PRUDENTIAL BANCORP,
INC. AND SUBSIDIARIES
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Dollars in Thousands, Except Per Share Data)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and amounts due from depository institutions
|
|
$
|
2,403
|
|
|
$
|
2,274
|
|
Interest-bearing deposits
|
|
|
33,652
|
|
|
|
25,629
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
36,055
|
|
|
|
27,903
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
|
1,604
|
|
|
|
1,604
|
|
Investment and mortgage-backed securities available for sale (amortized cost— June 30, 2018, $278,428; September 30, 2017, $180,087)
|
|
|
270,275
|
|
|
|
178,402
|
|
Investment and mortgage-backed securities held to maturity (fair value— June 30, 2018, $54,884; September 30, 2017, $60,179)
|
|
|
58,127
|
|
|
|
61,284
|
|
Loans receivable—net of allowance for loan losses (June 30, 2018, $5,041; September 30, 2017, $4,466)
|
|
|
602,455
|
|
|
|
571,343
|
|
Accrued interest receivable
|
|
|
3,670
|
|
|
|
2,825
|
|
Real estate owned
|
|
|
85
|
|
|
|
192
|
|
Federal Home Loan Bank stock—at cost
|
|
|
7,909
|
|
|
|
6,002
|
|
Office properties and equipment—net
|
|
|
7,549
|
|
|
|
7,804
|
|
Bank owned life insurance
|
|
|
28,533
|
|
|
|
28,048
|
|
Prepaid expenses and other assets
|
|
|
1,574
|
|
|
|
3,231
|
|
Goodwill
|
|
|
6,102
|
|
|
|
6,102
|
|
Intangible assets
|
|
|
605
|
|
|
|
709
|
|
Deferred tax assets-net
|
|
|
4,315
|
|
|
|
4,091
|
|
TOTAL ASSETS
|
|
$
|
1,028,858
|
|
|
$
|
899,540
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
14,322
|
|
|
$
|
9,375
|
|
Interest-bearing
|
|
|
700,731
|
|
|
|
626,607
|
|
Total deposits
|
|
|
715,053
|
|
|
|
635,982
|
|
Advances from Federal Home Loan Bank (short-term)
|
|
|
35,000
|
|
|
|
20,000
|
|
Advances from Federal Home Loan Bank (long-term)
|
|
|
129,164
|
|
|
|
94,318
|
|
Accrued interest payable
|
|
|
2,179
|
|
|
|
1,933
|
|
Advances from borrowers for taxes and insurance
|
|
|
3,808
|
|
|
|
2,207
|
|
Accounts payable and accrued expenses
|
|
|
12,137
|
|
|
|
8,921
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
897,341
|
|
|
|
763,361
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY:
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued
|
|
|
-
|
|
|
|
-
|
|
Common stock, $.01 par value, 40,000,000 shares authorized; 10,819,006 issued and 9,008,836 outstanding at June 30, 2018; 10,819,006 issued and 9,008,125 outstanding at September 30, 2017
|
|
|
108
|
|
|
|
108
|
|
Additional paid-in capital
|
|
|
118,141
|
|
|
|
118,751
|
|
Treasury stock, at cost: 1,810,170 shares at June 30, 2018 and and 1,810,881 shares at September 30, 2017
|
|
|
(27,155
|
)
|
|
|
(26,707
|
)
|
Retained earnings
|
|
|
47,023
|
|
|
|
44,787
|
|
Accumulated other comprehensive loss
|
|
|
(6,600
|
)
|
|
|
(760
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
131,517
|
|
|
|
136,179
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
1,028,858
|
|
|
$
|
899,540
|
|
See notes to unaudited consolidated financial statements.
PRUDENTIAL BANCORP, INC
AND SUBSIDIARIES
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Three Months Ended
June 30,
|
|
|
Nine Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(Dollars in Thousands, Except Per Share Data)
|
|
INTEREST INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on loans
|
|
$
|
6,485
|
|
|
$
|
5,647
|
|
|
$
|
18,853
|
|
|
$
|
14,062
|
|
Interest on mortgage-backed securities
|
|
|
1,060
|
|
|
|
802
|
|
|
|
2,753
|
|
|
|
2,179
|
|
Interest and dividends on investments
|
|
|
1,189
|
|
|
|
926
|
|
|
|
3,198
|
|
|
|
2,263
|
|
Interest on interest-bearing assets
|
|
|
197
|
|
|
|
55
|
|
|
|
518
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
8,931
|
|
|
|
7,430
|
|
|
|
25,322
|
|
|
|
18,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on deposits
|
|
|
1,932
|
|
|
|
1,002
|
|
|
|
4,915
|
|
|
|
2,690
|
|
Interest on advances from Federal Home Loan Bank(short-term)
|
|
|
43
|
|
|
|
-
|
|
|
|
184
|
|
|
|
-
|
|
Interest on advances from Federal Home Loan Bank(long-term)
|
|
|
734
|
|
|
|
375
|
|
|
|
1,637
|
|
|
|
918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
2,709
|
|
|
|
1,377
|
|
|
|
6,736
|
|
|
|
3,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME
|
|
|
6,222
|
|
|
|
6,053
|
|
|
|
18,586
|
|
|
|
14,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR LOAN LOSSES
|
|
|
325
|
|
|
|
30
|
|
|
|
685
|
|
|
|
2,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
|
|
|
5,897
|
|
|
|
6,023
|
|
|
|
17,901
|
|
|
|
12,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-INTEREST INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees and other service charges
|
|
|
177
|
|
|
|
179
|
|
|
|
505
|
|
|
|
472
|
|
Gain on sale of loans, net
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
52
|
|
Gain (loss) on the sale of investment securities
|
|
|
(376
|
)
|
|
|
70
|
|
|
|
(376
|
)
|
|
|
70
|
|
Swap income
|
|
|
925
|
|
|
|
-
|
|
|
|
1,087
|
|
|
|
-
|
|
Income from bank owned life insurance
|
|
|
160
|
|
|
|
229
|
|
|
|
480
|
|
|
|
506
|
|
Other
|
|
|
99
|
|
|
|
144
|
|
|
|
271
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
|
985
|
|
|
|
625
|
|
|
|
1,967
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-INTEREST EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
2,042
|
|
|
|
1,884
|
|
|
|
6,053
|
|
|
|
5,593
|
|
Data processing
|
|
|
180
|
|
|
|
175
|
|
|
|
545
|
|
|
|
481
|
|
Professional services
|
|
|
431
|
|
|
|
230
|
|
|
|
1,625
|
|
|
|
1,018
|
|
Office occupancy
|
|
|
266
|
|
|
|
274
|
|
|
|
845
|
|
|
|
701
|
|
Depreciation
|
|
|
157
|
|
|
|
158
|
|
|
|
469
|
|
|
|
399
|
|
Director compensation
|
|
|
56
|
|
|
|
57
|
|
|
|
176
|
|
|
|
218
|
|
Deposit insurance premium
|
|
|
90
|
|
|
|
52
|
|
|
|
231
|
|
|
|
93
|
|
Advertising
|
|
|
61
|
|
|
|
92
|
|
|
|
173
|
|
|
|
158
|
|
Merger-related expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,663
|
|
Core deposit amortization
|
|
|
34
|
|
|
|
37
|
|
|
|
105
|
|
|
|
75
|
|
Other
|
|
|
453
|
|
|
|
541
|
|
|
|
1,460
|
|
|
|
1,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
|
3,770
|
|
|
|
3,500
|
|
|
|
11,682
|
|
|
|
12,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
3,112
|
|
|
|
3,148
|
|
|
|
8,186
|
|
|
|
937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current expense
|
|
|
1,096
|
|
|
|
941
|
|
|
|
2,366
|
|
|
|
769
|
|
Deferred (benefit) expense
|
|
|
(420
|
)
|
|
|
90
|
|
|
|
1,193
|
|
|
|
(539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
|
676
|
|
|
|
1,031
|
|
|
|
3,559
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
2,436
|
|
|
$
|
2,117
|
|
|
$
|
4,627
|
|
|
$
|
707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS PER SHARE
|
|
$
|
0.28
|
|
|
$
|
0.25
|
|
|
$
|
0.52
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS PER SHARE
|
|
$
|
0.26
|
|
|
$
|
0.25
|
|
|
$
|
0.50
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS PER SHARE
|
|
$
|
0.05
|
|
|
$
|
0.03
|
|
|
$
|
0.30
|
|
|
$
|
0.09
|
|
See notes to unaudited consolidated financial statements.
PRUDENTIAL bancorp, inc. and subsidiarIES
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
|
|
|
Three months ended June 30,
|
|
|
Nine months ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(Dollars in Thousands)
|
|
Net income
|
|
$
|
2,436
|
|
|
$
|
2,117
|
|
|
$
|
4,627
|
|
|
$
|
707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available-for-sale securities
|
|
|
(1,996
|
)
|
|
|
1,120
|
|
|
|
(6,699
|
)
|
|
|
(2,881
|
)
|
Tax effect
|
|
|
275
|
|
|
|
(381
|
)
|
|
|
1,407
|
|
|
|
979
|
|
Reclassification adjustment for net security losses (gains) realized in net income
|
|
|
310
|
|
|
|
(70
|
)
|
|
|
310
|
|
|
|
(70
|
)
|
Tax effect
|
|
|
(65
|
)
|
|
|
24
|
|
|
|
(65
|
)
|
|
|
24
|
|
Unrealized holding (losses) gains on interest rate swaps
|
|
|
(47
|
)
|
|
|
(91
|
)
|
|
|
187
|
|
|
|
701
|
|
Tax effect
|
|
|
16
|
|
|
|
31
|
|
|
|
(39
|
)
|
|
|
(238
|
)
|
Reclassification adjustment for gains on interest rate swap
|
|
|
(808
|
)
|
|
|
-
|
|
|
|
(808
|
)
|
|
|
-
|
|
Tax effect
|
|
|
170
|
|
|
|
-
|
|
|
|
170
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
(2,145
|
)
|
|
|
633
|
|
|
|
(5,537
|
)
|
|
|
(1,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
291
|
|
|
$
|
2,750
|
|
|
$
|
(910
|
)
|
|
$
|
(778
|
)
|
See notes to unaudited consolidated financial statements.
PRUDENTIAL
bancorp, inc. and subsidiarIES
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common
|
|
|
Paid-In
|
|
|
ESOP
|
|
|
Treasury
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Shares
|
|
|
Stock
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
|
(Dollars in Thousands, Except Per Share Data)
|
|
BALANCE, October 1, 2017
|
|
$
|
108
|
|
|
$
|
118,751
|
|
|
$
|
-
|
|
|
$
|
(26,707
|
)
|
|
$
|
44,787
|
|
|
$
|
(760
|
)
|
|
$
|
136,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,627
|
|
|
|
|
|
|
|
4,627
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,537
|
)
|
|
|
(5,537
|
)
|
Dividends paid ($0.30 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,694
|
)
|
|
|
|
|
|
|
(2,694
|
)
|
Purchase of treasury stock (161,101 shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,922
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,922
|
)
|
Treasury stock used for employee benefit plans (161,812 shares)
|
|
|
|
|
|
|
(1,407
|
)
|
|
|
|
|
|
|
2,474
|
|
|
|
|
|
|
|
|
|
|
|
1,067
|
|
Stock option expense
|
|
|
|
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
389
|
|
Restricted shares award expense
|
|
|
|
|
|
|
408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
408
|
|
Reclassification due to change in federal income tax rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
303
|
|
|
|
(303
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, June 30, 2018
|
|
$
|
108
|
|
|
$
|
118,141
|
|
|
$
|
-
|
|
|
$
|
(27,155
|
)
|
|
$
|
47,023
|
|
|
$
|
(6,600
|
)
|
|
$
|
131,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common
|
|
|
Paid-In
|
|
|
ESOP
|
|
|
Treasury
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Shares
|
|
|
Stock
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
|
(Dollars in Thousands, Except Per Share Data)
|
|
BALANCE, October 1, 2016
|
|
$
|
95
|
|
|
$
|
95,713
|
|
|
$
|
(4,550
|
)
|
|
$
|
(21,098
|
)
|
|
$
|
43,044
|
|
|
$
|
798
|
|
|
$
|
114,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
707
|
|
|
|
|
|
|
|
707
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,485
|
)
|
|
|
(1,485
|
)
|
Dividends paid ($0.09 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(764
|
)
|
|
|
|
|
|
|
(764
|
)
|
Issuance of common stock (1,274,197 shares)
|
|
|
13
|
|
|
|
21,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,814
|
|
Purchase of treasury stock (43,698 shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,058
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,058
|
)
|
Terminate ESOP (303,115 shares)
|
|
|
|
|
|
|
733
|
|
|
|
4,456
|
|
|
|
(5,189
|
)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Treasury stock used for employee benefit plan (34,814 shares)
|
|
|
|
|
|
|
(653
|
)
|
|
|
|
|
|
|
653
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Tax benefit from stock compensation plans
|
|
|
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195
|
|
Stock option expense
|
|
|
|
|
|
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349
|
|
Restricted shares award expense
|
|
|
|
|
|
|
284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
284
|
|
ESOP shares committed to be released (8,879
shares)
|
|
|
|
|
|
|
58
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, June 30, 2017
|
|
$
|
108
|
|
|
$
|
118,480
|
|
|
$
|
-
|
|
|
$
|
(26,692
|
)
|
|
$
|
42,987
|
|
|
$
|
(687
|
)
|
|
$
|
134,196
|
|
See accompanying notes to the unaudited consolidated financial
statements
PRUDENTIAL BANCORP, INC. AND SUBSIDIARIES
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Nine Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Dollars in Thousands)
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,627
|
|
|
$
|
707
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
469
|
|
|
|
399
|
|
Net amortization of premiums/discounts
|
|
|
517
|
|
|
|
575
|
|
Provision for loan losses
|
|
|
685
|
|
|
|
2,580
|
|
Net (accretion) amortization of deferred loan fees and costs
|
|
|
(43
|
)
|
|
|
81
|
|
Share-based compensation expense for stock options and awards
|
|
|
797
|
|
|
|
828
|
|
Income from bank owned life insurance
|
|
|
(480
|
)
|
|
|
(506
|
)
|
Gain from sale of loans held for sale
|
|
|
-
|
|
|
|
(52
|
)
|
Gain on retirement of cash flow hedges
|
|
|
(808
|
)
|
|
|
-
|
|
Loss (gain) from sale of investment securities
|
|
|
376
|
|
|
|
(70
|
)
|
Gain on sale of other real estate owned
|
|
|
-
|
|
|
|
(60
|
)
|
Originations of loans held for sale
|
|
|
-
|
|
|
|
(2,634
|
)
|
Proceeds from sale of loans held for sale
|
|
|
-
|
|
|
|
2,686
|
|
Compensation expense of ESOP
|
|
|
-
|
|
|
|
139
|
|
Deferred income tax expense (benefit)
|
|
|
1,193
|
|
|
|
(539
|
)
|
Changes in assets and liabilities which used cash:
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
(845
|
)
|
|
|
(1,161
|
)
|
Accrued interest payable
|
|
|
246
|
|
|
|
(64
|
)
|
Other
|
|
|
590
|
|
|
|
1,706
|
|
Net cash provided by operating activities
|
|
|
7,324
|
|
|
|
4,615
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of investment and mortgage-backed securities available for sale
|
|
|
(113,535
|
)
|
|
|
(68,684
|
)
|
Purchase of investments held to maturity
|
|
|
(2,458
|
)
|
|
|
(18,847
|
)
|
Loans originated
|
|
|
(93,038
|
)
|
|
|
(160,085
|
)
|
Principal collected on loans
|
|
|
61,569
|
|
|
|
118,107
|
|
Principal payments received on investment and mortgage-backed securities:
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
975
|
|
|
|
861
|
|
Available-for-sale
|
|
|
10,663
|
|
|
|
8,131
|
|
Proceeds from the sale of investments and mortgage-backed securities
|
|
|
11,052
|
|
|
|
10,593
|
|
Proceeds from the sale of Polonia Bancorp Inc.'s investment portfolio acquired
|
|
|
-
|
|
|
|
42,164
|
|
Proceeds from retirement of cash flow hedges
|
|
|
856
|
|
|
|
|
|
Redemption of FHLB Stock
|
|
|
3,228
|
|
|
|
163
|
|
Purchase of FHLB stock
|
|
|
(5,135
|
)
|
|
|
(67
|
)
|
Proceeds from sale of real estate owned
|
|
|
278
|
|
|
|
449
|
|
Acquisition, net of cash
|
|
|
-
|
|
|
|
28,956
|
|
Purchase of BOLI
|
|
|
-
|
|
|
|
(10,000
|
)
|
Purchases of equipment
|
|
|
(214
|
)
|
|
|
(229
|
)
|
Net cash used in investing activities
|
|
|
(125,759
|
)
|
|
|
(48,488
|
)
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net decrease increase in demand deposits, NOW accounts, and savings accounts
|
|
|
(18,819
|
)
|
|
|
(12,686
|
)
|
Net increase in certificates of deposit
|
|
|
98,131
|
|
|
|
66,088
|
|
Proceeds from FHLB advances long-term
|
|
|
70,000
|
|
|
|
9,729
|
|
Repayment of FHLB advances long-term
|
|
|
(34,776
|
)
|
|
|
(9,521
|
)
|
Net proceeds from FHLB advances short-term
|
|
|
15,000
|
|
|
|
-
|
|
Increase in advances from borrowers for taxes and insurance
|
|
|
1,601
|
|
|
|
2,234
|
|
Cash dividends paid
|
|
|
(2,695
|
)
|
|
|
(764
|
)
|
Release unallocated shares from ESOP Plan
|
|
|
-
|
|
|
|
4,550
|
|
Repayment of remaining principal balance of ESOP Loan
|
|
|
-
|
|
|
|
(734
|
)
|
Treasury stock used for employee benefit plans
|
|
|
1,067
|
|
|
|
-
|
|
Purchase of treasury stock
|
|
|
(2,922
|
)
|
|
|
(4,536
|
)
|
Net cash provided by financing activities
|
|
|
126,587
|
|
|
|
54,360
|
|
PRUDENTIAL BANCORP, INC.
