Loans Receivable, Net and Allowance for Loan Losses | 6 Months Ended |
Mar. 31, 2014 |
Receivables [Abstract] | ' |
Loans Receivable, Net and Allowance for Loan Losses | ' |
7 | Loans Receivable, Net and Allowance for Loan Losses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Loans receivable consist of the following (in thousands): |
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| | March 31, | | | September 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Held for investment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 662,233 | | | $ | 686,651 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 2,853 | | | | 2,288 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 156,717 | | | | 159,469 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 10,612 | | | | 10,125 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | 40,344 | | | | 33,445 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | 39,953 | | | | 41,923 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | 2,306 | | | | 2,393 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | 915,018 | | | | 936,294 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Less allowance for loan losses | | | 8,662 | | | | 8,064 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Net loans | | $ | 906,356 | | | $ | 928,230 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Included in the March 31, 2014 balances are loans acquired from FNCB Bank, as of the acquisition date as follows: |
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Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 933 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Home equity loans and lines of credit | | | 77 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | 20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total loans | | $ | 1,030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Total | | | Individually Evaluated for | | | Loans Acquired with | | | Collectively Evaluated | | | | | | | | | | | | | | | | | | | | | |
Loans | Impairment | Deteriorated Credit Quality | for Impairment | | | | | | | | | | | | | | | | | | | | |
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March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 662,233 | | | $ | 12,634 | | | $ | 159 | | | $ | 649,440 | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 2,853 | | | | — | | | | — | | | | 2,853 | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 156,717 | | | | 18,517 | | | | 5,955 | | | | 132,245 | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 10,612 | | | | 545 | | | | 443 | | | | 9,624 | | | | | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | 40,344 | | | | — | | | | — | | | | 40,344 | | | | | | | | | | | | | | | | | | | | | |
Home Equity loans and lines of credit | | | 39,953 | | | | 272 | | | | 4 | | | | 39,677 | | | | | | | | | | | | | | | | | | | | | |
Other | | | 2,306 | | | | — | | | | — | | | | 2,306 | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | 915,018 | | | $ | 31,968 | | | $ | 6,561 | | | $ | 876,489 | | | | | | | | | | | | | | | | | | | | | |
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| | Total | | | Individually Evaluated | | | Loans Acquired with | | | Collectively Evaluated | | | | | | | | | | | | | | | | | | | | | |
Loans | for Impairment | Deteriorated Credit Quality | for Impairment | | | | | | | | | | | | | | | | | | | | |
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September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 686,651 | | | $ | 14,018 | | | $ | 271 | | | $ | 672,362 | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 2,288 | | | | — | | | | — | | | | 2,288 | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 159,469 | | | | 15,478 | | | | 6,355 | | | | 137,636 | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 10,125 | | | | 220 | | | | 502 | | | | 9,403 | | | | | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | 33,445 | | | | — | | | | — | | | | 33,445 | | | | | | | | | | | | | | | | | | | | | |
Home Equity loans and lines of credit | | | 41,923 | | | | 379 | | | | 3 | | | | 41,541 | | | | | | | | | | | | | | | | | | | | | |
Other | | | 2,393 | | | | — | | | | — | | | | 2,393 | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 936,294 | | | $ | 30,095 | | | $ | 7,131 | | | $ | 899,068 | | | | | | | | | | | | | | | | | | | | | |
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We maintain a loan review system that allows for a periodic review of our loan portfolio and the early identification of potential impaired loans. Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. Specific loan loss allowances are established for identified losses based on a review of such information. A loan evaluated for impairment is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as impaired are evaluated independently. We do not aggregate such loans for evaluation purposes. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent. |
