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Document and Entity Information (USD $)
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3 Months Ended |
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Jun. 30, 2011
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| Document and Entity Information | Â |
| Entity Registrant Name | TIMBERLAND BANCORP INC, |
| Document Type | 10-Q |
| Document Period End Date | Jun. 30, 2011 |
| Amendment Flag | false |
| Entity Central Index Key | 0001046050 |
| Current Fiscal Year End Date | --09-30 |
| Entity Common Stock, Shares Outstanding | 7,045,036 |
| Entity Public Float | $ 41,636,163 |
| Entity Filer Category | Smaller Reporting Company |
| Entity Current Reporting Status | Yes |
| Entity Voluntary Filers | No |
| Entity Well-known Seasoned Issuer | No |
| Document Fiscal Year Focus | 2011 |
| Document Fiscal Period Focus | Q3 |
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Loans Receivable And Allowance for Loan Losses
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3 Months Ended |
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Jun. 30, 2011
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| Loans Receivable And Allowance for Loan Losses | Â |
| Loans Receivable And Allowance for Loan Losses |
(6) LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
Loans receivable and loans held for sale consisted of the following at June 30, 2011 and September 30, 2010 (dollars in thousands):
June 30, September 30, 2011 2010 ------------------- ------------------ Amount Percent Amount Percent ------------------- ------------------ Mortgage loans: One- to four-family (1) $112,838 20.2% $121,014 21.6% Multi-family 31,058 5.6 32,267 5.8 Commercial 229,800 41.2 208,002 37.2 Construction and land development 68,017 12.2 69,271 12.4 Land 50,238 9.0 62,999 11.3 -------- ----- -------- ----- Total mortgage loans 491,951 88.2 493,553 88.3
Consumer loans: Home equity and second mortgage 36,991 6.6 38,418 6.9 Other 8,226 1.5 9,086 1.6 -------- ----- -------- ----- Total consumer loans 45,217 8.1 47,504 8.5
Commercial business loans 20,621 3.7 17,979 3.2 -------- ----- -------- -----
Total loans receivable 557,789 100.0% 559,036 100.0% -------- ===== -------- =====
Less: Undisbursed portion of construction loans in process (22,713) (17,952) Deferred loan origination fees (1,988) (2,229) Allowance for loan losses (11,790) (11,264) -------- --------
Total loans receivable, net $521,298 $527,591 ======== ========
------------- (1) Includes loans held for sale.
Construction and Land Development Loan Portfolio Composition ------------------------------------------------------------ The following table sets forth the composition of the Company's construction and land development loan portfolio at June 30, 2011 and September 30, 2010 (dollars in thousands): June 30, September 30, 2011 2010 ------------------- ------------------ Amount Percent Amount Percent ------------------- ------------------
Custom and owner/builder $ 28,128 41.4% $ 30,945 44.7% Speculative one- to four-family 3,028 4.5 4,777 6.9 Commercial real estate 26,081 38.3 23,528 33.9 Multi-family (including condominiums) 8,254 12.1 3,587 5.2 Land development 2,526 3.7 6,434 9.3 -------- ----- -------- ----- Total construction and land development loans $ 68,017 100.0% $ 69,271 100.0% ======== ===== ======== =====
Loan Segment Risk Characteristics ---------------------------------
One- To Four-Family Residential Lending: The Company originates both fixed rate and adjustable rate loans secured by one- to four-family residences. A portion of the fixed-rate one- to four-family loans are sold in the secondary market for asset/liability management purposes and to generate non-interest income. The Company's lending policies generally limit the maximum loan-to-value on one- to four-family loans to 95% of the lesser of the appraised value or the purchase price. However, the Company usually obtains private mortgage insurance on the portion of the principal amount that exceeds 80% of the appraised value of the property.
Multi-Family Lending: The Company originates loans secured by multi-family dwelling units (more than four units). Multi-family lending generally affords the Company an opportunity to receive interest at rates higher than those generally available from one- to four-family residential lending. However, loans secured by multi-family properties usually are greater in amount, more difficult to evaluate and monitor and, therefore, involve a greater degree of risk than one- to four-family residential mortgage loans. Because payments on the loans secured by multi-family properties are often dependent on the successful operation and management of the properties, repayment of such loans may be affected by adverse conditions in the real estate market or economy. The Company seeks to minimize these risks by scrutinizing the financial condition of the borrower, the quality of the collateral and the management of the property securing the loan.
Commercial Real Estate Lending: The Company originates commercial real estate loans secured by properties such as office buildings, retail/wholesale facilities, motels, restaurants, mini-storage facilities and other commercial properties. Commercial real estate lending generally affords the Company an opportunity to receive interest at higher rates than those available from one- to four-family residential lending. However, loans secured by such properties usually are greater in amount, more difficult to evaluate and monitor and, therefore, involve a greater degree of risk than one- to four-family residential mortgage loans. Because payments on loans secured by commercial properties often depend upon the successful operation and management of the properties, repayment of these loans may be affected by adverse conditions in the real estate market or economy. The Company seeks to mitigate these risks by generally limiting the maximum loan-to-value ratio to 80% and scrutinizing the financial condition of the borrower, the quality of the collateral and the management of the property securing the loan.
Construction and Land Development Lending: The Company currently originates the following types of construction loans: custom construction loans, owner/builder construction loans, speculative construction loans (on a very limited basis), commercial real estate construction loans, and multi-family construction loans. The Company is no longer originating land development loans.
Custom construction loans are made to home builders who, at the time of construction, have a signed contract with a home buyer who has a commitment to purchase the finished home. Owner/builder construction loans are originated to home owners rather than home builders and are typically refinanced into permanent loans at the completion of construction.
