| Loans Receivable And Allowance For Credit Losses | LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES Loans receivable, net at the dates presented is summarized as follows: December 31, 2021 September 30, 2021 (Dollars in thousands) One- to four-family: Originated $ 3,941,568 $ 3,956,064 Correspondent purchased 1,991,944 2,003,477 Bulk purchased 165,339 173,662 Construction 47,508 39,142 Total 6,146,359 6,172,345 Commercial: Commercial real estate 687,518 676,908 Commercial and industrial 76,254 66,497 Construction 105,702 85,963 Total 869,474 829,368 Consumer: Home equity 84,400 86,274 Other 7,825 8,086 Total 92,225 94,360 Total loans receivable 7,108,058 7,096,073 Less: ACL 17,535 19,823 Discounts/unearned loan fees 29,363 29,556 Premiums/deferred costs (34,445) (34,448) $ 7,095,605 $ 7,081,142 Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business. The Bank also originates consumer loans primarily secured by one- to four-family residential properties and originates and participates in commercial loans. The Bank has a loan concentration in one- to four-family loans and a geographic concentration of these loans in Kansas and Missouri. One- to four-family loans - Full documentation to support an applicant's credit and income, and sufficient funds to cover all applicable fees and reserves at closing, are required on all loans. Generally, loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the Consumer Financial Protection Bureau ("CFPB"). Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function. The underwriting standards for loans purchased from correspondent lenders are generally similar to the Bank's internal underwriting standards. The underwriting of loans purchased from correspondent lenders on a loan-by-loan basis is performed by the Bank's underwriters. The Bank also originates owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate. Construction draw requests and the supporting documentation are reviewed and approved by designated personnel. The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided. Commercial loans - The Bank's commercial real estate and commercial construction loans are originated by the Bank or are in participation with a lead bank. When underwriting a commercial real estate or commercial construction loan, several factors are considered, such as the income producing potential of the property, cash equity provided by the borrower, the financial strength of the borrower, managerial expertise of the borrower or tenant, feasibility studies, lending experience with the borrower and the marketability of the property. For commercial real estate and commercial construction participation loans, the Bank performs the same underwriting procedures as if the loan was being originated by the Bank. At the time of origination, loan-to-value ("LTV") ratios on commercial real estate loans generally do not exceed 85% of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.15. For commercial construction loans, LTV ratios generally do not exceed 80% of the projected appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.15, but it applies to the projected cash flows, and the borrower must have successful experience with the construction and operation of properties similar to the subject property. Appraisals on properties securing these loans are performed by independent state certified fee appraisers. The Bank's commercial and industrial loans are generally made in the Bank's market areas and are underwritten on the basis of the borrower's ability to service the debt from income. With the exception of Paycheck Protection Program ("PPP") loans, which are unsecured but are generally guaranteed by the U.S. Small Business Administration, working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets. In general, commercial and industrial loans involve more credit risk than commercial real estate loans due to the type of collateral securing these loans. As a result of these additional complexities, variables and risks, these loans require more thorough underwriting and servicing than other types of loans. Consumer loans - The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, vehicle loans, and loans secured by deposits. The Bank also originates a very limited amount of unsecured consumer loans. The majority of the consumer loan portfolio is comprised of home equity lines of credit for which the Bank also has the first mortgage