NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements as of March 31, 2014 and September 30, 2013 and for the three and six months ended March 31, 2014 and 2013, include the accounts of Teche Holding Company (the “Company”) and its subsidiary, Teche Federal Bank (the “Bank”). The Company’s business is conducted principally through the Bank. All significant inter-company accounts and transactions have been eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all information necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation of the consolidated financial statements, have been included. The results of operations for the six months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other period. These financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2013.
NOTE 3 - INCOME PER SHARE
Basic and diluted net income per share is computed based on the weighted average number of shares outstanding during each period. Diluted net income per share reflects the potential dilution that could occur if stock options were exercised, resulting in the issuance of common stock that then shared in the net income of the Company.
Following is a summary of the information used in the computation of basic and diluted income per common share for the three and six months ended March 31, 2014 and 2013 (in thousands).
|
Three Months Ended
|
|
Six Months Ended
|
|
March 31,
|
|
March 31,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Weighted average number of common shares outstanding -
used in computation of basic income per common share
|
2,103
|
|
|
2,038
|
|
2,081
|
|
2,039
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Stock options and grants
|
71
|
|
|
28
|
|
55
|
|
26
|
Weighted average number of common shares outstanding
plus effect of dilutive securities - used in computation
of diluted net income per common share
|
2,174
|
|
|
2,066
|
|
2,136
|
|
2,065
|
For the three and six months ended March 31, 2014 and 2013, net income for determining diluted earnings per share was equivalent to net income. Options to purchase shares that have been excluded from the determination of diluted earnings per share because they are antidilutive (the exercise price is higher than the current market price) amounted to 0 and 72,220 for the three and six months ended March 31, 2014 and 2013, respectively.
NOTE 4 - ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income for the Company consists of unrealized holding gains and losses on investments classified as available for sale, net of income taxes. For the six months ended March 31, 2014, there was a $39,000, net of tax, reclassification out of accumulated other comprehensive income for realized gains on the sale of investments. The reclassification out of accumulated other comprehensive income was reported within non-interest income on the Unaudited Consolidated Statements of Income. There were no reclassifications out of accumulated other comprehensive income for the three and six months ended March 31, 2013.
NOTE 5 – FAIR VALUE MEASUREMENTS
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Available for sale securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a nonrecurring basis, such as securities held-to-maturity, loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting, other than temporary impairment accounting or impairments of individual assets.
This is a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1 - Observable inputs such as quoted prices in active markets;
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The Company evaluates fair value measurement inputs on an ongoing basis in order to determine if there is a change of sufficient significance to warrant a transfer between levels. For example, changes in market activity or the addition of new unobservable inputs could, in the Company’s judgment, cause a transfer to either a higher or lower level. For the three and six months ended March 31, 2014, there were no transfers between levels.
Following is a description of valuation methodologies used for assets recorded at fair value.
Investment Securities
Securities available for sale are valued at quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities. These are inputs used by a third-party pricing service used by the Company. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government-sponsored entities. Securities classified as Level 3 include asset-backed securities in less liquid markets. Securities held to maturity are valued using discounted cash flow models that use assumptions about prepayment speeds, coupon default rates, discount rates and timing and other assumptions that may affect the amounts of cash flows. The Company periodically updates its understanding of the inputs used and compares valuations to an additional third party source.
Loans
The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310-10-35. The fair value of impaired loans is estimated using one of several methods, including the collateral value if the impaired loan is collateral-dependent, which is typically derived from appraisals
that take into consideration prices in observed transactions involving similar assets and similar locations. Each appraisal is updated on an annual basis, either through a new appraisal or through an internal review process. Other methods used to determine fair value are enterprise value, liquidation value and discounted cash flows. The fair value of impaired loans that are not collateral-dependent would require a measure using a discounted cash flow analysis considered to be a Level 3 input. Fair value is re-assessed at least quarterly, or more frequently when circumstances occur that indicate a change in fair value. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At March 31, 2014, substantially all of the impaired loans were evaluated based on the fair value of the collateral less estimated costs to sell. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.
Fair value is also used on a nonrecurring basis for nonfinancial assets and liabilities such as foreclosed assets, and other real estate owned measured at fair value for purposes of assessing impairment. A description of the valuation methodologies used for nonfinancial assets measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
Other Real Estate Owned
Other Real Estate Owned (“OREO”), consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs (Level 3). The fair value of OREO is based on a property’s appraised value adjusted at management’s discretion to reflect a further decline in the fair value of properties since the time the appraisal analysis was performed. The Company has experienced that appraisals quickly become outdated due to the volatile real estate environment. The inputs used to determine the fair value of OREO fall within Level 3. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. Gains or losses on sale and generally any subsequent adjustments to the value are recorded as a component of OREO expense.
The following tables present the fair value measurements of financial assets measured at fair value on a recurring and nonrecurring basis as of March 31, 2014 and September 30, 2013, respectively, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.
|
|
|
|
|
Fair Value Measurements using:
|
|
|
|
Fair Value
At
March 31, 2014
|
|
|
Quoted prices in active markets for identical assets
(Level 1)
|
|
|
Significant other observable inputs
(Level 2)
|
|
|
Significant unobservable inputs
(Level 3)
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets valued on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc.
|
|
$
|
1,317
|
|
|
$
|
-
|
|
|
$
|
1,317
|
|
|
$
|
-
|
|
Federal Home Loan Mortgage Corp.
|
|
|
1,142
|
|
|
|
-
|
|
|
|
1,142
|
|
|
|
-
|
|
Federal National Mortgage Assoc.
|
|
|
8,718
|
|
|
|
-
|
|
|
|
8,718
|
|
|
|
-
|
|
|
|
|
11,177
|
|
|
|
-
|
|
|
|
11,177
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc.
|
|
|
1,126
|
|
|
|
-
|
|
|
|
1,126
|
|
|
|
-
|
|
Marketable equity securities
|
|
|
423
|
|
|
|
423
|
|
|
|
-
|
|
|
|
-
|
|
Total recurring
|
|
$
|
12,726
|
|
|
$
|
423
|
|
|
$
|
12,303
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets valued on a non-recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
|
1,309
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,309
|
|
Other real estate owned
|
|
|
372
|
|
|
|
-
|
|
|
|
-
|
|
|
|
372
|
|
Total non-recurring
|
|
$
|
1,681
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,681
|
|
|
|
Fair Value At September
|
|
|
Fair Value Hierarchy
|
|
|
|
30, 2013
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets valued on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc.