Speculative one-to four-family construction loans are made to home builders and are termed "speculative" because the home builder does not have, at the time of the loan origination, a signed contract with a home buyer who has a commitment for permanent financing with the Bank or another lender for the finished home. The home buyer may be identified either during or after the construction period, with the risk that the builder will have to provide the debt service for the speculative construction loan and finance real estate taxes and other carrying costs of the completed home for a significant time after the completion of construction until the home
buyer is identified and a sale is consummated. The Company is currently originating speculative one-to four-family construction loans on a very limited basis.
Commercial construction loans are originated to construct properties such as office buildings, hotels, retail rental space and mini-storage facilities. Multi-family construction loans are originated to construct apartment buildings and condominium projects.
The Company historically originated loans to real estate developers for the purpose of developing residential subdivisions. The Company is not currently originating any new land development loans.
Construction lending affords the Company the opportunity to achieve higher interest rates and fees with shorter terms to maturity than does its single-family permanent mortgage lending. Construction lending, however, is generally considered to involve a higher degree of risk than one-to four family residential lending because of the inherent difficulty in estimating both a property's value at completion of the project and the estimated cost of the project. The nature of these loans is such that they are generally more difficult to evaluate and monitor. If the estimated cost of construction proves to be inaccurate, the Company may be required to advance funds beyond the amount originally committed to complete the project. If the estimate of value upon completion proves to be inaccurate, the Company may be confronted with a project whose value is insufficient to assure full repayment and it may incur a loss. Projects may also be jeopardized by disagreements between borrowers and builders and by the failure of builders to pay subcontractors. Loans to construct homes for which no purchaser has been identified carry more risk because the payoff for the loan depends on the builder's ability to sell the property prior to the time that the construction loan is due. The Company has sought to address these risks by adhering to strict underwriting policies, disbursement procedures, and monitoring practices.
Land Lending: The Company has historically originated loans for the acquisition of land upon which the purchaser can then build or make improvements necessary to build or to sell as improved lots. Currently, the Company is not offering land loans to new customers and is attempting to decrease its land loan portfolio. Loans secured by undeveloped land or improved lots involve greater risks than one- to four-family residential mortgage loans because these loans are more difficult to evaluate. If the estimate of value proves to be inaccurate, in the event of default or foreclosure, the Company may be confronted with a property value which is insufficient to assure full repayment. The Company attempts to minimize this risk by generally limiting the maximum loan-to-value ratio on land loans to 75%.
Consumer Lending: Consumer loans generally have shorter terms to maturity than mortgage loans. Consumer loans include home equity lines of credit, second mortgage loans, savings account loans, automobile loans, boat loans, motorcycle loans, recreational vehicle loans and unsecured loans. Home equity lines of credit and second mortgage loans have a greater credit risk than one- to four-family residential mortgage loans because they are secured by mortgages subordinated to the existing first mortgage on the property, which may or may not be held by the Company. Other consumer loans generally entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by rapidly depreciating assets such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation.
Commercial Business Lending: Commercial business loans are generally secured by business equipment, accounts receivable, inventory or other property. The Company also generally obtains personal guarantees from the principals based on a review of personal financial statements. Commercial business lending generally involves risks that are different from those associated with residential and commercial real estate lending. Real estate lending is generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral values, and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment, because accounts receivable may be uncollectible and inventories and equipment may be obsolete or of limited use. Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while the liquidation of collateral is a secondary and potentially insufficient source of repayment.
Allowance for Loan Losses ------------------------- The following table sets forth information for the three and nine months ended June 30, 2011, regarding activity in the allowance for loan losses (dollars in thousands):
For the Three Months Ended June 30, 2011 ----------------------------------------- Beginning Ending Allowance Provision Charge-offs Recoveries Allowance --------- --------- ----------- ---------- --------- Mortgage loans: One-to four-family $ 738 $ 250 $ 172 $ 1 $ 817 Multi-family 1,016 88 - - 11 1,115 Commercial real estate 4,179 (343) - - 4 3,840 Construction - custom and owner / builder 346 (92) - - - - 254 Construction - speculative one- to four-family 260 (63) - - - - 197 Construction - commercial 179 2,282 1,444 - - 1,017 Construction - multi-family 263 (125) - - - - 138 Construction - land development 28 667 667 - - 28 Land 3,254 790 1,147 6 2,903 Consumer loans: Home equity and second mortgage 505 (52) - - - - 453 Other 436 (8) - - - - 428 Commercial business loans 594 6 - - - - 600 ------- ------ ------ ---- ------- Total $11,798 $3,400 $3,430 $ 22 $11,790 ======= ====== ====== ==== =======
For the Nine Months Ended June 30, 2011 --------------------------------------- Beginning Ending Allowance Provision Charge-offs Recoveries Allowance --------- --------- ----------- ---------- --------- Mortgage loans: One-to four-family $ 530 $ 543 $ 405 $149 $ 817 Multi-family 393 692 - - 30 1,115 Commercial real estate 3,173 609 47 105 3,840 Construction - custom and owner / builder 481 (227) - - - - 254 Construction - speculative one- to four-family 414 (177) 40 - - 197 Construction - commercial 245 2,216 1,444 - - 1,017 Construction - multi- family 245 (107) - - - - 138 Construction - land development 240 938 1,150 - - 28 Land 3,709 709 1,560 45 2,903 Consumer loans: Home equity and second mortgage 922 (362) 114 7 453 Other 451 5 30 2 428 Commercial business loans 461 161 22 - - 600 ------- ------ ------ ---- ------- Total $11,264 $5,000 $4,812 $338 $11,790 ======= ====== ====== ==== =======
The following table presents information on the loans evaluated individually for impairment and collectively evaluated for impairment in the allowance for loan losses at June 30, 2011 (dollars in thousands):
Allowance for Loan Losses Recorded Investment in Loans ------------------------- ---------------------------- Individually Collectively Individually Collectively Evaluated for Evaluated for Evaluated for Evaluated for Impairment Impairment Total Impairment Impairment Total ---------- ---------- ----- ---------- ---------- ----- Mortgage loans: One- to four-family $ 56 $ 761 $ 817 $ 3,180 $109,658 $112,838 Multi-family 632 483 1,115 5,482 25,576 31,058 Commercial real estate 245 3,595 3,840 19,054 210,746 229,800 Construction - custom and owner / builder 13 241 254 591 19,056 19,647 Construction - speculative one- to four-family 39 158 197 1,500 1,008 2,508 Construction - commercial real estate 772 245 1,017 5,451 10,785 16,236 Construction - multi-family - - 138 138 1,911 2,485 4,396 Construction - land development - - 28 28 2,374 143 2,517 Land 461 2,442 2,903 10,498 39,740 50,238 Consumer loans: Home equity and second mortgage 13 440 453 993 35,998 36,991 Other 1 427 428 1 8,225 8,226 Commercial business loans - - 600 600 47 20,574 20,621 ------ ------ ------- ------- -------- -------- $2,232 $9,558 $11,790 $51,082 $483,994 $535,076 ====== ====== ======= ======= ======== ========
Credit Quality Indicators ------------------------- The Company uses credit risk grades which reflect the Company's assessment of a loan's risk or loss potential. The Company categorizes loans into risk grade categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors such as the estimated fair value of the collateral. The Company uses the following definitions for credit risk ratings:
Pass: Pass loans are defined as those loans that meet acceptable quality underwriting standards.
