Loans Receivable And Allowance For Loan Losses

9 Months Ended

Jun. 30, 2018

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, 2018 and September 30, 2017 (dollars in thousands):



	June 30, 2018				September 30, 2017
	Amount		Percent		Amount		Percent
Mortgage loans:
One- to four-family (1)	$	114,148	14.4	%	$	118,147	15.1	%
Multi-family	58,169		7.3		58,607		7.5
Commercial	345,543		43.5		328,927		41.9
Construction - custom and owner/builder	113,468		14.3		117,641		15.0
Construction - speculative one- to four-family	10,146		1.3		9,918		1.2
Construction - commercial	26,347		3.3		19,630		2.5
Construction - multi-family	15,225		1.9		21,327		2.7
Construction - land development	3,190		0.4		—		—
Land	23,662		3.0		23,910		3.0
Total mortgage loans	709,898		89.4		698,107		88.9

Consumer loans:
Home equity and second mortgage	38,143		4.8		38,420		4.9
Other	3,674		0.4		3,823		0.5
Total consumer loans	41,817		5.2		42,243		5.4

Commercial business loans (2)	43,284		5.4		44,444		5.7

Total loans receivable	794,999		100.0	%	784,794		100.0	%
Less:
Undisbursed portion of construction loans in process	65,674				82,411
Deferred loan origination fees, net	2,469				2,466
Allowance for loan losses	9,532				9,553
	77,675				94,430
Loans receivable, net	$	717,324			$	690,364
_____________________________
(1) Does not include one- to four-family loans held for sale totaling $2,321 and $3,515 at June 30, 2018 and September 30, 2017, respectively.
(2) Does not include commercial business loans held for sale totaling $0 and $84 at June 30, 2018 and September 30, 2017, respectively.

Allowance for Loan Losses

The following tables set forth information for the three and nine months ended June 30, 2018 and 2017 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands):



	Three Months Ended June 30, 2018
	Beginning Allowance		Provision for (Recapture of) Loan Losses			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One- to four-family	$	1,060	$	(33	)	$	—		$	—	$	1,027
Multi-family	386		21			—			—		407
Commercial	4,198		(15		)	—			—		4,183
Construction – custom and owner/builder	705		(38		)	—			—		667
Construction – speculative one- to four-family	99		34			—			—		133
Construction – commercial	445		74			—			—		519
Construction – multi-family	284		(137		)	—			—		147
Construction – land development	48		32			—			—		80
Land	691		64			(16		)	5		744
Consumer loans:
Home equity and second mortgage	945		1			—			—		946
Other	120		2			(1		)	—		121
Commercial business loans	563		(5		)	—			—		558
Total	$	9,544	$	—		$	(17	)	$	5	$	9,532



	Nine Months Ended June 30, 2018
	Beginning Allowance		Provision for (Recapture of) Loan Losses			Charge- offs			Recoveries		Ending Allowance
Mortgage loans:
One-to four-family	$	1,082	$	(55	)	$	—		$	—	$	1,027
Multi-family	447		(40		)	—			—		407
Commercial	4,184		27			(28		)	—		4,183
Construction – custom and owner/builder	699		(32		)	—			—		667
Construction – speculative one- to four-family	128		(6		)	—			11		133
Construction – commercial	303		216			—			—		519
Construction – multi-family	173		(26		)	—			—		147
Construction – land development	—		80			—			—		80
Land	918		(172		)	(16		)	14		744
Consumer loans:
Home equity and second mortgage	983		(37		)	—			—		946
Other	121		2			(3		)	1		121
Commercial business loans	515		43			—			—		558
Total	$	9,553	$	—		$	(47	)	$	26	$	9,532



	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

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, 2018 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
June 30, 2018
Mortgage loans:
One- to four-family	$	—	$	1,027	$	1,027	$	1,873	$	112,275	$	114,148
Multi-family	—		407		407		—		58,169		58,169
Commercial	—		4,183		4,183		2,801		342,742		345,543
Construction – custom and owner/builder	—		667		667		—		66,651		66,651
Construction – speculative one- to four-family	—		133		133		—		5,312		5,312
Construction – commercial	—		519		519		—		21,640		21,640
Construction – multi-family	—		147		147		—		6,526		6,526
Construction – land development	—		80		80		—		2,573		2,573
Land	—		744		744		540		23,122		23,662
Consumer loans:
Home equity and second mortgage	297		649		946		570		37,573		38,143
Other	—		121		121				3,674		3,674
Commercial business loans	61		497		558		174		43,110		43,284
Total	$	358	$	9,174	$	9,532	$	5,958	$	723,367	$	729,325