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Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential mortgage loans for impairment disclosures, unless such loans are part of a larger relationship that is impaired, or are classified as a troubled debt restructuring. |
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A loan is considered to be a troubled debt restructuring (“TDR”) loan when the Company grants a concession to the borrower because of the borrower’s financial condition that it would not otherwise consider. Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk. TDR loans that are in compliance with their modified terms and that yield a market rate may be removed from the TDR status after a period of performance. |
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The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable. Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired. |
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| | Recorded | | | Unpaid | | | Associated | | | Average | | | Interest | | | | | | | | | | | | | | | | | |
Investment | Principal | Allowance | Recorded | Income | | | | | | | | | | | | | | | | |
| Balance | | Investment | Recognized | | | | | | | | | | | | | | | | |
March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With no specific allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 8,715 | | | $ | 10,089 | | | $ | — | | | $ | 9,855 | | | $ | 150 | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Commercial | | | 21,328 | | | | 22,592 | | | | — | | | | 20,041 | | | | 374 | | | | | | | | | | | | | | | | | |
Commercial | | | 988 | | | | 1,019 | | | | — | | | | 1,002 | | | | 6 | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | 239 | | | | 558 | | | | — | | | | 319 | | | | 2 | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
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Total | | | 31,270 | | | | 34,258 | | | | — | | | | 31,217 | | | | 532 | | | | | | | | | | | | | | | | | |
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With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 4,078 | | | | 4,387 | | | | 618 | | | | 3,235 | | | | 58 | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Commercial | | | 3,144 | | | | 3,196 | | | | 263 | | | | 2,355 | | | | — | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | 37 | | | | 45 | | | | 38 | | | | 6 | | | | — | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
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Total | | | 7,259 | | | | 7,628 | | | | 919 | | | | 5,596 | | | | 58 | | | | | | | | | | | | | | | | | |
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Total: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 12,793 | | | | 14,476 | | | | 618 | | | | 13,090 | | | | 208 | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Commercial | | | 24,472 | | | | 25,788 | | | | 263 | | | | 22,396 | | | | 374 | | | | | | | | | | | | | | | | | |
Commercial | | | 988 | | | | 1,019 | | | | — | | | | 1,002 | | | | 6 | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | 276 | | | | 603 | | | | 38 | | | | 325 | | | | 2 | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
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Total Impaired Loans | | $ | 38,529 | | | $ | 41,886 | | | $ | 919 | | | $ | 36,813 | | | $ | 590 | | | | | | | | | | | | | | | | | |
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| | Recorded | | | Unpaid | | | Associated | | | Average | | | Interest | | | | | | | | | | | | | | | | | |
Investment | Principal | Allowance | Recorded | Income | | | | | | | | | | | | | | | | |
| Balance | | Investment | Recognized | | | | | | | | | | | | | | | | |
September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With no specific allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 11,251 | | | $ | 13,013 | | | $ | — | | | $ | 9,716 | | | $ | 159 | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Commercial | | | 18,711 | | | | 20,258 | | | | — | | | | 20,751 | | | | 615 | | | | | | | | | | | | | | | | | |
Commercial | | | 722 | | | | 731 | | | | — | | | | 1,034 | | | | 9 | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | 382 | | | | 683 | | | | — | | | | 373 | | | | 3 | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | 18 | | | | — | | | | | | | | | | | | | | | | | |
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Total | | | 31,066 | | | | 34,685 | | | | — | | | | 31,892 | | | | 786 | | | | | | | | | | | | | | | | | |