Watch: Watch loans are defined as those loans that still exhibit marginal acceptable quality, but have some concerns that justify greater attention. If these concerns are not corrected, a potential for further adverse categorization exists. These concerns could relate to a specific condition peculiar to the borrower or their industry segment or the general economic environment.
Special Mention: Special mention loans are defined as those loans deemed by management to have some potential weakness that deserve management's close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the payment prospects of the loan. Assets in this category do not expose the Company to sufficient risk to warrant a substandard classification.
Substandard: Substandard loans are defined as those loans that are inadequately protected by the current net worth and paying capacity of the obligor, or of the collateral pledged. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. If the weakness or weaknesses are not corrected, there is the distinct possibility that some loss will be sustained.
The following table lists the loan credit risk grades utilized by the Company that serve as credit quality indicators. Each of the credit risk loan grades include high and low factors associated with their classification that are utilized to calculate the aggregate ranges of the allowance for loan losses at June 30, 2011 (dollars in thousands):
Credit Risk Profile by Internally Assigned Grades
Loan Grades --------------------------------------- Special Pass Watch Mention Substandard Total ------ ----- ------- ----------- ----- Mortgage loans: One- to four-family $ 97,338 $ 7,754 $ 1,708 $ 6,038 $112,838 Multi-family 18,948 264 10,397 1,449 31,058 Commercial 188,985 10,104 5,271 25,440 229,800 Construction - custom and owner / builder 18,822 234 - - 591 19,647 Construction - speculative one- to four-family 286 - - 1,500 722 2,508 Construction - commercial real estate 10,785 - - - - 5,451 16,236 Construction - multi-family 1,733 - - 752 1,911 4,396 Construction - land development 143 - - - - 2,374 2,517 Land 26,171 7,568 5,095 11,404 50,238 Consumer loans: Home equity and second mortgage 33,612 745 1,524 1,110 36,991 Other 8,163 51 - - 12 8,226 Commercial business loans 17,147 85 2,124 1,265 20,621 -------- ------- ------- ------- -------- Total $422,133 $26,805 $28,371 $57,767 $535,076 ======== ======= ======= ======= ========
The following table presents an age analysis of past due status of loans by category at June 30, 2011 (dollars in thousands):
Past Due 90 Days 30-59 60-89 90 Days or More Days Days or More Total Total and Still Past Due Past Due Past Due(1) Past Due Current Loans Accruing -------- -------- ----------- -------- ------- ------ --------- Mortgage loans: One- to four-family $ 218 $ 1,547 $ 2,634 $ 4,399 $108,439 $112,838 $ 302 Multi-family 1,449 - - - - 1,449 29,609 31,058 - - Commercial - - 12,454 9,483 21,937 207,863 229,800 3,778 Construction - custom and owner / builder - - - - 591 591 19,056 19,647 209 Construction - speculative one- to four-family - - - - - - - - 2,508 2,508 - - Construction - commercial - - - - 704 704 15,532 16,236 - - Construction - multi-family - - - - 1,910 1,910 2,486 4,396 - - Construction - land development - - - - 2,374 2,374 143 2,517 - - Land 606 1,870 7,775 10,251 39,987 50,238 29 Consumer loans: Home equity and second mortgage 257 43 643 943 36,048 36,991 299 Other 33 - - 1 34 8,192 8,226 - - Commercial business loans 49 15 323 387 20,234 20,621 276 ------ ------- ------- ------- -------- -------- ------ Total $2,612 $15,929 $26,438 $44,979 $490,097 $535,076 $4,893 ====== ======= ======= ======= ======== ======== ======
------------ (1) Includes loans past due 90 days or more and still accruing.
Impaired Loans -------------- A loan is considered impaired when it is probable that the Company will be unable to collect all contractual principal and interest payments due in accordance with the original or modified terms of the loan agreement. Impaired loans are measured based on the estimated fair value of the collateral less estimated cost to sell if the loan is considered collateral dependent. Impaired loans not considered to be collateral dependent are measured based on the present value of expected future cash flows.
The categories of non-accrual loans and impaired loans overlap, although they are not coextensive. The Company considers all circumstances regarding the loan and borrower on an individual basis when determining whether an impaired loan should be placed on non-accrual status, such as the financial strength of the borrower, the estimated collateral value, reasons for the delay, payment record, the amount past due and the number of days past due.