|
|
$
|
1,435
|
|
|
$
|
-
|
|
|
$
|
1,435
|
|
|
$
|
-
|
|
Federal Home Loan Mortgage Corp.
|
|
|
1,463
|
|
|
|
-
|
|
|
|
1,463
|
|
|
|
-
|
|
Federal National Mortgage Assoc.
|
|
|
9,692
|
|
|
|
-
|
|
|
|
9,692
|
|
|
|
-
|
|
|
|
|
12,590
|
|
|
|
-
|
|
|
|
12,590
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc.
|
|
|
1,296
|
|
|
|
-
|
|
|
|
1,296
|
|
|
|
-
|
|
Marketable equity securities
|
|
|
561
|
|
|
|
561
|
|
|
|
-
|
|
|
|
-
|
|
Total recurring
|
|
$
|
14,447
|
|
|
$
|
561
|
|
|
$
|
13,886
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets valued on a non-recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
|
1,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,333
|
|
Other real estate owned
|
|
|
741
|
|
|
|
-
|
|
|
|
-
|
|
|
|
741
|
|
Total non-recurring
|
|
$
|
2,074
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,074
|
|
The following tables presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:
|
|
Quantitative Information about Level 3 Fair Value
Measurements
|
|
|
Fair Value
|
|
Valuation
|
|
Unobservable
|
|
Range (Weighted
|
|
|
Estimate
|
|
Techniques
|
|
Input
|
|
Average)
|
(In thousands)
|
|
|
|
|
|
|
|
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
$
|
1,309
|
|
Discounted
expected cash
flows
|
|
Interest rate and
Repayment term
|
|
Weighted average
discount rate 6.59%
Maturity range
60-72 months
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
372
|
|
Property
appraisals
|
|
Management discount for property type and recent market volatility
|
|
0%-34% discount
|
|
|
Quantitative Information about Level 3 Fair Value
Measurements
|
|
|
Fair Value
|
|
Valuation
|
|
Unobservable
|
|
Range (Weighted
|
|
|
Estimate
|
|
Techniques
|
|
Input
|
|
Average)
|
(In thousands)
|
|
|
|
|
|
|
|
|
September 30, 2013:
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
$
|
1,333
|
|
Discounted
expected cash
flows
|
|
Interest rate and
Repayment term
|
|
Weighted average
discount rate 6.59%
|
|
|
|
|
|
|
|
|
|
Maturity range
60-72 months
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
741
|
|
Property
appraisals
|
|
Management discount for property type and recent market volatility
|
|
10%-33% discount
|
The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. 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. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:
Cash -
For those short-term instruments, the carrying amount is a reasonable estimate of fair value.
Investment Securities –
See the discussion elsewhere in this Note 5 on the valuation of the fair value of investment securities. Investment securities’ fair value equal quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.
Loans -
See the discussion in Note 5 on the valuation of fair value of impaired loans. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers for the same remaining maturities. No adjustment has been made for illiquidity in the market for loans as there is no active market for many of the Company’s loans on which to reasonably base this estimate.
Federal Home Loan Bank Stock -
Federal Home Loan Bank (FHLB) stock is recorded at cost and is periodically reviewed for impairment. No ready market exists for the FHLB stock. It has no quoted market value and is carried at cost. Cost approximates fair market value based upon the redemption requirements of the FHLB, and this investment is not considered impaired at March 31, 2014. The FHLB of Dallas is still redeeming stock.
Bank Owned Life Insurance-
The carrying amounts of bank owned life insurance contracts approximate fair value.
Accrued Interest -
The carrying amounts of accrued interest receivable and payable approximate fair value.
Deposits -
The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.
Advances from Federal Home Loan Bank -
The fair value of advances is estimated using rates currently available for advances of similar remaining maturities.
Commitments -
The fair value of commitments to extend credit was not significant.
The estimated fair values of the Company’s financial instruments were as follows at March 31, 2014 and September 30, 2013:
|
|
|
|
|
|
|
|
Fair Value Measurements at
March 31, 2014
|
|
|
|
Carrying
|
|
|
Estimated
Fair
|
|
|
Quoted Prices in Active Markets for Identical Assets
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
|
Amount
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
(In thousands)
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
30,577
|
|
|
$
|
30,577
|
|
|
$
|
30,577
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Investment securities
|
|
|
72,253
|
|
|
|
72,913
|
|
|
|
423
|
|
|
|
72,490
|
|
|
|
-
|
|
FHLB stock
|
|
|
5,618
|
|
|
|
5,618
|
|
|
|
-
|
|
|
|
5,618
|
|
|
|
-
|
|
Accrued interest receivable
|
|
|
2,057
|
|
|
|
2,057
|
|
|
|
-
|
|
|
|
2,057
|
|
|
|
-
|
|
Life Insurance contracts
|
|
|
15,429
|
|
|
|
15,429
|
|
|
|
-
|
|
|
|
15,429
|
|
|
|
-
|
|
Loans receivable, net
|
|
|
697,876
|
|
|
|
698,974
|
|
|
|
-
|
|
|
|
-
|
|
|
|
698,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
654,040
|
|
|
|
654,584
|
|
|
|
110,964
|
|
|
|
543,620
|
|
|
|
-
|
|
Advance from Federal Home Loan Bank
|
|
|
108,634
|
|
|
|
113,356
|
|
|
|
-
|
|
|
|
113,356
|
|
|
|
-
|
|
Accrued interest payable
|
|
|
310
|
|
|
|
310
|
|
|
|
-
|
|
|
|
310
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
September 30, 2013
|
|
|
|
Carrying
|
|
|
Estimated
Fair
|
|
|
Quoted Prices in Active Markets for Identical Assets
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
|
Amount
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
(In thousands)
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
34,332
|
|
|
$
|
34,332
|
|
|
$
|
34,332
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Investment securities
|
|
|
82,179
|
|
|
|
82,945
|
|
|
|
561
|
|
|
|
82,384
|
|
|
|
-
|
|
FHLB stock
|
|
|
5,068
|
|
|
|
5,068
|
|
|
|
-
|
|
|
|
5,068
|
|
|
|
-
|
|
Accrued interest receivable
|
|
|
2,091
|
|
|
|
2,091
|
|
|
|
-
|
|
|
|
2,091
|
|
|
|
-
|
|
Life Insurance contracts
|
|
|
15,125
|
|
|
|
15,125
|
|
|
|
-
|
|
|
|
15,125
|
|
|
|
-
|
|
Loans receivable, net
|
|
|
676,535
|
|
|
|
680,901
|
|
|
|
-
|
|
|
|
-
|
|
|
|
680,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
650,791
|
|
|
|
652,019
|
|
|
|
100,822
|
|
|
|
551,197
|
|
|
|
-
|
|
Advance from Federal Home Loan Bank
|
|
|
108,997
|
|
|
|
113,774
|
|
|
|
-
|
|
|
|
113,774
|
|
|
|
-
|
|
Accrued interest payable
|
|
|
353
|
|
|
|
353
|
|
|
|
-
|
|
|
|
353
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 6 – SECURITIES
The amortized cost and estimated fair values of securities available-for-sale were as follows:
|
|
March 31, 2014
|
|
|
|
|
|
|
Gross Unrealized Gains
|
|
|
Gross
Unrealized Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
Amortized Cost
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc.
