Loans Receivable And Allowance For Loan Losses

3 Months Ended

Dec. 31, 2015

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Loans Receivable And Allowance For Loan Losses

LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Loans receivable and loans held for sale by portfolio segment consisted of the following at December 31, 2015 and September 30, 2015 (dollars in thousands):



	December 31, 2015					September 30, 2015
	Amount			Percent		Amount			Percent
Mortgage loans:
One- to four-family (1)	$	118,507		17.3	%	$	119,715		17.8	%
Multi-family	47,980			7.0		52,322			7.8
Commercial	295,595			43.1		291,216			43.3
Construction - custom and owner/builder	67,861			9.9		62,954			9.3
Construction - speculative one- to four-family	6,199			0.9		6,668			1.0
Construction - commercial	22,213			3.2		20,728			3.1
Construction - multi-family	20,570			3.0		20,570			3.1
Land	25,258			3.7		26,140			3.9
Total mortgage loans	604,183			88.1		600,313			89.3

Consumer loans:
Home equity and second mortgage	36,057			5.3		34,157			5.0
Other	4,387			0.6		4,669			0.7
Total consumer loans	40,444			5.9		38,826			5.7

Commercial business loans	40,886			6.0		33,763			5.0

Total loans receivable	685,513			100.0	%	672,902			100.0	%
Less:
Undisbursed portion of construction loans in process	(47,596		)			(53,457		)
Deferred loan origination fees	(2,183		)			(2,193		)
Allowance for loan losses	(9,889		)			(9,924		)
Total loans receivable, net	$	625,845				$	607,328

________________________

(1) Includes loans held for sale.

Allowance for Loan Losses

The following tables set forth information for the three months ended December 31, 2015 and 2014 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):



	Three Months Ended December 31, 2015
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs		Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,480	$	(37	)	$	26	$	3	$	1,420
Multi-family	392		(19		)	—		—		373
Commercial	4,065		(140		)	27		—		3,898
Construction – custom and owner/builder	451		104			—		—		555
Construction – speculative one- to four-family	123		(1		)	—		—		122
Construction – commercial	426		60			—		—		486
Construction – multi-family	283		22			—		31		336
Land	1,021		(96		)	8		6		923
Consumer loans:
Home equity and second mortgage	1,073		42			13		—		1,102
Other	187		(24		)	3		1		161
Commercial business loans	423		89			—		1		513
Total	$	9,924	$	—		$	77	$	42	$	9,889



	Three Months Ended December 31, 2014
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs		Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,650	$	(47	)	$	118	$	19	$	1,504
Multi-family	387		(19)			—		—		368
Commercial	4,836		(1,190)			—		—		3,646
Construction – custom and owner/builder	450		10			—		—		460
Construction – speculative one- to four-family	52		(2)			—		—		50
Construction – commercial	78		(50)			—		—		28
Construction – multi-family	25		50			—		—		75
Land	1,434		1,379			4		8		2,817
Consumer loans:
Home equity and second mortgage	879		(67)			11		—		801
Other	176		(17)			1		1		159
Commercial business loans	460		(47)			—		1		414
Total	$	10,427	$	—		$	134	$	29	$	10,322

The following tables present information on the loans evaluated individually and collectively for impairment in the allowance for loan losses by portfolio segment at December 31, 2015 and September 30, 2015 (dollars in thousands):



	Allowance for Loan Losses						Recorded Investment in Loans
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
December 31, 2015
Mortgage loans:
One- to four-family	$	243	$	1,177	$	1,420	$	4,265	$	114,242	$	118,507
Multi-family	—		373		373		—		47,980		47,980
Commercial	181		3,717		3,898		12,109		283,486		295,595
Construction – custom and owner/builder	—		555		555		—		41,107		41,107
Construction – speculative one- to four-family	—		122		122		—		3,790		3,790
Construction – commercial	—		486		486		—		13,955		13,955
Construction – multi-family	—		336		336		—		10,395		10,395
Land	25		898		923		1,286		23,972		25,258
Consumer loans:
Home equity and second mortgage	361		741		1,102		905		35,152		36,057
Other	23		138		161		34		4,353		4,387
Commercial business loans	—		513		513		73		40,813		40,886
Total	$	833	$	9,056	$	9,889	$	18,672	$	619,245	$	637,917


