Loans Receivable, Net and Allowance for Loan Losses | 7. Loans Receivable, Net and Allowance for Loan Losses Loans receivable consist of the following (in thousands): March 31, 2016 September 30, 2015 Real estate loans: Residential $ 602,085 $ 610,582 Construction 3,135 878 Commercial 286,684 200,004 Commercial 55,170 34,314 Obligations of states and political subdivisions 59,673 59,820 Home equity loans and lines of credit 46,613 39,903 Auto Loans 188,334 162,193 Other 3,334 3,343 1,245,028 1,111,037 Less allowance for loan losses 9,415 8,919 Net loans $ 1,235,613 $ 1,102,118 Included in the March 31, 2016 balances are loans acquired from Eagle National Bank, as of the acquisition date of December 4, 2015 as follows: 2015 Real estate loans: Residential $ 10,743 Commercial 87,336 Commercial 16,604 Home equity loans and lines of credit 8,632 Other 65 Total loans $ 123,380 Purchased loans acquired in a business combination are recorded at fair value on their purchase date without a carryover of the related allowance for loan losses. Upon acquisition, the Company evaluated whether each acquired loan (regardless of size) was within the scope of ASC 310-30, Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased credit-impaired loans are loans that have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. The fair value of purchased credit-impaired loans, on the acquisition date of December 4, 2015, was determined, primarily based on the fair value of loan collateral. The carrying value of all purchased loans acquired with deteriorated credit quality was $6.0 million at March 31, 2016. On the acquisition date, the preliminary estimate of the unpaid principal balance for all loans evidencing credit impairment acquired in the ENB acquisition was $3.5 million and the estimated fair value of the loans was $2.0 million. Total contractually required payments on these loans, including interest, at the acquisition date was $4.2 million. However, the Company’s preliminary estimate of expected cash flows was $2.2 million. At such date, the Company established a credit risk related non-accretable discount (a discount representing amounts which are not expected to be collected from the customer nor liquidation of collateral) of $2.0 million relating to these impaired loans, reflected in the recorded net fair value. Such amount is reflected as a non-accretable fair value adjustment to loans. The Company further estimated the timing and amount of expected cash flows in excess of the estimated fair value and established an accretable discount of $240,000 on the acquisition date relating to these impaired loans. The carrying value of the loans acquired and accounted for in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality Unpaid principal balance $ 3,468 Interest 717 Contractual cash flows 4,185 Non-accretable discount (1,973 ) Expected cash flows 2,212 Accretable discount (240 ) Estimated fair value $ 1,972 Changes in the accretable yield for purchased credit-impaired loans were as follows, since acquisition, for the periods ended March 31, 2016 and March 31, 2015: Six months ended March 31, 2016 2015 Balance at beginning of period $ 258 $ 170 Reclassification, new additions and other 240 — Accretion (133 ) (14 ) Balance at end of period $ 365 $ 156 The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30 (in thousands): March 31, 2016 September 30, 2015 Acquired Loans with Specific Acquired Loans with Specific Outstanding balance $ 7,622 $ 4,779 Carrying amount $ 5,995 $ 4,162 The following table shows the amount of loans in each category that was individually and collectively evaluated for impairment at the dates indicated (in thousands): Total Loans Individually Loans Acquired Collectively March 31, 2016 Real estate loans: Residential $ 602,085 $ 10,008 $ — $ 592,077 Construction 3,135 — — 3,135 Commercial 286,684 13,679 4,958 268,047 Commercial 55,170 1,939 411 52,820 Obligations of states and political subdivisions 59,673 — — 59,673 Home equity loans and lines of credit 46,613 640 626 45,347 Auto loans 188,334 707 — 187,627 Other 3,334 2 — 3,332 Total $ 1,245,028 $ 26,975 $ 5,995 $ 1,212,058 Total Loans Individually Loans Acquired Collectively September 30, 2015 Real estate loans: Residential $ 610,582 $ 11,985 $ — $ 598,597 Construction 878 — — 878 Commercial 200,004 15,100 4,108 180,796 Commercial 34,314 204 54 34,056 Obligations of states and political subdivisions 59,820 — — 59,820 Home equity loans and lines of credit 39,903 795 — 39,108 Auto loans 162,193 625 — 161,568 Other 3,343 — — 3,343 Total $ 1,111,037 $ 28,709 $ 4,162 $ 1,078,166 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. 