|
|
$
|
1,268
|
|
|
$
|
49
|
|
|
$
|
-
|
|
|
$
|
1,317
|
|
Federal Home Loan Mortgage Corp.
|
|
|
1,087
|
|
|
|
55
|
|
|
|
-
|
|
|
|
1,142
|
|
Federal National Mortgage Assoc.
|
|
|
8,362
|
|
|
|
356
|
|
|
|
-
|
|
|
|
8,718
|
|
|
|
|
10,717
|
|
|
|
460
|
|
|
|
-
|
|
|
|
11,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc.
|
|
|
1,050
|
|
|
|
76
|
|
|
|
-
|
|
|
|
1,126
|
|
Marketable equity securities
|
|
|
299
|
|
|
|
124
|
|
|
|
-
|
|
|
|
423
|
|
Total
|
|
$
|
12,066
|
|
|
$
|
660
|
|
|
$
|
-
|
|
|
$
|
12,726
|
|
|
|
September 30, 2013
|
|
|
|
|
|
|
Gross
Unrealized Gains
|
|
|
Gross
Unrealized Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
Amortized Cost
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc.
|
|
$
|
1,383
|
|
|
$
|
52
|
|
|
$
|
-
|
|
|
$
|
1,435
|
|
Federal Home Loan Mortgage Corp.
|
|
|
1,405
|
|
|
|
58
|
|
|
|
-
|
|
|
|
1,463
|
|
Federal National Mortgage Assoc.
|
|
|
9,231
|
|
|
|
461
|
|
|
|
-
|
|
|
|
9,692
|
|
|
|
|
12,019
|
|
|
|
571
|
|
|
|
-
|
|
|
|
12,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc.
|
|
|
1,175
|
|
|
|
121
|
|
|
|
-
|
|
|
|
1,296
|
|
Marketable equity securities
|
|
|
375
|
|
|
|
186
|
|
|
|
-
|
|
|
|
561
|
|
Total
|
|
$
|
13,569
|
|
|
$
|
878
|
|
|
$
|
-
|
|
|
$
|
14,447
|
|
The amortized cost and estimated fair values of securities held-to-maturity were as follows:
|
|
March 31, 2014
|
|
|
|
|
|
|
Gross
Unrealized Gains
|
|
|
Gross
Unrealized Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
Amortized Cost
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits other banks
|
|
$
|
46,453
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
46,453
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Assoc.
|
|
|
10,459
|
|
|
|
486
|
|
|
|
-
|
|
|
|
10,945
|
|
Federal Home Loan Mortgage Corp.
|
|
|
2,133
|
|
|
|
147
|
|
|
|
-
|
|
|
|
2,280
|
|
CMOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corp.
|
|
|
41
|
|
|
|
1
|
|
|
|
-
|
|
|
|
42
|
|
Federal National Mortgage Assoc.
|
|
|
441
|
|
|
|
26
|
|
|
|
-
|
|
|
|
467
|
|
Total
|
|
$
|
59,527
|
|
|
$
|
660
|
|
|
$
|
-
|
|
|
$
|
60,187
|
|
|
|
September 30, 2013
|
|
|
|
|
|
|
Gross
Unrealized Gains
|
|
|
Gross
Unrealized Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
Amortized Cost
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits other banks
|
|
$
|
52,995
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
52,995
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Assoc.
|
|
|
11,650
|
|
|
|
578
|
|
|
|
(1
|
)
|
|
|
12,227
|
|
Federal Home Loan Mortgage Corp.
|
|
|
2,528
|
|
|
|
155
|
|
|
|
-
|
|
|
|
2,683
|
|
CMOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corp.
|
|
|
43
|
|
|
|
1
|
|
|
|
-
|
|
|
|
44
|
|
Federal National Mortgage Assoc.
|
|
|
516
|
|
|
|
33
|
|
|
|
-
|
|
|
|
549
|
|
Total
|
|
$
|
67,732
|
|
|
$
|
767
|
|
|
$
|
(1
|
)
|
|
$
|
68,498
|
|
The Company had 298 investments at March 31, 2014, none of which had unrealized losses.
Details concerning securities with unrealized losses as of September 30, 2013 are as follows:
|
|
Security with losses
under 12 months
|
|
|
Securities with losses
over 12 months
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
Held-to-Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgaged-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Association
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
110
|
|
|
$
|
(1
|
)
|
|
$
|
110
|
|
|
$
|
(1
|
)
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
110
|
|
|
$
|
(1
|
)
|
|
$
|
110
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had 330 investments at September 30, 2013 of which one had immaterial unrealized losses.
The amortized cost and estimated fair value of available-for-sale securities by contractual maturity at March 31, 2014, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
(In thousands)
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
Due within one year
|
|
$
|
-
|
|
|
$
|
-
|
|
Due after one year but within five years
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
11,767
|
|
|
|
12,303
|
|
Equity securities
|
|
|
299
|
|
|
|
423
|
|
Total
|
|
$
|
12,066
|
|
|
$
|
12,726
|
|
The amortized cost and estimated fair value of held-to-maturity securities by contractual maturity at March 31, 2014, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
(In thousands)
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
Due within one year
|
|
$
|
25,305
|
|
|
$
|
25,305
|
|
Due after one year but within five years
|
|
|
21,148
|
|
|
|
21,148
|
|
Total
|
|
|
46,453
|
|
|
|
46,453
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
13,074
|
|
|
|
13,734
|
|
Total
|
|
$
|
59,527
|
|
|
$
|
60,187
|
|
There were no other than temporary impairment losses in the equity securities portfolio for the six months ended March 31, 2014 or the six months ended March 31, 2013. Management will continue to monitor the equity securities portfolio and make an impairment adjustment if deemed necessary based upon the prospects for recovery and the duration and severity of any future unrealized losses.