AND SUBSIDIARIES
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS –continued
|
|
|
Nine Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Dollars in Thousands)
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
8,152
|
|
|
|
10,487
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS—Beginning of period
|
|
|
27,903
|
|
|
|
12,440
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS—End of period
|
|
$
|
36,055
|
|
|
$
|
22,927
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest paid on deposits and advances from FHLB
|
|
$
|
6,981
|
|
|
$
|
2,842
|
|
Income taxes paid
|
|
|
1,900
|
|
|
|
980
|
|
Loans transferred to real estate owned
|
|
|
111
|
|
|
|
-
|
|
SUPPLEMENTAL DISCLOSURES OF NONCASH FLOW
|
|
|
|
|
|
|
|
|
Acquisition of noncash assets and liabilities
|
|
|
|
|
|
|
|
|
Assets acquired:
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
|
|
|
$
|
42,164
|
|
Loans
|
|
|
|
|
|
|
160,157
|
|
Premises
|
|
|
|
|
|
|
6,902
|
|
Core deposit intangible
|
|
|
|
|
|
|
822
|
|
Goodwill
|
|
|
|
|
|
|
7,163
|
|
Bank owned life insurance
|
|
|
|
|
|
|
4,318
|
|
Other assets
|
|
|
|
|
|
|
2,558
|
|
Total assets
|
|
|
|
|
|
$
|
224,084
|
|
Liabilities assumed:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
$
|
172,243
|
|
Advances
|
|
|
|
|
|
|
57,232
|
|
Other liabilities
|
|
|
|
|
|
|
8,914
|
|
Total liabilities assumed
|
|
|
|
|
|
$
|
238,389
|
|
Net non-cash assets (liabilities) acquired
|
|
|
|
|
|
|
(14,305
|
)
|
Cash acquired
|
|
|
|
|
|
$
|
47,901
|
|
See notes to the unaudited consolidated financial statements
PRUDENTIAL
BANCORP, INC. AND SUBSIDIARIES
|
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
|
1.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Prudential Bancorp, Inc. (the
“Company”) is a Pennsylvania corporation and the parent holding company for Prudential Bank (the “Bank”),
a Pennsylvania-chartered savings bank. The Company is a registered bank holding company.
The Bank is a community-oriented
Pennsylvania-chartered savings bank headquartered in South Philadelphia. The banking office network currently consists of the headquarters
and main office (which includes a branch office), administrative office, and nine full-service branch offices. Eight of the branch
offices are located in Philadelphia (Philadelphia County), one is in Drexel Hill, Delaware County, and one is in Huntingdon Valley,
Montgomery County (both Pennsylvania counties). The Bank maintains ATMs at all 10 of the banking offices. The Bank also provides
on-line and mobile banking services.
The Bank is subject to regulation
by the Pennsylvania Department of Banking and Securities (the “Department”), as its chartering authority and primary
regulator, and by the Federal Deposit Insurance Corporation (the “FDIC”), which insures the Bank’s deposits up
to applicable limits. As a bank holding company, the Company is subject to the regulation of the Board of Governors of the Federal
Reserve System.
On January 1, 2017, the Company
completed its acquisition of Polonia Bancorp, Inc. (“Polonia Bancorp”) and Polonia Bank, Polonia’s wholly owned
subsidiary. Polonia Bancorp and Polonia Bank were merged with and into the Company and the Bank, respectively.
Basis of presentation
–
The accompanying unaudited consolidated financial statements were prepared pursuant to the rules and regulations
of the U. S. Securities and Exchange Commission (“SEC”) for interim information and therefore do not include all the
information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income,
changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the financial
statements have been included. The results for the three and nine months ended June 30, 2018 are not necessarily indicative of
the results that may be expected for the fiscal year ending September 30, 2018, or any other period. These financial statements
should be read in conjunction with the audited consolidated financial statements of the Company and the accompanying notes thereto
included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017. The significant accounting
policies followed in the presentation of interim financial results are the same as those followed on an annual basis. These policies
are presented on pages 84 through 88 of the Form 10-K for the fiscal year ended September 30, 2017.
Use of Estimates in the
Preparation of Financial Statements
—
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting
period. The most significant estimates and assumptions in the Company’s consolidated financial statements are recorded in
the allowance for loan losses, goodwill and intangible assets, deferred income taxes, other-than-temporary impairment, and the
fair value measurement for financial instruments. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In May 2014, the FASB
issued ASU 2014-09,
Revenue from Contracts with Customers
(a new revenue recognition standard). The Update’s core
principle is that a company will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this Update
specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements
for revenue recognition. This Update is effective for annual reporting periods beginning after December 15, 2016, including
interim periods within that reporting period. In August 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers
(
Topic 606
). The amendments in this Update defer the effective date of ASU 2014-09 for all entities by one year. Public
business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09
to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.
All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and
interim reporting periods within annual reporting periods beginning after December 15, 2019. Since the guidance scopes out revenue
associated with financial instruments, including loan receivables and investment securities, we do not expect the adoption
of the new standard, or any of the amendments, to result in a material change from our current accounting for revenue because the
majority of the Company's revenue is not within the scope of Topic 606. However, we do expect that the standard will result
in new disclosure requirements, which are currently being evaluated
.
In January 2016, the FASB issued
ASU 2016-01,
Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities
. This Update applies to all entities that hold financial assets or owe financial liabilities and is intended to
provide more useful information on the recognition, measurement, presentation, and disclosure of financial instruments. Among other
things, this Update (a) requires equity investments (except those accounted for under the equity method of accounting or those
that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income;
(b) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative
assessment to identify impairment; (c) eliminates the requirement to disclose the fair value of financial instruments measured
at amortized cost for entities that are not public business entities; (d) eliminates the requirement for public business entities
to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial
instruments measured at amortized cost on the balance sheet; (e) requires public business entities to use the exit price notion
when measuring the fair value of financial instruments for disclosure purposes; (f) requires separate presentation of financial
assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables)
on the balance sheet or the accompanying notes to the financial statements; and (g) clarifies that an entity should evaluate the
need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s
other deferred tax assets. For public business entities, the amendments in this Update are effective for fiscal years beginning
after December 15, 2017, including interim periods within those fiscal years. For all other entities, including not-for-profit
entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, the amendments in this Update
are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December
15, 2019. All entities that are not public business entities may adopt the amendments in this Update earlier as of the fiscal years
beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the
impact the adoption of the standard will have on the Company’s financial position or results of operations.
In February 2016, the FASB
issued ASU 2016-02,
Leases (Topic 842)
. The standard requires lessees to recognize the assets and liabilities that arise
from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease
payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.
A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase
the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease
payments over the lease term on a straight-line basis. For public business entities, the amendments in this Update are effective
for fiscal years beginning after December 15, 2018 and interim periods within those years. For all other entities, the amendments
in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning
after December 15, 2020. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective
approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently
assessing the practical expedients it may elect at adoption, but does not anticipate the amendments will have a significant impact
on the financial statements. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s
balance sheet is estimated to result in less than a one percent increase in assets and liabilities. The Company also anticipates
additional disclosures to be provided at adoption
.
In June 2016, the FASB issued
ASU 2016-13,
Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments
, which changes
the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording
of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying
premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be
collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses
should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial
asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well
as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective
for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods
beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect
adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We
expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting
period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall
impact of the new guidance on the consolidated financial statements.
In August 2016, the FASB issued
ASU 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
, which addresses
eight specific cash flow issues with the objective of reducing diversity in practice. Among these include recognizing cash payments
for debt prepayment or debt extinguishment as cash outflows for financing activities; cash proceeds received from the settlement
of insurance claims should be classified on the basis of the related insurance coverage; and cash proceeds received from the settlement
of bank-owned life insurance policies should be classified as cash inflows from investing activities while the cash payments for
premiums on bank-owned policies may be classified as cash outflows for investing activities, operating activities, or a combination
of investing and operating activities. The amendments in this Update are effective for public business entities for fiscal years
beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective
for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.
Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period,
any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects
early adoption must adopt all of the amendments in the same period. The amendments in this Update should be applied using a retrospective
transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues,
the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating
the impact the adoption of the standard will have on the Company’s statement of cash flows.
In January 2017, the FASB issued
ASU 2017-01,
Business Combinations (Topic 805), Clarifying the Definition of a Business
, which provides a more robust framework
to use in determining when a set of assets and activities (collectively referred to as a “set”) is a business. The
screening process requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated
in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screening process reduces
the number of transactions that need to be further evaluated. Public business entities should apply the amendments in this Update
to annual periods beginning after December 15, 2017, including interim periods within those periods. All other entities should
apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after
December 15, 2019. The amendments in this Update should be applied prospectively on or after the effective date. This Update is
not expected to have a significant impact on the Company’s financial statements.
In January 2017, the FASB issued
ASU 2017-04,
Simplifying the Test for Goodwill Impairment
. To simplify the subsequent measurement of goodwill, the FASB
eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had
to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized
assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities
assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim,
goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an
impairment charge for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized
should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is an SEC filer
should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after
December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual
or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profit
entities, that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests
in fiscal years beginning after December 15, 2021.
This Update is not expected to have a significant
impact on the Company’s financial statements.
In February 2017, the FASB
issued ASU 2017-05,
Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20).
The
amendments in this Update clarify what constitutes a financial asset within the scope of Subtopic 610-20. The amendments also clarify
that entities should identify each distinct nonfinancial asset or in-substance nonfinancial asset that is promised to a counterparty
and to derecognize each asset when the counterparty obtains control. There is also additional guidance provided for partial sales
of a nonfinancial asset and when derecognition, and the related gain or loss, should be recognized. The amendments in this Update
are effective at the same time as the amendments in Update 2014-09. Therefore, for public entities, the amendments are effective
for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.
For all other entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2018,
and interim reporting periods within annual reporting periods beginning after December 15, 2019
.
The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position
or results of operations.
In March 2017, the FASB issued
ASU 2017-08,
Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20).
The
amendments in this Update shorten the amortization period for certain callable debt securities held at a premium. Specifically,
the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change
for securities held at a discount; the discount continues to be amortized to maturity. For public business entities, the amendments
in this Update are effective for fiscal years, and interim periods within those fiscal years, beg
inning after December 15,
2018.
For all other entities, the amendments are effective for fiscal years beginning after December
15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption
in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of
the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified
retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.
Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The Company
is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results
of operations.
In May 2017, the FASB issued
ASU 2017-09,
Compensation – Stock Compensation (Topic 718)
, which affects any entity that changes the terms or conditions
of a share-based payment award. This Update amends the definition of modification by qualifying that modification accounting
does not apply to changes to outstanding share-based payment awards that do not affect the total fair value, vesting requirements,
or equity/liability classification of the awards. The amendments in this Update are effective for all entities for annual
periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including
adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not
yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available
for issuance. The amendments in this Update should be applied prospectively to an award modified on or after the adoption date.
This Update is not expected to have a significant impact on the Company’s financial statements.
In August 2017, the FASB issued
ASU 2017-12,
Derivatives and Hedging (Topic 850)
, the objective of which is to improve the financial reporting of hedging
relationships to better portray the economic results of an entity’s risk management activities in its financial statements.
In addition, the amendments in this Update make certain targeted improvements to simplify the application and disclosure of the
hedge accounting guidance in current general accepted accounting principles. For public business entities, the amendments in this
Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all
other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning
after December 15, 2020. Early application is permitted in any period after issuance. For cash flow and net investment hedges existing
at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement
of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained
earnings as of the beginning of the fiscal year that an entity adopts the amendments in this Update. The amended presentation and
disclosure guidance is required only prospectively
. The Company early adopted the ASU during the
quarter ended June 30, 2018. There was not a significant impact on the Company’s financial statements.
In January 2018, the FASB issued
ASU 2018-01,
Leases (Topic 842)
, which provides an optional transition practical expedient to not evaluate under Topic 842
existing or expired land easements that were not previously accounted for as leases under the current lease guidance in Topic 840.
An entity that elects this practical expedient should evaluate new or modified land easements under Topic 842 beginning at the
date the entity adopts Topic 842; otherwise, an entity should evaluate all existing or expired land easements in connection with
the adoption of the new lease requirements in Topic 842 to assess whether they meet the definition of a lease. The effective date
and transition requirements for the amendments are the same as the effective date and transition requirements in ASU 2016-02 Topic
842.
The Company is currently evaluating the impact the adoption of the standard will have on the
Company’s financial position and results of operations.
In February 2018, the FASB
issued ASU 2018-02,
Income Statement – Reporting Comprehensive Income (Topic 220)
, to allow a reclassification from
accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.
The amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information
reported to financial statement users. The amendments in this Update are effective for all entities for fiscal years beginning
after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted,
including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements
have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been
made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively
to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and
Jobs Act is recognized. On January 1, 2018, the Company adopted this standard which resulted in a reclassification of $303,000
between accumulated other comprehensive income and retained earnings on the consolidated balance sheet.
In February 2018, the FASB
issued ASU 2018-03,
Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10)
, to
clarify certain aspects of the guidance issued in ASU 2016-01. (1) An entity measuring an equity security using the measurement
alternative may change its measurement approach to a fair value method in accordance with Topic 820,
Fair Value Measurement
,
through an irrevocable election that would apply to that security and all identical or similar investments of the same issuer.
