Loans Receivable And Allowance For Loan Losses

9 Months Ended

Jun. 30, 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 June 30, 2016 and September 30, 2015 (dollars in thousands):



	June 30, 2016				September 30, 2015
	Amount		Percent		Amount		Percent
Mortgage loans:
One- to four-family	$	117,055	16.5	%	$	116,664	17.4	%
Multi-family	51,672		7.3		52,322		7.8
Commercial	294,887		41.5		291,216		43.5
Construction - custom and owner/builder	88,593		12.5		62,954		9.4
Construction - speculative one- to four-family	8,261		1.2		6,668		1.0
Construction - commercial	21,427		3.0		20,728		3.1
Construction - multi-family	18,090		2.5		20,570		3.1
Land	24,076		3.4		26,140		3.9
Total mortgage loans	624,061		87.9		597,262		89.2

Consumer loans:
Home equity and second mortgage	38,482		5.4		34,157		5.1
Other	4,490		0.6		4,669		0.7
Total consumer loans	42,972		6.0		38,826		5.8

Commercial business loans	43,571		6.1		33,763		5.0

Total loans receivable	710,604		100.0	%	669,851		100.0	%
Less:
Undisbursed portion of construction loans in process	51,163				53,457
Deferred loan origination fees	2,233				2,193
Allowance for loan losses	9,842				9,924
	63,238				65,574
Loans receivable, net	647,366				604,277
Loans held for sale	4,885				3,051
Total loans receivable and loans held for sale, net	$	652,251			$	607,328

Allowance for Loan Losses

The following tables set forth information for the three and nine months ended June 30, 2016 and 2015 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):



	Three Months Ended June 30, 2016
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,323	$	(83	)	$	(27	)	$	1	$	1,214
Multi-family	315		33			—			—		348
Commercial	4,083		19			(128		)	—		3,974
Construction – custom and owner/builder	542		93			—			—		635
Construction – speculative one- to four-family	96		25			—			—		121
Construction – commercial	617		7			—			—		624
Construction – multi-family	409		(22		)	—			—		387
Land	954		9			(50		)	6		919
Consumer loans:
Home equity and second mortgage	1,021		(55		)	(5		)	—		961
Other	162		(4		)	(2		)	1		157
Commercial business loans	521		(22		)	—			3		502
Total	$	10,043	$	—		$	(212	)	$	11	$	9,842



	Nine Months Ended June 30, 2016
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,480	$	(112	)	$	(55	)	$	56	$	1,214
Multi-family	392		14			—			—		348
Commercial	4,065		(121		)	(209		)	—		3,974
Construction – custom and owner/builder	451		197			—			—		635
Construction – speculative one- to four-family	123		24			—			2		121
Construction – commercial	426		67			—			—		624
Construction – multi-family	283		—			—			181		387
Land	1,021		(95		)	(58		)	19		919
Consumer loans:
Home equity and second mortgage	1,073		(13		)	(18		)	—		961
Other	187		(28		)	(7		)	2		157
Commercial business loans	423		67			—			5		502
Total	$	9,924	$	—		$	(347	)	$	265	$	9,842



	Three Months Ended June 30, 2015
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,596	$	(236	)	$	(44	)	$	137	$	1,453
Multi-family	302		11			—			3		316
Commercial	3,601		89			—			—		3,690
Construction – custom and owner/builder	475		2			—			—		477
Construction – speculative one- to four-family	64		15			—			—		79
Construction – commercial	37		185			—			—		222
Construction – multi-family	129		235			—			—		364
Land	2,753		(321		)	(24		)	21		2,429
Consumer loans:
Home equity and second mortgage	797		4			(7		)	—		794
Other	190		(1)			(3		)	1		187
Commercial business loans	438		17			—			1		456
Total	$	10,382	$	—		$	(78	)	$	163	$	10,467



	Nine Months Ended June 30, 2015
	Beginning Allowance		Provision for /(Recapture of)			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,650	$	(259	)	$	(201	)	$	263	$	1,453
Multi-family	387		(74)			—			3		316
Commercial	4,836		(1,146)			—			—		3,690
Construction – custom and owner/builder	450		27			—			—		477
Construction – speculative one- to four-family	52		27			—			—		79
Construction – commercial	78		144			—			—		222
Construction – multi-family	25		339			—			—		364
Land	1,434		991			(28		)	32		2,429
Consumer loans:
Home equity and second mortgage	879		(58)			(27		)	—		794
Other	176		16			(8		)	3		187
Commercial business loans	460		(7)			—			3		456
Total	$	10,427	$	—		$	(264	)	$	304	$	10,467

