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Covered Assets | 6 Months Ended
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Mar. 31, 2015
Covered Assets [Abstract] |
Covered Assets | Covered Assets Covered assets represent loans and real estate held for sale acquired from the FDIC that are subject to loss sharing agreements and these net balances were $153,673,000 as of March 31, 2015 compared to $200,558,000 as of September 30, 2014. The FDIC loss share coverage for the acquired commercial loans will expire during fiscal year 2015. There are $83,077,000 of covered assets from the former Horizon Bank that will lose their FDIC loss share coverage after March 31, 2015. As of March 31, 2015, there are $53,181,000 of commercial loans from the former Home Valley Bank which are scheduled to expire on September 30, 2015. The FDIC loss share coverage for single family residential loans will continue for another five years. Changes in the net carrying amount and accretable yield for acquired impaired and non-impaired covered loans for the year to date period ended March 31, 2015 and the fiscal year ended September 30, 2014 were as follows:
March 31, 2015 | Acquired Impaired |  | Acquired Non-impaired
| Accretable Yield |  | Net Carrying Amount of Loans |  | Accretable Yield |  | Net Carrying Amount of Loans
| (In thousands)
Balance at beginning of period | $ | 64,534 |  |  | $ | 78,055 |  |  | $ | 10,259 |  |  | $ | 98,422 |
Reclassification from nonaccretable balance, net | 6,307 |  |  | — |  |  | — |  |  | — |
Accretion | (9,392 | ) |  | 9,392 |  |  | (4,016 | ) |  | 4,016 |
Transfers to REO | — |  |  | (936 | ) |  | — |  |  | — |
Payments received, net | — |  |  | (11,049 | ) |  | — |  |  | (40,452 | )
Balance at end of period | $ | 61,449 |  |  | $ | 75,462 |  |  | $ | 6,243 |  |  | $ | 61,986 |
September 30, 2014 | Acquired Impaired |  | Acquired Non-impaired
| Accretable Yield |  | Net Carrying Amount of Loans |  | Accretable Yield |  | Carrying Amount of Loans
| (In thousands)
Balance at beginning of period | $ | 78,277 |  |  | $ | 138,091 |  |  | $ | 17,263 |  |  | $ | 157,856 |
Reclassification from nonaccretable balance, net | 10,186 |  |  | (2,069 | ) |  | — |  |  | — |
Accretion | (23,929 | ) |  | 23,929 |  |  | (7,004 | ) |  | 7,004 |
Transfers to REO | — |  |  | (8,943 | ) |  | — |  |  | — |
Payments received, net | — |  |  | (72,953 | ) |  | — |  |  | (66,438 | )
Balance at end of period | $ | 64,534 |  |  | $ | 78,055 |  |  | $ | 10,259 |  |  | $ | 98,422 |
At March 31, 2015, none of the acquired impaired or non-impaired covered loans were classified as non-performing assets. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans. The allowance for credit losses related to the acquired loans as of September 30, 2014 results from decreased expectations of future cash flows due to increased credit losses for certain acquired loan pools. The outstanding principal balance of acquired covered loans was $159,018,000 and $213,203,000 as of March 31, 2015 and September 30, 2014, respectively. The discount balance related to the acquired covered loans was $21,013,000 and $34,483,000 as of March 31, 2015 and September 30, 2014, respectively. There is no allowance for covered loans as of March 31, 2015. There was an allowance of $2,244,000 as of September 30, 2014. The following table shows the year to date activity for the FDIC indemnification asset:
| March 31, 2015 |  | September 30, 2014
| (In thousands)
Balance at beginning of fiscal year 2015 and 2014 | $ | 36,860 |  |  | $ | 64,615 |
Additions and deletions (1) | (1,795 | ) |  | 1,795 |
Payments made (received) | 738 |  |  | (2,502 | )
Amortization | (12,972 | ) |  | (27,850 | )
Accretion | 284 |  |  | 802 |
Balance at end of period | $ | 23,115 |  |  | $ | 36,860 |