Once an entity makes this election, the entity should measure all future purchases of identical or similar investments of the same
issuer using a fair value method in accordance with Topic 820. (2) Adjustments made under the measurement alternative are intended
to reflect the fair value of the security as of the date that the observable transaction for a similar security took place. (3)
Remeasuring the entire value of forward contracts and purchased options is required when observable transactions occur on the underlying
equity securities. (4) When the fair value option is elected for a financial liability, the guidance in paragraph 825-10- 45-5
should be applied, regardless of whether the fair value option was elected under either Subtopic 815-15,
Derivatives and Hedging—Embedded
Derivatives
, or 825-10,
Financial Instruments—Overall
. (5) Financial liabilities for which the fair value option
is elected, the amount of change in fair value that relates to the instrument specific credit risk should first be measured in
the currency of denomination when presented separately from the total change in fair value of the financial liability. Then, both
components of the change in the fair value of the liability should be remeasured into the functional currency of the reporting
entity using end-of-period spot rates. (6) The prospective transition approach for equity securities without a readily determinable
fair value in the amendments in Update 2016-01 is meant only for instances in which the measurement alternative is applied. For
public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, and interim
periods within those fiscal years beginning after June 15, 2018. Public business entities with fiscal years beginning between December
15, 2017, and June 15, 2018, are not required to adopt these amendments until the interim period beginning after June 15, 2018,
and public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt
these amendments before adopting the amendments in Update 2016-01. For all other entities, the effective date is the same as the
effective date in Update 2016-01. All entities may early adopt these amendments for fiscal years beginning after December 15, 2017,
including interim periods within those fiscal years, as long as they have adopted Update 2016-01. The Company is currently evaluating
the impact the adoption of the standard will have on the Company’s financial position or results of operations.
In June 2018, the FASB issued
ASU 2018-07,
Compensation – Stock Compensation (Topic 718)
, which simplified the accounting for nonemployee share-based
payment transactions. The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for
acquiring goods and services from nonemployees. The amendments in this Update improve the following areas of nonemployee share-based
payment accounting; (a) the overall measurement objective, (b) the measurement date, (c) awards with performance conditions, (d)
classification reassessment of certain equity-classified awards, (e) calculated value (nonpublic entities only), and (f) intrinsic
value (nonpublic entities only). The amendments in this Update are effective for public business entities for fiscal years beginning
after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective
for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position
or results of operations.
Basic earnings per common share
is computed by dividing net income by the weighted average number of shares of common stock outstanding, net of any treasury shares,
during the period. Diluted earnings per share is calculated by dividing net income by the weighted average number of shares of
common stock outstanding, net of any treasury shares, after consideration of the potential dilutive effect of common stock equivalents,
consisting of restricted stock and stock options based upon the treasury stock method using an average market price for the period.
The calculated basic and diluted earnings per share
are as follows:
|
|
Three Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
(Dollars in Thousands Except Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,436
|
|
|
$
|
2,436
|
|
|
$
|
2,117
|
|
|
$
|
2,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
8,848,393
|
|
|
|
8,848,393
|
|
|
|
8,652,699
|
|
|
|
8,652,699
|
|
Effect of common stock equivalents
|
|
|
-
|
|
|
|
378,912
|
|
|
|
-
|
|
|
|
656,370
|
|
Adjusted weighted average shares used in earnings per share computation
|
|
|
8,848,393
|
|
|
|
9,227,305
|
|
|
|
8,652,699
|
|
|
|
9,309,069
|
|
Earnings per share
|
|
$
|
0.28
|
|
|
$
|
0.26
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
|
Nine Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
(Dollars in Thousands Except Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,627
|
|
|
$
|
4,627
|
|
|
$
|
707
|
|
|
$
|
707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
8,851,784
|
|
|
|
8,851,784
|
|
|
|
8,202,950
|
|
|
|
8,202,950
|
|
Effect of common stock equivalents
|
|
|
-
|
|
|
|
342,432
|
|
|
|
-
|
|
|
|
570,792
|
|
Adjusted weighted average shares used in earnings per share computation
|
|
|
8,851,784
|
|
|
|
9,194,216
|
|
|
|
8,202,950
|
|
|
|
8,773,742
|
|
Earnings per share
|
|
$
|
0.52
|
|
|
$
|
0.50
|
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
All exercisable stock options
outstanding as of June 30, 2018 and 2017 had exercise prices below the then current per share market price for the Company’s
common stock and were considered dilutive for the earnings per share calculation.
|
3.
|
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
|
The following table presents
the changes in accumulated other comprehensive income (loss) by component net of tax:
|
|
Three Months Ended June
30,
|
|
|
Three Months Ended June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
Unrealized
gain (loss)
on AFS securities (a)
|
|
|
Unrealized
gain
(loss) on interest
rate swaps (a)
|
|
|
Total
accumulated
other
comprehensive
income
|
|
|
Unrealized
gain
(loss) on AFS
securities (a)
|
|
|
Unrealized
gain
(loss) on interest
rate swaps (a)
|
|
|
Total
accumulated
other
comprehensive
income
|
|
Beginning balance, April 1
|
|
$
|
(4,965
|
)
|
|
$
|
510
|
|
|
$
|
(4,455
|
)
|
|
$
|
(1,710
|
)
|
|
$
|
390
|
|
|
$
|
(1,320
|
)
|
Other comprehensive (loss) income before reclassification
|
|
|
(1,721
|
)
|
|
|
(31
|
)
|
|
|
(1,752
|
)
|
|
|
739
|
|
|
|
(60
|
)
|
|
|
679
|
|
Amount reclassified from accumulated other comprehensive income
|
|
|
245
|
|
|
|
(638
|
)
|
|
|
(393
|
)
|
|
|
(46
|
)
|
|
|
-
|
|
|
|
(46
|
)
|
Total
|
|
|
(6,441
|
)
|
|
|
(159
|
)
|
|
|
(6,600
|
)
|
|
|
(1,017
|
)
|
|
|
330
|
|
|
|
(687
|
)
|
Reclassification due to change in federal income
tax rate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ending Balance, June 30
|
|
$
|
(6,441
|
)
|
|
$
|
(159
|
)
|
|
$
|
(6,600
|
)
|
|
$
|
(1,017
|
)
|
|
$
|
330
|
|
|
$
|
(687
|
)
|
(a) All amounts are net of
tax. Amounts in parentheses indicate debits.
The following table presents
the changes in accumulated other comprehensive (loss) income by component net of tax:
|
|
Nine Months Ended June
30,
|
|
|
Nine Months Ended June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss)
on AFS securities (a)
|
|
|
Unrealized gain
(loss)
on interest
rate swaps (a)
|
|
|
Total accumulated
other
comprehensive
income
|
|
|
Unrealized gain
(loss)
on AFS
securities (a)
|
|
|
Unrealized gain
(loss)
on interest
rate swaps (a)
|
|
|
Total accumulated
other
comprehensive
income
|
|
Beginning balance, October 1
|
|
$
|
(1,091
|
)
|
|
$
|
331
|
|
|
$
|
(760
|
)
|
|
$
|
931
|
|
|
$
|
(133
|
)
|
|
$
|
798
|
|
Other comprehensive (loss) income before reclassification
|
|
|
(5,292
|
)
|
|
|
148
|
|
|
|
(5,144
|
)
|
|
|
(1,902
|
)
|
|
|
463
|
|
|
|
(1,439
|
)
|
Amount reclassified from accumulated other comprehensive income
|
|
|
245
|
|
|
|
(638
|
)
|
|
|
(393
|
)
|
|
|
(46
|
)
|
|
|
-
|
|
|
|
(46
|
)
|
Total
|
|
|
(6,138
|
)
|
|
|
(159
|
)
|
|
|
(6,297
|
)
|
|
|
(1,017
|
)
|
|
|
330
|
|
|
|
(687
|
)
|
Reclassification due to change in federal income
tax rate
|
|
|
(303
|
)
|
|
|
-
|
|
|
|
(303
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ending Balance, June 30
|
|
$
|
(6,441
|
)
|
|
$
|
(159
|
)
|
|
$
|
(6,600
|
)
|
|
$
|
(1,017
|
)
|
|
$
|
330
|
|
|
$
|
(687
|
)
|
(a) All amounts are net of
tax. Amounts in parentheses indicate debits.
The following table presents significant amounts reclassified
out of each component of accumulated other comprehensive income (loss) for the three and nine months ended June 30, 2018 and 2017.
Amounts in parentheses indicate debits to net income:
|
|
Three Months Ended June 30,
|
|
|
Three Months Ended June 30,
|
|
|
|
2018
|
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Swaps
|
|
|
Total
|
|
|
Securities
|
|
|
Swaps
|
|
|
Total
|
|
Unrealized (losses) gain
|
|
$
|
(310
|
)(1)
|
|
$
|
808
|
(2)
|
|
$
|
498
|
|
|
$
|
70
|
(1)
|
|
$
|
-
|
|
|
$
|
70
|
|
|
|
|
65
|
(3)
|
|
|
(170
|
)(3)
|
|
|
(105
|
)
|
|
|
(24
|
)(3)
|
|
|
-
|
|
|
|
(24
|
)
|
|
|
$
|
(245
|
)
|
|
$
|
638
|
|
|
$
|
393
|
|
|
$
|
46
|
|
|
$
|
-
|
|
|
$
|
46
|
|
|
|
Nine Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
|
2018
|
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Swaps
|
|
|
Total
|
|
|
Securities
|
|
|
Swaps
|
|
|
Total
|
|
Unrealized (losses) gain
|
|
$
|
(310
|
)(1)
|
|
$
|
808
|
(2)
|
|
$
|
498
|
|
|
$
|
70
|
(1)
|
|
$
|
-
|
|
|
$
|
70
|
|
|
|
|
65
|
(3)
|
|
|
(170
|
)(3)
|
|
|
(105
|
)
|
|
|
(24
|
)(3)
|
|
|
-
|
|
|
|
(24
|
)
|
|
|
$
|
(245
|
)
|
|
$
|
638
|
|
|
$
|
393
|
|
|
$
|
46
|
|
|
$
|
-
|
|
|
$
|
46
|
|
(1) Recorded as a loss on the sale of investment securities
(2) Recorded as Swap income
(3) Recorded as income tax benefit (expense)
|
4.
|
INVESTMENT AND MORTGAGE-BACKED SECURITIES
|
The amortized cost and fair
value of investment and mortgage-backed securities, with gross unrealized gains and losses, are as follows:
|
|
June 30, 2018
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency obligations
|
|
$
|
25,592
|
|
|
$
|
-
|
|
|
$
|
(1,088
|
)
|
|
$
|
24,504
|
|
Mortgage-backed securities - U.S. government agencies
|
|
|
164,064
|
|
|
|
90
|
|
|
|
(4,830
|
)
|
|
|
159,324
|
|
State and political subdivisions
|
|
|
22,091
|
|
|
|
-
|
|
|
|
(32
|
)
|
|
|
22,059
|
|
Corporate debt securities
|
|
|
66,675
|
|
|
|
27
|
|
|
|
(2,356
|
)
|
|
|
64,346
|
|
Total debt securities available for sale
|
|
|
278,422
|
|
|
|
117
|
|
|
|
(8,306
|
)
|
|
|
270,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC preferred stock
|
|
|
6
|
|
|
|
36
|
|
|
|
-
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
278,428
|
|
|
$
|
153
|
|
|
$
|
(8,306
|
)
|
|
$
|
270,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency obligations
|
|
$
|
33,500
|
|
|
$
|
114
|
|
|
$
|
(2,863
|
)
|
|
$
|
30,751
|
|
Mortgage-backed securities - U.S. government agencies
|
|
|
6,052
|
|
|
|
171
|
|
|
|
(132
|
)
|
|
|
6,091
|
|
State and political subdivisions
|
|
|
18,575
|
|
|
|
5
|
|
|
|
(538
|
)
|
|
|
18,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
58,127
|
|
|
$
|
290
|
|
|
$
|
(3,533
|
)
|
|
$
|
54,884
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency obligations
|
|
$
|
26,125
|
|
|
$
|
9
|
|
|
$
|
(335
|
)
|
|
$
|
25,799
|
|
Mortgage-backed securities - U.S. government agencies
|
|
|
119,456
|
|
|
|
146
|
|
|
|
(1,475
|
)
|
|
|
118,127
|
|
Corporate debt securities
|
|
|
34,500
|
|
|
|
185
|
|
|
|
(285
|
)
|
|
|
34,400
|
|
Total debt securities available for sale
|
|
|
180,081
|
|
|
|
340
|
|
|
|
(2,095
|
)
|
|
|
178,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC preferred stock
|
|
|
6
|
|
|
|
70
|
|
|
|
-
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
180,087
|
|
|
$
|
410
|
|
|
$
|
(2,095
|
)
|
|
$
|
178,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency obligations
|
|
$
|
33,500
|
|
|
$
|
229
|
|
|
$
|
(1,688
|
)
|
|
$
|
32,041
|
|
State and political subdivisions
|
|
|
20,781
|
|
|
|
165
|
|
|
|
(104
|
)
|
|
|
20,842
|
|
Mortgage-backed securities - U.S. government agencies
|
|
|
7,003
|
|
|
|
304
|
|
|
|
(11
|
)
|
|
|
7,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
61,284
|
|
|
$
|
698
|
|
|
$
|
(1,803
|
)
|
|
$
|
60,179
|
|
The following table shows the
gross unrealized losses and related fair values of the Company’s investments and mortgage-backed securities, aggregated by
investment category and length of time that individual securities had been in a continuous loss position at June 30, 2018:
|
|
Less than 12 months
|
|
|
More than 12 months
|
|
|
Total
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency obligations
|
|
$
|
(1,088
|
)
|
|
$
|
24,504
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(1,088
|
)
|
|
$
|
24,504
|
|
Mortgage-backed securities - U.S. government agencies
|
|
|
(3,038
|
)
|
|
|
104,320
|
|
|
|
(1,792
|
)
|
|
|
37,699
|
|
|
|
(4,830
|
)
|
|
|
142,019
|
|
State and political subdivisions
|
|
|
(32
|
)
|
|
|
3,142
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(32
|
)
|
|
|
3,142
|
|
Corporate debt securities
|
|
|
(2,356
|
)
|
|
|
60,568
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,356
|
)
|
|
|
60,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
(6,514
|
)
|
|
$
|
192,534
|
|
|
$
|
(1,792
|
)
|
|
$
|
37,699
|
|
|
$
|
(8,306
|
)
|
|
$
|
230,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency obligations
|
|
$
|
(2,863
|
)
|
|
$
|
27,636
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(2,863
|
)
|
|
$
|
27,636
|
|
Mortgage-backed securities - U.S. government agencies
|
|
|
(91
|
)
|
|
|
2,777
|
|
|
|
(41
|
)
|
|
|
985
|
|
|
|
(132
|
)
|
|
|
3,762
|
|
State and political subdivisions
|
|
|
(538
|
)
|
|
|
16,003
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(538
|
)
|
|
|
16,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
(3,492
|
)
|
|
$
|
46,416
|
|
|
$
|
(41
|
)
|
|
$
|
985
|
|
|
$
|
(3,533
|
)
|
|
$
|
47,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(10,006
|
)
|
|
$
|
238,950
|
|
|
$
|
(1,833
|
)
|
|
$
|
38,684
|
|
|
$
|
(11,839
|
)
|
|
$
|
277,634
|
|
The following table shows the
gross unrealized losses and related fair values of the Company’s investment securities, aggregated by investment category
and length of time that individual securities had been in a continuous loss position at September 30, 2017:
|
|
Less than 12 months
|
|
|
More than 12 months
|
|
|
Total
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency obligations
|
|
$
|
(335
|
)
|
|
$
|
20,655
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(335
|
)
|
|
$
|
20,655
|
|
Mortgage-backed securities - U.S. government agencies
|
|
|
(1,135
|
)
|
|
|
77,176
|
|
|
|
(340
|
)
|
|
|
11,684
|
|
|
|
(1,475
|
)
|
|
|
88,860
|
|
Corporate debt securities
|
|
|
(285
|
)
|
|
|
22,511
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(285
|
)
|
|
|
22,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
(1,755
|
)
|
|
$
|
120,342
|
|
|
$
|
(340
|
)
|
|
$
|
11,684
|
|
|
$
|
(2,095
|
)
|
|
$
|
132,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency obligations
|
|
$
|
(1,688
|
)
|
|
$
|
28,813
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(1,688
|
)
|
|
$
|
28,813
|
|
Mortgage-backed securities - U.S. government agencies
|
|
|
(11
|
)
|
|
|
1,176
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11
|
)
|
|
|
1,176
|
|
State and political subdivisions
|
|
|
(104
|
)
|
|
|
7,854
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(104
|
)
|
|
|
7,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
(1,803
|
)
|
|
$
|
37,843
|
|
|
|
$
|
|
|
|
$
|
|
|
$
|
(1,803
|
)
|
|
$
|
37,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(3,558
|
)
|
|
$
|
158,185
|
|
|
$
|
(340
|
)
|
|
$
|
11,684
|
|
|
$
|
(3,898
|
)
|
|
$
|
169,869
|
|
Management evaluates securities
for other-than-temporary impairment (“OTTI”) at least once each quarter, and more frequently when economic or market
concerns warrant such evaluation. The evaluation is based upon factors such as the creditworthiness of the issuers/guarantors,
the underlying collateral, if applicable, and the continuing performance of the securities. Management also evaluates other
facts and circumstances that may be indicative of an OTTI condition. This includes, but is not limited to, an evaluation of
the type of security, the length of time and extent to which the fair value of the security has been less than its cost, and the
near-term prospects of the issuer.
