Credit Quality of Financing Receivables and the Allowance for Loan Losses | 12 Months Ended |
Sep. 30, 2013 |
Credit Quality of Financing Receivables and the Allowance for Loan Losses | ' |
Note 5. | Credit Quality of Financing Receivables and the Allowance for Loan Losses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management segregates the loan portfolio into portfolio segments which is defined as the level at which the Company develops and documents a systematic method for determining its allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate. |
The Company’s loan portfolio is segregated into the following portfolio segments. |
One-to Four-Family Owner Occupied Loans. This portfolio segment consists of the origination of first mortgage loans and home equity second mortgage loans secured by one-to four-family owner occupied residential properties located in our market area. The Company has experienced no foreclosures on its owner occupied loan portfolio during recent periods and believe this is due mainly to its conservative lending strategies including its non-participation in “interest only”, “Option ARM,” “sub-prime” or “Alt-A” loans. |
One-to Four-Family Non-Owner Occupied Loans. This portfolio segment consists of the origination of first mortgage loans secured by one-to four-family non-owner occupied residential properties in its market area. A majority of these loans are sold on a participation basis to other community banks. Such lending involves additional risks, since the properties are not owner occupied, and the renters of these properties are less likely to be concerned with property upkeep. |
Mobile Home Loans. This portfolio segment consists of mobile home loans that were purchased from a third-party originator and funded by us at settlement. Mobile home lending involves additional risks as a result of higher loan-to-value ratios usually associated with these types of loans. Mobile home loan customers have historically been more adversely impacted by weak economic conditions, consequently, mobile home loans bear a higher rate of interest, have a higher probability of default, and may involve higher delinquency rates. In addition, the values of mobile home loans decline over time and higher levels of inventories of repossessed and used mobile homes may affect the values of collateral and result in higher charge-offs and provisions for loan losses. The Company ceased originating these loans in September 2007, and no future originations of these types of loans are planned. |
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Secured by Other Properties. This portfolio segment includes loans secured by commercial real estate, including multi-family dwellings. Loans secured by commercial real estate generally have larger loan balances and more credit risk than one-to four-family mortgage loans. The increased risk is the result of several factors, including the concentration of principal in a limited number of loans and borrowers, the impact of local and general economic conditions on the borrower’s ability to repay the loan, and the increased difficulty of evaluating and monitoring these types of loans. |
Construction and Land Development Loans. This portfolio segment includes construction loans to individuals and builders, primarily for the construction of residential properties and land loans, which are loans made with land as security. Construction and land development financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, the Company may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project proves to be inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment. Construction loans also expose the Company to the risks that improvements will not be completed on time in accordance with specifications and projected costs and that repayment will depend on the successful operation or sale of the properties. In addition, many of these borrowers have more than one outstanding loan, so an adverse development with respect to one loan or credit relationship can expose the Company to significantly greater risk of non-payment and loss. |
Other Loans. This portfolio segment includes commercial business loans secured by assignments of corporate assets and personal guarantees of the business owners and consumer loans consisting solely of deposit account loans. Commercial business loans generally have higher interest rates and shorter terms than one- to four-family residential loans, but they also may involve higher average balances, increased difficulty of loan monitoring and a higher risk of default since their repayment generally depends on the successful operation of the borrower’s business. |