NOTE 7 - LOANS
Loans Receivable
Loans receivable are summarized as follows:
|
|
At Mar 31 '14
|
|
|
% Total
|
|
|
At Sept 30 '13
|
|
|
% Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
$
|
138,871
|
|
|
|
19.6
|
%
|
|
$
|
133,649
|
|
|
|
19.4
|
%
|
Commercial non-real estate loans
|
|
|
33,458
|
|
|
|
4.7
|
%
|
|
|
30,685
|
|
|
|
4.5
|
%
|
Commercial-construction loans
|
|
|
9,392
|
|
|
|
1.3
|
%
|
|
|
8,593
|
|
|
|
1.3
|
%
|
Commercial-land
|
|
|
10,171
|
|
|
|
1.5
|
%
|
|
|
10,349
|
|
|
|
1.5
|
%
|
Residential-construction loans
|
|
|
6,932
|
|
|
|
1.0
|
%
|
|
|
5,112
|
|
|
|
0.7
|
%
|
Residential-real estate loans
|
|
|
416,915
|
|
|
|
58.9
|
%
|
|
|
409,693
|
|
|
|
59.7
|
%
|
Consumer-Mobile home loans
|
|
|
46,594
|
|
|
|
6.6
|
%
|
|
|
43,198
|
|
|
|
6.3
|
%
|
Consumer-other
|
|
|
45,136
|
|
|
|
6.4
|
%
|
|
|
45,171
|
|
|
|
6.6
|
%
|
Total Loans
|
|
|
707,469
|
|
|
|
100.00
|
%
|
|
|
686,450
|
|
|
|
100.00
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
7,562
|
|
|
|
|
|
|
|
7,868
|
|
|
|
|
|
Deferred loan fees
|
|
|
2,031
|
|
|
|
|
|
|
|
2,047
|
|
|
|
|
|
Total Net Loans
|
|
$
|
697,876
|
|
|
|
|
|
|
$
|
676,535
|
|
|
|
|
|
Residential real estate loans increased $7.2 million between September 30, 2013 and March 31, 2014 due to increased loan originations. Commercial real estate loans increased $5.2 million due to increased loan originations. At March 31, 2014 approximately $306.0 million of loans receivable were pledged as collateral securing advances from the FHLB.
CREDIT QUALITY OF LOANS AND ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
|
|
Three Months Ended
March 31,
|
|
|
Six Months
Ended
March 31,
|
|
(in 000’s)
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Beginning ALLL
|
|
$
|
7,709
|
|
|
$
|
8,234
|
|
|
$
|
7,868
|
|
|
$
|
8,559
|
|
Provision for Loan Losses
|
|
|
-
|
|
|
|
250
|
|
|
|
-
|
|
|
|
400
|
|
Net Charge-offs
|
|
|
(147
|
)
|
|
|
(349
|
)
|
|
|
(306
|
)
|
|
|
(824
|
)
|
Ending ALLL
|
|
$
|
7,562
|
|
|
$
|
8,135
|
|
|
$
|
7,562
|
|
|
$
|
8,135
|
|
The amount of nonaccrual loans at March 31, 2014 and September 30, 2013 was $3.2 million and $2.4 million, respectively. The Company had total impaired loans of approximately $7.3 million and $7.6 million at March 31, 2014 and September 30, 2013, respectively. Specific reserves allocated to impaired loans totaled $138,000 at both March 31, 2014 and September 30, 2013.
Allowance for Loan Losses and Recorded Investment in Loans as of March 31, 2014 and September 30, 2013 and for the three and six months ended March 31, 2014 and March 31, 2013.
The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance is the amount, in the judgment of management, necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The methodology is based on the Bank’s historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations, with adjustments for current events and conditions. The Company’s process for determining the appropriate level of the allowance for loan losses is designed to account for credit deterioration as it occurs. The provision for loan losses reflects loan quality trends, potential problem loans, and criticized loans and net charge-offs, among other factors. The provision for loan losses also reflects the totality of actions taken on all loans for a particular period. In other words, the amount of the provision reflects not only the necessary increases in the allowance for loan losses related to newly identified criticized loans, but it also reflects actions taken related to other loans including, among other things, any necessary increases or decreases in required allowances for specific loans or loan class.
The table below provides an allocation of the allowance for possible loan losses by loan type; however, allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories:
|
|
Quarter Ended March 31, 2014
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial-real estate
|
|
|
Commercial-construction
|
|
|
Commercial-Land
|
|
|
Residential-construction
|
|
|
Residential-real estate
|
|
|
Commercial-non real estate
|
|
|
Consumer-Mobile Homes
|
|
|
Consumer-Other
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
1,959
|
|
|
$
|
141
|
|
|
$
|
398
|
|
|
$
|
80
|
|
|
$
|
3,863
|
|
|
$
|
268
|
|
|
$
|
527
|
|
|
$
|
473
|
|
|
$
|
7,709
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
106
|
|
|
|
-
|
|
|
|
50
|
|
|
|
27
|
|
|
|
183
|
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24
|
|
|
|
-
|
|
|
|
2
|
|
|
|
10
|
|
|
|
36
|
|
Provision
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ending balance
|
|
$
|
1,959
|
|
|
$
|
141
|
|
|
$
|
398
|
|
|
$
|
80
|
|
|
$
|
3,781
|
|
|
$
|
268
|
|
|
$
|
479
|
|
|
$
|
456
|
|
|
$
|
7,562
|
|
|
|
Quarter Ended March 31, 2013
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial-real estate
|
|
|
Commercial-construction
|
|
|
Commercial-Land
|
|
|
Residential-construction
|
|
|
Residential-real estate
|
|
|
Commercial-non real estate
|
|
|
Consumer-Mobile Homes
|
|
|
Consumer-Other
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
2,045
|
|
|
$
|
141
|
|
|
$
|
368
|
|
|
$
|
80
|
|
|
$
|
4,171
|
|
|
$
|
265
|
|
|
$
|
586
|
|
|
$
|
578
|
|
|
$
|
8,234
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
21
|
|
|
|
-
|
|
|
|
206
|
|
|
|
-
|
|
|
|
131
|
|
|
|
24
|
|
|
|
382
|
|
Recoveries
|
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
|
|
-
|
|
|
|
8
|
|
|
|
2
|
|
|
|
33
|
|
Provision
|
|
|
-
|
|
|
|
-
|
|
|
|
52
|
|
|
|
-
|
|
|
|
83
|
|
|
|
-
|
|
|
|
115
|
|
|
|
-
|
|
|
|
250
|
|
Ending balance
|
|
$
|
2,060
|
|
|
$
|
141
|
|
|
$
|
399
|
|
|
$
|
80
|
|
|
$
|
4,056
|
|
|
$
|
265
|
|
|
$
|
578
|
|
|
$
|
556
|
|
|
$
|
8,135
|
|
|
|
Six Months Ended March 31, 2014
