Loans Receivable And Allowance For Loan Losses

3 Months Ended

Dec. 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 by portfolio segment consisted of the following at December 31, 2016 and September 30, 2016 (dollars in thousands):



	December 31, 2016				September 30, 2016
	Amount		Percent		Amount		Percent
Mortgage loans:
One- to four-family	$	119,485	16.2	%	$	118,560	16.4	%
Multi-family	52,062		7.1		62,303		8.6
Commercial	323,496		44.0		312,525		43.2
Construction - custom and owner/builder	96,292		13.1		93,049		12.9
Construction - speculative one- to four-family	6,133		0.8		8,106		1.1
Construction - commercial	8,627		1.2		9,365		1.3
Construction - multi-family	22,092		3.0		12,590		1.7
Land	22,359		3.0		21,627		3.0
Total mortgage loans	650,546		88.4		638,125		88.2

Consumer loans:
Home equity and second mortgage	37,602		5.1		39,727		5.5
Other	4,523		0.7		4,139		0.5
Total consumer loans	42,125		5.8		43,866		6.0

Commercial business loans	42,657		5.8		41,837		5.8

Total loans receivable	735,328		100.0	%	723,828		100.0	%
Less:
Undisbursed portion of construction loans in process	54,161				48,627
Deferred loan origination fees	2,184				2,229
Allowance for loan losses	9,843				9,826
	66,188				60,682
Loans receivable, net	$	669,140			$	663,146

Allowance for Loan Losses

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



	Three Months Ended December 31, 2016
	Beginning Allowance		Provision for (Recapture of) Loan Losses			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One- to four-family	$	1,239	$	(83	)	$	—		$	21	$	1,177
Multi-family	473		(73		)	—			—		400
Commercial	4,384		144			(5		)	—		4,523
Construction – custom and owner/builder	619		17			—			—		636
Construction – speculative one- to four-family	130		(30		)	—			—		100
Construction – commercial	268		14			—			—		282
Construction – multi-family	316		69			—			—		385
Land	820		13			(2		)	5		836
Consumer loans:
Home equity and second mortgage	939		(80		)	—			—		859
Other	156		2			(3		)	1		156
Commercial business loans	482		7			—			—		489
Total	$	9,826	$	—		$	(10	)	$	27	$	9,843



	Three Months Ended December 31, 2015
	Beginning Allowance		Provision for (Recapture of) Loan Losses			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

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, 2016 and September 30, 2016 (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, 2016
Mortgage loans:
One- to four-family	$	68	$	1,109	$	1,177	$	2,190	$	117,295	$	119,485
Multi-family	—		400		400		—		52,062		52,062
Commercial	406		4,117		4,523		10,615		312,881		323,496
Construction – custom and owner/builder	—		636		636		367		53,181		53,548
Construction – speculative one- to four-family	—		100		100		—		3,118		3,118
Construction – commercial	—		282		282		—		6,860		6,860
Construction – multi-family	—		385		385		—		15,457		15,457
Land	52		784		836		1,448		20,911		22,359
Consumer loans:
Home equity and second mortgage	217		642		859		981		36,621		37,602
Other	13		143		156		29		4,494		4,523
Commercial business loans	—		489		489		—		42,657		42,657
Total	$	756	$	9,087	$	9,843	$	15,630	$	665,537	$	681,167


September 30, 2016
Mortgage loans:
One- to four-family	$	70	$	1,169	$	1,239	$	2,264	$	116,296	$	118,560
Multi-family	—		473		473		—		62,303		62,303
Commercial	413		3,971		4,384		11,309		301,216		312,525
Construction – custom and owner/builder	—		619		619		367		51,662		52,029
Construction – speculative one- to four-family	—		130		130		—		4,074		4,074
Construction – commercial	—		268		268		—		6,841		6,841
Construction – multi-family	—		316		316		—		11,539		11,539
Land	53		767		820		1,268		20,359		21,627
Consumer loans:
Home equity and second mortgage	227		712		939		999		38,728		39,727
Other	13		143		156		30		4,109		4,139
Commercial business loans	—		482		482		—		41,837		41,837
Total	$	776	$	9,050	$	9,826	$	16,237	$	658,964	$	675,201

