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, September 30, 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/ — — — — — 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 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. |