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Fair Value Measurements | 9 Months Ended
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Jun. 30, 2014
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 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 June 30, 2014 and September 30, 2013. 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. 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 Company used the following methods and significant assumptions to estimate fair value on a recurring basis: MBS and Other Investments Available for Sale 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 quoted market prices (Level 1), market prices of similar securities or observable inputs (Level 2). Mutual Funds The estimated fair value of mutual funds are based upon quoted market price assumptions (Level 1). The following table summarizes the balances of assets and liabilities measured at estimated fair value on a recurring basis at June 30, 2014 (dollars in thousands):
| Estimated Fair Value |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Available for Sale Securities |  |  |  |  |  |  |
MBS: |  |  |  |  |  |  |
U.S. government agencies | $ | — |  |  | $ | 1,967 |  |  | $ | — |  |  | $ | 1,967 |
Mutual funds | 961 |  |  | — |  |  | — |  |  | 961 |
Total | $ | 961 |  |  | $ | 1,967 |  |  | $ | — |  |  | $ | 2,928 |
There were no transfers among Level 1, Level 2 and Level 3 during the three and nine months ended June 30, 2014. The following table summarizes the balances of assets and liabilities measured at estimated fair value on a recurring basis at September 30, 2013 (dollars in thousands):
| Estimated Fair Value |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Available for Sale Securities |  |  |  |  |  |  |
MBS: |  |  |  |  |  |  |
U.S. government agencies | $ | — |  |  | $ | 2,229 |  |  | $ | — |  |  | $ | 2,229 |
Private label residential | — |  |  | 914 |  |  | — |  |  | 914 |
Mutual funds | 958 |  |  | — |  |  | — |  |  | 958 |
Total | $ | 958 |  |  | $ | 3,143 |  |  | $ | — |  |  | $ | 4,101 |
There were no transfers between Level 1, Level 2 and Level 3 during the year ended September 30, 2013. The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. The Company uses the following methods and significant assumptions to estimate fair value on a non-recurring basis: Impaired Loans: A loan is considered to be impaired when, based on current information and events, it is probable that 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, if applicable. 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. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. MBS and Other Investments Held to Maturity: 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 quoted market prices (Level 1), market prices of similar securities or observable inputs (Level 2) and unobservable inputs such as dealer quotes, discounted cash flows or similar techniques (Level 3). OREO and Other Repossessed Assets, net: 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 assets is subject to significant external and internal judgment (Level 3). MSRs: 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 MSRs based on the predominant risk characteristics that include the underlying loan’s interest rate, cash flows of the loan, origination date and term (Level 3). The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at June 30, 2014, and the total losses resulting from these estimated fair value adjustments for the nine months ended June 30, 2014 (dollars in thousands):
| Estimated Fair Value |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Total Losses
Impaired loans: |  |  |  |  |  |  |
Mortgage Loans: |  |  |  |  |  |  |
One-to four-family | $ | — |  |  | $ | — |  |  | $ | 4,087 |  |  | $ | 979 |
Multi-family | — |  |  | — |  |  | 3,276 |  |  | — |
Commercial | — |  |  | — |  |  | 6,970 |  |  | 463 |
Land | — |  |  | — |  |  | 4,024 |  |  | 260 |
Consumer loans: |  |  |  |  |  |  |  |  |  |
Home equity and second mortgage | — |  |  | — |  |  | 292 |  |  | 28 |
Total impaired loans (1) | — |  |  | — |  |  | 18,649 |  |  | 1,730 |
MBS – held to maturity (2): |  |  |  |  |  |  |  |  |  |  |
Private label residential | — |  |  | 91 |  |  | — |  |  | 15 |
OREO and other repossessed items (3) | — |  |  | — |  |  | 11,172 |  |  | 478 |
Total | $ | — |  |  | $ | 91 |  |  | $ | 29,821 |  |  | $ | 2,223 |
_______________________
(1) | The loss represents charge-offs on collateral dependent loans for estimated fair value adjustments based on the estimated fair value of the collateral. Fair value is the recorded investment less the related allowance.
(2) | The loss represents OTTI credit-related charges on held to maturity MBS.
(3) | The loss represents the results of management’s periodic reviews of 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.
The following table summarizes the balances of assets and liabilities measured at estimated fair value on a non-recurring basis at September 30, 2013 and the total losses resulting from these estimated fair value adjustments for the year ended September 30, 2013 (dollars in thousands):
| Estimated Fair Value |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Total Losses
Impaired loans: |  |  |  |  |  |  |
Mortgage Loans: |  |  |  |  |  |  |
One-to four-family | $ | — |  |  | $ | — |  |  | $ | 3,042 |  |  | $ | 769 |
Multi-family | — |  |  | — |  |  | 4,850 |  |  | — |
Commercial | — |  |  | — |  |  | 12,868 |  |  | 667 |
Construction – speculative one-to four-family | — |  |  | — |  |  | 599 |  |  | — |
Land | — |  |  | — |  |  | 969 |  |  | 2,307 |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |
Home equity and second mortgage | — |  |  | — |  |  | 242 |  |  | 184 |
Total impaired loans (1) | — |  |  | — |  |  | 22,570 |  |  | 3,927 |
MBS – held to maturity (2): |  |  |  |  |  |  |  |  |  |  |
Private label residential | — |  |  | 83 |  |  | — |  |  | 45 |
OREO and other repossessed items (3) | — |  |  | — |  |  | 11,720 |  |  | 2,064 |
Total | $ | — |  |  | $ | 83 |  |  | $ | 34,290 |  |  | $ | 6,036 |
_______________________
(1) | The loss represents charge-offs on collateral dependent loans for estimated fair value adjustments based on the estimated fair value of the collateral. Fair value is the recorded investment less the related allowance.
