Company Quick10K Filing
HV Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 2 $33
10-Q 2019-11-14 Quarter: 2019-09-30
10-K 2019-09-26 Annual: 2019-06-30
10-Q 2019-05-14 Quarter: 2019-03-31
10-Q 2019-02-14 Quarter: 2018-12-31
10-Q 2018-11-14 Quarter: 2018-09-30
10-K 2018-09-27 Annual: 2018-06-30
10-Q 2018-05-14 Quarter: 2018-03-31
10-Q 2018-02-13 Quarter: 2017-12-31
10-Q 2017-11-13 Quarter: 2017-09-30
10-K 2017-09-28 Annual: 2017-06-30
10-Q 2017-05-12 Quarter: 2017-03-31
10-Q 2017-02-14 Quarter: 2016-12-31
10-Q 2016-12-22 Quarter: 2016-09-30
8-K 2019-11-20 Shareholder Vote
8-K 2019-11-18 Officers, Exhibits
8-K 2019-11-08 Earnings, Exhibits
8-K 2019-08-21 Amend Bylaw, Exhibits
8-K 2019-08-15 Earnings, Exhibits
8-K 2019-07-17 Officers
8-K 2019-05-03 Earnings, Exhibits
8-K 2019-04-17 Other Events
8-K 2018-11-21 Shareholder Vote
8-K 2018-08-17 Earnings, Exhibits
8-K 2018-06-13 Officers, Shareholder Vote, Exhibits
8-K 2018-05-16 Officers, Amend Bylaw
8-K 2018-02-21 Accountant, Exhibits
8-K 2018-02-21 Other Events, Exhibits
8-K 2018-01-16 Officers
HVBC 2019-09-30
Part I - Financial Information
Item 1 - Consolidated Financial Statements - Unaudited
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part II - Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 - Defaults Upon Senior Securities
Item 4 - Mine Safety Disclosures
Item 5 - Other Information
Item 6 - Exhibits
EX-31.1 hvbc-ex311_6.htm
EX-31.2 hvbc-ex312_8.htm
EX-32 hvbc-ex32_7.htm

HV Bancorp Earnings 2019-09-30

HVBC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
BOTJ 62 690 631 2 0 5 12 29 0% 2.4 1%
PNBK 59 978 909 0 0 -0 17 8 0.5 -0%
SGB 55 552 505 0 0 5 11 24 2.1 1%
VBFC 49 537 497 24 0 3 9 49 0% 5.4 1%
MELR 44 326 283 0 0 2 7 26 3.9 0%
HVBC 33 344 312 0 0 1 4 13 0% 3.3 0%
GLBZ 31 378 343 0 0 1 4 21 5.7 0%
WCFB 22 133 105 0 0 -0 2 18 10.7 -0%
OPHC 7 111 106 0 0 -1 0 -5 -19.4 -1%
GLG 4 8 3 0 0 -4 -4 3 151% -0.6 -54%

10-Q 1 hvbc-10q_20190930.htm 10-Q hvbc-10q_20190930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from   to                to           

Commission file number: 001-37981

 

HV BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Pennsylvania

 

46-4351868

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

2005 South Easton Road, Suite 304, Doylestown, Pennsylvania  18901

(Address of Principal Executive Offices and Zip Code)

(267) 280-4000

(Registrant's Telephone Number, Including Area Code)

3501 Mason Mill Road, Suite 401, Huntingdon Valley, PA 19006

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

HVBC

 

The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  As of November 10, 2019, there were 2,268,917 outstanding shares of the issuer’s common stock.

