Loans Receivable And Allowance For Loan Losses

3 Months Ended

Dec. 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 December 31, 2017 and September 30, 2017 (dollars in thousands):



	December 31, 2017				September 30, 2017
	Amount		Percent		Amount		Percent
Mortgage loans:
One- to four-family (1)	$	116,976	14.6	%	$	118,147	15.1	%
Multi-family	61,366		7.7		58,607		7.5
Commercial	333,085		41.8		328,927		41.9
Construction - custom and owner/builder	123,365		15.5		117,641		15.0
Construction - speculative one- to four-family	7,253		0.9		9,918		1.2
Construction - commercial	22,000		2.8		19,630		2.5
Construction - multi-family	24,601		3.1		21,327		2.7
Land	21,122		2.7		23,910		3.0
Total mortgage loans	709,768		89.1		698,107		88.9

Consumer loans:
Home equity and second mortgage	38,975		4.9		38,420		4.9
Other	4,050		0.5		3,823		0.5
Total consumer loans	43,025		5.4		42,243		5.4

Commercial business loans (2)	43,993		5.5		44,444		5.7

Total loans receivable	796,786		100.0	%	784,794		100.0	%
Less:
Undisbursed portion of construction loans in process	79,449				82,411
Deferred loan origination fees, net	2,504				2,466
Allowance for loan losses	9,565				9,553
	91,518				94,430
Loans receivable, net	$	705,268			$	690,364
_____________________________
(1) Does not include one- to four-family loans held for sale totaling $3,236 and $3,515 at December 31, 2017 and September 30, 2017, respectively.
(2) Does not include commercial business loans held for sale totaling $171 and $84 at December 31, 2017 and September 30, 2017, respectively.

Allowance for Loan Losses

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



	Three Months Ended December 31, 2017
	Beginning Allowance		Provision for (Recapture of) Loan Losses			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One- to four-family	$	1,082	$	43		$	—		$	—	$	1,125
Multi-family	447		(17		)	—			—		430
Commercial	4,184		(91		)	—			—		4,093
Construction – custom and owner/builder	699		89			—			—		788
Construction – speculative one- to four-family	128		(61		)	—			8		75
Construction – commercial	303		93			—			—		396
Construction – multi-family	173		55			—			—		228
Land	918		(142		)	—			4		780
Consumer loans:
Home equity and second mortgage	983		(25		)	—			—		958
Other	121		8			(1		)	1		129
Commercial business loans	515		48			—			—		563
Total	$	9,553	$	—		$	(1	)	$	13	$	9,565



	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

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, 2017 and September 30, 2017 (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, 2017
Mortgage loans:
One- to four-family	$	1	$	1,124	$	1,125	$	1,467	$	115,509	$	116,976
Multi-family	—		430		430		—		61,366		61,366
Commercial	16		4,077		4,093		4,044		329,041		333,085
Construction – custom and owner/builder	—		788		788		—		71,548		71,548
Construction – speculative one- to four-family	—		75		75		—		2,723		2,723
Construction – commercial	—		396		396		—		14,390		14,390
Construction – multi-family	—		228		228		—		9,109		9,109
Land	72		708		780		944		20,178		21,122
Consumer loans:
Home equity and second mortgage	291		667		958		484		38,491		38,975
Other	—		129		129				4,050		4,050
Commercial business loans	55		508		563		181		43,812		43,993
Total	$	435	$	9,130	$	9,565	$	7,120	$	710,217	$	717,337


September 30, 2017
Mortgage loans:
One- to four-family	$	—	$	1,082	$	1,082	$	1,443	$	116,704	$	118,147
Multi-family	—		447		447		—		58,607		58,607
Commercial	26		4,158		4,184		3,873		325,054		328,927
Construction – custom and owner/builder	—		699		699		—		63,538		63,538
Construction – speculative one- to four-family	—		128		128		—		4,639		4,639
Construction – commercial	—		303		303		—		11,016		11,016
Construction – multi-family	—		173		173		—		6,912		6,912
Land	125		793		918		1,119		22,791		23,910
Consumer loans:
Home equity and second mortgage	325		658		983		557		37,863		38,420
Other	—		121		121		—		3,823		3,823
Commercial business loans	—		515		515		—		44,444		44,444
Total	$	476	$	9,077	$	9,553	$	6,992	$	695,391	$	702,383

