HV BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited
Consolidated Financial Statements
1. Organization, Basis of Presentation and Recent Accounting Pronouncements
Organization
HV Bancorp, Inc., a Pennsylvania Corporation (the “Company”) is the 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. 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. Offering costs from the sale of the common stock totaled $1.4 million, resulting in net proceeds of $20.4 million. Shares of the Company began trading on the Nasdaq Capital Market on January 12, 2017. The Company is subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Bank”).
The Bank is a stock savings bank organized under the laws of the Commonwealth of Pennsylvania and is subject to comprehensive regulation and examination by the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking (“PADOB”). The Bank was 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.
Basis of Presentation
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, 2017 have been derived from the audited consolidated financial statements.
These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto contained in the Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission on September 28, 2017
. The results of operations for the three months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending June 30, 2018 or any other period.
The Company has evaluated subsequent events through the date of issuance of the financial statements included herein.
Principles of Consolidation
The unaudited interim consolidated financial statements include accounts of the Company and its wholly-owned subsidiary, the Bank. In January 2017, the mutual to stock conversion of the Bank was completed and the Company became the parent holding company for the Bank. Prior to January 11, 2017, all financial information reflects the Bank’s transactions and balances only. All significant intercompany transactions and balances have been eliminated in consolidation.
6
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.
Recent Accounting Pronouncements
The Company qualifies under the Jumpstart Our Business Startups Act (the “JOBS Act”) as an emerging growth company. As an emerging growth company, the Company 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.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU establishes a comprehensive revenue recognition standard for virtually all industries following U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate and construction industries. The revenue standard’s core principal is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this, the standard requires five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) identify the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies the performance obligation. Three basic transition methods are available - full retrospective, retrospective with certain practical expedients, and a cumulative effect approach. Under the cumulative effect alternative, an entity would apply the new revenue standard only to contracts that are incomplete under legacy U.S. GAAP at the date of initial application and recognize the cumulative effect of the new standard as an adjustment to the opening balance of retained earnings. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date. The guidance in this ASU is now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net). While the ASU does not change the core provisions of Topic 606, it clarifies the implementation guidance on principal versus agent considerations. Namely, the ASU clarifies and offers guidance to help determine when the reporting entity is providing goods or services to a customer itself (i.e., the entity is a principal), or merely arranging for that good or service to be provided by the other party (i.e., the reporting entity is an agent). If the entity is a principal, it recognizes revenue in the gross amount of consideration to which it expects to be entitled in exchange for the specified good or service transferred to the customer. When the reporting entity is an agent, it recognizes revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified good or service to be provided by the other party. An entity is a principal if it controls the specified good or service before that good or service is transferred to a customer. The guidance includes indicators to assist in determining whether the control criteria are met. If a contract with a customer includes more than one specified good or service, an entity could be a principal for some specified goods or services and an agent for others. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing. This ASU clarifies guidance related to identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. The ASU includes targeted improvements based on input the FASB received from the Transition Resource Group for Revenue Recognition and other stakeholders. The ASU seeks to proactively address areas in which diversity in practice potentially could arise, as well as to reduce the cost and complexity of applying certain aspects of the guidance both at
7
implementation and on an ongoing basis. The amendments in this ASU affect the guidance in ASU 2014-09, Revenue from Contracts with Customers, which will be effective for f
iscal years beginning after December 31, 2017 for public entities. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients. This ASU clarifies certain aspects of Topic 606 gui
dance as follows:
|
•
|
The objective of the collectability assessment is to determine whether the contract is valid and represents a substantive transaction on the basis of whether a customer has the ability and intention to pay the promised consideration in exchange for the goods or services transferred.
|
|
•
|
An entity can recognize revenue in the amount of consideration received when it has transferred control of the goods or services, has no additional obligation to transfer goods or services, and the consideration received is nonrefundable.
|
|
•
|
A reporting entity is permitted to make the accounting policy election to exclude amounts collected from customers for all sales taxes from the transaction price.
|
|
•
|
The measurement date is specified as being the contract inception, and variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration.
|
|
•
|
As a practical expedient, a reporting entity is permitted to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented in accordance with Topic 606 when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.
|
|
•
|
The ASU clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application. Accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments in this ASU permit an entity to apply the modified retrospective transition method either to all contracts or only to contracts that are not completed contracts.
|
The amendments in this ASU clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted.
The guidance in the revenue recognition ASUs listed above is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of the various revenue recognition ASUs. The guidance does not apply to revenue associated with financial instruments, including loans and securities. The Company is currently evaluating its non-interest revenue sources and does not anticipate the adoption of these ASUs to have a material impact on its financial condition or results of operations.
In March 2017, the FASB issued Accounting Standards Update (ASU) 2017-08, Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 shortens the amortization for premiums on purchased callable debt securities to the earliest call date (i.e. yield-to-earliest call amortization), rather than amortizing over the full contractual term. The ASU does not change the accounting for securities held at a discount.
The amendments apply to callable debt securities with explicit, noncontingent call features that are callable at fixed prices and on preset dates. If a security may be prepaid based on prepayments of the underlying loans, not because the issuer has exercised a date specific call option, it is excluded from the scope of the new standard. However, for instruments with contingent call features, once the contingency is resolved and the security is callable at a fixed price and preset date, the security is within the scope of
8
the amendment. Further, the amendments apply to all premiums on callable debt secur
ities, regardless of how they were generated.
The amendments require companies to reset the effective yield using the payment terms of the debt security if the call option is not exercised on the earliest call date. If the security has additional call dates, any excess of the amortized cost basis over the amount repayable by the issuer at the next call date should be amortized to the next call date.
The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those years.
For all
other entities, including emerging growth entities as further described above, the amendments are effective for fiscal periods beginning after December 15, 2019, and interim periods within fiscal periods beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company adopted this standard on July 1, 2017 with no material impact on our consolidated financial statements.
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 above) 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 Company’s leases are operating leases and ASU 2016-02 will require us to add them to our balance sheet. The Company’s operating leases are predominantly related to real estate. The Company is currently evaluating other impacts of the pending adoption of the new standard on our consolidated 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
9
(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 mo
difications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.
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 ASU 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 above for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. In anticipation of the ASU, the Company has compiled data for the modeling and entered into a contract with a third party. The Company is currently evaluating the impact of adoption of the new standard on the consolidated financial statements.