The Company assesses whether
a credit loss exists with respect to a security by considering whether (1) the Company has the intent to sell the security, (2)
it is more likely than not that it will be required to sell the security before recovery has occurred, or (3) it does not expect
to recover the entire amortized cost basis of the security. The Company bifurcates the OTTI impact on impaired securities where
impairment in value was deemed to be other than temporary between the component representing credit loss and the component representing
loss related to other factors. The portion of the fair value decline attributable to credit loss must be recognized through a charge
to earnings. The credit component is determined by comparing the present value of the cash flows expected to be collected, discounted
at the rate in effect before recognizing any OTTI, with the amortized cost basis of the debt security. The Company uses the
cash flows expected to be realized from the security, which includes assumptions about interest rates, timing and severity of defaults,
estimates of potential recoveries, the cash flow distribution from the security and other factors, then applies a discount rate
equal to the effective yield of the security. The difference between the present value of the expected cash flows and the
amortized book value is considered a credit loss. The fair value of the security is determined using the same expected cash
flows; the discount rate is a rate the Company determines from open market and other sources as appropriate for the particular
security. The difference between the fair value and the security’s remaining amortized cost is recognized in other
comprehensive income (loss).
For both the three and nine
months ended June 30, 2018 and 2017, the Company did not record any credit losses on investment securities through earnings.
U.S. Government and Agency
Obligations -
At June 30, 2018, there were 14 securities in a gross unrealized loss position for less than 12 months. These
securities represent asset-backed issues that are issued or guaranteed by a U.S. Government sponsored agency or carry the full
faith and credit of the United States through a government agency and are currently rated AAA by at least one bond credit rating
agency. As a result, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2018.
Mortgage-Backed Securities
–
At June 30, 2018, there were 41 mortgage-backed securities in a gross unrealized loss position for less than 12 months,
while there were 32 securities in a gross unrealized loss position for more than 12 months at such date. These securities represent
asset-backed issues that are issued or guaranteed by a U.S. Government sponsored agency or carry the full faith and credit of the
United States through a government agency and are currently rated AAA by at least one bond credit rating agency. As a result, the
Company does not consider these investments to be other-than-temporarily impaired at June 30, 2018.
Corporate Debt Securities
– At June 30, 2018, there were 34 securities in a gross unrealized loss position for less than 12 months. These securities
were issued by publicly traded companies with an investment grade rating by at least one bond credit rating agency. As a result,
the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2018.
State and political subdivisions
– At June 30, 2018, there were 10 securities in a gross unrealized loss position for less than 12 months. These securities
were issued by government entities with an investment grade rating by at least one bond credit rating agency. As a result, the
Company does not consider these investments to be other-than-temporarily impaired at June 30, 2018.
The amortized cost and fair
value of debt securities, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The maturity table below excludes
mortgage-backed securities because the contractual maturities of such securities are not indicative of actual maturities due to
significant prepayments.
|
|
June 30, 2018
|
|
|
|
Held to Maturity
|
|
|
Available for Sale
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Due after one through five years
|
|
$
|
2,000
|
|
|
$
|
2,022
|
|
|
$
|
5,073
|
|
|
$
|
4,969
|
|
Due after five through ten years
|
|
|
25,504
|
|
|
|
24,542
|
|
|
|
61,602
|
|
|
|
59,376
|
|
Due after ten years
|
|
|
24,571
|
|
|
|
22,229
|
|
|
|
47,683
|
|
|
|
46,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
52,075
|
|
|
$
|
48,793
|
|
|
$
|
114,358
|
|
|
$
|
110,909
|
|
During both the three and nine
month periods ended June 30, 2018, the Company sold one mortgage-back security with an aggregate amortized cost of $5.1 million
at an recognized aggregate loss of $268,000 (pre-tax), a corporate bond with an amortized cost of $2.0 million for a loss of $42,000
(pre-tax) and three municipal securities with an aggregate amortized cost of $4.6 million at an aggregate loss of $66,000 (pre-tax).
The sales were of securities which bore yields below market rates in order to better position the securities portfolio in a rising
rate environment.
During the both three and nine month periods ended
June 30, 2018 and 2017, the Company did not use investment securities as collateral for any of its FHLB advances.
Loans receivable consist of the following:
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four family residential
|
|
$
|
340,480
|
|
|
$
|
351,298
|
|
Multi-family residential
|
|
|
38,448
|
|
|
|
21,508
|
|
Commercial real estate
|
|
|
112,332
|
|
|
|
127,644
|
|
Construction and land development
|
|
|
137,820
|
|
|
|
145,486
|
|
Loans to financial institutions
|
|
|
6,000
|
|
|
|
-
|
|
Commercial business
|
|
|
14,148
|
|
|
|
488
|
|
Leases
|
|
|
2,169
|
|
|
|
4,240
|
|
Consumer
|
|
|
981
|
|
|
|
1,943
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
652,378
|
|
|
|
652,607
|
|
|
|
|
|
|
|
|
|
|
Undisbursed portion of loans-in-process
|
|
|
(42,082
|
)
|
|
|
(73,858
|
)
|
Deferred loan fees, net
|
|
|
(2,800
|
)
|
|
|
(2,940
|
)
|
Allowance for loan losses
|
|
|
(5,041
|
)
|
|
|
(4,466
|
)
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
$
|
602,455
|
|
|
$
|
571,343
|
|
The following table summarizes
by loan segment the balance in the allowance for loan losses and the loans individually and collectively evaluated for impairment
by loan segment at June 30, 2018:
|
|
One-
to-four
family residential
|
|
|
Multi-family
residential
|
|
|
Commercial
real
estate
|
|
|
Construction
and
land development
|
|
|
Loans
to financial
institutions
|
|
|
Commercial
Business
|
|
|
Leases
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Collectively
evaluated for impairment
|
|
|
1,294
|
|
|
|
383
|
|
|
|
1,056
|
|
|
|
1,600
|
|
|
|
63
|
|
|
|
146
|
|
|
|
23
|
|
|
|
15
|
|
|
|
461
|
|
|
|
5,041
|
|
Total ending allowance balance
|
|
$
|
1,294
|
|
|
$
|
383
|
|
|
$
|
1,056
|
|
|
$
|
1,600
|
|
|
$
|
63
|
|
|
$
|
146
|
|
|
$
|
23
|
|
|
$
|
15
|
|
|
$
|
461
|
|
|
$
|
5,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
6,058
|
|
|
$
|
303
|
|
|
$
|
1,773
|
|
|
$
|
8,746
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
16,880
|
|
Collectively evaluated for
impairment
|
|
|
334,422
|
|
|
|
38,145
|
|
|
|
110,559
|
|
|
|
129,074
|
|
|
|
6,000
|
|
|
|
14,148
|
|
|
|
2,169
|
|
|
|
981
|
|
|
|
|
|
|
|
635,498
|
|
Total loans
|
|
$
|
340,480
|
|
|
$
|
38,448
|
|
|
$
|
112,332
|
|
|
$
|
137,820
|
|
|
$
|
6,000
|
|
|
$
|
14,148
|
|
|
$
|
2,169
|
|
|
$
|
981
|
|
|
|
|
|
|
$
|
652,378
|
|
The following table summarizes
by loan segment the balance in the allowance for loan losses and the loans individually and collectively evaluated for impairment
by loan segment at September 30, 2017:
|
|
One- to-four
family residential
|
|
|
Multi-family
residential
|
|
|
Commercial
real
estate
|
|
|
Construction
and
land development
|
|
|
Commercial
business
|
|
|
Leases
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Collectively
evaluated for impairment
|
|
|
1,241
|
|
|
|
205
|
|
|
|
1,201
|
|
|
|
1,358
|
|
|
|
4
|
|
|
|
23
|
|
|
|
24
|
|
|
|
410
|
|
|
|
4,466
|
|
Total ending allowance balance
|
|
$
|
1,241
|
|
|
$
|
205
|
|
|
$
|
1,201
|
|
|
$
|
1,358
|
|
|
$
|
4
|
|
|
$
|
23
|
|
|
$
|
24
|
|
|
$
|
410
|
|
|
$
|
4,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
8,277
|
|
|
$
|
317
|
|
|
$
|
2,337
|
|
|
$
|
8,724
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10
|
|
|
|
|
|
|
$
|
19,665
|
|
Collectively evaluated for
impairment
|
|
|
343,021
|
|
|
|
21,191
|
|
|
|
125,307
|
|
|
|
136,762
|
|
|
|
488
|
|
|
|
4,240
|
|
|
|
1,933
|
|
|
|
|
|
|
|
632,942
|
|
Total loans
|
|
$
|
351,298
|
|
|
$
|
21,508
|
|
|
$
|
127,644
|
|
|
$
|
145,486
|
|
|
$
|
488
|
|
|
$
|
4,240
|
|
|
$
|
1,943
|
|
|
|
|
|
|
$
|
652,607
|
|
The loan portfolio is segmented
at a level that allows management to monitor both risk and performance. Management evaluates for potential impairment all construction,
multi-family, commercial real estate, commercial business loans, loans to financial institutions, leases and all loans and leases
more than 90 days delinquent as to principal and/or interest. Loans are considered to be impaired when, based on current information
and events, it is probable that the Company will be unable to collect in full the scheduled payments of principal or interest when
due according to the contractual terms of the loan agreement.
Once the determination is made
that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is generally measured
by comparing the recorded investment in the loan to the fair value of the loan using one of the following three methods: (a) the
present value of the expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable
market price; or (c) the fair value of the collateral less selling costs. Management primarily utilizes the fair value of collateral
method as a practically expedient alternative. On collateral method evaluations, any portion of the loan deemed uncollectible is
charged-off against the loan loss allowance.
The following table presents impaired loans by class
as of June 30, 2018, segregated by those for which a specific allowance was required and those for which a specific allowance was
not required.
|
|
|
|
|
|
|
|
Impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with
|
|
|
|
|
|
|
|
|
|
Impaired Loans with
|
|
|
No Specific
|
|
|
|
|
|
|
|
|
|
Specific Allowance
|
|
|
Allowance
|
|
|
Total Impaired Loans
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
Recorded
|
|
|
Related
|
|
|
Recorded
|
|
|
Recorded
|
|
|
Principal
|
|
|
|
Investment
|
|
|
Allowance
|
|
|
Investment
|
|
|
Investment
|
|
|
Balance
|
|
One-to-four family residential
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,058
|
|
|
$
|
6,058
|
|
|
$
|
6,406
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
303
|
|
|
|
303
|
|
|
|
303
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
1,773
|
|
|
|
1,773
|
|
|
|
1,860
|
|
Construction and land development
|
|
|
-
|
|
|
|
-
|
|
|
|
8,746
|
|
|
|
8,746
|
|
|
|
11,127
|
|
Total impaired loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,880
|
|
|
$
|
16,880
|
|
|
$
|
19,696
|
|
The following table presents
impaired loans by class as of September 30, 2017, segregated by those for which a specific allowance was required and those for
which a specific allowance was not required.
|
|
|
|
|
|
|
|
Impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with
|
|
|
|
|
|
|
|
|
|
Impaired Loans with
|
|
|
No Specific
|
|
|
|
|
|
|
|
|
|
Specific Allowance
|
|
|
Allowance
|
|
|
Total Impaired Loans
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
Recorded
|
|
|
Related
|
|
|
Recorded
|
|
|
Recorded
|
|
|
Principal
|
|
|
|
Investment
|
|
|
Allowance
|
|
|
Investment
|
|
|
Investment
|
|
|
Balance
|
|
One-to-four family residential
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,277
|
|
|
$
|
8,277
|
|
|
$
|
9,245
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
317
|
|
|
|
317
|
|
|
|
317
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
2,337
|
|
|
|
2,337
|
|
|
|
2,449
|
|
Construction and land development
|
|
|
-
|
|
|
|
-
|
|
|
|
8,724
|
|
|
|
8,724
|
|
|
|
11,105
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
Total impaired loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,665
|
|
|
$
|
19,665
|
|
|
$
|
23,126
|
|
The following tables present
the average recorded investment in impaired loans and related interest income recognized for the periods indicated:
|
|
Three Months Ended June 30, 2018
|
|
|
|
Average
Recorded
Investment
|
|
|
Income Recognized
on Accrual Basis
|
|
|
Income
Recognized on
Cash Basis
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four family residential
|
|
$
|
6,159
|
|
|
$
|
-
|
|
|
$
|
17
|
|
Multi-family residential
|
|
|
305
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
2,624
|
|
|
|
-
|
|
|
|
2
|
|
Construction and land development
|
|
|
8,745
|
|
|
|
-
|
|
|
|
-
|
|
Total impaired loans
|
|
$
|
17,833
|
|
|
$
|
-
|
|
|
$
|
19
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
|
Average
Recorded
Investment
|
|
|
Income Recognized
on Accrual Basis
|
|
|
Income
Recognized on
Cash Basis
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four family residential
|
|
$
|
5,965
|
|
|
$
|
12
|
|
|
$
|
34
|
|
Multi-family residential
|
|
|
326
|
|
|
|
6
|
|
|
|
-
|
|
Commercial real estate
|
|
|
2,801
|
|
|
|
6
|
|
|
|
-
|
|
Construction and land development
|
|
|
9,607
|
|
|
|
-
|
|
|
|
-
|
|
Total impaired loans
|
|
$
|
18,699
|
|
|
$
|
24
|
|
|
$
|
34
|
|
|
|
Nine Months Ended June 30, 2018
|
|
|
|
Average
Recorded
Investment
|
|
|
Income Recognized
on Accrual Basis
|
|
|
Income
Recognized on
Cash Basis
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four family residential
|
|
$
|
6,636
|
|
|
$
|
77
|
|
|
$
|
21
|
|
Multi-family residential
|
|
|
307
|
|
|
|
11
|
|
|
|
-
|
|
Commercial real estate
|
|
|
3,004
|
|
|
|
58
|
|
|
|
2
|
|
Construction and land development
|
|
|
8,741
|
|
|
|
-
|
|
|
|
-
|
|
Total impaired loans
|
|
$
|
18,688
|
|
|
$
|
146
|
|
|
$
|
23
|
|
|
|
Nine Months Ended June 30, 2017
|
|
|
|
Average
Recorded
Investment
|
|
|
Income Recognized
on Accrual Basis
|
|
|
Income
Recognized on
Cash Basis
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four family residential
|
|
$
|
5,280
|
|
|
$
|
59
|
|
|
$
|
91
|
|
Multi-family residential
|
|
|
329
|
|
|
|
17
|
|
|
|
-
|
|
Commercial real estate
|
|
|
2,938
|
|
|
|
41
|
|
|
|
12
|
|
Construction and land development
|
|
|
10,399
|
|
|
|
-
|
|
|
|
-
|
|
Total impaired loans
|
|
$
|
18,946
|
|
|
$
|
117
|
|
|
$
|
103
|
|
Federal regulations and our loan policy
require that the Company utilize an internal asset classification system as a means of reporting problem and potential problem
assets. The Company has incorporated an internal asset classification system, consistent with Federal banking regulations, as a
part of its credit monitoring system. Management currently classifies problem and potential problem assets as “special mention”,
“substandard,” “doubtful” or “loss” assets. An asset is considered “substandard”
if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.
