Item 1 - Financial Statements - Unaudited
Statements of Financial Condition as of December 31, 2016 and June 30, 2016 (Unaudited) (in thousands)
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At December 31,
2016
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At June 30,
2016
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Assets
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Cash and due from banks
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$
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74,349
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$
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9,949
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Interest-earning deposits with banks
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14,096
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|
5,478
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|
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Cash and cash equivalents
|
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88,445
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15,427
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|
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Investment securities available-
for-
sale, at fair
value
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33,727
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|
33,281
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Investment securities held-
to-
maturity (fair value of
$5,781 at December 31, 2016 and $5,941 at June 30, 2016)
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5,688
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5,825
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Loans held for sale, at fair value
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6,181
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24,676
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Loans receivable, net of allowance for loan losses of (December 31, 2016 $626; June 30, 2016
$487)
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95,713
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93,450
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Bank-owned life insurance
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3,952
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3,895
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Restricted investment in bank stock
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|
658
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1,108
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Premises and equipment, net
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1,734
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1,652
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Accrued interest receivable
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525
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527
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Prepaid federal income taxes
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69
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147
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Deferred income taxes, net
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573
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26
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Prepaid expenses
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284
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231
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Real estate owned, net
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65
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115
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Mortgage banking derivatives
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369
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1,492
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Other assets
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1,157
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171
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Total Assets
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$
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239,140
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$
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182,023
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Liabilities and Equity
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Liabilities
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Deposits
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$
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213,088
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$
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141,771
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Advances from the Federal Home Loan Bank
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9,000
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20,000
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Securities sold under agreements to repurchase
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1,753
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3,929
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Advances from borrowers for taxes and insurance
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877
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1,357
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Deferred gain on sale - leaseback of building
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318
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326
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Other liabilities
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1,157
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1,669
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Total Liabilities
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226,193
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169,052
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Equity
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Retained earnings
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13,270
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12,978
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Accumulated other comprehensive loss
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(323
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)
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(7
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)
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Total Equity
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12,947
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12,971
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Total Liabilities and Equity
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$
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239,140
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$
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182,023
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See Notes to Unaudited Financial Statements
1
Statements of Income for the Three and Six Months Ended December 31, 2016 and 2015 (Unaudited) (in
thousands)
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For the Three
Months Ended
December 31,
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For the Six
Months Ended
December 31,
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2016
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2015
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2016
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2015
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Interest Income
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Interest and fee on loans
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$
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1,132
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$
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1,094
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$
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2,338
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$
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2,179
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Interest and dividends on investment:
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Taxable
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72
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47
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|
132
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98
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Nontaxable
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41
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38
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83
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78
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Interest on mortgage-backed securities and collateralized mortgage obligations
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48
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102
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111
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200
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Interest on interest-earning deposits
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53
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22
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|
83
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45
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Total Interest Income
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1,346
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1,303
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2,747
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2,600
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Interest Expense
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Interest on deposits
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163
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164
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|
329
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335
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Interest on advances from the Federal Home Loan Bank
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40
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21
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86
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38
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Interest on securities sold under agreements to repurchase
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1
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1
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2
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2
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Total Interest Expense
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|
204
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|
186
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|
417
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|
375
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Net Interest Income
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1,142
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1,117
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|
2,330
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2,225
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Provision (Credit) for Loan Losses
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12
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|
3
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135
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(44
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)
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Net Interest Income after Provision (Credit) for Loan Losses
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1,130
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1,114
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2,195
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2,269
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Non-Interest
Income
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Fee for customer services
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51
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54
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|
105
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|
109
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Increase in cash surrender value of bank owned life insurance
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28
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|
28
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57
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57
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Gain on sale of loans
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2,136
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|
974
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3,705
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2,129
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Gain on sale of
available-for-sale
securities
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2
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11
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|
9
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(Loss) gain from hedging instruments
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(560
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)
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2
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(939
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)
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(107
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)
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Change in fair value of loans
held-for-sale
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(778
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)
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|
102
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(695
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)
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(49
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)
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Other
|
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1
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2
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2
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4
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Total
Non-Interest
Income
|
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|
878
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|
1,164
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|
2,246
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|
2,152
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Non-Interest
Expense
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|
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|
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Salaries and employee benefits
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1,146
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1,166
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|
2,297
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|
|
2,187
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|
Occupancy
|
|
|
254
|
|
|
|
234
|
|
|
|
500
|
|
|
|
459
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|
Federal deposit insurance premiums
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|
32
|
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|
|
38
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|
70
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|
|
|
80
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Data processing related operations
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|
138
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|
132
|
|
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|
285
|
|
|
|
243
|
|
Loss (gain) on sale of other real estate owned
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|
12
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|
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|
12
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(4
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)
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Real estate owned expense
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|
5
|
|
|
|
69
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|
|
|
16
|
|
|
|
72
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|
Professional fees
|
|
|
135
|
|
|
|
111
|
|
|
|
270
|
|
|
|
231
|
|
Other
|
|
|
285
|
|
|
|
358
|
|
|
|
619
|
|
|
|
611
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
Non-Interest
Expense
|
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|
2,007
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|
|
|
2,108
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|
|
|
4,069
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|
|
|
3,879
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|
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|
|
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|
|
|
|
|
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|
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Income before Income Taxes
|
|
|
1
|
|
|
|
170
|
|
|
|
372
|
|
|
|
542
|
|
Income Tax (benefit) expense
|
|
|
(38
|
)
|
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|
52
|
|
|
|
80
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net Income
|
|
$
|
39
|
|
|
$
|
118
|
|
|
$
|
292
|
|
|
$
|
361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Financial Statements
2
Statements of Comprehensive (Loss) Income for the Three and Six Months Ended December 31, 2016 and 2015
(Unaudited) (in thousands)
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|
For the Three
Months Ended
December 31,
|
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|
For the Six
Months Ended
December 31,
|
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|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
Net Income
|
|
$
|
39
|
|
|
$
|
118
|
|
|
$
|
292
|
|
|
$
|
361
|
|
|
|
|
|
|
Other Comprehensive (Loss) Income, net of tax:
|
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|
|
|
|
|
|
|
|
|
|
|
|
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Unrealized (losses) gains on investment securities
available-for-sale
(pre-tax
$(490) and $(344);$(537) and $175, respectively)
|
|
|
(288
|
)
|
|
|
(213
|
)
|
|
|
(309
|
)
|
|
|
107
|
|
|
|
|
|
|
Reclassification adjustment for gain included in income
(pre-tax
$0 and $(2); $(11) and $(9), respectively) (1)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(7
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income
|
|
|
(288
|
)
|
|
|
(214
|
)
|
|
|
(316
|
)
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive (Loss) Income
|
|
$
|
(249
|
)
|
|
$
|
(96
|
)
|
|
$
|
(24
|
)
|
|
$
|
462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts are included in gain on sale of
available-for-sale
securities on the Statements of Income as a separate element within
non-interest
income. Income tax expense is included in the Statements of Income.
|
See
Notes to Unaudited Financial Statements
3
Statements of Equity for the Six Months Ended December 31, 2016 and 2015 (Unaudited) (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
Comprehensive Income/
(Loss)
|
|
|
Retained Earnings
|
|
|
Total Equity
|
|
|
|
|
|
BALANCE - July 1, 2016
|
|
$
|
(7
|
)
|
|
$
|
12,978
|
|
|
$
|
12,971
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
292
|
|
|
|
292
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(316
|
)
|
|
|
|
|
|
|
(316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE - December 31, 2016
|
|
$
|
(323
|
)
|
|
$
|
13,270
|
|
|
$
|
12,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
Comprehensive Income/
(Loss)
|
|
|
Retained Earnings
|
|
|
Total Equity
|
|
|
|
|
|
BALANCE - July 1, 2015
|
|
$
|
(496
|
)
|
|
$
|
11,952
|
|
|
$
|
11,456
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
361
|
|
|
|
361
|
|
|
|
|
|
Other comprehensive income
|
|
|
101
|
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE - December 31, 2015
|
|
$
|
(395
|
)
|
|
$
|
12,313
|
|
|
$
|
11,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Financial Statements
4
Statements of Cash Flows for the Six Months Ended December 31, 2016 and 2015 (Unaudited) (in thousands)
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
292
|
|
|
$
|
361
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
96
|
|
|
|
91
|
|
Impairment of real estate owned, net
|
|
|
5
|
|
|
|
68
|
|
Amortization (accretion) of deferred loan fees
|
|
|
3
|
|
|
|
(1
|
)
|
Net amortization of securities premiums and discounts
|
|
|
210
|
|
|
|
154
|
|
Loss (gain) on sale of real estate owned
|
|
|
12
|
|
|
|
(4
|
)
|
Gain on sale of
available-for-sale
securities
|
|
|
(11
|
)
|
|
|
(9
|
)
|
Provision for loan losses
|
|
|
135
|
|
|
|
(44
|
)
|
(Benefit) Expense for deferred income taxes
|
|
|
(327
|
)
|
|
|
82
|
|
Amortization of deferred gain on sale-leaseback transaction
|
|
|
(8
|
)
|
|
|
(8
|
)
|
Increase in the cash surrender value of bank owned life insurance
|
|
|
(57
|
)
|
|
|
(57
|
)
|
Loans held for sale:
|
|
|
|
|
|
|
|
|
Originations, net of prepayments
|
|
|
(90,831
|
)
|
|
|
(73,026
|
)
|
Proceeds from sales
|
|
|
112,336
|
|
|
|
78,208
|
|
Gain on sale of loan
|
|
|
(3,705
|
)
|
|
|
(2,129
|
)
|
Change in fair value of loans held for sale
|
|
|
695
|
|
|
|
49
|
|
Decrease (increase) in:
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
2
|
|
|
|
8
|
|
Prepaid federal income taxes
|
|
|
78
|
|
|
|
67
|
|
Mortgage banking derivatives
|
|
|
1,123
|
|
|
|
110
|
|
Prepaid and other assets
|
|
|
(1,039
|
)
|
|
|
(218
|
)
|
Other liabilities
|
|
|
(512
|
)
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
Net Cash provided by Operating Activities
|
|
|
18,497
|
|
|
|
3,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Net increase in loans receivable
|
|
|
(2,465
|
)
|
|
|
(7,850
|
)
|
Activity in
available-for-sale
securities:
|
|
|
|
|
|
|
|
|
Proceeds from sales
|
|
|
2,054
|
|
|
|
5,891
|
|
Maturities and repayments
|
|
|
2,101
|
|
|
|
3,353
|
|
Purchases
|
|
|
(5,200
|
)
|
|
|
(4,298
|
)
|
Activity in
held-to-maturity
securities:
|
|
|
|
|
|
|
|
|
Maturities and repayments
|
|
|
|
|
|
|
200
|
|
Purchases
|
|
|
|
|
|
|
(510
|
)
|
Redemption (purchase) of restricted investment in bank stock
|
|
|
450
|
|
|
|
(90
|
)
|
Proceeds from sale of real estate owned
|
|
|
98
|
|
|
|
61
|
|
Purchases of premises and equipment
|
|
|
(178
|
)
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash (used in) Investing Activities
|
|
|
(3,141
|
)
|
|
|
(3,323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits
|
|
|
71,317
|
|
|
|
(1,291
|
)
|
Net decrease in advances from borrowers for taxes and insurance
|
|
|
(480
|
)
|
|
|
(172
|
)
|
Net decrease in securities sold under agreements to repurchase
|
|
|
(2,176
|
)
|
|
|
(1,871
|
)
|
Proceeds from Federal Home Loan Bank
|
|
|
19,000
|
|
|
|
4,000
|
|
Repayment of Federal Home Loan Bank
|
|
|
(30,000
|
)
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash provided by (used in) Financing Activities
|
|
|
57,662
|
|
|
|
(334
|
)
|
|
|
|
Net Increase in Cash and Cash Equivalents
|
|
|
73,018
|
|
|
|
58
|
|
|
|
|
Cash and Cash Equivalents - Beginning of Period
|
|
$
|
15,427
|
|
|
$
|
15,596
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents - End of Period
|
|
$
|
88,445
|
|
|
$
|
15,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
Cash payments for interest
|
|
$
|
413
|
|
|
$
|
381
|
|
|
|
|
|
|
|
|
|
|
Cash payments for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Schedule of Noncash Investing Activities
|
|
|
|
|
|
|
|
|
Transfer from loans to real estate owned
|
|
$
|
65
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Financial Statements
5
Notes to Unaudited Financial Statements
1
. Organization, Basis of Presentation and Recent Accounting Pronouncements
Organization
HV Bancorp, Inc., a Pennsylvania Corporation (the
Company) is the proposed holding company of Huntingdon Valley Bank (the Bank) and was formed in connection with the conversion of the Bank from the mutual to the stock form of organization. As of December 31, 2016, the
conversion had not been completed, and, as of that date, the Company had no assets or liabilities, and had not conducted any business other than that of an organizational nature. Therefore, financial and other information of the Bank is included in
this Quarterly Report. See footnote 6 Adoption of Plan of Conversion.
The Bank is a Pennsylvania savings bank, organized in 1871, and
currently provides residential and commercial loans to its general service area (Montgomery, Bucks and Philadelphia Counties of Pennsylvania) as well as offering a wide variety of savings, checking and certificate of deposit accounts to its retail
and business customers.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America (US GAAP) for interim information and with the instructions to Form
10-Q,
as applicable to a smaller reporting company. Accordingly, they do not include all the information and
footnotes required by US GAAP for complete financial statements.
The financial statements are unaudited; but in the opinion of management include
all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation thereof. The balances as of June 30, 2016 have been derived from the audited financial statements. These financial statements should
be read in conjunction with the financial statements and notes thereto included in the Companys Registration Statement on Form
S-1
(File
No. 333-213537)
declared effective by the Securities and Exchange Commission on November 10, 2016. The results of operations for the three and six months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the
year ending June 30, 2017 or any other period.
The Bank has evaluated subsequent events through the date of issuance of the financial statements
included herein.
Use of Estimates in the Preparation of Financial Statements
In preparing financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to
significant change in the near term relate to the determination of the allowance for loan losses, other-than-temporary impairments of securities, interest rate lock commitments (IRLCs), mandatory sales commitments, the valuation of
mortgage loans
held-for-sale,
other real estate owned, and the valuation of deferred tax assets.
6
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (ASU)
2016-02,
Leases
. The new leases standard
applies a
right-of-use
(ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the
underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At
inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the
effect on the statement of cash flows, differs depending on the lease classification.
