Loans Receivable And Allowance For Loan Losses

6 Months Ended

Mar. 31, 2016

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 March 31, 2016 and September 30, 2015 (dollars in thousands):



	March 31, 2016				September 30, 2015
	Amount		Percent		Amount		Percent
Mortgage loans:
One- to four-family	$	117,465	17.3	%	$	116,664	17.4	%
Multi-family	42,666		6.3		52,322		7.8
Commercial	290,817		42.8		291,216		43.5
Construction - custom and owner/builder	69,817		10.3		62,954		9.4
Construction - speculative one- to four-family	6,384		0.9		6,668		1.0
Construction - commercial	22,487		3.3		20,728		3.1
Construction - multi-family	20,570		3.0		20,570		3.1
Land	24,322		3.6		26,140		3.9
Total mortgage loans	594,528		87.5		597,262		89.2

Consumer loans:
Home equity and second mortgage	37,144		5.5		34,157		5.1
Other	4,380		0.6		4,669		0.7
Total consumer loans	41,524		6.1		38,826		5.8

Commercial business loans	43,355		6.4		33,763		5.0

Total loans receivable	679,407		100.0	%	669,851		100.0	%
Less:
Undisbursed portion of construction loans in process	44,465				53,457
Deferred loan origination fees	2,048				2,193
Allowance for loan losses	10,043				9,924
	56,556				65,574
Loans receivable, net	622,851				604,277
Loans held for sale (one- to four-family)	1,584				3,051
Total loans receivable and loans held for sale, net	$	624,435			$	607,328

Allowance for Loan Losses

The following tables set forth information for the three and six months ended March 31, 2016 and 2015 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):



	Three Months Ended March 31, 2016
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,420	$	(147	)	$	(2	)	$	52	$	1,323
Multi-family	373		(58		)	—			—		315
Commercial	3,898		239			(54		)	—		4,083
Construction – custom and owner/builder	555		(13		)	—			—		542
Construction – speculative one- to four-family	122		(28		)	—			2		96
Construction – commercial	486		131			—			—		617
Construction – multi-family	336		(77		)	—			150		409
Land	923		24			—			7		954
Consumer loans:
Home equity and second mortgage	1,102		(81		)	—			—		1,021
Other	161		3			(2		)	—		162
Commercial business loans	513		7			—			1		521
Total	$	9,889	$	—		$	(58	)	$	212	$	10,043



	Six Months Ended March 31, 2016
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,480	$	(184	)	$	(28	)	$	55	$	1,323
Multi-family	392		(77		)	—			—		315
Commercial	4,065		99			(81		)	—		4,083
Construction – custom and owner/builder	451		91			—			—		542
Construction – speculative one- to four-family	123		(29		)	—			2		96
Construction – commercial	426		191			—			—		617
Construction – multi-family	283		(55		)	—			181		409
Land	1,021		(72		)	(8		)	13		954
Consumer loans:
Home equity and second mortgage	1,073		(39		)	(13		)	—		1,021
Other	187		(21		)	(5		)	1		162
Commercial business loans	423		96			—			2		521
Total	$	9,924	$	—		$	(135	)	$	254	$	10,043



	Three Months Ended March 31, 2015
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,504	$	24		$	(39	)	$	107	$	1,596
Multi-family	368		(66)			—			—		302
Commercial	3,646		(45)			—			—		3,601
Construction – custom and owner/builder	460		15			—			—		475
Construction – speculative one- to four-family	50		14			—			—		64
Construction – commercial	28		9			—			—		37
Construction – multi-family	75		54			—			—		129
Land	2,817		(67		)	—			3		2,753
Consumer loans:
Home equity and second mortgage	801		5			(9		)	—		797
Other	159		34			(4		)	1		190
Commercial business loans	414		23			—			1		438
Total	$	10,322	$	—		$	(52	)	$	112	$	10,382