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With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 3,038 | | | | 3,221 | | | | 518 | | | | 2,655 | | | | 74 | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Commercial | | | 3,122 | | | | 3,178 | | | | 301 | | | | 2,839 | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
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Total | | | 6,160 | | | | 6,399 | | | | 819 | | | | 5,494 | | | | 74 | | | | | | | | | | | | | | | | | |
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Total: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 14,289 | | | | 16,234 | | | | 518 | | | | 12,371 | | | | 233 | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Commercial | | | 21,833 | | | | 23,436 | | | | 301 | | | | 23,590 | | | | 615 | | | | | | | | | | | | | | | | | |
Commercial | | | 722 | | | | 731 | | | | — | | | | 1,034 | | | | 9 | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | 382 | | | | 683 | | | | — | | | | 373 | | | | 3 | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | 18 | | | | — | | | | | | | | | | | | | | | | | |
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Total Impaired Loans | | $ | 37,226 | | | $ | 41,084 | | | $ | 819 | | | $ | 37,386 | | | $ | 860 | | | | | | | | | | | | | | | | | |
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Management uses a ten point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. The portion of any loan that represents a specific allocation of the allowance for loan losses is placed in the Doubtful category. Any portion of a loan that has been charged off is placed in the Loss category. |
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To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Bank’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. The Bank’s Commercial Loan Officers perform an annual review of all commercial relationships $250,000 or greater. Confirmation of the appropriate risk grade is included in the review on an ongoing basis. The Bank engages an external consultant to conduct loan reviews on at least a semi-annual basis. Generally, the external consultant reviews commercial relationships greater than $500,000 and/or all criticized relationships. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance. |
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The following tables present the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of March 31, 2014 and September 30, 2013 (in thousands): |
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March 31, 2014 | | Pass | | | Special | | | Substandard | | | Doubtful | | | Total | | | | | | | | | | | | | | | | | |
Mention | | | | | | | | | | | | | | | | |
Commercial real estate loans | | $ | 126,234 | | | $ | 7,470 | | | $ | 22,707 | | | $ | 306 | | | $ | 156,717 | | | | | | | | | | | | | | | | | |
Commercial | | | 9,670 | | | | 276 | | | | 666 | | | | — | | | | 10,612 | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | 40,344 | | | | — | | | | — | | | | — | | | | 40,344 | | | | | | | | | | | | | | | | | |
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Total | | $ | 176,248 | | | $ | 7,746 | | | $ | 23,373 | | | $ | 306 | | | $ | 207,673 | | | | | | | | | | | | | | | | | |
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September 30, 2013 | | Pass | | | Special | | | Substandard | | | Doubtful | | | Total | | | | | | | | | | | | | | | | | |
Mention | | | | | | | | | | | | | | | | |
Commercial real estate loans | | $ | 129,799 | | | $ | 9,440 | | | $ | 20,230 | | | $ | — | | | $ | 159,469 | | | | | | | | | | | | | | | | | |
Commercial | | | 9,466 | | | | 436 | | | | 223 | | | | — | | | | 10,125 | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | 33,445 | | | | — | | | | — | | | | — | | | | 33,445 | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 172,710 | | | $ | 9,876 | | | $ | 20,453 | | | $ | — | | | $ | 203,039 | | | | | | | | | | | | | | | | | |
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All other loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are normally risk rated and monitored collectively on a monthly basis. These are typically loans to individuals in the consumer categories and are delineated as either performing or non-performing. The following tables present the risk ratings in the consumer categories of performing and non-performing loans at March 31, 2014 and September 30, 2013 (in thousands): |
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| | Performing | | | Non-performing | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 653,430 | | | $ | 8,803 | | | $ | 662,233 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 2,853 | | | | — | | | | 2,853 | | | | | | | | | | | | | | | | | | | | | | | | | |
