Loans Receivable And Allowance For Loan Losses | LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES Loans receivable at March 31, 2019 are reported net of unamortized discounts totaling $1.64 million. Loans receivable by portfolio segment consisted of the following at March 31, 2019 and September 30, 2018 (dollars in thousands): March 31, September 30, Amount Percent Amount Percent Mortgage loans: One- to four-family (1) $ 130,413 13.3 % $ 115,941 14.1 % Multi-family 74,816 7.6 61,928 7.5 Commercial 417,223 42.6 345,113 42.0 Construction - custom and owner/builder 120,789 12.3 119,555 14.6 Construction - speculative one- to four-family 20,014 2.0 15,433 1.9 Construction - commercial 42,157 4.4 39,590 4.8 Construction - multi-family 29,399 3.0 10,740 1.3 Construction - land development 8,782 0.9 3,040 0.4 Land 22,471 2.3 25,546 3.1 Total mortgage loans 866,064 88.4 736,886 89.8 Consumer loans: Home equity and second mortgage 41,609 4.2 37,341 4.5 Other 4,605 0.5 3,515 0.5 Total consumer loans 46,214 4.7 40,856 5.0 Commercial business loans 68,074 6.9 43,053 5.2 Total loans receivable 980,352 100.0 % 820,795 100.0 % Less: Undisbursed portion of construction loans in process 94,471 83,237 Deferred loan origination fees, net 2,856 2,637 Allowance for loan losses 9,741 9,530 107,068 95,404 Loans receivable, net $ 873,284 $ 725,391 _____________________________ (1) Does not include one- to four-family loans held for sale totaling $3,068 and $1,785 at March 31, 2019 and September 30, 2018, respectively. Allowance for Loan Losses The following tables set forth information for the three and six months ended March 31, 2019 and 2018 regarding activity in the allowance for loan losses by portfolio segment (dollars in thousands): Three Months Ended March 31, 2019 Beginning Allowance Provision for (Recapture of) Loan Losses Charge- offs Recoveries Ending Allowance Mortgage loans: One- to four-family $ 1,159 $ (72 ) $ — $ 67 $ 1,154 Multi-family 449 21 — — 470 Commercial 4,239 (267 ) — 150 4,122 Construction – custom and owner/builder 643 23 — — 666 Construction – speculative one- to four-family 206 43 — — 249 Construction – commercial 386 (2 ) — — 384 Construction – multi-family 209 63 — — 272 Construction – land development 143 101 — — 244 Land 757 (112 ) — 4 649 Consumer loans: Home equity and second mortgage 666 5 (4 ) — 667 Other 101 11 (1 ) 1 112 Commercial business loans 575 186 (9 ) — 752 Total $ 9,533 $ — $ (14 ) $ 222 $ 9,741 Six Months Ended March 31, 2019 Beginning Allowance Provision for (Recapture of) Loan Losses Charge- offs Recoveries Ending Allowance Mortgage loans: One-to four-family $ 1,086 $ 1 $ — $ 67 $ 1,154 Multi-family 433 37 — — 470 Commercial 4,248 (276 ) — 150 4,122 Construction – custom and owner/builder 671 (5 ) — — 666 Construction – speculative one- to four-family 178 71 — — 249 Construction – commercial 563 (179 ) — — 384 Construction – multi-family 135 137 — — 272 Construction – land development 49 195 — — 244 Land 844 (203 ) — 8 649 Consumer loans: Home equity and second mortgage 649 22 (4 ) — 667 Other 117 (4 ) (3 ) 2 112 Commercial business loans 557 204 (9 ) — 752 Total $ 9,530 $ — $ (16 ) $ 227 $ 9,741 Three Months Ended March 31, 2018 Beginning Allowance Provision for (Recapture of) Loan Losses Charge- offs Recoveries Ending Allowance Mortgage loans: One- to four-family $ 1,125 $ (65 ) $ — $ — $ 1,060 Multi-family 430 (44 ) — — 386 Commercial 4,093 133 (28 ) — 