“Substandard” assets include those characterized by the “distinct possibility” that the insured institution
will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all
of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present
make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly
questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and
of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets
which do not currently expose the insured institution to sufficient risk to warrant classification in one of the three aforementioned
categories but possess weaknesses are required to be designated “special mention.”
The Company evaluates the classification
of one-to-four family residential, leases and consumer loans primarily on a pooled basis. If the Company becomes aware that adverse
or distressed conditions exist that may affect a particular single-family residential or consumer loan, the loan is downgraded
following the above definitions of special mention, substandard, doubtful and loss.
The following tables present the classes
of the loan portfolio in which a formal risk rating system is utilized (as compared to a pooled basis) summarized by the aggregate
“Pass” and the criticized category of “special mention”, and the classified categories of “substandard”,
“doubtful” and “loss” within the Company’s risk rating system as applied to the loan portfolio. The
Company had no loans classified as “doubtful” or “loss” at either of the dates presented.
|
|
June 30, 2018
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
Total
|
|
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Loans
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four family residential
|
|
$
|
-
|
|
|
$
|
3,608
|
|
|
$
|
6,058
|
|
|
$
|
9,666
|
|
Multi-family residential
|
|
|
38,145
|
|
|
|
-
|
|
|
|
303
|
|
|
|
38,448
|
|
Commercial real estate
|
|
|
108,622
|
|
|
|
1,937
|
|
|
|
1,773
|
|
|
|
112,332
|
|
Construction and land development
|
|
|
129,074
|
|
|
|
-
|
|
|
|
8,746
|
|
|
|
137,820
|
|
Loans to financial institutions
|
|
|
6,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,000
|
|
Commercial business
|
|
|
14,148
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,148
|
|
Total loans
|
|
$
|
295,989
|
|
|
$
|
5,545
|
|
|
$
|
16,880
|
|
|
$
|
318,414
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
Total
|
|
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Loans
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four family residential
|
|
$
|
-
|
|
|
$
|
1,635
|
|
|
$
|
3,878
|
|
|
$
|
5,513
|
|
Multi-family residential
|
|
|
21,191
|
|
|
|
-
|
|
|
|
317
|
|
|
|
21,508
|
|
Commercial real estate
|
|
|
125,307
|
|
|
|
1,449
|
|
|
|
888
|
|
|
|
127,644
|
|
Construction and land development
|
|
|
136,763
|
|
|
|
-
|
|
|
|
8,723
|
|
|
|
145,486
|
|
Commercial business
|
|
|
488
|
|
|
|
-
|
|
|
|
-
|
|
|
|
488
|
|
Total loans
|
|
$
|
283,749
|
|
|
$
|
3,084
|
|
|
$
|
13,806
|
|
|
$
|
300,639
|
|
The following tables represent loans in
which a formal risk rating system is not utilized, but loans are segregated between performing and non-performing based primarily
on delinquency status. Non-performing loans that would be included in the tables are those loans greater than 90 days past due
as to principal and/or interest that do not have a designated risk rating.
|
|
June 30, 2018
|
|
|
|
|
|
|
Non-
|
|
|
Total
|
|
|
|
Performing
|
|
|
Performing
|
|
|
Loans
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four family residential
|
|
$
|
336,571
|
|
|
$
|
3,909
|
|
|
$
|
340,480
|
|
Leases
|
|
|
2,169
|
|
|
|
-
|
|
|
|
2,169
|
|
Consumer
|
|
|
981
|
|
|
|
-
|
|
|
|
981
|
|
Total loans
|
|
$
|
339,721
|
|
|
$
|
3,909
|
|
|
$
|
343,630
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
Non-
|
|
|
Total
|
|
|
|
Performing
|
|
|
Performing
|
|
|
Loans
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four family residential
|
|
$
|
343,021
|
|
|
$
|
2,764
|
|
|
$
|
345,785
|
|
Leases
|
|
|
4,240
|
|
|
|
-
|
|
|
|
4,240
|
|
Consumer
|
|
|
1,943
|
|
|
|
-
|
|
|
|
1,943
|
|
Total residential and consumer loans
|
|
$
|
349,204
|
|
|
$
|
2,764
|
|
|
$
|
351,968
|
|
Management further monitors the performance
and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment
is due or overdue, as the case may be. The following table presents the loan categories of the loan portfolio summarized by the
aging categories of performing and delinquent loans and nonaccrual loans:
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 Days+
|
|
|
|
|
|
|
30-89 Days
|
|
|
90 Days +
|
|
|
Total
|
|
|
Total
|
|
|
Non-
|
|
|
Past Due
|
|
|
|
Current
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Loans
|
|
|
Accrual
|
|
|
and
Accruing
|
|
|
|
|
|
|
|
|
One-to-four family residential
|
|
$
|
334,362
|
|
|
$
|
2,385
|
|
|
$
|
3,733
|
|
|
$
|
6,118
|
|
|
$
|
340,480
|
|
|
$
|
3,909
|
|
|
$
|
-
|
|
Multi-family residential
|
|
|
38,448
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,448
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
112,332
|
|
|
|
727
|
|
|
|
1,473
|
|
|
|
2,200
|
|
|
|
114,532
|
|
|
|
1,543
|
|
|
|
-
|
|
Construction and land development
|
|
|
129,074
|
|
|
|
-
|
|
|
|
8,746
|
|
|
|
8,746
|
|
|
|
137,820
|
|
|
|
8,746
|
|
|
|
-
|
|
Financial institutions
|
|
|
6,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,000
|
|
|
|
-
|
|
|
|
-
|
|
Commercial business
|
|
|
11,948
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,948
|
|
|
|
-
|
|
|
|
-
|
|
Leases
|
|
|
2,169
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,169
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
923
|
|
|
|
58
|
|
|
|
-
|
|
|
|
58
|
|
|
|
981
|
|
|
|
-
|
|
|
|
-
|
|
Total loans
|
|
$
|
635,256
|
|
|
$
|
3,170
|
|
|
$
|
13,952
|
|
|
$
|
17,122
|
|
|
$
|
652,378
|
|
|
$
|
14,198
|
|
|
$
|
-
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 Days+
|
|
|
|
|
|
|
30-89 Days
|
|
|
90 Days +
|
|
|
Total
|
|
|
Total
|
|
|
Non-
|
|
|
Past Due
|
|
|
|
Current
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Loans
|
|
|
Accrual
|
|
|
and
Accruing
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
One-to-four family residential
|
|
$
|
346,877
|
|
|
$
|
1,746
|
|
|
$
|
2,675
|
|
|
$
|
4,421
|
|
|
$
|
351,298
|
|
|
$
|
5,107
|
|
|
$
|
-
|
|
Multi-family residential
|
|
|
21,508
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,508
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
125,157
|
|
|
|
1,000
|
|
|
|
1,487
|
|
|
|
2,487
|
|
|
|
127,644
|
|
|
|
1,566
|
|
|
|
-
|
|
Construction and land development
|
|
|
136,762
|
|
|
|
-
|
|
|
|
8,724
|
|
|
|
8,724
|
|
|
|
145,486
|
|
|
|
8,724
|
|
|
|
-
|
|
Commercial business
|
|
|
488
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
488
|
|
|
|
-
|
|
|
|
-
|
|
Leases
|
|
|
4,240
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,240
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
1,874
|
|
|
|
69
|
|
|
|
-
|
|
|
|
69
|
|
|
|
1,943
|
|
|
|
-
|
|
|
|
-
|
|
Total loans
|
|
$
|
636,906
|
|
|
$
|
2,815
|
|
|
$
|
12,886
|
|
|
$
|
15,701
|
|
|
$
|
652,607
|
|
|
$
|
15,397
|
|
|
$
|
-
|
|
The allowance for loan losses
is established through a provision for loan losses charged to expense. The Company maintains the allowance at a level believed
to cover all known and inherent losses in the portfolio that are both probable and reasonable to estimate at each reporting date.
Management reviews the allowance for loan losses no less than quarterly in order to identify these inherent losses and to assess
the overall collection probability for the loan portfolio in view of these inherent losses. For each primary type of loan, a loss
factor is established reflecting an estimate of the known and inherent losses in such loan type contained in the portfolio using
both a quantitative analysis as well as consideration of qualitative factors. The evaluation process includes, among other things,
an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience,
total loans outstanding, the volume of loan originations, the type, size and geographic concentration of the Company’s loans,
the value of collateral securing the loans, the borrowers’ ability to repay and repayment performance, the number of loans
requiring heightened management oversight, local economic conditions and industry experience.
Commercial real estate loans
entail significant additional credit risks compared to owner-occupied one-to-four family residential mortgage loans, as they generally
involve large loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience
on loans secured by income-producing properties typically depends on the successful operation of the related real estate project
and/or business operation of the borrower who is, in some cases, also the primary occupant, and thus may be subject to a greater
extent to the effects of adverse conditions in the real estate market and in the economy in general. Commercial business loans
typically involve a higher risk of default than residential loans of like duration since their repayment is generally dependent
on the successful operation of the borrower’s business and the sufficiency of collateral, if any. Land acquisition, development
and construction lending exposes the Company to greater credit risk than permanent mortgage financing. The repayment of land acquisition,
development and construction loans depends upon the sale of the property to third parties or the availability of permanent financing
upon completion of all improvements. These events may adversely affect the sale of the properties, potentially reducing both the
borrower’s ability to make required payments as well as reducing the value of the collateral properties. Such lending is
additionally subject to the risk that if the estimate of construction cost proves to be inaccurate, the Company potentially will
be compelled to advance additional funds to allow completion of the project. In addition, if the estimate of value proves to be
inaccurate, the Company may be confronted with a project, when completed, having less value than the loan amount. If the Company
is forced to foreclose on a project prior to completion, there is no assurance that the Company would be able to recover the entire
unpaid portion of the loan.
The following tables summarize
the primary segments of the allowance for loan losses. Activity in the allowance is presented for the both three and nine month
periods ended June 30, 2018 and 2017:
|
|
Three
Months Ended June 30, 2018
|
|
|
|
One-
to
four-family
residential
|
|
|
Multi-
family
residential
|
|
|
Commercial
real estate
|
|
|
Construction
and land
development
|
|
|
Financial
institutions
|
|
|
Commercial
Business
|
|
|
Leases
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
ALLL balance at March 31, 2018
|
|
$
|
1,308
|
|
|
$
|
205
|
|
|
$
|
1,083
|
|
|
$
|
1,465
|
|
|
$
|
62
|
|
|
$
|
106
|
|
|
$
|
29
|
|
|
$
|
97
|
|
|
$
|
486
|
|
|
$
|
4,841
|
|
Charge-offs
|
|
|
(114
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(125
|
)
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Provision
|
|
|
100
|
|
|
|
178
|
|
|
|
(27
|
)
|
|
|
135
|
|
|
|
-
|
|
|
|
40
|
|
|
|
5
|
|
|
|
(81
|
)
|
|
|
(25
|
)
|
|
|
325
|
|
ALLL balance at June 30, 2018
|
|
$
|
1,294
|
|
|
$
|
383
|
|
|
$
|
1,056
|
|
|
$
|
1,600
|
|
|
$
|
62
|
|
|
$
|
146
|
|
|
$
|
23
|
|
|
$
|
16
|
|
|
$
|
461
|
|
|
$
|
5,041
|
|
|
|
Nine
Months Ended June 30, 2018
|
|
|
|
One-
to
four-family
residential
|
|
|
Multi-
family
residential
|
|
|
Commercial
real estate
|
|
|
Construction
and land
development
|
|
|
Financial
institutions
|
|
|
Commercial
business
|
|
|
Leases
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
ALLL balance at September 30, 2017
|
|
$
|
1,241
|
|
|
$
|
205
|
|
|
$
|
1,201
|
|
|
$
|
1,358
|
|
|
$
|
-
|
|
|
$
|
4
|
|
|
$
|
23
|
|
|
$
|
24
|
|
|
$
|
410
|
|
|
$
|
4,466
|
|
Charge-offs
|
|
|
(125
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(12
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(137
|
)
|
Recoveries
|
|
|
27
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27
|
|
Provision
|
|
|
151
|
|
|
|
178
|
|
|
|
(145
|
)
|
|
|
254
|
|
|
|
62
|
|
|
|
142
|
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
51
|
|
|
|
685
|
|
ALLL balance at June 30, 2018
|
|
$
|
1,294
|
|
|
$
|
383
|
|
|
$
|
1,056
|
|
|
$
|
1,600
|
|
|
$
|
62
|
|
|
$
|
146
|
|
|
$
|
23
|
|
|
$
|
16
|
|
|
$
|
461
|
|
|
$
|
5,041
|
|
|
|
Three
Months Ended June 30, 2017
|
|
|
|
One-
to
four-family
residential
|
|
|
Multi-
family
residential
|
|
|
Commercial
real estate
|
|
|
Construction
and land
development
|
|
|
Commercial
Business
|
|
|
Leases
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
ALLL balance at March 31, 2017
|
|
$
|
1,350
|
|
|
$
|
122
|
|
|
$
|
862
|
|
|
$
|
1,035
|
|
|
$
|
-
|
|
|
$
|
28
|
|
|
$
|
135
|
|
|
$
|
364
|
|
|
$
|
3,896
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Recoveries
|
|
|
132
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
132
|
|
Provision
|
|
|
(241
|
)
|
|
|
36
|
|
|
|
362
|
|
|
|
(24
|
)
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
(111
|
)
|
|
|
5
|
|
|
|
30
|
|
ALLL balance at June 30, 2017
|
|
$
|
1,241
|
|
|
$
|
158
|
|
|
$
|
1,224
|
|
|
$
|
1,011
|
|
|
$
|
4
|
|
|
$
|
27
|
|
|
$
|
24
|
|
|
$
|
369
|
|
|
$
|
4,058
|
|
|
|
Nine
Months Ended June 30, 2017
|
|
|
|
One-
to
four-family
residential
|
|
|
Multi-
family
residential
|
|
|
Commercial
real estate
|
|
|
Construction
and land
development
|
|
|
Commercial
business
|
|
|
Leases
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
ALLL balance at September 30, 2016
|
|
$
|
1,627
|
|
|
$
|
137
|
|
|
$
|
859
|
|
|
$
|
316
|
|
|
$
|
1
|
|
|
$
|
21
|
|
|
$
|
10
|
|
|
$
|
298
|
|
|
$
|
3,269
|
|
Charge-offs
|
|
|
(113
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,819
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(16
|
)
|
|
|
-
|
|
|
|
(1,948
|
)
|
Recoveries
|
|
|
157
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
157
|
|
Provision
|
|
|
(430
|
)
|
|
|
21
|
|
|
|
365
|
|
|
|
2,514
|
|
|
|
3
|
|
|
|
6
|
|
|
|
30
|
|
|
|
71
|
|
|
|
2,580
|
|
ALLL balance at June 30, 2017
|
|
$
|
1,241
|
|
|
$
|
158
|
|
|
$
|
1,224
|
|
|
$
|
1,011
|
|
|
$
|
4
|
|
|
$
|
27
|
|
|
$
|
24
|
|
|
$
|
369
|
|
|
$
|
4,058
|
|
The Company recorded a provision for loan
losses in the amount of $325,000 and $685,000 for the three and nine months period ended June 30, 2018, respectively, compared
to $30,000 and $2.6 million for the comparable three and nine months periods in fiscal 2017. During the quarter ended June 30,
2018, the Company recorded charge offs of $125,000 and recoveries of $0. The remainder of the increase in the provision was due
to increased balances of construction and land development and multi-family residential loans.
