Company Quick10K Filing
HV Bancorp
Price14.76 EPS0
Shares2 P/E36
MCap33 P/FCF-2
Net Debt-27 EBIT4
TEV6 TEV/EBIT1
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-14
10-Q 2019-09-30 Filed 2019-11-14
10-K 2019-06-30 Filed 2019-09-26
10-Q 2019-03-31 Filed 2019-05-14
10-Q 2018-12-31 Filed 2019-02-14
10-Q 2018-09-30 Filed 2018-11-14
10-K 2018-06-30 Filed 2018-09-27
10-Q 2018-03-31 Filed 2018-05-14
10-Q 2017-12-31 Filed 2018-02-13
10-Q 2017-09-30 Filed 2017-11-13
10-K 2017-06-30 Filed 2017-09-28
10-Q 2017-03-31 Filed 2017-05-12
10-Q 2016-12-31 Filed 2017-02-14
10-Q 2016-09-30 Filed 2016-12-22
8-K 2020-05-20
8-K 2020-05-01
8-K 2020-02-28
8-K 2019-11-20
8-K 2019-11-18
8-K 2019-11-08
8-K 2019-08-21
8-K 2019-08-15
8-K 2019-07-17
8-K 2019-05-03
8-K 2019-04-17
8-K 2018-11-21
8-K 2018-08-17
8-K 2018-06-13
8-K 2018-05-16
8-K 2018-02-21
8-K 2018-02-21
8-K 2018-01-16

HVBC 10Q Quarterly Report

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
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_8.htm
EX-31.2 hvbc-ex312_7.htm
EX-32 hvbc-ex32_6.htm

HV Bancorp Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
3602882161447202015201620182020
Assets, Equity
0.50.40.30.20.10.02016201720182020
Rev, G Profit, Net Income
6546278-11-302015201620182020
Ops, Inv, Fin

10-Q 1 hvbc-10q_20200331.htm 10-Q hvbc-10q_20200331.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 March 31, 2020

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)

 

(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 May 10, 2020, there were 2,240,613 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

33

 

 

 

 

 

 

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

48

 

 

 

 

 

 

Item 4 – Controls and Procedures

48

 

 

 

 

 

 

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

49

 

 

 

 

Item 4 – Mine Safety Disclosures

49

 

 

 

 

Item 5 – Other Information

49

 

 

 

 

Item 6 – Exhibits

49

 

 

 

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 March 31, 2020 and December 31, 2019 (Dollars in thousands, except share and per share data)

 

 

At March 31,

 

 

At December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

2,025

 

 

$

1,473

 

Interest-earning deposits with banks

 

 

14,492

 

 

 

19,152

 

Federal funds sold

 

 

3,998

 

 

 

 

Cash and cash equivalents

 

 

20,515

 

 

 

20,625

 

Investment securities available-for-sale, at fair value

 

 

23,200

 

 

 

21,156

 

Equity securities

 

 

500

 

 

 

500

 

Loans held for sale, at fair value

 

 

37,368

 

 

 

37,876

 

Loans receivable, net of allowance for loan losses of  $1,549 at

March 31, 2020 and $1,437 at December 31, 2019

 

 

252,704

 

 

 

255,032

 

Bank-owned life insurance

 

 

6,293

 

 

 

6,255

 

Restricted investment in bank stock

 

 

1,751

 

 

 

1,552

 

Premises and equipment, net

 

 

2,618

 

 

 

2,501

 

Operating lease right-of-use assets

 

 

6,187

 

 

 

5,979

 

Accrued interest receivable

 

 

1,112

 

 

 

967

 

Mortgage banking derivatives

 

 

2,236

 

 

 

1,204

 

Other assets

 

 

1,102

 

 

 

939

 

Total Assets

 

$

355,586

 

 

$

354,586

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Deposits

 

$

278,185

 

 

$

283,767

 

Advances from the Federal Home Loan Bank

 

 

32,000

 

 

 

27,000

 

Operating lease liabilities

 

 

6,296

 

 

 

6,023

 

Advances from borrowers for taxes and insurance

 

 

1,936

 

 

 

2,138

 

Deferred income taxes, net

 

 

317

 

 

 

97

 

Other liabilities

 

 

3,039

 

 

 

1,962

 

Total Liabilities

 

 

321,773

 

 

 

320,987

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

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

   issued and outstanding as of March 31, 2020  and December 31, 2019

 

 

 

 

 

 

Common Stock, $0.01 par value, 20,000,000 shares authorized; 2,270,725 and 2,269,125 shares issued as of March 31, 2020 and December 31, 2019, respectively; 2,259,052 and 2,268,917 shares outstanding as of March 31, 2020 and December 31, 2019, respectively

 

 

23

 

 

 

23

 

Treasury Stock, at cost (11,673 shares at March 31, 2020 and 208 shares December 31, 2019)