or the home equity line of credit is in the first lien position. The underwriting standards for consumer loans include a determination of an applicant's payment history on other debts and an assessment of an applicant's ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of an applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security in relation to the proposed loan amount. Credit Quality Indicators - Based on the Bank's lending emphasis and underwriting standards, management has segmented the loan portfolio into three segments: (1) one- to four-family; (2) consumer; and (3) commercial. These segments are further divided into classes for purposes of providing disaggregated credit quality information about the loan portfolio. The classes are: one- to four-family - originated, one- to four-family - correspondent purchased, one- to four-family - bulk purchased, consumer - home equity, consumer - other, commercial - commercial real estate, and commercial - commercial and industrial. One- to four-family construction loans are included in the originated class and commercial construction loans are included in the commercial real estate class. As part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators including trends related to loan classification and delinquency status. Loan Classification - In accordance with the Bank's asset classification policy, management regularly reviews the problem loans in the Bank's portfolio to determine whether any loans require classification. Loan classifications are defined as follows: • Special mention - These loans are performing loans on which known information about the collateral pledged or the possible credit problems of the borrower(s) have caused management to have doubts as to the ability of the borrower(s) to comply with present loan repayment terms and which may result in the future inclusion of such loans in the nonaccrual loan categories. • Substandard - A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans include those characterized by the distinct possibility the Bank will sustain some loss if the deficiencies are not corrected. • Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts and conditions and values highly questionable and improbable. • Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as assets on the books is not warranted. The following table sets forth, as of the dates indicated, the amortized cost of loans by class of financing receivable, year of origination or most recent credit decision, and loan classification. All revolving lines of credit are presented separately, regardless of origination year. Loans classified as doubtful or loss are individually evaluated for loss. At December 31, 2021 and September 30, 2021, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off. December 31, 2021 Current Fiscal Fiscal Fiscal Fiscal Revolving Fiscal Year Year Year Year Prior Line of Year 2021 2020 2019 2018 Years Credit Total (Dollars in thousands) One- to four-family: Originated Pass $ 153,605 $ 953,530 $ 679,862 $ 309,547 $ 238,567 $ 1,616,383 $ — $ 3,951,494 Special Mention — 280 441 489 674 7,502 — 9,386 Substandard — — 965 862 151 10,421 — 12,399 Correspondent purchased Pass 64,897 682,510 309,379 81,155 125,506 743,060 — 2,006,507 Special Mention — — — 353 517 2,706 — 3,576 Substandard — — — 169 — 4,917 — 5,086 Bulk purchased Pass — — — — — 161,842 — 161,842 Special Mention — — — — — — — — Substandard — — — — — 4,154 — 4,154 218,502 1,636,320 990,647 392,575 365,415 2,550,985 — 6,154,444 Commercial: Commercial real estate Pass 38,103 276,050 149,120 94,674 58,672 117,858 6,057 740,534 Special Mention — 47,093 — — — — — 47,093 Substandard — 944 594 225 662 32 — 2,457 Commercial and industrial Pass 18,238 27,849 9,012 6,422 1,683 1,499 10,651 75,354 Special Mention — — — — — — — — Substandard — — — — 86 38 786 910 56,341 351,936 158,726 101,321 61,103 119,427 17,494 866,348 Consumer: Home equity Pass 347 3,143 1,857 1,241 1,287 2,561 73,106 83,542 Special Mention — — — 56 — — 265 321 Substandard — — 59 — — 85 521 665 Other Pass 820 2,964 1,374 895 854 521 381 7,809 Special Mention — — — — — — — — Substandard — — — 7 1 3 — 11 1,167 6,107 3,290 2,199 2,142 3,170 74,273 92,348 Total $ 276,010 $ 1,994,363 $ 1,152,663 $ 496,095 $ 428,660 $ 2,673,582 $ 91,767 $ 7,113,140 September 30, 2021 Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Year Year Year Year Year Prior Line of 2021 2020 