At June 30, 2018, the Company had 10 loans
aggregating $6.2 million that were classified as troubled debt restructurings (“TDRs”). Six of such loans aggregating
$1.1 million were performing in accordance with the restructured terms as of June 30, 2018 and accruing interest. Three of the
TDRs totaling $4.9 million are on non-accrual and are a part of a troubled lending relationship totaling $10.7 million. The remaining
TDR is also on non-accrual and consists of a $156,000 loan secured by various commercial and residential properties.
The Company did not restructure any debt
during the three month period ended June 30, 2018; there was one loan restructured during the nine month period ending June 30,
2018. The restructuring of the loan entailed extending the maturity date of the loan from December 2017 to April 2018. The loan
was paid off in April 2018. The Company did not restructure any debt during the three and nine month periods ended June 30, 2017.
|
|
As of and for the Nine months Ended June 30, 2018
|
|
(Dollars in Thousands)
|
|
Number of
Loans
|
|
|
Pre- Modification
Outstanding
Recorded
Investment
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential
|
|
|
1
|
|
|
$
|
77
|
|
|
$
|
77
|
|
Total
|
|
|
1
|
|
|
$
|
77
|
|
|
$
|
77
|
|
No TDRs defaulted during the period ending June 30, 2018.
Deposits consist of the following major classifications:
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(Dollars in Thousands)
|
|
Money market deposit accounts
|
|
$
|
64,349
|
|
|
|
9.0
|
%
|
|
$
|
76,272
|
|
|
|
12.0
|
%
|
Interest-bearing checking accounts
|
|
|
46,469
|
|
|
|
6.5
|
|
|
|
54,267
|
|
|
|
8.5
|
|
Non interest-bearing checking accounts
|
|
|
14,315
|
|
|
|
2.0
|
|
|
|
9,375
|
|
|
|
1.5
|
|
Passbook, club and statement savings
|
|
|
97,730
|
|
|
|
13.7
|
|
|
|
101,743
|
|
|
|
16.0
|
|
Certificates maturing in six months or less
|
|
|
187,930
|
|
|
|
26.3
|
|
|
|
154,750
|
|
|
|
24.3
|
|
Certificates maturing in more than six months
|
|
|
304,260
|
|
|
|
42.5
|
|
|
|
239,575
|
|
|
|
37.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
715,053
|
|
|
|
100.0
|
%
|
|
$
|
635,982
|
|
|
|
100.0
|
%
|
Certificates
of $250,000 and over totaled $40.3 million as of June 30, 2018 and $28.9 million as of September 30, 2017.
|
7.
|
ADVANCES FROM FEDERAL HOME LOAN BANK-SHORT TERM
|
As of June 30, 2018 and September
30, 2017 outstanding balances and related information of short-term borrowings from the FHLB are summarized follows:
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
Type
|
|
Maturity Date
|
|
Coupon
|
|
|
Call Date
|
|
Amount
|
|
|
Amount
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Fixed Rate - Advances
|
|
6-Oct-17
|
|
|
1.30
|
%
|
|
Not Applicable
|
|
|
-
|
|
|
$
|
10,000
|
|
Fixed Rate - Advances
|
|
13-Oct-17
|
|
|
1.31
|
%
|
|
Not Applicable
|
|
|
-
|
|
|
|
10,000
|
|
Weighted average rate
|
|
|
|
|
1.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate - Advances
|
|
2-Jul-18
|
|
|
2.10
|
%
|
|
Not Applicable
|
|
$
|
5,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
11-Jul-18
|
|
|
2.15
|
%
|
|
Not Applicable
|
|
|
10,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
14-Sep-18
|
|
|
2.22
|
%
|
|
Not Applicable
|
|
|
20,000
|
|
|
|
-
|
|
Weighted average rate
|
|
|
|
|
2.18
|
%
|
|
|
|
$
|
35,000
|
|
|
$
|
20,000
|
|
As of June 30,
2018, short-term advances consisted of $35.0 million maturing in three month or less. One advance for $10.0 million at June
30, 2018 was applied to an interest rate swap contract with an effective cost of 280 basis points, while the remaining $25.0
million of advances were used to fund short-term liquidity needs. There were two $10.0 million advances associated with
two interest rate swap contracts with a weighted average effective cost of 125 basis points and 117 basis points
respectively at June 30, 2017.
|
8.
|
ADVANCES FROM FEDERAL HOME LOAN BANK – LONG TERM
|
Pursuant to collateral agreements with the FHLB of Pittsburgh,
advances are secured by a blanket collateral of loans held by the Company and qualifying fixed-income securities and FHLB stock.
The long-term advances outstanding as of June 30, 2018 and September 30, 2017 are as follows:
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
Type
|
|
Maturity Date
|
|
Coupon
|
|
|
Call Date
|
|
Amount
|
|
|
Amount
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Fixed Rate - Amortizing
|
|
1-Dec-17
|
|
|
1.16
|
%
|
|
Not Applicable
|
|
$
|
-
|
|
|
$
|
505
|
|
Fixed Rate - Amortizing
|
|
18-Nov-19
|
|
|
1.53
|
%
|
|
Not Applicable
|
|
|
1,987
|
|
|
|
3,044
|
|
Fixed Rate - Amortizing
|
|
26-Oct-20
|
|
|
1.94
|
%
|
|
Not Applicable
|
|
|
3,131
|
|
|
|
-
|
|
Fixed Rate - Amortizing
|
|
16-Mar-21
|
|
|
2.64
|
%
|
|
Not Applicable
|
|
|
2,298
|
|
|
|
-
|
|
Fixed Rate - Amortizing
|
|
19-Apr-21
|
|
|
2.72
|
%
|
|
Not Applicable
|
|
|
2,844
|
|
|
|
|
|
Fixed Rate - Amortizing
|
|
19-Apr-21
|
|
|
2.75
|
%
|
|
Not Applicable
|
|
|
4,070
|
|
|
|
|
|
Fixed Rate - Amortizing
|
|
3-May-21
|
|
|
2.83
|
%
|
|
Not Applicable
|
|
|
8,760
|
|
|
|
|
|
Fixed Rate - Amortizing
|
|
7-May-21
|
|
|
2.82
|
%
|
|
Not Applicable
|
|
|
4,380
|
|
|
|
|
|
Fixed Rate - Amortizing
|
|
12-Oct-21
|
|
|
1.99
|
%
|
|
Not Applicable
|
|
|
2,517
|
|
|
|
|
|
Fixed Rate - Amortizing
|
|
20-Jun-22
|
|
|
2.94
|
%
|
|
Not Applicable
|
|
|
5,000
|
|
|
|
-
|
|
Fixed Rate - Amortizing
|
|
15-Aug-23
|
|
|
1.94
|
%
|
|
Not Applicable
|
|
|
1,736
|
|
|
|
1,974
|
|
|
|
|
|
|
2.57
|
%
|
|
(a)
|
|
|
36,723
|
|
|
|
5,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate - Advances
|
|
17-Nov-17
|
|
|
1.20
|
%
|
|
Not Applicable
|
|
|
-
|
|
|
|
10,000
|
|
Fixed Rate - Advances
|
|
4-Dec-17
|
|
|
1.15
|
%
|
|
Not Applicable
|
|
|
-
|
|
|
|
2,000
|
|
Fixed Rate - Advances
|
|
19-Mar-18
|
|
|
2.53
|
%
|
|
Not Applicable
|
|
|
-
|
|
|
|
5,029
|
|
Fixed Rate - Advances
|
|
19-Mar-18
|
|
|
2.13
|
%
|
|
Not Applicable
|
|
|
-
|
|
|
|
5,041
|
|
Fixed Rate - Advances
|
|
20-Jun-18
|
|
|
1.86
|
%
|
|
Not Applicable
|
|
|
-
|
|
|
|
3,011
|
|
Fixed Rate - Advances
|
|
25-Jun-18
|
|
|
2.09
|
%
|
|
Not Applicable
|
|
|
-
|
|
|
|
3,016
|
|
Fixed Rate - Advances
|
|
27-Aug-18
|
|
|
4.15
|
%
|
|
Not Applicable
|
|
|
7,030
|
|
|
|
7,174
|
|
Fixed Rate - Advances
|
|
15-Nov-18
|
|
|
1.89
|
%
|
|
Not Applicable
|
|
|
3,005
|
|
|
|
3,014
|
|
Fixed Rate - Advances
|
|
16-Nov-18
|
|
|
1.40
|
%
|
|
Not Applicable
|
|
|
7,500
|
|
|
|
7,500
|
|
Fixed Rate - Advances
|
|
26-Nov-18
|
|
|
1.81
|
%
|
|
Not Applicable
|
|
|
2,003
|
|
|
|
2,008
|
|
Fixed Rate - Advances
|
|
3-Dec-18
|
|
|
1.54
|
%
|
|
Not Applicable
|
|
|
3,000
|
|
|
|
3,000
|
|
Fixed Rate - Advances
|
|
16-Aug-19
|
|
|
2.66
|
%
|
|
Not Applicable
|
|
|
3,033
|
|
|
|
3,056
|
|
Fixed Rate - Advances
|
|
9-Oct-19
|
|
|
2.54
|
%
|
|
Not Applicable
|
|
|
2,021
|
|
|
|
2,034
|
|
Fixed Rate - Advances
|
|
26-Nov-19
|
|
|
2.35
|
%
|
|
Not Applicable
|
|
|
3,033
|
|
|
|
3,062
|
|
Fixed Rate - Advances
|
|
22-Jun-20
|
|
|
2.60
|
%
|
|
Not Applicable
|
|
|
3,045
|
|
|
|
3,000
|
|
Fixed Rate - Advances
|
|
24-Jun-20
|
|
|
2.85
|
%
|
|
Not Applicable
|
|
|
2,039
|
|
|
|
2,054
|
|
Fixed Rate - Advances
|
|
27-Jul-20
|
|
|
1.38
|
%
|
|
Not Applicable
|
|
|
249
|
|
|
|
249
|
|
Fixed Rate - Advances
|
|
17-Aug-20
|
|
|
3.06
|
%
|
|
Not Applicable
|
|
|
2,050
|
|
|
|
2,068
|
|
Fixed Rate - Advances
|
|
9-Oct-20
|
|
|
2.92
|
%
|
|
Not Applicable
|
|
|
2,046
|
|
|
|
2,061
|
|
Fixed Rate - Advances
|
|
27-Jul-21
|
|
|
1.52
|
%
|
|
Not Applicable
|
|
|
249
|
|
|
|
249
|
|
Fixed Rate - Advances
|
|
28-Jul-21
|
|
|
1.48
|
%
|
|
Not Applicable
|
|
|
249
|
|
|
|
249
|
|
Fixed Rate - Advances
|
|
29-Jul-21
|
|
|
1.42
|
%
|
|
Not Applicable
|
|
|
249
|
|
|
|
249
|
|
Fixed Rate - Advances
|
|
19-Aug-21
|
|
|
1.55
|
%
|
|
Not Applicable
|
|
|
249
|
|
|
|
249
|
|
Fixed Rate - Advances
|
|
7-Oct-21
|
|
|
3.19
|
%
|
|
Not Applicable
|
|
|
2,073
|
|
|
|
2,089
|
|
Fixed Rate - Advances
|
|
12-Oct-21
|
|
|
3.23
|
%
|
|
Not Applicable
|
|
|
2,069
|
|
|
|
2,084
|
|
Fixed Rate - Advances
|
|
20-Oct-21
|
|
|
2.12
|
%
|
|
Not Applicable
|
|
|
4,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
6-Jun-22
|
|
|
2.05
|
%
|
|
Not Applicable
|
|
|
10,000
|
|
|
|
10,000
|
|
Fixed Rate - Advances
|
|
6-Sep-22
|
|
|
1.94
|
%
|
|
Not Applicable
|
|
|
249
|
|
|
|
249
|
|
Fixed Rate - Advances
|
|
22-Sep-22
|
|
|
2.11
|
%
|
|
Not Applicable
|
|
|
5,000
|
|
|
|
5,000
|
|
Fixed Rate - Advances
|
|
12-Oct-22
|
|
|
2.22
|
%
|
|
Not Applicable
|
|
|
3,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
17-Oct-22
|
|
|
2.18
|
%
|
|
Not Applicable
|
|
|
3,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
26-Oct-22
|
|
|
2.29
|
%
|
|
Not Applicable
|
|
|
3,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
31-Oct-22
|
|
|
2.30
|
%
|
|
Not Applicable
|
|
|
2,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
13-Dec-22
|
|
|
2.44
|
%
|
|
Not Applicable
|
|
|
4,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
17-Jan-23
|
|
|
2.58
|
%
|
|
Not Applicable
|
|
|
5,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
27-Mar-23
|
|
|
2.93
|
%
|
|
Not Applicable
|
|
|
3,000
|
|
|
|
-
|
|
Fixed Rate - Advances
|
|
9-May-24
|
|
|
3.20
|
%
|
|
Not Applicable
|
|
|
5,000
|
|
|
|
-
|
|
|
|
|
|
|
2.46
|
%
|
|
(a)
|
|
|
92,441
|
|
|
|
88,795
|
|
(a) Weighted average coupon rate
|
|
|
|
|
|
|
|
Total
|
|
$
|
129,164
|
|
|
$
|
94,318
|
|
The Company has contracted
with a third party to participate in interest rate swap contracts. One of the swaps is a cash flow hedge associated with a $10.0
million FHLB advance at June 30, 2018. There were two cash flow hedges associated with $20.0 million of FHLB advances at September
30, 2017. These interest rate swaps involve the receipt of variable rate amounts from a counterparty in exchange for the Company
making fixed payments. During the quarters ended June 30, 2018 and 2017, no income was recognized as ineffectiveness through earnings.
During the nine month period ended June 30, 2018, $49,000 of income was recognized as ineffectiveness through earnings, while none
was recognized as ineffectiveness through earnings during the comparable period in fiscal 2017. The two interest rate SWAPs from
the 2017 period were unwound during June 2018 at a pre-tax gain of $808,000. There were nine interest rate swaps designated as
a fair value hedge involving the receipt of variable-rate payments from a counterparty in exchange for the Company making fixed-rate
payments over the life of the agreements applicable to two loans and seven investment securities as of September 30, 2017. There
was one interest rate swap designated as a fair value hedge involving the receipt of variable-rate payments from a counterparty
in exchange for the Company making fixed-rate payments over the life of the agreements applicable to a $1.1 million commercial
loan as of September 30, 2017. During the quarter ended June 30, 2018, $1,000 of income was recognized through earnings, while
none was recognized through earnings during the comparable period in 2017. During the nine month period ended June 30, 2018, $15,000
of income was recognized through earnings, while none was recognized through earnings during the comparable period in fiscal 2017.