Loans are generally carried at the amount of unpaid principal, less the allowance for loan losses and adjusted for deferred loan fees, which are amortized over the term of the loan using the interest method. Interest on loans is accrued based on the principal amounts outstanding. It is the Company’s policy to discontinue the accrual of interest when a loan is specifically determined to be impaired or when the principal or interest is delinquent for 90 days or more. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Interest income generally is not recognized on specific impaired loans unless the likelihood of further loss is remote. Cash collections on such loans are applied as reductions of the loan principal and no interest income is recognized on those loans until the principal balance has been collected. The carrying value of impaired loans is based on the present value of the loan’s expected future cash flows or, alternatively, the observable market price of the loan or the fair value of the collateral. |
As a financial services provider, the Company is routinely party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans made. |
Management further disaggregates the loan portfolio segments into classes of loans, which are based on the initial measurement of the loan, risk characteristics of the loan and the method for monitoring and assessing the credit risk of the loan. |
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The allowance for loan losses is established through a provision for loan losses. The Company maintains the allowance at a level believed, to the best of management’s knowledge, to cover all known and inherent losses in the loan portfolio that are both probable and reasonable to estimate at each reporting date. |
Management reviews the allowance for loan losses on no less than a quarterly basis in order to identify those inherent losses and to assess the overall collection probability for the loan portfolio. The evaluation process by portfolio segment includes, among other things, an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of the loans, the value of collateral securing the loan, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, local economic conditions and industry experience. |
The establishment of the allowance for loan losses is significantly affected by management’s judgment and uncertainties, and there is a likelihood that different amounts would be reported under different conditions or assumptions. The Office of the Commissioner of Financial Regulation for the State of Maryland, as an integral part of its examination process, periodically reviews the allowance for loan losses and may require the Company to make additional provisions for estimated loan losses based upon judgments different from those of management. |
The allowance generally consists of specific and general components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. |
The Company will continue to monitor and modify its allowance for loan losses as conditions dictate. No assurances can be given that the level of allowance for loan losses will cover all of the inherent losses on the loans or that future adjustments to the allowance for loan losses will not be necessary if economic and other conditions differ substantially from the economic and other conditions used by management to determine the current level of the allowance for loan losses. |
The following tables set forth as of the end of each reporting period, the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. The allowance for loan losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments. |
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| | As of September 30, 2013 | |
| | One-to | | | One-to | | | Mobile | | | Secured by | | | Construction | | | Other | | | Unallocated | | | Total | |
Four-Family | Four-Family | Home | Other | and Land | Loans |
Owner | Non-Owner | | Properties | Development | |
Occupied | Occupied | | | | |
Allowance for Credit Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning Balance | | $ | 85,217 | | | $ | 273,683 | | | $ | 95,613 | | | $ | 30,442 | | | $ | 80,327 | | | $ | 3,057 | | | $ | 49,135 | | | $ | 617,474 | |
Charge-offs | | | — | | | | (363,842 | ) | | | (23,921 | ) | | | — | | | | — | | | | — | | | | — | | | | (387,763 | ) |
Recoveries | | | — | | | | 3,740 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,740 | |
Provision | | | (4,654 | ) | | | 562,003 | | | | 9,251 | | | | (8,077 | ) | | | (49,522 | ) | | | 974 | | | | (9,975 | ) | | | 500,000 | |
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Ending Balance | | $ | 80,563 | | | $ | 475,584 | | | $ | 80,943 | | | $ | 22,365 | | | $ | 30,805 | | | $ | 4,031 | | | $ | 39,160 | | | $ | 733,451 | |