4,198 Construction – custom and owner/builder 788 (83 ) — — 705 Construction – speculative one- to four-family 75 21 — 3 99 Construction – commercial 396 49 — — 445 Construction – multi-family 228 56 — — 284 Construction – land development — 48 — — 48 Land 780 (94 ) — 5 691 Consumer loans: Home equity and second mortgage 958 (13 ) — — 945 Other 129 (8 ) (1 ) — 120 Commercial business loans 563 — — — 563 Total $ 9,565 $ — $ (29 ) $ 8 $ 9,544 Six Months Ended March 31, 2018 Beginning Allowance Provision for (Recapture of) Loan Losses Charge- offs Recoveries Ending Allowance Mortgage loans: One-to four-family $ 1,082 $ (22 ) $ — $ — $ 1,060 Multi-family 447 (61 ) — — 386 Commercial 4,184 42 (28 ) — 4,198 Construction – custom and owner/builder 699 6 — — 705 Construction – speculative one- to four-family 128 (40 ) — 11 99 Construction – commercial 303 142 — — 445 Construction – multi-family 173 111 — — 284 Construction – land development — 48 — — 48 Land 918 (236 ) — 9 691 Consumer loans: Home equity and second mortgage 983 (38 ) — — 945 Other 121 — (2 ) 1 120 Commercial business loans 515 48 — — 563 Total $ 9,553 $ — $ (30 ) $ 21 $ 9,544 The following tables present information on the loans evaluated individually and collectively for impairment in the allowance for loan losses by portfolio segment at March 31, 2019 and September 30, 2018 (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 March 31, 2019 Mortgage loans: One- to four-family $ — $ 1,154 $ 1,154 $ 1,069 $ 129,344 $ 130,413 Multi-family — 470 470 — 74,816 74,816 Commercial — 4,122 4,122 3,271 413,952 417,223 Construction – custom and owner/builder — 666 666 — 66,622 66,622 Construction – speculative one- to four-family — 249 249 — 11,296 11,296 Construction – commercial — 384 384 — 27,752 27,752 Construction – multi-family — 272 272 — 13,595 13,595 Construction – land development — 244 244 — 7,405 7,405 Land 77 572 649 461 22,010 22,471 Consumer loans: Home equity and second mortgage — 667 667 342 41,267 41,609 Other 9 103 112 15 4,590 4,605 Commercial business loans 145 607 752 515 67,559 68,074 Total $ 231 $ 9,510 $ 9,741 $ 5,673 $ 880,208 $ 885,881 September 30, 2018 Mortgage loans: One- to four-family $ — $ 1,086 $ 1,086 $ 1,054 $ 114,887 $ 115,941 Multi-family — 433 433 — 61,928 61,928 Commercial — 4,248 4,248 2,446 342,667 345,113 Construction – custom and owner/builder — 671 671 — 67,024 67,024 Construction – speculative one- to four-family — 178 178 — 7,107 7,107 Construction – commercial — 563 563 — 23,440 23,440 Construction – multi-family — 135 135 — 5,983 5,983 Construction – land development — 49 49 — 1,567 1,567 Land 34 810 844 243 25,303 25,546 Consumer loans: Home equity and second mortgage — 649 649 359 36,982 37,341 Other — 117 117 — 3,515 3,515 Commercial business loans 63 494 557 170 42,883 43,053 Total $ 97 $ 9,433 $ 9,530 $ 4,272 $ 733,286 $ 737,558 The following tables present an analysis of loans by aging category and portfolio segment at March 31, 2019 and September 30, 2018 (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 March 31, 2019 Mortgage loans: One- to four-family $ — $ — $ 568 $ — $ 568 $ 129,845 $ 130,413 Multi-family — — — — — 74,816 74,816 Commercial 456 — 844 — 1,300 415,923 417,223 Construction – custom and owner/builder — — — — — 66,622 66,622 Construction – speculative one- to four- family — — — — — 11,296 11,296 Construction – commercial — — — — — 27,752 27,752 Construction – multi-family — — — — — 13,595 13,595 Construction – land development 228 — — — 228 7,177 7,405 Land 11 — 461 — 472 21,999 22,471 Consumer loans: Home equity and second mortgage — 36 342 — 378 41,231 41,609 Other — — 15 — 15 4,590 4,605 Commercial business loans 99 — 515 — 614 67,460 68,074 Total $ 794 $ 36 $ 2,745 $ — $ 3,575 $ 882,306 $ 885,881 September 30, 2018 Mortgage loans: One- to four-family $ 557 $ — $ 545 $ — $ 1,102 $ 114,839 $ 115,941 Multi-family — — — — — 61,928 61,928 Commercial 574 — — — 574 344,539 345,113 Construction – custom and owner/ — — — — — 67,024 67,024 Construction – speculative one- to four- family — — — — — 7,107 7,107 Construction – commercial — — — — — 23,440 23,440 Construction – multi-family — — — — — 5,983 5,983 Construction – land development — — — — — 1,567 1,567 Land 40 — 243 — 283 25,263 25,546 Consumer loans: Home equity and second mortgage 42 — 359 — 401 36,940 37,341 Other 10 16 — — 26 3,489 3,515 Commercial business loans — — 170 — 170 42,883 43,053 Total $ 1,223 $ 16 $ 1,317 $ — $ 2,556 $ 735,002 $ 737,558 ______________________ (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 March 31, 2019 and September 30, 2018 , there were no loans classified as loss. The following tables present an analysis of loans by credit quality indicator and portfolio segment at March 31, 2019 and September 30, 2018 (dollars in thousands): Loan Grades March 31, 2019 Pass Watch Special Substandard Total Mortgage loans: One- to four-family $ 127,202 $ 699 $ 567 $ 1,945 $ 130,413 Multi-family 74,816 — — — 74,816 Commercial 406,675 8,285 696 1,567 417,223 Construction – custom and owner/builder 66,391 231 — — 66,622 Construction – speculative one- to four-family 11,296 — — — 11,296 Construction – commercial 27,752 — — — 27,752 Construction – multi-family 13,595 — — — 13,595 Construction – land development 7,178 — — 227 7,405 Land 19,806 968 1,236 461 22,471 Consumer loans: Home equity and second mortgage 40,994 79 — 536 41,609 Other 4,556 34 — 15 4,605 Commercial business loans 66,766 274 131 903 68,074 Total $ 867,027 $ 10,570 $ 2,630 $ 5,654 $ 885,881 September 30, 2018 Mortgage loans: One- to four-family $ 113,148 $ 882 $ 581 $ 1,330 $ 115,941 Multi-family 61,928 — — — 61,928 Commercial 334,908 8,375 988 842 345,113 Construction – custom and owner/builder 66,720 304 — — 67,024 Construction – speculative one- to four-family 7,107 — — — 7,107 Construction – commercial 23,440 — — — 23,440 Construction – multi-family 5,983 — — — 5,983 Construction – land development 1,567 — — — 1,567 Land 22,810 988 1,505 243 25,546 Consumer loans: Home equity and second mortgage 36,697 82 — 562 37,341 Other 3,480 — — 35 3,515 Commercial business loans 42,812 22 49 170 43,053 Total $ 720,600 $ 10,653 $ 3,123 $ 3,182 $ 737,558 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 estimated net realizable value 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 March 31, 2019 and for the three and six 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 $ 1,069 $ 1,150 $ — $ 1,042 $ 1,046 $ 17 $ 35 $ 16 $ 32 Commercial 3,271 3,271 — 2,854 2,718 40 80 32 62 Land 68 141 — 34 53 — — — — Consumer loans: Home equity and second mortgage 342 342 — 364 362 — — — — Commercial business loans 205 213 — 160 106 2 2 2 2 Subtotal 4,955 5,117 — 4,454 4,285 59 117 50 96 With an allowance recorded: Mortgage loans: Land 393 393 77 395 263 — — — — Consumer loans: Home equity and second mortgage — — — — 