(1) reclassification of ALLL allowance due to changes in cash flows |  |  |
The following tables provide information on covered loans based on credit quality indicators (defined in Note E ) as of March 31, 2015 and September 30, 2014:
March 31, 2015 | Internally Assigned Grade |  | Total Net Loans
| Pass |  | Special mention |  | Substandard |  | Doubtful |  | Loss |
| (In thousands)
Acquired non-impaired loans: |  |  |  |  |  |  |  |  |  |  |
Single-family residential | $ | 19,975 |  |  | $ | — |  |  | $ | 775 |  |  | $ | — |  |  | $ | — |  |  | $ | 20,750 |
Construction - speculative | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Construction - custom | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Land - acquisition & development | 349 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 349 |
Land - consumer lot loans | 72 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 72 |
Multi-family | 903 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 903 |
Commercial real estate | 14,188 |  |  | — |  |  | 8,779 |  |  | — |  |  | — |  |  | 22,967 |
Commercial & industrial | 2,241 |  |  | — |  |  | 2,142 |  |  | — |  |  | — |  |  | 4,383 |
HELOC | 10,093 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 10,093 |
Consumer | 336 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 336 |
| $ | 48,157 |  |  | $ | — |  |  | $ | 11,696 |  |  | $ | — |  |  | $ | — |  |  | $ | 59,853 |
Total grade as a % of total net loans | 80.5 | % |  | — | % |  | 19.5 | % |  | — | % |  | — | % |  |
Acquired credit-impaired loans: |  |  |  |  |  |  |  |
Pool 1 - Construction and land A&D | $ | 6,639 |  |  | $ | — |  |  | $ | 9,424 |  |  | $ | — |  |  | $ | — |  |  | $ | 16,063 |
Pool 2 - Single-family residential | 14,700 |  |  | — |  |  | 228 |  |  | — |  |  | — |  |  | 14,928 |
Pool 3 - Multi-family | 49 |  |  | — |  |  | 409 |  |  | — |  |  | — |  |  | 458 |
Pool 4 - HELOC & other consumer | 2,728 |  |  | — |  |  | 581 |  |  | — |  |  | — |  |  | 3,309 |
Pool 5 - Commercial real estate | 32,425 |  |  | 685 |  |  | 24,224 |  |  | 1,734 |  |  | — |  |  | 59,068 |
Pool 6 - Commercial & industrial | 3,423 |  |  | — |  |  | 1,916 |  |  | — |  |  | — |  |  | 5,339 |
| $ | 59,964 |  |  | $ | 685 |  |  | $ | 36,782 |  |  | $ | 1,734 |  |  | $ | — |  |  | 99,165 |
|  |  |  |  |  |  | Total covered loans |  | 159,018 |
|  |  |  |  |  |  |  |  | Discount |  | (21,013 | )
|  |  |  |  |  |  |  |  | Allowance |  | — |
|  |  |  |  |  |  |  |  | Covered loans, net |  | $ | 138,005 |
September 30, 2014 | Internally Assigned Grade |  | Total Net Loans
| Pass |  | Special mention |  | Substandard |  | Doubtful |  | Loss |
| (In thousands)
Acquired non-impaired loans: |  |  |  |  |  |  |  |  |  |  |
Single-family residential | $ | 21,311 |  |  | $ | — |  |  | $ | 1,756 |  |  | $ | — |  |  | $ | — |  |  | $ | 23,067 |
Construction - speculative | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Construction - custom | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Land - acquisition & development | 972 |  |  | — |  |  | 392 |  |  | — |  |  | — |  |  | 1,364 |
Land - consumer lot loans | 73 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 73 |
Multi-family | 6,598 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6,598 |
Commercial real estate | 26,940 |  |  | 115 |  |  | 24,281 |  |  | — |  |  | — |  |  | 51,336 |
Commercial & industrial | 2,801 |  |  | — |  |  | 2,691 |  |  | — |  |  | — |  |  | 5,492 |
HELOC | 11,777 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 11,777 |
Consumer | 454 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 454 |
| $ | 70,926 |  |  | $ | 115 |  |  | $ | 29,120 |  |  | $ | — |  |  | $ | — |  |  | $ | 100,161 |
