Fair Value Measurements	3 Months Ended
Dec. 31, 2011
Fair Value Measurements
Fair Value Measurements	(9) FAIR VALUE MEASUREMENTS GAAP requires disclosure of estimated fair values for financial instruments. Such estimates are subjective in nature, and significant judgment is required regarding the risk characteristics of various financial instruments at a discrete point in time. Therefore, such estimates could vary significantly if assumptions regarding uncertain factors were to change. In addition, as the Company normally intends to hold the majority of its financial instruments until maturity, it does not expect to realize many of the estimated amounts disclosed. The disclosures also do not include estimated fair value amounts for certain items which are not defined as financial instruments but which may have significant value. The Company does not believe that it would be practicable to estimate a representational fair value for these types of items as of December 31, 2011 and September 30, 2011. Because GAAP excludes certain items from fair value disclosure requirements, any aggregation of the fair value amounts presented would not represent the underlying value of the Company. Major assumptions, methods and fair value estimates for the Company's significant financial instruments are set forth below: Cash and Cash Equivalents --------------------------------- The estimated fair value of financial instruments that are short-term or re-price frequently and that have little or no risk are considered to have an estimated fair value equal to the recorded value. CDs Held for Investment ------------------------------- The estimated fair value of financial instruments that are short-term or re-price frequently and that have little or no risk are considered to have an estimated fair value equal to the recorded value. MBS and Other Investments ----------------------------------- The estimated fair value of MBS and other investments are based upon the assumptions market participants would use in pricing the security. Such assumptions include observable and unobservable inputs such as quoted market prices, dealer quotes, or discounted cash flows. FHLB Stock ---------------- FHLB stock is not publicly traded; however, the recorded value of the stock holdings approximates the estimated fair value, as the FHLB is required to pay par value upon re-acquiring this stock. Loans Receivable, Net ---------------------------- At December 31, 2011 and September 30, 2011, because of the illiquid market for loan sales, loans were priced using comparable market statistics. The loan portfolio was segregated into various categories and a weighted average valuation discount that approximated similar loan sales was applied to each category. Loans Held for Sale ------------------------- The estimated fair value is based on quoted market prices obtained from the Federal Home Loan Mortgage Corporation. Accrued Interest --------------------- The recorded amount of accrued interest approximates the estimated fair value. Deposits ----------- The estimated fair value of deposits with no stated maturity date is included at the amount payable on demand. The estimated fair value of fixed maturity certificates of deposit is computed by discounting future cash flows using the rates currently offered by the Bank for deposits of similar remaining maturities. FHLB Advances --------------------- The estimated fair value of FHLB advances is computed by discounting the future cash flows of the borrowings at a rate which approximates the current offering rate of the borrowings with a comparable remaining life. Repurchase Agreements ------------------------------ The recorded value of repurchase agreements approximates the estimated fair value due to the short-term nature of the borrowings. Off-Balance-Sheet Instruments --------------------------------------- Since the majority of the Company's off-balance-sheet instruments consist of variable-rate commitments, the Company has determined that they do not have a distinguishable estimated fair value. The estimated fair values of financial instruments were as follows as of December 31, 2011 and September 30, 2011 (dollars in thousands): December 31, 2011 September 30, 2011 ------------------------ ------------------------ Estimated Estimated Recorded Fair Recorded Fair Amount Value Amount Value ------ ----- ------ ----- Financial Assets Cash and cash equivalents $111,547 $111,547 $112,065 $112,065 CDs held for investment 19,810 19,810 18,659 18,659 MBS and other investments 10,225 10,290 10,862 10,946 FHLB stock 5,705 5,705 5,705 5,705 Loans receivable, net 525,932 481,212 523,980 490,322 Loans held for sale 3,110 3,216 4,044 4,185 Accrued interest receivable 2,388 2,388 2,411 2,411 Financial Liabilities Deposits $589,175 $591,595 $592,678 $595,331 