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FAIR VALUE OF FINANCIAL INSTRUMENTS
 6 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS FAIR VALUES OF FINANCIAL INSTRUMENTS
Accounting Standards Codification ("ASC") 820, Fair Value Measurements defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system and requires disclosures about fair value measurement. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.

The fair value hierarchy is as follows:

Level 1 Inputs - Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access at measurement date.

Level 2 Inputs - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which significant assumptions are observable in the market.

Level 3 Inputs - Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

There were no transfers between levels of the fair value hierarchy at March 31, 2020 or September 30, 2019.
 
Debt Securities Available for Sale and Held to Maturity. Debt securities available for sale are recorded at fair value on a recurring basis and debt securities held to maturity are carried at amortized cost.
 
The fair values of debt securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or valuation based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which significant assumptions are observable in the market (Level 2 inputs). The Company considers these valuations supplied by a third-party provider, which utilizes several sources for valuing fixed-income securities. These sources include Interactive Data Corporation, Reuters, Standard and Poor’s, Bloomberg Financial Markets, Street Software Technology and the third-party provider’s own matrix and desk pricing. The Company, no less than annually, reviews the third-party provider’s methods and source’s methodology for reasonableness and to ensure an understanding of inputs utilized in determining fair value. Sources utilized by the third-party provider include but are not limited to pricing models that vary based on asset class and include available trade, bid, and other market information. This methodology includes but is not limited to broker quotes, proprietary models, descriptive terms and conditions databases, as well as extensive quality control programs. Monthly, the Company receives and compares prices provided by multiple securities dealers and pricing providers to validate the accuracy and reasonableness of prices received from the third-party provider; and our Investment Committee reviews mark-to-market changes in the securities portfolio for reasonableness.

Equity Securities. Marketable equity securities and certain non-marketable equity securities are recorded at fair value on a recurring basis. The fair values of marketable equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs).

The following tables summarize the fair values of debt securities available for sale and equity securities as they are measured at fair value on a recurring basis:
 Fair Value At March 31, 2020
(Dollars in Thousands)TotalLevel 1Level 2Level 3
Debt securities AFS    
SBA securities$173,246  $—  $173,246  $—  
Obligations of states and political subdivisions872  —  872  —  
Non-bank qualified obligations of states and political subdivisions346,170  —  346,170  —  
Asset-backed securities320,237  —  320,237  —  
Mortgage-backed securities355,094  —  355,094  —  
Total debt securities AFS$1,195,619  $—  $1,195,619  $—  
Common equities and mutual funds(1)
$2,899  $2,899  $—  $—  
Non-marketable equity securities(2)
$2,532  $—  $—  $—  
(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at March 31, 2020 and September 30, 2019.
(2) Consists of certain non-marketable equity securities that are measured at fair value using net asset value ("NAV") per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.
 Fair Value At September 30, 2019
(Dollars in Thousands)TotalLevel 1Level 2Level 3
Debt securities AFS    
SBA securities$185,982  $—  $185,982  $—  
Obligations of states and political subdivisions874  —  874  —  
Non-bank qualified obligations of states and political subdivisions400,557  —  400,557  —  
Asset-backed securities302,534  —  302,534  —  
Mortgage-backed securities382,546  —  382,546  —  
Total debt securities AFS$1,272,493  $—  $1,272,493  $—  
Common equities and mutual funds(1)
$2,606  $2,606  $—  $—  
Non-marketable equity securities(2)
$1,669  $—  $—  $—  
(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at March 31, 2020 and September 30, 2019.
(2) Consists of certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

Foreclosed Real Estate and Repossessed Assets. Real estate properties and repossessed assets are initially recorded at the fair value less selling costs at the date of foreclosure, establishing a new cost basis. The carrying amount represents the lower of the new cost basis or the fair value less selling costs of foreclosed assets that were measured at fair value subsequent to their initial classification as foreclosed assets.

Loans and Leases.  The Company does not record loans and leases at fair value on a recurring basis. However, if a loan or lease is considered impaired, an allowance for loan and lease losses is established. Once a loan or lease is identified as individually impaired, management measures impairment in accordance with ASC 310, Receivables. See Note 5. Loans and Leases, Net for further information.