 

 

 


 

INDEX

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION

2

 

 

 

 

 

 

Item 1 – Consolidated Financial Statements – Unaudited

2

 

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

7

 

 

 

 

 

 

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

 

 

 

 

 

 

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

47

 

 

 

 

 

 

Item 4 – Controls and Procedures

47

 

 

 

 

 

 

PART II OTHER INFORMATION

48

 

 

 

 

Item 1 – Legal Proceedings

48

 

 

 

 

 

 

Item 1A – Risk Factors

48

 

 

 

 

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

48

 

 

 

 

Item 3 – Defaults upon Senior Securities

48

 

 

 

 

Item 4 – Mine Safety Disclosures

48

 

 

 

 

Item 5 – Other Information

48

 

 

 

 

Item 6 – Exhibits

48

 

 

 

SIGNATURES

50

 

 

 


PART I – FINANCIAL INFORMATION

Item 1 – Consolidated Financial Statements – Unaudited

HV BANCORP, INC. AND SUBSIDIARY

Unaudited Consolidated Statements of Financial Condition as of September 30, 2019 and June 30, 2019 (Dollars in thousands, except share and per share data)

 

 

At September 30,

 

 

At June 30,

 

 

 

2019

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

1,521

 

 

$

1,345

 

Interest-earning deposits with banks

 

 

24,419

 

 

 

17,519

 

Federal funds sold

 

 

1,315

 

 

 

1,370

 

Cash and cash equivalents

 

 

27,255

 

 

 

20,234

 

Investment securities available-for-sale, at fair value

 

 

21,588

 

 

 

35,236

 

Equity securities

 

 

500

 

 

 

500

 

Loans held for sale, at fair value

 

 

39,013

 

 

 

33,748

 

Loans receivable, net of allowance for loan losses of $1,334 at

September 30, 2019 and $1,182 at June 30, 2019

 

 

248,581

 

 

 

240,786

 

Bank-owned life insurance

 

 

6,216

 

 

 

6,175

 

Restricted investment in bank stock

 

 

1,553

 

 

 

1,662

 

Premises and equipment, net

 

 

2,338

 

 

 

2,254

 

Operating lease right-of-use assets

 

 

5,783

 

 

 

 

Accrued interest receivable

 

 

974

 

 

 

1,111

 

Mortgage banking derivatives

 

 

1,823

 

 

 

1,679

 

Other assets

 

 

935

 

 

 

810

 

Total Assets

 

$

356,559

 

 

$

344,195

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Deposits

 

$

284,576

 

 

$

275,130

 

Advances from the Federal Home Loan Bank

 

 

27,000

 

 

 

28,000

 

Operating lease liabilities

 

 

5,757

 

 

 

 

Securities sold under agreements to repurchase

 

 

2,104

 

 

 

3,789

 

Advances from borrowers for taxes and insurance

 

 

1,376

 

 

 

2,600

 

Deferred gain on sale - leaseback of building

 

 

 

 

 

278

 

Deferred income taxes, net

 

 

87

 

 

 

112

 

Other liabilities

 

 

2,375

 

 

 

1,606

 

Total Liabilities

 

 

323,275

 

 

 

311,515

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Preferred  Stock, $0.01 par value, 2,000,000 shares authorized; no shares

   issued and outstanding as of September 30, 2019 and June 30, 2019

 

 

 

 

 

 

Common Stock, $0.01 par value, 20,000,000 shares authorized;

   2,268,917 shares issued and outstanding as of September 30, 2019

   and June 30, 2019

 

 

23

 

 

 

23

 

Treasury Stock, at cost (208 shares at September 30, 2019 and June 30, 2019)

 

 

(3

)

 

 

(3

)

Additional paid-in capital

 

 

20,676

 

 

 

20,611

 

Retained earnings

 

 

14,766

 

 

 

14,156

 

Accumulated other comprehensive (loss) income

 

 

(31

)

 

 

70

 

Unearned Employee Stock Option Plan

 

 

(2,147

)

 

 

(2,177

)

Total Shareholders' Equity

 

 

33,284

 

 

 

32,680

 

Total Liabilities and Shareholders' Equity

 

$

356,559

 

 

$

344,195

 

 

See Notes to the Unaudited Consolidated Financial Statements

2


HV BANCORP, INC. AND SUBSIDIARY

Unaudited Consolidated Statements of Income for the Three Months Ended September 30, 2019 and 2018; (Dollars in thousands, except per share data)

 

 