Home Equity loans and lines of credit | | | 39,563 | | | | 390 | | | | 39,953 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | 2,306 | | | | — | | | | 2,306 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | 698,152 | | | $ | 9,193 | | | $ | 707,345 | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Performing | | | Non-performing | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | |
September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 675,706 | | | $ | 10,945 | | | $ | 686,651 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 2,288 | | | | — | | | | 2,288 | | | | | | | | | | | | | | | | | | | | | | | | | |
Home Equity loans and lines of credit | | | 41,584 | | | | 339 | | | | 41,923 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | 2,393 | | | | — | | | | 2,393 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | 721,971 | | | $ | 11,284 | | | $ | 733,255 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2014 and September 30, 2013 (in thousands): |
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| | Current | | | 31-60 Days | | | 61-90 Days | | | Greater than | | | Non-Accrual | | | Total Past | | | Total | | | | | | | | | |
Past Due | Past Due | 90 Days Past | Due and | Loans | | | | | | | | |
| | Due and still | Non- | | | | | | | | | |
| | accruing | Accrual | | | | | | | | | |
March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 649,512 | | | $ | 2,834 | | | $ | 1,084 | | | $ | — | | | $ | 8,803 | | | $ | 12,721 | | | $ | 662,233 | | | | | | | | | |
Construction | | | 2,853 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,853 | | | | | | | | | |
Commercial | | | 144,540 | | | | 493 | | | | — | | | | — | | | | 11,684 | | | | 12,177 | | | | 156,717 | | | | | | | | | |
Commercial | | | 9,093 | | | | 199 | | | | — | | | | — | | | | 1,320 | | | | 1,519 | | | | 10,612 | | | | | | | | | |
Obligations of states and political subdivisions | | | 40,344 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 40,344 | | | | | | | | | |
Home equity loans and lines of credit | | | 39,163 | | | | 365 | | | | 35 | | | | — | | | | 390 | | | | 790 | | | | 39,953 | | | | | | | | | |
Other | | | 2,299 | | | | 7 | | | | — | | | | — | | | | — | | | | 7 | | | | 2,306 | | | | | | | | | |
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Total | | $ | 887,804 | | | $ | 3,898 | | | $ | 1,119 | | | $ | — | | | $ | 22,197 | | | $ | 27,214 | | | $ | 915,018 | | | | | | | | | |
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| | Current | | | 31-60 Days | | | 61-90 Days | | | Greater than | | | Non-Accrual | | | Total Past | | | Total | | | | | | | | | |
Past Due | Past Due | 90 Days Past | Due and | Loans | | | | | | | | |
| | Due and still | Non- | | | | | | | | | |
| | accruing | Accrual | | | | | | | | | |
September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 671,850 | | | $ | 2,866 | | | $ | 990 | | | $ | — | | | $ | 10,945 | | | $ | 14,801 | | | $ | 686,651 | | | | | | | | | |
Construction | | | 2,288 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,288 | | | | | | | | | |
Commercial | | | 146,062 | | | | 2,589 | | | | | | | | — | | | | 10,818 | | | | 13,407 | | | | 159,469 | | | | | | | | | |
Commercial | | | 8,948 | | | | — | | | | — | | | | — | | | | 1,177 | | | | 1,177 | | | | 10,125 | | | | | | | | | |
Obligations of states and political subdivisions | | | 33,445 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 33,445 | | | | | | | | | |
Home equity loans and lines of credit | | | 41,380 | | | | 127 | | | | 77 | | | | — | | | | 339 | | | | 543 | | | | 41,923 | | | | | | | | | |
Other | | | 2,336 | | | | 57 | | | | — | | | | — | | | | — | | | | 57 | | | | 2,393 | | | | | | | | | |
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Total | | $ | 906,309 | | | $ | 5,639 | | | $ | 1,067 | | | $ | — | | | $ | 23,279 | | | $ | 29,985 | | | $ | 936,294 | | | | | | | | | |