Below is a summary of the interest rate swap agreements
and the terms as of June 30, 2018.
|
|
Notinal
|
|
|
Pay
|
|
|
Receive
|
|
Maturity
|
|
Unrealized
|
|
|
|
Amount
|
|
|
Rate
|
|
|
Rate
|
|
Date
|
|
Gain (loss)
|
|
|
|
(Dollar in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contract
|
|
$
|
10,000
|
|
|
|
2.70
|
%
|
|
1 Mth Libor
|
|
10-Apr-25
|
|
$
|
35
|
|
Interest rate swap contract
|
|
|
1,705
|
|
|
|
3.06
|
%
|
|
3 Mth Libor
|
|
15-Feb-27
|
|
|
(19
|
)
|
Interest rate swap contract
|
|
|
2,825
|
|
|
|
3.06
|
%
|
|
3 Mth Libor
|
|
1-Apr-27
|
|
|
(31
|
)
|
Interest rate swap contract
|
|
|
5,000
|
|
|
|
3.07
|
%
|
|
3 Mth Libor
|
|
1-Jan-28
|
|
|
(57
|
)
|
Interest rate swap contract
|
|
|
1,235
|
|
|
|
3.07
|
%
|
|
3 Mth Libor
|
|
1-Mar-28
|
|
|
(14
|
)
|
Interest rate swap contract
|
|
|
4,500
|
|
|
|
3.07
|
%
|
|
3 Mth Libor
|
|
1-May-28
|
|
|
(52
|
)
|
Interest rate swap contract
|
|
|
3,305
|
|
|
|
3.05
|
%
|
|
3 Mth Libor
|
|
1-Feb-27
|
|
|
(32
|
)
|
Interest rate swap contract
|
|
|
3,000
|
|
|
|
3.06
|
%
|
|
3 Mth Libor
|
|
15-Oct-27
|
|
|
(32
|
)
|
Interest rate swap contract
|
|
|
8,300
|
|
|
|
5.74
|
%
|
|
1 Mth Libor +250 bp
|
|
13-Jun-25
|
|
|
-
|
|
Interest rate swap contract
|
|
|
1,100
|
|
|
|
4.10
|
%
|
|
1 Mth Libor +276 bp
|
|
1-Aug-26
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(202
|
)
|
Below is a summary of the interest rate swap agreements
and the terms as of September 30, 2017.
|
|
Notinal
|
|
|
Pay
|
|
|
Receive
|
|
Maturity
|
|
Unrealized
|
|
|
|
Amount
|
|
|
Rate
|
|
|
Rate
|
|
Date
|
|
Gain
|
|
|
|
|
|
|
|
|
|
(Dollar in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contract
|
|
$
|
10,000
|
|
|
|
1.15
|
%
|
|
1 Mth Libor
|
|
6-Apr-21
|
|
$
|
217
|
|
Interest rate swap contract
|
|
|
10,000
|
|
|
|
1.18
|
%
|
|
1 Mth Libor
|
|
13-Jun-21
|
|
|
223
|
|
Interest rate swap contract
|
|
|
1,100
|
|
|
|
4.10
|
%
|
|
1 Mth Libor +276 bp
|
|
1-Aug-26
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
502
|
|
All interest swaps are carried at fair value in
accordance with FASB ASC 815 “Derivatives and Hedging.”
Items that gave rise to significant portions of
deferred income taxes are as follows:
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Dollars in Thousands)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
1,390
|
|
|
$
|
1,675
|
|
Nonaccrual interest
|
|
|
310
|
|
|
|
349
|
|
Accrued vacation
|
|
|
7
|
|
|
|
12
|
|
Capital loss carryforward
|
|
|
300
|
|
|
|
476
|
|
Split dollar life insurance
|
|
|
10
|
|
|
|
15
|
|
Post-retirement benefits
|
|
|
58
|
|
|
|
98
|
|
Unrealized losses on available for sale securities
|
|
|
1,712
|
|
|
|
569
|
|
Unrealized losses on interest rate swaps
|
|
|
43
|
|
|
|
-
|
|
Deferred compensation
|
|
|
847
|
|
|
|
1,439
|
|
Goodwill
|
|
|
83
|
|
|
|
148
|
|
Purchse accounting adjustments
|
|
|
198
|
|
|
|
731
|
|
Other
|
|
|
48
|
|
|
|
254
|
|
Employee benefit plans
|
|
|
99
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
5,105
|
|
|
|
5,856
|
|
Valuation allowance
|
|
|
(239
|
)
|
|
|
(378
|
)
|
Total deferred tax assets, net of valuation allowance
|
|
|
4,866
|
|
|
|
5,478
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property
|
|
|
132
|
|
|
|
332
|
|
Unrealized gains on interest rate swaps
|
|
|
-
|
|
|
|
171
|
|
Deferred loan fees
|
|
|
419
|
|
|
|
884
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
551
|
|
|
|
1,387
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
4,315
|
|
|
$
|
4,091
|
|
The Company establishes a valuation
allowance for deferred tax assets when management believes that the use of the deferred tax assets is not likely to be fully realized
through future reversals of existing taxable temporary differences, and/or to a lesser extent, future taxable income. The tax deduction
generated by the redemption of the shares of a mutual fund held by the Bank and the subsequent impairment charge on the assets
acquired through the redemption in kind are considered capital losses and can only be utilized to the extent of capital gains recognized
over a five year period, resulting in the establishment of a valuation allowance for the carryforward period. The valuation allowance
totaled $239,000 and $378,000 at June 30, 2018, and September 30, 2017, respectively.
For the nine-month period ended
June 30, 2018, the Company recorded income tax expense of $3.6 million, which included a $1.8 million one-time non-cash charge
related to a re-evaluation of the Company’s deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act
in December 2017, compared to tax expense of $230,000 for the same period in 2017. The reevaluation reflected the effect of the
significant decline in the federal corporate income tax rate applicable to the Company. During fiscal 2018, commencing with the
quarter ended December 31, 2017, the Company’s statutory income tax rate will be 24.25% as compared to companies which are
calendar year tax reporting companies whose statutory rate will decrease to 21% starting January 1, 2018. Effective October 1,
2018, the Company’s statutory tax rate will be reduced to 21%.
The income tax expense differs
from that computed at the statutory federal corporate tax rate as follows:
|
|
For The Nine Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
of Pretax
|
|
|
|
|
|
of Pretax
|
|
|
|
Amount
|
|
|
Income
|
|
|
Amount
|
|
|
Income
|
|
|
|
(Dollars in Thousands)
|
|
Tax expense at statutory rate
|
|
$
|
1,985
|
|
|
|
24.25
|
%
|
|
$
|
319
|
|
|
|
(34.00
|
)%
|
Adjustments resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-down of deferred tax asset
|
|
|
1,756
|
|
|
|
21.45
|
|
|
|
-
|
|
|
|
-
|
|
Non deductible merger expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
31
|
|
|
|
3.31
|
|
Tax exempt income
|
|
|
(108
|
)
|
|
|
(1.32
|
)
|
|
|
(53
|
)
|
|
|
(5.65
|
)
|
Income from bank owned life insurance
|
|
|
(116
|
)
|
|
|
(1.42
|
)
|
|
|
(172
|
)
|
|
|
(18.34
|
)
|
Employee benefit plans
|
|
|
54
|
|
|
|
0.66
|
|
|
|
103
|
|
|
|
11.01
|
|
Other
|
|
|
(12
|
)
|
|
|
(0.15
|
)
|
|
|
2
|
|
|
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
3,559
|
|
|
|
43.47
|
%
|
|
$
|
230
|
|
|
|
24.55
|
%
|
There is currently no liability
for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties
related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statements of Operations as a component
of income tax expense. During fiscal 2017, the Internal Revenue Service conducted an audit of the Company’s tax return for
the year ended September 30, 2014, and no adverse findings were reported. The Company’s federal and state income tax returns
for taxable years through September 30, 2014 have been closed for purposes of examination by the Internal Revenue Service and the
Pennsylvania Department of Revenue.
|
11.
|
STOCK COMPENSATION PLANS
|
The Company maintains the 2008
Recognition and Retention Plan (“RRP”) which is administered by a committee of the Board of Directors of the Company.
The RRP provides for the grant of shares of common stock of the Company to officers, employees and directors of the Company. In
order to fund the grant of shares under the RRP, the 2008 RRP purchased 213,528 shares (on a converted basis) of the Company’s
common stock in the open market for an aggregating cost of approximately $2.5 million, at an average purchase price per share of
$11.49. The Company made sufficient contributions to the 2008 RRP to fund these purchases. Shares subject to awards under the 2008
RRP generally vest at the rate of 20% per year over five years. During February 2015, shareholders approved the 2014 Stock Incentive
Plan (the “2014 SIP”). As part of the 2014 SIP, a maximum of 285,655 shares of common stock can be awarded as restricted
stock awards or units, of which 233,500 shares were awarded during February 2015. In August 2016, the Company granted 7,473 shares
under the 2008 RRP and 3,027 shares under the 2014 SIP. In March 2017, the Company granted 17,128 shares under the 2014 SIP. In
March 2018, the Company granted 8,209 shares under the 2008 RRP and 18,291 shares under the 2014 SIP.
Compensation expense related
to the shares subject to restricted stock awards granted is recognized ratably over the five-year vesting period in an amount which
totals the grant date fair value multiplied by the number of shares subject to the grant. During the three and nine months ended
June 30, 2018, an aggregate of $158,000 and $408,000, respectively, was recognized in compensation expense for the grants pursuant
to the 2008 RRP and the 2014 SIP. During the three and nine months ended June 30, 2017, $149,000 and $430,000, respectively, was
recognized in compensation expense for the grants pursuant to the 2008 RRP and the 2014 SIP. At June 30, 2018, approximately $1.5
million in additional compensation expense for shares awarded related to the 2008 RRP and 2014 SIP remained unrecognized.
A summary of the Company’s
non-vested stock award activity for the nine months ended June 30, 2018 and 2017 is presented in the following tables:
|
|
Nine Months Ended
June 30, 2018
|
|
|
|
Number of
Shares (1)
|
|
|
Weighted Average
Grant Date Fair
Value
|
|
|
|
|
|
|
|
|
Nonvested stock awards at October 1, 2017
|
|
|
142,594
|
|
|
$
|
12.79
|
|
Granted
|
|
|
26,500
|
|
|
|
18.46
|
|
Forfeited
|
|
|
4,636
|
|
|
|
11.91
|
|
Vested
|
|
|
(44,647
|
)
|
|
|
12.07
|
|
Nonvested stock awards at June 30, 2018
|
|
|
129,083
|
|
|
$
|
14.17
|
|
|
|
Nine Months Ended
June 30, 2017
|
|
|
|
Number of
Shares
|
|
|
Weighted Average
Grant Date Fair
Value
|
|
|
|
|
|
|
|
|
Nonvested stock awards at October 1, 2016
|
|
|
172,788
|
|
|
$
|
12.03
|
|
Granted
|
|
|
17,128
|
|
|
|
17.43
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
(43,755
|
)
|
|
|
11.59
|
|
Nonvested stock awards at June 30, 2017
|
|
|
146,161
|
|
|
$
|
12.78
|
|
The Company maintains the 2008
Stock Option Plan (the “2008 Option Plan”) which authorizes the grant of stock options to officers, employees and directors
of the Company to acquire shares of common stock with an exercise price at least equal to the fair market value of the common stock
on the grant date. Options generally become vested and exercisable at the rate of 20% per year over five years and are generally
exercisable for a period of ten years after the grant date. A total of 533,808 shares of common stock were approved for future
issuance pursuant to the 2008 Option Plan. As of June 30, 2018, all of the options had been awarded under the 2008 Option Plan.
The 2014 SIP reserved up to 714,145 shares for issuance pursuant to options. Options to purchase 605,000 shares were awarded during
February 2015. During August 2016, the Company granted 18,867 shares under the 2008 Option Plan and 8,633 shares under the 2014
SIP. In March 2017, the Company granted 22,828 shares under the 2014 SIP. In May 2017, the Company granted 24,717 shares under
the 2014 SIP and 283 shares under the 2008 Option Plan. In March 2018, the Company granted 159,265 shares under the 2014 SIP and
18,235 shares under the 2008 Option Plan.
A summary of the status of
the Company’s stock options under the 2008 Option Plan and the 2014 SIP for the nine months ended June 30, 2018 and 2017
are presented below:
|
|
Nine Months Ended
June 30, 2018
|
|
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding at October 1, 2017
|
|
|
922,564
|
|
|
$
|
12.04
|
|
Granted
|
|
|
177,500
|
|
|
|
18.46
|
|
Exercised
|
|
|
(110,926
|
)
|
|
|
11.73
|
|
Forfeited
|
|
|
(12,234
|
)
|
|
|
11.90
|
|
Outstanding at June 30, 2018
|
|
|
976,904
|
|
|
$
|
13.15
|
|
Exercisable at June 30, 2018
|
|
|
521,630
|
|
|
$
|
11.49
|
|
|
|
Nine Months Ended
June 30, 2017
|
|
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding at October 1, 2016
|
|
|
921,909
|
|
|
$
|
11.70
|
|
Granted
|
|
|
47,828
|
|
|
|
17.48
|
|
Exercised
|
|
|
(40,757
|
)
|
|
|
11.48
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2017
|
|
|
928,980
|
|
|
$
|
11.85
|
|
Exercisable at June 30, 2017
|
|
|
552,435
|
|
|
$
|
11.43
|
|
The weighted average remaining
contractual term for options outstanding as of June 30, 2018 was approximately 3.8 years.
The estimated fair value of
options granted during fiscal 2009 was $2.98 per share, $2.92 for options granted during fiscal 2010, $3.34 for options granted
during fiscal 2013, $4.67 for the options granted during fiscal 2014, $4.58 for options granted during fiscal 2015, $2.13 for options
granted during fiscal 2016, $3.18 for options granted during fiscal 2017 and $3.63 for options granted to date in fiscal 2018.
The fair value for grants made in fiscal 2017 was estimated on the date of grant using the Black-Scholes pricing model with the
following assumptions: an exercise price range from $17.43 to $18.39, expected term of seven years, volatility of 14.37%, interest
rate of 2.22% and a yield of 0.69%. The fair value for grants made in March 2018 was estimated on the date of grant using the Black-Scholes
pricing model with the following assumptions: an exercise price of $18.46, expected term of seven years, volatility of 15.9%, interest
rate of 2.82% and a yield of 1.08%.
During the three and nine months
ended June 30, 2018, $150,000 and $389,000, respectively, was recognized in compensation expense for options granted pursuant to
the 2008 Option Plan and the 2014 SIP. During the three and nine months ended June 30, 2017, $139,000 and $397,000, respectively,
was recognized in compensation expense for options granted pursuant to the 2008 Option Plan and the 2014 SIP.
At June 30, 2018, there was
approximately $1.5 million in additional compensation expense to be recognized for awarded options which remained outstanding and
unvested at such date. The weighted average period over which this expense will be recognized is approximately 2.6 years.
|
12.
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
At June 30, 2018, the Company
had $27.4 million in outstanding commitments to originate fixed-rate loans with market interest rates ranging from 5.15% to 5.75%.
At September 30, 2017, the Company had $45.9 million in outstanding commitments to originate fixed-rate loans with market
interest rates ranging from 3.75% to 5.25%. The aggregate undisbursed portion of loans-in-process amounted to $42.1 million at
June 30, 2018 and $73.9 million at September 30, 2017.
The Company also had commitments
under unused lines of credit of $66.9 million as of June 30, 2018 and $7.4 million as of September 30, 2017 and letters of credit
outstanding of $1.7 million as of June 30, 2018 and $1.4 million as of September 30, 2017. The increase in unused commitments as
of June 30, 2018 was primarily the result of six construction loans with unused commitments totaling $50.5 million, as of such
date.
Among the Company’s contingent
liabilities are exposures to limited recourse arrangements with respect to the Company’s sales of whole loans and participation
interests. At June 30, 2018, the exposure, which represents a portion of credit risk associated with the interests sold, amounted
to $1.7 million related to loans sold to the FHLB. This exposure is for the life of the related loans and payables, on our proportionate
share, as actual losses are incurred. These loans are seasoned loans and remain performing.
