440 Other 50 1 (10) 1 42 Commercial business loans 1,513 315 (49) 22 1,801 Total $ 13,469 $ 270 $ (59) $ 23 $ 13,703 The following table presents information on loans evaluated individually and collectively for impairment in the allowance for loan losses by portfolio segment at September 30, 2023 (dollars in thousands) prior to the adoption of ASU 2016-13: Allowance for Loan Losses Recorded Investment in Loans Individually Collectively Total Individually Collectively Total Mortgage loans: One- to four-family $ — $ 2,417 $ 2,417 $ 368 $ 252,859 $ 253,227 Multi-family — 1,156 1,156 — 127,176 127,176 Commercial — 7,209 7,209 2,973 565,292 568,265 Construction – custom and owner/ builder — 750 750 — 73,239 73,239 Construction – speculative one- to four-family — 148 148 — 9,361 9,361 Construction – commercial — 316 316 — 26,030 26,030 Construction – multi-family — 602 602 — 45,890 45,890 Construction – land development — 274 274 — 16,129 16,129 Land — 406 406 — 26,726 26,726 Consumer loans: Home equity and second mortgage — 519 519 382 37,899 38,281 Other — 53 53 — 2,772 2,772 Commercial business loans 123 1,844 1,967 286 135,516 135,802 SBA PPP loans — — — — 466 466 Total $ 123 $ 15,694 $ 15,817 $ 4,009 $ 1,319,355 $ 1,323,364 Non-Accrual Loans When a loan is 90 days delinquent the accrual of interest is generally discontinued and the loan is placed on non-accrual. All interest accrued but not collected for loans placed on non-accrual is reversed out of interest income. Generally, payments received on non-accrual loans are applied to reduce the outstanding principal balance of the loan. At times interest may be accounted for on a cash basis, depending on the collateral value and the borrower's payment history. A loan is generally not returned to accrual status until all delinquent principal, interest and late fees have been brought current and the borrower demonstrates repayment ability over a period of not less than six months and all taxes are current. The following table presents an analysis of loans by aging category and portfolio segment at September 30, 2024 (dollars in thousands): 30-59 60-89 Non- Past Due Total Current Total Mortgage loans: One- to four-family $ — $ — $ 49 $ — $ 49 $ 299,074 $ 299,123 Multi-family — — — — — 177,350 177,350 Commercial — — 1,158 — 1,158 598,061 599,219 Construction – custom and owner/ builder — — — — — 81,274 81,274 Construction – speculative one- to four-family — — — — — 7,451 7,451 Construction – commercial — — — — — 23,812 23,812 Construction – multi-family — — — — — 20,757 20,757 Construction – land development — — — — — 16,029 16,029 Land — — — — — 29,366 29,366 Consumer loans: Home equity and second mortgage — — 618 — 618 47,295 47,913 Other — 1 — — 1 3,128 3,129 Commercial business loans 424 169 2,060 — 2,653 136,090 138,743 SBA PPP loans — — — — — 260 260 Total $ 424 $ 170 $ 3,885 $ — $ 4,479 $ 1,439,947 $ 1,444,426 __________________ (1) Includes non-accrual loans past due 90 days or more and other loans classified as non-accrual. The following table presents an analysis of loans by aging category and portfolio segment at September 30, 2023 (dollars in thousands): 30-59 60-89 Non- Past Due Total Current Total Mortgage loans: One- to four-family $ — $ — $ 368 $ — $ 368 $ 252,859 $ 253,227 Multi-family — — — — — 127,176 127,176 Commercial — — 683 — 683 567,582 568,265 Construction – custom and owner/ builder 151 — — — 151 73,088 73,239 Construction – speculative one- to four-family — — — — — 9,361 9,361 Construction – commercial — — — — — 26,030 26,030 Construction – multi-family — — — — — 45,890 45,890 Construction – land development — — — — — 16,129 16,129 Land — — — — — 26,726 26,726 Consumer loans: — Home equity and second mortgage — — 177 — 177 38,104 38,281 Other — — — — — 2,772 2,772 Commercial business loans — — 286 — 286 135,516 135,802 SBA PPP loans — — — — — 466 466 Total $ 151 $ — $ 1,514 $ — $ 1,665 $ 1,321,699 $ 1,323,364 ___________________ (1) Includes non-accrual loans past due 90 days or more and other loans classified as non-accrual. At September 30, 2024, the Company had $1,825,000 of non-accrual loans with an ACL of $506,000 and $2,060,000 of non-accrual loans with no ACL. The following table is a summary of the amortized cost of collateral dependent non-accrual loans as of September 30, 2024 (in thousands): Recorded Investment Related ACL Mortgage loans: One- to four- family $ 49 $ — Commercial 1,158 — Construction - custom and owner/builder — — Consumer loans: Home equity and second mortgage 618 — Commercial business loans 2,060 506 Total $ 3,885 $ 506 The following table presents an analysis of loans by credit quality indicator and portfolio segment at September 30, 2023 (dollars in thousands): Loan Grades Pass Watch Special Mention Substandard Total Mortgage loans: One- to four-family $ 252,859 $ — $ — $ 368 $ 253,227 Multi-family 127,176 — — — 127,176 Commercial 551,669 11,143 — 5,453 568,265 Construction – custom and owner / builder 68,181 5,058 — — 73,239 Construction – speculative one- to four-family 9,361 — — — 9,361 Construction – commercial 25,063 967 — — 26,030 Construction – multi-family 45,890 — — — 45,890 Construction – land development 16,129 — — — 16,129 Land 26,226 500 — — 26,726 Consumer loans: Home equity and