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Our allowance for loan losses is maintained at a level necessary to absorb loan losses that are both probable and reasonably estimable. Management, in determining the allowance for loan losses, considers the losses inherent in its loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. Our allowance for loan losses consists of two elements: (1) an allocated allowance, which comprises allowances established on specific loans and class allowances based on historical loss experience and current trends, and (2) an allocated allowance based on general economic conditions and other risk factors in our markets and portfolios. We maintain a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans. Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. General loan loss allowances are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of the loan portfolio, current economic conditions, management’s judgment and losses which are probable and reasonably estimable. The allowance is increased through provisions charged against current earnings and recoveries of previously charged-off loans. Loans that are determined to be uncollectible are charged against the allowance. While management uses available information to recognize probable and reasonably estimable loan losses, future loss provisions may be necessary, based on changing economic conditions. Payments received on impaired loans generally are either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. The allowance for loan losses as of March 31, 2014 is maintained at a level that represents management’s best estimate of losses inherent in the loan portfolio, and such losses were both probable and reasonably estimable. |
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In addition, the FDIC and the Pennsylvania Department of Banking, as an integral part of their examination process, have periodically reviewed our allowance for loan losses. The banking regulators may require that we recognize additions to the allowance based on its analysis and review of information available to it at the time of its examination. |
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Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL. |
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The following tables summarize changes in the primary segments of the ALL for the three and six month periods ending March 31, 2014: |
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| | Real Estate Loans | | | Commercial | | | Obligations of | | | Home | | | Other | | | Unallocated | | | Total | |
Loans | States and | Equity | Loans |
| Political | Loans and | |
| Subdivisions | Lines of | |
| | Credit | |
| | Residential | | | Construction | | | Commercial | | | | | | | | | | | | | | | | | | | |
ALL balance at December 31, 2013 | | $ | 5,903 | | | $ | 26 | | | $ | 1,011 | | | $ | 330 | | | $ | 106 | | | $ | 491 | | | $ | 22 | | | $ | 480 | | | $ | 8,369 | |
Charge-offs | | | (536 | ) | | | — | | | | (11 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (547 | ) |
Recoveries | | | 1 | | | | — | | | | 83 | | | | 1 | | | | — | | | | — | | | | 5 | | | | — | | | | 90 | |
Provision | | | 552 | | | | — | | | | (80 | ) | | | 38 | | | | — | | | | 9 | | | | (1 | ) | | | 232 | | | | 750 | |
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ALL balance at March 31, 2014 | | $ | 5,920 | | | $ | 26 | | | $ | 1,003 | | | $ | 369 | | | $ | 106 | | | $ | 500 | | | $ | 26 | | | $ | 712 | | | $ | 8,662 | |
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| | Real Estate Loans | | | Commercial | | | Obligations of | | | Home | | | Other | | | Unallocated | | | Total | |
Loans | States and | Equity | Loans |
| Political | Loans and | |
| Subdivisions | Lines of | |
| | Credit | |
| | Residential | | | Construction | | | Commercial | | | | | | | | | | | | | | | | | | | |
ALL balance at December 31, 2012 | | $ | 5,549 | | | $ | 8 | | | $ | 784 | | | $ | 384 | | | $ | 116 | | | $ | 377 | | | $ | 133 | | | $ | 204 | | | $ | 7,555 | |
Charge-offs | | | (598 | ) | | | — | | | | (108 | ) | | | — | | | | — | | | | (32 | ) | | | (6 | ) | | | — | | | | (744 | ) |
Recoveries | | | 4 | | | | — | | | | 1 | | | | 0 | | | | — | | | | 5 | | | | — | | | | — | | | | 10 | |
Provision | | | 836 | | | | 20 | | | | 160 | | | | (34 | ) | | | (10 | ) | | | 146 | | | | (108 | ) | | | (160 | ) | | | 850 | |
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ALL balance at March 31, 2013 | | $ | 5,791 | | | $ | 28 | | | $ | 837 | | | $ | 350 | | | $ | 106 | | | $ | 496 | | | $ | 19 | | | $ | 44 | | | $ | 7,671 | |
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| | Real Estate Loans | | | Commercial | | | Obligations of | | | Home | | | Other | | | Unallocated | | | Total | |
Loans | States and | Equity | Loans |
| Political | Loans and | |
| Subdivisions | Lines of | |
| | Credit | |
| | Residential | | | Construction | | | Commercial | | | | | | | | | | | | | | | | | | | |
ALL balance at September 30, 2013 | | $ | 5,787 | | | $ | 20 | | | $ | 946 | | | $ | 337 | | | $ | 130 | | | $ | 430 | | | $ | 21 | | | $ | 393 | | | $ | 8,064 | |
Charge-offs | | | (923 | ) | | | — | | | | (50 | ) | | | (48 | ) | | | — | | | | (63 | ) | | | — | | | | — | | | | (1,084 | ) |
Recoveries | | | 78 | | | | — | | | | 83 | | | | 12 | | | | — | | | | — | | | | 9 | | | | — | | | | 182 | |
