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Fair Value Measurements | 6 Months Ended
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Mar. 31, 2018
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS GAAP defines fair value and establishes a framework for measuring fair value. Fair value is the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The three levels for categorizing assets and liabilities under GAAP's fair value measurement requirements are as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: Significant observable inputs other than quoted prices included within Level 1, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions market participants would use in pricing an asset or liability based on the best information available in the circumstances. The Company's assets measured at fair value on a recurring basis consist of investment securities available for sale. The estimated fair values of MBS are based upon market prices of similar securities or observable inputs (Level 2). The estimated fair values of mutual funds are based upon quoted market prices (Level 1). The Company had no liabilities measured at fair value on a recurring basis at March 31, 2018 and September 30, 2017. The Company's assets measured at estimated fair value on a recurring basis at March 31, 2018 and September 30, 2017 were as follows (dollars in thousands):
March 31, 2018 | Estimated Fair Value |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Available for sale investment securities |  |  |  |  |  |  |
MBS: U.S. government agencies | $ | — |  |  | $ | 262 |  |  | $ | — |  |  | $ | 262 |
Mutual funds | 931 |  |  | — |  |  | — |  |  | 931 |
Total | $ | 931 |  |  | $ | 262 |  |  | $ | — |  |  | $ | 1,193 |
September 30, 2017 | Estimated Fair Value |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Available for sale investment securities |  |  |  |  |  |  |
MBS: U.S. government agencies | $ | — |  |  | $ | 289 |  |  | $ | — |  |  | $ | 289 |
Mutual funds | 952 |  |  | — |  |  | — |  |  | 952 |
Total | $ | 952 |  |  | $ | 289 |  |  | $ | — |  |  | $ | 1,241 |
There were no transfers among Level 1, Level 2 and Level 3 during the six months ended March 31, 2018 and the year ended September 30, 2017. The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. The Company uses the following methods and significant assumptions to estimate fair value on a non-recurring basis: Impaired Loans: The estimated fair value of impaired loans is calculated using the collateral value method or on a discounted cash flow basis. The specific reserve for collateral dependent impaired loans is based on the estimated fair value of the collateral less estimated costs to sell, if applicable. In some cases, adjustments are made to the appraised values due to various factors including age of the appraisal, age of comparables included in the appraisal and known changes in the market and in the collateral. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Investment Securities Held to Maturity: The estimated fair value of investment securities held to maturity is based upon the assumptions market participants would use in pricing the investment security. Such assumptions include quoted market prices (Level 1), market prices of similar securities or observable inputs (Level 2) and unobservable inputs such as dealer quotes, discounted cash flows or similar techniques (Level 3). OREO and Other Repossessed Assets, net: OREO and other repossessed assets are recorded at estimated fair value less estimated costs to sell. Estimated fair value is generally determined by management based on a number of factors, including third-party appraisals of estimated fair value in an orderly sale. Estimated costs to sell are based on standard market factors. The valuation of OREO and other repossessed assets is subject to significant external and internal judgment (Level 3). The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at March 31, 2018 (dollars in thousands):
| Estimated Fair Value
| Level 1 |  | Level 2 |  | Level 3
Impaired loans: |  |  |  |  |
Mortgage loans: |  |  |  |  |
Land | $ | — |  |  | $ | — |  |  | $ | 155 |
Consumer loans: |  |  |  |  |
Home equity and second mortgage | — |  |  | — |  |  | 1 |
Commercial business loans | — |  |  | — |  |  | 118 |
