| 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, 2022 September 30, 2022 (Dollars in thousands) One- to four-family: Originated $ 4,007,596 $ 3,988,469 Correspondent purchased 2,353,335 2,201,886 Bulk purchased 145,209 147,939 Construction 70,869 66,164 Total 6,577,009 6,404,458 Commercial: Commercial real estate 833,444 745,301 Commercial and industrial 88,327 79,981 Construction 188,516 141,062 Total 1,110,287 966,344 Consumer: Home equity 95,352 92,203 Other 9,022 8,665 Total 104,374 100,868 Total loans receivable 7,791,670 7,471,670 Less: ACL 19,189 16,371 Deferred loan fees/discounts 30,513 29,736 Premiums/deferred costs (41,390) (38,645) $ 7,783,358 $ 7,464,208 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 geographic concentrations of these loans in Kansas, Missouri, and Texas. 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. 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 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. 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 commercial and industrial loans. As a result of these additional complexities, variables and risks, commercial and industrial loans require more thorough underwriting and servicing than other types of loans. Consumer loans - The Bank offers a variety of consumer loans, the majority of which are home equity loans and 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 tables set 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, 2022 and September 30, 2022, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off. December 31, 2022 Current Fiscal Fiscal Fiscal Fiscal Revolving Fiscal Year Year Year Year Prior Line of Year 2022 2021 2020 2019 Years Credit Total (Dollars in thousands) One- to four-family: Originated Pass $ 100,424 $ 569,293 $ 923,122 $ 610,572 $ 274,505 $ 1,562,821 $ — $ 4,040,737 Special Mention 185 298 583 1,372 1,282 9,037 — 12,757 Substandard — 158 — 277 736 7,641 — 8,812 Correspondent purchased Pass 146,776 538,663 643,407 268,000 67,808 709,034 — 2,373,688 Special Mention — — 754 — 354 2,589 — 3,697 Substandard — — — — 168 5,655 — 5,823 Bulk purchased Pass — — — — — 142,131 — 142,131 Special Mention — — — — — — — — Substandard — — — — — 3,602 — 3,602 247,385 1,108,412 1,567,866 880,221 344,853 2,442,510 — 6,591,247 Commercial: Commercial real estate Pass 178,810 295,202 218,991 116,758 84,688 85,818 8,598 988,865 Special Mention — 28,435 — — — — — 28,435 Substandard — — — 594 219 267 — 1,080 Commercial and industrial Pass 10,927 26,299 15,764 4,980 3,487 1,342 24,205 87,004 Special Mention — — — — — — — — Substandard — 19 — 73 — 83 1,158 1,333 189,737 349,955 234,755 122,405 88,394 87,510 33,961 1,106,717 Consumer: Home equity Pass 1,376 6,232 2,270 1,382 935 2,845 79,993 95,033 Special Mention — — — — — — 228 228 Substandard — — — — 18 15 267 300 Other Pass 1,463 3,810 1,681 715 308 705 317 8,999 Special Mention — — — 6 — — — 6 Substandard — 3 13 1 — — — 17 2,839 10,045 3,964 2,104 1,261 3,565 80,805 104,583 Total $ 439,961 $ 1,468,412 $ 1,806,585 $ 1,004,730 $ 434,508 $ 2,533,585 $ 114,766 $ 7,802,547 September 30, 2022 Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Year Year Year Year Year Prior Line of 2022 2021 2020 2019 2018 Years Credit Total (Dollars in thousands) One- to four-family: Originated Pass $ 563,460 $ 930,019 $ 624,274 $ 281,342 $ 212,037 $ 1,406,444 $ — $ 4,017,576 Special Mention 47 457 1,111 518 428 7,641 — 10,202 Substandard 158 — 278 1,106 256 8,968 — 10,766 Correspondent purchased Pass 494,854 651,363 273,626 69,752 104,150 627,390 — 2,221,135 Special Mention — — — 355 1,186 1,197 — 2,738 Substandard — — — 168 513 4,783 — 5,464 Bulk purchased Pass — — — — — 144,840 — 144,840 Special Mention — — — — — — — — Substandard — — — — — 3,637 — 3,637 1,058,519 1,581,839 899,289 353,241 318,570 2,204,900 — 6,416,358 Commercial: Commercial real estate Pass 366,794 221,001 111,689 86,456 41,322 46,383 7,436 881,081 Special Mention 565 — — — — — — 565 Substandard 436 — 594 221 239 30 — 1,520 Commercial and industrial Pass 38,442 17,453 5,708 4,212 919 630 11,413 78,777 Special Mention — — — — — — — — Substandard — — 78 — 73 10 1,052 1,213 406,237 238,454 118,069 90,889 42,553 47,053 19,901 963,156 Consumer: Home equity Pass 6,447 2,375 1,486 982 992 2,020 77,448 91,750 Special Mention — 66 — — — — 233 299 Substandard — — — 18 — 3 331 352 