The new leases standard requires a lessor to classify leases as
either sales-type, direct financing or operating, similar to existing U.S. GAAP. Classification depends on the same five criteria used by lessees plus certain additional factors. The subsequent accounting treatment for all three lease types is
substantially equivalent to existing U.S. GAAP for sales-type leases, direct financing leases, and operating leases. However, the new standard updates certain aspects of the lessor accounting model to align it with the new lessee accounting model,
as well as with the new revenue standard under Topic 606.
Lessees and lessors are required to provide certain qualitative and quantitative disclosures to
enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.
The new leases standard addresses
other considerations including identification of a lease, separating lease and
non-lease
components of a contract, sale and leaseback transactions, modifications, combining contracts, reassessment of the lease
term, and
re-measurement
of lease payments. It also contains comprehensive implementation guidance with practical examples.
The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years. The amendments are effective for all other entities (including emerging growth entities as further described below) for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after
December 15, 2020. Early adoption is permitted. Specific transition requirements apply. The Bank is currently evaluating the impact of adoption of the new standard on the financial statements.
In June 2016,
the FASB issued Accounting Standards Update (ASU)
2016-13,
Financial Instruments - Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
ASU
2016-13
requires credit losses on most financial assets measured at amortized cost and certain other instruments to be
measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated
prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.
7
The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The
allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (PCD assets), should be determined in a similar manner to other financial assets measured on an
amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price (gross up approach) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets
is the same expected loss model described above.
Further, the ASU made certain targeted amendments to the existing impairment model for
available-for-sale
(AFS) debt securities. For an AFS debt security for which there is neither the intent nor a
more-likely-than-not
requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis.
The Update is effective
for public business entities for fiscal years after December 15, 2019, including interim periods within those fiscal years. The amendments are effective for all other entities (including emerging growth companies as further described below for
fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. The Bank is currently evaluating the impact of adoption of the new standard on the financial statements.
HV Bancorp Inc. qualifies under the Jumpstart Our Business Startups Act (the JOBS Act) as an emerging growth company. As an emerging growth
company, HV Bancorp has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements until such pronouncements are made applicable to private companies.
8
2. Investment Securities
Investment securities
available-for-sale
was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
|
|
|
|
U.S. Governmental securities
|
|
$
|
3,416
|
|
|
$
|
5
|
|
|
$
|
(46
|
)
|
|
$
|
3,375
|
|
Corporate notes
|
|
|
9,924
|
|
|
|
23
|
|
|
|
(125
|
)
|
|
|
9,822
|
|
Collateralized mortgage obligations - agency residential
|
|
|
8,905
|
|
|
|
5
|
|
|
|
(255
|
)
|
|
|
8,655
|
|
Mortgage-backed securities - agency residential
|
|
|
5,266
|
|
|
|
4
|
|
|
|
(130
|
)
|
|
|
5,140
|
|
Municipal securities
|
|
|
3,521
|
|
|
|
|
|
|
|
(33
|
)
|
|
|
3,488
|
|
Bank CDs
|
|
|
3,244
|
|
|
|
9
|
|
|
|
(6
|
)
|
|
|
3,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,276
|
|
|
$
|
46
|
|
|
$
|
(595
|
)
|
|
$
|
33,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
held-to-maturity
was
comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
5,688
|
|
|
$
|
94
|
|
|
$
|
(1
|
)
|
|
$
|
5,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,688
|
|
|
$
|
94
|
|
|
$
|
(1
|
)
|
|
$
|
5,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
Investment securities
available-for-sale
was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
|
|
|
|
U.S. Governmental securities
|
|
$
|
1,493
|
|
|
$
|
28
|
|
|
$
|
|
|
|
$
|
1,521
|
|
Corporate notes
|
|
|
8,423
|
|
|
|
40
|
|
|
|
(136
|
)
|
|
|
8,327
|
|
Collateralized mortgage obligations - agency residential
|
|
|
9,879
|
|
|
|
45
|
|
|
|
(93
|
)
|
|
|
9,831
|
|
Mortgage-backed securities - agency residential
|
|
|
6,980
|
|
|
|
44
|
|
|
|
(15
|
)
|
|
|
7,009
|
|
Municipal securities
|
|
|
3,524
|
|
|
|
42
|
|
|
|
|
|
|
|
3,566
|
|
Bank CDs
|
|
|
2,994
|
|
|
|
41
|
|
|
|
(8
|
)
|
|
|
3,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,293
|
|
|
$
|
240
|
|
|
$
|
(252
|
)
|
|
$
|
33,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
held-to-maturity
was
comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
5,825
|
|
|
$
|
117
|
|
|
$
|
(1
|
)
|
|
$
|
5,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,825
|
|
|
$
|
117
|
|
|
$
|
(1
|
)
|
|
$
|
5,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The scheduled maturities of securities
available-for-sale
and
held-to-maturity
at December 31, 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Available- for- Sale
|
|
|
Held- to- Maturity
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
1,000
|
|
|
$
|
997
|
|
|
$
|
1,188
|
|
|
$
|
1,191
|
|
Due from more than one to five years
|
|
|
11,201
|
|
|
|
11,164
|
|
|
|
2,858
|
|
|
|
2,876
|
|
Due from more than five to ten years
|
|
|
4,563
|
|
|
|
4,474
|
|
|
|
1,642
|
|
|
|
1,714
|
|
Due after ten years
|
|
|
17,512
|
|
|
|
17,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,276
|
|
|
$
|
33,727
|
|
|
$
|
5,688
|
|
|
$
|
5,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
Securities with a fair value of $6.5 million and $3.3 million at December 31, 2016 and
June 30, 2016, respectively, were pledged to secure public deposits and for other purposes as required by law.
Proceeds from the sale of
available-for-sale
securities for the six months ended December 31, 2016 were $2.1 million. Gross realized gains on such sales were approximately $11,000 and gross
realized losses on such sales were $0.
Proceeds from the sale of
available-for-sale
securities for the six months ended December 31, 2015 were $5.9 million. Gross realized gains on such sales were $10,000 and gross realized
losses on such sales were $1,000.
The following tables summarize the unrealized loss positions of securities
available-for-sale
and
held-to-maturity
as of December 31, 2016 and June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
(Dollars in thousands)
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
Available-for-sale:
|
|
|
|
|
U.S. Governmental securities
|
|
$
|
2,072
|
|
|
$
|
(19
|
)
|
|
$
|
683
|
|
|
$
|
(27
|
)
|
|
$
|
2,755
|
|
|
$
|
(46
|
)
|
Corporate notes
|
|
|
3,073
|
|
|
|
(27
|
)
|
|
|
4,462
|
|
|
|
(98
|
)
|
|
|
7,535
|
|
|
|
(125
|
)
|
Collateralized mortgage obligations
|
|
|
943
|
|
|
|
(15
|
)
|
|
|
7,141
|
|
|
|
(240
|
)
|
|
|
8,084
|
|
|
|
(255
|
)
|
Mortgage-backed securities
|
|
|
2,493
|
|
|
|
(52
|
)
|
|
|
2,190
|
|
|
|
(78
|
)
|
|
|
4,683
|
|
|
|
(130
|
)
|
Municipal securities
|
|
|
353
|
|
|
|
(3
|
)
|
|
|
3,135
|
|
|
|
(30
|
)
|
|
|
3,488
|
|
|
|
(33
|
)
|
Bank CDs
|
|
|
244
|
|
|
|
(1
|
)
|
|
|
245
|
|
|
|
(5
|
)
|
|
|
489
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,178
|
|
|
$
|
(117
|
)
|
|
$
|
17,856
|
|
|
$
|
(478
|
)
|
|
$
|
27,034
|
|
|
$
|
(595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heldto-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
139
|
|
|
$
|
|
|
|
$
|
504
|
|
|
$
|
(1
|
)
|
|
$
|
643
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
139
|
|
|
$
|
|
|
|
$
|
504
|
|
|
$
|
(1
|
)
|
|
$
|
643
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
(Dollars in thousands)
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
Available-for-sale:
|
|
|
|
|
U.S. Governmental securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Corporate notes
|
|
|
1,000
|
|
|
|
(13
|
)
|
|
|
3,677
|
|
|
|
(123
|
)
|
|
|
4,677
|
|
|
|
(136
|
)
|
Collateralized mortgage obligations
|
|
|
|
|
|
|
|
|
|
|
5,792
|
|
|
|
(93
|
)
|
|
|
5,792
|
|
|
|
(93
|
)
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
1,885
|
|
|
|
(15
|
)
|
|
|
1,885
|
|
|
|
(15
|
)
|
Municipal securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank CDs
|
|
|
249
|
|
|
|
(1
|
)
|
|
|
493
|
|
|
|
(7
|
)
|
|
|
742
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,249
|
|
|
$
|
(14
|
)
|
|
$
|
11,847
|
|
|
$
|
(238
|
)
|
|
$
|
13,096
|
|
|
$
|
(252
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
506
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
506
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
506
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
506
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016 and June 30, 2016, the investment portfolio included eight and five U.S. Government securities,
respectively, with total market values of $3.4 million and $1.5 million, respectively. Of these securities, five and zero were in an unrealized loss position as of December 31, 2016 and June 30, 2016, respectively. These
securities are zero risk weighted for capital purposes and are guaranteed for repayment of principal and interest. As of December 31, 2016 and June 30, 2016, management found no evidence of Other Than Temporary Impairment
(OTTI) on any of the U.S. Governmental securities held in the investment securities portfolio and the Bank has no intention to sell the securities before a recovery of the cost has occurred.
At December 31, 2016 and June 30, 2016, the investment portfolio included nineteen and sixteen corporate notes with total market values of
$9.8 million and $8.3 million, respectively. Of these securities, fifteen and nine were in an unrealized loss position as of December 31, 2016 and June 30, 2016, respectively. At the time of purchase and as of December 31,
2016 and June 30, 2016, these bonds continue to maintain investment grade ratings. As of December 31, 2016 and June 30, 2016, management found no evidence of OTTI on any of the corporate notes held in the investment securities
portfolio and the Bank has no intention to sell the securities before a recovery of the cost has occurred.
12
At December 31, 2016 and June 30, 2016, the investment portfolio included
thirty-one
and
thirty-two
collateralized mortgage obligations (CMOs) with total market values of $8.7 million and $9.8 million at December 31, 2016
and June 30, 2016, respectively. Of these securities, twenty-nine and nineteen were in an unrealized loss position as of December 31, 2016 and June 30, 2016, respectively. The CMO portfolio is comprised of 100% agency (FHLMC, FNMA and
GNMA) investment grade bonds. As of December 31, 2016 and June 30, 2016, management found no evidence of OTTI on any of the CMOs held in the investment securities portfolio and the Bank has no intention to sell the securities before a
recovery of the cost has occurred.
At December 31, 2016 and June 30, 2016, the investment portfolio included sixteen and nineteen mortgage
backed securities (MBS) with a total market value of $5.1 million and $7.0 million, respectively. Of these securities, twelve and four were in an unrealized loss position as of December 31, 2016 and June 30, 2016,
respectively. The MBS portfolio is comprised of 100% agency (FHLMC, FNMA and GNMA) investment grade bonds. As of December 31, 2016 and June 30, 2016, management found no evidence of OTTI on any of the MBS held in the investment securities
portfolio and the Bank has no intention to sell the securities before a recovery of the cost has occurred.
At December 31, 2016 and June 30,
2016, the investment portfolio included twenty-four municipal securities with a total market value of $9.3 million and $9.5 million, respectively. Of these securities, twelve and one were in an unrealized loss position as of
December 31, 2016 and June 30, 2016, respectively. The Banks municipal portfolio issuers are located in Pennsylvania and were purchased and, as of December 31, 2016 and June 30, 2016, continue to maintain investment grade
ratings. Each of the municipal securities is reviewed quarterly for impairment. This includes research on each issuer to ensure the financial stability of the municipal entity. As of December 31, 2016 and June 30, 2016, management found no
evidence of OTTI on any of the municipal securities held in the investment securities portfolio and the Bank has no intention to sell the securities before a recovery of the cost has occurred.
13
3. Loans Receivable
Loans receivable were comprised of the following:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
December 31,
2016
|
|
|
June 30,
2016
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
74,263
|
|
|
$
|
71,980
|
|
Home equity and HELOCs
|
|
|
5,746
|
|
|
|
6,448
|
|
Commercial:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
12,555
|
|
|
|
11,620
|
|
Commercial business
|
|
|
427
|
|
|
|
558
|
|
Construction
|
|
|
3,091
|
|
|
|
3,179
|
|
Consumer
|
|
|
18
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,100
|
|
|
|
93,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Unearned discounts, origination and commitment fees and costs
|
|
|
239
|
|
|
|
142
|
|
Allowance for loan losses
|
|
|
(626
|
)
|
|
|
(487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
95,713
|
|
|
$
|
93,450
|
|
|
|
|
|
|
|
|
|
|
Overdraft deposits are reclassified as consumer loans and are included in the total loans on the statements of financial
condition. Overdrafts were $16,000 and $10,000 at December 31, 2016 and June 30, 2016, respectively.