September 30, 2015
Mortgage loans:
One- to four-family	$	307	$	1,173	$	1,480	$	4,291	$	115,424	$	119,715
Multi-family	16		376		392		4,037		48,285		52,322
Commercial	265		3,800		4,065		12,852		278,364		291,216
Construction – custom and owner/builder	—		451		451		—		36,192		36,192
Construction – speculative one- to four-family	—		123		123		—		3,781		3,781
Construction – commercial	—		426		426		—		12,200		12,200
Construction – multi-family	—		283		283		—		5,290		5,290
Land	37		984		1,021		2,305		23,835		26,140
Consumer loans:
Home equity and second mortgage	362		711		1,073		910		33,247		34,157
Other	24		163		187		36		4,633		4,669
Commercial business loans	—		423		423		—		33,763		33,763
Total	$	1,011	$	8,913	$	9,924	$	24,431	$	595,014	$	619,445

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 ongoing 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. Assets in this category do not expose the Company to sufficient risk to warrant a substandard classification.

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.

Loss: Loans in this classification are considered uncollectible and of such little value that continuance as bankable assets 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 December 31, 2015 and September 30, 2015, there were no loans classified as loss.

The following table lists the loan credit risk grades utilized by the Company that serve as credit quality indicators by portfolio segment at December 31, 2015 and September 30, 2015 (dollars in thousands):



	Loan Grades
December 31, 2015	Pass		Watch		Special Mention		Substandard		Total
Mortgage loans:
One- to four-family	$	113,704	$	223	$	982	$	3,598	$	118,507
Multi-family	44,966		—		3,014		—		47,980
Commercial	275,732		8,313		5,728		5,822		295,595
Construction – custom and owner/builder	40,920		—		—		187		41,107
Construction – speculative one- to four-family	3,790		—		—		—		3,790
Construction – commercial	13,955		—		—		—		13,955
Construction – multi-family	10,395		—		—		—		10,395
Land	21,342		1,065		1,873		978		25,258
Consumer loans:
Home equity and second mortgage	33,776		663		402		1,216		36,057
Other	4,353		—		—		34		4,387
Commercial business loans	40,766		47		—		73		40,886
Total	$	603,699	$	10,311	$	11,999	$	11,908	$	637,917


September 30, 2015
Mortgage loans:
One- to four-family	$	114,402	$	653	$	1,339	$	3,321	$	119,715
Multi-family	45,249		—		6,313		760		52,322
Commercial	270,685		8,040		6,803		5,688		291,216
Construction – custom and owner/builder	36,192		—		—		—		36,192
Construction – speculative one- to four-family	3,781		—		—		—		3,781
Construction – commercial	12,200		—		—		—		12,200
Construction – multi-family	5,290		—		—		—		5,290
Land	20,964		1,105		2,078		1,993		26,140
Consumer loans:
Home equity and second mortgage	32,172		664		404		917		34,157
Other	4,631		—		—		38		4,669
Commercial business loans	33,635		49		79		—		33,763
Total	$	579,201	$	10,511	$	17,016	$	12,717	$	619,445

The following tables present an age analysis of past due status of loans by portfolio segment at December 31, 2015 and September 30, 2015 (dollars in thousands):



	30–59 Days Past Due		60-89 Days Past Due		Non- Accrual (1)		Past Due 90 Days or More and Still Accruing		Total Past Due		Current		Total Loans
December 31, 2015
Mortgage loans:
One- to four-family	$	30	$	264	$	2,694	$	—	$	2,988	$	115,519	$	118,507
Multi-family	—		—		—		—		—		47,980		47,980
Commercial	—		—		1,184		—		1,184		294,411		295,595
Construction – custom and owner/builder	—		—		—		—		—		41,107		41,107
Construction – speculative one- to four- family	—		—		—		—		—		3,790		3,790
Construction – commercial	—		—		—		—		—		13,955		13,955
Construction – multi-family	—		—		—		—		—		10,395		10,395
Land	16		—		546		—		562		24,696		25,258
Consumer loans:
Home equity and second mortgage	54		—		300		285		639		35,418		36,057
Other	—		—		34		—		34		4,353		4,387
Commercial business loans	—		—		73		—		73		40,813		40,886
Total	$	100	$	264	$	4,831	$	285	$	5,480	$	632,437	$	637,917


September 30, 2015
Mortgage loans:
One- to four-family	$	—	$	425	$	2,368	$	—	$	2,793	$	116,922	$	119,715
Multi-family	—		—		760		—		760		51,562		52,322
Commercial	—		—		1,016		—		1,016		290,200		291,216
Construction – custom and owner/ builder	—		345		—		—		345		35,847		36,192
Construction – speculative one- to four- family	—		—		—		—		—		3,781		3,781
Construction – commercial	—		—		—		—		—		12,200		12,200
Construction – multi-family	—		—		—		—		—		5,290		5,290
Land	15		32		1,558		—		1,605		24,535		26,140
Consumer loans:
Home equity and second mortgage	146		14		303		151		614		33,543		34,157
Other	—		—		35		—		35		4,634		4,669
Commercial business loans	—		—		—		—		—		33,763		33,763
Total	$	161	$	816	$	6,040	$	151	$	7,168	$	612,277	$	619,445

______________________

(1) Includes non-accrual loans past due 90 days or more and other loans classified as non-accrual.