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial-real estate
|
|
|
Commercial-construction
|
|
|
Commercial-Land
|
|
|
Residential-construction
|
|
|
Residential-real estate
|
|
|
Commercial-non real estate
|
|
|
Consumer-Mobile Homes
|
|
|
Consumer-Other
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
1,959
|
|
|
$
|
141
|
|
|
$
|
398
|
|
|
$
|
80
|
|
|
$
|
3,931
|
|
|
$
|
268
|
|
|
$
|
560
|
|
|
$
|
531
|
|
|
$
|
7,868
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
178
|
|
|
|
-
|
|
|
|
87
|
|
|
|
86
|
|
|
|
351
|
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28
|
|
|
|
-
|
|
|
|
6
|
|
|
|
11
|
|
|
|
45
|
|
Provision
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ending balance
|
|
$
|
1,959
|
|
|
$
|
141
|
|
|
$
|
398
|
|
|
$
|
80
|
|
|
$
|
3,781
|
|
|
$
|
268
|
|
|
$
|
479
|
|
|
$
|
456
|
|
|
$
|
7,562
|
|
|
|
Six Months Ended March 31, 2013
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial-real estate
|
|
|
Commercial-construction
|
|
|
Commercial-Land
|
|
|
Residential-construction
|
|
|
Residential-real estate
|
|
|
Commercial-non real estate
|
|
|
Consumer-Mobile Homes
|
|
|
Consumer-Other
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
2,045
|
|
|
$
|
141
|
|
|
$
|
437
|
|
|
$
|
80
|
|
|
$
|
4,390
|
|
|
$
|
265
|
|
|
$
|
609
|
|
|
$
|
592
|
|
|
$
|
8,559
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
141
|
|
|
|
-
|
|
|
|
506
|
|
|
|
-
|
|
|
|
188
|
|
|
|
39
|
|
|
|
874
|
|
Recoveries
|
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22
|
|
|
|
-
|
|
|
|
10
|
|
|
|
3
|
|
|
|
50
|
|
Provision
|
|
|
-
|
|
|
|
-
|
|
|
|
103
|
|
|
|
-
|
|
|
|
150
|
|
|
|
-
|
|
|
|
147
|
|
|
|
-
|
|
|
|
400
|
|
Ending balance
|
|
$
|
2,060
|
|
|
$
|
141
|
|
|
$
|
399
|
|
|
$
|
80
|
|
|
$
|
4,056
|
|
|
$
|
265
|
|
|
$
|
578
|
|
|
$
|
556
|
|
|
$
|
8,135
|
|
|
|
As of March 31, 2014
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial-real estate
|
|
|
Commercial-construction
|
|
|
Commercial-Land
|
|
|
Residential-construction
|
|
|
Residential-real estate
|
|
|
Commercial-non real estate
|
|
|
Consumer-Mobile Homes
|
|
|
Consumer-Other
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
138
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
$
|
1,821
|
|
|
$
|
141
|
|
|
$
|
398
|
|
|
$
|
80
|
|
|
$
|
3,781
|
|
|
$
|
268
|
|
|
$
|
479
|
|
|
$
|
456
|
|
|
$
|
7,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
Ending Balance
Collectively evaluated for impairment
|
|
$
|
133,503
|
|
|
$
|
9,392
|
|
|
$
|
10,171
|
|
|
$
|
6,932
|
|
|
$
|
416,387
|
|
|
$
|
32,089
|
|
|
$
|
46,594
|
|
|
$
|
45,136
|
|
|
$
|
700,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance individually evaluated for impairment
|
|
$
|
5,368
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
528
|
|
|
$
|
1,369
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,265
|
|
|
|
As of September 30, 2013
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial-real estate
|
|
|
Commercial-construction
|
|
|
Commercial-Land
|
|
|
Residential-construction
|
|
|
Residential-real estate
|
|
|
Commercial-non real estate
|
|
|
Consumer-Mobile Homes
|
|
|
Consumer-Other
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
138
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
$
|
1,821
|
|
|
$
|
141
|
|
|
$
|
398
|
|
|
$
|
80
|
|
|
$
|
3,931
|
|
|
$
|
268
|
|
|
$
|
560
|
|
|
$
|
531
|
|
|
$
|
7,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
Ending Balance
Collectively evaluated for impairment
|
|
$
|
128,091
|
|
|
$
|
8,593
|
|
|
$
|
10,349
|
|
|
$
|
5,112
|
|
|
$
|
409,096
|
|
|
$
|
29,283
|
|
|
$
|
43,198
|
|
|
$
|
45,171
|
|
|
$
|
678,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance individually evaluated for impairment
|
|
$
|
5,558
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
597
|
|
|
$
|
1,402
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,557
|
|
Credit Quality Indicators
As of March 31, 2014
Commercial Credit Exposure
Credit Risk Profile by Internally Assigned Grade
Prime – Credits secured by cash (accounts held in the Bank), stocks, bonds (companies with debt ratings of “A” or better), U.S. Government securities with advance rates within bank policy and cash value of insurance policies (with sound AM Best rating).
Excellent – Borrowers that demonstrate exceptional credit fundamentals, including stable and predictable profit margins, cash flows, strong liquidity, conservative balance sheet and significant historical cash flow coverage of existing and pro-forma debt service coverage. Credits rated Excellent will have a strong primary source of repayment usually consisting of strong historical cash flows along with strong secondary and tertiary repayment sources. Subsequent repayment sources could consist of financially strong guarantors, low loan to value ratios on collateral with a strong secondary market or resale source. Companies fitting the profile of minimal risk will have low leverage, a defined management succession plan and a broad product mix.
Average – Borrowers that fit this classification would most likely be a typical middle market businesses or a high net worth individual. Loans would typically be secured and may have some reliance on inventory. Cash flow is adequate to service debt but may be susceptible to some deterioration due to cyclical, seasonal or economic events. Management is experienced but is concentrated in a few key people. Credits fitting this classification would typically have at least one very strong repayment source and a good secondary repayment source. Company product mix may lack diversity. The majority of loans fall within this classification. Annual financial statements on the borrower and guarantor(s) should be obtained.