For the Three Months Ended

September 30,

 

 

 

2019

 

 

2018

 

Interest Income

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

2,789

 

 

$

2,299

 

Interest and dividends on investments:

 

 

 

 

 

 

 

 

Taxable

 

 

104

 

 

 

101

 

Nontaxable

 

 

70

 

 

 

75

 

Interest on mortgage-backed securities and

   collateralized mortgage obligations

 

 

53

 

 

 

103

 

Interest on interest-earning deposits

 

 

95

 

 

 

73

 

Total Interest Income

 

 

3,111

 

 

 

2,651

 

Interest Expense

 

 

 

 

 

 

 

 

Interest on deposits

 

 

877

 

 

 

514

 

Interest on advances from the Federal Home

   Loan Bank

 

 

158

 

 

 

99

 

Interest on securities sold under agreements

   to repurchase

 

 

1

 

 

 

1

 

Total Interest Expense

 

 

1,036

 

 

 

614

 

Net interest income

 

 

2,075

 

 

 

2,037

 

Provision for Loan Losses

 

 

244

 

 

 

59

 

Net interest income after provision for loan losses

 

 

1,831

 

 

 

1,978

 

Non-Interest Income

 

 

 

 

 

 

 

 

Fees for customer services

 

 

51

 

 

 

72

 

Increase in cash surrender value of bank-owned

   life insurance

 

 

41

 

 

 

40

 

Gain on sale of loans, net

 

 

1,680

 

 

 

901

 

Gain on sale of available-for-sale securities, net

 

 

211

 

 

 

 

Gain (Loss) from derivative instruments, net

 

 

177

 

 

 

(317

)

Change in fair value of loans held-for-sale

 

 

40

 

 

 

61

 

Other

 

 

5

 

 

 

1

 

Total Non-Interest Income

 

 

2,205

 

 

 

758

 

Non-Interest Expense

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

2,192

 

 

 

1,260

 

Occupancy

 

 

465

 

 

 

254

 

Federal deposit insurance premiums

 

 

4

 

 

 

70

 

Data processing related operations

 

 

214

 

 

 

171

 

Professional fees

 

 

169

 

 

 

201

 

Other expenses

 

 

558

 

 

 

422

 

Total Non-Interest Expense

 

 

3,602

 

 

 

2,378

 

Income before income taxes

 

 

434

 

 

 

358

 

Income Tax Expense

 

 

101

 

 

 

88

 

Net Income

 

$

333

 

 

$

270

 

Net Income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

0.13

 

Diluted

 

$

0.16

 

 

$

0.13

 

See Notes to the Unaudited Consolidated Financial Statements

 

 

3


HV BANCORP, INC. AND SUBSIDIARY

 

Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2019 and 2018 (Dollars in thousands)

 

 

 

For the Three Months Ended

September 30,

 

 

 

2019

 

 

2018

 

Comprehensive Income, Net of Taxes

 

 

 

 

 

 

 

 

Net Income

 

$

333

 

 

$

270

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities (pre-tax

  $66 and ($122), respectively)

 

 

61

 

 

 

(86

)

Reclassification for gains included in income (pre-tax ($211) and $0, respectively)(1)

 

 

(162

)

 

 

 

Other comprehensive loss

 

 

(101

)

 

 

(86

)

Comprehensive Income

 

$

232

 

 

$

184

 

 

(1)

Amounts are included in gain on sale of available-for-sale securities on the Consolidated Statements of Income as a separate element within non-interest income. Income tax expense is included in the Consolidated Statements of Income.