Provision | | | 978 | | | | 6 | | | | 24 | | | | 68 | | | | (24 | ) | | | 133 | | | | (4 | ) | | | 319 | | | | 1,500 | |
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ALL balance at March 31, 2014 | | $ | 5,920 | | | $ | 26 | | | $ | 1,003 | | | $ | 369 | | | $ | 106 | | | $ | 500 | | | $ | 26 | | | $ | 712 | | | $ | 8,662 | |
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| | Real Estate Loans | | | Commercial | | | Obligations of | | | Home | | | Other | | | Unallocated | | | Total | |
Loans | States and | Equity | Loans |
| Political | Loans and | |
| Subdivisions | Lines of | |
| | Credit | |
| | Residential | | | Construction | | | Commercial | | | | | | | | | | | | | | | | | | | |
ALL balance at September 30, 2012 | | $ | 5,401 | | | $ | 29 | | | $ | 699 | | | $ | 474 | | | $ | 127 | | | $ | 499 | | | $ | 22 | | | $ | 51 | | | $ | 7,302 | |
Charge-offs | | | (1,243 | ) | | | — | | | | (214 | ) | | | 0 | | | | — | | | | (67 | ) | | | (6 | ) | | | — | | | | (1,530 | ) |
Recoveries | | | 41 | | | | 0 | | | | 2 | | | | 0 | | | | 0 | | | | 6 | | | | 0 | | | | 0 | | | | 49 | |
Provision | | | 1,592 | | | | (1 | ) | | | 350 | | | | (124 | ) | | | (21 | ) | | | 58 | | | | 3 | | | | (7 | ) | | | 1,850 | |
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ALL balance at March 31, 2013 | | $ | 5,791 | | | $ | 28 | | | $ | 837 | | | $ | 350 | | | $ | 106 | | | $ | 496 | | | $ | 19 | | | $ | 44 | | | $ | 7,671 | |
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The following table summarizes the primary segments of the ALL, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of March 31, 2014 (in thousands): |
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| | Real Estate Loans | | | Commercial | | | Obligations of | | | Home | | | Other | | | Unallocated | | | Total | |
Loans | States and | Equity | Loans |
| Political | Loans and | |
| Subdivisions | Lines of | |
| | Credit | |
| | Residential | | | Construction | | | Commercial | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 618 | | | $ | — | | | $ | 263 | | | $ | — | | | $ | — | | | $ | 38 | | | $ | — | | | $ | — | | | $ | 919 | |
Collectively evaluated for impairment | | | 5,302 | | | | 26 | | | | 740 | | | | 369 | | | | 106 | | | | 462 | | | | 26 | | | | 712 | | | | 7,743 | |
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ALL balance at March 31, 2014 | | $ | 5,920 | | | $ | 26 | | | $ | 1,003 | | | $ | 369 | | | $ | 106 | | | $ | 500 | | | $ | 26 | | | $ | 712 | | | $ | 8,662 | |
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| | Real Estate Loans | | | Commercial | | | Obligations of | | | Home | | | Other | | | Unallocated | | | Total | |
Loans | States and | Equity | Loans |
| Political | Loans and | |
| Subdivisions | Lines of | |
| | Credit | |
| | Residential | | | Construction | | | Commercial | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 518 | | | $ | — | | | $ | 301 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 819 | |
Collectively evaluated for impairment | | | 5,269 | | | | 20 | | | | 645 | | | | 337 | | | | 130 | | | | 430 | | | | 21 | | | | 393 | | | | 7,245 | |
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ALL balance at September 30, 2013 | | $ | 5,787 | | | $ | 20 | | | $ | 946 | | | $ | 337 | | | $ | 130 | | | $ | 430 | | | $ | 21 | | | $ | 393 | | | $ | 8,064 | |
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The allowance for loan losses is based on estimates, and actual losses will vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date. The Company allocated increased provisions to the residential real estate, commercial loans, home equity loans and lines of credit segments for the six month period ending March 31, 2014 due to increased charge off activity and impairment evaluations in those segments. Despite the above allocations, the allowance for loan losses is general in nature and is available to absorb losses from any loan segment. |
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The following is a summary of troubled debt restructuring granted during the three and six months ended March 31, 2014 and 2013. |
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| | For the Three Months Ended March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | | | | | | | | | |
Contracts | Outstanding | Outstanding | | | | | | | | | | | | | | | | | | | | | | | | |