Satisfactory – These loans display an acceptable degree of risk in the short-term. Unfavorable characteristics may exist however; these are offset by the positive trends. Some unpredictability in earnings and cash flow may exist. Leverage may be higher than typical in the industry and liquidity less than desirable. Management, while competent, may not be experienced and lack depth. Secondary and tertiary sources of repayment may be limited. Companies in a start-up situation typically fit this classification. Other characteristics of this classification would be companies with volatility in earnings and/or increasing leverage.
Watch List – Assets considered on a “Watch List” are technically not classified in the usual sense of the term and are considered “Pass” assets. Assets in this category do not trigger a need for additional valuation allowances. The purpose of this list is to identify assets that warrant increased monitoring for minor exceptions or problems, which could worsen in the near future if left unattended.
Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.
Substandard - Assets classified Substandard have a well-defined weakness or weaknesses. A Substandard asset is inadequately protected by the current net worth or paying capacity of the obligor or pledged collateral, if any. It is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Weaknesses are to be based upon objective evidence.
Doubtful - Assets classified Doubtful have all of the weaknesses inherent in those classified Substandard. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of the currently existing facts, conditions and values.
Loss - Assets classified as Loss are considered uncollectible, or of such little value that the continuance of the loan or other asset on the books of the Bank is not warranted. Some recovery of funds could be possible in the future, but the amount and probability of this recovery are not determinable, thus leaving little justification for the assets to remain on the books.
A Loss classification does not mean that an asset has no recovery or salvage value, but simply that it is not practical or desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be effected in the future.
Commercial Loans
Our underwriting philosophy is centered primarily on the borrower’s ability to generate adequate cash flow to service the debt in accordance with the terms and conditions of the loan agreement. Understanding the borrowers’ businesses along with their level of experience and the background of the principals is also a part of our lending philosophy. Generally, our loans are secured by collateral and we assess the market value of the collateral and the strength it brings to the loan. We generally require personal guarantees of the borrower’s principals and assess the financial strength and liquidity of each guarantor as part of our process.
Common risks to each class of commercial loans include risks that are not specific to the individual transactions such as general economic conditions within our markets. There are risks associated with each individual transaction such as a change in marital status, disability or death of the borrower and the loss of value of our collateral due to market conditions.
In addition to these common risks, additional risks are inherent in certain types of commercial loans.
Commercial Construction and Land Development:
Commercial construction and land development loans are dependent upon the supply and demand for commercial real estate in the markets we serve as well as the demand for newly constructed residential homes and lots. A continuing decrease in demand could result in significant decreases in the underlying collateral values and make repayment of the outstanding loans more difficult for our borrowers.
Commercial Mortgage and C&I Loans:
The repayment of commercial mortgage and C&I loans is primarily dependent upon the ability of our borrowers to produce cash flow consistent with original projections analyzed during the credit underwriting process. While our loans are generally secured by collateral with limitations on maximum loan to value, there is the risk that liquidation of the collateral will not fully satisfy the loan balance.
Non-owner occupied nonresidential and multifamily properties:
Loans secured by non-residential properties such as office buildings, and loans secured by multifamily housing are dependent upon the ability of the property to produce enough cash flow sufficient to service the debt. These types of properties are generally susceptible to high unemployment or generally weak economic conditions which can result in high vacancy rates.
Non-commercial loans
Most of our non-commercial loans are centrally underwritten. When assessing credit risk, we analyze certain factors relating to credit performance such as payment history, credit utilization, length of credit history. Since most of our non-commercial loans are secured, we evaluate the likely market value of the collateral. Common risks that are not specific to individual loan transactions include economic conditions within or markets, particularly unemployment rates and potential declines in real estate values. Personal events such as disability, death or a change in marital status also add risk to non-commercial loans.
In addition to these common risks, additional risks are inherent in certain types of non-commercial loans.
Revolving Mortgages:
Revolving loans such as HELOCs may be secured by first and junior liens on residential real estate making such loans susceptible to deterioration in residential real estate values. Additional risks include lien perfection deficiencies. Further, open end lines of credit have the inherent risk that the borrower may draw on the lines in excess of their collateral value particularly in a deteriorating real estate market.
Consumer Loans:
Consumer loans include loans secured by personal property such as automobiles, mobile homes, and other title recreational vehicles such as boats, RV’s and motorcycles. Consumer loans also may include unsecured loans. The value of the underlying collateral within this group of loans is especially volatile due to the potential rapid depreciation in values.
Residential Construction and Permanent Mortgages:
Residential mortgages are typically secured by 1-4 family residential property and residential lots. Declines in market value can result in residential mortgages with balances in excess of the value of the property securing the loan. Residential construction loans can experience delays in construction and cost overruns that can exceed the borrower’s financial ability to complete the home leading to unmarketable collateral.