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Ending balance: individually evaluated for impairment | | $ | — | | | $ | 201,267 | | | $ | 488 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 201,755 | |
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Ending balance: collectively evaluated for impairment | | $ | 80,563 | | | $ | 274,317 | | | $ | 80,455 | | | $ | 22,365 | | | $ | 30,805 | | | $ | 4,031 | | | $ | 39,160 | | | $ | 531,696 | |
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Ending balance: loans acquired with deteriorated credit quality | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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Financing receivables: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 28,607,668 | | | $ | 17,480,953 | | | $ | 1,785,854 | | | $ | 2,783,794 | | | $ | 3,911,156 | | | $ | 1,612,477 | | | | | | | $ | 56,181,902 | |
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Ending balance: individually evaluated for impairment | | $ | 436,317 | | | $ | 1,635,383 | | | $ | 105,940 | | | $ | 213,099 | | | $ | 370,411 | | | $ | — | | | | | | | $ | 2,761,150 | |
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Ending balance: collectively evaluated for impairment | | $ | 27,780,213 | | | $ | 15,845,570 | | | $ | 1,679,914 | | | $ | 2,570,695 | | | $ | 3,540,745 | | | $ | 1,612,477 | | | | | | | $ | 53,029,614 | |
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Ending balance: loans acquired with deteriorated credit quality | | $ | 391,138 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | $ | 391,138 | |
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| | As of September 30, 2012 | |
| | One-to | | | One-to | | | Mobile | | | Secured by | | | Construction | | | Other | | | Unallocated | | | Total | |
Four-Family | Four-Family | Home | Other | and Land | Loans |
Owner | Non-Owner | | Properties | Development | |
Occupied | Occupied | | | | |
Allowance for Credit Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning Balance | | $ | 64,547 | | | $ | 382,023 | | | $ | 52,719 | | | $ | 25,702 | | | $ | 91,135 | | | $ | 3,907 | | | $ | 45,256 | | | $ | 665,289 | |
Charge-offs | | | (72,815 | ) | | | (175,000 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (247,815 | ) |
Recoveries | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Provision | | | 93,485 | | | | 66,660 | | | | 42,894 | | | | 4,740 | | | | (10,808 | ) | | | (850 | ) | | | 3,879 | | | | 200,000 | |
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Ending Balance | | $ | 85,217 | | | $ | 273,683 | | | $ | 95,613 | | | $ | 30,442 | | | $ | 80,327 | | | $ | 3,057 | | | $ | 49,135 | | | $ | 617,474 | |
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Ending balance: individually evaluated for impairment | | $ | — | | | $ | 30,901 | | | $ | 36,517 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 67,418 | |
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Ending balance: collectively evaluated for impairment | | $ | 85,217 | | | $ | 242,782 | | | $ | 59,096 | | | $ | 30,442 | | | $ | 80,327 | | | $ | 3,057 | | | $ | 49,135 | | | $ | 550,056 | |
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Ending balance: loans acquired with deteriorated credit quality | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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Financing receivables: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 28,270,045 | | | $ | 17,855,304 | | | $ | 2,068,672 | | | $ | 2,613,025 | | | $ | 3,262,452 | | | $ | 1,222,824 | | | | | | | $ | 55,292,322 | |
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Ending balance: individually evaluated for impairment | | $ | 437,872 | | | $ | 1,577,271 | | | $ | 152,256 | | | $ | 216,000 | | | $ | — | | | $ | — | | | | | | | $ | 2,383,399 | |
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Ending balance: collectively evaluated for impairment | | $ | 27,434,223 | | | $ | 16,278,033 | | | $ | 1,916,416 | | | $ | 2,397,025 | | | $ | 3,262,452 | | | $ | 1,222,824 | | | | | | | $ | 52,510,973 | |
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Ending balance: loans acquired with deteriorated credit quality | | $ | 397,950 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | $ | 397,950 | |
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The Company’s policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that there continuance as assets is not warranted. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve close attention, are required to be designated as special mention. |