The following tables present an analysis of loans by aging category and portfolio segment at December 31, 2017 and September 30, 2017 (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, 2017
Mortgage loans:
One- to four-family	$	325	$	—	$	947	$	—	$	1,272	$	115,704	$	116,976
Multi-family	—		—		—		—		—		61,366		61,366
Commercial	502		—		402		—		904		332,181		333,085
Construction – custom and owner/builder	—		—		—		—		—		71,548		71,548
Construction – speculative one- to four- family	—		—		—		—		—		2,723		2,723
Construction – commercial	—		—		—		—		—		14,390		14,390
Construction – multi-family	—		—		—		—		—		9,109		9,109
Land	43		—		395		—		438		20,684		21,122
Consumer loans:
Home equity and second mortgage	101		—		188		—		289		38,686		38,975
Other	—		36		—		—		36		4,014		4,050
Commercial business loans	—		—		181		—		181		43,812		43,993
Total	$	971	$	36	$	2,113	$	—	$	3,120	$	714,217	$	717,337


September 30, 2017
Mortgage loans:
One- to four-family	$	193	$	—	$	874	$	—	$	1,067	$	117,080	$	118,147
Multi-family	—		—		—		—		—		58,607		58,607
Commercial	—		107		213		—		320		328,607		328,927
Construction – custom and owner/ builder	—		—		—		—		—		63,538		63,538
Construction – speculative one- to four- family	—		—		—		—		—		4,639		4,639
Construction – commercial	—		—		—		—		—		11,016		11,016
Construction – multi-family	—		—		—		—		—		6,912		6,912
Land	—		—		566		—		566		23,344		23,910
Consumer loans:
Home equity and second mortgage	56		—		258		—		314		38,106		38,420
Other	36		—		—		—		36		3,787		3,823
Commercial business loans	110		—		—		—		110		44,334		44,444
Total	$	395	$	107	$	1,911	$	—	$	2,413	$	699,970	$	702,383

______________________

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



	Loan Grades
December 31, 2017	Pass		Watch		Special Mention		Substandard		Total
Mortgage loans:
One- to four-family	$	113,235	$	902	$	595	$	2,244	$	116,976
Multi-family	61,366		—		—		—		61,366
Commercial	322,737		6,028		3,522		798		333,085
Construction – custom and owner/builder	70,989		559		—		—		71,548
Construction – speculative one- to four-family	2,723		—		—		—		2,723
Construction – commercial	14,390		—		—		—		14,390
Construction – multi-family	9,109		—		—		—		9,109
Land	17,929		1,014		1,784		395		21,122
Consumer loans:
Home equity and second mortgage	38,463		149		—		363		38,975
Other	4,014		—		—		36		4,050
Commercial business loans	43,728		29		55		181		43,993
Total	$	698,683	$	8,681	$	5,956	$	4,017	$	717,337


September 30, 2017
Mortgage loans:
One- to four-family	$	115,481	$	422	$	644	$	1,600	$	118,147
Multi-family	56,857		—		1,750		—		58,607
Commercial	318,717		6,059		3,540		611		328,927
Construction – custom and owner/builder	63,210		328		—		—		63,538
Construction – speculative one- to four-family	4,639		—		—		—		4,639
Construction – commercial	11,016		—		—		—		11,016
Construction – multi-family	6,912		—		—		—		6,912
Land	20,528		1,022		1,794		566		23,910
Consumer loans:
Home equity and second mortgage	37,828		152		—		440		38,420
Other	3,787		—		—		36		3,823
Commercial business loans	43,416		973		55		—		44,444
Total	$	682,391	$	8,956	$	7,783	$	3,253	$	702,383