| Recorded | Recorded | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructurings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 3 | | | $ | 473 | | | $ | 473 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 1 | | | | 197 | | | | 197 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total | | | 4 | | | $ | 670 | | | $ | 670 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Of the four new troubled debt restructurings granted for the three months ended March 31, 2014, three loans totaling $473,000 were granted terms and rate concessions and one loan totaling $197,000 was granted terms concessions. |
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| | For the Three Months Ended March 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | | Pre-Modification | | | Pre-Modification | | | | | | | | | | | | | | | | | | | | | | | | | |
Contracts | Outstanding | Outstanding | | | | | | | | | | | | | | | | | | | | | | | | |
| Recorded | Recorded | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructurings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 3 | | | $ | 471 | | | $ | 471 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 3 | | | $ | 471 | | | $ | 471 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Of the three new troubled debt restructurings granted for the three months ended March 31, 2013, one loan totaling $397,000 was granted terms and rate concessions and two loans totaling $74,000 were granted terms concessions. |
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| | For the Six Months Ended March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | | | | | | | | | |
Contracts | Outstanding | Outstanding | | | | | | | | | | | | | | | | | | | | | | | | |
| Recorded | Recorded | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructurings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 7 | | | $ | 1,066 | | | $ | 1,066 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 1 | | | | 197 | | | | 197 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 8 | | | $ | 1,263 | | | $ | 1,263 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Of the eight new troubled debt restructurings granted for the six months ended March 31, 2014, five loans totaling $604,000 were granted terms and rate concessions and three loans totaling $660,000 were granted terms concessions. |
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| | For the Six Months Ended March 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | | Pre-Modification | | | Pre-Modification | | | | | | | | | | | | | | | | | | | | | | | | | |
Contracts | Outstanding | Outstanding | | | | | | | | | | | | | | | | | | | | | | | | |
| Recorded | Recorded | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructurings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | 4 | | | $ | 600 | | | $ | 604 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 4 | | | $ | 600 | | | $ | 604 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Of the four new troubled debt restructurings granted for the six months ended March 31, 2013, two loans totaling $527,000 were granted terms and rate concessions and two loans totaling $74,000 were granted terms concessions. The following is a summary of troubled debt restructurings that have subsequently defaulted within one year of modification, (in thousands). |
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| | For the Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | | Pre-Modification | | | Number of | | | Pre-Modification | | | | | | | | | | | | | | | | | | | | | |
Contracts | Outstanding | Contracts | Outstanding | | | | | | | | | | | | | | | | | | | | |
| Recorded | | Recorded | | | | | | | | | | | | | | | | | | | | |
| Investment | | Investment | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructurings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | — | | | $ | — | | | $ | 1 | | | $ | 77 | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | — | | | | — | | | | 1 | | | | 5 | | | | | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | — | | | $ | — | | | $ | 2 | | | $ | 82 | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Six Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | | Pre-Modification | | | Number of | | | Pre-Modification | | | | | | | | | | | | | | | | | | | | | |
Contracts | Outstanding | Contracts | Outstanding | | | | | | | | | | | | | | | | | | | | |
| Recorded | | Recorded | | | | | | | | | | | | | | | | | | | | |
| Investment | | Investment | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructurings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | — | | | $ | — | | | $ | 1 | | | $ | 77 | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | | — | | | | — | | | | 1 | | | | 5 | | | | | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | — | | | $ | — | | | $ | 2 | | | $ | 82 | | | | | | | | | | | | | | | | | | | | | |
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