When assets are classified as either substandard or doubtful, the Company allocates a portion of the related general loss allowances to such assets as the Company deems prudent. Determinations as to the classification of assets and the amount of loss allowances are subject to review by our principal federal regulator, the Office of the Commissioner of Financial Regulation of the State of Maryland, which can require that we establish additional loss allowances. The Company regularly reviews its asset portfolio to determine whether any assets require classification in accordance with applicable regulations. |
The following tables are a summary of the loan portfolio quality indicators by loan class recorded investment as of September 30, 2013 and September 30, 2012: |
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| | September 30, 2013 | | | | | | | | | |
| | One-to | | | One-to | | | Home | | | Mobile | | | Secured | | | Construction | | | | | | | | | |
Four-Family | Four-Family | Equity | Home | by | and Land | | | | | | | | |
Owner | Non-Owner | | | Other | Development | | | | | | | | |
Occupied | Occupied | | | Properties | | | | | | | | | |
Grade: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Pass | | $ | 25,536,497 | | | $ | 15,291,094 | | | $ | 2,243,716 | | | $ | 1,655,013 | | | $ | 2,570,695 | | | $ | 3,540,745 | | | | | | | | | |
Special Mention | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | |
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Substandard | | | 827,455 | | | | 1,845,206 | | | | — | | | | 130,841 | | | | 213,099 | | | | 370,411 | | | | | | | | | |
Doubtful | | | — | | | | 344,653 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | |
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| | $ | 26,363,952 | | | $ | 17,480,953 | | | $ | 2,243,716 | | | $ | 1,785,854 | | | $ | 2,783,794 | | | $ | 3,911,156 | | | | | | | | | |
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| | Secured | | | Savings | | | Totals | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | | | | | | | | | | | | | | | | | | |
Grade: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,603,318 | | | $ | 9,159 | | | $ | 52,450,238 | | | | | | | | | | | | | | | | | | | | | |
Special Mention | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Substandard | | | — | | | | — | | | | 3,387,011 | | | | | | | | | | | | | | | | | | | | | |
Doubtful | | | — | | | | — | | | | 344,653 | | | | | | | | | | | | | | | | | | | | | |
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| | $ | 1,603,318 | | | $ | 9,159 | | | $ | 56,181,902 | | | | | | | | | | | | | | | | | | | | | |
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| | September 30, 2012 | | | | | | | | | |
| | One-to | | | One-to | | | Home | | | Mobile | | | Secured | | | Construction | | | | | | | | | |
Four-Family | Four-Family | Equity | Home | by | and Land | | | | | | | | |
Owner | Non-Owner | | | Other | Development | | | | | | | | |
Occupied | Occupied | | | Properties | | | | | | | | | |
Grade: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Pass | | $ | 25,261,976 | | | $ | 15,904,215 | | | $ | 2,172,247 | | | $ | 1,814,197 | | | $ | 2,397,025 | | | $ | 2,820,472 | | | | | | | | | |
Special Mention | | | — | | | | — | | | | — | | | | 74,743 | | | | — | | | | — | | | | | | | | | |
Substandard | | | 835,822 | | | | 1,951,089 | | | | — | | | | 179,732 | | | | — | | | | 441,980 | | | | | | | | | |
Doubtful | | | — | | | | — | | | | — | | | | — | | | | 216,000 | | | | — | | | | | | | | | |
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| | $ | 26,097,798 | | | $ | 17,855,304 | | | $ | 2,172,247 | | | $ | 2,068,672 | | | $ | 2,613,025 | | | $ | 3,262,452 | | | | | | | | | |
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| | Secured | | | Savings | | | Totals | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | | | | | | | | | | | | | | | | | | |
Grade: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,212,534 | | | $ | 10,290 | | | $ | 51,592,956 | | | | | | | | | | | | | | | | | | | | | |
Special Mention | | | — | | | | — | | | | 74,743 | | | | | | | | | | | | | | | | | | | | | |
Substandard | | | — | | | | — | | | | 3,408,623 | | | | | | | | | | | | | | | | | | | | | |
Doubtful | | | — | | | | — | | | | 216,000 | | | | | | | | | | | | | | | | | | | | | |
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| | $ | 1,212,534 | | | $ | 10,290 | | | $ | 55,292,322 | | | | | | | | | | | | | | | | | | | | | |