14
The following tables summarizes the activity in the allowance for loan losses by loan class for the three months
ended December 31, 2016 and for the three months ended December 31, 2015 and information in regards to the recorded investment in loans receivable as of December 31, 2016 and June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended December 31, 2016
|
|
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Beginning
Balance
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision/
(Credit)
|
|
|
Ending
Balance
|
|
|
Ending
Balance:
Individually
Evaluated
for
Impairment
|
|
|
Ending
Balance:
Collectively
Evaluated
for
Impairment
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
360
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
362
|
|
|
$
|
|
|
|
$
|
362
|
|
Home equity and HELOCs
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114
|
|
|
|
96
|
|
|
|
18
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
|
|
|
|
30
|
|
|
|
88
|
|
Commercial business
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
15
|
|
|
|
5
|
|
Construction
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Consumer
|
|
|
|
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
613
|
|
|
$
|
(2
|
)
|
|
$
|
3
|
|
|
$
|
12
|
|
|
$
|
626
|
|
|
$
|
141
|
|
|
$
|
485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended December 31, 2015
|
|
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Beginning
Balance
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provisions
|
|
|
Ending
Balance
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
219
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
219
|
|
Home equity and HELOCs
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203
|
|
Commercial business
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
3
|
|
|
|
2
|
|
Unallocated reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
467
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
3
|
|
|
$
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
The following tables summarizes the activity in the allowance for loan losses by loan class for the six months
ended December 31, 2016 and December 31, 2015 and information in regards to the recorded investment in loans receivable as of December 31, 2016 and June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended December 31, 2016
|
|
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Beginning
Balance
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision/
(Credit)
|
|
|
Ending
Balance
|
|
|
Ending
Balance:
Individually
Evaluated
for
Impairment
|
|
|
Ending
Balance:
Collectively
Evaluated
for
Impairment
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
314
|
|
|
$
|
|
|
|
$
|
5
|
|
|
$
|
43
|
|
|
$
|
362
|
|
|
$
|
|
|
|
$
|
362
|
|
Home equity and HELOCs
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
96
|
|
|
|
114
|
|
|
|
96
|
|
|
|
18
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
118
|
|
|
|
30
|
|
|
|
88
|
|
Commercial business
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
20
|
|
|
|
15
|
|
|
|
5
|
|
Construction
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Consumer
|
|
|
|
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
487
|
|
|
$
|
(2
|
)
|
|
$
|
6
|
|
|
$
|
135
|
|
|
$
|
626
|
|
|
$
|
141
|
|
|
$
|
485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended December 31, 2015
|
|
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Beginning
Balance
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
(Credit)/
Provisions
|
|
|
Ending
Balance
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
219
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
219
|
|
Home equity and HELOCs
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
203
|
|
Commercial business
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
26
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
3
|
|
|
|
2
|
|
Unallocated reserve
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
514
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
(44
|
)
|
|
$
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Loans Receivable
|
|
(Dollars in thousands)
|
|
Ending
Balance
|
|
|
Ending
Balance:
Individually
Evaluated
for
Impairment
|
|
|
Ending
Balance:
Collectively
Evaluated
for
Impairment
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
74,263
|
|
|
$
|
989
|
|
|
$
|
73,274
|
|
Home equity and HELOCs
|
|
|
5,746
|
|
|
|
230
|
|
|
|
5,516
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
12,555
|
|
|
|
749
|
|
|
|
11,806
|
|
Commercial business
|
|
|
427
|
|
|
|
183
|
|
|
|
244
|
|
Construction
|
|
|
3,091
|
|
|
|
|
|
|
|
3,091
|
|
Consumer
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
96,100
|
|
|
$
|
2,151
|
|
|
$
|
93,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
Loans Receivable
|
|
(Dollars in thousands)
|
|
Ending
Balance
|
|
|
Ending
Balance:
Individually
Evaluated
for
Impairment
|
|
|
Ending
Balance:
Collectively
Evaluated
for
Impairment
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
71,980
|
|
|
$
|
818
|
|
|
$
|
71,162
|
|
Home equity and HELOCs
|
|
|
6,448
|
|
|
|
227
|
|
|
|
6,221
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
11,620
|
|
|
|
760
|
|
|
|
10,860
|
|
Commercial business
|
|
|
558
|
|
|
|
193
|
|
|
|
365
|
|
Construction
|
|
|
3,179
|
|
|
|
|
|
|
|
3,179
|
|
Consumer
|
|
|
10
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
93,795
|
|
|
$
|
1,998
|
|
|
$
|
91,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
The following table summarizes the Allowance for Loan Losses by loan portfolio class as of June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
Allowance for Loan Losses
|
|
(Dollars in thousands)
|
|
Ending
Balance
|
|
|
Ending
Balance:
Individually
Evaluated
for
Impairment
|
|
|
Ending
Balance:
Collectively
Evaluated
for
Impairment
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
314
|
|
|
$
|
|
|
|
$
|
314
|
|
Home equity and HELOCs
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
131
|
|
|
|
39
|
|
|
|
92
|
|
Commercial business
|
|
|
23
|
|
|
|
19
|
|
|
|
4
|
|
Construction
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
487
|
|
|
$
|
58
|
|
|
$
|
429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
The following tables summarize information in regard to impaired loans by loan portfolio class as of
December 31, 2016 and June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
June 30, 2016
|
|
(Dollars in thousands)
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
|
|
|
|
|
|
With no related allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
989
|
|
|
$
|
989
|
|
|
$
|
|
|
|
$
|
818
|
|
|
$
|
818
|
|
|
$
|
|
|
Home equity and HELOCs
|
|
|
110
|
|
|
|
110
|
|
|
|
|
|
|
|
227
|
|
|
|
227
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
550
|
|
|
|
550
|
|
|
|
|
|
|
|
557
|
|
|
|
600
|
|
|
|
|
|
Commercial business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,649
|
|
|
$
|
1,649
|
|
|
$
|
|
|
|
$
|
1,602
|
|
|
$
|
1,645
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Home equity and HELOCs
|
|
|
120
|
|
|
|
120
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
199
|
|
|
|
199
|
|
|
|
30
|
|
|
|
203
|
|
|
|
203
|
|
|
|
39
|
|
Commercial business
|
|
|
183
|
|
|
|
183
|
|
|
|
15
|
|
|
|
193
|
|
|
|
193
|
|
|
|
19
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
502
|
|
|
$
|
502
|
|
|
$
|
141
|
|
|
$
|
396
|
|
|
$
|
396
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
989
|
|
|
$
|
989
|
|
|
$
|
|
|
|
$
|
818
|
|
|
$
|
818
|
|
|
$
|
|
|
Home equity and HELOCs
|
|
|
230
|
|
|
|
230
|
|
|
|
96
|
|
|
|
227
|
|
|
|
227
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
749
|
|
|
|
749
|
|
|
|
30
|
|
|
|
760
|
|
|
|
803
|
|
|
|
39
|
|
Commercial business
|
|
|
183
|
|
|
|
183
|
|
|
|
15
|
|
|
|
193
|
|
|
|
193
|
|
|
|
19
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,151
|
|
|
$
|
2,151
|
|
|
$
|
141
|
|
|
$
|
1,998
|
|
|
$
|
2,041
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
The following table presents additional information regarding the Banks impaired loans for the three months
ended December 31, 2016 and December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
(Dollars in thousands)
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
924
|
|
|
$
|
1
|
|
|
$
|
1,166
|
|
|
$
|
|
|
Home equity and HELOCs
|
|
|
147
|
|
|
|
|
|
|
|
178
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
552
|
|
|
|
8
|
|
|
|
579
|
|
|
|
9
|
|
Commercial business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,623
|
|
|
$
|
9
|
|
|
$
|
1,923
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Home equity and HELOCs
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
200
|
|
|
|
4
|
|
|
|
225
|
|
|
|
1
|
|
Commercial business
|
|
|
185
|
|
|
|
3
|
|
|
|
204
|
|
|
|
3
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
505
|
|
|
$
|
7
|
|
|
$
|
429
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
924
|
|
|
$
|
1
|
|
|
$
|
1,166
|
|
|
$
|
|
|
Home equity and HELOCs
|
|
|
267
|
|
|
|
|
|
|
|
178
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
752
|
|
|
|
12
|
|
|
|
804
|
|
|
|
10
|
|
Commercial business
|
|
|
185
|
|
|
|
3
|
|
|
|
204
|
|
|
|
3
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,128
|
|
|
$
|
16
|
|
|
$
|
2,352
|
|
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
If these loans were performing under the original contractual rate, interest income on such loans would have increased
approximately $23,000 and $27,000 for the three months ended December 31, 2016 and 2015, respectively.
20
The following table presents additional information regarding the Banks impaired loans for the six months
ended December 31, 2016 and December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
(Dollars in thousands)
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
854
|
|
|
$
|
3
|
|
|
$
|
979
|
|
|
$
|
1
|
|
Home equity and HELOCs
|
|
|
106
|
|
|
|
|
|
|
|
178
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
553
|
|
|
|
16
|
|
|
|
553
|
|
|
|
18
|
|
Commercial business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,513
|
|
|
$
|
19
|
|
|
$
|
1,710
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Home equity and HELOCs
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
200
|
|
|
|
8
|
|
|
|
226
|
|
|
|
2
|
|
Commercial business
|
|
|
188
|
|
|
|
6
|
|
|
|
206
|
|
|
|
6
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
509
|
|
|
$
|
14
|
|
|
$
|
432
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
854
|
|
|
$
|
3
|
|
|
$
|
979
|
|
|
$
|
1
|
|
Home equity and HELOCs
|
|
|
227
|
|
|
|
|
|
|
|
178
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
753
|
|
|
|
24
|
|
|
|
779
|
|
|
|
20
|
|
Commercial business
|
|
|
188
|
|
|
|
6
|
|
|
|
206
|
|
|
|
6
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,022
|
|
|
$
|
33
|
|
|
$
|
2,142
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
If these loans were performing under the original contractual rate, interest income on such loans would have increased
approximately $35,000 and $44,000 for the six months ended December 31, 2016 and 2015, respectively.
21
The following table presents nonaccrual loans by classes of the loan portfolio as of December 31, 2016 and
June 30, 2016:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
December 31,
2016
|
|
|
June 30,
2016
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
801
|
|
|
$
|
818
|
|
Home equity and HELOCs
|
|
|
230
|
|
|
|
227
|
|
Commercial:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
100
|
|
|
|
100
|
|
Commercial business
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,131
|
|
|
$
|
1,145
|
|
|
|
|
|
|
|
|
|
|
Credit quality risk ratings include regulatory classifications of Special Mention, Substandard, Doubtful and Loss. Loans
classified as Special Mention have potential weaknesses that deserve managements close attention. If uncorrected, the potential weaknesses may result in deterioration of prospects for repayment. Loans classified substandard have a well-defined
weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have
all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered
uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.
22
The following tables summarize the aggregate Pass and criticized categories of Special Mention, Substandard and
Doubtful within the Banks internal risk rating system as of December 31, 2016 and June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
72,988
|
|
|
$
|
|
|
|
$
|
1,275
|
|
|
$
|
|
|
|
$
|
74,263
|
|
Home equity and HELOCs
|
|
|
5,516
|
|
|
|
|
|
|
|
230
|
|
|
|
|
|
|
|
5,746
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
11,621
|
|
|
|
574
|
|
|
|
360
|
|
|
|
|
|
|
|
12,555
|
|
Commercial business
|
|
|
244
|
|
|
|
|
|
|
|
183
|
|
|
|
|
|
|
|
427
|
|
Construction
|
|
|
3,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,091
|
|
Consumer
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
93,478
|
|
|
$
|
574
|
|
|
$
|
2,048
|
|
|
$
|
|
|
|
$
|
96,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
(Dollars in thousands)
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
70,874
|
|
|
$
|
|
|
|
$
|
1,106
|
|
|
$
|
|
|
|
$
|
71,980
|
|
Home equity and HELOCs
|
|
|
6,221
|
|
|
|
|
|
|
|
227
|
|
|
|
|
|
|
|
6,448
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
10,860
|
|
|
|
395
|
|
|
|
365
|
|
|
|
|
|
|
|
11,620
|
|
Commercial business
|
|
|
162
|
|
|
|
203
|
|
|
|
193
|
|
|
|
|
|
|
|
558
|
|
Construction
|
|
|
3,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,179
|
|
Consumer
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
91,306
|
|
|
$
|
598
|
|
|
$
|
1,891
|
|
|
$
|
|
|
|
$
|
93,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
The following tables present the segments of the loan portfolio summarized by aging categories as of
December 31, 2016 and June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
30-59
Days
Past Due
|
|
|
60-89
Days
Past
Due
|
|
|
Greater
than 90
Days
|
|
|
Total
Past Due
|
|
|
Current
|
|
|
Total Loan
Receivables
|
|
|
Loans
Receivable
>90 Days
and
Accruing
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
405
|
|
|
$
|
109
|
|
|
$
|
546
|
|
|
$
|
1,060
|
|
|
$
|
73,203
|
|
|
$
|
74,263
|
|
|
$
|
|
|
Home equity and HELOCs
|
|
|
89
|
|
|
|
|
|
|
|
230
|
|
|
|
319
|
|
|
|
5,427
|
|
|
|
5,746
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
|
|
12,455
|
|
|
|
12,555
|
|
|
|
|
|
Commercial business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
427
|
|
|
|
427
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,091
|
|
|
|
3,091
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
494
|
|
|
$
|
109
|
|
|
$
|
876
|
|
|
$
|
1,479
|
|
|
$
|
94,621
|
|
|
$
|
96,100
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
(Dollars in thousands)
|
|
30-59
Days
Past Due
|
|
|
60-89
Days
Past Due
|
|
|
Greater
than 90
Days
|
|
|
Total
Past Due
|
|
|
Current
|
|
|
Total Loan
Receivables
|
|
|
Loans
Receivable
>90 Days
and
Accruing
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
$
|
470
|
|
|
$
|
317
|
|
|
$
|
659
|
|
|
$
|
1,446
|
|
|
$
|
70,534
|
|
|
$
|
71,980
|
|
|
$
|
|
|
Home equity and HELOCs
|
|
|
94
|
|
|
|
79
|
|
|
|
227
|
|
|
|
400
|
|
|
|
6,048
|
|
|
|
6,448
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
|
|
11,520
|
|
|
|
11,620
|
|
|
|
|
|
Commercial business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
558
|
|
|
|
558
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,179
|
|
|
|
3,179
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
564
|
|
|
$
|
396
|
|
|
$
|
986
|
|
|
$
|
1,946
|
|
|
$
|
91,849
|
|
|
$
|
93,795
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
The Bank may grant a concession or modification for economic or legal reasons related to a borrowers
financial condition that it would not otherwise consider resulting in a modified loan that is then identified as a troubled debt restructuring (TDR). The Bank may modify loans through rate reductions, extensions of maturity, interest
only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers operations. Loan modifications are intended to minimize the economic loss and to avoid
foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Banks allowance for loan losses. TDRs are restored to accrual status when the obligation is brought current, has performed in
accordance with the contractual terms for a reasonable period of time, generally six months, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.
The Bank may identify loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrowers financial
statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions and negative trends may result in a
payment default in the near future.
As of December 31, 2016 and June 30, 2016, the Bank had two loans identified as TDRs totaling $344,000 and
$357,000, respectively. At December 31, 2016 and June 30, 2016, all of the TDRs were performing in compliance with their restructured terms and on accrual status. There were no modifications to loans classified as TDRs during the six month
period ended December 31, 2016. No additional loan commitments were outstanding to these borrowers at December 31, 2016 and June 30, 2016.