	Six Months Ended March 31, 2015
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,650	$	(23	)	$	(157	)	$	126	$	1,596
Multi-family	387		(85)			—			—		302
Commercial	4,836		(1,235)			—			—		3,601
Construction – custom and owner/builder	450		25			—			—		475
Construction – speculative one- to four-family	52		12			—			—		64
Construction – commercial	78		(41)			—			—		37
Construction – multi-family	25		104			—			—		129
Land	1,434		1,312			(4		)	11		2,753
Consumer loans:
Home equity and second mortgage	879		(62)			(20		)	—		797
Other	176		17			(5		)	2		190
Commercial business loans	460		(24)			—			2		438
Total	$	10,427	$	—		$	(186	)	$	141	$	10,382

The following tables present information on the loans evaluated individually and collectively for impairment in the allowance for loan losses by portfolio segment at March 31, 2016 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
March 31, 2016
Mortgage loans:
One- to four-family	$	120	$	1,203	$	1,323	$	2,930	$	114,535	$	117,465
Multi-family	—		315		315		—		42,666		42,666
Commercial	412		3,671		4,083		11,977		278,840		290,817
Construction – custom and owner/builder	—		542		542		—		41,312		41,312
Construction – speculative one- to four-family	—		96		96		—		2,956		2,956
Construction – commercial	—		617		617		—		16,902		16,902
Construction – multi-family	—		409		409		—		13,623		13,623
Land	57		897		954		1,185		23,137		24,322
Consumer loans:
Home equity and second mortgage	259		762		1,021		1,015		36,129		37,144
Other	16		146		162		33		4,347		4,380
Commercial business loans	—		521		521		—		43,355		43,355
Total	$	864	$	9,179	$	10,043	$	17,140	$	617,802	$	634,942


September 30, 2015
Mortgage loans:
One- to four-family	$	307	$	1,173	$	1,480	$	4,291	$	112,373	$	116,664
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	$	591,963	$	616,394

The following tables present an age analysis of past due status of loans by portfolio segment at March 31, 2016 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
March 31, 2016
Mortgage loans:
One- to four-family	$	—	$	—	$	1,365	$	—	$	1,365	$	116,100	$	117,465
Multi-family	—		—		—		—		—		42,666		42,666
Commercial	—		—		1,129		—		1,129		289,688		290,817
Construction – custom and owner/builder	—		—		—		—		—		41,312		41,312
Construction – speculative one- to four- family	—		—		—		—		—		2,956		2,956
Construction – commercial	—		—		—		—		—		16,902		16,902
Construction – multi-family	—		—		—		—		—		13,623		13,623
Land	64		—		451		—		515		23,807		24,322
Consumer loans:
Home equity and second mortgage	29		48		413		135		625		36,519		37,144
Other	—		—		33		—		33		4,347		4,380
Commercial business loans	—		—		—		—		—		43,355		43,355
Total	$	93	$	48	$	3,391	$	135	$	3,667	$	631,275	$	634,942


September 30, 2015
Mortgage loans:
One- to four-family	$	—	$	425	$	2,368	$	—	$	2,793	$	113,871	$	116,664
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	$	609,226	$	616,394

______________________

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

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 March 31, 2016 and September 30, 2015, there were no loans classified as loss.

The following tables list the loan credit risk grades utilized by the Company that serve as credit quality indicators by portfolio segment at March 31, 2016 and September 30, 2015 (dollars in thousands):



	Loan Grades
March 31, 2016	Pass		Watch		Special Mention		Substandard		Total
Mortgage loans:
One- to four-family	$	113,311	$	722	$	668	$	2,764	$	117,465
Multi-family	40,844		—		1,822		—		42,666
Commercial	271,130		8,266		5,686		5,735		290,817
Construction – custom and owner/builder	41,125		—		—		187		41,312
Construction – speculative one- to four-family	2,956		—		—		—		2,956
Construction – commercial	16,902		—		—		—		16,902
Construction – multi-family	13,623		—		—		—		13,623
Land	20,502		1,058		1,887		875		24,322
Consumer loans:
Home equity and second mortgage	34,796		626		710		1,012		37,144
Other	4,347		—		—		33		4,380
Commercial business loans	43,310		45		—		—		43,355
Total	$	602,846	$	10,717	$	10,773	$	10,606	$	634,942


September 30, 2015
Mortgage loans:
One- to four-family	$	111,351	$	653	$	1,339	$	3,321	$	116,664
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	$	576,150	$	10,511	$	17,016	$	12,717	$	616,394

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.