2. Investment Securities
Investment securities available-for-sale was comprised of the following:
|
|
September 30, 2017
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
(Dollars in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
U.S. Governmental securities
|
|
$
|
1,477
|
|
|
$
|
11
|
|
|
$
|
(12
|
)
|
|
$
|
1,476
|
|
Corporate notes
|
|
|
6,310
|
|
|
|
15
|
|
|
|
(49
|
)
|
|
|
6,276
|
|
Collateralized mortgage obligations - agency
residential
|
|
|
11,694
|
|
|
|
41
|
|
|
|
(175
|
)
|
|
|
11,560
|
|
Mortgage-backed securities - agency
residential
|
|
|
4,378
|
|
|
|
—
|
|
|
|
(68
|
)
|
|
|
4,310
|
|
Municipal securities
|
|
|
2,065
|
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
2,058
|
|
Bank CDs
|
|
|
5,492
|
|
|
|
13
|
|
|
|
(19
|
)
|
|
|
5,486
|
|
|
|
$
|
31,416
|
|
|
$
|
80
|
|
|
$
|
(330
|
)
|
|
$
|
31,166
|
|
Investment securities held-to-maturity was comprised of the following:
|
|
September 30, 2017
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
(Dollars in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Corporate notes
|
|
$
|
2,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,000
|
|
Municipal securities
|
|
|
9,802
|
|
|
|
97
|
|
|
|
(10
|
)
|
|
|
9,889
|
|
|
|
$
|
11,802
|
|
|
$
|
97
|
|
|
$
|
(10
|
)
|
|
$
|
11,889
|
|
10
Investment securities available-for-sale was comprised of the following:
|
|
June 30, 2017
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
(Dollars in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
U.S. Governmental securities
|
|
$
|
4,330
|
|
|
$
|
26
|
|
|
$
|
(16
|
)
|
|
$
|
4,340
|
|
Corporate notes
|
|
|
11,231
|
|
|
|
59
|
|
|
|
(64
|
)
|
|
|
11,226
|
|
Collateralized mortgage obligations - agency
residential
|
|
|
12,668
|
|
|
|
59
|
|
|
|
(160
|
)
|
|
|
12,567
|
|
Mortgage-backed securities - agency
residential
|
|
|
4,520
|
|
|
|
—
|
|
|
|
(85
|
)
|
|
|
4,435
|
|
Municipal securities
|
|
|
3,517
|
|
|
|
1
|
|
|
|
(11
|
)
|
|
|
3,507
|
|
Bank CDs
|
|
|
6,742
|
|
|
|
23
|
|
|
|
(20
|
)
|
|
|
6,745
|
|
|
|
$
|
43,008
|
|
|
$
|
168
|
|
|
$
|
(356
|
)
|
|
$
|
42,820
|
|
Investment securities held-to-maturity was comprised of the following:
|
|
June 30, 2017
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
(Dollars in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Corporate notes
|
|
$
|
2,000
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
2,012
|
|
Municipal securities
|
|
$
|
9,809
|
|
|
$
|
88
|
|
|
$
|
(13
|
)
|
|
$
|
9,884
|
|
|
|
$
|
11,809
|
|
|
$
|
100
|
|
|
$
|
(13
|
)
|
|
$
|
11,896
|
|
The scheduled maturities of securities available-for-sale and held-to-maturity at September 30, 2017 were as follows:
|
|
September 30, 2017
|
|
|
|
Available-for-Sale
|
|
|
Held-to-Maturity
|
|
|
|
Amortized
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
(Dollars in thousands)
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
Due in one year or less
|
|
$
|
1,550
|
|
|
$
|
1,551
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Due from one to five years
|
|
|
8,571
|
|
|
|
8,562
|
|
|
|
2,641
|
|
|
|
2,645
|
|
Due from after five to ten years
|
|
|
3,750
|
|
|
|
3,711
|
|
|
|
7,492
|
|
|
|
7,555
|
|
Due after ten years
|
|
|
17,545
|
|
|
|
17,342
|
|
|
|
1,669
|
|
|
|
1,689
|
|
|
|
$
|
31,416
|
|
|
$
|
31,166
|
|
|
$
|
11,802
|
|
|
$
|
11,889
|
|
Securities with a fair value of $5.9 million and $8.2 million at September 30, 2017 and June 30, 2017, 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 three months ended September 30, 2017 were $11.2 million. Gross realized gains on such sales were approximately $39,000 and gross realized losses on such sales were $5,000 for the three months ended September 30, 2017.
Proceeds from the sale of available-for-sale securities for the three months ended September 30, 2016 were $1.2 million. Gross realized gains on such sales were approximately $11,000 and gross realized losses on such sales were $0.
11
The following table
s
summarize the unrealized loss positions of securities available-for-sale and held-to-maturity
as of
September 30
, 2017
and June 30, 201
7
:
|
|
September 30, 2017
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
(Dollars in thousands)
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governmental securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
625
|
|
|
$
|
(12
|
)
|
|
$
|
625
|
|
|
$
|
(12
|
)
|
Corporate notes
|
|
|
1,945
|
|
|
|
(10
|
)
|
|
|
2,461
|
|
|
|
(39
|
)
|
|
|
4,406
|
|
|
|
(49
|
)
|
Collateralized mortgage obligations
|
|
|
1,061
|
|
|
|
(23
|
)
|
|
|
4,995
|
|
|
|
(152
|
)
|
|
|
6,056
|
|
|
|
(175
|
)
|
Mortgage-backed securities
|
|
|
3,198
|
|
|
|
(33
|
)
|
|
|
1,107
|
|
|
|
(35
|
)
|
|
|
4,305
|
|
|
|
(68
|
)
|
Municipal securities
|
|
|
851
|
|
|
|
(6
|
)
|
|
|
241
|
|
|
|
(1
|
)
|
|
|
1,092
|
|
|
|
(7
|
)
|
Bank CDs
|
|
|
2,736
|
|
|
|
(12
|
)
|
|
|
243
|
|
|
|
(7
|
)
|
|
|
2,979
|
|
|
|
(19
|
)
|
|
|
$
|
9,791
|
|
|
$
|
(84
|
)
|
|
$
|
9,672
|
|
|
$
|
(246
|
)
|
|
$
|
19,463
|
|
|
$
|
(330
|
)
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
2,435
|
|
|
$
|
(9
|
)
|
|
$
|
501
|
|
|
$
|
(1
|
)
|
|
$
|
2,936
|
|
|
$
|
(10
|
)
|
|
|
$
|
12,226
|
|
|
$
|
(93
|
)
|
|
$
|
10,173
|
|
|
$
|
(247
|
)
|
|
$
|
22,399
|
|
|
$
|
(340
|
)
|
|
|
June 30, 2017
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
(Dollars in thousands)
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governmental securities
|
|
$
|
1,115
|
|
|
$
|
(16
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,115
|
|
|
$
|
(16
|
)
|
Corporate notes
|
|
|
2,045
|
|
|
|
(6
|
)
|
|
|
2,492
|
|
|
|
(58
|
)
|
|
|
4,537
|
|
|
|
(64
|
)
|
Collateralized mortgage obligations
|
|
|
2,218
|
|
|
|
(40
|
)
|
|
|
4,278
|
|
|
|
(120
|
)
|
|
|
6,496
|
|
|
|
(160
|
)
|
Mortgage-backed securities
|
|
|
3,297
|
|
|
|
(46
|
)
|
|
|
1,133
|
|
|
|
(39
|
)
|
|
|
4,430
|
|
|
|
(85
|
)
|
Municipal securities
|
|
|
2,214
|
|
|
|
(9
|
)
|
|
|
238
|
|
|
|
(2
|
)
|
|