The Company is involved in
various legal proceedings occurring in the ordinary course of business. Management of the Company, based on discussions with litigation
counsel, believes that such proceedings will not have a material adverse effect on the financial condition, operations or cash
flows of the Company. However, there can be no assurance that any of the outstanding legal proceedings to which the Company is
a party will not be decided adversely to the Company's interests and not have a material adverse effect on the financial condition
and operations of the Company.
|
13.
|
FAIR VALUE MEASUREMENT
|
The fair value estimates presented
herein are based on pertinent information available to management as of June 30, 2018 and September 30, 2017, respectively. Although
management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
Generally accepted accounting
principles used in the United States establish a fair value hierarchy which requires an entity to maximize the use of observable
inputs and minimizes the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that
may be used to measure fair value.
The three broad levels of hierarchy are as follows:
Level 1
|
Quoted prices in active markets for identical assets or liabilities.
|
Level 2
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
|
Those assets as of June 30,
2018 which are to be measured at fair value on a recurring basis are as follows:
|
|
Category Used for Fair Value Measurement
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency obligations
|
|
$
|
-
|
|
|
$
|
24,504
|
|
|
$
|
-
|
|
|
$
|
24,504
|
|
Mortgage-backed securities - U.S. Government agencies
|
|
|
-
|
|
|
|
159,324
|
|
|
|
-
|
|
|
|
159,324
|
|
State and political subdivisions
|
|
|
-
|
|
|
|
22,059
|
|
|
|
-
|
|
|
|
22,059
|
|
Corporate bonds
|
|
|
-
|
|
|
|
64,346
|
|
|
|
-
|
|
|
|
64,346
|
|
FHLMC preferred stock
|
|
|
42
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42
|
|
Total
|
|
$
|
42
|
|
|
$
|
270,233
|
|
|
$
|
-
|
|
|
$
|
270,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts:
|
|
$
|
-
|
|
|
$
|
186
|
|
|
$
|
-
|
|
|
$
|
186
|
|
Total
|
|
$
|
-
|
|
|
$
|
186
|
|
|
$
|
-
|
|
|
$
|
186
|
|
Those assets as of September 30, 2017 which are
measured at fair value on a recurring basis are as follows:
|
|
Category Used for Fair Value Measurement
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency obligations
|
|
$
|
-
|
|
|
$
|
25,799
|
|
|
$
|
-
|
|
|
$
|
25,799
|
|
Mortgage-backed securities - U.S. Government agencies
|
|
|
-
|
|
|
|
118,127
|
|
|
|
-
|
|
|
|
118,127
|
|
Corporate bonds
|
|
|
-
|
|
|
|
34,400
|
|
|
|
-
|
|
|
|
34,400
|
|
FHLMC preferred stock
|
|
|
76
|
|
|
|
-
|
|
|
|
-
|
|
|
|
76
|
|
Interest rate swap contracts
|
|
|
-
|
|
|
|
502
|
|
|
|
-
|
|
|
|
502
|
|
Total
|
|
$
|
76
|
|
|
$
|
178,828
|
|
|
$
|
-
|
|
|
$
|
178,904
|
|
Certain assets are measured
at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject
to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The Company measures impaired
loans and real estate owned at fair value on a non-recurring basis.
Impaired Loans
The Company considers loans
to be impaired when it becomes more likely than not that the Company will be unable to collect all amounts due (principle and interest)
in accordance with the contractual terms of the loan agreements. Collateral dependent impaired loans are based on the fair value
of the collateral which is based on appraisals and would be categorized as Level 2 measurement. In some cases, adjustments
are made to the appraised values for various factors including the age of the appraisal, age of the comparables included in the
appraisal, and known changes in the market and in the collateral. These adjustments are based upon unobservable inputs, and therefore,
the fair value measurement has been categorized as a Level 3 measurement. These loans are reviewed for impairment and written down
to their net realizable value by charges against the allowance for loan losses. The collateral underlying these loans had a fair
value in excess of $16.8 million as of June 30, 2018.
Real Estate Owned
Once an asset is determined
to be uncollectible, the underlying collateral is generally repossessed and reclassified to foreclosed real estate and repossessed
assets. These repossessed assets are carried at the lower of cost or fair value of the collateral, based on independent appraisals,
less cost to sell and would be categorized as Level 2 measurement. In some cases, adjustments are made to the appraised values
for various factors including age of the appraisal, age of the comparable included in the appraisal, and known changes in the market
and in the collateral. As a result, the evaluations are based upon unobservable inputs, and therefore, the fair value measurement
has been categorized as a Level 3 measurement.
Summary of Non-Recurring
Fair Value Measurements
|
|
At June 30, 2018
|
|
|
|
(Dollars in Thousands)
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Impaired loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,880
|
|
|
$
|
16,880
|
|
Real estate owned
|
|
|
-
|
|
|
|
-
|
|
|
|
85
|
|
|
|
85
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,965
|
|
|
$
|
16,965
|
|
|
|
At September 30, 2017
|
|
|
|
(Dollars in Thousands)
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Impaired loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,665
|
|
|
$
|
19,665
|
|
Real estate owned
|
|
|
-
|
|
|
|
-
|
|
|
|
192
|
|
|
|
192
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,857
|
|
|
$
|
19,857
|
|
The following table provides information describing the valuation
processes used to determine nonrecurring fair value measurements categorized within Level 3 of the fair value hierarchy:
|
|
At June 30, 2018
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
Valuation
|
|
|
|
Range/
|
|
|
Fair Value
|
|
|
Technique
|
|
Unobservable Input
|
|
Weighted Ave.
|
Impaired loans
|
|
$
|
16,880
|
|
|
Property appraisals (1) (3)
|
|
Management discount for selling costs, property type and market volatility (2)
|
|
6% to 10% discount/10%
|
Real estate owned
|
|
$
|
85
|
|
|
Property appraisals (1)(3)
|
|
Management discount for selling costs, property type and market volatility (2)
|
|
10% discount
|
|
|
At September 30, 2017
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
Valuation
|
|
|
|
Range/
|
|
|
Fair Value
|
|
|
Technique
|
|
Unobservable Input
|
|
Weighted Ave.
|
Impaired loans
|
|
$
|
19,665
|
|
|
Property appraisals (1) (3)
|
|
Management discount for selling costs, property type and market volatility (2)
|
|
6% to 57% discount/7%
|
Real estate owned
|
|
$
|
192
|
|
|
Property appraisals (1)(3)
|
|
Management discount for selling costs, property type and market volatility (2)
|
|
10% discount
|
|
(1)
|
Fair value is generally determined through independent appraisals of the underlying collateral, which generally includes various
Level 3 inputs, which are not identifiable.
|
|
(2)
|
Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.
The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.
|
|
(3)
|
Includes qualitative adjustments by management and estimated
liquidation expenses.
|
The fair value of financial
instruments has been determined by the Company using available market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange.
The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value
amounts.
|
|
|
|
|
|
|
|
Fair Value Measurements at
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
36,055
|
|
|
$
|
36,055
|
|
|
$
|
36,055
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Certificates of deposit
|
|
|
1,604
|
|
|
|
1,604
|
|
|
|
1,604
|
|
|
|
-
|
|
|
|
-
|
|
Investment and mortgage-backed securities available for sale
|
|
|
270,275
|
|
|
|
270,275
|
|
|
|
42
|
|
|
|
270,233
|
|
|
|
-
|
|
Investment and mortgage-backed securities held to maturity
|
|
|
58,127
|
|
|
|
54,884
|
|
|
|
-
|
|
|
|
54,884
|
|
|
|
-
|
|
Loans receivable, net
|
|
|
602,455
|
|
|
|
600,280
|
|
|
|
-
|
|
|
|
-
|
|
|
|
600,280
|
|
Accrued interest receivable
|
|
|
3,670
|
|
|
|
3,670
|
|
|
|
3,670
|
|
|
|
-
|
|
|
|
-
|
|
Other real estate owned
|
|
|
85
|
|
|
|
85
|
|
|
|
85
|
|
|
|
-
|
|
|
|
-
|
|
Federal Home Loan Bank stock
|
|
|
7,909
|
|
|
|
7,909
|
|
|
|
7,909
|
|
|
|
-
|
|
|
|
-
|
|
Bank owned life insurance
|
|
|
28,533
|
|
|
|
28,533
|
|
|
|
28,533
|
|
|
|
-
|
|
|
|
-
|
|
Interest rate swap contracts
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking accounts
|
|
|
60,784
|
|
|
|
60,784
|
|
|
|
60,784
|
|
|
|
-
|
|
|
|
-
|
|
Money market deposit accounts
|
|
|
64,349
|
|
|
|
64,349
|
|
|
|
64,349
|
|
|
|
-
|
|
|
|
-
|
|
Passbook, club and statement savings accounts
|
|
|
97,730
|
|
|
|
97,730
|
|
|
|
97,730
|
|
|
|
-
|
|
|
|
-
|
|
Certificates of deposit
|
|
|
492,190
|
|
|
|
496,678
|
|
|
|
-
|
|
|
|
-
|
|
|
|
496,678
|
|
Accrued interest payable
|
|
|
2,179
|
|
|
|
2,179
|
|
|
|
2,179
|
|
|
|
-
|
|
|
|
-
|
|
Advances from FHLB -short-term
|
|
|
35,000
|
|
|
|
35,000
|
|
|
|
35,000
|
|
|
|
-
|
|
|
|
-
|
|
Advances from FHLB -long-term
|
|
|
129,164
|
|
|
|
126,054
|
|
|
|
-
|
|
|
|
-
|
|
|
|
126,054
|
|
Advances from borrowers for taxes and insurance
|
|
|
3,808
|
|
|
|
3,808
|
|
|
|
3,808
|
|
|
|
-
|
|
|
|
-
|
|
Interest rate swap contracts
|
|
|
202
|
|
|
|
202
|
|
|
|
-
|
|
|
|
202
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
27,903
|
|
|
$
|
27,903
|
|
|
$
|
27,903
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Certificates of deposit
|
|
|
1,604
|
|
|
|
1,604
|
|
|
|
1,604
|
|
|
|
-
|
|
|
|
-
|
|
Investment and mortgage-backed securities available for sale
|
|
|
178,402
|
|
|
|
178,402
|
|
|
|
76
|
|
|
|
178,326
|
|
|
|
-
|
|
Investment and mortgage-backed securities held to maturity
|
|
|
61,284
|
|
|
|
60,179
|
|
|
|
-
|
|
|
|
60,179
|
|
|
|
-
|
|
Loans receivable, net
|
|
|
571,343
|
|
|
|
575,876
|
|
|
|
-
|
|
|
|
-
|
|
|
|
575,876
|
|
Accrued interest receivable
|
|
|
2,825
|
|
|
|
2,825
|
|
|
|
2,825
|
|
|
|
-
|
|
|
|
-
|
|
Federal Home Loan Bank stock
|
|
|
6,002
|
|
|
|
6,002
|
|
|
|
6,002
|
|
|
|
-
|
|
|
|
-
|
|
Interest rate swap contracts
|
|
|
502
|
|
|
|
502
|
|
|
|
-
|
|
|
|
502
|
|
|
|
-
|
|
Bank owned life insurance
|
|
|
28,048
|
|
|
|
28,048
|
|
|
|
28,048
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking accounts
|
|
|
59,956
|
|
|
|
59,956
|
|
|
|
59,956
|
|
|
|
-
|
|
|
|
-
|
|
Money market deposit accounts
|
|
|
48,797
|
|
|
|
48,797
|
|
|
|
48,797
|
|
|
|
-
|
|
|
|
-
|
|
Passbook, club and statement savings accounts
|
|
|
101,743
|
|
|
|
101,743
|
|
|
|
101,743
|
|
|
|
-
|
|
|
|
-
|
|
Certificates of deposit
|
|
|
394,325
|
|
|
|
398,078
|
|
|
|
-
|
|
|
|
-
|
|
|
|
398,078
|
|
Advances from FHLB -short-term
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
-
|
|
Advances from FHLB -long-term
|
|
|
94,318
|
|
|
|
93,579
|
|
|
|
-
|
|
|
|
-
|
|
|
|
93,579
|
|
Accrued interest payable
|
|
|
1,933
|
|
|
|
1,933
|
|
|
|
1,933
|
|
|
|
-
|
|
|
|
-
|
|
Advances from borrowers for taxes and insurance
|
|
|
2,207
|
|
|
|
2,207
|
|
|
|
2,207
|
|
|
|
-
|
|
|
|
-
|
|
Cash and Cash Equivalents
-
For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value.
Investments and Mortgage-Backed
Securities
-
The fair value of investment securities and mortgage-backed securities is based on quoted market prices,
dealer quotes, and prices obtained from independent pricing services.
Loans Receivable
-
The fair value of loans is estimated based on present value using the current market rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining maturities. The carrying value that fair value is compared
to is net of the allowance for loan losses and other associated premiums and discounts. Due to the significant judgment involved
in evaluating credit quality, loans are classified within Level 3 of the fair value hierarchy.
Accrued Interest Receivable
–
For accrued interest receivable, the carrying amount is a reasonable estimate of fair value.
Federal Home Loan Bank
(FHLB) Stock
-
Although FHLB stock is an equity interest in an FHLB, it is carried at cost because it does not have
a readily determinable fair value as its ownership is restricted and it lacks a market. The estimated fair value approximates the
carrying amount.
Bank Owned Life Insurance
-
The fair value of bank owned life insurance is based on the cash surrender value obtained from an independent advisor that
is derivable from observable market inputs.
Checking Accounts, Money
Market Deposit Accounts, Passbook Accounts, Club Accounts, Statement Savings Accounts, and Certificates of Deposit
-
The fair value of passbook accounts, club accounts, statement savings accounts, checking accounts, and money market deposit
accounts is the amount reported in the financial statements. The fair value of certificates of deposit is based on market rates
currently offered for deposits of similar remaining maturity.
Short-term Advances from
Federal Home Loan Bank
-
The fair value of advances from FHLB is the amount payable on demand at the reporting date.
Long-term Advances from Federal Home Loan
Bank
-
The fair value of advances from FHLB is the amount payable on demand at the reporting date.
Accrued Interest Payable
–
For accrued interest payable, the carrying amount is a reasonable estimate of fair value.
Advances from borrowers
for taxes and insurance –
For advances from borrowers for taxes and insurance, the carrying amount is a reasonable
estimate of fair value.
Interest Rate Swaps –
The fair values of the interest rate swap contracts are based upon the estimated amount the Company would receive or pay, as applicable,
to terminate the contracts.
Commitments to Extend
Credit and Letters of Credit -
The majority of the Bank’s commitments to extend credit and letters of credit carry
current market interest rates if converted to loans. Because commitments to extend credit and letters of credit are generally unassignable
by either the Bank or the borrower, they only have value to the Bank and the borrower. The estimated fair value approximates the
recorded deferred fee amounts, which are not significant.
|
14.
|
GOODWILL AND OTHER INTANGIBLE ASSETS
|
The Company’s goodwill
and intangible assets are related to the acquisition of Polonia Bancorp on January 1, 2017.
|
|
Balance
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
October 1,
|
|
|
Additions/
|
|
|
|
|
|
June 30,
|
|
|
Amortization
|
|
|
2017
|
|
|
Adjustments
|
|
|
Amortization
|
|
|
2018
|
|
|
Period
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
6,102
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,102
|
|
|
|
Core deposit intangible
|
|
|
710
|
|
|
|
-
|
|
|
|
(105
|
)
|
|
|
605
|
|
|
10 years
|
|
|
$
|
6,812
|
|
|
$
|
-
|
|
|
$
|
(105
|
)
|
|
$
|
6,707
|
|
|
|
As of June 30, 2018, and for the future
fiscal periods, the amortization expense for the core deposit intangible is:
(Dollars In Thousands)
|
|
|
|
|
|
|
|
2018
|
|
$
|
33
|
|
2019
|
|
|
123
|
|
2020
|
|
|
108
|
|
2021
|
|
|
93
|
|
2022
|
|
|
78
|
|
Thereafter
|
|
|
170
|
|
Total
|
|
$
|
605
|
|