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 June 30, 2018 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
June 30, 2018
Mortgage loans:
One- to four-family	$	—	$	—	$	1,361	$	—	$	1,361	$	112,787	$	114,148
Multi-family	—		—		—		—		—		58,169		58,169
Commercial	103		—		598		—		701		344,842		345,543
Construction – custom and owner/builder	—		—		—		—		—		66,651		66,651
Construction – speculative one- to four- family	—		—		—		—		—		5,312		5,312
Construction – commercial	—		—		—		—		—		21,640		21,640
Construction – multi-family	—		—		—		—		—		6,526		6,526
Construction – land development	—		—		—		—		—		2,573		2,573
Land	42		—		295		—		337		23,325		23,662
Consumer loans:
Home equity and second mortgage	34		—		278		428		740		37,403		38,143
Other	4		—		—		—		4		3,670		3,674
Commercial business loans	110		—		174		—		284		43,000		43,284
Total	$	293	$	—	$	2,706	$	428	$	3,427	$	725,898	$	729,325


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 June 30, 2018 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 June 30, 2018 and September 30, 2017 (dollars in thousands):



	Loan Grades
June 30, 2018	Pass		Watch		Special Mention		Substandard		Total
Mortgage loans:
One- to four-family	$	110,784	$	888	$	587	$	1,889	$	114,148
Multi-family	58,169		—		—		—		58,169
Commercial	335,497		5,961		3,199		886		345,543
Construction – custom and owner/builder	65,739		912		—		—		66,651
Construction – speculative one- to four-family	5,312		—		—		—		5,312
Construction – commercial	21,640		—		—		—		21,640
Construction – multi-family	6,526		—		—		—		6,526
Construction – land development	2,573		—		—		—		2,573
Land	20,610		996		1,761		295		23,662
Consumer loans:
Home equity and second mortgage	37,559		144		—		440		38,143
Other	3,639		—		—		35		3,674
Commercial business loans	43,037		24		49		174		43,284
Total	$	711,085	$	8,925	$	5,596	$	3,719	$	729,325


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 June 30, 2018 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	$	1,873	$	2,020	$	—	$	1,596	$	1,514	$	21	$	62	$	18	$	53
Commercial	2,801		2,801		—		2,690		2,374		38		114		31		93
Land	540		644		—		493		332		5		11		5		10
Consumer loans:
Home equity and second mortgage	195		195		—		190		173		—		3		—		3
Subtotal	5,409		5,660		—		4,969		4,393		64		190		54		159

With an allowance recorded:
Mortgage loans:
One- to four-family	—		—		—		—		11		—		—		—		—
Commercial	—		—		—		—		950		—		27		—		21
Land	—				—		98		479		—		9		—		8
Consumer loans:
Home equity and second mortgage	375		375		297		335		350		5		16		3		13
Commercial business loans	174		174		61		178		134		—		—		—		—
Subtotal	549		549		358		611		1,924		5		52		3		42

Total:
Mortgage loans:
One- to four-family	1,873		2,020		—		1,596		1,525		21		62		18		53
Commercial	2,801		2,801		—		2,690		3,324		38		141		31		114
Land	540		644		—		591		811		5		20		5		18
Consumer loans:
Home equity and second mortgage	570		570		297		525		523		5		19		3		16
Commercial business loans	174		174		61		178		134		—		—		—		—
Total	$	5,958	$	6,209	$	358	$	5,580	$	6,317	$	69	$	242	$	57	$	201

______________________________________________


(1)	For the three months ended June 30, 2018.


(2)	For the nine months ended June 30, 2018.

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 $3.12 million and $3.60 million in TDRs included in impaired loans at June 30, 2018 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 June 30, 2018 and September 30, 2017 was $0 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 nine months ended June 30, 2018.

The following tables set forth information with respect to the Company’s TDRs by interest accrual status as of June 30, 2018 and September 30, 2017 (dollars in thousands):



	June 30, 2018
	Accruing		Non- Accrual		Total
Mortgage loans:
One- to four-family	$	512	$	—	$	512
Commercial	2,203		—		2,203
Land	245		155		400
Total	$	2,960	$	155	$	3,115



	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 nine months ended June 30, 2018 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 June 30, 2018 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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