|
2,452
|
|
|
|
(11
|
)
|
Bank CDs
|
|
|
2,736
|
|
|
|
(13
|
)
|
|
|
243
|
|
|
|
(7
|
)
|
|
|
2,979
|
|
|
|
(20
|
)
|
|
|
$
|
13,625
|
|
|
$
|
(130
|
)
|
|
$
|
8,384
|
|
|
$
|
(226
|
)
|
|
$
|
22,009
|
|
|
$
|
(356
|
)
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
3,227
|
|
|
$
|
(11
|
)
|
|
$
|
501
|
|
|
$
|
(2
|
)
|
|
$
|
3,728
|
|
|
$
|
(13
|
)
|
|
|
$
|
16,852
|
|
|
$
|
(141
|
)
|
|
$
|
8,885
|
|
|
$
|
(228
|
)
|
|
$
|
25,737
|
|
|
$
|
(369
|
)
|
At September 30, 2017 and June 30, 2017, the investment portfolio included five and ten U.S. Government securities, respectively, with total market values of $1.5 million and $4.3 million, respectively. Of these securities, two and three were in an unrealized loss position as of September 30, 2017 and June 30, 2017, respectively. These securities are zero risk weighted for capital purposes and are guaranteed for repayment of principal and interest. As of September 30, 2017 and June 30, 2017, management found no evidence of Other Than Temporary Impairment (“OTTI”) on any of the U.S. Governmental securities in an unrealized loss position held in the investment securities portfolio. The Company has the ability to hold to maturity and will not be required to sell the securities before a recovery of the cost has occurred.
At September 30, 2017 and June 30, 2017, the investment portfolio included fifteen and twenty-four corporate notes with total market values of $8.3 million and $13.2 million, respectively. Of these securities,
nine were in an unrealized loss position as of September 30, 2017 and June 30, 2017. At the time of purchase and as of September 30, 2017 and June 30, 2017, these bonds continue to maintain investment grade ratings. As of September 30, 2017 and June 30, 2017, management found no evidence of OTTI on any of the corporate notes held in the investment securities portfolio. The Company has the ability to hold to maturity and will not be required to sell the securities before a recovery of the cost has occurred.
At September 30, 2017 and June 30, 2017, the investment portfolio included thirty-four and thirty-five collateralized mortgage obligations (“CMOs”) with total market values of $11.6 million and $12.6 million,
12
respectively
. Of these securities,
twenty-eight
were in an unrealized loss position as of
September 30, 2017 and June 30, 2017
. The CMO p
ortfolio is comprised of 100% agency (FHLMC, FNMA and GNMA) investment grade bonds. As of
September 30, 2017 and June 30, 2017
, management found no evidence of OTTI on any of the CMOs held in the investment securities port
folio. The Company has the ability
to hold to maturity and
will not be required to sell
the securities before a recovery of the cost has occurred.
At September 30, 2017 and June 30, 2017, the investment portfolio included fifteen mortgage backed securities (“MBS”) with a total market value of $4.3 million and $4.4 million, respectively. Of these securities,
twelve were in an unrealized loss position as of September 30, 2017 and June 30, 2017. The MBS portfolio is comprised of 100% agency (FHLMC, FNMA and GNMA) investment grade bonds. As of September 30, 2017 and June 30, 2017, management found no evidence of OTTI on any of the MBS held in the investment securities portfolio. The Company has the ability to hold to maturity and will not be required to sell the securities before a recovery of the cost has occurred.
At September 30, 2017 and June 30, 2017, the investment portfolio included twenty-six and thirty municipal securities with a total market value of $11.9 million and $13.4 million, respectively. Of these securities, eight and thirteen were in an unrealized loss position as of September 30, 2017 and June 30, 2017, respectively. The Company’s municipal portfolio issuers are located in Pennsylvania and at the time of purchase, and as of September 30, 2017 and June 30, 2017, 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 September 30, 2017 and June 30, 2017, management found no evidence of OTTI on any of the municipal securities held in the investment securities portfolio. The Company has the ability to hold to maturity and will not be required to sell the securities before a recovery of the cost has occurred.
At September 30, 2017 and June 30, 2017, the investment portfolio included twenty-two and twenty-six Bank CDs with a total market value of $5.5 million and $6.7 million, respectively. Of these securities, twelve were in an unrealized loss position as of September 30, 2017 and June 30, 2017. The Bank CDs
are fully insured by the FDIC. As of September 30, 2017 and June 30, 2017, management found no evidence of OTTI on any of the Bank CDs held in the investment securities portfolio. The Company has the ability to hold to maturity and will not be required to sell the securities before a recovery of the cost has occurred.
13
3. Loans Receivable
Loans receivable were comprised of the following:
|
|
September 30,
|
|
|
June 30,
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2017
|
|
Residential:
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
115,308
|
|
|
$
|
88,578
|
|
Home equity and HELOCs
|
|
|
5,453
|
|
|
|
5,466
|
|
Commercial:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
12,414
|
|
|
|
12,191
|
|
Commercial business
|
|
|
4,773
|
|
|
|
3,801
|
|
Construction
|
|
|
289
|
|
|
|
2,004
|
|
Consumer
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138,242
|
|
|
|
112,045
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Unearned discounts, origination and commitment
fees and costs
|
|
|
687
|
|
|
|
359
|
|
Allowance for loan losses
|
|
|
(615
|
)
|
|
|
(593
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
138,314
|
|
|
$
|
111,811
|
|
Overdraft deposits are reclassified as consumer loans and are included in the total loans on the statements of financial condition. Overdrafts were $5,000 at September 30, 2017 and June 30, 2017, respectively.