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. 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 one year of performance. The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable (in thousands): Recorded Unpaid Associated March 31, 2016 With no specific allowance recorded: Real estate loans Residential $ 7,344 $ 9,071 $ — Construction — — — Commercial 11,944 13,862 — Commercial 1,939 1,954 — Obligations of states and political subdivisions — — — Home equity loans and lines of credit 583 642 — Auto loans 275 395 — Other 2 25 — Total 22,087 25,949 — With an allowance recorded: Real estate loans Residential 2,664 3,067 343 Construction — — — Commercial 1,735 1,883 170 Commercial — — — Obligations of states and political subdivisions — — — Home equity loans and lines of credit 57 106 56 Auto loans 432 432 191 Other — — — Total 4,888 5,488 760 Total: Real estate loans Residential 10,008 12,138 343 Construction — — — Commercial 13,679 15,745 170 Commercial 1,939 1,954 — Obligations of states and political subdivisions — — — Home equity loans and lines of credit 640 748 56 Auto loans 707 827 191 Other 2 25 — Total Impaired Loans $ 26,975 $ 31,437 $ 760 Recorded Unpaid Associated September 30, 2015 With no specific allowance recorded: Real Estate Loans Residential $ 9,552 $ 11,521 $ — Construction — — — Commercial 15,100 16,316 — Commercial 204 216 — Obligations of states and political subdivisions — — — Home equity loans and lines of credit 731 743 — Auto Loans 350 464 — Other — — — Total 25,937 29,260 — With an allowance recorded: Real Estate Loans Residential 2,433 2,639 373 Construction — — — Commercial — — — Commercial — — — Obligations of states and political subdivisions — — — Home equity loans and lines of credit 64 93 64 Auto Loans 275 275 131 Other — — — Total 2,772 3,007 568 Total: Real Estate Loans Residential 11,985 14,160 373 Construction — — — Commercial 15,100 16,316 — Commercial 204 216 — Obligations of states and political subdivisions — — — Home equity loans and lines of credit 795 836 64 Auto Loans 625 739 131 Other — — — Total Impaired Loans $ 28,709 $ 32,267 $ 568 The following table represents 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 (in thousands): Three months ended March 31, 2016 2015 2016 2015 Average Average Interest Interest With no specific allowance recorded: Real estate loans Residential $ 7,296 $ 10,551 $ 22 $ 64 Construction — — — — Commercial 12,128 15,247 131 190 Commercial 1,919 343 37 2 Obligations of states and political subdivisions — — — — Home equity loans and lines of credit 594 266 — — Auto loans 228 55 — 1 Other — — — — Total 22,165 26,462 190 257 With an allowance recorded: Real estate loans Residential 2,679 2,411 4 19 Construction — — — — Commercial 1,490 313 — — Commercial 6 — — — Obligations of states and political subdivisions — — — — Home equity loans and lines of credit 59 39 — — Auto loans 222 67 2 1 Other 1 — — — Total 4,457 2,830 6 20 Total: Real estate loans Residential 9,975 12,962 26 83 Construction — — — — Commercial 13,618 15,560 131 190 Commercial 1,925 343 37 2 Obligations of states and political subdivisions — — — — Home equity loans and lines of credit 653 305 — — Auto loans 450 122 2 2 Other 1 — — — Total Impaired Loans $ 26,622 $ 29,292 $ 196 $ 277 Six months ended March 31, 2016 2015 2016 2015 Average Average Interest Interest With no specific allowance recorded: Real estate loans Residential $ 8,040 $ 10,740 $ 48 $ 163 Construction — — — — Commercial 12,908 15,446 307 384 Commercial 1,350 334 52 4 Obligations of states and political subdivisions — — — — Home equity loans and lines of credit 672 234 2 2 Auto loans 255 53 2 1 Other — — — — Total 23,225 26,807 411 554 With an allowance recorded: Real estate loans Residential 2,636 2,453 9 43 Construction — — — — Commercial 974 442 — — Commercial 4 — — — Obligations of states and political subdivisions — — — — Home equity loans and lines of credit 66 26 — — Auto loans 181 101 3 3 Other — — — — Total 3,861 3,022 12 46 Total: Real estate loans Residential 10,676 13,193 57 206 Construction — — — — Commercial 13,882 15,888 307 384 Commercial 1,354 334 52 4 Obligations of states and political subdivisions — — — — Home equity loans and lines of credit 738 260 2 2 Auto loans 436 154 5 4 Other — — — — Total Impaired Loans $ 27,086 $ 29,829 $ 423 $ 600 The Company 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 fundamentally sound yet, exhibit potentially unacceptable credit risk or deteriorating trends or characteristics which if left uncorrected, may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. 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. Loans in the Doubtful category have all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans in the Loss category are considered uncollectible and of little value that their continuance as bankable assets is not warranted. Certain residential real estate loans, construction loans, home equity loans and lines of credit, auto loans and other consumer 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. 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 $500,000 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 $1,000,000 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. 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, 2016 and September 30, 2015 (in thousands): Pass Special Substandard Doubtful Total March 31, 2016 Commercial real estate loans $ 254,939 $ 10,578 $ 21,167 $ — $ 286,684 Commercial 51,561 330 3,279 — 55,170 Obligations of states and political subdivisions 59,673 — — — 59,673 Total $ 366,173 $ 10,908 $ 24,446 $ — $ 401,527 Pass Special Substandard Doubtful Total September 30, 2015 Commercial real estate loans $ 174,516 $ 4,521 $ 20,967 $ — $ 200,004 Commercial 33,801 — 513 — 34,314 Obligations of states and political subdivisions 59,820 — — — 59,820 Total $ 268,137 $ 4,521 $ 21,480 $ — $ 294,138 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, 2016 and September 30, 2015 (in thousands): Performing Non-performing Total March 31, 2016 Real estate loans: Residential $ 592,400 $ 9,685 $ 602,085 Construction 3,135 — 3,135 Home equity loans and lines of credit 45,322 1,291 46,613 Auto loans 187,738 596 188,334 Other 3,297 37 3,334 Total $ 831,892 $ 11,609 $ 843,501 Performing Non-performing Total September 30, 2015 Real estate loans: Residential $ 600,810 $ 9,772 $ 610,582 Construction 878 — 878 Home equity loans and lines of credit 39,213 690 39,903 Auto loans 161,827 366 162,193 Other 3,322 21 3,343 Total $ 806,050 $ 10,849 $ 816,899 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, 2016 and September 30, 2015 (in thousands): Current 31-60 Days 61-90 Days Greater than Non-Accrual Total Past Total March 31, 2016 Real estate loans Residential $ 590,617 $ 1,321 $ 462 $ — $ 9,685 $ 11,468 $ 602,085 Construction 3,135 — — — — — 3,135 Commercial 275,800 214 157 — 10,513 10,884 286,684 Commercial 54,598 98 — — 474 572 55,170 Obligations of states and political subdivisions 59,673 — — — — — 59,673 Home equity loans and lines of credit 45,109 121 92 — 1,291 1,504 46,613 Auto loans 186,764 852 122 — 596 1,570 188,334 Other 3,255 42 — — 37 79 3,334 Total $ 1,218,951 $ 2,648 $ 833 $ — $ 22,596 $ 26,077 $ 1,245,028 Current 31-60 Days Past Due 61-90 Days Past Due Greater than Non-Accrual Total Past Total September 30, 2015 Real estate loans Residential $ 598,190 $ 1,575 $ 1,045 $ — $ 9,772 $ 12,392 $ 610,582 Construction 878 — — — — — 878 Commercial 190,440 137 587 — 8,840 9,564 200,004 Commercial 33,545 346 7 — 416 769 34,314 Obligations of states and political subdivisions 59,820 — — — — — 59,820 Home equity loans and lines of credit 39,136 32 45 — 690 767 39,903 Auto loans 160,272 1,375 180 — 366 1,921 162,193 Other 3,295 27 — — 21 48 3,343 Total $ 1,085,576 $ 3,492 $ 1,864 $ — $ 20,105 $ 25,461 $ 1,111,037 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, 2016 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. In addition, the FDIC and the Pennsylvania Department of Banking and Securities, 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. 