Commercial Credit Exposure
Credit Risk Profile by Internally Assigned Grade at March 31, 2014
(In thousands)
|
|
Commercial-Land
|
|
|
Commercial- Construction
|
|
|
Commercial-Non-Real Estate
|
|
|
Commercial-Real Estate
|
|
|
Total
|
|
|
% Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,641
|
|
|
$
|
-
|
|
|
$
|
2,641
|
|
|
|
1.4
|
%
|
Excellent
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
|
|
4
|
|
|
|
19
|
|
|
|
0.0
|
|
Average
|
|
|
752
|
|
|
|
-
|
|
|
|
610
|
|
|
|
3,470
|
|
|
|
4,832
|
|
|
|
2.5
|
|
Satisfactory
|
|
|
8,675
|
|
|
|
9,037
|
|
|
|
28,434
|
|
|
|
116,668
|
|
|
|
162,814
|
|
|
|
84.9
|
|
Watch
|
|
|
744
|
|
|
|
-
|
|
|
|
389
|
|
|
|
11,782
|
|
|
|
12,915
|
|
|
|
6.7
|
|
Special Mention
|
|
|
-
|
|
|
|
355
|
|
|
|
-
|
|
|
|
3,759
|
|
|
|
4,114
|
|
|
|
2.1
|
|
Substandard
|
|
|
-
|
|
|
|
-
|
|
|
|
1,369
|
|
|
|
3,188
|
|
|
|
4,557
|
|
|
|
2.4
|
|
Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.0
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.0
|
|
Total
|
|
$
|
10,171
|
|
|
$
|
9,392
|
|
|
$
|
33,458
|
|
|
$
|
138,871
|
|
|
$
|
191,892
|
|
|
|
100.00
|
%
|
Commercial Credit Exposure
Credit Risk Profile by Internally Assigned Grade at September 30, 2013
(In thousands)
|
|
Commercial-Land
|
|
|
Commercial- Construction
|
|
|
Commercial-Non-Real Estate
|
|
|
Commercial-Real Estate
|
|
|
Total
|
|
|
% Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,074
|
|
|
$
|
-
|
|
|
$
|
3,074
|
|
|
|
1.7
|
%
|
Excellent
|
|
|
-
|
|
|
|
-
|
|
|
|
16
|
|
|
|
9
|
|
|
|
25
|
|
|
|
0.0
|
|
Average
|
|
|
624
|
|
|
|
-
|
|
|
|
638
|
|
|
|
3,851
|
|
|
|
5,113
|
|
|
|
2.8
|
|
Satisfactory
|
|
|
9,119
|
|
|
|
8,233
|
|
|
|
25,213
|
|
|
|
110,415
|
|
|
|
152,980
|
|
|
|
83.4
|
|
Watch
|
|
|
606
|
|
|
|
-
|
|
|
|
342
|
|
|
|
12,478
|
|
|
|
13,426
|
|
|
|
7.3
|
|
Special Mention
|
|
|
-
|
|
|
|
360
|
|
|
|
-
|
|
|
|
1,781
|
|
|
|
2,141
|
|
|
|
1.2
|
|
Substandard
|
|
|
-
|
|
|
|
-
|
|
|
|
1,402
|
|
|
|
5,115
|
|
|
|
6,517
|
|
|
|
3.6
|
|
Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.0
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.0
|
|
Total
|
|
$
|
10,349
|
|
|
$
|
8,593
|
|
|
$
|
30,685
|
|
|
$
|
133,649
|
|
|
$
|
183,276
|
|
|
|
100.0
|
%
|
Consumer Credit Exposure Credit Risk Profile
By Creditworthiness Category at March 31, 2014
|
|
Residential-
Real Estate Construction
|
|
|
Residential-
Real Estate
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
6,932
|
|
|
$
|
411,807
|
|
|
$
|
418,739
|
|
Special Mention
|
|
|
-
|
|
|
|
808
|
|
|
|
808
|
|
Substandard
|
|
|
-
|
|
|
|
4,300
|
|
|
|
4,300
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
6,932
|
|
|
$
|
416,915
|
|
|
$
|
423,847
|
|
Consumer Credit Exposure Credit Risk Profile
By Creditworthiness Category at September 30, 2013
|
|
Residential-
Real Estate Construction
|
|
|
Residential-
Real Estate
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
5,112
|
|
|
$
|
405,863
|
|
|
$
|
410,975
|
|
Special Mention
|
|
|
-
|
|
|
|
316
|
|
|
|
316
|
|
Substandard
|
|
|
-
|
|
|
|
3,514
|
|
|
|
3,514
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
5,112
|
|
|
$
|
409,693
|
|
|
$
|
414,805
|
|
Consumer Credit Exposure
Credit Risk Profile Based on Payment Activity at March 31, 2014
|
|
|
|
|
|
Consumer-
Mobile Homes
|
|
|
Consumer-
Other Loans
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Performing
|
|
$
|
46,287
|
|
|
$
|
45,051
|
|
|
$
|
91,338
|
|
Nonperforming
|
|
|
307
|
|
|
|
85
|
|
|
|
392
|
|
Total
|
|
$
|
46,594
|
|
|
$
|
45,136
|
|
|
$
|
91,730
|
|
Consumer Credit Exposure
Credit Risk Profile Based on Payment Activity at September 30, 2013
|
|
|
|
|
|
Consumer-
Mobile Homes
|
|
|
Consumer-
Other Loans
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Performing
|
|
$
|
42,952
|
|
|
$
|
44,905
|
|
|
$
|
87,857
|
|
Nonperforming
|
|
|
246
|
|
|
|
266
|
|
|
|
512
|
|
Total
|
|
$
|
43,198
|
|
|
$
|
45,171
|
|
|
$
|
88,369
|
|
Age Analysis of Past Due Loans
As of March 31, 2014
|
|
30-89
Days Past
Due
|
|
|
Greater
than 90
Days Past
Due
|
|
|
Total Past
Due
|
|
|
Current
|
|
|
Total Loans
|
|
|
Recorded
Investment
> 90 days
and Accruing
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
$
|
1,145
|
|
|
$
|
-
|
|
|
$
|
1,145
|
|
|
$
|
137,726
|
|
|
$
|
138,871
|
|
|
$
|
-
|
|
Commercial non-real estate loans
|
|
|
19
|
|
|
|
10
|
|
|
|
29
|
|
|
|
33,429
|
|
|
|
33,458
|
|
|
|
-
|
|
Commercial-construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,392
|
|
|
|
9,392
|
|
|
|
-
|
|
Commercial-land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,171
|
|
|
|
10,171
|
|
|
|
-
|
|
Residential-construction loans
|
|
|
172
|
|
|
|
-
|
|
|
|
172
|
|
|
|
6,760
|
|
|
|
6,932
|
|
|
|
-
|
|
Residential-real estate loans
|
|
|
3,215
|
|
|
|
2,665
|
|
|
|
5,880
|
|
|
|
411,035
|
|
|
|
416,915
|
|
|
|
177
|
|
Consumer-Mobile home loans
|
|
|
600
|
|
|
|
307
|
|
|
|
907
|
|
|
|
45,687
|
|
|
|
46,594
|
|
|
|
-
|
|
Consumer-other
|
|
|
347
|
|
|
|
90
|
|
|
|
437
|
|
|
|
44,699
|
|
|
|
45,136
|
|
|
|
-
|
|
Total
|
|
$
|
5,498
|
|
|
$
|
3,072
|
|
|
$
|
8,570
|
|
|
$
|
698,899
|
|
|
$
|
707,469
|
|
|
$
|
177
|
|
Age Analysis of Past Due Loans
As of September 30, 2013
|
|
30-89
Days Past
Due
|
|
|
Greater
than 90
Days Past
Due
|
|
|
Total Past
Due
|
|
|
Current
|
|
|
Total Loans
|
|
|
Recorded
Investment
> 90 days
and Accruing
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
$
|
783
|
|
|
$
|
-
|
|
|
$
|
783
|
|
|
$
|
132,866
|
|
|
$
|
133,649
|
|
|
$
|
-
|
|
Commercial non-real estate loans
|
|
|
50
|
|
|
|
-
|
|
|
|
50
|
|
|
|
30,635
|
|
|
|
30,685
|
|
|
|
-
|
|
Commercial-construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,593
|
|
|
|
8,593
|
|
|
|
-
|
|