2019 2018 2017 Years Credit Total (Dollars in thousands) One- to four-family: Originated Pass $ 958,080 $ 705,561 $ 326,156 $ 250,846 $ 281,104 $ 1,434,455 $ — $ 3,956,202 Special Mention 402 443 501 678 237 7,805 — 10,066 Substandard — 966 867 51 192 11,192 — 13,268 Correspondent purchased Pass 630,977 334,042 88,057 136,572 162,938 664,530 — 2,017,116 Special Mention 760 — 356 — — 3,160 — 4,276 Substandard — — 169 504 — 4,527 — 5,200 Bulk purchased Pass — — — — — 169,519 — 169,519 Special Mention — — — — — — — — Substandard — — — — — 4,848 — 4,848 1,590,219 1,041,012 416,106 388,651 444,471 2,300,036 — 6,180,495 Commercial: Commercial real estate Pass 272,329 149,244 94,972 61,214 38,962 35,591 5,231 657,543 Special Mention 50,352 — — — — 49,369 — 99,721 Substandard 810 627 225 669 — 34 — 2,365 Commercial and industrial Pass 32,651 10,168 6,988 2,213 1,155 595 11,709 65,479 Special Mention — — — — — — — — Substandard — — — 86 48 — 765 899 356,142 160,039 102,185 64,182 40,165 85,589 17,705 826,007 Consumer: Home equity Pass 3,295 2,218 1,428 1,563 536 2,473 74,036 85,549 Special Mention — — 37 12 — — 82 131 Substandard — 60 — — — 9 636 705 Other Pass 3,491 1,631 1,086 944 465 105 339 8,061 Special Mention — — 4 — — — — 4 Substandard — 3 6 1 3 — — 13 6,786 3,912 2,561 2,520 1,004 2,587 75,093 94,463 Total $ 1,953,147 $ 1,204,963 $ 520,852 $ 455,353 $ 485,640 $ 2,388,212 $ 92,798 $ 7,100,965 Delinquency Status - The following tables set forth, as of the dates indicated, the amortized cost of current loans, loans 30 to 89 days delinquent, and loans 90 or more days delinquent or in foreclosure ("90+/FC"), by class of financing receivable and year of origination or most recent credit decision as of the dates indicated. All revolving lines of credit are presented separately, regardless of origination year. December 31, 2021 Current Fiscal Fiscal Fiscal Fiscal Revolving Fiscal Year Year Year Year Prior Line of Year 2021 2020 2019 2018 Years Credit Total (Dollars in thousands) One- to four-family: Originated Current $ 153,605 $ 953,810 $ 680,212 $ 309,531 $ 238,982 $ 1,626,212 $ — $ 3,962,352 30-89 — — 372 1,251 410 4,960 — 6,993 90+/FC — — 684 116 — 3,134 — 3,934 Correspondent purchased Current 64,897 681,753 309,379 81,508 124,031 745,230 — 2,006,798 30-89 — 757 — — 1,992 2,464 — 5,213 90+/FC — — — 169 — 2,989 — 3,158 Bulk purchased Current — — — — — 163,873 — 163,873 30-89 — — — — — 155 — 155 90+/FC — — — — — 1,968 — 1,968 218,502 1,636,320 990,647 392,575 365,415 2,550,985 — 6,154,444 Commercial: Commercial real estate Current 38,103 323,897 149,120 94,674 59,102 117,858 6,057 788,811 30-89 — 190 — — — 32 — 222 90+/FC — — 594 225 232 — — 1,051 Commercial and industrial Current 18,238 27,849 9,012 6,422 1,683 1,499 11,437 76,140 30-89 — — — — — — — — 90+/FC — — — — 86 38 — 124 56,341 351,936 158,726 101,321 61,103 119,427 17,494 866,348 Consumer: Home equity Current 347 3,143 1,857 1,297 1,287 2,559 73,423 83,913 30-89 — — — — — 7 142 149 90+/FC — — 59 — — 80 327 466 Other Current 820 2,961 1,365 895 854 518 381 7,794 30-89 — 3 9 — — 3 — 15 90+/FC — — — 7 1 3 — 11 1,167 6,107 3,290 2,199 2,142 3,170 74,273 92,348 Total $ 276,010 $ 1,994,363 $ 1,152,663 $ 496,095 $ 428,660 $ 2,673,582 $ 91,767 $ 7,113,140 September 30, 2021 Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Year Year Year Year Year Prior Line of 2021 2020 2019 2018 2017 Years Credit Total (Dollars in thousands) One- to four-family: Originated Current $ 958,482 $ 706,970 $ 327,408 $ 251,524 $ 281,341 $ 1,445,992 $ — $ 3,971,717 30-89 — — — 51 — 4,091 — 4,142 90+/FC — — 116 — 192 3,369 — 3,677 Correspondent purchased Current 630,977 334,042 88,413 136,572 162,017 668,685 — 2,020,706 30-89 760 — — — 921 948 — 2,629 90+/FC — — 169 504 — 2,584 — 3,257 Bulk purchased Current — — — — — 170,809 — 170,809 30-89 — — — — — 555 — 555 90+/FC — — — — — 3,003 — 3,003 1,590,219 1,041,012 416,106 388,651 444,471 2,300,036 — 6,180,495 Commercial: Commercial real estate Current 323,491 149,244 94,972 61,651 38,962 84,957 5,231 758,508 30-89 — — — — — 37 — 37 90+/FC — 627 225 232 — — — 1,084 Commercial and industrial Current 32,651 10,168 6,988 2,212 1,155 595 12,474 66,243 30-89 — — — — — — — — 90+/FC — — — 87 48 — — 135 356,142 160,039 102,185 64,182 40,165 85,589 17,705 826,007 Consumer: Home equity Current 3,295 2,218 1,465 1,575 536 2,357 73,958 85,404 30-89 — — — — — 121 375 496 90+/FC — 60 — — — 4 421 485 