 

 

(148

)

 

 

(3

)

Additional paid-in capital

 

 

20,831

 

 

 

20,740

 

Retained earnings

 

 

15,122

 

 

 

14,973

 

Accumulated other comprehensive income (loss)

 

 

71

 

 

 

(18

)

Unearned Employee Stock Option Plan

 

 

(2,086

)

 

 

(2,116

)

Total Shareholders' Equity

 

 

33,813

 

 

 

33,599

 

Total Liabilities and Shareholders' Equity

 

$

355,586

 

 

$

354,586

 

 

See Notes to the Unaudited Consolidated Financial Statements

2


HV BANCORP, INC. AND SUBSIDIARY

Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 2020 and 2019; (Dollars in thousands, except per share data)

 

 

For the Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Interest Income

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

2,776

 

 

$

2,330

 

Interest and dividends on investments:

 

 

 

 

 

 

 

 

Taxable

 

 

96

 

 

 

109

 

Nontaxable

 

 

11

 

 

 

72

 

Interest on mortgage-backed securities and collateralized mortgage obligations

 

 

53

 

 

 

102

 

Interest on interest-earning deposits and federal funds sold

 

 

90

 

 

 

115

 

Total Interest Income

 

 

3,026

 

 

 

2,728

 

Interest Expense

 

 

 

 

 

 

 

 

Interest on deposits

 

 

777

 

 

 

689

 

Interest on advances from the Federal Home Loan Bank

 

 

156

 

 

 

45

 

Interest on securities sold under agreements to repurchase

 

 

 

 

 

1

 

Total Interest Expense

 

 

933

 

 

 

735

 

Net interest income

 

 

2,093

 

 

 

1,993

 

Provision for Loan Losses

 

 

111

 

 

 

241

 

Net interest income after provision for loan losses

 

 

1,982

 

 

 

1,752

 

Non-Interest Income

 

 

 

 

 

 

 

 

Fees for customer services

 

 

39

 

 

 

30

 

Increase in cash surrender value of bank-owned life insurance

 

 

38

 

 

 

39

 

Gain on sale of loans, net

 

 

1,629

 

 

 

890

 

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

 

 

 

 

 

4

 

Gain from derivative instruments, net

 

 

384

 

 

 

395

 

Change in fair value of loans held-for-sale

 

 

6

 

 

 

(376

)

Other

 

 

48

 

 

 

4

 

Total Non-Interest Income

 

 

2,144

 

 

 

986

 

Non-Interest Expense

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

2,413

 

 

 

1,591

 

Occupancy

 

 

433

 

 

 

322

 

Federal deposit insurance premiums

 

 

57

 

 

 

62

 

Data processing related operations

 

 

229

 

 

 

189

 

Professional fees

 

 

191

 

 

 

132

 

Other expenses

 

 

606

 

 

 

404

 

Total Non-Interest Expense

 

 

3,929

 

 

 

2,700

 

Income before income taxes

 

 

197

 

 

 

38

 

Income Tax Expense (Benefit)

 

 

48

 

 

 

(24

)

Net Income

 

$

149

 

 

$

62

 

Net Income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.03

 

Diluted

 

$

0.07

 

 

$

0.03

 

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 March 31, 2020 and 2019 (Dollars in thousands)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Comprehensive Income, Net of Taxes

 

 

 

 

 

 

 

 

Net Income

 

$

149

 

 

$

62

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

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

  $127 and $352, respectively)

 

 

89

 

 

 

249

 

Reclassification for gains included in income (pre-tax ($0) and $4,respectively) (1)

 

 

 

 

 

3

 

Other comprehensive income

 

 

89

 

 

 

246

 

Comprehensive Income

 

$

238

 

 

$

308

 

 

(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 Changes in Shareholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (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, January 1, 2020

 

 

2,268,917

 

 

$

23

 

 

$

(3

)

 

$

20,740

 

 

$

14,973

 

 

$

(18

)

 

$

(2,116

)

 

$

33,599

 

ESOP shares committed to be

released

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

30

 

 

 

35

 

Treasury stock purchases

 

 

(11,465

)

 

 

 

 

 

(145

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(145

)

Stock option exercise

 

 

1,600

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

24

 

Stock option expense

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

15

 

Restricted stock expense

 

 

 

 

 

 

 

 

 

 

 

47

 

 

 

 

 

 

 

 

 

 

 

 

47

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

149

 

 

 

 

 

 

 

 

 

149

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

89

 

 

 

 

 

 

89

 

Balance, March 31, 2020

 

 

2,259,052

 

 

$

23

 

 

$

(148

)

 

$

20,831

 

 

$

15,122

 

 

$

71

 

 

$

(2,086

)

 

$

33,813

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Treasury Stock

 

 