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When a loan is 15 days past due, the Company sends the borrower a late notice. The Company also contacts the borrower by phone if the delinquency is not corrected promptly after the notice has been sent. When the loan is 30 days past due, the Company mails the borrower a letter reminding the borrower of the delinquency, and attempt to contact the borrower personally to determine the reason for the delinquency in order to ensure that the borrower understands the terms of the loan and the importance of making payments on or before the due date. If necessary, subsequent delinquency notices are issued and the account will be monitored on a regular basis thereafter. By the 90th day of delinquency, the Company will send the borrower a final demand for payment and may recommend foreclosure. Loans are charged off when the Company believes that the recovery of principal is improbable. A summary report of all loans 30 days or more past due is provided to the board of directors of the Company each month. |
Loans are automatically placed on non-accrual status when payment of principal or interest is more than 90 days delinquent. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt or if the loan has been restructured. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if unpaid principal and interest are repaid so that the loan is less than 90 days delinquent. |
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The following tables set forth certain information with respect to our loan portfolio delinquencies by loan class and amount as of September 30, 2013, and September 30, 2012: |
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| | September 30, 2013 | | | | | |
| | 30-59 | | | 60-89 | | | Greater | | | Total Past | | | Current | | | Total | | | Recorded | | | | | |
Days Past | Days Past | Than 90 | Due | Financing | Investment > | | | | |
Due | Due | Days | | Receivables | 90 Days and | | | | |
| | | | | Accruing | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | $ | — | | | $ | — | | | $ | 690,975 | | | $ | 690,975 | | | $ | 25,672,977 | | | $ | 26,363,952 | | | $ | — | | | | | |
One-to four-family non-owner occupied | | | — | | | | — | | | | 1,635,383 | | | | 1,635,383 | | | | 15,845,570 | | | | 17,480,953 | | | | — | | | | | |
Home equity | | | — | | | | — | | | | — | | | | — | | | | 2,243,716 | | | | 2,243,716 | | | | — | | | | | |
Mobile home | | | 73,774 | | | | — | | | | — | | | | 73,774 | | | | 1,712,080 | | | | 1,785,854 | | | | — | | | | | |
Secured by other properties | | | — | | | | — | | | | — | | | | — | | | | 2,783,794 | | | | 2,783,794 | | | | — | | | | | |
Construction and land development | | | — | | | | — | | | | — | | | | — | | | | 3,911,156 | | | | 3,911,156 | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total real estate loans | | | 73,774 | | | | — | | | | 2,326,358 | | | | 2,400,132 | | | | 52,169,293 | | | | 54,569,425 | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Secured commercial | | | — | | | | — | | | | — | | | | — | | | | 1,603,318 | | | | 1,603,318 | | | | — | | | | | |
Savings accounts | | | — | | | | — | | | | — | | | | — | | | | 9,159 | | | | 9,159 | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total other loans | | | — | | | | — | | | | — | | | | — | | | | 1,612,477 | | | | 1,612,477 | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total loans | | $ | 73,774 | | | $ | — | | | $ | 2,326,358 | | | $ | 2,400,132 | | | $ | 53,781,770 | | | $ | 56,181,902 | | | $ | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2012 | | | | | |
| | 30-59 | | | 60-89 | | | Greater | | | Total Past | | | Current | | | Total | | | Recorded | | | | | |
Days Past | Days Past | Than 90 | Due | Financing | Investment > | | | | |
Due | Due | Days | | Receivables | 90 Days and | | | | |
| | | | | Accruing | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | $ | — | | | $ | — | | | $ | 835,822 | | | $ | 835,822 | | | $ | 25,261,976 | | | $ | 26,097,798 | | | $ | — | | | | | |
One-to four-family non-owner occupied | | | 228,229 | | | | — | | | | 721,392 | | | | 949,621 | | | | 16,905,683 | | | | 17,855,304 | | | | — | | | | | |
Home equity | | | — | | | | — | | | | — | | | | — | | | | 2,172,247 | | | | 2,172,247 | | | | — | | | | | |
Mobile home | | | 46,927 | | | | — | | | | 103,541 | | | | 150,468 | | | | 1,918,204 | | | | 2,068,672 | | | | — | | | | | |
Secured by other properties | | | — | | | | — | | | | 216,000 | | | | 216,000 | | | | 2,397,025 | | | | 2,613,025 | | | | — | | | | | |
Construction and land development | | | — | | | | — | | | | — | | | | — | | | | 3,262,452 | | | | 3,262,452 | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total real estate loans | | | 275,156 | | | | — | | | | 1,876,755 | | | | 2,151,911 | | | | 51,917,587 | | | | 54,069,498 | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Other loans: | | | | | | | | | | | | | | | | | | | | | | | | |
Secured commercial | | | — | | | | — | | | | — | | | | — | | | | 1,212,534 | | | | 1,212,534 | | | | — | | | | | |