FHLB advances - long term 55,000 60,878 55,000 61,009 Repurchase agreements 538 538 729 729 Accrued interest payable 525 525 545 545 The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the estimated fair value of the Company's financial instruments will change when interest rate levels change, and that change may either be favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed interest rate obligations are less likely to prepay in a rising interest rate environment and more likely to prepay in a falling interest rate environment. Conversely, depositors who are receiving fixed interest rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors interest rates and maturities of assets and liabilities, and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company's overall interest rate risk. Accounting guidance regarding fair value measurements defines fair value and establishes a framework for measuring fair value in accordance with GAAP. Fair value is the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The following definitions describe the levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: Significant observable inputs other than quoted prices included within Level 1, such as quoted prices in markets that are not active, and inputs other than quoted prices that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a company's own assumptions about the assumptions market participants would use in pricing an asset or liability based on the best information available in the circumstances. The following table summarizes the balances of assets and liabilities measured at estimated fair value on a recurring basis at December 31, 2011, and the total losses resulting from these estimated fair value adjustments for the three months ended December 31, 2011 (dollars in thousands): Estimated Fair Value ----------------------------- Level 1 Level 2 Level 3 Total Losses ------- ------- ------- ------------ Available for Sale Securities Mutual funds $ 995 $ - - $ - - $ - - MBS - - 5,289 - - 38 ----- ------ ------ ------ Total $ 995 $5,289 $ - - $ 38 ===== ===== ===== ==== The following table summarizes the balances of assets and liabilities measured at estimated fair value on a nonrecurring basis at December 31, 2011, and the total losses resulting from these estimated fair value adjustments for the three months ended December 31, 2011 (dollars in thousands): Estimated Fair Value --------------------------- Level 1 Level 2 Level 3 Total Losses ------- ------- ------- ------------ Impaired loans (1) $ - - $ - - $23,520 $ 1,148 MBS - held to maturity (2 ) - - 267 - - 22 OREO and other repossessed items (3) - - - - 7,714 369 MSR's (4) - - - - 2,169 - - ------ ----- ------- ------- Total $ - - $ 267 $33,403 $ 1,439 ==== ==== ====== ====== ------------- (1) The loss represents charge offs on collateral dependent loans for estimated fair value adjustments based on the estimated fair value of the collateral. A loan is considered to be impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The specific reserve for collateral dependent impaired loans was based on the estimated fair value of the collateral less estimated costs to sell. The estimated fair value of collateral was determined based primarily 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. (2) The loss represents OTTI credit-related charges on held-to-maturity MBS. (3) The Company's OREO and other repossessed assets are initially recorded at estimated fair value less estimated costs to sell. This amount becomes the property's new basis. Estimated fair value was generally determined by management based on a number of factors, including third-party appraisals of estimated fair value in an orderly sale. Estimated costs to sell were based on standard market factors. The valuation of OREO and other repossessed items is subject to significant external and internal judgment. Management periodically reviews the recorded value to determine whether the property continues to be recorded at the lower of its recorded book value or estimated fair value, net of estimated costs to sell. (4) The fair value of the MSRs was determined using a third-party model, which incorporates the expected life of the loans, estimated cost to service the loans, servicing fees received and other factors. The estimated fair value is calculated by stratifying the mortgage servicing rights based on the predominant risk characteristics that include the underlying loan's interest rate, cash flows of the loan, origination date and term. The amount of impairment recognized is the amount, if any, by which the amortized cost of the rights exceed their estimated fair value. Impairment, if deemed temporary, is recognized through a valuation allowance to the extent that estimated fair value is less than the recorded amount.

