Loans Receivable And Allowance For Loan Losses

9 Months Ended

Jun. 30, 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 June 30, 2017 and September 30, 2016 (dollars in thousands):



	June 30, 2017				September 30, 2016
	Amount		Percent		Amount		Percent
Mortgage loans:
One- to four-family (a)	$	121,705	15.8	%	$	118,560	16.4	%
Multi-family	61,051		7.9		62,303		8.6
Commercial	331,901		43.0		312,525		43.2
Construction - custom and owner/builder	109,578		14.3		93,049		12.9
Construction - speculative one- to four-family	8,002		1.0		8,106		1.1
Construction - commercial	20,067		2.6		9,365		1.3
Construction - multi-family	11,057		1.4		12,590		1.7
Land	24,333		3.2		21,627		3.0
Total mortgage loans	687,694		89.2		638,125		88.2

Consumer loans:
Home equity and second mortgage	36,320		4.7		39,727		5.5
Other	3,789		0.5		4,139		0.5
Total consumer loans	40,109		5.2		43,866		6.0

Commercial business loans	43,407		5.6		41,837		5.8

Total loans receivable	771,210		100.0	%	723,828		100.0	%
Less:
Undisbursed portion of construction loans in process	72,133				48,627
Deferred loan origination fees, net	2,309				2,229
Allowance for loan losses	9,610				9,826
	84,052				60,682
Loans receivable, net	$	687,158			$	663,146
_____________________________
(a) Does not include one- to four-family loans held for sale totaling $3,523 and $3,604 at June 30, 2017 and September 30, 2016, respectively.

Allowance for Loan Losses

The following tables set forth information for the three and nine months ended June 30, 2017 and 2016 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):



	Three Months Ended June 30, 2017
	Beginning Allowance		Provision for (Recapture of) Loan Losses			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One- to four-family	$	1,126	$	(11	)	$	—		$	—	$	1,115
Multi-family	480		(16		)	—			—		464
Commercial	4,316		(1,040		)	—			1,061		4,337
Construction – custom and owner/builder	695		17			—			—		712
Construction – speculative one- to four-family	85		(15		)	—			5		75
Construction – commercial	268		15			—			—		283
Construction – multi-family	96		36			—			—		132
Land	947		1			(49		)	5		904
Consumer loans:
Home equity and second mortgage	957		(2		)	—			—		955
Other	130		6			(2		)	—		134
Commercial business loans	490		9			—			—		499
Total	$	9,590	$	(1,000	)	$	(51	)	$	1,071	$	9,610



	Nine Months Ended June 30, 2017
	Beginning Allowance		Provision for (Recapture of) Loan Losses			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,239	$	(145	)	$	—		$	21	$	1,115
Multi-family	473		(9		)	—			—		464
Commercial	4,384		(1,095		)	(13		)	1,061		4,337
Construction – custom and owner/builder	619		93			—			—		712
Construction – speculative one- to four-family	130		(60		)	—			5		75
Construction – commercial	268		15			—			—		283
Construction – multi-family	316		(184		)	—			—		132
Land	820		120			(51		)	15		904
Consumer loans:
Home equity and second mortgage	939		16			—			—		955
Other	156		(18		)	(6		)	2		134
Commercial business loans	482		17			—			—		499
Total	$	9,826	$	(1,250	)	$	(70	)	$	1,104	$	9,610



	Three Months Ended June 30, 2016
	Beginning Allowance		Provision for (Recapture of) Loan Losses			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) Loan Losses			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,480	$	(267	)	$	(55	)	$	56	$	1,214
Multi-family	392		(44)			—			—		348
Commercial	4,065		118			(209		)	—		3,974
Construction – custom and owner/builder	451		184			—			—		635
Construction – speculative one- to four-family	123		(4)			—			2		121
Construction – commercial	426		198			—			—		624
Construction – multi-family	283		(77		)	—			181		387
Land	1,021		(63)			(58		)	19		919
Consumer loans:
Home equity and second mortgage	1,073		(94)			(18		)	—		961
Other	187		(25)			(7		)	2		157
Commercial business loans	423		74			—			5		502
Total	$	9,924	$	—		$	(347	)	$	265	$	9,842