Savings accounts | | | — | | | | — | | | | — | | | | — | | | | 10,290 | | | | 10,290 | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total other loans | | | — | | | | — | | | | — | | | | — | | | | 1,222,824 | | | | 1,222,824 | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total loans | | $ | 275,156 | | | $ | — | | | $ | 1,876,755 | | | $ | 2,151,911 | | | $ | 53,140,411 | | | $ | 55,292,322 | | | $ | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following table is a summary of the non-accrual loans by loan class as of: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | | September 30, | | | | | | | | | | | | | | | | | | | | | | | | | |
2013 | 2012 | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | $ | 690,975 | | | $ | 835,822 | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family non-owner occupied | | | 1,635,383 | | | | 721,392 | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Mobile home | | | 59,554 | | | | 103,541 | | | | | | | | | | | | | | | | | | | | | | | | | |
Secured by other properties | | | — | | | | 216,000 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction and land development | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 2,385,912 | | | | 1,876,755 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Secured commercial | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Savings accounts | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total other loans | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 2,385,912 | | | $ | 1,876,755 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At September 30, 2013 and September 30, 2012, there were no loans 90 days past due and still accruing interest. At September 30, 2013, the Company had twenty-nine loans on non-accrual status with foregone interest in the amount of $251,798. At September 30, 2012, the Company had twenty-three loans on non-accrual status with foregone interest in the amount of $160,495. |
The Company accounts for impaired loans under generally accepted accounting principles. An impaired loan generally is one for which it is probable, based on current information, that the lender will not collect all the amounts due under the contractual terms of the loan. Loans are individually evaluated for impairment. When the Company classifies a problem asset as impaired, it provides a specific reserve for that portion of the asset that is deemed uncollectible based on the present value of expected future cash flows discounted at the loan’s original effective interest rate, or based on the loan’s observable market price or fair value of the collateral if the loan is collateral dependent. |
The following tables are a summary of impaired loans by class as of September 30, 2013 and September 30, 2012: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2013 | | | | | | | | | | | | | |
| | Recorded | | | Unpaid | | | Related | | | Average | | | Interest | | | | | | | | | | | | | |
Investment | Principal | Allowance | Recorded | Income | | | | | | | | | | | | |
| Balance | | Investment | Recognized | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | $ | 904,113 | | | $ | 827,455 | | | $ | — | | | $ | 904,113 | | | $ | 31,184 | | | | | | | | | | | | | |
One-to four-family non-owner occupied | | | 609,362 | | | | 507,227 | | | | — | | | | 609,362 | | | | 13,288 | | | | | | | | | | | | | |
Secured by other properties | | | 226,434 | | | | 213,099 | | | | — | | | | 226,434 | | | | 684 | | | | | | | | | | | | | |
Construction and land development | | | 370,411 | | | | 370,411 | | | | — | | | | 370,411 | | | | 20,043 | | | | | | | | | | | | | |
Mobile homes | | | 59,627 | | | | 59,554 | | | | — | | | | 59,627 | | | | 4,078 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family non-owner occupied | | $ | 1,217,512 | | | $ | 1,128,156 | | | $ | 201,267 | | | $ | 1,217,512 | | | $ | 21,255 | | | | | | | | | | | | | |
Mobile home | | | 46,508 | | | | 46,386 | | | | 488 | | | | 46,508 | | | | 3,097 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | $ | 904,113 | | | $ | 827,455 | | | $ | — | | | $ | 904,113 | | | $ | 31,184 | | | | | | | | | | | | | |
One-to four-family non-owner occupied | | | 1,867,709 | | | | 1,635,383 | | | | 201,267 | | | | 1,867,709 | | | | 34,543 | | | | | | | | | | | | | |
Secured by other properties | | | 226,434 | | | | 213,099 | | | | — | | | | 226,434 | | | | 684 | | | | | | | | | | | | | |
Construction and land development | | | 370,411 | | | | 370,411 | | | | — | | | | 370,411 | | | | 20,043 | | | | | | | | | | | | | |
Mobile home | | | 106,135 | | | | 105,940 | | | | 488 | | | | 106,135 | | | | 7,175 | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2012 | | | | | | | | | | | | | |
| | Recorded | | | Unpaid | | | Related | | | Average | | | Interest | | | | | | | | | | | | | |
Investment | Principal | Allowance | Recorded | Income | | | | | | | | | | | | |