The following tables summarize the activity in the allowance for loan losses by loan class for the three months ended September 30, 2017 and 2016.
Allowance for Loan Losses
|
|
September 30, 2017
|
|
(Dollars in thousands)
|
|
Beginning Balance
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
(Credit)
Provisions
|
|
|
Ending
Balance
|
|
|
Ending
Balance:
Individually
Evaluated
for
Impairment
|
|
|
Ending
Balance:
Collectively
Evaluated
for
Impairments
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
399
|
|
|
$
|
—
|
|
|
$
|
44
|
|
|
$
|
(23
|
)
|
|
$
|
420
|
|
|
$
|
—
|
|
|
$
|
420
|
|
Home equity and HELOCs
|
|
|
38
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
39
|
|
|
|
—
|
|
|
|
39
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
89
|
|
|
|
(22
|
)
|
|
|
—
|
|
|
|
18
|
|
|
|
85
|
|
|
|
—
|
|
|
|
85
|
|
Commercial business
|
|
|
58
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
|
|
|
68
|
|
|
|
13
|
|
|
|
55
|
|
Construction
|
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
Consumer:
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Unallocated reserve
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
593
|
|
|
$
|
(22
|
)
|
|
$
|
45
|
|
|
$
|
(1
|
)
|
|
$
|
615
|
|
|
$
|
13
|
|
|
$
|
602
|
|
14
Allowance for Loan Losses
|
|
September 30, 2016
|
|
(Dollars in thousands)
|
|
Beginning Balance
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
(Credit)
Provisions
|
|
|
Ending
Balance
|
|
|
Ending
Balance:
Individually
Evaluated
for
Impairment
|
|
|
Ending
Balance:
Collectively
Evaluated
for
Impairments
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
314
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
43
|
|
|
$
|
360
|
|
|
$
|
—
|
|
|
$
|
360
|
|
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:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Unallocated reserve
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
487
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
123
|
|
|
$
|
613
|
|
|
$
|
141
|
|
|
$
|
472
|
|
The following tables summarize information in regards to the recorded investment in loans receivable by loan class as of September 30, 2017 and June 30, 2017:
September 30, 2017
|
|
Loan Receivable
|
|
(Dollars in thousands)
|
|
Ending
Balance
|
|
|
Ending
Balance:
Individually
Evaluated
for
Impairment
|
|
|
Ending
Balance:
Collectively
Evaluated
for
Impairment
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
115,308
|
|
|
$
|
1,217
|
|
|
$
|
114,091
|
|
Home equity and HELOCs
|
|
|
5,453
|
|
|
|
190
|
|
|
|
5,263
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
12,414
|
|
|
|
488
|
|
|
|
11,926
|
|
Commercial business
|
|
|
4,773
|
|
|
|
168
|
|
|
|
4,605
|
|
Construction
|
|
|
289
|
|
|
|
—
|
|
|
|
289
|
|
Consumer
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
138,242
|
|
|
$
|
2,063
|
|
|
$
|
136,179
|
|
15
June 30, 2017
|
|
Loan Receivable
|
|
(Dollars in thousands)
|
|
Ending
Balance
|
|
|
Ending
Balance:
Individually
Evaluated
for
Impairment
|
|
|
Ending
Balance:
Collectively
Evaluated
for
Impairment
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
88,578
|
|
|
$
|
1,198
|
|
|
$
|
87,380
|
|
Home equity and HELOCs
|
|
|
5,466
|
|
|
|
196
|
|
|
|
5,270
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
12,191
|
|
|
|
507
|
|
|
|
11,684
|
|
Commercial business
|
|
|
3,801
|
|
|
|
173
|
|
|
|
3,628
|
|
Construction
|
|
|
2,004
|
|
|
|
—
|
|
|
|
2,004
|
|
Consumer
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
112,045
|
|
|
$
|
2,074
|
|
|
$
|
109,971
|
|
The following tables summarize information in regard to impaired loans by loan portfolio class as of September 30, 2017 and June 30, 2017:
|
|
September 30, 2017
|
|
|
June 30, 2017
|
|
(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
|
|
$
|
1,217
|
|
|
$
|
1,217
|
|
|
$
|
—
|
|
|
$
|
1,198
|
|
|
$
|
1,198
|
|
|
$
|
—
|
|
Home equity and HELOCs
|
|
|
190
|
|
|
|
190
|
|
|
|
—
|
|
|
|
196
|
|
|
|
196
|
|
|
|
—
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
488
|
|
|
|
488
|
|
|
|
—
|
|
|
|
514
|
|
|
|
514
|
|
|
|
—
|
|
|
|
|
1,895
|
|
|
|
1,895
|
|
|
|
—
|
|
|
|
1,908
|
|
|
|
1,908
|
|
|
|
—
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
|
168
|
|
|
|
168
|
|
|
|
13
|
|
|
|
173
|
|
|
|
173
|
|
|
|
15
|
|
|
|
|
168
|
|
|
|
168
|
|
|
|
13
|
|
|
|
173
|
|
|
|
173
|
|
|
|
15
|
|
|
|
$
|
2,063
|
|
|
$
|
2,063
|
|
|
$
|
13
|
|
|
$
|
2,081
|
|
|
$
|
2,081
|
|
|
$
|
15
|
|
16
The following table presents additional
information regarding the impaired loans for the three months ended September 30, 2017 and
September 30, 2016:
|
|
Three Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
(Dollars in thousands)
|
|
Average
Record
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Average
Record
Investment
|
|
|
Interest
Income
Recognized
|
|
With no related allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
1,207
|
|
|
$
|
2
|
|
|
$
|
788
|
|
|
$
|
2
|
|
Home equity and HELOCs
|
|
|
191
|
|
|
|
—
|
|
|
|
146
|
|
|
|
—
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
501
|
|
|
|
6
|
|
|
|
555
|
|
|
|
8
|
|
|
|
|
1,899
|
|
|
|
8
|
|
|
|
1,489
|
|
|
|
10
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and HELOCs
|
|
|
—
|
|
|
|
—
|
|
|
|
120
|
|
|
|
—
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
202
|
|
|
|
4
|
|
Commercial business
|
|
|
171
|
|
|
|
2
|
|
|
|
190
|
|
|
|
3
|
|
|
|
|
171
|
|
|
|
2
|
|
|
|
512
|
|
|
|
7
|
|
|
|
$
|
2,070
|
|
|
$
|
10
|
|
|
$
|
2,001
|
|
|
$
|
17
|
|
If these loans were performing under the original contractual rate, interest income on such loans would have increased approximately $22,000 and $16,000 for the three months ended September 30, 2017 and 2016, respectively.