At June 30, 2011 and September 30, 2010, the Company had impaired loans totaling $51.08 million and $42.25 million, respectively. At June 30, 2011, the Company had loans totaling $4.89 million that were 90 days or more past due and still accruing interest. At September 30, 2010, the Company had loans totaling $1.33 million that were 90 days or more past due and still accruing interest. Interest income recognized on impaired loans for the nine months ended June 30, 2011 and June 30, 2010 was $1.43 million and $861,000, respectively. Interest income recognized on a cash basis on impaired loans for the nine months ended June 30, 2011 and June 30, 2010, was $843,000 and $517,000, respectively. The average investment in impaired loans for the nine months ended June 30, 2011 and June 30, 2010 was $46.15 million and $42.87 million, respectively.
Troubled debt restructured loans are loans for which the Company, for economic or legal reasons related to the borrower's financial condition, has granted a significant concession to the borrower that it would otherwise not consider. Troubled debt restructured loans are considered impaired loans and can be classified as either accrual or non-accrual. The Company had $25.80 million in troubled debt restructured loans included in impaired loans at June 30, 2011 and had $144,000 in commitments to lend additional funds on these loans. At June 30, 2011, $4.96 million of the $25.80 million in troubled debt restructured loans were on non-accrual status and included in non-performing loans. The Company had $16.40 million in troubled debt restructured loans included in impaired loans at September 30, 2010 and had $1.06 million in commitments to lend additional funds on these loans. At September 30, 2010, $7.41 million of the $16.40 million in troubled debt restructured loans were on non-accrual status and included in non-performing loans.
The following table is a summary of information related to impaired loans as of June 30, 2011 (dollars in thousands):
Unpaid Average Interest Recorded Principal Related Recorded Income Investment Balance Allowance Investment Recognized(1) ---------- ------- --------- ---------- ------------
With no related allowance recorded: Mortgage loans: One- to four-family $ 2,212 $ 2,436 $ - - $ 2,437 $ 6 Commercial 16,315 16,737 - - 14,727 397 Construction - custom and owner / builder 478 478 - - 513 7 Construction - speculative one- to four-family - - 20 - - 132 - - Construction - commercial - - - - - - - - - - Construction - multi-family 1,911 1,915 - - 1,505 4 Construction - land development 2,374 7,663 - - 2,704 - - Land 6,113 10,106 - - 6,475 12 Consumer loans: Home equity and second mortgage 647 698 - - 528 12 Other - - - - - - 6 - - Commercial business loans 47 68 - - 44 1 ------- ------- ------ ------- ---- Subtotal 30,097 40,121 - - 29,071 439
With an allowance recorded: Mortgage loans: One- to four-family 968 968 56 957 6 Multi-family 5,482 5,482 632 5,482 73 Commercial 2,739 3,459 245 2,931 - - Construction - custom and owner / builder 113 113 13 57 - - Construction - speculative one- to four-family 1,500 1,500 39 1,500 20 Construction - commercial 5,451 6,895 772 6,126 91 Land 4,385 4,408 461 4,403 34 Consumer loans: Home equity and second mortgage 346 346 13 343 5 Other 1 1 1 1 - - ------- ------- ------ ------- ---- Subtotal 20,985 23,172 2,232 21,800 229
Total Mortgage loans: One- to four-family 3,180 3,404 56 3,394 12 Multi-family 5,482 5,482 632 5,482 73 Commercial 19,054 20,196 245 17,658 397 Construction - custom and owner / builder 591 591 13 570 7 Construction - speculative one- to four-family 1,500 1,520 39 1,632 20 Construction - commercial 5,451 6,895 772 6,126 91 Construction - multi-family 1,911 1,915 - - 1,505 4 Construction - land development 2,374 7,663 - - 2,704 - - Land 10,498 14,514 461 10,878 46 Consumer loans: Home equity and second mortgage 993 1,044 13 871 17 Other 1 1 1 7 - - Commercial business loans 47 68 - - 44 1 ------- ------- ------ ------- ---- Total $51,082 $63,293 $2,232 $50,871 $668 ======= ======= ====== ======= ==== -------------- (1) For the three months ended June 30, 2011
The following is a summary of information related to impaired loans at September 30, 2010 (dollars in thousands):
Impaired loans without a valuation allowance $ 36,475 Impaired loans with a valuation allowance 5,770 -------- Total impaired loans $ 42,245 ========
Valuation allowance related to impaired loans $ 862
The following table sets forth information with respect to the Company's non-performing assets at June 30, 2011 and September 30, 2010 (dollars in thousands):
Loans accounted for on a non-accrual basis: June 30, September 30, 2011 2010 -------- -------- Mortgage loans: One- to four family $ 2,332 $ 3,691 Commercial 5,706 7,252 Construction - custom and owner / builder 382 - - Construction - speculative one- to four-family - - 2,050 Construction - commercial real estate 704 - - Construction - multi-family 1,910 1,771 Construction - land development 2,374 3,788 Land 7,745 5,460 Consumer loans: Home equity and second mortgage 344 781 Other 1 25 Commercial business 47 46 -------- -------- Total 21,545 24,864
Accruing loans which are contractually past due 90 days or more 4,893 1,325 -------- --------
Total of non-accrual and 90 days past due loans 26,438 26,189
Non-accrual investment securities 3,184 3,390
OREO and other repossessed assets 10,996 11,519 -------- -------- Total non-performing assets (1) $ 40,618 $ 41,098 ======== ========
Troubled debt restructured loans on accrual status (2) $ 20,783 $ 8,995
Non-accrual and 90 days or more past due loans as a percentage of loans receivable 4.96% 4.86%
Non-accrual and 90 days or more past due loans as a percentage of total assets 3.60% 3.53%
Non-performing assets as a percentage of total assets 5.53% 5.53%
Loans receivable (3) $533,088 $538,855 ======== ========
Total assets $735,018 $742,687 ======== ========
(1) Does not include troubled debt restructured loans on accrual status. (2) Does not include troubled debt restructured loans totaling $4,956 and $7,405 reported as non-accrual loans at June 30, 2011 and September 30, 2010, respectively. (3) Includes loans held-for-sale and is before the allowance for loan losses.