The following table is a summary of information related to impaired loans by portfolio segment as of March 31, 2016 and for the three and six months then ended (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance (Loan Balance Plus Charge Off)		Related Allowance		QTD Average Recorded Investment (1)		YTD Average Recorded Investment (2)		QTD Interest Income Recognized (1)		YTD Interest Income Recognized (2)		QTD Cash Basis Interest Income Recognized (1)		YTD Cash Basis Interest Income Recognized (2)
With no related allowance recorded:
Mortgage loans:
One- to four-family	$	1,365	$	1,435	$	—	$	1,634	$	1,531	$	6	$	18	$	6	$	18
Multi-family	—		—		—		—		253		—		—		—		—
Commercial	8,207		9,348		—		8,167		7,844		112		234		88		184
Land	600		1,009		—		648		970		4		8		3		6
Consumer loans:
Home equity and second mortgage	280		485		—		223		204		—		—		—		—
Other	—		—		—		—		—		—		—		—		—
Commercial business loans	—		3		—		37		24		—		—		—		—
Subtotal	10,452		12,280		—		10,709		10,826		122		260		97		208

With an allowance recorded:
Mortgage loans:
One- to four-family	1,565		1,565		120		1,964		2,299		31		63		23		47
Multi-family	—		—		—		—		1,092		—		—		—		—
Commercial	3,770		3,770		412		3,877		4,469		59		113		46		88
Land	585		585		57		588		622		10		20		8		16
Consumer loans:
Home equity and second mortgage	735		735		259		737		740		10		21		9		19
Other	33		33		16		34		34		—		—		—		—
Commercial business loans	—		—		—				—		—		—		—		—
Subtotal	6,688		6,688		864		7,200		9,256		110		217		86		170



	Recorded Investment		Unpaid Principal Balance (Loan Balance Plus Charge Off)		Related Allowance		QTD Average Recorded Investment (1)		YTD Average Recorded Investment (2)		QTD Interest Income Recognized (1)		YTD Interest Income Recognized (2)		QTD Cash Basis Interest Income Recognized (1)		YTD Cash Basis Interest Income Recognized (2)

Total:
Mortgage loans:
One- to four-family	$	2,930	$	3,000	$	120	$	3,598	$	3,830	$	37	$	81	$	29	$	65
Multi-family	—		—		—		—		1,345		—		—		—		—
Commercial	11,977		13,118		412		12,044		12,313		171		347		134		272
Land	1,185		1,594		57		1,236		1,592		14		28		11		22
Consumer loans:
Home equity and second mortgage	1,015		1,220		259		960		944		10		21		9		19
Other	33		33		16		34		34		—		—		—		—
Commercial business loans	—		3		—		37		24		—		—		—		—
Total	$	17,140	$	18,968	$	864	$	17,909	$	20,082	$	232	$	477	$	183	$	378

________________________________________________


(1)	For the three months ended March 31, 2016.


(2)	For the six months ended March 31, 2016.

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.

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 $8.46 million and $13.72 million in troubled debt restructured loans included in impaired loans at March 31, 2016 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 March 31, 2016 and September 30, 2015 was $525,000 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 six months ended March 31, 2016.

The following tables set forth information with respect to the Company’s troubled debt restructured loans by interest accrual status as of March 31, 2016 and September 30, 2015 (dollars in thousands):



	March 31, 2016
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	1,565	$	127	$	1,692
Commercial	5,331		—		5,331
Land	734		253		987
Consumer loans:
Home equity and second mortgage	293		152		445
Total	$	7,923	$	532	$	8,455



	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 six months ended March 31, 2016 and the year ended September 30, 2015 (dollars in thousands):



March 31, 2016
There were no new troubled debt restructured loans during the six months ended March 31, 2016.



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

___________________________


(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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