Total impaired loans | — |  |  | — |  |  | 274 |
Investment securities – held to maturity: |  |  |  |  |  |  |  |
MBS - private label residential | — |  |  | 9 |  |  | — |
OREO and other repossessed assets | — |  |  | — |  |  | 2,221 |
Total | $ | — |  |  | $ | 9 |  |  | $ | 2,495 |
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis as of March 31, 2018 (dollars in thousands):
| Estimated Fair Value |  | Valuation Technique(s) |  | Unobservable Input(s) |  | Range
Impaired loans | $ | 274 |  |  | Market approach |  | Appraised value less selling costs |  | NA
OREO and other repossessed assets | $ | 2,221 |  |  | Market approach |  | Lower of appraised value or listing price less selling costs |  | NA
The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at September 30, 2017 (dollars in thousands):
| Estimated Fair Value
| Level 1 |  | Level 2 |  | Level 3
Impaired loans: |  |  |  |  |
Mortgage loans: |  |  |  |  |
Commercial | $ | — |  |  | $ | — |  |  | $ | 1,880 |
Land | — |  |  | — |  |  | 697 |
Consumer loans: |  |  |  |  |  |  |  |
Home equity and second mortgage | — |  |  | — |  |  | 109 |
Total impaired loans | — |  |  | — |  |  | 2,686 |
Investment securities – held to maturity: |  |  |  |  |  |  |  |
MBS - private label residential | — |  |  | 125 |  |  | — |
OREO and other repossessed assets | — |  |  | — |  |  | 3,301 |
Total | $ | — |  |  | $ | 125 |  |  | $ | 5,987 |
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis as of September 30, 2017 (dollars in thousands):
| Estimated Fair Value |  | Valuation Technique(s) |  | Unobservable Input(s) |  | Range
Impaired loans | $ | 2,686 |  |  | Market approach |  | Appraised value less selling costs |  | NA
OREO and other repossessed assets | $ | 3,301 |  |  | Market approach |  | Lower of appraised value or listing price less selling costs |  | NA
GAAP requires disclosure of estimated fair values for financial instruments. Such estimates are subjective in nature, and significant judgment is required regarding the risk characteristics of various financial instruments at a discrete point in time. Therefore, such estimates could vary significantly if assumptions regarding uncertain factors were to change. In addition, as the Company normally intends to hold the majority of its financial instruments until maturity, it does not expect to realize many of the estimated amounts disclosed. The disclosures also do not include estimated fair value amounts for certain items which are not defined as financial instruments but which may have significant value. The Company does not believe that it would be practicable to estimate a representational fair value for these types of items as of March 31, 2018 and September 30, 2017. Because GAAP excludes certain items from fair value disclosure requirements, any aggregation of the fair value amounts presented would not represent the underlying value of the Company. The following methods and assumptions were used by the Company in estimating fair value of its other financial instruments: Cash and Cash Equivalents and CDs Held for Investment: The estimated fair value of financial instruments that are short-term or re-price frequently and that have little or no risk are considered to have an estimated fair value equal to the recorded value. Investment Securities: See descriptions above. FHLB Stock: No ready market exists for this stock, and it has no quoted market value. However, redemption of this stock has historically been at par value. Accordingly, par value is deemed to be a reasonable estimate of fair value. Other Investments: The Bank invests in the Solomon Hess SBA Loan Fund LLC. Shares in the fund are not publicly traded and therefore have no readily determinable fair market value, therefore they are recorded on the balance sheet at cost. An investor can have its investment in the funds redeemed for the balance of its capital account at any quarter end with 60 days notice to the fund. Loans Held for Sale: The estimated fair value is based on quoted market prices (for one-to four-family loans) and the guaranteed value of U.S. Small Business Administration ("SBA") loans (made to small businesses under the SBA's 7(a) loan programs). Quoted market prices are obtained from the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the FHLB. Loans Receivable, Net: The fair value of