The following table presents nonaccrual loans by classes of the loan portfolio as of September 30, 2017 and June 30, 2017:
|
|
September 30,
|
|
|
June 30,
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2017
|
|
Residential:
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
1,074
|
|
|
$
|
1,198
|
|
Home equity and HELOCs
|
|
|
106
|
|
|
|
110
|
|
Commercial:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
78
|
|
|
|
100
|
|
Commercial business
|
|
|
—
|
|
|
|
—
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,258
|
|
|
$
|
1,408
|
|
Credit quality risk ratings include regulatory classifications of Special Mention, Substandard, Doubtful and Loss. Loans classified as Special Mention have potential weaknesses that deserve management’s 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.
17
The
following tables summarize the
a
ggregate Pass and criticized categories of Special Mention, Substandard and Doubtful within the
Company
’s
internal risk rating system as of
September 30
, 2017
and
June 30
,
201
7
:
|
|
September 30, 2017
|
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
113,811
|
|
|
$
|
—
|
|
|
$
|
1,497
|
|
|
$
|
—
|
|
|
$
|
115,308
|
|
Home equity and HELOCs
|
|
|
5,263
|
|
|
|
—
|
|
|
|
190
|
|
|
|
—
|
|
|
|
5,453
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
11,703
|
|
|
|
379
|
|
|
|
332
|
|
|
|
—
|
|
|
|
12,414
|
|
Commercial business
|
|
|
4,605
|
|
|
|
—
|
|
|
|
168
|
|
|
|
—
|
|
|
|
4,773
|
|
Construction
|
|
|
289
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
289
|
|
Consumer
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
$
|
135,676
|
|
|
$
|
379
|
|
|
$
|
2,187
|
|
|
$
|
—
|
|
|
$
|
138,242
|
|
|
|
June 30, 2017
|
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
87,099
|
|
|
$
|
—
|
|
|
$
|
1,479
|
|
|
$
|
—
|
|
|
$
|
88,578
|
|
Home equity and HELOCs
|
|
|
5,270
|
|
|
|
—
|
|
|
|
196
|
|
|
|
—
|
|
|
|
5,466
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
11,283
|
|
|
|
552
|
|
|
|
356
|
|
|
|
—
|
|
|
|
12,191
|
|
Commercial business
|
|
|
3,628
|
|
|
|
—
|
|
|
|
173
|
|
|
|
—
|
|
|
|
3,801
|
|
Construction
|
|
|
2,004
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,004
|
|
Consumer
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
109,289
|
|
|
$
|
552
|
|
|
$
|
2,204
|
|
|
$
|
—
|
|
|
$
|
112,045
|
|
The following tables present the segments of the loan portfolio summarized by aging categories as of September 30, 2017 and June 30, 2017:
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivable
|
|
|
|
30-59
|
|
|
60-89
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
>90 Days
|
|
|
|
Days
|
|
|
Days
|
|
|
than 90
|
|
|
Total
|
|
|
|
|
|
|
Total Loans
|
|
|
and
|
|
(Dollars in thousands)
|
|
Past Due
|
|
|
Past Due
|
|
|
Days
|
|
|
Past Due
|
|
|
Current
|
|
|
Receivable
|
|
|
Accruing
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
514
|
|
|
$
|
419
|
|
|
$
|
822
|
|
|
$
|
1,755
|
|
|
$
|
113,553
|
|
|
$
|
115,308
|
|
|
$
|
—
|
|
Home equity and HELOCs
|
|
|
—
|
|
|
|
—
|
|
|
|
106
|
|
|
|
106
|
|
|
|
5,347
|
|
|
|
5,453
|
|
|
|
—
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
78
|
|
|
|
78
|
|
|
|
12,336
|
|
|
|
12,414
|
|
|
|
—
|
|
Commercial business
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,773
|
|
|
|
4,773
|
|
|
|
—
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
289
|
|
|
|
289
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
5
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
514
|
|
|
$
|
419
|
|
|
$
|
1,006
|
|
|
$
|
1,939
|
|
|
$
|
136,303
|
|
|
$
|
138,242
|
|
|
$
|
—
|
|
18
|
|
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivable
|
|
|
|
30-59
|
|
|
60-89
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
>90 Days
|
|
|
|
Days
|
|
|
Days
|
|
|
than 90
|
|
|
Total
|
|
|
|
|
|
|
Total Loans
|
|
|
and
|
|
(Dollars in thousands)
|
|
Past Due
|
|
|
Past Due
|
|
|
Days
|
|
|
Past Due
|
|
|
Current
|
|
|
Receivable
|
|
|
Accruing
|
|
Residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
554
|
|
|
$
|
381
|
|
|
$
|
950
|
|
|
$
|
1,885
|
|
|
$
|
86,693
|
|
|
$
|
88,578
|
|
|
$
|
—
|
|
Home equity and HELOCs
|
|
|
—
|
|
|
|
—
|
|
|
|
110
|
|
|
|
110
|
|
|
|
5,356
|
|
|
|
5,466
|
|
|
|
—
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
|
100
|
|
|
|
12,091
|
|
|
|
12,191
|
|
|
|
—
|
|
Commercial business
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,801
|
|
|
|
3,801
|
|
|
|
—
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,004
|
|
|
|
2,004
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
5
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
554
|
|
|
$
|
381
|
|
|
$
|
1,160
|
|
|
$
|
2,095
|
|
|
$
|
109,950
|
|
|
$
|
112,045
|
|
|
$
|
—
|
|
The Company may grant a concession or modification for economic or legal reasons related to a borrower's financial condition that it would not otherwise consider resulting in a modified loan that is then identified as a troubled debt restructuring (“TDR”). The Company 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 Company's allowance for loan losses. TDRs are restored to accrual status when the obligation is brought current, has performed in accordance with the modified 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 Company may identify loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower's 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 September 30, 2017 and June 30, 2017, the Company had two loans identified as TDRs totaling $324,000 and $331,000, respectively. At September 30, 2017 and June 30, 2017, both 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 2017. No additional loan commitments were outstanding to these borrowers at September 30, 2017 and June 30, 2017.