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Regulatory Matters
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Jun. 30, 2011
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| Regulatory Matters | Â |
| Regulatory Matters |
(2) REGULATORY MATTERS
In December 2009, the FDIC and the Washington State Department of Financial Institutions, Division of Banks ("Division") determined that the Bank required supervisory attention and, on December 29, 2009, entered into an agreement on a Memorandum of Understanding with the Bank ("Bank MOU"). Under the Bank MOU, the Bank must among other things, maintain Tier 1 Capital of not less than 10.0% of the Bank's adjusted total assets and maintain capital ratios above the "well capitalized" thresholds as defined under FDIC Rules and Regulations; obtain the prior consent from the FDIC and the Division prior to the Bank declaring a dividend to its holding company; and not engage in any transactions that would materially change the Bank's balance sheet composition including growth in total assets of five percent or more or significant changes in funding sources without the prior non-objection of the FDIC.
In addition, on February 1, 2010, the Federal Reserve Bank of San Francisco ("FRB") determined that the Company required additional supervisory attention and entered into a Memorandum of Understanding with the Company ("Company MOU"). Under the Company MOU, the Company must, among other things, obtain prior written approval or non-objection from the FRB to declare or pay any dividends, or make any other capital distributions; issue any trust preferred securities; or purchase or redeem any of its stock. The FRB has denied the Company's requests to pay dividends on its Series A Preferred Stock issued under the U.S. Treasury Department's Capital Purchase Program ("CPP") for quarterly payments due for the last five quarters commencing with the payments due May 15, 2010. For additional information on the CPP, see Note 3 below entitled "U.S Treasury Department's Capital Purchase Program."
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Stock Plans And Stock Based Compensation
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| Stock Plans And Stock Based Compensation | Â |
| Stock Plans And Stock Based Compensation |
(8) STOCK PLANS AND STOCK BASED COMPENSATION
Stock Option Plans ------------------ Under the Company's stock option plans (the 1999 Stock Option Plan and the 2003 Stock Option Plan), the Company was able to grant options for up to a combined total of 1,622,500 shares of common stock to employees, officers and directors. Shares issued may be purchased in the open market or may be issued from authorized and unissued shares. The exercise price of each option equals the fair market value of the Company's common stock on the date of grant. Generally, options vest in 20% annual installments on each of the five anniversaries from the date of the grant. At June 30, 2011, options for 250,238 shares are available for future grant under the 2003 Stock Option Plan and no shares are available for future grant under the 1999 Stock Option Plan. Activity under the plans for the nine months ended June 30, 2011 is as follows: Total Options Outstanding ------------------------- Weighted Average Exercise Shares Price ------ ----- Options outstanding, beginning of period 194,864 $ 8.71 Forfeited 57,138 7.42 ------- Options outstanding, end of period 137,726 $ 9.25 =======
Options exercisable, end of period 117,326 $ 10.06 =======
The aggregate intrinsic value of options outstanding at June 30, 2011 was $35,000.
At June 30, 2011, there were 20,400 unvested options with an aggregate grant date fair value of $26,000, all of which the Company assumes will vest. The aggregate intrinsic value of unvested options at June 30, 2011 was $28,000. There were 5,200 options with an aggregate grant date fair value of $7,000 that vested during the nine months ended June 30, 2011. At June 30, 2010, there were 26,000 unvested options with an aggregate grant date fair value of $34,000, all of which the Company assumes will vest. There were no options that vested during the nine months ended June 30, 2010.
The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards with the weighted average assumptions noted in the following table. The risk-free interest rate is based on the U.S. Treasury rate of a similar term as the stock option at the particular grant date. The expected life is based on historical data, vesting terms and estimated exercise dates. The expected dividend yield is based on the most recent quarterly dividend on an annualized basis in effect at the time the options were granted. The expected volatility is based on historical volatility of the Company's stock price. There were no options granted during the nine months ended June 30, 2011, and there were 26,000 options granted during the nine months ended June 30, 2010. The weighted average assumptions for options granted during the nine months ended June 30, 2010 were:
Expected volatility 38% Expected term (in years) 5 Expected dividend yield 2.64% Risk free interest rate 2.47% Grant date fair value per share $1.29
Stock Grant Plan ---------------- The Company adopted the Management Recognition and Development Plan ("MRDP") in 1998 for the benefit of employees, officers and directors of the Company. The objective of the MRDP is to retain and attract personnel of experience and ability in key positions by providing them with a proprietary interest in the Company.
The MRDP allowed for the issuance to participants of up to 529,000 shares of the Company's common stock. Awards under the MRDP are made in the form of shares of common stock that are subject to restrictions on the transfer of ownership and are subject to a five-year vesting period. Compensation expense is the amount of the fair value of the common stock at the date of the grant to the plan participants and is recognized over a five-year vesting period, with 20% vesting on each of the five anniversaries from the date of the grant.
There were no MRDP shares granted to officers and directors during the nine months ended June 30, 2011 and 2010.
At June 30, 2011, there were a total of 24,892 unvested MRDP shares with an aggregated grant date fair value of $273,000. There were 11,033 MRDP shares that vested during the nine months ended June 30, 2011 with an aggregated grant date fair value of $132,000. There were 500 MRDP shares forfeited during the nine months ended June 30, 2011 with a grant date fair value of $5,000. At June 30, 2011, there were no shares available for future awards under the MRDP.