The following table details the Banks TDRs that are on accrual status and
non-accrual
status at
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
(Dollars in thousands)
|
|
Number of
Loans
|
|
|
Accrual
Status
|
|
|
Non-Accrual
Status
|
|
|
Total TDRs
|
|
|
|
|
|
|
Commercial real estate
|
|
|
2
|
|
|
$
|
344
|
|
|
$
|
|
|
|
$
|
344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2
|
|
|
$
|
344
|
|
|
$
|
|
|
|
$
|
344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table details the Banks TDRs that are on accrual status and
non-accrual
status at June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
|
(Dollars in thousands)
|
|
Number of
Loans
|
|
|
Accrual
Status
|
|
|
Non-Accrual
Status
|
|
|
Total TDRs
|
|
|
|
|
|
|
Commercial real estate
|
|
|
2
|
|
|
$
|
357
|
|
|
$
|
|
|
|
$
|
357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2
|
|
|
$
|
357
|
|
|
$
|
|
|
|
$
|
357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amount of residential mortgage loans in the process of foreclosure was $655,000 and $886,000 at December 31,
2016 and June 30, 2016, respectively.
25
4.
Derivatives and Risk Management Activities
The Bank did not have any derivative instruments designated as hedging instruments or subject to master netting and collateral agreements as of and for the six
months ended December 31, 2016 and for the year ended June 30, 2016. The following table summarizes the amounts recorded in the Banks statements of financial condition for derivatives not designated as hedging instruments as of
December 31, 2016 and June 30, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
Presentation
|
|
Fair Value
|
|
|
Notional
Amount
|
|
|
|
|
|
Interest Rate Lock Commitments
|
|
Mortgage banking derivatives
|
|
$
|
315
|
|
|
$
|
10,847
|
|
|
|
|
|
Mandatory sale commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to interest rate and price risk for Loans held for sale
|
|
Mortgage banking derivatives
|
|
|
36
|
|
|
|
799
|
|
|
|
|
|
To Be Announced securities
|
|
Mortgage banking derivatives
|
|
|
18
|
|
|
|
1,500
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
Presentation
|
|
Fair Value
|
|
|
Notional
Amount
|
|
|
|
|
|
Interest Rate Lock Commitments
|
|
Other liabilities
|
|
$
|
4
|
|
|
$
|
769
|
|
|
|
|
|
Mandatory sale commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to interest rate and price risk for Loans held for sale
|
|
Other liabilities
|
|
|
4
|
|
|
|
1,549
|
|
|
|
|
|
To Be Announced securities
|
|
Other liabilities
|
|
|
37
|
|
|
|
5,250
|
|
26
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
Presentation
|
|
Fair Value
|
|
|
Notional
Amount
|
|
|
|
|
|
Interest Rate Lock Commitments
|
|
Mortgage banking derivatives
|
|
$
|
1,084
|
|
|
$
|
30,006
|
|
|
|
|
|
Mandatory sale commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to interest rate and price risk for Loans Held for Sale
|
|
Mortgage banking derivatives
|
|
|
408
|
|
|
|
7,046
|
|
|
|
|
|
To Be Announced securities
|
|
Mortgage banking derivatives
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
Presentation
|
|
Fair Value
|
|
|
Notional
Amount
|
|
|
|
|
|
Interest Rate Lock Commitments
|
|
Other liabilities
|
|
$
|
32
|
|
|
$
|
4,572
|
|
|
|
|
|
Mandatory sale commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to interest rate and price risk for Loans Held for Sale
|
|
Other liabilities
|
|
|
48
|
|
|
|
5,544
|
|
|
|
|
|
To Be Announced securities
|
|
Other liabilities
|
|
|
166
|
|
|
|
22,000
|
|
The following tables summarize the amounts recorded in the Banks statements of income for derivative instruments not
designated as hedging instruments for the six and three months ended December 31, 2016 and 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(Loss)
|
|
|
|
Statement of Income
Presentation
|
|
Six Months Ended
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
Interest Rate Lock Commitments
|
|
(Loss) from hedging Instruments
|
|
$
|
(269
|
)
|
|
$
|
(332
|
)
|
Mandatory sale commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to interest rate and price risk for Loans Held for Sale
|
|
(Loss) from hedging instruments
|
|
|
(928
|
)
|
|
|
(234
|
)
|
|
|
|
|
To Be Announced securities
|
|
Gain (Loss) from hedging Instruments
|
|
|
258
|
|
|
|
(205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (Loss) from hedging instruments
|
|
$
|
(939
|
)
|
|
$
|
(107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(Loss)
|
|
|
|
Statement of Income
Presentation
|
|
Three Months Ended
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
Interest Rate Lock Commitments
|
|
(Loss) gain from hedging Instruments
|
|
$
|
(486
|
)
|
|
$
|
56
|
|
Mandatory sale commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to interest rate and price risk for Loans Held for Sale
|
|
(Loss) gain from hedging instruments
|
|
|
(583
|
)
|
|
|
9
|
|
|
|
|
|
To Be Announced securities
|
|
Gain (loss) from hedging Instruments
|
|
|
509
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (loss) gain from hedging instruments
|
|
$
|
(560
|
)
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of the Banks Interest Rate Lock Commitments (IRLCs) and mandatory sales commitments are based
upon the estimated fair value of the underlying mortgage loan (determined consistent with Loans Held for Sale), adjusted for (1) estimated costs to complete and originate the loan, and (ii) the estimated percentage of IRLCs
that will result in a closed mortgage loan. The valuation of the Banks IRLCs approximates a whole-loan price, which includes the value of the related mortgage servicing.
5.
Fair Value of Financial Instruments
The Bank uses
fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with FASB ASC Topic 820, Fair Value Measurement, the fair value of a financial instrument
is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many
instances, there are no quoted market prices for the Banks various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation
or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the
use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and
requires the use of significant judgment. The fair value is determined at a reasonable point within the range that is most representative of fair value under current market conditions. Management uses its best judgment in estimating the fair value
of the Banks financial instruments; however,
28
there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts
the Bank could have realized in sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends, and have not been reevaluated or updated for purposes of these financial statements
subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each
year-end.
In accordance with this guidance, the Bank groups its financial assets and financial liabilities generally measured at fair value in three levels, based
on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
Level 1 -
Valuation is based unadjusted on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity
securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 - Valuation is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
or indirectly. The valuation may be based on 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 asset or liability.
Level 3 - Valuation is based on 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 determination of fair value requires significant management judgment or estimation.
29
The incorporation of counterparty credit risk did not have significant impact on the valuation of assets and
liabilities recorded at fair value as of December 31, 2016 or June 30, 2016.
Assets measured at fair value on a recurring basis at
December 31, 2016 and June 30, 2016 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
Investment securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. governmental securities
|
|
$
|
|
|
|
$
|
3,375
|
|
|
$
|
|
|
|
$
|
3,375
|
|
Corporate notes
|
|
|
|
|
|
|
9,822
|
|
|
|
|
|
|
|
9,822
|
|
Collateralized mortgage obligations - agency residential
|
|
|
|
|
|
|
8,655
|
|
|
|
|
|
|
|
8,655
|
|
Mortgage-backed securities - agency residential
|
|
|
|
|
|
|
5,140
|
|
|
|
|
|
|
|
5,140
|
|
Municipal securities
|
|
|
|
|
|
|
3,488
|
|
|
|
|
|
|
|
3,488
|
|
Bank CDs
|
|
|
|
|
|
|
3,247
|
|
|
|
|
|
|
|
3,247
|
|
Loans Held for Sale
|
|
|
|
|
|
|
6,181
|
|
|
|
|
|
|
|
6,181
|
|
Price risk for Loans Held for Sale
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
36
|
|
To Be Announced Securities
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
Interest rate lock commitments
|
|
|
|
|
|
|
315
|
|
|
|
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
40,277
|
|
|
$
|
|
|
|
$
|
40,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
Investment securities available-
for-
sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. governmental securities
|
|
$
|
|
|
|
$
|
1,521
|
|
|
$
|
|
|
|
$
|
1,521
|
|
Corporate notes
|
|
|
|
|
|
|
8,327
|
|
|
|
|
|
|
|
8,327
|
|
Collateralized mortgage obligations - agency residential
|
|
|
|
|
|
|
9,831
|
|
|
|
|
|
|
|
9,831
|
|
Mortgage-backed securities - agency residential
|
|
|
|
|
|
|
7,009
|
|
|
|
|
|
|
|
7,009
|
|
Municipal securities
|
|
|
|
|
|
|
3,566
|
|
|
|
|
|
|
|
3,566
|
|
Bank CDs
|
|
|
|
|
|
|
3,027
|
|
|
|
|
|
|
|
3,027
|
|
Loans Held for Sale
|
|
|
|
|
|
|
24,676
|
|
|
|
|
|
|
|
24,676
|
|
Price risk for Loans Held for Sale
|
|
|
|
|
|
|
408
|
|
|
|
|
|
|
|
408
|
|
Interest rate lock commitments
|
|
|
|
|
|
|
1,084
|
|
|
|
|
|
|
|
1,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
59,449
|
|
|
$
|
|
|
|
$
|
59,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value on a recurring basis at December 31, 2016 are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
Price risk for Loans Held for Sale
|
|
$
|
|
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
4
|
|
To Be Announced securities
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
37
|
|
Interest rate lock commitments
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
45
|
|
|
$
|
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value on a recurring basis at June 30, 2016 are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
Price risk for Loans Held for Sale
|
|
$
|
|
|
|
$
|
48
|
|
|
$
|
|
|
|
$
|
48
|
|
To Be Announced securities
|
|
|
|
|
|
|
166
|
|
|
|
|
|
|
|
166
|
|
Interest rate lock commitments
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
246
|
|
|
$
|
|
|
|
$
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair
value hierarchy used at December 31, 2016 and June 30, 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
|
|
|
$
|
|
|
|
$
|
361
|
|
|
$
|
361
|
|
Real estate owned
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
426
|
|
|
$
|
426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
|
|
|
$
|
|
|
|
$
|
338
|
|
|
$
|
338
|
|
Real estate owned
|
|
|
|
|
|
|
|
|
|
|
115
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
453
|
|
|
$
|
453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
The following tables presents additional quantitative information about assets measured at fair value on a
nonrecurring basis and for which the Bank has utilized Level 3 inputs to determine fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of December 31, 2016
|
|
|
|
Qualitative Information about Level 3 Fair Value Measurements
|
|
(Dollars in thousands)
|
|
Fair Value
|
|
|
Valuation
Techniques
|
|
Unobservable
Input
|
|
Range
(Weighted
Average)
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
361
|
|
|
Appraisal of collateral
(1)
|
|
Liquidation expenses/ borrower negotiations
|
|
|
5.0%-16.3
(11.7
|
%
%)
|
|
|
|
|
|
Other real estate owned
|
|
$
|
65
|
|
|
Appraisal of collateral
(1)
|
|
Liquidation expenses
|
|
|
7.0% to
7.0
(7.0
|
%
%)
|
|
|
|
|
Balances as of June 30, 2016
|
|
|
|
Qualitative Information about Level 3 Fair Value Measurements
|
|
(Dollars in thousands)
|
|
Fair Value
|
|
|
Valuation
Techniques
|
|
Unobservable
Input
|
|
Range
(Weighted
Average)
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
338
|
|
|
Appraisal of collateral
(1)
|
|
Liquidation expenses/ borrower negotiations
|
|
|
5.0%-16.3
(11.2
|
%
%)
|
|
|
|
|
|
Other real estate owned
|
|
$
|
115
|
|
|
Appraisal of collateral
(1)
|
|
Liquidation expenses
|
|
|
7.0% to
8.0
(7.5
|
%
%)
|
(1)
|
Appraisals may be discounted for qualitative factors such as age of appraisal, interior condition of the property, and liquidation expenses. Fair value may also be based on negotiated settlements with the borrowers.
|
33
The estimated fair values of the Banks financial instruments, whether carried at cost or fair value, at
December 31, 2016 and June 30, 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2016
|
|
(Dollars in thousands)
|
|
Carrying
Amount
|
|
|
Estimated Fair
Value
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
Level 1
|
|
|
Significant
Other
Observable
Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
Level 3
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
88,445
|
|
|
$
|
88,445
|
|
|
$
|
88,445
|
|
|
$
|
|
|
|
$
|
|
|
Investment securities
available-for-sale
|
|
|
33,727
|
|
|
|
33,727
|
|
|
|
|
|
|
|
33,727
|
|
|
|
|
|
Investment securities
held-to-maturity
|
|
|
5,688
|
|
|
|
5,781
|
|
|
|
|
|
|
|
5,781
|
|
|
|
|
|
Loans held for sale at fair value
|
|
|
6,181
|
|
|
|
6,181
|
|
|
|
|
|
|
|
6,181
|
|
|
|
|
|
Loans receivable, net
|
|
|
95,713
|
|
|
|
92,985
|
|
|
|
|
|
|
|
|
|
|
|
92,985
|
|
Restricted investment in bank stock
|
|
|
658
|
|
|
|
658
|
|
|
|
|
|
|
|
|
|
|
|
658
|
|
Accrued interest receivable
|
|
|
525
|
|
|
|
525
|
|
|
|
|
|
|
|
525
|
|
|
|
|
|
Price risk for Loans Held for Sale
|
|
|
36
|
|
|
|
36
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
To Be Announced Securities
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
Interest rate lock commitments
|
|
|
315
|
|
|
|
315
|
|
|
|
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Deposits
|
|
$
|
213,088
|
|
|
|
201,283
|
|
|
|
|
|
|
|
201,283
|
|
|
|
|
|
Advances from the FHLB
|
|
|
9,000
|
|
|
|
8,969
|
|
|
|
|
|
|
|
8,969
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
|
1,753
|
|
|
|
1,753
|
|
|
|
|
|
|
|
1,753
|
|
|
|
|
|
Price risk for Loans Held for Sale
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
To Be Announced securities
|
|
|
37
|
|
|
|
37
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
Interest rate lock commitments
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Accrued Interest Payable
|
|
|
15
|
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance
sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
June 30, 2016
|
|
(Dollars in thousands)
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
Level 1
|
|
|
Significant
Other
Observable
Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
Level 3
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,427
|
|
|
$
|
15,427
|
|
|
$
|
15,427
|
|
|
$
|
|
|
|
$
|
|
|
Investment securities
available-for-sale
|
|
|
33,281
|
|
|
|
33,281
|
|
|
|
|
|
|
|
33,281
|
|
|
|
|
|
Investment securities
held-to-maturity
|
|
|
5,825
|
|
|
|
5,941
|
|
|
|
|
|
|
|
5,941
|
|
|
|
|
|
Loans held for sale at fair value
|
|
|
24,676
|
|
|
|
24,676
|
|
|
|
|
|
|
|
24,676
|
|
|
|
|
|
Loans receivable, net
|
|
|
93,450
|
|
|
|
93,907
|
|
|
|
|
|
|
|
|
|
|
|
93,907
|
|
Restricted investment in bank stock
|
|
|
1,108
|
|
|
|
1,108
|
|
|
|
|
|
|
|
|
|
|
|
1,108
|
|
Accrued interest receivable
|
|
|
527
|
|
|
|
527
|
|
|
|
|
|
|
|
527
|
|
|
|
|
|
Price risk for Loans Held for Sale
|
|
|
408
|
|
|
|
408
|
|
|
|
|
|
|
|
408
|
|
|
|
|
|
Interest rate lock commitments
|
|
|
1,084
|
|
|
|
1,084
|
|
|
|
|
|
|
|
1,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Deposits
|
|
$
|
141,771
|
|
|
$
|
138,711
|
|
|
$
|
|
|
|
$
|
138,711
|
|
|
$
|
|
|
Advances from the FHLB
|
|
|
20,000
|
|
|
|
20,040
|
|
|
|
|
|
|
|
20,040
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
|
3,929
|
|
|
|
3,929
|
|
|
|
|
|
|
|
3,929
|
|
|
|
|
|
Price risk for Loans Held for Sale
|
|
|
48
|
|
|
|
48
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
To Be Announced securities
|
|
|
167
|
|
|
|
167
|
|
|
|
|
|
|
|
167
|
|
|
|
|
|
Interest rate lock commitments
|
|
|
32
|
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
Accrued Interest Payable
|
|
|
19
|
|
|
|
19
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance
sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
The following information should not be interpreted as an estimate of the fair value of the entire Bank since a
fair value calculation is only provided for a limited portion of the Banks assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Banks
disclosures and those of other companies may not be meaningful. There were no changes in methodologies or transfers between levels during the six months ended December 31, 2016 and for the year ended June 30, 2016.