The following table details the Company’s TDRs that are on accrual status and non-accrual status at September 30, 2017:
|
|
As of September 30, 2017
|
|
|
|
Number
|
|
|
Accrual
|
|
|
Non-Accrual
|
|
|
|
|
|
(Dollars in thousands)
|
|
Of Loans
|
|
|
Status
|
|
|
Status
|
|
|
Total TDRs
|
|
Commercial real estate
|
|
|
2
|
|
|
$
|
324
|
|
|
$
|
—
|
|
|
$
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2
|
|
|
$
|
324
|
|
|
$
|
—
|
|
|
$
|
324
|
|
19
The following table details the
Company
’s TDRs that are on accrual
status
and non-accrual status at June 30,
201
7
:
|
|
As of June 30, 2017
|
|
|
|
Number
|
|
|
Accrual
|
|
|
Non-Accrual
|
|
|
|
|
|
(Dollars in thousands)
|
|
Of Loans
|
|
|
Status
|
|
|
Status
|
|
|
Total TDRs
|
|
Commercial real estate
|
|
|
2
|
|
|
$
|
331
|
|
|
$
|
—
|
|
|
$
|
331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2
|
|
|
$
|
331
|
|
|
$
|
—
|
|
|
$
|
331
|
|
The carrying amount of residential mortgage loans in the process of foreclosure was $647,000 and $946,000 at September, 2017 and June 30, 2017, respectively.
4. Derivatives and Risk Management Activities
The Company did not have any derivative instruments designated as hedging instruments or subject to master netting and collateral agreements as of September 30, 2017 and June 30, 2017 and for the three months ended September 30, 2017 and 2016. The following tables summarize the amounts recorded in the Company’s consolidated statements of financial condition for derivatives not designated as hedging instruments as of September 30, 2017 and June 30, 2017 (in thousands):
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
|
Notional
|
|
|
|
Presentation
|
|
Fair Value
|
|
|
Amount
|
|
Interest rate lock commitments
|
|
Mortgage banking derivatives
|
|
$
|
412
|
|
|
$
|
18,539
|
|
Forward loan sales commitments
|
|
Mortgage banking derivatives
|
|
|
148
|
|
|
|
3,518
|
|
To Be Announced securities
|
|
Mortgage banking derivatives
|
|
|
19
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
|
Notional
|
|
|
|
Presentation
|
|
Fair Value
|
|
|
Amount
|
|
Interest rate lock commitments
|
|
Other liabilities
|
|
$
|
15
|
|
|
$
|
2,931
|
|
Forward loan sales commitments
|
|
Other liabilities
|
|
|
14
|
|
|
|
1,264
|
|
To Be Announced securities
|
|
Other liabilities
|
|
|
4
|
|
|
|
3,750
|
|
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
|
Notional
|
|
|
|
Presentation
|
|
Fair Value
|
|
|
Amount
|
|
Interest rate lock commitments
|
|
Mortgage banking derivatives
|
|
$
|
786
|
|
|
$
|
21,389
|
|
Forward loan sales commitments
|
|
Mortgage banking derivatives
|
|
|
179
|
|
|
|
10,864
|
|
To Be Announced securities
|
|
Mortgage banking derivatives
|
|
|
36
|
|
|
|
14,750
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
|
Notional
|
|
|
|
Presentation
|
|
Fair Value
|
|
|
Amount
|
|
Interest rate lock commitments
|
|
Other liabilities
|
|
$
|
19
|
|
|
$
|
4,089
|
|
Forward loan sales commitments
|
|
Other liabilities
|
|
|
37
|
|
|
|
3,713
|
|
To Be Announced securities
|
|
Other liabilities
|
|
|
8
|
|
|
|
2,750
|
|
20
The following table summarize
s
the amounts recorded in the
Company
’s
consolidated
statements of
i
ncome
for derivative instruments not designated as hedging instruments for the
three
months ended
September 30
, 2017 and
September 30,
2016
(in thousands):
|
|
|
|
Gain/(Loss)
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Consolidated Statements of Income Presentation
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
Interest rate lock commitments
|
|
Gain from hedging Instruments
|
|
$
|
(369
|
)
|
|
$
|
217
|
|
Forward loan sales commitments
|
|
Loss from hedging instruments
|
|
|
(8
|
)
|
|
|
(345
|
)
|
To Be Announced securities
|
|
Loss from hedging instruments
|
|
|
(13
|
)
|
|
|
(251
|
)
|
|
|
Total loss from hedging instruments
|
|
$
|
(390
|
)
|
|
$
|
(379
|
)
|
5.
Fair Value of Financial Instruments
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. 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 Company’s 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 Company’s financial instruments; however, 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 Company 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 Company 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 on unadjusted 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.
21
Level 2 – Valuation is based on inputs other than quoted price
s 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 o
bservable 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.
The incorporation of counterparty credit risk did not have significant impact on the valuation of assets and liabilities recorded at fair value as of September 30, 2017 or June 30, 2017.
Assets measured at fair value on a recurring basis at September 30, 2017 and June 30, 2017 are summarized below:
|
|
September 30, 2017
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. governmental securities
|
|
$
|
—
|
|
|
$
|
1,476
|
|
|
$
|
—
|
|
|
$
|
1,476
|
|
Corporate notes
|
|
|
—
|
|
|
|
5,294
|
|
|
|
982
|
|
|
|
6,276
|
|
Collateralized mortgage obligations - agency
residential
|
|
|
—
|
|
|
|
11,560
|
|
|
|
—
|
|
|
|
11,560
|
|
Mortgage-backed securities - agency
residential
|
|
|
—
|
|
|
|
4,310
|
|
|
|
—
|
|
|
|
4,310
|
|
Municipal securities
|
|
|
—
|
|
|
|
2,058
|
|
|
|
—
|
|
|
|
2,058
|
|
Bank CDs
|
|
|
—
|
|
|
|
5,243
|
|
|
|
243
|
|
|
|
5,486
|
|
Loans held for sale
|
|
|
—
|
|
|
|
10,535
|
|
|
|
—
|
|
|
|
10,535
|
|
Interest rate lock commitments
|
|
|
—
|
|
|
|
—
|
|
|
|
412
|
|
|
|
412
|
|
Forward loan sales commitments
|
|
|
—
|
|
|
|
148
|
|
|
|
—
|
|
|
|
148
|
|
To Be Announced securities
|
|
|
—
|
|
|
|
19
|
|
|
|
—
|
|
|
|
19
|
|
|
|
June 30, 2017
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. governmental securities
|
|
$
|
—
|
|
|
$
|
4,340
|
|
|
$
|
—
|
|
|
$
|
4,340
|
|
Corporate notes
|
|
|
—
|
|
|
|
10,258
|
|
|
|
968
|
|
|
|
11,226
|
|
Collateralized mortgage obligations - agency
residential
|
|
|
—
|
|
|
|
12,567
|
|
|
|
—
|
|
|
|
12,567
|
|
Mortgage-backed securities - agency
residential
|
|
|
—
|
|
|
|
4,435
|
|
|
|
—
|
|
|
|
4,435
|
|
Municipal securities
|
|
|
—
|
|
|
|
3,507
|
|
|
|
—
|
|
|
|
3,507
|
|
Bank CDs
|
|
|
—
|
|
|
|
6,502
|
|
|
|
243
|
|
|
|
6,745
|
|
Loans held for sale
|
|
|
—
|
|
|
|
12,784
|
|
|
|
—
|
|
|
|
12,784
|
|
Interest rate lock commitments
|
|
|
—
|
|
|
|
—
|
|
|
|
786
|
|
|
|
786
|
|
Forward loan sales commitments
|
|
|
—
|
|
|
|
179
|
|
|
|
—
|
|
|
|
179
|
|
To Be Announced securities
|
|
|
—
|
|
|
|
36
|
|
|
|
—
|
|
|
|
36
|
|
Liabilities measured at fair value on a recurring basis at September 30, 2017 are summarized below.