Expenses for Stock Compensation Plans ------------------------------------- Compensation expenses for all stock-based plans were as follows: Nine Months Ended June 30, -------------------------- 2011 2010 ---- ---- (Dollars in thousands) Stock Stock Stock Stock Options Grants Options Grants ------- ------ ------- ------ Compensation expense recognized in income $ 5 $ 129 $ 4 $ 130 Related tax benefit recognized 2 44 1 45
The compensation expense yet to be recognized for stock based awards that have been awarded but not vested for the years ending September 30 is as follows (dollars in thousands):
Stock Stock Total Options Grants Awards ------- ------ ------ Remainder of 2011 $ 2 $ 36 $ 38 2012 7 112 119 2013 6 38 44 2014 6 2 8 2015 1 - - 1 ----- ------ ------ Total $ 22 $ 188 $ 210 ===== ====== ======
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Fair Value Measurements
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3 Months Ended |
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Jun. 30, 2011
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| Fair Value Measurements | Â |
| 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 June 30, 2011 and September 30, 2010. 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 June 30, 2011 and September 30, 2010, 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 June 30, 2011 and September 30, 2010 (dollars in thousands):
June 30, 2011 September 30, 2010 ------------------- ------------------- Estimated Estimated Recorded Fair Recorded Fair Amount Value Amount Value -------- --------- -------- --------- Financial Assets Cash and cash equivalents $114,303 $114,303 $111,786 $111,786 CDs held for investment 18,087 18,087 18,047 18,047 MBS and other investments 11,962 12,031 16,185 15,961 FHLB stock 5,705 5,705 5,705 5,705 Loans receivable, net 520,532 474,021 524,621 473,986 Loans held for sale 766 786 2,970 3,059 Accrued interest receivable 2,527 2,527 2,630 2,630
Financial Liabilities Deposits $589,498 $592,058 $578,869 $581,046 FHLB advances 55,000 59,268 75,000 81,579 Repurchase agreements 598 598 622 622 Accrued interest payable 591 591 737 737
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 June 30, 2011, and the total losses resulting from these estimated fair value adjustments for the nine months ended June 30, 2011 (dollars in thousands):
Estimated Fair Value --------------------------- Level 1 Level 2 Level 3 Total Losses ------- ------- ------- ------------ Available for Sale Securities ----------------------------- Mutual funds $ 975 $ - - $ - - $ - - MBS - - 6,704 - - 29 ------ ------ ------ ------ Total $ 975 $6,704 $ - - $ 29 ====== ====== ====== ======
The following table summarizes the balances of assets and liabilities measured at estimated fair value on a nonrecurring basis at June 30, 2011, and the total losses resulting from these estimated fair value adjustments for the nine months ended June 30, 2011 (dollars in thousands):
Estimated Fair Value --------------------------- Level 1 Level 2 Level 3 Total Losses ------- ------- ------- ------------ Impaired loans (1) $ - - $ - - $20,716 $ 4,811 MBS - held to maturity (2) - - 673 - - 306 OREO and other repossessed items (3) - - - - 10,996 973 ------ ------ ------- ------- Total $ - - $ 673 $31,712 $ 6,090 ====== ====== ======= ======= ---------------- (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.
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Net Income (Loss) Per Common Share
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3 Months Ended |
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Jun. 30, 2011
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| Net Income (Loss) Per Common Share | Â |
| Net Income (Loss) Per Common Share |
(7) NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed by dividing net income (loss) to common shareholders by the weighted average number of common shares outstanding during the period, without considering any dilutive items. Diluted net income (loss) per common share is computed by dividing net income (loss) to common shareholders by the weighted average number of common shares and common stock equivalents for items that are dilutive, net of shares assumed to be repurchased using the treasury stock method at the average share price for the Company's common stock during the period. Diluted net loss per common share is the same as basic net loss per common share due to the anti-dilutive effect of common stock equivalents. Common stock equivalents arise from the assumed conversion of outstanding stock options and the outstanding warrant to purchase common stock. In accordance with the Financial Accounting Standards Board ("FASB") guidance for stock compensation, shares owned by the Bank's ESOP that have not been allocated are not considered to be outstanding for the purpose of computing net income (loss) per common share. At June 30, 2011 and 2010, there were 299,810 and 329,626 shares, respectively, that had not been allocated under the Bank's ESOP.
The following table is in thousands, except for share and per share data: Three Months Ended Nine Months Ended June 30, June 30, 2011 2010 2011 2010 ---------------- ----------------- Basic net income (loss) ----------------------- per common share computation: ---------------------------- Numerator - net income (loss) $(1,280) $ 804 $ 1,162 $(2,150) Preferred stock dividend (208) (208) (624) (624) Preferred stock discount accretion (57) (53) (168) (156) ------- ----- ------- ------- Net income (loss) to common shareholders $(1,545) $ 543 $ 370 $(2,930) ======= ===== ======= =======
Denominator - weighted average common shares outstanding 6,745,250 6,715,410 6,745,250 6,713,103 --------- --------- --------- ---------
Basic net income (loss) per common share $ (0.23) $0.08 $ 0.05 $ (0.44) ======= ===== ======= =======
Diluted net income (loss) ------------------------ per common share computation: ---------------------------- Numerator - net income (net loss) $(1,280) $ 804 $ 1,162 $(2,150) Preferred stock dividend (208) (208) (624) (624) Preferred stock discount accretion (57) (53) (168) (156) ------- ----- ------- ------- Net income (loss) to common shareholders $(1,545) $ 543 $ 370 $(2,930) ======= ===== ======= =======
Denominator - weighted average common shares outstanding 6,745,250 6,715,410 6,745,250 6,713,103 Effect of dilutive stock options (1) (2) - - - - 237 - - Effect of dilutive stock warrants (3) - - - - - - - - ------- ----- ------- ------- Weighted average common shares and common stock equivalents 6,745,250 6,715,410 6,745,487 6,713,103 --------- --------- --------- ---------
Diluted net income (loss) per common share $ (0.23) $0.08 $ 0.05 $ (0.44) ======= ===== ======= ======= -------------------- (1) For the three months and nine months ended June 30, 2011, options to purchase 140,545 and 168,186 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income (loss) per common share because the options' exercise prices were greater than the average market price of the common stock, and, therefore, their effect would have been anti-dilutive. For the three months and nine months ended June 30, 2010, options to purchase 194,864 and 192,483 shares of common stock, respectively, were outstanding but not included in the computation of diluted net income (loss) per common share because the options' exercise prices were greater than the average market price of the common stock, and, therefore, their effect would have been anti-dilutive. (2) For the three months ended June 30, 2011, the dilutive effect of dilutive stock options was computed to be 710 shares. However, the dilutive effect of these stock options has been excluded from the diluted net income (loss) per common share for the three months ended June 30, 2011 because the Company reported a net loss for the period, and, therefore, their effect would have been anti-dilutive. (3) For the three and nine months ended June 30, 2011 and June 30, 2010, a warrant to purchase 370,899 shares of common stock was outstanding but not included in the computation of diluted net income (loss) per common share because the warrant's exercise price was greater than the average market price of the common stock, and, therefore, its effect would have been anti-dilutive.