Impaired Loans

A loan is considered impaired when it is probable that the Company 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, 2017 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	$	1,423	$	1,569	$	—	$	1,433	$	19	$	16
Commercial	2,151		2,151		—		2,059		24		17
Land	45		141		—		171		—		—
Consumer loans:
Home equity and second mortgage	188		188		—		156		2		2
Subtotal	3,807		4,049		—		3,819		45		35

With an allowance recorded:
Mortgage loans:
One- to four-family	44		44		1		22		—		—
Commercial	1,893		1,893		16		1,900		27		21
Land	899		899		72		861		9		8
Consumer loans:
Home equity and second mortgage	296		296		291		365		6		5
Commercial business loans	181		181		55		91		—		—
Subtotal	3,313		3,313		435		3,239		42		34

Total:
Mortgage loans:
One- to four-family	1,467		1,613		1		1,455		19		16
Commercial	4,044		4,044		16		3,959		51		38
Land	944		1,040		72		1,032		9		8
Consumer loans:
Home equity and second mortgage	484		484		291		521		8		7
Commercial business loans	181		181		55		91		—		—
Total	$	7,120	$	7,362	$	435	$	7,058	$	87	$	69

______________________________________________


(1)	For the three months ended December 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, 2017 (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	$	1,443	$	1,589	$	—	$	1,108	$	68	$	62
Commercial	1,967		1,967		—		3,901		188		143
Construction – custom and owner/builder	—		—		—		147		7		7
Land	297		410		—		512		8		6
Consumer loans:
Home equity and second mortgage	123		123		—		284		—		—
Commercial business loans	—		—		—		11		—		—
Subtotal	3,830		4,089		—		5,963		271		218

With an allowance recorded:
Mortgage loans:
One- to four-family	—		—		—		721		50		38
Commercial	1,906		1,906		26		3,326		182		144
Land	822		881		125		666		35		29
Consumer loans:
Home equity and second mortgage	434		434		325		530		29		26
Other	—		—		—		17		—		—
Subtotal	3,162		3,221		476		5,260		296		237
Total:
Mortgage loans:
One- to four-family	1,443		1,589		—		1,829		118		100
Commercial	3,873		3,873		26		7,227		370		287
Construction – custom and owner/builder	—		—		—		147		7		7
Land	1,119		1,291		125		1,178		43		35
Consumer loans:
Home equity and second mortgage	557		557		325		814		29		26
Other	—		—		—		17		—		—
Commercial business loans	—		—		—		11		—		—
Total	$	6,992	$	7,310	$	476	$	11,223	$	567	$	455

______________________________________________

(1) For the year ended September 30, 2017.

A troubled debt restructured loan ("TDR") is a loan for which the Company, for reasons related to a borrower’s financial difficulties, grants a 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. TDRs are considered impaired and are individually evaluated for impairment. TDRs are classified as non-accrual (and considered to be non-performing) unless they have been performing in accordance with modified terms for a period of at least six months. The Company had $3.48 million and $3.60 million in TDRs included in impaired loans at December 31, 2017 and September 30, 2017, respectively, and had no commitments at these dates to lend additional funds on these loans. The allowance for loan losses allocated to TDRs at December 31, 2017 and September 30, 2017 was $33,000 and $10,000, respectively. There were no TDRs for which there was a payment default within the first 12 months of the modification during the three months ended December 31, 2017.

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



	December 31, 2017
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	520	$	44	$	564
Commercial	2,214		—		2,214
Land	548		155		703
Total	$	3,282	$	199	$	3,481



	September 30, 2017
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	569	$	—	$	569
Commercial	2,219		—		2,219
Land	554		253		807
Total	$	3,342	$	253	$	3,595

There was one new TDR during the three months ended December 31, 2017 as a result of a reduction in the face amount of the debt on a land loan. This TDR had a pre-modification balance of $214,000, a post-modification balance of $155,000 and a balance at December 31, 2017 of $155,000. There were no new TDRs during the year ended September 30, 2017.

- 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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