22
|
|
September 30, 2017
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Interest rate lock commitments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
15
|
|
Forward loan sales commitments
|
|
|
—
|
|
|
|
14
|
|
|
|
—
|
|
|
|
14
|
|
To Be Announced securities
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
4
|
|
Liabilities measured at fair value on a recurring basis at June 30, 2017 are summarized below.
|
|
June 30, 2017
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Interest rate lock commitments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19
|
|
|
$
|
19
|
|
Forward loan sales commitments
|
|
|
—
|
|
|
|
37
|
|
|
|
—
|
|
|
|
37
|
|
To Be Announced securities
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
The following table represents assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at September 30, 2017:
|
|
Level 3
|
|
|
|
Bank Cds
|
|
|
Corporate notes
|
|
|
IRLC- Asset
|
|
|
IRLC- Liability
|
|
Beginning Balance: July 1, 2017
|
|
$
|
243
|
|
|
$
|
968
|
|
|
$
|
786
|
|
|
$
|
(19
|
)
|
Total gains (unrealized):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other comprehensive income
|
|
|
—
|
|
|
|
14
|
|
|
|
—
|
|
|
|
—
|
|
Total (losses) or gains included in earnings and held at reporting date
|
|
|
—
|
|
|
|
—
|
|
|
|
(374
|
)
|
|
|
4
|
|
Transfers in and/or out of Level 3
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ending Balance: September 30,
2017
|
|
$
|
243
|
|
|
$
|
982
|
|
|
$
|
412
|
|
|
$
|
(15
|
)
|
|
|
Level 3
|
|
|
|
Bank CDs
|
|
|
Corporate notes
|
|
|
IRLC- Asset
|
|
|
IRLC- Liability
|
|
Beginning Balance: July 1, 2016
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,084
|
|
|
$
|
(32
|
)
|
Total losses (unrealized):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other comprehensive income
|
|
|
(7
|
)
|
|
|
(32
|
)
|
|
|
—
|
|
|
|
—
|
|
Total (losses) or gains included in earnings and held at reporting date
|
|
|
—
|
|
|
|
—
|
|
|
|
(298
|
)
|
|
|
13
|
|
Transfers in and/or out of Level 3
|
|
|
250
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
Ending Balance: June 30, 2017
|
|
$
|
243
|
|
|
$
|
968
|
|
|
$
|
786
|
|
|
$
|
(19
|
)
|
For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2017 is as follows:
|
|
September 30, 2017
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Real estate owned
|
|
|
—
|
|
|
|
—
|
|
|
|
127
|
|
|
|
127
|
|
23
The following table
present
s
additional quali
tative
information about assets measured at fair value on a nonrecurring basis and for which the
Company
has utilized Level 3 inputs to determine fair value:
|
|
Balances as of September 30, 2017
|
|
|
Qualitative Information about Level 3 Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
Range
|
|
|
|
|
|
|
Valuation
|
|
Unobservable
|
|
(Weighted
|
(Dollars in thousands)
|
|
Fair Value
|
|
|
Techniques
|
|
Input
|
|
Average)
|
Real estate owned
|
|
$
|
127
|
|
|
Appraisal of
collateral (1)
|
|
Liquidation
expenses
|
|
8.0% - 8.0% (8.0%)
|
|
(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.
|
The estimated fair values of the Company's financial instruments at September 30, 2017 and June 30, 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
September 30, 2017
|
|
Carrying
|
|
|
Estimated
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
(Dollars in thousands)
|
|
Amount
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,607
|
|
|
$
|
15,607
|
|
|
$
|
15,607
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investment securities held-to-maturity
|
|
|
11,802
|
|
|
|
11,889
|
|
|
|
—
|
|
|
|
9,889
|
|
|
|
2,000
|
|
Loans receivable, net
|
|
|
138,314
|
|
|
|
134,811
|
|
|
|
—
|
|
|
|
—
|
|
|
|
134,811
|
|
Restricted investment in bank stock
|
|
|
629
|
|
|
|
629
|
|
|
|
—
|
|
|
|
—
|
|
|
|
629
|
|
Accrued interest receivable
|
|
|
654
|
|
|
|
654
|
|
|
|
—
|
|
|
|
654
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
171,259
|
|
|
$
|
142,782
|
|
|
$
|
—
|
|
|
$
|
142,782
|
|
|
$
|
—
|
|
Advances from the FHLB
|
|
|
9,000
|
|
|
|
8,971
|
|
|
|
—
|
|
|
|
8,971
|
|
|
|
—
|
|
Securities sold under agreements to
repurchase
|
|
|
3,713
|
|
|
|
3,713
|
|
|
|
—
|
|
|
|
3,713
|
|
|
|
—
|
|
Accrued interest payable
|
|
|
21
|
|
|
|
21
|
|
|
|
—
|
|
|
|
21
|
|
|
|
—
|
|
Off-balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitment to extend credit
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
24
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
June 30, 2017
|
|
Carrying
|
|
|
Estimated
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
(Dollars in thousands)
|
|
Amount
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
28,577
|
|
|
$
|
28,577
|
|
|
$
|
28,577
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investment securities held-to-maturity
|
|
|
11,809
|
|
|
|
11,896
|
|
|
|
—
|
|
|
|
9,884
|
|
|
|
2,012
|
|
Loans receivable, net
|
|
|
111,811
|
|
|
|
107,510
|
|
|
|
—
|
|
|
|
—
|
|
|
|
107,510
|
|
Restricted investment in bank stock
|
|
|
643
|
|
|
|
643
|
|
|
|
—
|
|
|
|
—
|
|
|
|
643
|
|
Accrued interest receivable
|
|
|
620
|
|
|
|
620
|
|
|
|
—
|
|
|
|
620
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
170,481
|
|
|
$
|
160,764
|
|
|
$
|
—
|
|
|
$
|
160,764
|
|
|
$
|
—
|
|
Advances from the FHLB
|
|
|
9,000
|
|
|
|
8,958
|
|
|
|
—
|
|
|
|
8,958
|
|
|
|
—
|
|
Securities sold under agreements to repurchase
|
|
|
2,883
|
|
|
|
2,883
|
|
|
|
—
|
|
|
|
2,883
|
|
|
|
—
|
|
Accrued interest payable
|
|
|
20
|
|
|
|
20
|
|
|
|
—
|
|
|
|
20
|
|
|
|
—
|
|
Off-balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitment to extend credit
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The above information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. There were no changes in methodologies or transfers between levels during the three months ended September 30, 2017. During the three months ended June 30, 2017, certain investment securities were transferred into a Level 3 valuation as significant observable inputs that the Bank relied upon to classify certain investment securities as Level 2 in prior periods are no longer sufficiently observable at June 30, 2017.
