Fair Value Measurements | 3 Months Ended |
Dec. 31, 2014 |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements |
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ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: |
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Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
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Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. |
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Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
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A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. |
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Securities available-for-sale: The fair value of the Company’s securities available-for-sale is determined using Level 2 inputs, which are derived from readily available pricing sources and third-party pricing services for comparable instruments. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, treasury yield curves, trading levels, credit information and credit terms, among other factors. In certain cases where Level 1 or Level 2 are not available, securities are classified within Level 3 of the hierarchy. |
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Derivatives: The fair values of the Company’s embedded derivatives related to certain certificates of deposit are determined using inputs that are observable or that can be corroborated by observable market data (such as the S&P 500 Index and the 10- year U.S. Treasury rate) and, therefore, are classified within Level 2 of the valuation hierarchy. |
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Assets and liabilities recorded at fair value on a recurring basis: The following table summarizes assets measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value as of: |
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| | | | Fair Value Measurements | | | |
31-Dec-14 | | Total | | Quoted Prices in | | Significant Other | | Significant Other | | | |
Active Markets for | Observable Inputs | Unobservable | | | |
Identical Assets | (Level 2) | Inputs (Level 3) | | | |
(Level 1) | | | | | |
Assets | | | | | | | | | | | | | | | |
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Securities available-for-sale | | | | | | | | | | | | | | | |
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U.S. Government and agency securities | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | |
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U.S. Government agency residential mortgage-backed securities | | 38,593 | | | — | | | 38,593 | | | — | | | | |
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U.S. Government agency collateralized mortgage obligations | | 5,203 | | | — | | | 5,203 | | | — | | | | |
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U.S. Government agency commercial mortgage-backed securities | | 12,557 | | | — | | | 12,557 | | | — | | | | |
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Municipal securities | | 26,827 | | | | | 26,827 | | | | | | |
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Total securities available-for-sale | | $ | 83,180 | | | $ | — | | | $ | 83,180 | | | $ | — | | | | |
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Derivatives | | $ | 146 | | | $ | — | | | $ | 146 | | | $ | — | | | | |
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Liabilities | | | | | | | | | | | | | |
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Derivatives | | $ | 146 | | | $ | — | | | $ | 146 | | | $ | — | | | | |
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| | | | Fair Value Measurements | | | |
September 30, 2014 | | Total | | Quoted Prices in | | Significant Other | | Significant Other | | | |
Active Markets for | Observable Inputs | Unobservable | | | |
Identical Assets | (Level 2) | Inputs (Level 3) | | | |
(Level 1) | | | | | |
Assets | | | | | | | | | | | | | | | |
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Securities available-for-sale | | | | | | | | | | | | | | | |
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U.S. Government and agency securities | | $ | 5,179 | | | $ | — | | | $ | 5,179 | | | $ | — | | | | |
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U.S. Government agency residential mortgage-backed securities | | 37,196 | | | — | | | 37,196 | | | — | | | | |
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U.S. Government agency collateralized mortgage obligations | | 3,432 | | | — | | | 3,432 | | | — | | | | |
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U.S. Government agency commercial mortgage-backed securities | | 10,752 | | | — | | | 10,752 | | | — | | | | |
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Municipal securities | | 33,787 | | | | | 33,787 | | | | | | |
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Total securities available-for-sale | | $ | 90,346 | | | $ | — | | | $ | 90,346 | | | $ | — | | | | |
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Derivatives | | $ | 87 | | | $ | — | | | $ | 87 | | | $ | — | | | | |
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Liabilities | | | | | | | | | | | | | | | |
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Derivatives | | $ | 87 | | | $ | — | | | $ | 87 | | | $ | — | | | | |
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The Company did not have any transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the three months ended December 31, 2014. The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in a transfer between levels. |
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Assets recorded at fair value on a nonrecurring basis: The Company may be required, from time to time, to measure certain instruments at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. |