The following tables present an analysis of loans by aging category and portfolio segment at December 31, 2016 and September 30, 2016 (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, 2016
Mortgage loans:
One- to four-family	$	394	$	—	$	846	$	—	$	1,240	$	118,245	$	119,485
Multi-family	—		—		—		—		—		52,062		52,062
Commercial	299		111		—		—		410		323,086		323,496
Construction – custom and owner/builder	213		—		367		—		580		52,968		53,548
Construction – speculative one- to four- family	—		—		—		—		—		3,118		3,118
Construction – commercial	—		—		—		—		—		6,860		6,860
Construction – multi-family	—		—		—		—		—		15,457		15,457
Land	232		—		735		—		967		21,392		22,359
Consumer loans:
Home equity and second mortgage	206		41		387		135		769		36,833		37,602
Other	31		—		29		—		60		4,463		4,523
Commercial business loans	34		—		—		—		34		42,623		42,657
Total	$	1,409	$	152	$	2,364	$	135	$	4,060	$	677,107	$	681,167


September 30, 2016
Mortgage loans:
One- to four-family	$	—	$	207	$	914	$	—	$	1,121	$	117,439	$	118,560
Multi-family	—		—		—		—		—		62,303		62,303
Commercial	113		—		612		—		725		311,800		312,525
Construction – custom and owner/ builder	—		—		367		—		367		51,662		52,029
Construction – speculative one- to four- family	—		—		—		—		—		4,074		4,074
Construction – commercial	—		—		—		—		—		6,841		6,841
Construction – multi-family	—		—		—		—		—		11,539		11,539
Land	—		—		548		—		548		21,079		21,627
Consumer loans:
Home equity and second mortgage	37		—		402		135		574		39,153		39,727
Other	31		—		30		—		61		4,078		4,139
Commercial business loans	37		38		—		—		75		41,762		41,837
Total	$	218	$	245	$	2,873	$	135	$	3,471	$	671,730	$	675,201

______________________

(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 on-going 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.

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

The following tables present an analysis of loans by credit quality indicator and portfolio segment at December 31, 2016 and September 30, 2016 (dollars in thousands):



	Loan Grades
December 31, 2016	Pass		Watch		Special Mention		Substandard		Total
Mortgage loans:
One- to four-family	$	116,242	$	357	$	657	$	2,229	$	119,485
Multi-family	50,275		—		1,787		—		52,062
Commercial	304,358		8,363		10,775		—		323,496
Construction – custom and owner/builder	53,181		—		—		367		53,548
Construction – speculative one- to four-family	3,118		—		—		—		3,118
Construction – commercial	6,860		—		—		—		6,860
Construction – multi-family	15,457		—		—		—		15,457
Land	18,581		1,036		1,843		899		22,359
Consumer loans:
Home equity and second mortgage	36,024		588		136		854		37,602
Other	4,463		—		—		60		4,523
Commercial business loans	42,620		37		—		—		42,657
Total	$	651,179	$	10,381	$	15,198	$	4,409	$	681,167

September 30, 2016
Mortgage loans:
One- to four-family	$	115,131	$	364	$	661	$	2,404	$	118,560
Multi-family	60,504		—		1,799		—		62,303
Commercial	292,756		8,411		10,746		612		312,525
Construction – custom and owner/builder	51,432		229		—		368		52,029
Construction – speculative one- to four-family	4,074		—		—		—		4,074
Construction – commercial	6,841		—		—		—		6,841
Construction – multi-family	11,539		—		—		—		11,539
Land	18,010		1,043		1,859		715		21,627
Consumer loans:
Home equity and second mortgage	38,261		590		—		876		39,727
Other	4,078		—		—		61		4,139
Commercial business loans	41,797		40		—		—		41,837
Total	$	644,423	$	10,677	$	15,065	$	5,036	$	675,201

Impaired Loans

In accordance with GAAP, a loan is considered impaired when it is probable that a creditor will be unable to collect all amounts (principal and interest) when due according to the contractual terms of the loan agreement. Smaller balance homogeneous loans, such as residential mortgage loans and consumer loans, may be collectively evaluated for impairment. When a loan has been identified as being impaired, the amount of the impairment is measured by using discounted cash flows, except when, as an alternative, the current estimated fair value of the collateral, reduced by estimated costs to sell (if applicable), or observable market price is used. The valuation of real estate collateral is subjective in nature and may be adjusted in future periods because of changes in economic conditions. Management considers third-party appraisals, as well as independent fair market value assessments from realtors or persons involved in selling real estate, in determining the estimated fair value of particular properties. In addition, as certain of these third-party appraisals and independent fair market value assessments are only updated periodically, changes in the values of specific properties may have occurred subsequent to the most recent appraisals. Accordingly, the amounts of any such potential changes and any related adjustments are generally recorded at the time such information is received. When the measurement of the impaired loan is less than the recorded investment in the loan (including accrued interest and net deferred loan origination fees or costs), impairment is recognized by creating or adjusting an allocation of the allowance for loan losses and uncollected accrued interest is reversed against interest income. If ultimate collection of principal is in doubt, all cash receipts on impaired loans are applied to reduce the principal balance.