non-impaired loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers for the same remaining maturities. Prepayments are based on the historical experience of the Bank. Fair values for impaired loans are estimated using the methods described above. Accrued Interest: The recorded amount of accrued interest approximates the estimated fair value. Deposits: The estimated fair value of deposits with no stated maturity date is deemed to be the amount payable on demand. The estimated fair value of fixed maturity certificates of deposit is computed by discounting future cash flows using the rates currently offered by the Bank for deposits of similar remaining maturities. Off-Balance-Sheet Instruments: Since the majority of the Company’s off-balance-sheet instruments consist of variable-rate commitments, the Company has determined that they do not have a distinguishable estimated fair value. The recorded amounts and estimated fair values of financial instruments were as follows as of March 31, 2018 and September 30, 2017 (dollars in thousands):
| March 31, 2018
|  |  | Fair Value Measurements Using:
| Recorded Amount |  | Estimated Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Financial assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 169,405 |  |  | $ | 169,405 |  |  | $ | 169,405 |  |  | $ | — |  |  | $ | — |
CDs held for investment | 52,938 |  |  | 52,938 |  |  | 52,938 |  |  | — |  |  | — |
Investment securities | 9,263 |  |  | 9,746 |  |  | 3,869 |  |  | 5,877 |  |  | — |
FHLB stock | 1,107 |  |  | 1,107 |  |  | 1,107 |  |  | — |  |  | — |
Other investments | 3,000 |  |  | 3,000 |  |  | 3,000 |  |  | — |  |  | — |
Loans held for sale | 3,981 |  |  | 4,047 |  |  | 4,047 |  |  | — |  |  | — |
Loans receivable, net | 708,568 |  |  | 696,663 |  |  | — |  |  | — |  |  | 696,663 |
Accrued interest receivable | 2,655 |  |  | 2,655 |  |  | 2,655 |  |  | — |  |  | — |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |  |
Non-interest-bearing demand | 222,302 |  |  | 222,302 |  |  | 222,302 |  |  | — |  |  | — |
Interest-bearing | 658,109 |  |  | 658,256 |  |  | 516,032 |  |  | — |  |  | 142,224 |
Total deposits | 880,411 |  |  | 880,558 |  |  | 738,334 |  |  | — |  |  | 142,224 |
Accrued interest payable | 184 |  |  | 184 |  |  | 184 |  |  | — |  |  | — |
| September 30, 2017
|  |  | Fair Value Measurements Using:
| Recorded Amount |  | Estimated Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Financial assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 148,188 |  |  | $ | 148,188 |  |  | $ | 148,188 |  |  | $ | — |  |  | $ | — |
CDs held for investment | 43,034 |  |  | 43,034 |  |  | 43,034 |  |  | — |  |  | — |
Investment securities | 8,380 |  |  | 8,985 |  |  | 3,954 |  |  | 5,031 |  |  | — |
FHLB stock | 1,107 |  |  | 1,107 |  |  | 1,107 |  |  | — |  |  | — |
Other investments | 3,000 |  |  | 3,000 |  |  | 3,000 |  |  | — |  |  | — |
Loans held for sale | 3,599 |  |  | 3,619 |  |  | 3,619 |  |  | — |  |  | — |
Loans receivable, net | 690,364 |  |  | 688,332 |  |  | — |  |  | — |  |  | 688,332 |
Accrued interest receivable | 2,520 |  |  | 2,520 |  |  | 2,520 |  |  | — |  |  | — |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |  |
Non-interest-bearing demand | 205,952 |  |  | 205,952 |  |  | 205,952 |  |  | — |  |  | — |
Interest-bearing | 631,946 |  |  | 632,629 |  |  | 492,305 |  |  | — |  |  | 140,324 |
Total deposits | 837,898 |  |  | 838,581 |  |  | 698,257 |  |  | — |  |  | 140,324 |
Accrued interest payable | 161 |  |  | 161 |  |  | 161 |  |  | — |  |  | — |
The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the estimated fair value of the Company’s financial instruments will change when interest rate levels change, and that change may either be favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to appropriately manage interest rate risk. However, borrowers with fixed interest rate obligations are less likely to prepay in a rising interest rate environment and more likely to prepay in a falling interest rate environment. Conversely, depositors who are receiving fixed interest rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors interest rates and maturities of assets and liabilities, and attempts to manage interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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