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Impaired loans: The Company does not record loans at fair value on a recurring basis. The specific reserves for collateral-dependent impaired loans are based on the fair value of the collateral less estimated costs to sell. The fair value of collateral is determined based on appraisals. In some cases, adjustments were made to the appraised values due to various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral. When significant adjustments were based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement. Impaired loans with a carrying amount of $452 and $541 have a valuation allowance of $103 and $136 included in the allowance for loan losses to reflect their fair value as of December 31, 2014 and September 30, 2014, respectively. |
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Foreclosed real estate: The Company does not record foreclosed real estate owned at a fair value on a recurring basis. The fair value of foreclosed real estate was determined using Level 3 inputs based on appraisals or broker pricing opinions. In some cases, adjustments were made to these values due to various factors including the age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in collateral. Foreclosed real estate is measured at fair value less estimated costs to sell at the date of foreclosure. Subsequent to foreclosure, additional writedowns may be recorded based on changes to the fair value of the assets. |
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Mortgage servicing rights: Mortgage servicing rights ("MSRs") do not trade in an active, open market with readily observable prices. While sales of MSRs do occur, the precise terms and conditions typically are not readily available. Accordingly, the Company estimates the fair value of MSRs using discounted cash flow models incorporating numerous assumptions from the perspective of market participants including servicing income, servicing costs, market discount rates, prepayments speeds, and default rates. Due to the nature of the valuation inputs, MSRs are classified within Level 3 of the valuation hierarchy. As of December 31, 2014, mortgage servicing rights with a carrying amount of $1,688 have a valuation allowance of $160 to reflect their fair value of $1,528. As of September 30, 2014, mortgage servicing rights with a carrying amount of $1,784 have a valuation allowance of $160 to reflect their fair value of $1,624. |
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| | | | Fair Value Measurements | | | |
31-Dec-14 | | Total | | Quoted Prices in | | Significant Other | | Significant Other | | | |
Active Markets for | Observable Inputs | Unobservable | | | |
Identical Assets | (Level 2) | Inputs (Level 3) | | | |
(Level 1) | | | | | |
Assets | | | | | | | | | | | | | | | |
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Impaired loans | | $ | 349 | | | $ | — | | | $ | — | | | $ | 349 | | | | |
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Foreclosed real estate | | 2,333 | | | — | | | — | | | 2,333 | | | | |
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Mortgage servicing rights | | 1,528 | | | — | | | — | | | 1,528 | | | | |
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| | | | Fair Value Measurements | | | |
September 30, 2014 | | Total | | Quoted Prices in | | Significant Other | | Significant Other | | | |
Active Markets for | Observable Inputs | Unobservable | | | |
Identical Assets | (Level 2) | Inputs (Level 3) | | | |
(Level 1) | | | | | |
Assets | | | | | | | | | | | | | | | |
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Impaired loans | | $ | 405 | | | $ | — | | | $ | — | | | $ | 405 | | | | |
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Foreclosed real estate | | 2,355 | | | — | | | — | | | 2,355 | | | | |
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Mortgage servicing rights | | 1,624 | | | — | | | — | | | 1,624 | | | | |
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Disclosure of fair value information about financial instruments, for which it is practicable to estimate that value, is required whether or not recognized in the consolidated balance sheets. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments with a fair value that is not practicable to estimate and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not necessarily represent the underlying value of the Company for assets and liabilities not previously described. The Company, in estimating its fair value disclosures for financial instruments not described above, used the following methods and assumptions: |
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Cash and cash equivalents: The carrying amounts of cash and cash equivalents reported in the consolidated balance sheets approximate those assets’ fair values. |
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Securities held to maturity: The fair values of securities held to maturity are based on quoted market prices for similar securities, adjusted for differences in security characteristics. |
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Loans: For variable-rate mortgage loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for fixed rate residential mortgage loans are based on quoted market prices for similar loans sold in conjunction with sale transactions, adjusted for differences in loan characteristics. The fair values for commercial real estate loans, rental property mortgage loans, and consumer and other loans are estimated using discounted cash flow analyses and using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. |
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Loans held for sale: Fair value of loans held for sale are based on commitments on hand from investors or prevailing market prices. |
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Federal Home Loan Bank stock: The carrying amount of FHLB stock approximates its fair value based on the redemption provisions of the FHLB. |
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Accrued interest receivable and payable: The carrying amounts of accrued interest receivable and payable approximate their fair values. |