51 — — — — Other 15 15 9 8 5 — — — — Commercial business loans 310 310 145 248 222 — — — — Subtotal 718 718 231 651 541 — — — — Total: Mortgage loans: One- to four-family 1,069 1,150 — 1,042 1,046 17 35 16 32 Commercial 3,271 3,271 — 2,854 2,718 40 80 32 62 Land 461 534 77 429 316 — — — — Consumer loans: Home equity and second mortgage 342 342 — 364 413 — — — — Other 15 15 9 8 5 — — — — Commercial business loans 515 523 145 408 328 2 2 2 2 Total $ 5,673 $ 5,835 $ 231 $ 5,105 $ 4,826 $ 59 $ 117 $ 50 $ 96 ______________________________________________ (1) For the three months ended March 31, 2019 . (2) For the six months ended March 31, 2019. The following table is a summary of information related to impaired loans by portfolio segment as of and for the year ended September 30, 2018 (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 $ 1,054 $ 1,200 $ — $ 1,422 $ 80 $ 69 Commercial 2,446 2,446 — 2,389 121 93 Land 90 195 — 283 11 10 Consumer loans: Home equity and second mortgage 359 359 — 210 3 3 Subtotal 3,949 4,200 — 4,304 215 175 With an allowance recorded: Mortgage loans: One- to four-family — — — 9 — — Commercial — — — 760 28 21 Land 153 153 34 383 9 8 Consumer loans: Home equity and second mortgage — — — 310 16 13 Commercial business loans 170 170 63 141 — — Subtotal 323 323 97 1,603 53 42 Total: Mortgage loans: One- to four-family 1,054 1,200 — 1,431 80 69 Commercial 2,446 2,446 — 3,149 149 114 Land 243 348 34 666 20 18 Consumer loans: Home equity and second mortgage 359 359 — 520 19 16 Commercial business loans 170 170 63 141 — — Total $ 4,272 $ 4,523 $ 97 $ 5,907 $ 268 $ 217 ______________________________________________ (1) For the year ended September 30, 2018. 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 $3.23 million and $3.28 million in TDRs included in impaired loans at March 31, 2019 and September 30, 2018, respectively, and had no commitments at these dates to lend additional funds on these loans. The allowance for loan losses allocated to TDRs at March 31, 2019 and September 30, 2018 was $78,000 and $97,000 , respectively. There were no TDRs for which there was a payment default within the first 12 months of the modification during the six months ended March 31, 2019. The following tables set forth information with respect to the Company’s TDRs by interest accrual status as of March 31, 2019 and September 30, 2018 (dollars in thousands): March 31, 2019 Accruing Non- Accrual Total Mortgage loans: One- to four-family $ 501 $ 144 $ 645 Commercial 2,427 — 2,427 Commercial business loans — 155 155 Total $ 2,928 $ 299 $ 3,227 September 30, 2018 Accruing Non- Accrual Total Mortgage loans: One- to four-family $ 509 $ — $ 509 Commercial 2,446 — 2,446 Land — 153 153 Commercial business loans — 170 170 Total $ 2,955 $ 323 $ 3,278 There were no new TDRs during the six months ended March 31, 2019 . There were three new TDRs for the year ended September 30, 2018. The following table sets forth information with respect to the Company's TDRs, by portfolio segment, during the year ended September 30, 2018 (dollars in thousands): 2018 Number of Contracts Pre-Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment End of Period Balance Land loans (1) 1 $ 244 $ 155 $ 153 Commercial business loans (2) 2 183 183 170 Total 3 $ 427 $ 338 $ 323 (1) Modification was a result of a reduction in principal balance. (2) Modifications were a result of reduction in monthly payment amounts. |