The following table summarizes the assets of the Company that are measured at fair value in the Condensed Consolidated Statements of Financial Condition on a non-recurring basis:

 Fair Value At March 31, 2020
(Dollars in Thousands)TotalLevel 1Level 2Level 3
Impaired loans and leases, net    
Commercial finance$13,489  $—  $—  $13,489  
Total National Lending13,489  —  —  13,489  
Commercial real estate and operating85  —  —  85  
Total Community Banking85  —  —  85  
     Total impaired loans and leases, net13,574  —  —  13,574  
Foreclosed assets, net7,249  —  —  7,249  
Total$20,823  $—  $—  $20,823  

 Fair Value At September 30, 2019
(Dollars in Thousands)TotalLevel 1Level 2Level 3
Impaired loans and leases, net    
Commercial finance$8,707  $—  $—  $8,707  
Total National Lending8,707  —  —  8,707  
     Total impaired loans and leases, net8,707  —  —  8,707  
Foreclosed assets, net29,494  —  —  29,494  
Total$38,201  $—  $—  $38,201  
 Quantitative Information About Level 3 Fair Value Measurements
(Dollars in Thousands)Fair Value at
March 31, 2020		Fair Value at
September 30, 2019		Valuation
Technique		Unobservable InputRange of Inputs
Impaired loans and leases, net$13,574  8,707  Market approach
Appraised values(1)
4% - 10%
Foreclosed assets, net$7,249  29,494  Market approach
Appraised values(1)
4% - 30%
(1) The Company generally relies on external appraisers to develop this information. Management reduced the appraised value by estimating selling costs and other inputs in a range of 4% to 30%.

The following tables disclose the Company’s estimated fair value amounts of its financial instruments at the dates set forth below. It is management’s belief that the fair values presented below are reasonable based on the valuation techniques and data available to the Company at March 31, 2020 and September 30, 2019, as more fully described below. The operations of the Company are managed from a going concern basis and not a liquidation basis.  As a result, the ultimate value realized for the financial instruments presented could be substantially different when actually recognized over time through the normal course of operations. Additionally, a substantial portion of the Company’s inherent value is the Bank’s capitalization and franchise value. Neither of these components have been given consideration in the presentation of fair values below.

The following tables present the carrying amount and estimated fair value of the financial instruments held by the Company:
 March 31, 2020
(Dollars in Thousands)Carrying
Amount		Estimated
Fair Value		Level 1Level 2Level 3
Financial assets
Cash and cash equivalents$108,733  $108,733  $108,733  $—  $—  
Debt securities available for sale1,195,619  1,195,619  —  1,195,619  —  
Debt securities held to maturity114,857  114,405  —  114,405  —  
Common equities and mutual funds(1)
2,899  2,899  2,899  —  —  
Non-marketable equity securities(1)(2)
13,032  13,032  —  10,500  —  
Loans held for sale13,610  13,610  —  13,610  —  
Loans and leases receivable3,610,785  3,606,603  —  —  3,606,603  
Federal Home Loan Bank stock29,944  29,944  —  29,944  —  
Accrued interest receivable16,958  16,958  16,958  —  —  
Financial liabilities
Deposits3,962,404  3,966,232  3,363,025  603,207  —  
Overnight federal funds purchased717,000  717,000  717,000  —  —  
Federal Home Loan Bank advances110,000  112,122  —  112,122  —  
Other short- and long-term borrowings101,353  100,826  —  100,826  —  
Accrued interest payable3,607  3,607  3,607  —  —  
(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at March 31, 2020 and September 30, 2019.
(2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.
 September 30, 2019
(Dollars in Thousands)Carrying
Amount		Estimated
Fair Value		Level 1Level 2Level 3
Financial assets
Cash and cash equivalents$126,545  $126,545  $126,545  $—  $—  
Debt securities available for sale1,272,493  1,272,493  —  1,272,493  —  
Debt securities held to maturity134,764  133,470  —  133,470  —  
Common equities and mutual funds(1)
2,606  2,606  2,606  —  —  
Non-marketable equity securities(1)(2)
8,169  8,169  —  6,500  —  
Loans held for sale148,777  148,777  —  148,777  —  
Loans and leases receivable3,651,413  3,622,597  —  —  3,622,597  
Federal Home Loan Bank stock30,916  30,916  —  30,916  —  
Accrued interest receivable20,400  20,400  20,400  —  —  
Financial liabilities
Deposits4,337,005  4,338,510  2,920,516  1,417,994  —  
Overnight federal funds purchased642,000  642,000  642,000  —  —  
Federal Home Loan Bank advances110,000  110,691  —  110,691  —  
Other short- and long-term borrowings109,857  113,876  —  113,876  —  
Accrued interest payable9,414  9,414  9,414  —  —  
(1) Equity securities at fair value are included within other assets on the consolidated statement of financial condition at March 31, 2020 and September 30, 2019.
(2) Includes certain non-marketable equity securities that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