Impaired Loans

A loan is considered impaired when (based on current information and events) it is probable that the Company will be unable to collect all contractual principal and interest payments when due in accordance with the original or modified terms of the loan agreement. Impaired loans are measured based on the estimated fair value of the collateral less the estimated cost to sell if the loan is considered collateral dependent. Impaired loans that are not considered to be collateral dependent are measured based on the present value of expected future cash flows.

The categories of non-accrual loans and impaired loans overlap, although they are not identical. The Company considers all circumstances regarding the loan and borrower on an individual basis when determining whether an impaired loan should be placed on non-accrual status, such as the financial strength of the borrower, the estimated collateral value, reasons for the delay, payment record, the amount past due and the number of days past due.

ollowing table is a summary of information related to impaired loans by portfolio segment as of December 31, 2015 and for the three months then ended (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance (Loan Balance Plus Charge Off)		Related Allowance		YTD Average Recorded Investment (1)		YTD Interest Income Recognized (1)		YTD Cash Basis Interest Income Recognized (1)
With no related allowance recorded:
Mortgage loans:
One- to four-family	$	1,903	$	2,148	$	—	$	1,615	$	12	$	12
Multi-family	—		—		—		380		—		—
Commercial	8,126		9,214		—		7,662		122		96
Land	696		1,119		—		1,155		4		3
Consumer loans:
Home equity and second mortgage	165		382		—		166		—		—
Commercial business loans	73		78		—		37		—		—
Subtotal	10,963		12,941		—		11,015		138		111

With an allowance recorded:
Mortgage loans:
One- to four-family	2,362		—		243		2,666		32		24
Multi-family	—		—		—		1,639		—		—
Commercial	3,983		—		181		4,818		55		43
Land	590		—		25		641		10		8
Consumer loans:
Home equity and second mortgage	740		—		361		743		10		9
Other	34		—		23		35		—		—
Subtotal	7,709		—		833		10,542		107		84

Total:
Mortgage loans:
One- to four-family	4,265		2,148		243		4,281		44		36
Multi-family	—		—		—		2,019		—		—
Commercial	12,109		9,214		181		12,480		177		139
Land	1,286		1,119		25		1,796		14		11
Consumer loans:
Home equity and second mortgage	905		382		361		909		10		9
Other	34		—		23		35		—		—
Commercial business loans	73		78		—		37		—		—
Total	$	18,672	$	12,941	$	833	$	21,557	$	245	$	195

________________________________________________


(1)	For the three months ended December 31, 2015.

The following table is a summary of information related to impaired loans by portfolio segment as of and for the year ended September 30, 2015 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance (Loan Balance Plus Charge Off)		Related Allowance		YTD Average Recorded Investment (1)		YTD Interest Income Recognized (1)		YTD Cash Basis Interest Income Recognized (1)
With no related allowance recorded:
Mortgage loans:
One- to four-family	$	1,321	$	1,546	$	—	$	1,919	$	25	$	25
Multi-family	760		791		—		570		3		3
Commercial	7,199		8,259		—		9,078		521		412
Construction – custom and owner/builder	—		—		—		118		—		—
Land	1,614		2,150		—		1,028		25		20
Consumer loans:
Home equity and second mortgage	165		381		—		270		—		—
Commercial business loans	—		6		—		—		—		—
Subtotal	11,059		13,133		—		12,983		574		460

With an allowance recorded:
Mortgage loans:
One- to four-family	2,970		2,970		307		3,833		149		112
Multi-family	3,277		3,277		16		3,291		184		137
Commercial	5,653		5,653		265		3,475		202		152
Construction – custom and owner/builder	—		—		—		17		—		—
Land	691		691		37		3,298		32		27
Consumer loans:
Home equity and second mortgage	745		745		362		516		18		15
Other	36		36		24		28		—		—
Subtotal	13,372		13,372		1,011		14,458		585		443
Total:
Mortgage loans:
One- to four-family	4,291		4,516		307		5,752		174		137
Multi-family	4,037		4,068		16		3,861		187		140
Commercial	12,852		13,912		265		12,553		723		564
Construction – custom and owner/builder	—		—		—		135		—		—
Land	2,305		2,841		37		4,326		57		47
Consumer loans:
Home equity and second mortgage	910		1,126		362		786		18		15
Other	36		36		24		28		—		—
Commercial business loans	—		6		—		—		—		—
Total	$	24,431	$	26,505	$	1,011	$	27,441	$	1,159	$	903

______________________________________________

(1) For the year ended September 30, 2015.