See Notes to the Unaudited Consolidated Financial Statements

 

4


HV BANCORP, INC. AND SUBSIDIARY

Unaudited Consolidated Statements of Shareholders’ Equity for the Three Months Ended September 30, 2019 and 2018 (Dollars in thousands, except per share data)

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Treasury Stock

 

 

Additional Paid-In Capital

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Unearned ESOP Shares

 

 

Total

 

Balance, July 1, 2019

 

 

2,268,917

 

 

$

23

 

 

$

(3

)

 

$

20,611

 

 

$

14,156

 

 

$

70

 

 

$

(2,177

)

 

$

32,680

 

ESOP shares committed to be

released

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

30

 

 

 

34

 

Stock option expense

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

15

 

Restricted stock expense

 

 

 

 

 

 

 

 

 

 

 

46

 

 

 

 

 

 

 

 

 

 

 

 

46

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

333

 

 

 

 

 

 

 

 

 

333

 

Adoption of ASU 2016-02, Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

277

 

 

 

 

 

 

 

 

 

277

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(101

)

 

 

 

 

 

(101

)

Balance, September 30, 2019

 

 

2,268,917

 

 

$

23

 

 

$

(3

)

 

$

20,676

 

 

$

14,766

 

 

$

(31

)

 

$

(2,147

)

 

$

33,284

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Treasury Stock

 

 

Additional Paid-In Capital

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Unearned ESOP Shares

 

 

Total

 

Balance, July 1, 2018

 

 

2,259,125

 

 

$

23

 

 

$

 

 

$

20,368

 

 

$

13,277

 

 

$

(648

)

 

$

(2,299

)

 

$

30,721

 

ESOP shares committed to be

released

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

31

 

 

 

34

 

Stock option expense

 

 

 

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

18

 

Restricted stock expense

 

 

 

 

 

 

 

 

 

 

 

46

 

 

 

 

 

 

 

 

 

 

 

 

46

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

270

 

 

 

 

 

 

 

 

 

270

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(86

)

 

 

 

 

 

(86

)

Balance, September 30, 2018

 

 

2,259,125

 

 

$

23

 

 

$

 

 

$

20,435

 

 

$

13,547

 

 

$

(734

)

 

$

(2,268

)

 

$

31,003

 

 

 

 

 

 

See Notes to the Unaudited Consolidated Financial Statements

 

5


HV BANCORP, INC. AND SUBSIDIARY

Unaudited Consolidated Statements of Cash Flows (Dollars in thousands)

Three Months Ended September 30,

 

2019

 

 

2018

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net income

 

$

333

 

 

$

270

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

147

 

 

 

75

 

Amortization of net deferred loan costs

 

 

102

 

 

 

42

 

Amortization of net securities premiums

 

 

19

 

 

 

29

 

Amortization of Operating Lease Right-of-Use Assets

 

 

73

 

 

 

 

Gain on sale of available-for-sale securities

 

 

(211

)

 

 

 

(Gain) Loss from derivative instruments

 

 

(177

)

 

 

317

 

Provision for loan losses

 

 

244

 

 

 

59

 

Deferred income taxes

 

 

18

 

 

 

(6

)

Accretion of deferred gain on sale-leaseback transaction

 

 

 

 

 

(4

)

Earnings on bank owned life insurance

 

 

(41

)

 

 

(40

)

Stock base compensation expense

 

 

61

 

 

 

64

 

ESOP compensation expense

 

 

34

 

 

 

34

 

Loans held for sale:

 

 

 

 

 

 

 

 

Originations, net of prepayments

 

 

(83,078

)

 

 

(44,160

)

Proceeds from sales

 

 

79,533

 

 

 

42,827

 

Gain on sales

 

 

(1,680

)

 

 

(901

)

Change in fair value of loans held for sale

 

 

(40

)

 

 

(61

)

Changes in assets and liabilities which provided (used) cash:

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

137

 

 

 

(28

)

Other assets

 

 

(125

)

 

 

(72

)

Other liabilities

 

 

702

 

 

 

177

 

Net cash used in operating activities

 

 

(3,949

)

 

 

(1,378

)

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Net Increase in loans receivable

 

 

(8,141

)

 

 

(12,582

)

Activity in available-for-sale securities:

 

 

 

 

 

 

 

 

Proceeds from sales

 

 

12,147

 

 

 

 

Maturities and repayments

 

 

1,549

 

 

 

1,460

 

Purchase of equity securities

 

 

 

 

 

(500

)