The following methods and assumptions were used to estimate the fair values of the Banks financial instruments at December 31, 2016 and
June 30, 2016:
Cash and Cash Equivalents
These
short-term assets are valued at their face value, which approximate fair value.
Investments (Available-
for-
Sale and Held-
to-
Maturity)
Where quoted prices are available in an active market for identical instruments,
investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid U.S. Treasury securities and most equity securities. If quoted market prices are not available, then fair
values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy,
include certain Mortgage Backed Securities (MBS). In cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. Investment
securities classified within Level 3 include certain equity securities that do not have readily available market prices, certain municipal bonds, certain Asset Backed Securities (ABS), and other less liquid investment securities.
Loans Held for Sale at Fair Value
The Bank adopted the
fair value option for its loan held for sale portfolio in order to more accurately reflect the economic value of the mortgages held for sale on the Statements of Financial Condition. All mortgage loans held for sale are carried at fair value.
Interest income on loans held for sale, which totaled $275,000 and $196,000 for the six months ended December 31, 2016 and 2015, respectively, and $113,000 and $84,000 for the three months ended December 31, 2016 and 2015, respectively,
are included in Interest and fees on loans in the Statements of Income.
Changes in fair value of loans held for sale are reported in
non-interest
income in the statements of income and amounted to $(695,000) and $(49,000) for the six months ended December 31, 2016 and 2015, respectively, and $(778,000) and $102,000 for the three months ended
December 31, 2016 and 2015, respectively.
The Banks mortgage loans are generally classified within Level 2 of the valuation hierarchy.
36
The following table reflects the difference between the carrying amount of mortgage loans held for sale, measured
at fair value and the aggregate unpaid principal amount that the Bank is contractually entitled to receive at maturity as of December 31, 2016 and June 30, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale
|
|
Carrying
Amount
|
|
|
Aggregate Unpaid
Principal Balance
|
|
|
Excess Carrying
Amount Over
Aggregate Unpaid
Principal Balance
|
|
|
|
|
|
December 31, 2016
|
|
$
|
6,181
|
|
|
$
|
6,048
|
|
|
$
|
133
|
|
June 30, 2016
|
|
$
|
24,676
|
|
|
$
|
23,848
|
|
|
$
|
828
|
|
The Bank did not have any mortgage loans held for sale recorded at fair value that were 90 or more days past due and on
non-accrual at December 31, 2016.
Interest Rate Lock Commitments (IRLC)
The fair value of the Banks IRLC instruments are based upon the underlying loans measured at fair value on a recurring basis and the probability of such
commitments being exercised. Due to observable market data inputs used by the Bank, the Banks IRLCs are classified within Level 2 of the valuation hierarchy.
Mandatory Sales Commitments for Loans Held for Sale
Fair
values for mandatory sales commitments are based on fair values of the underlying mortgage loans and the probability of such commitments being exercised. Due to the observable inputs used by the Bank, the Banks mandatory sales commitments
(LHS) are classified within Level 2 of the valuation hierarchy.
To Be Announced Securities (TBAs)
TBAs are valued based on forward dealer marks from the Banks approved counterparties. The Bank utilizes a third party market pricing service which
compiles current prices for instruments from market sources, and those prices represent the current executable price. Due to the observable inputs used by the Bank, the Banks TBAs are classified within Level 2 of the valuation hierarchy.
Loan Receivable, Net
Fair values are estimated for
portfolios of loans with similar financial characteristics. For loans that reprice frequently, the carrying value approximates fair value. The fair value of other type of loans is estimated by discounting expected cash flows using the current rates
at which similar loans would be made to borrowers with comparable credit ratings and for similar remaining maturities.
37
Impaired Loans
Impaired loans include those collateral-dependent loans and leases for which the practical expedient under ASC
310-40
was applied, resulting in a fair value adjustment to the loans. Impaired loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or fair value. Fair value is measured based on the value of the collateral
securing these loans less cost to sell and is classified at Level 3 in the fair value hierarchy. The fair value of collateral is based on appraisals performed by qualified licensed appraisers hired by the Bank.
Restricted Investment in Bank Stock
The stock is carried
at cost; which approximates fair value and considers the limited marketability of such securities.
Real Estate Owned (Cost or Fair Value)
Real estate properties acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of
foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. These assets are included in
Level 3 fair value based upon the lowest level of input that is significant to the fair value measurements.
Accrued Interest Receivable and
Accrued Interest Payable
The carrying amount of accrued interest receivable and payable approximates their respective fair values.
Deposits
The fair value of demand deposits, savings
accounts, and money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated discounting the contractual cash flows. The discount rate is estimated using the rates currently
offered for deposits with comparable remaining maturities.
Advances from the FHLB
The fair value of advances is estimated based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently
offered for borrowings with comparable terms, credit, and remaining maturities.
Securities Sold Under Agreements to Repurchase
The fair value of securities sold under agreements to repurchase is estimated based on the discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for borrowings with comparable terms, credit, and remaining maturities.
38
Commitments to Extend Credit
The majority of the Banks commitments to extend credit carry current market interest rates if converted to loans. Because commitments to extend credit
are generally unassignable by either the Bank or the borrower, they only have value to the Bank and the borrower. The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the present creditworthiness of the counterparties.
6. Adoption of Plan of Conversion
On July 20, 2016, the Board of Trustees of the Bank unanimously adopted a Plan of Conversion whereby the Bank will convert from the mutual form of
ownership to a stock form of ownership. HV Bancorp (the Company) will become the stock holding company of the Bank and will offer for sale shares of common stock to certain depositors and certain borrowers of the Bank and potentially
others in a subscription and community offering.
The Plan of Conversion was approved by the FDIC, the Pennsylvania Department of Banking and Securities
and by a majority of the votes eligible to be cast either in person or by proxy by members of the Bank at a special meeting held January 4, 2017.
On
January 11, 2017, the mutual to stock conversion of the Bank was completed and the Company became the parent holding company for the Bank. A total of 2,182,125 shares of common stock were sold to depositors at $10.00 per share through which the
Company received gross offering proceeds of approximately $21.8 million. Shares of the Company began trading on the Nasdaq Capital Market on January 12, 2017.
39
Item 2 Managements Discussion and Analysis of Financial Condition
and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form
10-Q
contains certain forward-looking statements and information relating to the Bank
within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the beliefs of management as well as assumptions made by and information currently available to management. Forward-looking statements can be identified by
the fact that they do not relate strictly to historical or current facts. They often include words like believe, expect, anticipate, estimate, and intend or future or conditional verbs such
as will, should, could, or may and similar expressions or the negative thereof. Certain factors that could cause actual results to differ materially from expected results include, changes in the
interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of the Bank, and changes in the securities markets. Should one or more of these risks or uncertainties
materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to
revise or update any forward-looking statements contained in this Form
10-Q
to reflect future events or developments.
Overview
The Bank provides financial services to
individuals and businesses from our main office in Huntingdon Valley, Pennsylvania, and from our three additional full-service banking offices located in Plumsteadville, Warrington and Huntingdon Valley, Pennsylvania. We also operate a limited
service branch in Philadelphia, Pennsylvania. We have a loan production office located in Warminster, Pennsylvania and a loan origination office in Montgomeryville, Pennsylvania. Our primary market area includes Montgomery, Bucks and Philadelphia
Counties in Pennsylvania. Our principal business consists of attracting retail deposits from the general public in our market area and investing those deposits, together with funds generated from operations and borrowings, primarily in
one-
to four-family residential mortgage loans, commercial real estate loans (including multi-family loans), home equity loans and lines of credit and, to a lesser extent, construction loans. We retain our loans in
portfolio depending on market conditions, but we primarily sell our fixed-rate
one-
to four-family residential mortgage loans in the secondary market. We also invest in various investment securities. Our
revenue is derived principally from interest on loans and investments and loan sales. Our primary sources of funds are deposits, Federal Home Loan Bank advances and principal and interest payments on loans and securities.
Our results of operations depend primarily on our net interest income which is the difference between the interest income we earn on our interest-earning
assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for loan losses,
non-interest
income and
non-interest
expense.
Non-interest
income currently consists primarily of gains recognized from the sale of residential mortgage loans in the secondary market, fees and
service charges on deposit accounts, gain from hedging instruments and sales of securities.
Non-interest
expense currently consists primarily of expenses related to salaries and employee benefits, occupancy,
data processing related operations, professional fees, real estate owned and other expenses.
40
Our results of operations also may be affected significantly by general and local economic and competitive
conditions, changes in market interest rates, governmental policies and actions of regulatory authorities. A complete set of Risk factors are described in the Registration Statement on Form
S-1
(File
No. 333-213537)
declared effective by the Securities and Exchange Commission on November 10, 2016.
Critical Accounting Policies
The accounting and
financial reporting policies of the Bank conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the financial statements require certain estimates,
judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the periods presented. Critical accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies
require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.
Our critical accounting policies involving significant judgments and assumptions used in the preparation of the Financial Statements as of December 31,
2016 and have remained unchanged from the disclosures presented in our Registration Statement on
Form S-1
(file number
333-213537).
The Jumpstart Our Business Startups Act (JOBS Act) contains provisions that, among other things, reduce certain reporting requirements for
qualifying public companies. As an emerging growth company we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are
made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. As of December 31, 2016 and
June 30, 2016, there is not a significant difference in the presentation of our financial statements as compared to other public companies as a result of this transition guidance.
The complete list of Critical Accounting Policies are described in the Registration Statement on Form
S-1
(File
No. 333-213537)
declared effective by the Securities and Exchange Commission on November 10, 2016.
41
Comparison of Statements of Financial Condition at December 31, 2016 and at June 30, 2016
Total Assets
Total assets increased
$57.1 million, or 31.4%, to $239.1 million at December 31, 2016 from $182.0 million at June 30, 2016. The increase was primarily the result of increases of $73.0 million in cash and cash equivalents primarily as a
result of receiving subscriptions of approximately $57.5 million related to the conversion of the Bank from the mutual to the stock form of organization which was completed January 11, 2017.
Cash and cash equivalents
Cash and cash
equivalents increased $73.0 million, or 473.3%, to $88.4 million at December 31, 2016 from $15.4 million at June 30, 2016, primarily as a result of subscriptions received by the Bank relating to the mutual to stock
conversion of the Bank, as previously discussed.
Investment Securities
Investment securities increased by $309,000, or 0.8%, to $39.4 million at December 31, 2016 from $39.1 million at June 30, 2016. The
increase was primarily due to purchases of $5.2 million in new securities, partially offset by sales and principal repayments of $4.2 million. At December 31, 2016, our
held-to-maturity
portion of the securities portfolio, at amortized cost, was $5.7 million, and our
available-for-sale
portion of the securities portfolio, at fair value, was $33.7 million.
Net Loans
Net loans increased $2.2 million,
or 2.4%, to $95.7 million at December 31, 2016 from $93.5 million at June 30, 2016.
One-
to four-family residential real estate loans increased $2.3 million, or 3.2%, to
$74.3 million at December 31, 2016 from $72.0 million at June 30, 2016 as a result of our continued strategic emphasis on growing our adjustable-rate jumbo
one-
to four-family residential
real estate loan portfolio. Commercial real estate loans increased by $900,000 from $11.6 million at June 30, 2016 to $12.5 million at December 31, 2016 as a result of increased demand. Construction loans decreased $200,000 to
$3.0 million at December 31, 2016 from $3.2 million at June 30, 2016 primarily as a result of a payoff of one loan. Home equity loans decreased $800,000 to $5.7 million at December 31, 2016 from $6.5 million at
June 30, 2016 primarily as a result of borrower refinancing.
Loans Held For Sale
Loans held for sale decreased $18.5 million, or 75.0%, to $6.2 million at December 31, 2016 from $24.7 million at June 30, 2016 as the
pipeline of
one-
to four-family residential real estate loans decreased during the six months ended December 31, 2016 due to increases in interest rates and lowered demand for loans due to seasonality.
Deposits
Deposits increased
$71.3 million, or 50.3%, to $213.1 million at December 31, 2016 from $141.8 million at June 30, 2016. Our core deposits (consisting of NOW, money market, pass book and statement and checking accounts) increased by
$74.0 million, or 71.0%, to $178.3 million at December 31, 2016 from $104.3 million at June 30, 2016, primarily as a result of subscriptions received by the Bank related to the mutual to stock conversion of the Bank.