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Timberland Bancorp, Inc. and Subsidiary Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $)
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3 Months Ended | 9 Months Ended | ||
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Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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| Comprehensive Income (loss): | Â | Â | Â | Â |
| Net income (loss) | $ (1,280) | $ 804 | $ 1,162 | $ (2,150) |
| Unrealized holding gain on securities available for sale, net of tax | 50 | 79 | 2 | 84 |
| Change in OTTI on securities held to maturity, net of tax: | Â | Â | Â | Â |
| Additions | (9) | 23 | (65) | 83 |
| Additional amount recognized related to credit loss for which OTTI was previously recognized | 5 | 10 | 15 | 706 |
| Amount reclassified to credit loss for previously recorded market loss | 67 | 13 | 124 | 82 |
| Accretion of OTTI on securities held to maturity, net of tax | 8 | 7 | 27 | 25 |
| Total comprehensive income (loss) | $ (1,159) | $ 936 | $ 1,265 | $ (1,170) |
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U.S. Treasury Department's Capital Purchase Program
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3 Months Ended |
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Jun. 30, 2011
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| U.S. Treasury Department's Capital Purchase Program | Â |
| U.S. Treasury Department's Capital Purchase Program |
(3) U.S. TREASURY DEPARTMENT'S CAPITAL PURCHASE PROGRAM
On December 23, 2008, the Company received $16.64 million from the U.S. Treasury Department ("Treasury") as a part of the Treasury's CPP. The CPP was established as part of the Troubled Asset Relief Program ("TARP"). The Company sold 16,641 shares of senior preferred stock with a related warrant to purchase 370,899 shares of the Company's common stock at a price of $6.73 per share at any time through December 23, 2018. The preferred stock pays a 5.0% dividend for the first five years, after which the rate increases to 9.0% if the preferred shares are not redeemed by the Company.
Preferred stock is initially recorded at the amount of proceeds received. Any discount from the liquidation value is accreted to the expected call date and charged to retained earnings. This accretion is recorded using the level-yield method. Preferred dividends paid (or accrued) and any accretion is deducted from (added to) net income (loss) for computing income available (loss) to common shareholders and net income (loss) per share computations.
Under the Company MOU, the Company must, among other things, obtain prior written approval, or non-objection from the FRB to declare or pay any dividends. The FRB has denied the Company's requests to pay dividends on its Series A Preferred Stock issued under the CPP for quarterly payments due for the last five quarters commencing with the payment due May 15, 2010. There can be no assurances that the FRB will approve such payments or dividends in the future. The Company may not declare or pay dividends on its common stock or, with certain exceptions, repurchase common stock without first having paid all cumulative preferred dividends that are due. If dividends on the Series A Preferred Stock are not paid for six quarters, whether or not consecutive, the Treasury has the right to appoint two members to the Company's Board of Directors.
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MBS And Other Investments
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3 Months Ended |
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Jun. 30, 2011
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| MBS And Other Investments | Â |
| MBS And Other Investments | (4) MBS AND OTHER INVESTMENTS
MBS and other investments have been classified according to management's intent and are as follows as of June 30, 2011 and September 30, 2010 (dollars in thousands):
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- ------- June 30, 2011 -------------
Held to Maturity MBS: U.S. government agencies $ 1,889 $ 35 $ (4) $ 1,920 Private label residential 2,366 107 (71) 2,402 U.S. agency securities 28 2 - - 30 ------- ----- ------ ------- Total $ 4,283 $ 144 $ (75) $ 4,352 ======= ===== ====== =======
Available for Sale MBS: U.S. government agencies $ 4,800 $ 176 $ - - $ 4,976 Private label residential 1,804 69 (145) 1,728 Mutual funds 1,000 - - (25) 975 ------- ----- ------ ------- Total $ 7,604 $ 245 $ (170) $ 7,679 ======= ===== ====== =======
September 30, 2010 ------------------
Held to Maturity MBS: U.S. government agencies $ 2,107 $ 29 $ (5) $ 2,131 Private label residential 2,931 161 (411) 2,681 U.S. agency securities 28 2 - - 30 ------- ----- ------ ------- Total $ 5,066 $ 192 $ (416) $ 4,842 ======= ===== ====== =======
Available for Sale MBS: U.S. government agencies $ 7,846 $ 262 $ - - $ 8,108 Private label residential 2,198 73 (248) 2,023 Mutual funds 1,000 - - (12) 988 ------- ----- ------ ------- Total $11,044 $ 335 $ (260) $11,119 ======= ===== ====== =======
The estimated fair value of temporarily impaired securities, the amount of unrealized losses and the length of time these unrealized losses existed as of June 30, 2011 are as follows (dollars in thousands):
Less Than 12 Months 12 Months or Longer ------------------- ------------------- Total Esti- Esti- Esti- mated Gross mated Gross mated Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses ----- ------ ----- ------ ----- ------
Held to Maturity MBS: U.S. government agencies $ 77 $ (1) $ 365 $ (3) $ 442 $ (4) Private label residential - - - - 549 (71) 549 (71) ----- ----- ------ ----- ------ ----- Total $ 77 $ (1) $ 914 $ (74) $ 991 $ (75) ===== ===== ====== ===== ====== =====
Available for Sale MBS: U.S. government agencies $ - - $ - - $ - - $ - - $ - - $ - - Private label residential - - - - 1,033 (145) 1,033 (145) Mutual funds - - - - 975 (25) 975 (25) ----- ----- ------ ----- ------ ----- Total $ - - $ - - $2,008 $(170) $2,008 $(170) ===== ===== ====== ===== ====== =====
During the three months ended June 30, 2011 and 2010, the Company recorded net OTTI charges through earnings on residential MBS of $165,000 and $152,000, respectively. During the nine months ended June 30, 2011 and 2010, the Company recorded net OTTI charges through earnings on residential MBS of $336,000 and $2.03 million, respectively. The Company provides for the bifurcation of OTTI into (i) amounts related to credit losses which are recognized through earnings, and (ii) amounts related to all other factors which are recognized as a component of other comprehensive income (loss).