Fair Value Measurements

3 Months Ended

Dec. 31, 2011

Fair Value Measurements

Fair Value Measurements

(9) FAIR VALUE MEASUREMENTS

GAAP requires disclosure of estimated fair values for financial instruments. Such

estimates are subjective in nature, and significant judgment is required regarding the

risk characteristics of various financial instruments at a discrete point in time.

Therefore, such estimates could vary significantly if assumptions regarding uncertain

factors were to change. In addition, as the Company normally intends to hold the

majority of its financial instruments until maturity, it does not expect to realize

many of the estimated amounts disclosed. The disclosures also do not include

estimated fair value amounts for certain items which are not defined as financial

instruments but which may have significant value. The Company does not believe that

it would be practicable to estimate a representational fair value for these types of

items as of December 31, 2011 and September 30, 2011. Because GAAP excludes certain

items from fair value disclosure requirements, any aggregation of the fair value

amounts presented would not represent the underlying value of the Company. Major

assumptions, methods and fair value estimates for the Company's significant financial

instruments are set forth below:

Cash and Cash Equivalents

---------------------------------

The estimated fair value of financial instruments that are short-term or

re-price frequently and that have little or no risk are considered to

have an estimated fair value equal to the recorded value.

CDs Held for Investment

-------------------------------

The estimated fair value of financial instruments that are short-term or

re-price frequently and that have little or no risk are considered to

have an estimated fair value equal to the recorded value.

MBS and Other Investments

-----------------------------------

The estimated fair value of MBS and other investments are based upon the

assumptions market participants would use in pricing the security. Such

assumptions include observable and unobservable inputs such as quoted

market prices, dealer quotes, or discounted cash flows.

FHLB Stock

----------------

FHLB stock is not publicly traded; however, the recorded value of the

stock holdings approximates the estimated fair value, as the FHLB is

required to pay par value upon re-acquiring this stock.

Loans Receivable, Net

----------------------------

At December 31, 2011 and September 30, 2011, because of the illiquid

market for loan sales, loans were priced using comparable market

statistics. The loan portfolio was segregated into various categories

and a weighted average valuation discount that approximated similar loan

sales was applied to each category.

Loans Held for Sale

-------------------------

The estimated fair value is based on quoted market prices obtained from

the Federal Home Loan Mortgage Corporation.

Accrued Interest

---------------------

The recorded amount of accrued interest approximates the estimated fair

value.

Deposits

-----------

The estimated fair value of deposits with no stated maturity date is

included at the amount payable on demand. The estimated fair value of

fixed maturity certificates of deposit is computed by discounting

future cash flows using the rates currently offered by the Bank for

deposits of similar remaining maturities.

FHLB Advances

---------------------

The estimated fair value of FHLB advances is computed by discounting the

future cash flows of the borrowings at a rate which approximates the

current offering rate of the borrowings with a comparable remaining life.

Repurchase Agreements

------------------------------

The recorded value of repurchase agreements approximates the estimated

fair value due to the short-term nature of the borrowings.

Off-Balance-Sheet Instruments

---------------------------------------

Since the majority of the Company's off-balance-sheet instruments consist

of variable-rate commitments, the Company has determined that they do not

have a distinguishable estimated fair value.

The estimated fair values of financial instruments were as follows as of December 31,

2011 and September 30, 2011 (dollars in thousands):

December 31, 2011 September 30, 2011

------------------------ ------------------------

Estimated Estimated

Recorded Fair Recorded Fair

Amount Value Amount Value

------ ----- ------ -----

Financial Assets

Cash and cash equivalents $111,547 $111,547 $112,065 $112,065

CDs held for investment 19,810 19,810 18,659 18,659

MBS and other investments 10,225 10,290 10,862 10,946

FHLB stock 5,705 5,705 5,705 5,705

Loans receivable, net 525,932 481,212 523,980 490,322

Loans held for sale 3,110 3,216 4,044 4,185

Accrued interest receivable 2,388 2,388 2,411 2,411

Financial Liabilities

Deposits $589,175 $591,595 $592,678 $595,331

FHLB advances - long term 55,000 60,878 55,000 61,009

Repurchase agreements 538 538 729 729

Accrued interest payable 525 525 545 545

The Company assumes interest rate risk (the risk that general interest rate levels

will change) as a result of its normal operations. As a result, the estimated fair

value of the Company's financial instruments will change when interest rate levels

change, and that change may either be favorable or unfavorable to the Company.

Management attempts to match maturities of assets and liabilities to the extent

believed necessary to minimize interest rate risk. However, borrowers with fixed

interest rate obligations are less likely to prepay in a rising interest rate

environment and more likely to prepay in a falling interest rate environment.