Certificates of deposit decreased $2.7 million, or 7.1%, to $34.8 million at December 31, 2016 from $37.5 million at June 30, 2016. The decrease in certificates of deposit resulted primarily from a $2.0 million
reduction in deposits held by credit unions and banks through deposit listing services.
42
Advances from the Federal Home Loan Bank
Advances from the Federal Home Loan Bank decreased by $11.0 million from $20.0 million at June 30, 2016 to $9.0 million at
December 31, 2016. The reduction was primarily due to the decrease in loan funding requirements, as loans held for sale decreased $18.5 million from $24.7 million at June 30, 2016 to $6.2 million at December 31, 2016.
Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase decreased $2.2 million, or 55.4%, to $1.8 million at December 31, 2016 from $3.9 million at
June 30, 2016 as a result of a reduction in the underlying deposit balances, which are primarily held by title companies.
Total Equity
Total equity decreased $24,000 to $13.0 million at December 31, 2016 as a result of a decrease of $316,000 in accumulated other
comprehensive income for the six months ended December 31, 2016, partially offset by net income of $292,000 for the six months ended December 31, 2016.
Comparison of Statements of Income for the Three Months Ended December 31, 2016 and 2015
General
Net income decreased $79,000, or 67.0%, to
$39,000 for the three months ended December 31, 2016 from $118,000 for the three months ended December 31, 2015. The decrease in net income was primarily due to a reduction in fair value of loans
held-for-sale
of $880,000, and increased losses from hedging instruments of $562,000, which was partially offset by an increase of $1.2 million in gain on sales of loans.
Interest Income
Total interest income increased
$43,000 or 3.3%, to $1.3 million for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015. The increase was primarily the result of a $38,000 increase in interest and fees on loans, a
$31,000 increase in interest on interest-earning deposits and a $28,000 increase in interest and dividends on investments, partially offset by a $54,000 decrease in interest on mortgage-backed securities and collateralized mortgage obligations. The
average balance of our interest-earning assets increased by $30.4 million to $183.7 million for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015 primarily due to growth in
residential loan originations as our mortgage loans held for sale increased from an average balance of $7.6 million for the three months ended December 31, 2015 to $16.1 million for the three months ended December 31, 2016. This
increase was partially offset by a decrease in the average yield on our interest-earning assets which decreased 47 basis points to 2.93% for the three months ended December 31, 2016 as compared to 3.40% for the three months ended
December 31, 2015 as a result of a lower average yield on loans held for sale.
Interest and fees on loans increased $38,000, or 3.5%, to
$1.1 million for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015. This increase resulted from a $12.0 million increase in the average balance of loans to $111.7 million for
the
43
three months ended December 31, 2016 from $99.7 million for the three months ended December 31, 2015, due to our focus on increasing our portfolio of adjustable-rate jumbo
one-
to four-family residential mortgages. However, the increase in interest and fees on loans was partially offset by a 33 basis points decrease in the average yield on loans to 4.06% for the three months ended
December 31, 2016 from 4.39% for the three months ended December 31, 2015, due to
pay-offs
of higher-yielding existing loans during the current low interest rate environment and lower yields earned
on new loan originations.
Interest and dividends on investments, mortgage-backed securities and collateralized mortgage obligations decreased $26,000, or
13.9%, to $161,000 for the three months ended December 31, 2016 from $187,000 for the three months ended December 31, 2015. This decrease was primarily due to a $54,000 decrease in interest on mortgage-backed securities and collateralized
mortgage obligations for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015. There was a $2.9 million decrease in the average balance of investment securities to $36.9 million for the
three months ended December 31, 2016 from $39.8 million for the three months ended December 31, 2015 as a result of proceeds from maturities and repayments of securities
available-for-sale
and $2.1 million in proceeds from securities sales during the three months ended December 31, 2016. However
, t
he average yield on
investment securities increased 9 basis points to 1.74% for the three months ended December 31, 2016 from 1.65% for the three months ended December 31, 2015, due to the current low interest rates on shorter-term securities in our
portfolio, which generally bear interest at lower rates than longer-term securities.
Interest on interest-earning cash and cash equivalents
increased $3,000 to $41,000 for the three months ended December 31, 2016 from $38,000 for the three months ended December 31, 2015. This increase was due to an increase in the average balance of interest-earning deposits of
$21.0 million to $34.1 million for the three months ended December 31, 2016 from $13.1 million for the three months ended December 31, 2015 as a result of the subscriptions from the conversion offering received in December
2016. This increase was partially offset by a decrease in the average yield on interest-earning cash and cash equivalents of 68 basis points to 0.48% for the three months ended December 31, 2016 from 1.16% for the three months ended
December 31, 2015.
Interest Expense
Total interest expense increased $18,000, or 9.68%, to $204,000 for the three months ended December 31, 2016 from $186,000 for the three months ended
December 31, 2015, due to a $19,000 increase in interest on advances from the Federal Home Loan Bank, partially offset by a $1,000 decrease in interest on deposits.
Interest on deposits decreased $1,000, or 0.6%, to $163,000 for the three months ended December 31, 2016 from $164,000 for the three months ended
December 31, 2015 primarily as a result of a reduction in average cost of deposits. The average cost of deposits decreased by 5 basis points to 0.45% for the three months ended December 31, 2016 from 0.50% for the three months ended
December 31, 2015, due primarily to the decrease in the average cost of certificates of deposit. The average cost of certificates of deposit decreased by 2 basis points to 0.98% during the three months ended December 31, 2016 as compared
to 1.00% for the three months ended December 31, 2015, reflecting downward repricing in the current low interest rate environment. This was partially offset by an increase in the average balance of interest-bearing deposits, which increased by
$15.9 million to $146.3 million during the three months ended December 31, 2016 as compared to $130.4 million for the prior year period, primarily as a result of a $19.8 million increase in the average balance of our core
deposit accounts, which was partially offset by a $3.9 million decrease in the average balance of our certificates of deposit. The change in the mix of
44
deposits was due to inflows from the conversion subscriptions received in December 2016 reflected in the increase in the average balance of NOW accounts, and our decision not to compete with
other banks that offer higher rates on term deposits.
Interest on advances from the Federal Home Loan Bank increased $19,000 for the three months ended
December 31, 2016 from $21,000 for the three months ended December 31, 2015 as a result of an increase in the average balance of Federal Home Loan Bank advances. The average balance of Federal Home Loan Bank advances increased by
$11.1 million to $19.1 million during the three months ended December 31, 2016 as compared to the three months ended December 31, 2015 due to an increase in loan funding requirements. This increase was partially offset by a
decrease in the average cost of Federal Home Loan Bank advances which decreased by 20 basis points to 0.84% for the three months ended December 31, 2016 from 1.04% for the three months ended December 31, 2015, due primarily to decreases in
advance rates.
Net Interest Income
Net
interest income increased $25,000, or 2.2%, to $1.1 million for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015 as a result of an increase in our average net interest-earning assets
which increased to $183.7 million for the three months ended December 31, 2016 from $153.3 million for the three months ended December 31, 2015, primarily as a result of an increase in average balances of cash and cash
equivalents which increased $21.0 million from $13.1 million for the three months ended December 31, 2015 to $34.1 million for the three months ended December 31, 2016 due to the inflow of cash from stock conversion
subscriptions during the three months ended December 31, 2016. Our net interest spread decreased 43 basis points from 2.87% for the three months ended December 31, 2015 to 2.44% for the three months ended December 31, 2016. Our net
interest margin decreased by 42 basis points to 2.49% for the three months ended December 31, 2016 from 2.91% for the three months ended December 31, 2015.
45
Average Balances, Net Interest Income, Yields Earned and Rates Paid
The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well
as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Average
Balance
|
|
|
Interest
Income
Expense
|
|
|
Yield
/Cost
|
|
|
Average
Balance
|
|
|
Interest
Income
Expense
|
|
|
Yield
/Cost
|
|
|
|
|
|
|
|
|
Interest earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (1)
|
|
$
|
111,659
|
|
|
$
|
1,132
|
|
|
|
4.06
|
%
|
|
$
|
99,723
|
|
|
$
|
1,094
|
|
|
|
4.39
|
%
|
Cash and cash equivalents
|
|
|
34,069
|
|
|
|
41
|
|
|
|
0.48
|
%
|
|
|
13,094
|
|
|
|
38
|
|
|
|
1.16
|
%
|
Investment securities
|
|
|
36,932
|
|
|
|
161
|
|
|
|
1.74
|
%
|
|
|
39,824
|
|
|
|
164
|
|
|
|
1.65
|
%
|
Restricted Investment in bank stock
|
|
|
1,078
|
|
|
|
12
|
|
|
|
4.45
|
%
|
|
|
640
|
|
|
|
7
|
|
|
|
4.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets
|
|
|
183,738
|
|
|
|
1,346
|
|
|
|
2.93
|
%
|
|
|
153,281
|
|
|
|
1,303
|
|
|
|
3.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets
|
|
|
9,264
|
|
|
|
|
|
|
|
|
|
|
|
7,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
193,002
|
|
|
|
|
|
|
|
|
|
|
$
|
160,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Now accounts
|
|
$
|
44,430
|
|
|
$
|
23
|
|
|
|
0.21
|
%
|
|
$
|
29,673
|
|
|
$
|
11
|
|
|
|
0.15
|
%
|
Money market deposit accounts
|
|
|
24,716
|
|
|
|
19
|
|
|
|
0.31
|
%
|
|
|
24,788
|
|
|
|
17
|
|
|
|
0.27
|
%
|
Passbooks and statement savings accounts
|
|
|
34,954
|
|
|
|
26
|
|
|
|
0.30
|
%
|
|
|
33,325
|
|
|
|
25
|
|
|
|
0.30
|
%
|
Checking accounts
|
|
|
6,740
|
|
|
|
9
|
|
|
|
0.53
|
%
|
|
|
3,233
|
|
|
|
13
|
|
|
|
1.61
|
%
|
Certificate of deposit
|
|
|
35,434
|
|
|
|
86
|
|
|
|
0.98
|
%
|
|
|
39,368
|
|
|
|
98
|
|
|
|
1.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
146,274
|
|
|
$
|
163
|
|
|
|
0.45
|
%
|
|
$
|
130,387
|
|
|
$
|
164
|
|
|
|
0.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal home loan bank advances
|
|
|
19,109
|
|
|
|
40
|
|
|
|
0.84
|
%
|
|
|
8,043
|
|
|
|
21
|
|
|
|
1.04
|
%
|
Securities sold under agreements to repurchase
|
|
|
1,925
|
|
|
|
1
|
|
|
|
0.21
|
%
|
|
|
1,927
|
|
|
|
1
|
|
|
|
0.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
$
|
167,308
|
|
|
$
|
204
|
|
|
|
0.49
|
%
|
|
$
|
140,357
|
|
|
$
|
186
|
|
|
|
0.53
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking
|
|
|
11,494
|
|
|
|
|
|
|
|
|
|
|
|
7,856
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
1,325
|
|
|
|
|
|
|
|
|
|
|
|
989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
180,127
|
|
|
|
|
|
|
|
|
|
|
$
|
149,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
12,875
|
|
|
|
|
|
|
|
|
|
|
|
11,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
193,002
|
|
|
|
|
|
|
|
|
|
|
$
|
160,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
1,142
|
|
|
|
|
|
|
|
|
|
|
$
|
1,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (2)
|
|
|
|
|
|
|
|
|
|
|
2.44
|
%
|
|
|
|
|
|
|
|
|
|
|
2.87
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets (3)
|
|
$
|
183,738
|
|
|
|
|
|
|
|
|
|
|
$
|
153,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (4)
|
|
|
|
|
|
|
|
|
|
|
2.49
|
%
|
|
|
|
|
|
|
|
|
|
|
2.91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets to average interest-bearing liabilities
|
|
|
109.82
|
%
|
|
|
|
|
|
|
|
|
|
|
109.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes loans held for sale.
|
(2)
|
Interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.
|
(3)
|
Net interest earning assets represent total interest-earning assets less total interest-bearing liabilities.
|
(4)
|
Net interest margin represents net interest income divided by total average interest-earning assets.
|
46
Rate/ Volume Analysis
The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects
attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns.
For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended December 31, 2016 and 2015
|
|
Increase (Decrease) Due to
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
Increase
(Decrease)
|
|
Interest-Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
105
|
|
|
$
|
(67
|
)
|
|
$
|
38
|
|
Cash and cash equivalents
|
|
|
5
|
|
|
|
(2
|
)
|
|
|
3
|
|
Investment securities
|
|
|
(15
|
)
|
|
|
12
|
|
|
|
(3
|
)
|
Restricted investment in bank stock
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
$
|
100
|
|
|
$
|
(57
|
)
|
|
$
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Bearing-Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
12
|
|
Money market deposit accounts
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Passbook and statement savings accounts
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Checking accounts
|
|
|
(11
|
)
|
|
|
7
|
|
|
|
(4
|
)
|
Certificates of deposits
|
|
|
(10
|
)
|
|
|
(2
|
)
|
|
|
(12
|
)
|
Federal Home Loan Bank advances
|
|
|
22
|
|
|
|
(3
|
)
|
|
|
19
|
|
Securities sold under agreements to repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income
|
|
$
|
91
|
|
|
$
|
(66
|
)
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
We establish a provision for loan losses, which is charged to operations, in order to maintain the allowance for loan losses at a level we consider necessary
to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimated at the balance sheet date. In determining the level of the allowance for loan losses, we consider past and current loss experience, evaluations of
real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrowers ability to repay a loan and the levels of
non-performing
loans. The amount
of the allowance is based on estimates, and actual losses may vary from such estimates as more information becomes available or economic conditions change.
47
This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision
as circumstances change as more information becomes available. The allowance for loan losses is assessed on a quarterly basis and provisions are made for loan losses as required in order to maintain the allowance.
Provision for loan losses increased by $9,000 to $12,000 for the three months ended December 31, 2016, from a provision of $3,000 for the three months
ended December 31, 2015 as a result of an increase in required specific reserves of $3,000 and an increase in the general reserve due to an increase in loans outstanding. We recorded charge-offs of $2,000 and recoveries of $3,000 for the three
months ended December 31, 2016. We recorded charge-offs of $1,000 and no recoveries for the three months ended December 31, 2015.