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. The following tables summarize changes in the primary segments of the ALL for the three and six month periods ending March 31, 2016 and 2015 (in thousands): Real Estate Loans Residential Construction Commercial Commercial Obligations of Home Auto Loans Other Unallocated Total ALL balance at December 31, 2015 $ 4,747 $ 14 $ 858 $ 705 $ 187 $ 389 $ 1,754 $ 27 $ 576 $ 9,257 Charge-offs (308 ) — (9 ) — — (29 ) (234 ) — — (580 ) Recoveries — — 52 — — 3 80 3 — 138 Provision 216 10 67 33 9 26 325 (5 ) (81 ) 600 ALL balance at March 31, 2016 $ 4,655 $ 24 $ 968 $ 738 $ 196 $ 389 $ 1,925 $ 25 $ 495 $ 9,415 ALL balance at December 31, 2014 $ 5,571 $ 13 $ 676 $ 515 $ 145 $ 545 $ 674 $ 26 $ 351 $ 8,516 Charge-offs (251 ) — (42 ) — — — (125 ) — — (418 ) Recoveries 4 — 20 9 — 4 8 — — 45 Provision (35 ) 4 189 111 (58 ) (81 ) 466 4 (75 ) 525 ALL balance at March 31, 2015 $ 5,289 $ 17 $ 843 $ 635 $ 87 $ 468 $ 1,023 $ 30 $ 276 $ 8,668 Real Estate Loans Residential Construction Commercial Commercial Obligations of Home Auto Loans Other Unallocated Total ALL balance at September 30, 2015 $ 5,140 $ 7 $ 671 $ 693 $ 189 $ 461 $ 1,570 $ 27 $ 161 $ 8,919 Charge-offs (399 ) — (9 ) (3 ) — (54 ) (422 ) — — (887 ) Recoveries 3 — 52 1 — 4 117 6 — 183 Provision (89 ) 17 254 47 7 (22 ) 660 (8 ) 334 1,200 ALL balance at March 31, 2016 $ 4,655 $ 24 $ 968 $ 738 $ 196 $ 389 $ 1,925 $ 25 $ 495 $ 9,415 ALL balance at September 30, 2014 $ 5,573 $ 11 $ 663 $ 528 $ 163 $ 470 $ 459 $ 32 $ 735 $ 8,634 Charge-offs (760 ) — (53 ) (27 ) — (19 ) (165 ) — — (1,024 ) Recoveries 22 — 31 9 — 12 9 — — 83 Provision 454 6 202 125 (76 ) 5 720 (2 ) (459 ) 975 ALL balance at March 31, 2015 $ 5,289 $ 17 $ 843 $ 635 $ 87 $ 468 $ 1,023 $ 30 $ 276 $ 8,668 Acquired loans are recorded at fair value on their purchase date without a carryover of the related allowance for loan losses. The following table summarizes the primary segments of the ALL, segregated into amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of March 31, 2016 and September 30, 2015 (in thousands): Real Estate Loans Residential Construction Commercial Commercial Obligations of Home Auto Loans Other Unallocated Total Individually evaluated for impairment $ 343 $ — $ 170 $ 0 $ — $ 56 $ 191 $ — $ — $ 760 Collectively evaluated for impairment 4,312 24 798 738 196 333 1,734 25 495 8,655 ALL Balance at March 31, 2016 $ 4,655 $ 24 $ 968 $ 738 $ 196 $ 389 $ 1,925 $ 25 $ 495 $ 9,415 Individually evaluated for impairment $ 373 $ — $ — $ — $ — $ 64 $ 131 $ — $ — $ 568 Collectively evaluated for impairment 4,767 7 671 693 189 397 1,439 27 161 8,351 ALL balance at September 30, 2015 $ 5,140 $ 7 $ 671 $ 693 $ 189 $ 461 $ 1,570 $ 27 $ 161 $ 8,919 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 residential real estate, construction loan, commercial real estate, commercial loans, obligations of states and political subdivisions and home equity loans and lines of credit for the three month period ending March 31, 2016 due to increased balances and impairment evaluations in those segments. The Company allocated decreased provisions to other loans for the three month period ending March 31, 2016 due primarily to decreased loan balances. The Company allocated increased provisions in auto loans due to increased loan balances, increased classified assets and increased charge off activity. Despite the above allocations, the allowance for loan losses is general in nature and is available to absorb losses from any loan segment. The Company allocated decreased provisions to residential real estate, home equity loans and lines of credit and other loans for the six month period ending March 31, 2016 due to declining loan balances and impairment evaluations in those segments. The Company allocated increased provisions to commercial real estate, obligations of states and political subdivisions, commercial loans and construction loans for the six month period ending March 31, 2016 due primarily to increased loan balances and increased classified