The following tables present information on the loans evaluated individually and collectively for impairment in the allowance for loan losses by portfolio segment at June 30, 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
June 30, 2016
Mortgage loans:
One- to four-family	$	71	$	1,143	$	1,214	$	2,592	$	114,463	$	117,055
Multi-family	—		348		348		—		51,672		51,672
Commercial	416		3,558		3,974		11,581		283,306		294,887
Construction – custom and owner/builder	—		635		635		—		50,851		50,851
Construction – speculative one- to four-family	—		121		121		—		3,773		3,773
Construction – commercial	—		624		624		—		16,495		16,495
Construction – multi-family	—		387		387		—		14,089		14,089
Land	56		863		919		1,172		22,904		24,076
Consumer loans:
Home equity and second mortgage	252		709		961		1,035		37,447		38,482
Other	14		143		157		31		4,459		4,490
Commercial business loans	—		502		502		—		43,571		43,571
Total	$	809	$	9,033	$	9,842	$	16,411	$	643,030	$	659,441


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 June 30, 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
June 30, 2016
Mortgage loans:
One- to four-family	$	—	$	98	$	1,236	$	—	$	1,334	$	115,721	$	117,055
Multi-family	—		—		—		—		—		51,672		51,672
Commercial	—		—		808		—		808		294,079		294,887
Construction – custom and owner/builder	—		367		—		—		367		50,484		50,851
Construction – speculative one- to four- family	—		—		—		—		—		3,773		3,773
Construction – commercial	—		—		—		—		—		16,495		16,495
Construction – multi-family	—		—		—		—		—		14,089		14,089
Land	215		63		444		—		722		23,354		24,076
Consumer loans:
Home equity and second mortgage	124		—		436		135		695		37,787		38,482
Other	49		—		31		—		80		4,410		4,490
Commercial business loans	—		—		—		—		—		43,571		43,571
Total	$	388	$	528	$	2,955	$	135	$	4,006	$	655,435	$	659,441


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



	Loan Grades
June 30, 2016	Pass		Watch		Special Mention		Substandard		Total
Mortgage loans:
One- to four-family	$	113,648	$	112	$	665	$	2,630	$	117,055
Multi-family	49,861		—		1,811		—		51,672
Commercial	275,402		8,457		7,962		3,066		294,887
Construction – custom and owner/builder	50,516		148		—		187		50,851
Construction – speculative one- to four-family	3,773		—		—		—		3,773
Construction – commercial	16,495		—		—		—		16,495
Construction – multi-family	14,089		—		—		—		14,089
Land	20,313		1,051		1,845		867		24,076
Consumer loans:
Home equity and second mortgage	36,266		593		707		916		38,482
Other	4,460		—		—		30		4,490
Commercial business loans	43,529		42		—		—		43,571
Total	$	628,352	$	10,403	$	12,990	$	7,696	$	659,441


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 June 30, 2016 and for the three and nine 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	$	1,236	$	1,411	$	—	$	1,301	$	1,458	$	11	$	29	$	11	$	29
Multi-family	—		—		—		—		190		—		—		—		—
Commercial	7,823		8,942		—		8,015		7,839		75		308		59		243
Land	592		1,002		—		596		876		4		12		3		9
Consumer loans:
Home equity and second mortgage	305		510		—		293		229		—		—		—		—
Commercial business loans	—		—		—		—		18		—		—		—		—
Subtotal	9,956		11,865		—		10,205		10,610		90		349		73		281
With an allowance recorded:
Mortgage loans:
One- to four-family	1,356		1,356		71		1,461		2,063		27		90		20		68
Multi-family	—		—		—		—		819		—		—		—		—
Commercial	3,758		3,758		416		3,764		4,291		106		219		84		172
Land	580		580		56		583		612		10		30		8		24
Consumer loans:
Home equity and second mortgage	730		730		252		732		737		13		33		12		30
Other	31		31		14		32		34		2		2		2		2
Subtotal	6,455		6,455		809		6,572		8,556		158		374		126		296
Total:
Mortgage loans:
One- to four-family	2,592		2,767		71		2,762		3,521		38		119		31		97
Multi-family	—		—		—		—		1,009		—		—		—		—
Commercial	11,581		12,700		416		11,779		12,130		181		527		143		415
Land	1,172		1,582		56		1,179		1,488		14		42		11		33
Consumer loans:
Home equity and second mortgage	1,035		1,240		252		1,025		966		13		33		12		30
Other	31		31		14		32		34		2		2		2		2
Commercial business loans	—		—		—		—		18		—		—		—		—
Total	$	16,411	$	18,320	$	809	$	16,777	$	19,166	$	248	$	723	$	199	$	577

______________________________________________


(1)	For the three months ended June 30, 2016.


(2)	For the nine months ended June 30, 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 $8.21 million and $13.72 million in troubled debt restructured loans included in impaired loans at June 30, 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 June 30, 2016 and September 30, 2015 was $479,000 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 nine months ended June 30, 2016.

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



	June 30, 2016
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	1,356	$	126	$	1,482
Commercial	5,302		—		5,302
Land	727		252		979
Consumer loans:
Home equity and second mortgage	292		152		444
Total	$	7,677	$	530	$	8,207



	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 nine months ended June 30, 2016 and the year ended September 30, 2015 (dollars in thousands):



June 30, 2016
There were no new troubled debt restructured loans during the nine months ended June 30, 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

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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.

+ References + Details