Non-Interest
Income
Non-interest
income decreased $286,000 to $878,000
for the three months ended December 31, 2016 from $1.2 million for the three months ended December 31, 2015. The decrease was primarily related to a decrease of $880,000 in the change in fair value of loans held for sale and an
increase of net losses from hedging instruments of $562,000. These losses were partially offset by an increase of $1.2 million in our gain on sale of loans. Loss from hedging instruments increased $562,000 to $560,000 for the three months ended
December 31, 2016 from a gain of $2,000 for the three months ended December 31, 2015 due to a higher interest rate environment and increased volume of locked loans associated with hedging. The offset to the losses incurred from the hedging
instruments is realized in the increased value of the loan when it is committed to the investor in the secondary market. Gain on sales of loans, net increased $1.2 million, or 119.30%, to $2.1 million for the three months ended
December 31, 2016 from $974,000 for the three months ended December 31, 2015 primarily as a result of an increase in premiums earned based on the increase in the amount of loans sold from $32.1 million for the three months ended
December 31, 2015 to $62.0 million for the three months ended December 31, 2016.
Non-Interest
Expense
Non-interest
expense decreased $101,000, or 4.8%, to $2.0 million for the three months ended
December 31, 2016 from $2.1 million for the three months ended December 31, 2015. The decrease primarily reflected a $73,000 decrease in other expenses primarily due to costs incurred with a potential merger of $54,000 incurred during
the three months ended December 31, 2015 that did not recur for the same period during 2016. Real estate owned expense decreased $64,000, or 92.8%, to $5,000 for the three months ended December 31, 2016 from $69,000 for the three months
ended December 31, 2015
due to reductions in other real estate owned, which was $65,000 at December 31, 2016 and $449,000 at December 31, 2015.
Income Tax (Benefit) Expense
Income tax (benefit)
was $(38,000) for the three months ended December 31, 2016 as compared to income tax expense of $52,000 for the three months ended December 31, 2015. The reduction in income tax expense was primarily due to adjustments to reconcile the
Banks final
year-end
tax provision to income tax returns, as filed.
48
Comparison of Statements of Income for the Six Months Ended December 31, 2016 and 2015
General
Net income decreased $69,000, or 19.1%, to
$292,000 for the six months ended December 31, 2016 from $361,000 for the six months ended December 31, 2015. The decrease in net income was primarily due to an increase in
non-interest
expense of
$190,000 primarily from increases in salaries and employee benefits of $110,000 and data processing related operations of $42,000 and an increase in provision for loan losses of $179,000.
Interest Income
Total interest income increased
$147,000 or 5.7%, to $2.7 million for the six months ended December 31, 2016 from $2.6 million for the six months ended December 31, 2015. The increase was primarily the result of a $159,000 increase in interest and fees on
loans, partially offset by a $50,000 decrease in interest on investment securities. The average balance of our interest-earning assets increased by $22.5 million to $177.5 million for the six months ended December 31, 2016 as compared
to the six months ended December 31, 2015 primarily due to growth in residential loan originations as our mortgage loans held for sale increased from an average balance of $9.7 million for the six months ended December 31, 2015 to
$19.1 million for the six months ended December 31, 2016. Also effecting the growth in average assets was the increase in cash and cash equivalents as a result of receiving subscriptions of approximately $57.5 million from the
conversion of the Bank from a mutual to the stock form of organization. The effect of these increases in average interest earning balances were partially offset by a decrease in the average yield on our interest-earning assets which decreased 25
basis points to 3.10% for the six months ended December 31, 2016 as compared to 3.35% for the six months ended December 31, 2015 primarily as a result of a lower average yield on loans.
Interest and fees on loans increased $159,000, or 7.3%, to $2.3 million for the six months ended December 31, 2016 from $2.2 million for the
six months ended December 31, 2015. This increase resulted from a $16.2 million increase in the average balance of loans to $114.5 million for the six months ended December 31, 2016 from $98.4 million for the six months
ended December 31, 2015, due to our focus on increasing our portfolio of adjustable-rate jumbo
one-
to four-family residential mortgages. However, the increase in interest and fees on loans was partially
offset by a 35 basis points decrease in the average yield on loans to 4.08% for the six months ended December 31, 2016 from 4.43% for the six months ended December 31, 2015, due to
pay-offs
of
higher-yielding existing loans during the current low interest rate environment and lower yields earned on new loan originations.
Interest and dividends
on investments, mortgage-backed securities and collateralized mortgage obligations decreased $50,000, or 13.3%, to $326,000 for the six months ended December 31, 2016 from $376,000 for the six months ended December 31, 2015. This decrease
was primarily due to a $89,000 decrease in interest on mortgage-backed securities and collateralized mortgage obligations and partially offset by an increase of $39,000 in other investments for the six months ended December 31, 2016 as compared
to the six months ended December 31, 2015. The average yield on investment securities decreased 12 basis points to 1.64% for the six months ended December 31, 2016 from 1.76% for the six months ended December 31, 2015, due to the
current low interest rates on shorter-term securities in our portfolio, which generally bear interest at lower rates than longer-term securities.
In addition to the decrease in the average yield on investment securities, there was a
$3.8 million decrease in the average balance of investment securities to $37.4 million for the six months ended December 31, 2016 from $41.2 million for the six months ended December 31, 2015 as a result of proceeds from
maturities and repayments of securities
available-for-sale
of $2.1 million and $2.1 million in proceeds from securities sales during the six months ended
December 31, 2016.
49
Interest on interest-earning deposits increased $38,000, or 84.4%, to $83,000 for the six months ended
December 31, 2016 from $45,000 for the six months ended December 31, 2015 due to an increase in the average yield on interest-earning deposits of 7 basis points to 0.68% for the six months ended December 31, 2016 from 0.61% for the
six months ended December 31, 2015. In addition to the increase in the average yield on interest-earning deposits, there was also an increase in the average balance of interest-earning deposits of $9.7 million to $24.5 million for the
six months ended December 31, 2016 from $14.8 million for the six months ended December 31, 2015, primarily as the result of the previously noted conversion subscription.
Interest Expense
Total interest expense increased
$42,000, or 11.2%, to $417,000 for the six months ended December 31, 2016 from $375,000 for the six months ended December 31, 2015, due primarily to a $48,000 increase in interest on advances from the Federal Home Loan Bank, partially
offset by a $6,000 decrease in interest on deposits.
Interest on deposits decreased $6,000, or 1.8%, to $329,000 for the six months ended
December 31, 2016 from $335,000 for the six months ended December 31, 2015 due to a decrease in the average cost of deposits, offset by an increase in the average balance of deposits. The average cost of deposits decreased by 3 basis
points to 0.47% for the six months ended December 31, 2016 from 0.50% for the six months ended December 31, 2015, due primarily to the decrease in the average cost of certificates of deposit. The average cost of certificates of deposit
decreased by 7 basis points to 1.03% during the six months ended December 31, 2016 as compared to 1.10% for the six months ended December 31, 2015, reflecting downward repricing in the current low interest rate environment. The average
balance of interest-bearing deposits increased by $7.0 million to $139.9 million during the six months ended December 31, 2016 as compared to $132.9 million for the prior year period primarily as a result of a $10.9 million
increase in the average balance of our core deposit accounts, partially offset by a $3.9 million decrease in the average balance of our certificates of deposit. The change in the mix of deposits was due to the current low interest rate
environment and our decision not to compete with other banks that offer higher rates on term deposits.
Interest on advances from the Federal Home Loan
Bank increased $48,000 to $86,000 for the six months ended December 31, 2016 from $38,000 for the six months ended December 31, 2015 as a result of an increase in the average balance of Federal Home Loan Bank advances, partially offset by
a decrease in the average cost of Federal Home Loan Bank advances. The average balance of Federal Home Loan Bank advances increased by $12.1 million to $19.6 million during the six months ended December 31, 2016 as compared to the six
months ended December 31, 2015 due to an increase in loan funding requirements. This increase was partially offset by a decrease in the average cost of Federal Home Loan Bank advances which decreased by 13 basis points to 0.88% for the six
months ended December 31, 2016 from 1.01% for the six months ended December 31, 2015, due primarily to decreases in advance rates.
Net
Interest Income
Net interest income increased $105,000, or 4.7%, to $2.3 million for the six months ended December 31, 2016 from
$2.2 million for the six months ended December 31, 2015 as we increased our interest income at a greater rate than our interest expense. Our net interest-earning assets increased to $177.4 million for the six months ended
December 31, 2016 from $155.0 million for the six months ended December 31, 2015. Our interest rate spread decreased by 25 basis points to
50
2.58% for the six months ended December 31, 2016 from 2.83% for the six months ended December 31, 2015. Our net interest margin decreased by 24 basis points to 2.63% for the six months
ended December 31, 2016 from 2.87% for the six months ended December 31, 2015.
51
Average Balances, Net Interest Income, Yields Earned and Rates Paid
The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well
as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Average
Balance
|
|
|
Interest
Income
Expense
|
|
|
Yield
/Cost
|
|
|
Average
Balance
|
|
|
Interest
Income
Expense
|
|
|
Yield
/Cost
|
|
|
|
|
|
|
|
|
Interest earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (1)
|
|
$
|
114,495
|
|
|
$
|
2,338
|
|
|
|
4.08
|
%
|
|
$
|
98,369
|
|
|
$
|
2,179
|
|
|
|
4.43
|
%
|
Cash and cash equivalents
|
|
|
24,525
|
|
|
|
83
|
|
|
|
0.68
|
%
|
|
|
14,805
|
|
|
|
45
|
|
|
|
0.61
|
%
|
Investment securities
|
|
|
37,365
|
|
|
|
306
|
|
|
|
1.64
|
%
|
|
|
41,217
|
|
|
|
363
|
|
|
|
1.76
|
%
|
Restricted Investment in bank stock
|
|
|
1,092
|
|
|
|
20
|
|
|
|
3.66
|
%
|
|
|
629
|
|
|
|
13
|
|
|
|
4.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets
|
|
|
177,477
|
|
|
|
2,747
|
|
|
|
3.10
|
%
|
|
|
155,020
|
|
|
|
2,600
|
|
|
|
3.35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets
|
|
|
8,374
|
|
|
|
|
|
|
|
|
|
|
|
7,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
185,851
|
|
|
|
|
|
|
|
|
|
|
$
|
162,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Now accounts
|
|
$
|
37,304
|
|
|
$
|
41
|
|
|
|
0.22
|
%
|
|
$
|
30,344
|
|
|
$
|
22
|
|
|
|
0.15
|
%
|
Money market deposit accounts
|
|
|
24,973
|
|
|
|
38
|
|
|
|
0.30
|
%
|
|
|
25,076
|
|
|
|
34
|
|
|
|
0.27
|
%
|
Passbooks and statement savings accounts
|
|
|
34,864
|
|
|
|
52
|
|
|
|
0.30
|
%
|
|
|
33,849
|
|
|
|
52
|
|
|
|
0.31
|
%
|
Checking accounts
|
|
|
6,169
|
|
|
|
10
|
|
|
|
0.32
|
%
|
|
|
3,206
|
|
|
|
4
|
|
|
|
0.25
|
%
|
Certificate of deposit
|
|
|
36,565
|
|
|
|
188
|
|
|
|
1.03
|
%
|
|
|
40,429
|
|
|
|
223
|
|
|
|
1.10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
139,875
|
|
|
$
|
329
|
|
|
|
0.47
|
%
|
|
$
|
132,904
|
|
|
$
|
335
|
|
|
|
0.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal home loan bank advances
|
|
|
19,554
|
|
|
|
86
|
|
|
|
0.88
|
%
|
|
|
7,522
|
|
|
|
38
|
|
|
|
1.01
|
%
|
Securities sold under agreements to repurchase
|
|
|
1,955
|
|
|
|
2
|
|
|
|
0.20
|
%
|
|
|
2,031
|
|
|
|
2
|
|
|
|
0.20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
$
|
161,384
|
|
|
$
|
417
|
|
|
|
0.52
|
%
|
|
$
|
142,457
|
|
|
$
|
375
|
|
|
|
0.53
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking
|
|
|
10,371
|
|
|
|
|
|
|
|
|
|
|
|
7,522
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
1,135
|
|
|
|
|
|
|
|
|
|
|
|
764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
172,890
|
|
|
|
|
|
|
|
|
|
|
$
|
150,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
12,961
|
|
|
|
|
|
|
|
|
|
|
|
11,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
185,851
|
|
|
|
|
|
|
|
|
|
|
$
|
162,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
2,330
|
|
|
|
|
|
|
|
|
|
|
$
|
2,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (2)
|
|
|
|
|
|
|
|
|
|
|
2.58
|
%
|
|
|
|
|
|
|
|
|
|
|
2.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets (3)
|
|
$
|
177,477
|
|
|
|
|
|
|
|
|
|
|
$
|
155,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (4)
|
|
|
|
|
|
|
|
|
|
|
2.63
|
%
|
|
|
|
|
|
|
|
|
|
|
2.87
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets to average interest-bearing liabilities
|
|
|
109.97
|
%
|
|
|
|
|
|
|
|
|
|
|
108.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes loans held for sale.
|
(2)
|
Interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.
|
(3)
|
Net interest earning assets represent total interest-earning assets less total interest-bearing liabilities.
|
(4)
|
Net interest margin represents net interest income divided by total average interest-earning assets.
|
52
Rate/ Volume Analysis
The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects
attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns.
For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended December 31, 2016 and 2015
|
|
Increase (Decrease) Due to
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total Increase
(Decrease)
|
|
Interest-Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
303
|
|
|
$
|
(144
|
)
|
|
$
|
159
|
|
Cash and cash equivalents
|
|
|
33
|
|
|
|
5
|
|
|
|
38
|
|
Investment securities
|
|
|
(33
|
)
|
|
|
(24
|
)
|
|
|
(57
|
)
|
Restricted investment in bank stock
|
|
|
8
|
|
|
|
(1
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
$
|
311
|
|
|
$
|
(164
|
)
|
|
$
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Bearing-Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
3
|
|
|
$
|
16
|
|
|
$
|
19
|
|
Money market deposit accounts
|
|
|
|
|
|
|
4
|
|
|
|
4
|
|
Passbook and statement savings accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking accounts
|
|
|
(39
|
)
|
|
|
45
|
|
|
|
6
|
|
Certificates of deposits
|
|
|
(23
|
)
|
|
|
(12
|
)
|
|
|
(35
|
)
|
Federal Home Loan Bank advances
|
|
|
69
|
|
|
|
(21
|
)
|
|
|
48
|
|
Securities sold under agreements to repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
$
|
10
|
|
|
$
|
32
|
|
|
$
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income
|
|
$
|
301
|
|
|
$
|
(196
|
)
|
|
$
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
We establish a provision for loan losses, which is charged to operations, in order to maintain the allowance for loan losses at a level we consider necessary
to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimated at the balance sheet date. In determining the level of the allowance for loan losses, we consider past and current loss experience, evaluations of
real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrowers ability to repay a loan and the levels of
non-performing
loans. The amount
of the allowance is based on estimates, and actual losses may vary from such estimates as more information becomes available or economic conditions change.