Other Current 3,491 1,631 1,088 944 465 105 339 8,063 30-89 — — 2 — — — — 2 90+/FC — 3 6 1 3 — — 13 6,786 3,912 2,561 2,520 1,004 2,587 75,093 94,463 Total $ 1,953,147 $ 1,204,963 $ 520,852 $ 455,353 $ 485,640 $ 2,388,212 $ 92,798 $ 7,100,965 Delinquent and Nonaccrual Loans - The following tables present the amortized cost, at the dates indicated, by class, of loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total loans. At December 31, 2021 and September 30, 2021, all loans 90 or more days delinquent were on nonaccrual status. December 31, 2021 90 or More Days Total Total 30 to 89 Days Delinquent or Delinquent Current Amortized Delinquent in Foreclosure Loans Loans Cost (Dollars in thousands) One- to four-family: Originated $ 6,993 $ 3,934 $ 10,927 $ 3,962,352 $ 3,973,279 Correspondent purchased 5,213 3,158 8,371 2,006,798 2,015,169 Bulk purchased 155 1,968 2,123 163,873 165,996 Commercial: Commercial real estate 222 1,051 1,273 788,811 790,084 Commercial and industrial — 124 124 76,140 76,264 Consumer: Home equity 149 466 615 83,913 84,528 Other 15 11 26 7,794 7,820 $ 12,747 $ 10,712 $ 23,459 $ 7,089,681 $ 7,113,140 September 30, 2021 90 or More Days Total Total 30 to 89 Days Delinquent or Delinquent Current Amortized Delinquent in Foreclosure Loans Loans Cost (Dollars in thousands) One- to four-family: Originated $ 4,142 $ 3,677 $ 7,819 $ 3,971,717 $ 3,979,536 Correspondent purchased 2,629 3,257 5,886 2,020,706 2,026,592 Bulk purchased 555 3,003 3,558 170,809 174,367 Commercial: Commercial real estate 37 1,084 1,121 758,508 759,629 Commercial and industrial — 135 135 66,243 66,378 Consumer: Home equity 496 485 981 85,404 86,385 Other 2 13 15 8,063 8,078 $ 7,861 $ 11,654 $ 19,515 $ 7,081,450 $ 7,100,965 The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of December 31, 2021 and September 30, 2021 was $845 thousand and $799 thousand, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the tables above. The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $319 thousand at December 31, 2021 and $170 thousand at September 30, 2021. The following table presents the amortized cost at December 31, 2021 and September 30, 2021, by class, of loans classified as nonaccrual. Additionally, the amortized cost of nonaccrual loans that had no related ACL is presented, all of which were individually evaluated for loss and any identified losses have been charged off. December 31, 2021 September 30, 2021 Nonaccrual Loans Nonaccrual Loans with No ACL Nonaccrual Loans Nonaccrual Loans with No ACL (Dollars in thousands) One- to four-family: Originated $ 4,385 $ 1,835 $ 4,965 $ 2,237 Correspondent purchased 3,158 307 3,257 307 Bulk purchased 1,968 1,062 3,134 1,564 Commercial: Commercial real estate 1,108 457 1,496 485 Commercial and industrial 124 124 134 86 Consumer: Home equity 466 83 494 84 Other 11 — 13 — $ 11,220 $ 3,868 $ 13,493 $ 4,763 Troubled Debt Restructurings ("TDRs") - The following tables present the amortized cost prior to restructuring and immediately after restructuring in all loans restructured during the periods presented. These tables do not reflect the amortized cost at the end of the periods indicated. Any increase in the amortized cost at the time of the restructuring was generally due to the capitalization of delinquent interest and/or escrow balances. For the Three Months Ended December 31, 2021 December 31, 2020 Number Pre- Post- Number Pre- Post- of Restructured Restructured of Restructured Restructured Contracts Outstanding Outstanding Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family: Originated 1 $ 24 $ 24 4 $ 647 $ 645 Correspondent purchased — — — — — — Bulk purchased — — — — — — Commercial: Commercial real estate — — — — — — Commercial and industrial — — — — — — Consumer: Home equity — — — — — — Other — — — — — — 1 $ 24 $ 24 4 $ 647 $ 645 The following table provides information on TDRs that became delinquent during the periods presented within 12 months after being restructured. For the Three Months Ended December 31, 2021 December 31, 2020 Number of Amortized Number of Recorded Contracts Cost Contracts Investment (Dollars in thousands) One- to four-family: Originated 1 $ 684 — $ — Correspondent purchased — — — — Bulk purchased — — — — Commercial: Commercial real estate — — — — Commercial and industrial — — — — Consumer: Home equity — — — — Other — — — — 1 $ 684 — $ — Allowance for Credit Losses - The following is a summary of