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, 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
June 30, 2017
Mortgage loans:
One- to four-family	$	—	$	1,115	$	1,115	$	1,469	$	120,236	$	121,705
Multi-family	—		464		464		—		61,051		61,051
Commercial	20		4,317		4,337		4,084		327,817		331,901
Construction – custom and owner/builder	—		712		712		—		59,352		59,352
Construction – speculative one- to four-family	—		75		75		—		2,506		2,506
Construction – commercial	—		283		283		—		9,417		9,417
Construction – multi-family	—		132		132		—		5,296		5,296
Land	89		815		904		1,054		23,279		24,333
Consumer loans:
Home equity and second mortgage	320		635		955		560		35,760		36,320
Other	—		134		134		—		3,789		3,789
Commercial business loans	—		499		499		—		43,407		43,407
Total	$	429	$	9,181	$	9,610	$	7,167	$	691,910	$	699,077


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 June 30, 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
June 30, 2017
Mortgage loans:
One- to four-family	$	—	$	4	$	896	$	—	$	900	$	120,805	$	121,705
Multi-family	—		—		—		—		—		61,051		61,051
Commercial	108		—		403		—		511		331,390		331,901
Construction – custom and owner/builder	—		—		—		—		—		59,352		59,352
Construction – speculative one- to four- family	—		—		—		—		—		2,506		2,506
Construction – commercial	—		—		—		—		—		9,417		9,417
Construction – multi-family	—		—		—		—		—		5,296		5,296
Land	—		102		496		—		598		23,735		24,333
Consumer loans:
Home equity and second mortgage	—		87		260		—		347		35,973		36,320
Other	68		—		—		—		68		3,721		3,789
Commercial business loans	—		17		—		—		17		43,390		43,407
Total	$	176	$	210	$	2,055	$	—	$	2,441	$	696,636	$	699,077


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



	Loan Grades
June 30, 2017	Pass		Watch		Special Mention		Substandard		Total
Mortgage loans:
One- to four-family	$	118,923	$	507	$	648	$	1,627	$	121,705
Multi-family	59,289		—		1,762		—		61,051
Commercial	321,664		6,274		3,560		403		331,901
Construction – custom and owner/builder	59,352		—		—		—		59,352
Construction – speculative one- to four-family	2,506		—		—		—		2,506
Construction – commercial	9,417		—		—		—		9,417
Construction – multi-family	5,296		—		—		—		5,296
Land	20,955		1,030		1,807		541		24,333
Consumer loans:
Home equity and second mortgage	35,661		155		55		449		36,320
Other	3,723		—		—		66		3,789
Commercial business loans	43,374		33		—		—		43,407
Total	$	680,160	$	7,999	$	7,832	$	3,086	$	699,077


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 June 30, 2017 and for the three and nine 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	$	1,423	$	1,570	$	—	$	1,145	$	1,024	$	23	$	46	$	20	$	43
Commercial	839		839		—		1,540		4,384		2		166		2		127
Construction – custom and owner/ builder	—		—		—		—		184		—		7		—		7
Land	252		369		—		345		566		—		8		—		6
Consumer loans:
Home equity and second mortgage	125		125		—		254		324		—		—		—		—
Commercial business loans	—		—		—		27		14		—		—		—		—
Subtotal	2,639		2,903		—		3,311		6,496		25		227		22		183

With an allowance recorded:
Mortgage loans:
One- to four-family	46		46		—		479		901		1		50		1		38
Commercial	3,245		3,245		20		3,629		3,681		45		159		35		128
Land	802		802		89		683		627		9		28		7		23
Consumer loans:
Home equity and second mortgage	435		435		320		513		554		5		25		5		23
Other	—		—		—		14		22		—		—		—		—
Subtotal	4,528		4,528		429		5,318		5,785		60		262		48		212

Total:
Mortgage loans:
One- to four-family	1,469		1,616		—		1,624		1,925		24		96		21		81
Commercial	4,084		4,084		20		5,169		8,065		47		325		37		255
Construction – custom and owner/ builder	—		—		—		—		184		—		7		—		7
Land	1,054		1,171		89		1,028		1,193		9		36		7		29
Consumer loans:
Home equity and second mortgage	560		560		320		767		878		5		25		5		23
Other	—		—		—		14		22		—		—		—		—
Commercial business loans	—		—		—		27		14		—		—		—		—
Total	$	7,167	$	7,431	$	429	$	8,629	$	12,281	$	85	$	489	$	70	$	395

______________________________________________


(1)	For the three months ended June 30, 2017.


(2)	For the nine months ended June 30, 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 $3.61 million and $8.16 million in TDR loans included in impaired loans at June 30, 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 June 30, 2017 and September 30, 2016 was $9,000 and $465,000, respectively. There were no TDR loans which incurred a payment default within 12 months of the restructure date during the nine months ended June 30, 2017.

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



	June 30, 2017
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	573	$	—	$	573
Commercial	2,229		—		2,229
Land	559		252		811
Total	$	3,361	$	252	$	3,613



	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 nine months ended June 30, 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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