second mortgage 37,982 34 — 265 38,281 Other 2,716 56 — — 2,772 Commercial business loans 135,502 — — 300 135,802 SBA PPP loans 466 — — — 466 Total $ 1,299,220 $ 17,758 $ — $ 6,386 $ 1,323,364 Impaired Loans Prior to the adoption of CECL, a loan was considered impaired when it was probable that the Company would be unable to collect all amounts (principal and interest) when due according to the original contract terms of the loan agreement. Smaller balance homogeneous loans, such as residential mortgage loans and consumer loans, may be collectively evaluated for impairment. When a loan was identified as being impaired, the amount of the impairment was measured by using discounted cash flows, except when, as an alternative, the current estimated fair value of the collateral (reduced by estimated costs to sell, if applicable) or observable market price was used. The valuation of real estate is subjective in nature and may be adjusted in future periods because of changes in economic conditions. Management considers third-party appraisals, as well as independent fair market value assessments from realtors or persons involved in selling real estate, in determining the estimated fair value of particular properties. In addition, as certain of these third-party appraisals and independent fair market value assessments are only updated periodically, changes in the values of specific properties may have occurred subsequent to the most recent appraisals. Accordingly, the amounts of any such potential changes and any related adjustments are generally recorded at the time that such information is received. When the estimated net realizable value of the impaired loan is less that the recorded investment of the loan (including accrued interest and net deferred loan origination fees or costs), impairment is recognized by creating or adjusting an allocation of the allowance for credit losses, and uncollected accrued interest is reversed against interest income. If ultimate collection of the loan is in doubt, all cash receipts on impaired loans are applied to reduce the principal balance. The categories of non-accrual loans and impaired loans overlap, although they are not identical. The following table is a summary of information related to impaired loans by portfolio segment as of and for the year ended September 30, 2023 (dollars in thousands): September 30, 2023 For the Year Ended September 30, 2023 Recorded Unpaid Principal Related Average Interest Cash Basis With no related allowance recorded: Mortgage loans: One- to four-family $ 368 $ 412 $ — $ 378 $ 29 $ 29 Commercial 2,973 2,973 — 2,987 167 129 Land — — — 297 5 4 Consumer loans: Home equity and second mortgage 382 382 — 390 12 10 Other — — — 1 — — Commercial business loans 41 90 — 49 — — Subtotal 3,764 3,857 — 4,102 213 172 With an allowance recorded: Commercial business loans 245 245 123 247 — — Subtotal 245 245 123 247 — — Total: Mortgage loans: One- to four-family 368 412 — 378 29 29 Commercial 2,973 2,973 — 2,987 167 129 Land — — — 297 5 4 Consumer loans: Home equity and second mortgage 382 382 — 390 12 10 Other — — — 1 — — Commercial business loans 286 335 123 296 — — Total $ 4,009 $ 4,102 $ 123 $ 4,349 $ 213 $ 172 The following table is a summary of information related to impaired loans by portfolio segment as of and for the year ended September 30, 2022 (dollars in thousands): September 30, 2022 For the Year Ended September 30, 2022 Recorded Unpaid Principal Related Average Interest Cash Basis With no related allowance recorded: Mortgage loans: One- to four-family $ 388 $ 432 $ — $ 470 $ 31 $ 31 Commercial 2,988 2,988 — 3,041 152 123 Land 450 450 — 492 — — Consumer loans: Home equity and second mortgage 394 394 — 436 6 5 Other 3 3 — 7 — — Commercial business loans 59 108 — 121 — — Subtotal 4,282 4,375 — 4,567 189 159 With an allowance recorded: Consumer loans: Home equity and second mortgage — — — 145 — — Commercial business loans 250 250 127 268 — — Subtotal 250 250 127 413 — — Total: Mortgage loans: One- to four-family 388 432 — 470 31 31 Commercial 2,988 2,988 — 3,041 152 123 Land 450 450 — 492 — — Consumer loans: Home equity and second mortgage 394 394 — 581 6 5 Other 3 3 — 7 — — Commercial business loans 309 358 127 389 — — Total $ 4,532 $ 4,625 $ 127 $ 4,980 $ 189 $ 159 On October 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments - Credit Losses (ASU 2016-13). This ASU eliminated the accounting guidance for TDR loans 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 years ended September 30, 2024 and 2023. At September 30, 2023, the Company had $2.50 million of TDRs, all of which were paying as agreed. There were no defaults in these loans during the years ended September 30, 2024 and 2023. In accordance with the Company's policy guidelines, unsecured loans are generally charged-off when no payments have been received for three consecutive months unless an alternative action plan is in effect. The outstanding balance of a secured loan that is in excess of the net realizable value is generally charged-off if no payments are received for four or five consecutive months. However, charge-offs are postponed if alternative proposals to restructure, obtain additional guarantors, obtain additional assets as collateral or a pote |