The following sets forth the methods and assumptions used in determining the fair value estimates for the Company’s financial instruments at March 31, 2020 and September 30, 2019.
 
CASH AND CASH EQUIVALENTS
The carrying amount of cash and short-term investments is assumed to approximate the fair value.
 
DEBT SECURITIES AVAILABLE FOR SALE AND EQUITY SECURITIES
Debt securities available for sale and equity securities are recorded at fair value on a recurring basis. Fair values for these investment securities are based on obtaining quoted prices on nationally recognized securities exchanges, or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. Non-marketable equity securities are measured at fair value using NAV per share (or its equivalent) as a practical expedient.

LOANS HELD FOR SALE
The carrying amount of loans held for sale is assumed to approximate the fair value.

LOANS AND LEASES, NET
The fair values of loans and leases were estimated using an exit price methodology. The exit price estimation of fair value is based on the present value of expected cash flows, which are based on the contractual terms of the loans, adjusted for prepayments and a discount rate based on the relative risk of the cash flows. Other considerations include the loan type, remaining life of the loan and credit risk.

FEDERAL HOME LOAN BANK STOCK
The fair value of FHLB stock is assumed to approximate book value since the Company is only able to redeem this stock at par value.
 
ACCRUED INTEREST RECEIVABLE
The carrying amount of accrued interest receivable is assumed to approximate the fair value.
 
DEPOSITS
The carrying values of noninterest-bearing checking deposits, interest-bearing checking deposits, savings, money markets, and wholesale non-maturing deposits are assumed to approximate fair value since deposits are immediately withdrawable without penalty. The fair value of time certificate deposits and wholesale certificate of deposits are estimated using a discounted cash flows calculation that applies the FHLB Des Moines curve to aggregated expected maturities of time deposits. In accordance with Subtopic 825-10, Financial Instruments, no value has been assigned to the Company’s long-term relationships with its deposit customers (core value of deposits intangible) as such intangibles are not financial instruments as defined under Subtopic 825-10.
 
OVERNIGHT FEDERAL FUNDS PURCHASED
The carrying amount of federal funds purchased is assumed to approximate the fair value.

FEDERAL HOME LOAN BANK ADVANCES
The fair value of such advances was estimated by discounting the expected future cash flows using current interest rates for advances with similar terms and remaining maturities.
 
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, SUBORDINATED DEBENTURES AND OTHER BORROWINGS
The fair value of these instruments was estimated by discounting the expected future cash flows using derived interest rates approximating market over the contractual maturity of such borrowings.
 
ACCRUED INTEREST PAYABLE
The carrying amount of accrued interest payable is assumed to approximate the fair value.
 
LIMITATIONS
Fair value estimates are made at a specific point in time and are based on relevant market information about the financial instrument. Additionally, fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business, customer relationships and the value of assets and liabilities that are not considered financial instruments. These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time. Furthermore, since no market exists for certain of the Company’s financial instruments, fair value estimates may be based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with a high level of precision. Changes in assumptions as well as tax considerations could significantly affect the estimates. Accordingly, based on the limitations described above, the aggregate fair value estimates are not intended to represent the underlying value of the Company, on either a going concern or a liquidation basis.