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Deposits: The fair value disclosed for interest-bearing and non-interest-bearing checking accounts, savings accounts, and money market accounts are equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The fair values of fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities of the outstanding certificates of deposit. |
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Advances from the Federal Home Loan Bank: The fair values of FHLB advances are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. |
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Advance payments by borrowers for property taxes and insurance: The carrying amounts of the advance payments by borrowers for property taxes and insurance approximate their fair values. |
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Mortgage banking derivatives: The fair value of commitments to originate mortgage loans held for sale is estimated by comparing the Company’s cost to acquire mortgages and the current price for similar mortgage loans, taking into account the terms of the commitments and the credit worthiness of the counterparties. The fair value of forward commitments to sell residential mortgage loans is the estimated amount that the Bank would receive or pay to terminate the forward delivery contract at the reporting date based on market prices for similar financial instruments. The fair value of these derivative financial instruments was not material at December 31, 2014 and September 30, 2014. |
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The estimated fair values and related carrying amounts of the Company’s financial instruments are as follows: |
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| 31-Dec-14 |
| Carrying | | Estimated Fair | | Quoted Prices in | | Significant Other | | Significant Other |
Amount | Value | Active Markets for | Observable | Unobservable |
| | Identical Assets | Inputs | Inputs |
| | (Level 1) | (Level 2) | (Level 3) |
Financial assets: | | | | | | | | | | | | | | |
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Cash and cash equivalents | $ | 24,475 | | | $ | 24,475 | | | $ | 24,475 | | | $ | — | | | $ | — | |
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Securities available for sale | 83,180 | | | 83,180 | | | — | | | 83,180 | | | — | |
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Securities held to maturity | 3,025 | | | 3,025 | | | — | | | 3,025 | | | — | |
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Loans, net | 438,172 | | | 440,204 | | | — | | | — | | | 440,204 | |
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Loans held for sale, net | 2,082 | | | 2,082 | | | — | | | 2,082 | | | — | |
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Federal Home Loan Bank stock | 2,670 | | | 2,670 | | | — | | | — | | | 2,670 | |
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Mortgage servicing rights | 1,528 | | | 1,528 | | | — | | | — | | | 1,528 | |
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Accrued interest receivable | 1,748 | | | 1,748 | | | 1,748 | | | — | | | — | |
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Derivative asset | 146 | | | 146 | | | — | | | 146 | | | — | |
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Financial liabilities: | | | | | | | | | | | | | | |
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Deposits | 472,688 | | | 460,304 | | | 88,628 | | | — | | | 371,676 | |
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Advances from Federal Home Loan Bank | 31,000 | | | 31,000 | | | — | | | 31,000 | | | — | |
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Advance payments by borrowers for property taxes and insurance | 255 | | | 255 | | | 255 | | | — | | | — | |
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Accrued interest payable | 4 | | | 4 | | | 4 | | | — | | | — | |
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Derivative liability | 146 | | | 146 | | | — | | | 146 | | | — | |
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| 30-Sep-14 |
| Carrying | | Estimated Fair | | Quoted Prices in | | Significant Other | | Significant Other |
Amount | Value | Active Markets for | Observable | Unobservable |
| | Identical Assets | Inputs | Inputs |
| | (Level 1) | (Level 2) | (Level 3) |
Financial assets: | | | | | | | | | | | | | | |
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Cash and cash equivalents | $ | 17,608 | | | $ | 17,608 | | | $ | 17,608 | | | $ | — | | | $ | — | |
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Securities available for sale | 90,346 | | | 90,346 | | | — | | | 90,346 | | | — | |
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Loans, net | 416,874 | | | 415,857 | | | — | | | — | | | 415,857 | |
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Loans held for sale, net | 326 | | | 326 | | | — | | | 326 | | | — | |
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Federal Home Loan Bank stock | 2,670 | | | 2,670 | | | — | | | — | | | 2,670 | |
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Mortgage servicing rights | 1,624 | | | 1,624 | | | — | | | — | | | 1,624 | |
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Accrued interest receivable | 1,784 | | | 1,784 | | | 1,784 | | | — | | | — | |
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Derivative asset | 87 | | | 87 | | | — | | | 87 | | | — | |
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Financial liabilities: | | | | | | | | | | | | | | |
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Deposits | 454,928 | | | 442,342 | | | 77,790 | | | — | | | 364,552 | |
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Advances from Federal Home Loan Bank | 17,000 | | | 17,000 | | | — | | | 17,000 | | | — | |
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Advance payments by borrowers for property taxes and insurance | 5,869 | | | 5,869 | | | 5,869 | | | — | | | — | |
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Accrued interest payable | 3 | | | 3 | | | 3 | | | — | | | — | |
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Derivative liability | 87 | | | 87 | | | — | | | 87 | | | — | |
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