The categories of non-accrual loans and impaired loans overlap, although they are not identical.

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



	Recorded Investment		Unpaid Principal Balance (Loan Balance Plus Charge Off)		Related Allowance		Year to Date ("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	$	893	$	1,040	$	—	$	904	$	12	$	11
Commercial	6,892		7,953		—		7,229		113		87
Construction – custom and owner/ builder	367		367		—		367		7		7
Land	879		1,284		—		786		4		3
Consumer loans:
Home equity and second mortgage	387		578		—		395		—		—
Subtotal	9,418		11,222		—		9,681		136		108

With an allowance recorded:
Mortgage loans:
One- to four-family	1,297		1,297		68		1,324		27		20
Commercial	3,723		3,723		406		3,733		65		54
Land	569		569		52		572		9		8
Consumer loans:
Home equity and second mortgage	594		594		217		596		10		9
Other	29		29		13		30		—		—
Subtotal	6,212		6,212		756		6,255		111		91

Total:
Mortgage loans:
One- to four-family	2,190		2,337		68		2,228		39		31
Commercial	10,615		11,676		406		10,962		178		141
Construction – custom and owner/ builder	367		367		—		367		7		7
Land	1,448		1,853		52		1,358		13		11
Consumer loans:
Home equity and second mortgage	981		1,172		217		991		10		9
Other	29		29		13		30		—		—
Total	$	15,630	$	17,434	$	756	$	15,936	$	247	$	199

______________________________________________


(1)	For the three months ended December 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, 2016 (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	$	914	$	1,060	$	—	$	1,349	$	38	$	38
Multi-family	—		—		—		152		—		—
Commercial	7,566		8,685		—		7,784		421		330
Construction – custom and owner/builder	367		367		—		73		—		—
Land	693		1,101		—		839		16		12
Consumer loans:
Home equity and second mortgage	402		593		—		264		—		—
Commercial business loans	—		—		—		15		—		—
Subtotal	9,942		11,806		—		10,476		475		380

With an allowance recorded:
Mortgage loans:
One- to four-family	1,350		1,350		70		1,921		118		89
Multi-family	—		—		—		655		—		—
Commercial	3,743		3,743		413		4,181		275		215
Land	575		575		53		604		39		32
Consumer loans:
Home equity and second mortgage	597		597		227		709		44		40
Other	30		30		13		33		2		2
Subtotal	6,295		6,295		776		8,103		478		378
Total:
Mortgage loans:
One- to four-family	2,264		2,410		70		3,270		156		127
Multi-family	—		—		—		807		—		—
Commercial	11,309		12,428		413		11,965		696		545
Construction – custom and owner/builder	367		367		—		73		—		—
Land	1,268		1,676		53		1,443		55		44
Consumer loans:
Home equity and second mortgage	999		1,190		227		973		44		40
Other	30		30		13		33		2		2
Commercial business loans	—		—		—		15		—		—
Total	$	16,237	$	18,101	$	776	$	18,579	$	953	$	758

______________________________________________

(1) For the year ended September 30, 2016.

A troubled debt restructured loan ("TDR") 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-amortizations, extensions, deferrals and renewals. TDR loans are considered impaired and are individually evaluated for impairment. TDR loans are classified as either accrual or non-accrual. TDR 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 $7.98 million and $8.16 million in TDR loans included in impaired loans at December 31, 2016 and September 30, 2016, respectively, and had no commitments at these dates to lend additional funds on these loans. The allowance for loan losses allocated to TDR loans at December 31, 2016 and September 30, 2016 was $462,000 and $465,000, respectively. There were no TDR loans which incurred a payment default within 12 months of the restructure date during the three months ended December 31, 2016.

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



	December 31, 2016
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	1,344	$	—	$	1,344
Commercial	5,232		—		5,232
Land	713		252		965
Consumer loans:
Home equity and second mortgage	290		152		442
Total	$	7,579	$	404	$	7,983



	September 30, 2016
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	1,350	$	126	$	1,476
Commercial	5,268		—		5,268
Land	720		253		973
Consumer loans:
Home equity and second mortgage	291		152		443
Total	$	7,629	$	531	$	8,160

The were no new TDR loans during the three months ended December 31, 2016 or the year ended September 30, 2016.

- 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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