Conversely, depositors who are receiving fixed interest rates are more likely to

withdraw funds before maturity in a rising interest rate environment and less likely

to do so in a falling interest rate environment. Management monitors interest rates

and maturities of assets and liabilities, and attempts to minimize interest rate risk

by adjusting terms of new loans and deposits and by investing in securities with terms

that mitigate the Company's overall interest rate risk.

Accounting guidance regarding fair value measurements defines fair value and

establishes a framework for measuring fair value in accordance with GAAP. Fair value

is the exchange price that would be received for an asset or paid to transfer a

liability in an orderly transaction between market participants on the measurement

date. The following definitions describe the levels of inputs that may be used to

measure fair value:

Level 1: Quoted prices (unadjusted) in active markets for identical

assets or liabilities that the reporting entity has the ability to access

at the measurement date.

Level 2: Significant observable inputs other than quoted prices included

within Level 1, such as quoted prices in markets that are not active, and

inputs other than quoted prices that are observable or can be

corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company's own

assumptions about the assumptions market participants would use in

pricing an asset or liability based on the best information available in

the circumstances.

The following table summarizes the balances of assets and liabilities measured at

estimated fair value on a recurring basis at December 31, 2011, and the total losses

resulting from these estimated fair value adjustments for the three months ended

December 31, 2011 (dollars in thousands):

Estimated Fair Value

-----------------------------

Level 1 Level 2 Level 3 Total Losses

------- ------- ------- ------------

Available for Sale Securities

Mutual funds $ 995 $ - - $ - - $ - -

MBS - - 5,289 - - 38

----- ------ ------ ------

Total $ 995 $5,289 $ - - $ 38

===== ===== ===== ====

The following table summarizes the balances of assets and liabilities measured at

estimated fair value on a nonrecurring basis at December 31, 2011, and the total

losses resulting from these estimated fair value adjustments for the three months

ended December 31, 2011 (dollars in thousands):

Estimated Fair Value

---------------------------

Level 1 Level 2 Level 3 Total Losses

------- ------- ------- ------------

Impaired loans (1) $ - - $ - - $23,520 $ 1,148

MBS - held to maturity (2 ) - - 267 - - 22

OREO and other repossessed

items (3) - - - - 7,714 369

MSR's (4) - - - - 2,169 - -

------ ----- ------- -------

Total $ - - $ 267 $33,403 $ 1,439

==== ==== ====== ======

-------------

(1) The loss represents charge offs on collateral dependent loans for estimated fair

value adjustments based on the estimated fair value of the collateral. A loan is

considered to be impaired when, based on current information and events, it is

probable the Company will be unable to collect all amounts due according to the

contractual terms of the loan agreement. The specific reserve for collateral

dependent impaired loans was based on the estimated fair value of the collateral less

estimated costs to sell. The estimated fair value of collateral was determined based

primarily 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.

(2) The loss represents OTTI credit-related charges on held-to-maturity MBS.

(3) The Company's OREO and other repossessed assets are initially recorded at

estimated fair value less estimated costs to sell. This amount becomes the property's

new basis. Estimated fair value was generally determined by management based on a

number of factors, including third-party appraisals of estimated fair value in an

orderly sale. Estimated costs to sell were based on standard market factors. The

valuation of OREO and other repossessed items is subject to significant external and

internal judgment. Management periodically reviews the recorded value to determine

whether the property continues to be recorded at the lower of its recorded book value

or estimated fair value, net of estimated costs to sell.

(4) The fair value of the MSRs was determined using a third-party model, which

incorporates the expected life of the loans, estimated cost to service the loans,

servicing fees received and other factors. The estimated fair value is calculated by

stratifying the mortgage servicing rights based on the predominant risk

characteristics that include the underlying loan's interest rate, cash flows of the

loan, origination date and term. The amount of impairment recognized is the amount,

if any, by which the amortized cost of the rights exceed their estimated fair value.

Impairment, if deemed temporary, is recognized through a valuation allowance to the

extent that estimated fair value is less than the recorded amount.