ACL activity, by loan portfolio segment, for the periods presented. For the Three Months Ended December 31, 2021 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 1,612 $ 2,062 $ 304 $ 3,978 $ 15,652 $ 193 $ 19,823 Charge-offs (4) — — (4) (10) (1) (15) Recoveries 9 — — 9 36 1 46 Provision for credit losses 22 20 (36) 6 (2,325) — (2,319) Ending balance $ 1,639 $ 2,082 $ 268 $ 3,989 $ 13,353 $ 193 $ 17,535 For the Three Months Ended December 31, 2020 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 6,085 $ 2,691 $ 467 $ 9,243 $ 21,800 $ 484 $ 31,527 Adoption of CECL (4,452) (367) 436 (4,383) (193) (185) (4,761) Balance at October 1, 2020 1,633 2,324 903 4,860 21,607 299 26,766 Charge-offs (14) — — (14) (515) (3) (532) Recoveries 34 — — 34 12 22 68 Provision for credit losses (115) (566) (51) (732) 603 (48) (177) Ending balance $ 1,538 $ 1,758 $ 852 $ 4,148 $ 21,707 $ 270 $ 26,125 The key assumptions in the Company's ACL model include the economic forecast, the forecast and reversion to mean time periods, and prepayment and curtailment assumptions. Management also considered certain qualitative factors when evaluating the adequacy of the ACL at December 31, 2021. The key assumptions utilized in estimating the Company's ACL at December 31, 2021 are discussed below. • Economic Forecast - Management considered several economic forecasts provided by a third party and selected the economic forecast believed to be the most appropriate considering the facts and circumstances at December 31, 2021. The forecasted economic indices applied to the model at December 31, 2021 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S. gross domestic product. The economic index most impactful to all loan pools within the model at December 31, 2021 was the national unemployment rate. The forecast national unemployment rate in the economic scenario selected by management at December 31, 2021 had the national unemployment rate gradually declining to 3.5% by December 31, 2022 which was the end of our four quarter forecast time period. • Forecast and reversion to mean time period - The forecasted time period and the reversion to mean time period were each four quarters for all of the economic indices at December 31, 2021. • Prepayment and curtailment assumptions - The assumptions used at December 31, 2021 were generally based on actual historical prepayment and curtailment speeds for each respective loan pool in the model over the trailing 12 months. • Qualitative factors - The qualitative factors applied by management at December 31, 2021 included the following: ◦ The economic uncertainties related to (1) the job market, the labor force composition, the unemployment rate, and labor participation rate and how the significant federal assistance and other factors may be impacting those measures and (2) the unevenness of the recovery in certain industries in which the Bank has lending relationships; ◦ The balance and trending of large-dollar special mention commercial loans; and ◦ Coronavirus Disease 2019 ("COVID-19") loan modifications related to commercial real estate loans. The decrease in ACL during the current quarter was primarily a result of a negative provision for credit losses of $2.3 million. The negative provision for credit losses associated with the ACL was due primarily to a reduction in the large-dollar special mention commercial loan qualitative factor due to two large-dollar special mention commercial loans moving to the pass classification during the current quarter. Additionally, the economic uncertainty qualitative factor for commercial loans also decreased during the current quarter as economic conditions continued to improve for the industries related to this qualitative factor. Reserve for Off-Balance Sheet Credit Exposures - The following is a summary of the changes in reserve for off-balance sheet credit exposures during the periods indicated. The negative provision for credit losses in the current quarter was due primarily to improvements in economic conditions in certain industries in which the Bank has lending relationships. For the Three Months Ended For the Three Months Ended December 31, 2021 December 31, 2020 (Dollars in thousands) Beginning balance $ 5,743 Beginning balance $ — Provision for credit losses (1,120) Adoption of CECL 7,788 Ending balance $ 4,623 Balance at October 1, 2020 7,788 Provision for credit losses (1,355) Ending balance $ 6,433 |
