Loans Receivable And Allowance For Loan Losses

6 Months Ended

Mar. 31, 2017

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 March 31, 2017 and September 30, 2016 (dollars in thousands):



	March 31, 2017				September 30, 2016
	Amount		Percent		Amount		Percent
Mortgage loans:
One- to four-family	$	122,889	16.4	%	$	118,560	16.4	%
Multi-family	63,181		8.4		62,303		8.6
Commercial	325,120		43.5		312,525		43.2
Construction - custom and owner/builder	99,304		13.3		93,049		12.9
Construction - speculative one- to four-family	5,311		0.7		8,106		1.1
Construction - commercial	10,762		1.4		9,365		1.3
Construction - multi-family	11,057		1.5		12,590		1.7
Land	25,866		3.5		21,627		3.0
Total mortgage loans	663,490		88.7		638,125		88.2

Consumer loans:
Home equity and second mortgage	38,024		5.1		39,727		5.5
Other	3,527		0.5		4,139		0.5
Total consumer loans	41,551		5.6		43,866		6.0

Commercial business loans	42,603		5.7		41,837		5.8

Total loans receivable	747,644		100.0	%	723,828		100.0	%
Less:
Undisbursed portion of construction loans in process	59,724				48,627
Deferred loan origination fees, net	2,251				2,229
Allowance for loan losses	9,590				9,826
	71,565				60,682
Loans receivable, net	$	676,079			$	663,146

Allowance for Loan Losses

The following tables set forth information for the three and six months ended March 31, 2017 and 2016 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):



	Three Months Ended March 31, 2017
	Beginning Allowance		Provision for (Recapture of) Loan Losses			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One- to four-family	$	1,177	$	(51	)	$	—		$	—	$	1,126
Multi-family	400		80			—			—		480
Commercial	4,523		(199		)	(8		)	—		4,316
Construction – custom and owner/builder	636		59			—			—		695
Construction – speculative one- to four-family	100		(15		)	—			—		85
Construction – commercial	282		(14		)	—			—		268
Construction – multi-family	385		(289		)	—			—		96
Land	836		106			—			5		947
Consumer loans:
Home equity and second mortgage	859		98			—			—		957
Other	156		(26		)	(1		)	1		130
Commercial business loans	489		1			—			—		490
Total	$	9,843	$	(250	)	$	(9	)	$	6	$	9,590



	Six Months Ended March 31, 2017
	Beginning Allowance		Provision for (Recapture of) Loan Losses			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,239	$	(134	)	$	—		$	21	$	1,126
Multi-family	473		7			—			—		480
Commercial	4,384		(55		)	(13		)	—		4,316
Construction – custom and owner/builder	619		76			—			—		695
Construction – speculative one- to four-family	130		(45		)	—			—		85
Construction – commercial	268		—			—			—		268
Construction – multi-family	316		(220		)	—			—		96
Land	820		119			(2		)	10		947
Consumer loans:
Home equity and second mortgage	939		18			—			—		957
Other	156		(24		)	(4		)	2		130
Commercial business loans	482		8			—			—		490
Total	$	9,826	$	(250	)	$	(19	)	$	33	$	9,590



	Three Months Ended March 31, 2016
	Beginning Allowance		Provision for (Recapture of) Loan Losses			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) Loan Losses			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

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, 2017 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
March 31, 2017
Mortgage loans:
One- to four-family	$	1	$	1,125	$	1,126	$	1,779	$	121,110	$	122,889
Multi-family	—		480		480		—		63,181		63,181
Commercial	108		4,208		4,316		6,252		318,868		325,120
Construction – custom and owner/builder	—		695		695		—		53,624		53,624
Construction – speculative one- to four-family	—		85		85		—		2,649		2,649
Construction – commercial	—		268		268		—		6,588		6,588
Construction – multi-family	—		96		96		—		3,849		3,849
Land	13		934		947		1,001		24,865		25,866
Consumer loans:
Home equity and second mortgage	307		650		957		974		37,050		38,024
Other	17		113		130		28		3,499		3,527
Commercial business loans	—		490		490		54		42,549		42,603
Total	$	446	$	9,144	$	9,590	$	10,088	$	677,832	$	687,920