Purchases of restricted investment in bank stock

 

 

(295

)

 

 

(1,257

)

Redemption of restricted investment in bank stock

 

 

404

 

 

 

1,547

 

Purchases of premises and equipment

 

 

(231

)

 

 

(178

)

Net cash provided by (used in) investing activities

 

 

5,433

 

 

 

(11,510

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Net increase in deposits

 

 

9,446

 

 

 

15,656

 

Net decrease in advances from borrowers for taxes and insurance

 

 

(1,224

)

 

 

(969

)

Net decrease in securities sold under agreements to repurchase

 

 

(1,685

)

 

 

(2,524

)

Net decrease in short-term borrowing from Federal Home Loan Bank

 

 

 

 

 

(7,000

)

Repayment of long-term borrowings from Federal Home Loan Bank

 

 

(1,000

)

 

 

(1,000

)

Net cash provided by financing activities

 

 

5,537

 

 

 

4,163

 

Increase (Decrease )in Cash and Cash Equivalents

 

 

7,021

 

 

 

(8,725

)

Cash and Cash Equivalents, beginning of year

 

 

20,234

 

 

 

14,745

 

Cash and Cash Equivalents, end of year

 

$

27,255

 

 

$

6,020

 

Supplementary Disclosure of Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid during the year of interest

 

$

1,213

 

 

$

579

 

Cash paid during the year for income taxes

 

$

 

 

$

305

 

Supplementary Schedule of Noncash Investing Activities

 

 

 

 

 

 

 

 

Transfer of loans to real estate owned

 

$

 

 

$

127

 

Initial recognition of operating lease right-of-use assets

 

$

2,106

 

 

$

 

Initial recognition of operating lease obligations

 

$

2,086

 

 

$

 

See Notes to Unaudited Consolidated Financial Statements

 

 

 

6


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. 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 and Securities (“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 and Wilmington County, Delaware) 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 the Quarterly Report on 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, 2019 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 26, 2019. Certain items previously reported have been reclassified to conform to the current period’s reporting format. Such reclassifications did not affect net income or stockholders’ equity. The results of operations for the three months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the six-month period ending December 31, 2019.

On August 21, 2019, the Company’s Board of Directors approved a change to the Company’s fiscal year end to December 31 from a fiscal year ending on June 30. As a result of the change in fiscal year, the Company will file a transition report on Form 10-KT covering the transition period from July 1, 2019 to December 31, 2019.

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. All significant intercompany transactions and balances have been eliminated in consolidation.

 

7


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 Statement of Financial Condition 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 (“OTTI”), interest rate lock commitments (“IRLCs”), mandatory sales commitments, the valuation of mortgage loans held-for-sale 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 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.

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. On October 16, 2019, the FASB decided to move forward with finalizing its proposal to defer the effective date for ASU 2016-13 for smaller reporting companies to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods. Since the Company currently meets the SEC definition of a smaller reporting company, the delay will be applicable to the Company. In anticipation of the ASU, the Company has entered into a contract with a third party, compiled data for the modeling and is working on developing an estimate using historically and qualitative data based on the requirements of ASU 2016-13.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements.  The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value

8


measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  This Update is not expected to have a significant impact on the Company’s consolidated financial statements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. Topic 326, Financial Instruments – Credit Losses amendments are effective for SEC registrants for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other public business entities, the effective date is for fiscal years beginning after December 15, 2020, and for all other entities, the effective date is for fiscal years beginning after December 15, 2021. On October 16, 2019, the FASB voted to defer the effective date for ASC 326, Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.  The final ASU is expected to be issued in mid-November.  Topic 815, Derivatives and Hedging amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. For entities that have adopted the amendments in Update 2017-12, the effective date is as of the beginning of the first annual period beginning after the issuance of this Update. Topic 825, Financial Instruments amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s consolidated statements of financial position or statements of financial income.