Other Pass 4,207 1,977 843 408 651 201 369 8,656 Special Mention — — 7 — — — — 7 Substandard 1 — — — — — — 1 10,655 4,418 2,336 1,408 1,643 2,224 78,381 101,065 Total $ 1,475,411 $ 1,824,711 $ 1,019,694 $ 445,538 $ 362,766 $ 2,254,177 $ 98,282 $ 7,480,579 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, 2022 Current Fiscal Fiscal Fiscal Fiscal Revolving Fiscal Year Year Year Year Prior Line of Year 2022 2021 2020 2019 Years Credit Total (Dollars in thousands) One- to four-family: Originated Current $ 100,609 $ 569,591 $ 923,705 $ 611,905 $ 276,447 $ 1,574,314 $ — $ 4,056,571 30-89 — — — 316 76 4,309 — 4,701 90+/FC — 158 — — — 876 — 1,034 Correspondent purchased Current 146,776 538,663 644,161 268,000 68,162 712,039 — 2,377,801 30-89 — — — — — 1,230 — 1,230 90+/FC — — — — 168 4,009 — 4,177 Bulk purchased Current — — — — — 143,359 — 143,359 30-89 — — — — — 865 — 865 90+/FC — — — — — 1,509 — 1,509 247,385 1,108,412 1,567,866 880,221 344,853 2,442,510 — 6,591,247 Commercial: Commercial real estate Current 178,810 323,509 218,991 116,758 84,688 85,796 8,598 1,017,150 30-89 — 128 — — — 33 — 161 90+/FC — — — 594 219 256 — 1,069 Commercial and industrial Current 10,927 26,299 15,764 5,053 3,487 1,340 25,354 88,224 30-89 — 19 — — — 2 9 30 90+/FC — — — — — 83 — 83 189,737 349,955 234,755 122,405 88,394 87,510 33,961 1,106,717 Consumer: Home equity Current 1,376 6,232 2,270 1,325 935 2,846 80,022 95,006 30-89 — — — 57 18 2 369 446 90+/FC — — — — — 12 97 109 Other Current 1,463 3,795 1,681 715 297 558 317 8,826 30-89 — 15 — 6 11 147 — 179 90+/FC — 3 13 1 — — — 17 2,839 10,045 3,964 2,104 1,261 3,565 80,805 104,583 Total $ 439,961 $ 1,468,412 $ 1,806,585 $ 1,004,730 $ 434,508 $ 2,533,585 $ 114,766 $ 7,802,547 September 30, 2022 Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Year Year Year Year Year Prior Line of 2022 2021 2020 2019 2018 Years Credit Total (Dollars in thousands) One- to four-family: Originated Current $ 563,507 $ 930,476 $ 625,110 $ 282,598 $ 212,549 $ 1,417,268 $ — $ 4,031,508 30-89 — — 553 — 64 3,506 — 4,123 90+/FC 158 — — 368 108 2,279 — 2,913 Correspondent purchased Current 494,854 651,363 273,626 70,107 105,336 629,150 — 2,224,436 30-89 — — — — — 1,117 — 1,117 90+/FC — — — 168 513 3,103 — 3,784 Bulk purchased Current — — — — — 146,399 — 146,399 30-89 — — — — — 921 — 921 90+/FC — — — — — 1,157 — 1,157 1,058,519 1,581,839 899,289 353,241 318,570 2,204,900 — 6,416,358 Commercial: Commercial real estate Current 367,795 221,001 111,689 86,456 41,322 46,383 7,436 882,082 30-89 — — — — — — — — 90+/FC — — 594 221 239 30 — 1,084 Commercial and industrial Current 38,442 17,453 5,786 4,212 919 630 12,465 79,907 30-89 — — — — — — — — 90+/FC — — — — 73 10 — 83 406,237 238,454 118,069 90,889 42,553 47,053 19,901 963,156 Consumer: Home equity Current 6,447 2,441 1,429 1,000 980 1,999 77,633 91,929 30-89 — — 57 — 12 24 226 319 90+/FC — — — — — — 153 153 Other Current 4,205 1,964 844 404 651 201 368 8,637 30-89 2 13 6 4 — — 1 26 90+/FC 1 — — — — — — 1 10,655 4,418 2,336 1,408 1,643 2,224 78,381 101,065 Total $ 1,475,411 $ 1,824,711 $ 1,019,694 $ 445,538 $ 362,766 $ 2,254,177 $ 98,282 $ 7,480,579 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, 2022 and September 30, 2022, all loans 90 or more days delinquent were on nonaccrual status. December 31, 2022 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 $ 4,701 $ 1,034 $ 5,735 $ 4,056,571 $ 4,062,306 Correspondent purchased 1,230 4,177 5,407 2,377,801 2,383,208 Bulk purchased 865 1,509 2,374 143,359 145,733 Commercial: Commercial real estate 161 1,069 1,230 1,017,150 1,018,380 Commercial and industrial 30 83 113 88,224 88,337 Consumer: Home equity 446 109 555 95,006 95,561 Other 179 17 196 8,826 9,022 $ 7,612 $ 7,998 $ 15,610 $ 7,786,937 $ 7,802,547 September 30, 2022 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 $ 4,123 $ 2,913 $ 7,036 $ 4,031,508 $ 4,038,544 Correspondent purchased 1,117 3,784 4,901 2,224,436 2,229,337 Bulk purchased 921 1,157 2,078 146,399 148,477 Commercial: Commercial real estate — 1,084 1,084 882,082 883,166 Commercial and industrial — 83 83 79,907 79,990 Consumer: Home equity 319 153 472 91,929 92,401 Other 26 1 27 8,637 8,664 $ 6,506 $ 9,175 $ 15,681 $ 7,464,898 $ 7,480,579 The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of December 31, 2022 and September 30, 2022 was $1.5 million and $2.0 million, 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 $182 thousand at December 31, 2022 and $328 thousand at September 30, 2022. The following table presents the amortized cost at December 31, 2022 and September 30, 2022, 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, 2022 September 30, 2022 Nonaccrual Loans Nonaccrual Loans with No ACL Nonaccrual Loans Nonaccrual Loans with No ACL (Dollars in thousands) One- to four-family: Originated $ 1,253 $ 379 $ 3,135 $ 1,018 Correspondent purchased 4,177 304 3,784 304 Bulk purchased 1,509 987 1,157 630 Commercial: Commercial real estate 1,080 446 1,084 449 Commercial and industrial 156 156 161 161 Consumer: Home equity 109 — 172 19 Other 17 — 1 — $ 8,301 $ 2,272 $ 9,494 $ 2,581 TDRs - The following table presents the amortized cost prior to restructuring and immediately after restructuring in all loans restructured during the periods presented. This table does 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, 2022 December 31, 2021 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 Correspondent purchased — — — — — — Bulk purchased — — — — — — Commercial: Commercial real estate — — — — — — Commercial and industrial — — — — — — Consumer: Home equity — — — — — — Other — — — — — — — $ — $ — 1 $ 24 $ 24 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, 2022 December 31, 2021 Number of Amortized Number of Amortized Contracts Cost Contracts Cost (Dollars in thousands) One- to four-family: Originated 1 $ 8 1 $ 684 Correspondent purchased — — — — Bulk purchased — — — — Commercial: Commercial real estate — — — — Commercial and industrial — — — — Consumer: Home equity — — — — Other — — — — 1 $ 8 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, 2022 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 2,066 $ 2,734 $ 206 $ 5,006 $ 11,120 $ 245 $ 16,371 Charge-offs — — — — — (4) (4) Recoveries 1 — — 1 — 1 2 Provision for credit losses 92 253 10 355 2,464 1 2,820 Ending balance $ 2,159 $ 2,987 $ 216 $ 5,362 $ 13,584 $ 243 $ 19,189 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 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, 2022. The key assumptions utilized in estimating the Company's ACL at December 31, 2022 are discussed below. • Economic Forecast - Management considered several economic forecasts provided by a third party and selected an economic forecast that was the most appropriate considering the facts and circumstances at December 31, 2022. The forecasted economic indices applied to the model at December 31, 2022 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, 2022 was the national unemployment rate. The forecasted national unemployment rate in the economic scenario selected by management at December 31, 2022 had the national unemployment rate gradually increasing to 4.2% by December 31, 2023 which was the end of our four quarter forecast time period. • Forecast and reversion to mean time periods - The forecasted time period and the reversion to mean time period were each four quarters for all of the economic indices at December 31, 2022. • Prepayment and curtailment assumptions - The assumptions used at December 31, 2022 were generally based on actual historical prepayment and curtailment speeds for each respective loan pool in the model. During the current quarter, there was a slowdown in portfolio prepayment speeds which reduced the projected prepayment speeds used in the model for generally all loan categories. • Qualitative factors - The qualitative factors applied by management at December 31, 2022 included the following: ◦ The economic uncertainties related to the unemployment rate, the labor force composition, and the labor participation rate that are not captured in the economic forecasts; and ◦ Other management considerations related to commercial real estate loans that were not captured via the model assumptions, such as the balance and trending of large dollar commercial real estate loans. 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. At December 31, 2022 and September 30, 2022, the Bank's off-balance sheet credit exposures totaled $1.07 billion and $992.6 million, respectively. For the Three Months Ended December 31, 2022 December 31, 2021 (Dollars in thousands) Beginning balance $ 4,751 $ 5,743 Provision for credit losses 840 (1,120) Ending balance $ 5,591 $ 4,623 |