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 March 31, 2017 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
March 31, 2017
Mortgage loans:
One- to four-family	$	143	$	—	$	820	$	—	$	963	$	121,926	$	122,889
Multi-family	—		—		—		—		—		63,181		63,181
Commercial	—		—		313		—		313		324,807		325,120
Construction – custom and owner/builder	368		—		—		—		368		53,256		53,624
Construction – speculative one- to four- family	—		—		—		—		—		2,649		2,649
Construction – commercial	—		—		—		—		—		6,588		6,588
Construction – multi-family	—		—		—		—		—		3,849		3,849
Land	38		—		296		—		334		25,532		25,866
Consumer loans:
Home equity and second mortgage	79		—		383		135		597		37,427		38,024
Other	7		—		28		—		35		3,492		3,527
Commercial business loans	—		—		54		—		54		42,549		42,603
Total	$	635	$	—	$	1,894	$	135	$	2,664	$	685,256	$	687,920


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 March 31, 2017 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 March 31, 2017 and September 30, 2016 (dollars in thousands):



	Loan Grades
March 31, 2017	Pass		Watch		Special Mention		Substandard		Total
Mortgage loans:
One- to four-family	$	119,689	$	610	$	653	$	1,937	$	122,889
Multi-family	61,406		—		1,775		—		63,181
Commercial	312,612		6,280		5,914		314		325,120
Construction – custom and owner/builder	53,256		—		—		368		53,624
Construction – speculative one- to four-family	2,649		—		—		—		2,649
Construction – commercial	6,588		—		—		—		6,588
Construction – multi-family	3,849		—		—		—		3,849
Land	22,305		1,028		2,075		458		25,866
Consumer loans:
Home equity and second mortgage	36,889		157		135		843		38,024
Other	3,469		—		—		58		3,527
Commercial business loans	42,514		35		—		54		42,603
Total	$	665,226	$	8,110	$	10,552	$	4,032	$	687,920


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 March 31, 2017 and for the three and six months then ended (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance (Loan Balance Plus Charge Off)		Related Allowance		Quarter to Date ("QTD") Average Recorded Investment (1)		Year to Date ("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	$	867	$	1,013	$	—	$	880	$	891	$	12	$	23	$	12	$	23
Commercial	2,240		3,301		—		4,566		5,566		52		164		38		125
Construction – custom and owner/ builder	—		—		—		184		245		—		7		—		7
Land	438		560		—		659		670		4		8		3		6
Consumer loans:
Home equity and second mortgage	383		574		—		385		391		—		—		—		—
Commercial business loans	54		54		—		27		18		—		—		—		—
Subtotal	3,982		5,502		—		6,701		7,781		68		202		53		161

With an allowance recorded:
Mortgage loans:
One- to four-family	912		912		1		1,105		1,186		23		49		18		38
Commercial	4,012		4,012		108		3,868		3,826		49		115		39		93
Land	563		563		13		566		569		9		19		8		15
Consumer loans:
Home equity and second mortgage	591		591		307		593		594		10		20		9		18
Other	28		28		17		29		29		—		—		—		—
Subtotal	6,106		6,106		446		6,161		6,204		91		203		74		164

Total:
Mortgage loans:
One- to four-family	1,779		1,925		1		1,985		2,077		35		72		30		61
Commercial	6,252		7,313		108		8,434		9,392		101		279		77		218
Construction – custom and owner/ builder	—		—		—		184		245		—		7		—		7
Land	1,001		1,123		13		1,225		1,239		13		27		11		21
Consumer loans:
Home equity and second mortgage	974		1,165		307		978		985		10		20		9		18
Other	28		28		17		29		29		—		—		—		—
Commercial business loans	54		54		—		27		18		—		—		—		—
Total	$	10,088	$	11,608	$	446	$	12,862	$	13,985	$	159	$	405	$	127	$	325

______________________________________________


(1)	For the three months ended March 31, 2017.


(2)	For the six months ended March 31, 2017.

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		Average Recorded Investment (1)		Interest Income Recognized (1)		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 ("TDR") 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-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 $6.83 million and $8.16 million in TDR loans included in impaired loans at March 31, 2017 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 March 31, 2017 and September 30, 2016 was $28,000 and $465,000, respectively. There were no TDR loans which incurred a payment default within 12 months of the restructure date during the six months ended March 31, 2017.

The following tables set forth information with respect to the Company’s TDR loans by interest accrual status as of March 31, 2017 and September 30, 2016 (dollars in thousands):



	March 31, 2017
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	959	$	—	$	959
Commercial	4,475		—		4,475
Land	706		252		958
Consumer loans:
Home equity and second mortgage	289		152		441
Total	$	6,429	$	404	$	6,833



	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 six months ended March 31, 2017 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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