 

 

Adoption of New Accounting Standards

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet.  A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.  A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise.  For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. ASU 2016-02 was effective for the Company on July 1, 2019. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) - Targeted Improvements,” which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors,” which provides for certain policy elections and changes lessor accounting for sales and similar taxes and certain lessor costs. Upon adoption of ASU 2016-02, ASU 2018-11 and ASU 2018-20 on July 1, 2019, we recognized a right-of-use asset of $2,106,100 and a related lease liability totaling $2,086,000 each. We elected to apply certain practical expedients provided under ASU 2016-02 whereby we did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We also elected not to apply the recognition requirements of ASU 2016-02 to any short-term leases (as defined by related accounting guidance). We account for lease and non-lease components separately because such amounts are readily determinable under our lease contracts. We utilized the modified-retrospective transition approach prescribed by ASU 2018-11. Certain of the Company’s leases contain options to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the positive performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal it

9


is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease as of July 1, 2019. We have included additional disclosures in note 12.

 

 

2. INVESTMENT SECURITIES

Investment securities available-for-sale was comprised of the following:

 

 

 

September 30, 2019

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(Dollars in thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Governmental securities

 

$

456

 

 

$

2

 

 

$

(3

)

 

$

455

 

Corporate notes

 

 

6,000

 

 

 

79

 

 

 

(9

)

 

 

6,070

 

Collateralized mortgage obligations - agency

   residential

 

 

5,578

 

 

 

3

 

 

 

(115

)

 

 

5,466

 

Mortgage-backed securities - agency

   residential

 

 

2,225

 

 

 

9

 

 

 

(21

)

 

 

2,213

 

Municipal securities

 

 

4,376

 

 

 

2

 

 

 

 

 

 

4,378

 

Bank CDs

 

 

2,998

 

 

 

9

 

 

 

(1

)

 

 

3,006

 

 

 

$

21,633

 

 

$

104

 

 

$

(149

)

 

$

21,588

 

 

Investment securities available-for-sale was comprised of the following:

 

 

 

June 30, 2019

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(Dollars in thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Governmental securities

 

$

478

 

 

$

 

 

$

(1

)

 

$

477

 

Corporate notes

 

 

6,960

 

 

 

44

 

 

 

(20

)

 

 

6,984

 

Collateralized mortgage obligations - agency

   residential

 

 

8,818

 

 

 

31

 

 

 

(123

)

 

 

8,726

 

Mortgage-backed securities - agency

   residential

 

 

3,468

 

 

 

9

 

 

 

(33

)

 

 

3,444

 

Municipal securities

 

 

11,915

 

 

 

207

 

 

 

(2

)

 

 

12,120

 

Bank CDs

 

 

3,497

 

 

 

 

 

 

(12

)

 

 

3,485

 

 

 

$

35,136

 

 

$

291

 

 

$

(191

)

 

$

35,236

 

 

The scheduled maturities of securities available-for-sale at September 30, 2019 were as follows:

 

 

 

September 30, 2019

 

 

 

Available-for-Sale

 

 

 

Amortized

 

 

 

 

 

(Dollars in thousands)

 

Cost

 

 

Fair Value

 

Due in one year or less

 

$

3,761

 

 

$

3,761

 

Due from one to five years

 

 

5,613

 

 

 

5,631

 

Due from after five to ten years

 

 

4,001

 

 

 

4,063

 

Due after ten years

 

 

8,258

 

 

 

8,133

 

 

 

$

21,633

 

 

$

21,588

 

 

Securities with a fair value of $9.4 million and $11.3 million at September 30, 2019 and June 30, 2019, respectively, were pledged to secure public deposits and for other purposes as required by law.

10


Proceeds from the sale of available-for-sale securities for the three months ended September 30, 2019 were $12.1 million. Gross realized gains on such sales were approximately $211,000 and gross realized losses were $0 for the three months ended September 30, 2019.

 

There were no sales of available-for-sale securities for the three months ended September 30, 2018.

The following tables summarize the unrealized loss positions of securities available-for-sale as of September 30, 2019 and June 30, 2019:

 

 

 

September 30, 2019

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

(Dollars in thousands)

 

Value