Total grade as a % of total net loans | 70.8 | % |  | 0.1 | % |  | 29.1 | % |  | — | % |  | — | % |  |
Acquired credit-impaired loans: |  |  |  |  |  |  |  |
Pool 1 - Construction and land A&D | $ | 8,349 |  |  | $ | — |  |  | $ | 11,912 |  |  | $ | — |  |  | $ | — |  |  | $ | 20,261 |
Pool 2 - Single-family residential | 15,585 |  |  | — |  |  | 379 |  |  | — |  |  | — |  |  | 15,964 |
Pool 3 - Multi-family | 52 |  |  | — |  |  | 471 |  |  | — |  |  | — |  |  | 523 |
Pool 4 - HELOC & other consumer | 2,804 |  |  | — |  |  | 1,173 |  |  | — |  |  | — |  |  | 3,977 |
Pool 5 - Commercial real estate | 33,909 |  |  | 700 |  |  | 29,782 |  |  | — |  |  | — |  |  | 64,391 |
Pool 6 - Commercial & industrial | 3,509 |  |  | — |  |  | 3,892 |  |  | 525 |  |  | — |  |  | 7,926 |
| $ | 64,208 |  |  | $ | 700 |  |  | $ | 47,609 |  |  | $ | 525 |  |  | $ | — |  |  | 113,042 |
|  |  |  |  |  |  | Total covered loans |  | 213,203 |
|  |  |  |  |  |  |  |  | Discount |  | (34,483 | )
|  |  |  |  |  |  |  |  | Allowance |  | (2,244 | )
|  |  |  |  |  |  |  |  | Covered loans, net |  | $ | 176,476 |
The following tables provide an analysis of the age of acquired non credit-impaired covered loans in past due status as of March 31, 2015 and September 30, 2014:
March 31, 2015 | Amount of Loans Net of LIP & Chg.-Offs |  | Days Delinquent Based on $ Amount of Loans |  | % based on $
Type of Loans | Current |  | 30 |  | 60 |  | 90 |  | Total |
Single-Family Residential | $ | 20,750 |  |  | $ | 20,068 |  |  | $ | 122 |  |  | $ | — |  |  | $ | 560 |  |  | $ | 682 |  |  | 3.29 | %
Construction - Speculative | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Construction - Custom | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Land - Acquisition & Development | 349 |  |  | 349 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Land - Consumer Lot Loans | 72 |  |  | 72 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Multi-Family | 903 |  |  | 903 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial Real Estate | 22,967 |  |  | 22,092 |  |  | — |  |  | — |  |  | 875 |  |  | 875 |  |  | 3.81 |
Commercial & Industrial | 4,383 |  |  | 2,315 |  |  | — |  |  | 2,068 |  |  | — |  |  | 2,068 |  |  | 47.18 |
HELOC | 10,093 |  |  | 10,035 |  |  | 58 |  |  | — |  |  | — |  |  | 58 |  |  | 0.57 |
Consumer | 336 |  |  | 327 |  |  | 9 |  |  | — |  |  | — |  |  | 9 |  |  | 2.68 |
| $ | 59,853 |  |  | $ | 56,161 |  |  | $ | 189 |  |  | $ | 2,068 |  |  | $ | 1,435 |  |  | $ | 3,692 |  |  | 6.17 | %
September 30, 2014 | Amount of Loans Net of LIP & Chg.-Offs |  | Days Delinquent Based on $ Amount of Loans |  | % based on $
Type of Loans | Current |  | 30 |  | 60 |  | 90 |  | Total |
Single-Family Residential | $ | 23,067 |  |  | $ | 22,391 |  |  | $ | 230 |  |  | $ | 40 |  |  | $ | 406 |  |  | $ | 676 |  |  | 2.93 | %
Construction - Speculative | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Construction - Custom | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Land - Acquisition & Development | 1,364 |  |  | 1,328 |  |  | — |  |  | — |  |  | 36 |  |  | 36 |  |  | 2.64 |
Land - Consumer Lot Loans | 73 |  |  | 73 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Multi-Family | 6,598 |  |  | 6,598 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial Real Estate | 51,336 |  |  | 50,240 |  |  | — |  |  | — |  |  | 1,096 |  |  | 1,096 |  |  | 2.13 |
Commercial & Industrial | 5,492 |  |  | 5,492 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
HELOC | 11,777 |  |  | 11,777 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer | 454 |  |  | 443 |  |  | 11 |  |  | — |  |  | — |  |  | 11 |  |  | 2.42 |
| $ | 100,161 |  |  | $ | 98,342 |  |  | $ | 241 |  |  | $ | 40 |  |  | $ | 1,538 |  |  | $ | 1,819 |  |  | 1.82 | %

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