53
This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision
as circumstances change as more information becomes available. The allowance for loan losses is assessed on a quarterly basis and provisions are made for loan losses as required in order to maintain the allowance.
Provision for loan losses increased by $179,000 to $135,000 for the six months ended December 31, 2016, from a credit to provision of ($44,000) for the
six months ended December 31, 2015. The primary factor that contributed to the increase in the provision for loan losses was a specific loan loss reserve of $96,000 on one residential owner-occupied loan.
Non-performing
loans decreased from $1,145,000 at June 30, 2016 to $1,131,000 as of December 31, 2016, a decrease of $14,000, or 1.2%. We recorded charge-offs of $2,000 and recoveries of $6,000 for
the six months ended December 31, 2016. We recorded charge-offs of $1,000 and no recoveries for the six months ended December 31, 2015.
Non-Interest
Income
Non-interest
income increased $94,000 to
$2.2 million for the six months ended December 31, 2016. The increase was primarily related to an increase of $1.6 million for the net gain on sale of loans, partially offset by a decrease of $646,000 in the change in fair value of
loans held for sale, and an increase in losses from hedging instruments of $832,000. Gain on sale of loans, net increased $1.6 million to $3.7 million for the six months ended December 31, 2016 from $2.1 million for the six
months ended December 31, 2015 primarily as a result of an increase in premiums earned based on the higher interest rate environment, partially offset by a decrease in the amount of loans sold from $78.2 million for the six months ended
December 31, 2015 to $50.3 million for the six months ended December 31, 2016. Loss from hedging instruments increased by $832,000 for the six months ended December 31, 2016 due to a higher interest rate environment and increased
volume of locked loans associated with hedging. The offset to the losses incurred from the hedging instruments is realized in the increased value of the loan when it is committed to the investor in the secondary market. The decrease in the change in
fair value of loans held for sale was due to the decrease in principal balances in loans held for sale. The aggregate unpaid balance of loans held for sale decreased from $23.8 million at June 30, 2016 to $ 6.0 million at
December 31, 2016.
Non-Interest
Expense
Non-interest
expense increased $190,000, or 4.9%, to $4.1 million for the six months ended
December 31, 2016 from $3.9 million for the six months ended December 31, 2015. The increase primarily reflected a $110,000 increase in salaries and employee benefits and a $42,000 increase in data processing related operations.
Salaries and employee benefits increased $110,000, or 5.0%, to $2.3 million for the six months ended December 31, 2016 from $2.2 million for the six months ended December 31, 2015 primarily due to additional personnel added to
our loan production departments (including underwriting, processing, closing and secondary marketing) in fiscal 2016. Data processing related operations increased $42,000, or 17.3%, to $285,000 for the six months ended December 31, 2016 from
$243,000 for the six months ended December 31, 2015
due to vendor incentives received during the six months ended December 31, 2015, which did not recur for the same period in 2016.
Income Tax Expense
Income tax expense was $80,000
for the six months ended December 31, 2016 as compared to income tax expense of $181,000 for the six months ended December 31, 2015. The reduction in income tax expense was primarily due to the reduction in Pennsylvania state taxable
income due to the application of certain state tax deductions during the six months ended December 31, 2016,
54
resulting in a decrease in state tax expense to $35,000 for the six months ended December 31, 2016 compared to the six months ended December 31, 2015. The effective tax rate was 21.5%
for the six months ended December 31, 2016 as compared to 33.4% for the six months ended December 31, 2015.
55
Non-Performing
Assets
We define
non-performing
loans as loans that are either
non-accruing
or
accruing whose payments are 90 days or more past due and
non-accruing
troubled debt
restructurings. Non-performing
assets, including
non-performing
loans and other real estate owned, totaled $1.2 million, or 0.50% of total assets, at December 31, 2016 and $1.3 million, or 0.69% of total assets, at June 30,
2016. The following table sets forth the amounts and categories of our
non-performing
assets at the dates indicated. We had no accruing loans past due 90 days or more at December 31, 2016, June 30,
2016 or 2015.
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
At June 30,
|
|
|
|
(dollars in thousands)
|
|
|
|
2016
|
|
|
2016
|
|
Non-accrual
loans:
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
$
|
801
|
|
|
$
|
818
|
|
Home equity and HELOCs
|
|
|
230
|
|
|
|
227
|
|
Commercial real estate
|
|
|
100
|
|
|
|
100
|
|
Commercial business
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-accrual
loans
|
|
$
|
1,131
|
|
|
$
|
1,145
|
|
|
|
|
Real estate owned
|
|
|
65
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing
assets
|
|
$
|
1,196
|
|
|
$
|
1,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing
loans to total loans
|
|
|
1.18
|
%
|
|
|
1.22
|
%
|
|
|
|
Total
non-performing
loans to total assets
|
|
|
0.47
|
%
|
|
|
0.63
|
%
|
|
|
|
Total
non-performing
assets to total assets
|
|
|
0.50
|
%
|
|
|
0.69
|
%
|
56
Allowance for Loan Losses
The following table sets forth activity in our allowance for loan losses for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Three
Months Ended
December 31,
|
|
|
At or For the Six
Months Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Balance at beginning of period
|
|
$
|
613
|
|
|
$
|
467
|
|
|
$
|
487
|
|
|
$
|
514
|
|
|
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and HELOCs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
|
2
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
Home equity and HELOCs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
3
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net recoveries (charge-offs)
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
4
|
|
|
|
(1
|
)
|
Provision (credit) for loan losses
|
|
|
12
|
|
|
|
3
|
|
|
|
135
|
|
|
|
44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
626
|
|
|
$
|
469
|
|
|
$
|
626
|
|
|
$
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs to average loans outstanding
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
|
|
Allowance for loan losses to
non-performing
loans at end
of period
|
|
|
55.35
|
%
|
|
|
29.18
|
%
|
|
|
55.35
|
%
|
|
|
29.18
|
%
|
|
|
|
|
|
Allowance for loan losses to total loans at end of period
|
|
|
0.65
|
%
|
|
|
0.45
|
%
|
|
|
0.65
|
%
|
|
|
0.45
|
%
|
57
Liquidity and Capital Resources
Liquidity Management
. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity
is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds
from sales, and matured loans and securities. We also have the ability to borrow from the Federal Home Loan Bank of Pittsburgh. Huntingdon Valley Bank had Federal Home Loan Bank of Pittsburgh advances of $9.0 million outstanding with unused
borrowing capacity of $69.5 million as of December 31, 2016. Additionally, at December 31, 2016, we had the ability to borrow $3.0 million from the Atlantic Community Bankers Bank and we maintained a line of credit equal to 95%
of the fair value of collateral held by the Federal Reserve Bank, which was $2.6 million at December 31, 2016. We have not borrowed against the credit lines with the Atlantic Community Bankers Bank and the Federal Reserve Bank as of
December 31, 2016.
The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure
that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we have enough sources of liquidity to satisfy our short and long-term liquidity needs
as of December 31, 2016.
We monitor and adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand;
(2) expected deposit flows; (3) yields available on interest-earning deposits and securities; and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits
and
short-and
intermediate-term securities.
While maturities and scheduled amortization of loans and securities
are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents, which include federal funds sold and
interest-earning deposits in other banks. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At December 31, 2016, cash and cash equivalents totaled
$88.4 million. Securities classified as
available-for-sale,
which provide additional sources of liquidity, totaled $33.7 million at December 31, 2016.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net
cash provided by operating activities was $18.5 million and $3.7 million for the six months ended December 31, 2016 and December 31, 2015, respectively. Net cash used in investing activities, which consists primarily of
disbursements for loans originations and the purchase of securities, offset by principal collections on loans and proceeds from maturing securities, was $3.1 million and $3.4 million for the six months ended December 31, 2016 and
December 31, 2015, respectively. During the six months ended December 31, 2016 and December 31, 2015, we sold $2.1 million and $5.9 million, respectively, in securities
available-for-sale.
Net cash provided by (used in) financing activities, consisting primarily of decreases in deposits and advances from borrowers for taxes and insurance, was $57.7 million for the six
months ended December 31, 2016 and ($334,000) for the six months ended December 31, 2015.
We are committed to maintaining a strong liquidity
position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding
58
commitments. Certificates of deposit due within one year of December 31, 2016, totaled $18.2 million, or 8.5%, of total deposits. If these deposits do not remain with us, we will be
required to seek other sources of funds, including other deposits and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however,
based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.
Capital Management.
Huntingdon Valley Bank is subject to various regulatory capital requirements, including a risk-based capital measure.
The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and
off-balance
sheet items to broad risk
categories. At December 31, 2016, Huntingdon Valley Bank exceeded all regulatory capital requirements and was considered well capitalized under regulatory guidelines.
Regulatory Capital
Information presented for
December 31, 2016 and June 30, 2016, reflects the Basel III capital requirements that became effective January 1, 2015 for the Bank. Under these capital requirements and the regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Banks capital amounts and classifications
are also subject to qualitative judgments by regulators about components,
risk-
weightings and other factors.
Federal bank regulators require the Bank maintain minimum ratios of core capital to adjusted average assets of 4.0%, common equity Tier 1 capital to
risk-weighted
assets of 4.5%, Tier 1 capital to
risk-weighted
assets of 6.0% and total risk-based capital to
risk-weighted
assets of
8.0%. At December 31, 2016, the Bank met all the capital adequacy requirements to which it was subject. At December 31, 2016, the Bank was well capitalized under the regulatory framework for prompt corrective action. To be
well capitalized, the Bank must maintain minimum leverage, common equity Tier 1 risk-based, Tier 1 risk-based and total risk-based capital ratios of at least 5.0%, 6.5%, 8.0% and 10.0%, respectively. Management believes that no
conditions or events have occurred since December 31, 2016 that would materially adversely change the Banks capital classifications.
59
The Banks actual capital amounts and ratios are presented in the table (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Capital Adequacy
Purposes
|
|
|
To Be Well
Capitalized Under
the Prompt
Corrective Action
Provision
|
|
|
|
|
(Dollars in thousands)
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
As of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital (to risk-weighted assets)
|
|
$
|
13,325
|
|
|
|
13.5
|
%
|
|
$
|
³
7,912
|
|
|
|
³
8.0
|
%
|
|
$
|
³
9,890
|
|
|
|
³
10.0
|
%
|
Tier I capital (to risk-weighted assets)
|
|
|
12,699
|
|
|
|
12.9
|
|
|
|
³
5,934
|
|
|
|
³
6.0
|
|
|
|
³
7,912
|
|
|
|
³
8.0
|
|
Tier I capital (to average assets)
|
|
|
12,699
|
|
|
|
6.6
|
|
|
|
³
7,723
|
|
|
|
³
4.0
|
|
|
|
³
9,653
|
|
|
|
³
5.0
|
|
Tier I common equity (to risk-weighted assets)
|
|
|
12,699
|
|
|
|
12.9
|
|
|
|
³
4,451
|
|
|
|
³
4.5
|
|
|
|
³
6,429
|
|
|
|
³
6.5
|
|
|
|
|
|
|
|
|
As of June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital (to risk-weighted assets)
|
|
$
|
13,438
|
|
|
|
12.5
|
%
|
|
$
|
³
8,607
|
|
|
|
³
8.0
|
%
|
|
$
|
³
10,759
|
|
|
|
³
10.0
|
%
|
Tier I capital (to risk-weighted assets)
|
|
|
12,951
|
|
|
|
12.0
|
|
|
|
³
6,455
|
|
|
|
³
6.0
|
|
|
|
³
8,607
|
|
|
|
³
8.0
|
|
Tier I capital (to average assets)
|
|
|
12,951
|
|
|
|
7.6
|
|
|
|
³
6,787
|
|
|
|
³
4.0
|
|
|
|
³
8,483
|
|
|
|
³
5.0
|
|
Tier I common equity (to risk-weighted assets)
|
|
|
12,951
|
|
|
|
12.0
|
|
|
|
³
4,842
|
|
|
|
³
4.5
|
|
|
|
³
6,993
|
|
|
|
³
6.5
|
|
As a licensed mortgagee, the Bank is subject to the rules and regulations of the Department of Housing and Urban Development
(HUD), Federal Housing Authority (FHA) and state regulatory authorities with respect to originating, processing and selling loans. Those rules and regulations, among other things, require the maintenance of minimum net worth
levels (which vary based on the portfolio of FHA loans originated by the Bank). Failure to meet the net worth requirements could adversely impact the ability to originate loans and access secondary markets. As of December 31, 2016 and
June 30, 2016, the Bank maintained the minimum required net worth levels.
The Bank must hold a capital conservation buffer, subject to a
phase-in
from January 1, 2016 through December 31, 2019, above its minimum risk-based capital requirements. As of December 31, 2016,
60
the Bank is required to maintain a capital conservation buffer of 0.625%. The Banks conservation buffer was 5.5% as of December 31, 2016. Failure to maintain the full amount of the
buffer will result in restrictions on the Banks ability to make capital distributions and to pay discretionary bonuses to executive officers. The
phase-in
requires the Bank to increase its capital
conservation buffer from 0.625% as of December 31, 2016 to 2.50% as of December 31, 2019 and thereafter.
Off-Balance
Sheet Arrangements and Contractual Obligations
Commitments.
As a financial services provider, we routinely are a party to various financial instruments with
off-balance-sheet
risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend
credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2016, we had outstanding commitments to originate loans of $14.4 million,
unused lines of credit totaling $8.1 million and no
stand-by
letters of credit outstanding. We anticipate that we will have sufficient funds available to meet our current lending commitments. Certificates
of deposit that are scheduled to mature in less than one year from December 31, 2016 totaled $18.3 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial
portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.
Contractual Obligations.
In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data
processing services, operating leases for equipment, agreements with respect to borrowed funds and deposit liabilities.