(2) | The loss represents OTTI credit-related charges on held to maturity MBS.
(3) | The loss represents the results of management’s periodic reviews of 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.
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis as of June 30, 2014 (dollars in thousands):
| Estimated Fair Value |  | Valuation Technique(s) |  | Unobservable Input(s) |  | Range
Impaired loans | $ | 18,649 |  |  | Market approach |  | Appraised value of underlying collateral less selling costs |  | NA
OREO and other repossessed assets | $ | 11,172 |  |  | Market approach |  | Lower of appraised value or listing price less selling costs |  | NA
The following methods and assumptions were used by the Company in estimating fair value of its other financial instruments: 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: See descriptions above. FHLB Stock: No ready market exists for this stock, and it has no quoted market value. However, redemption of this stock has historically been at par value. During the three months ended June 30, 2014, 1,530 shares of FHLB stock were redeemed from the Company at par value. Accordingly, par value is deemed to be a reasonable estimate of fair value. Loans Receivable, Net: The fair value of loans was estimated using a discounted cash flow analysis and comparable market statistics. A discounted cash flow analysis was used to estimate the fair value of loans graded pass. The fair value of loans graded watch, special mention and substandard was estimated using comparable market statistics that approximated sales of similarly rated loans. 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. 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 June 30, 2014 and September 30, 2013 (dollars in thousands):
| June 30, 2014
|  |  | Fair Value Measurements Using:
| Recorded Amount |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Financial Assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 63,967 |  |  | $ | 63,967 |  |  | $ | 63,967 |  |  | $ | — |  |  | $ | — |
CDs held for investment | 32,336 |  |  | 32,336 |  |  | 32,336 |  |  | — |  |  | — |
MBS and other investments | 8,345 |  |  | 9,213 |  |  | 961 |  |  | 8,212 |  |  | 40 |
FHLB stock | 5,299 |  |  | 5,299 |  |  | 5,299 |  |  | — |  |  | — |
Loans receivable, net | 556,194 |  |  | 544,485 |  |  | — |  |  | — |  |  | 544,485 |
Loans held for sale | 1,501 |  |  | 1,552 |  |  | 1,552 |  |  | — |  |  | — |
Accrued interest receivable | 1,922 |  |  | 1,922 |  |  | 1,922 |  |  | — |  |  | — |
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |  |
Non-interest-bearing demand | $ | 92,995 |  |  | $ | 92,995 |  |  | $ | 92,995 |  |  | $ | — |  |  | $ | — |
Interest-bearing | 505,637 |  |  | 506,392 |  |  | 345,394 |  |  | — |  |  | 160,998 |
Total deposits | 598,632 |  |  | 599,387 |  |  | 438,389 |  |  | — |  |  | 160,998 |
FHLB advances | 45,000 |  |  | 47,702 |  |  | — |  |  | 47,702 |  |  | — |
Accrued interest payable | 294 |  |  | 294 |  |  | 294 |  |  | — |  |  | — |
| September 30, 2013
|  |  | Fair Value Measurements Using:
| Recorded Amount |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Financial Assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 94,496 |  |  | $ | 94,496 |  |  | $ | 94,496 |  |  | $ | — |  |  | $ | — |
CDs held for investment | 30,042 |  |  | 30,042 |  |  | 30,042 |  |  | — |  |  | — |
MBS and other investments | 6,838 |  |  | 7,634 |  |  | 973 |  |  | 6,661 |  |  | — |
FHLB stock | 5,452 |  |  | 5,452 |  |  | 5,452 |  |  | — |  |  | — |
Loans receivable, net | 546,193 |  |  | 534,364 |  |  | — |  |  | — |  |  | 534,364 |
Loans held for sale | 1,911 |  |  | 1,973 |  |  | 1,973 |  |  | — |  |  | — |
Accrued interest receivable | 1,972 |  |  | 1,972 |  |  | 1,972 |  |  | — |  |  | — |
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |  |
Non-interest-bearing demand | $ | 87,657 |  |  | $ | 87,657 |  |  | $ | 87,657 |  |  | $ | — |  |  | $ | — |
Interest-bearing | 520,605 |  |  | 522,021 |  |  | 346,455 |  |  | — |  |  | 175,566 |
Total deposits | 608,262 |  |  | 609,678 |  |  | 434,112 |  |  | — |  |  | 175,566 |
FHLB advances | 45,000 |  |  | 48,445 |  |  | — |  |  | 48,445 |  |  | — |
Accrued interest payable | 320 |  |  | 320 |  |  | 320 |  |  | — |  |  | — |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 + Details
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