| Balance | | Investment | Recognized | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | $ | 877,758 | | | $ | 835,822 | | | $ | — | | | $ | 877,758 | | | $ | 25,376 | | | | | | | | | | | | | |
One-to four-family non-owner occupied | | | 896,218 | | | | 721,392 | | | | — | | | | 896,218 | | | | 15,792 | | | | | | | | | | | | | |
Secured by other properties | | | 227,819 | | | | 216,000 | | | | — | | | | 225,834 | | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family non-owner occupied | | $ | 856,752 | | | $ | 855,879 | | | $ | 30,901 | | | $ | 856,752 | | | $ | 47,446 | | | | | | | | | | | | | |
Mobile home | | | 165,267 | | | | 152,256 | | | | 36,517 | | | | 165,267 | | | | 9,561 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | $ | 877,758 | | | $ | 835,822 | | | $ | — | | | $ | 877,758 | | | $ | 25,376 | | | | | | | | | | | | | |
One-to four-family non-owner occupied | | | 1,752,970 | | | | 1,577,271 | | | | 30,901 | | | | 1,752,970 | | | | 63,238 | | | | | | | | | | | | | |
Secured by other properties | | | 227,819 | | | | 216,000 | | | | — | | | | 227,819 | | | | — | | | | | | | | | | | | | |
Mobile home | | | 165,267 | | | | 152,256 | | | | 36,517 | | | | 165,267 | | | | 9,561 | | | | | | | | | | | | | |
Loans may be periodically modified in a troubled debt restructuring (a “TDR”) to make concessions to help a borrower remain current on the loan and/or to avoid foreclosure. Generally we do not forgive principal or interest on a loan or modify the interest rate on loans that are below market rates. When we modify loans in a TDR, we evaluate any possible impairment similar to other impaired loans. If we determine that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through a specific allowance estimate or a charge-off to the allowance. At September 30, 2013, we had ten loans that were restructured. One loan was secured by a one-to four-family owner occupied property in the amount of $136,481. Five loans to the same borrower in the amount of $783,503 were secured by one-to four-family non-owner occupied properties. One loan was secured by other properties in the amount of $213,099, one loan was secured by construction and land development in the amount of $370,411 and two loans were secured by a mobile homes in the amount of $105,940. At September 30, 2012, we had eight loans that were restructured. One loan was secured by a one-to four-family owner occupied property in the amount of $138,035. Five loans to the same borrower in the amount of $855,879 were secured by one-to four-family non-owner occupied properties. One loan was secured by other properties in the amount of $216,000 and one loan was secured by a mobile home loan in the amount of $51,313. The Company has no commitments to loan additional funds to borrowers whose loans have been modified. |
The following table is a summary of impaired loans that were modified due to a troubled debt restructuring by class as of September 30, 2013 and September 30, 2012: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Modifications for the year ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | | | | | | | |
contracts | Outstanding Recorded | Outstanding Recorded | | | | | | | | | | | | | | | | | | | | | | |
| Investments | Investments | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction and land development | | 1 | | $ | 370,411 | | | $ | 370,411 | | | | | | | | | | | | | | | | | | | | | | | |
Mobile home | | 1 | | | 59,627 | | | | 59,627 | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Recorded Investment | | | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring that subsequently defaulted | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | | | | 1 | | | $ | 67,000 | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Modifications for the year ended September 30, 2012 | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | | | | | | | |
contracts | Outstanding Recorded | Outstanding Recorded | | | | | | | | | | | | | | | | | | | | | | |
| Investments | Investments | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | 1 | | $ | 151,932 | | | $ | 151,932 | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family non-owner occupied | | 5 | | | 856,752 | | | | 825,851 | | | | | | | | | | | | | | | | | | | | | | | |
Secured by other properties | | 1 | | | 227,819 | | | | 227,819 | | | | | | | | | | | | | | | | | | | | | | | |
Mobile home | | 1 | | | 48,715 | | | | 46,198 | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Recorded Investment | | | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring that subsequently defaulted | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to four-family owner occupied | | 1 | | $ | 151,932 | | | | | | | | | | | | | | | | | | | | | | | | | | | |