The following table sets forth information with respect to the Company’s non-performing assets at December 31, 2015 and September 30, 2015 (dollars in thousands):



	December 31, 2015			September 30, 2015
Loans accounted for on a non-accrual basis:
Mortgage loans:
One- to four-family	$	2,694		$	2,368
Multi-family	—			760
Commercial	1,184			1,016
Land	546			1,558
Consumer loans:
Home equity and second mortgage	300			303
Other	34			35
Commercial business loans	73			—
Total loans accounted for on a non-accrual basis	4,831			6,040

Accruing loans which are contractually past due 90 days or more	285			151

Total of non-accrual and 90 days past due loans	5,116			6,191

Non-accrual investment securities	891			932

OREO and other repossessed assets, net	7,667			7,854
Total non-performing assets (1)	$	13,674		$	14,977

Troubled debt restructured loans on accrual status (2)	$	7,971		$	12,485

Non-accrual and 90 days or more past due loans as a percentage of loans receivable	0.80		%	1.00		%

Non-accrual and 90 days or more past due loans as a percentage of total assets	0.61		%	0.76		%

Non-performing assets as a percentage of total assets	1.63		%	1.84		%

Loans receivable (3)	$	635,734		$	617,252

Total assets	$	837,379		$	815,815

___________________________________

(1) Does not include troubled debt restructured loans on accrual status.

(2) Does not include troubled debt restructured loans totaling $1.2 million and $1.2 million reported as non-accrual loans at December 31, 2015 and September 30, 2015, respectively.

(3) Includes loans held for sale and before the allowance for loan losses.

A troubled debt restructured loan is a loan for which the Company, for reasons related to a borrower’s financial difficulties, grants a significant concession to the borrower that the Company would not otherwise consider. Examples of such concessions include but are not limited to: a reduction in the stated interest rate; an extension of the maturity at an interest rate below current market rates; a reduction in the face amount of the debt; a reduction in the accrued interest; or re-amorizations, extensions, deferrals and renewals. Troubled debt restructured loans are considered impaired and are individually evaluated for impairment. Troubled debt restructured loans can be classified as either accrual or non-accrual. Troubled debt restructured loans are classified as non-performing loans unless they have been performing in accordance with their modified terms for a period of at least six months. The Company had $9.20 million and $13.72 million in troubled debt restructured loans included in impaired loans at December 31, 2015 and September 30, 2015, respectively, and had no commitments at these dates to lend additional funds on these loans. The allowance for loan losses allocated to troubled debt restructured loans at December 31, 2015 and September 30, 2015 was $332,000 and $310,000, respectively. There were no troubled debt restructured loans which incurred a payment default within 12 months of the restructure date during the three months ended December 31, 2015.

The following tables set forth information with respect to the Company’s troubled debt restructured loans by interest accrual status as of December 31, 2015 and September 30, 2015 (dollars in thousands):



	December 31, 2015
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	1,571	$	825	$	2,396
Commercial	5,366		—		5,366
Land	740		252		992
Consumer loans:
Home equity and second mortgage	294		152		446
Total	$	7,971	$	1,229	$	9,200



	September 30, 2015
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	1,929	$	826	$	2,755
Multi-family	3,277		—		3,277
Commercial	6,237		—		6,237
Land	747		255		1,002
Consumer loans:
Home equity and second mortgage	295		152		447
Total	$	12,485	$	1,233	$	13,718

The following tables set forth information with respect to the Company’s troubled debt restructured loans by portfolio segment that occurred during the three months ended December 31, 2015 and the year ended September 30, 2015 (dollars in thousands):



December 31, 2015
There were no new troubled debt restructured loans during the three months ended December 31, 2015.



September 30, 2015	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		End of Period Balance
One-to four-family (1)	1	$	48	$	48	$	48
Total	1	$	48	$	48	$	48

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(1)	Modification was a result of a reduction in the stated interest rate.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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