assets. The Company allocated increased provisions in auto loans due to increased loan balances, increased classified assets and increased charge off activity. Despite the above allocations, the allowance for loan losses is general in nature and is available to absorb losses from any loan segment. The following is a summary of troubled debt restructuring granted during the three and six months ended March 31, 2016 and 2015 (dollars in thousands). For the Three Months Ended March 31, 2016 Dollars in thousands Number of Pre-Modification Post-Modification Troubled Debt Restructurings Real estate loans: Residential 3 $ 587 $ 587 Construction — — — Commercial 1 77 77 Commercial — — — Obligations of states and political subdivisions — — — Home equity loans and lines of credit — — — Auto loans — — — Other — — — Total 4 $ 664 $ 664 For the Three Months Ended March 31, 2015 Dollars in thousands Number of Pre-Modification Post-Modification Recorded Troubled Debt Restructurings Real estate loans: Residential 2 $ 408 $ 408 Construction — — — Commercial — — — Commercial — — — Obligations of states and political subdivisions — — — Home equity loans and lines of credit 1 150 150 Auto loans — — — Other — — — Total 3 $ 558 $ 558 For the Six Months Ended March 31, 2016 Dollars in thousands Number of Pre-Modification Post-Modification Troubled Debt Restructurings Real estate loans: Residential 4 $ 668 $ 668 Construction — — — Commercial — — — Commercial — — — Obligations of states and political subdivisions — — — Home equity loans and lines of credit 1 77 77 Auto loans — — — Other — — — Total 5 $ 745 $ 745 For the Six Months Ended March 31, 2016 Dollars in thousands Number of Pre-Modification Post-Modification Troubled Debt Restructurings Real estate loans: Residential 9 $ 1,474 $ 1,474 Construction — — — Commercial — — — Commercial — — — Obligations of states and political subdivisions — — — Home equity loans and lines of credit 1 150 150 Auto loans — — — Other — — — Total 10 $ 1,624 $ 1,624 Of the four new troubled debt restructurings granted for the three months ended March 31, 2016, two loans totaling $572,000 were granted term and rate concessions, one loans totaling $15,000 was granted term concessions and one loan totaling $77,000 was granted a rate concession. Of the three new troubled debt restructurings granted for the three months ended March 31, 2015, two loans totaling $408,000 were granted terms and rate concessions and one loan totaling $150,000 was granted terms concessions. Of the five new troubled debt restructurings granted for the six months ended March 31, 2016, two loans totaling $572,000 were granted term and rate concessions, two loans totaling $96,000 were granted term concessions and one loan totaling $77,000 was granted a rate concession. Of the ten new troubled debt restructurings granted for the six months ended March 31, 2015, five loans totaling $762,000 were granted terms and rate concessions, three loans totaling $496,000 were granted terms concessions and two loans totaling $366,000 were granted rate concessions (dollars in thousands). For the three and six months ended March 31, 2016, no loans defaulted on a restructuring agreement within one year of modification. For the three months ended March 31, 2015, three residential real estate loans totaling $521,000 defaulted on a restructuring agreement within one year of modification. For the six months ended March 31, 2015, four residential real estate loans totaling $677,000 defaulted on a restructuring agreement within one year of modification. Foreclosed assets acquired in settlement of loans are carried at fair value, less estimated costs to sell, and are included in other assets on the Consolidated Balance Sheet. As of March 31, 2016 and September 30, 2015 included with other assets are $2.3 million and $2.5 million, respectively, of foreclosed assets. As of March 31, 2016, included within the foreclosed assets is $1.9 million of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end. As of March 31, 2016, the Company has initiated formal foreclosure proceedings on $4.7 million of consumer residential mortgages which have not yet been transferred into foreclosed assets. |