The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2017 and June 30, 2017:
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. If observable market-based inputs
25
are not available, we use unobservable inputs to determine appropriate valuation adjustments by reviewing valuation reports provided by a third-party (Level 3).
Loans Held for Sale at Fair Value
All mortgage loans held for sale are carried at fair value which is
determined on a recurring basis by utilizing quoted prices from dealers in such loans.
The Company's mortgage loans held for sale are generally classified within Level 2 of the valuation hierarchy.
The
f
o
l
l
o
w
i
ng
t
a
b
l
e
r
e
f
l
e
c
t
s
t
he
d
i
f
f
e
r
en
c
e be
t
w
e
en
t
he
c
a
rr
y
i
ng a
m
ount
of
m
o
rt
g
a
g
e
l
oans
h
e
l
d
f
o
r
s
a
l
e
,
m
ea
s
u
r
ed
at
f
a
i
r
v
a
l
ue
a
n
d
t
he
a
gg
r
e
g
a
t
e
unp
a
i
d
p
r
i
nc
i
p
a
l
a
m
ou
n
t
t
h
at
t
he
Company
is
co
nt
r
a
c
t
u
al
ly
en
t
i
t
l
ed
t
o
r
ec
e
i
v
e at
m
a
t
u
r
i
t
y
as
of
September 30, 2017 and June
30, 2017 (in thousands):
Loans held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount
|
|
|
Aggregated Unpaid Principal Balance
|
|
|
Excess Carrying
Amount Over Aggregate Unpaid Principal Balance
|
|
September 30, 2017
|
|
$
|
10,535
|
|
|
$
|
10,241
|
|
|
$
|
294
|
|
June 30, 2017
|
|
$
|
12,784
|
|
|
$
|
12,534
|
|
|
$
|
250
|
|
The
Company
d
i
d not
h
a
v
e any
m
o
rt
g
a
g
e
l
oans h
e
l
d
f
or
sa
l
e
r
eco
r
ded
a
t
f
a
i
r
v
a
l
ue
t
ha
t
w
e
r
e
9
0 or mo
r
e da
y
s pa
s
t due and
on no
n
-
acc
r
u
a
l
at
September 30, 2017, or June 30, 2017
.
Interest Rate Lock Commitments (“IRLC”)
The fair value of the Company’s IRLC instruments are based upon the underlying mortgage loan adjusted for the probability of such commitments being exercised and estimated costs to complete and originate the loan. The Company’s IRLCs are classified within Level 3 of the valuation hierarchy as a result of unobservable market data inputs.
Forward Loan Sale Commitments
Fair values for forward loan sales commitments are based on forward prices with dealers in such securities. Due to the observable inputs used by the Company, the Company’s forward loan sales commitments are classified within Level 2 of the valuation hierarchy.
To Be Announced Securities (“TBAs”)
TBAs are valued based on forward dealer marks from the Company’s approved counterparties. The Company 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 Company, the Company’s 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.
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
26
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 b
y qualified licensed appraisers hired by the
Company
.
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
The fair value basis of real estate owned is generally determined based upon the lower of an independent appraisal of the property’s appraisal value or applicable listing price or contracted sales price. 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 estimated by discounting expected cash flow, net of expected servicing costs, using the current rates and anticipated maturities of each deposit category. As these deposits do not have stated maturity dates, the average lives of these deposits are estimated when calculating the discounted cash flow. 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
Securities sold under agreements to repurchase are carried at the amounts at which the securities will be subsequently repurchased as specified in the agreements. The Company values the collateral on a daily basis and obtains additional collateral, if necessary, to protect the Company in the event of default by the counterparties.
Commitments to Extend Credit
The majority of the Company's commitments to extend credit carry current market interest rates if converted to loans. Because commitments to extend credit are generally unassignable by either the Company or the borrower, they only have value to the Company 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. Earnings per Share
Earnings per share ("EPS") consist of two separate components: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for each period presented. The diluted EPS calculation reflects the EPS if all outstanding instruments convertible to common stock were exercised. There were no common shares outstanding for the three months ended September 30, 2016. For the three months ended September 30, 2017 and 2016, there
27
were no
stock options or other convertible instruments outstanding for either period. Therefore, there is no effect of dilution on the Company’s earnings per share.
The calculation of EPS for the three months ended September 30, 2017 and 2016 is as follows (in thousands, except per share data):
|
|
For the Three Months
|
|
|
|
Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Net income (basic and diluted)
|
|
$
|
236
|
|
|
$
|
253
|
|
Weighted average shares outstanding
|
|
|
2,182,125
|
|
|
N/A
|
|
Net income per share – basic and diluted
|
|
$
|
0.11
|
|
|
$
|
N/A
|
|
7. Employee Stock Ownership Plan
The Company adopted the Huntingdon Valley Bank Employee Stock Ownership Plan (the “ESOP”) for eligible employees. Eligible employees who have attained age 21 may participation in the ESOP on the later of the effective date of the ESOP or upon the first entry date commencing on or after the eligible employee’s completion of 1,000 hours of service during a continuous 12-month period.
During the three months ended September 30, 2017, ESOP shares committed to be released was 2,182 with a value of approximately $24,000. There no shares were purchased by the ESOP during the three months ended September 30, 2017.
28