Commercial-land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,349
|
|
|
|
10,349
|
|
|
|
-
|
|
Residential-construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,112
|
|
|
|
5,112
|
|
|
|
-
|
|
Residential-real estate loans
|
|
|
5,582
|
|
|
|
1,678
|
|
|
|
7,260
|
|
|
|
402,433
|
|
|
|
409,693
|
|
|
|
353
|
|
Consumer-Mobile home loans
|
|
|
1,073
|
|
|
|
246
|
|
|
|
1,319
|
|
|
|
41,879
|
|
|
|
43,198
|
|
|
|
-
|
|
Consumer-other
|
|
|
262
|
|
|
|
206
|
|
|
|
468
|
|
|
|
44,703
|
|
|
|
45,171
|
|
|
|
-
|
|
Total
|
|
$
|
7,750
|
|
|
$
|
2,130
|
|
|
$
|
9,880
|
|
|
$
|
676,570
|
|
|
$
|
686,450
|
|
|
$
|
353
|
|
Impaired Loans
As of and for the six months ended March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
Year to Date
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
$
|
4,411
|
|
|
$
|
4,411
|
|
|
$
|
-
|
|
|
$
|
4,471
|
|
|
$
|
123
|
|
Commercial non-real estate
|
|
|
1,369
|
|
|
|
1,369
|
|
|
|
-
|
|
|
|
1,381
|
|
|
|
39
|
|
Commercial-construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial-land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Residential-real estate loans
|
|
|
528
|
|
|
|
643
|
|
|
|
-
|
|
|
|
530
|
|
|
|
17
|
|
Subtotal:
|
|
|
6,308
|
|
|
|
6,423
|
|
|
|
-
|
|
|
|
6,382
|
|
|
|
179
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
957
|
|
|
|
957
|
|
|
|
138
|
|
|
|
970
|
|
|
|
16
|
|
Commercial non-real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial-construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial-land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Residential-real estate loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal:
|
|
|
957
|
|
|
|
957
|
|
|
|
138
|
|
|
|
970
|
|
|
|
16
|
|
Totals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
6,737
|
|
|
|
6,737
|
|
|
|
138
|
|
|
|
6,822
|
|
|
|
178
|
|
Residential
|
|
|
528
|
|
|
|
643
|
|
|
|
-
|
|
|
|
530
|
|
|
|
17
|
|
Total
|
|
$
|
7,265
|
|
|
$
|
7,380
|
|
|
$
|
138
|
|
|
$
|
7,352
|
|
|
$
|
195
|
|
Impaired Loans
As of and for the year ended September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
Year to Date
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
$
|
4,580
|
|
|
$
|
4,639
|
|
|
$
|
-
|
|
|
$
|
3,872
|
|
|
$
|
190
|
|
Commercial non-real estate
|
|
|
1,402
|
|
|
|
1,402
|
|
|
|
-
|
|
|
|
791
|
|
|
|
53
|
|
Commercial-construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial-land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,069
|
|
|
|
-
|
|
Residential-real estate loans
|
|
|
597
|
|
|
|
873
|
|
|
|
-
|
|
|
|
584
|
|
|
|
34
|
|
Subtotal:
|
|
|
6,579
|
|
|
|
6,914
|
|
|
|
-
|
|
|
|
7,316
|
|
|
|
277
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
978
|
|
|
|
979
|
|
|
|
138
|
|
|
|
722
|
|
|
|
33
|
|
Commercial non-real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial-construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial-land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Residential-real estate loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal:
|
|
|
978
|
|
|
|
979
|
|
|
|
138
|
|
|
|
722
|
|
|
|
33
|
|
Totals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
6,960
|
|
|
|
7,020
|
|
|
|
138
|
|
|
|
7,454
|
|
|
|
276
|
|
Residential
|
|
|
597
|
|
|
|
873
|
|
|
|
-
|
|
|
|
584
|
|
|
|
34
|
|
Total
|
|
$
|
7,557
|
|
|
$
|
7,893
|
|
|
$
|
138
|
|
|
$
|
8,038
|
|
|
$
|
310
|
|
Troubled debt restructured loans (“TDRs”) which are included in the impaired loan totals, were $3.1 million with all still accruing at March 31, 2014 and $3.2 million with all still accruing at September 30, 2013. The Company has not committed to lend additional funds to the customers with outstanding loans that are classified as a TDR. As of September 30, 2013, no loans that were modified as troubled debt restructurings within the previous twelve months defaulted after their restructure.
Modifications
As of March 31, 2014
There were no new troubled debt restructurings during the six month period ended March 31, 2014.
As of March 31, 2014, no loans that were modified as TDRs within the previous twelve months defaulted after their restructure.
Modifications
As of March 31, 2013
There were no new TDRs during the six month period ended March 31, 2013.
As of March 31, 2013, no loans that were modified as TDRs within the previous twelve months defaulted after their restructure.
Loans on Nonaccrual Status
At March 31, 2014 and September 30, 2013
(in thousands)
|
|
March 31, 2014
|
|
|
September 30, 2013
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
$
|
-
|
|
|
$
|
-
|
|
Commercial non-real estate loans
|
|
|
10
|
|
|
|
-
|
|
Commercial-construction loans
|
|
|
-
|
|
|
|
-
|
|
Commercial-land
|
|
|
-
|
|
|
|
-
|
|
Residential-construction loans
|
|
|
-
|
|
|
|
-
|
|
Residential-real estate loans
|
|
|
2,767
|
|
|
|
1,973
|
|
Consumer-Mobile home loans
|
|
|
308
|
|
|
|
246
|
|
Consumer-other
|
|
|
90
|
|
|
|
206
|
|
Total
|
|
$
|
3,175
|
|
|
$
|
2,425
|
|
Nonaccrual loans at March 31, 2014 increased by $0.8 million primarily due to the increase in delinquent residential-real estate loans.
NOTE 8 - Merger with IBERIABANK Corporation
On January 12, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with IBERIABANK Corporation (“IBKC”), the parent company of IBERIABANK. Under the Merger Agreement, subject to the receipt of shareholder and regulatory approval and the satisfaction of certain other conditions, the Company will merge with and into IBKC (the “Merger”) after which Teche Federal Bank is expected to merge with and into IBERIABANK. As a result of the Merger, each share of Company common stock will be exchanged for 1.162 shares of IBKC common stock, subject to adjustment as set forth in the Merger Agreement.