To determine the component of the gross OTTI related to credit losses, the Company compared the amortized cost basis of each OTTI security to the present value of its revised expected cash flows, discounted using its pre-impairment yield. The revised expected cash flow estimates for individual securities are based primarily on an analysis of default rates, prepayment speeds and third-party analytic reports. Significant judgment by management is required in this analysis that includes, but is not limited to, assumptions regarding the collectability of principal and interest, net of related expenses, on the underlying loans. The following table presents a summary of the significant inputs utilized to measure management's estimate of the credit loss component on OTTI securities as of June 30, 2011 and September 30, 2010:
Range --------------------- Weighted Minimum Maximum Average ------- ------- -------- At June 30, 2011 ---------------- Constant prepayment rate 6.00% 15.00% 10.16% Collateral default rate 0.51% 40.48% 10.52% Loss severity rate 28.13% 66.10% 45.74%
At September 30, 2010 --------------------- Constant prepayment rate 6.00% 15.00% 8.28% Collateral default rate 3.69% 68.09% 34.75% Loss severity rate 30.02% 60.43% 45.35%
The following tables present the OTTI for the three and nine months ended June 30, 2011 and 2010 (dollars in thousands):
Three months ended Three months ended June 30, 2011 June 30, 2011 ------------------- -------------------- Held To Available Held To Available Maturity For Sale Maturity For Sale -------- --------- -------- --------- Total OTTI $ 41 $ 29 $ 81 $ - - Portion of OTTI recognized in other comprehensive loss (before income taxes) (1) 95 - - 71 - - ------ ------ ------- ----- Net OTTI recognized in earnings (2) $ 136 $ 29 $ 152 $ - - ====== ====== ======= =====
Nine months ended Nine months ended June 30, 2011 June 30, 2011 ------------------- -------------------- Held To Available Held To Available Maturity For Sale Maturity For Sale -------- --------- -------- --------- Total OTTI $ 194 $ 30 $ 595 $ 93 Portion of OTTI recognized in other comprehensive loss (before income taxes) (1) 112 - - 1,340 - - ------ ------ ------- ----- Net OTTI recognized in earnings (2) $ 306 $ 30 $ 1,935 $ 93 ====== ====== ======= =====
------------- (1) Represents OTTI related to all other factors. (2) Represents OTTI related to credit losses.
The following table presents a roll-forward of the credit loss component of held to maturity debt securities that have been written down for OTTI with the credit loss component recognized in earnings and the remaining impairment loss related to all other factors recognized in other comprehensive income (loss) for the nine months ended June 30, 2011 and 2010 (in thousands):
Nine months ended June 30, 2011 2010 ------- -------
Beginning balance of credit loss $ 4,725 $ 3,551 Additions: Credit losses for which OTTI was not previously recognized 53 374 Additional increases to the amount related to credit loss for which OTTI was previously recognized 283 1,623 Subtractions: Realized losses recorded previously as credit losses (1,390) (499) ------- ------- Ending balance of credit loss $ 3,671 $ 5,049 ======= =======
There were no gross realized gains on sale of securities for the three months ended June 30, 2011. There was a gross realized gain on sale of securities for the nine months ended June 30, 2011 of $79,000. There were no gross realized gains on sale of securities for the three or nine months ended June 30, 2010. During the three months ended June 30, 2011, the Company recorded a $509,000 realized loss (as a result of the securities being deemed worthless) on 22 held to maturity residential MBS and one available for sale residential MBS of which the entire amount had been recognized previously as a credit loss. During the nine months ended June 30, 2011, the Company recorded a $1.392 million realized loss on 23 held to maturity residential MBS and one available for sale residential MBS of which $1.390 million had been recognized previously as a credit loss. During the three months ended June 30, 2010, the Company recorded a $247,000 realized loss on nine held to maturity residential MBS which had previously been recognized as a credit loss. During the nine months ended June 30, 2010, the Company recorded a $499,000 realized loss on thirteen held to maturity residential MBS of which $482,000 had been recognized previously as a credit loss.
The amortized cost of residential mortgage-backed and agency securities pledged as collateral for public fund deposits, federal treasury tax and loan deposits, FHLB collateral, retail repurchase agreements and other non-profit organization deposits totaled $8.68 million and $12.80 million at June 30, 2011 and September 30, 2010, respectively.
The contractual maturities of debt securities at June 30, 2011 are as follows (dollars in thousands). Expected maturities may differ from scheduled maturities as a result of the prepayment of principal or call provisions.
Held to Maturity Available for Sale ---------------- ------------------ Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value --------------------- ---------------------
Due within one year $ - - $ - - $ 218 $ 216 Due after one year to five years 25 26 - - - - Due after five to ten years 39 41 115 123 Due after ten years 4,219 4,285 6,271 6,365 ------ ------ ------ ------ Total $4,283 $4,352 $6,604 $6,704 ====== ====== ====== ======
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