Additional Paid-In Capital

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Unearned ESOP Shares

 

 

Total

 

Balance, January 1, 2019

 

 

2,255,125

 

 

$

23

 

 

$

 

 

$

20,487

 

 

$

13,686

 

 

$

(548

)

 

$

(2,237

)

 

$

31,411

 

ESOP shares committed to be

released

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

29

 

 

 

31

 

Stock option expense

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

14

 

Restricted stock expense

 

 

 

 

 

 

 

 

 

 

 

45

 

 

 

 

 

 

 

 

 

 

 

 

45

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62

 

 

 

 

 

 

 

 

 

62

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

246

 

 

 

 

 

 

246

 

Restricted stock awards

 

 

4,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

 

 

2,259,125

 

 

$

23

 

 

$

 

 

$

20,548

 

 

$

13,748

 

 

$

(302

)

 

$

(2,208

)

 

$

31,809

 

 

 

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 March 31,

 

2020

 

 

2019

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net income

 

$

149

 

 

$

62

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

139

 

 

 

98

 

Amortization of net deferred loan costs

 

 

121

 

 

 

57

 

Amortization of net securities premiums

 

 

17

 

 

 

27

 

Amortization of operating lease right-of-use Assets

 

 

132

 

 

 

 

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

 

 

 

 

 

(4

)

Gain from derivative instruments, net

 

 

(384

)

 

 

(395

)

Provision for loan losses

 

 

111

 

 

 

241

 

Deferred income taxes

 

 

182

 

 

 

93

 

Accretion of deferred gain on sale-leaseback transaction

 

 

 

 

 

(3

)

Earnings on bank owned life insurance

 

 

(38

)

 

 

(39

)

Stock based compensation expense

 

 

62

 

 

 

59

 

ESOP compensation expense

 

 

35

 

 

 

31

 

Loans held for sale:

 

 

 

 

 

 

 

 

Originations, net of prepayments

 

 

(77,226

)

 

 

(17,106

)

Proceeds from sales

 

 

79,369

 

 

 

28,474

 

Gain on sales

 

 

(1,629

)

 

 

(890

)

Change in fair value of loans held for sale

 

 

(6

)

 

 

376

 

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

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

(145

)

 

 

(53

)

Other assets

 

 

(163

)

 

 

(156

)

Other liabilities

 

 

259

 

 

 

(298

)

Net cash provided by operating activities

 

 

985

 

 

 

10,574

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Net (increase) decrease in loans receivable

 

 

2,096

 

 

 

(4,039

)

Activity in available-for-sale securities:

 

 

 

 

 

 

 

 

Proceeds from sales

 

 

 

 

 

1,956

 

Maturities and repayments

 

 

2,395

 

 

 

1,974

 

Purchases

 

 

(4,329

)

 

 

 

Activity in held-to-maturity securities:

 

 

 

 

 

 

 

 

Maturities and repayments

 

 

 

 

 

7

 

Purchases of restricted investment in bank stock

 

 

(275

)

 

 

(38

)

Redemption of restricted investment in bank stock

 

 

76

 

 

 

42

 

Purchases of premises and equipment

 

 

(153

)

 

 

(227

)

Net cash used in investing activities

 

 

(190

)

 

 

(325

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Net decrease in deposits

 

 

(5,582

)

 

 

(14,332

)

Net decrease in advances from borrowers for taxes and insurance

 

 

(202

)

 

 

(342

)

Net increase in securities sold under agreements to repurchase

 

 

 

 

 

315

 

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

 

 

5,000

 

 

 

 

Proceeds from stock option exercise

 

 

24

 

 

 

 

Purchase of treasury stock

 

 

(145

)

 

 

 

Net cash used in financing activities

 

 

(905

)

 

 

(14,359

)

Decrease in Cash and Cash Equivalents

 

 

(110

)

 

 

(4,110

)

Cash and Cash Equivalents, beginning of year

 

 

20,625

 

 

 

16,992

 

Cash and Cash Equivalents, end of year

 

$

20,515

 

 

$

12,882

 

Supplementary Disclosure of Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid during the year of interest

 

$

1,052

 

 

$

840

 

Cash paid during the year for income taxes

 

$

19

 

 

$

 

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 New Castle 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 December 31, 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-KT filed by the Company with the U.S. Securities and Exchange Commission on March 27, 2020. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year-ending December 31, 2020.

The Company has evaluated subsequent events through the date of issuance of the financial statements included herein.

 

Significant Event

The COVID-19 pandemic has adversely affected economic activity globally, nationally and locally. It has caused substantial disruption in international and U.S. economies, markets, and employment. In response to the COVID-19 national emergency, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law by President Trump on March 27, 2020. The CARES Act provides an estimated $2.2 trillion of economy-wide financial stimulus to combat the pandemic and stimulate the economy in the form of financial aid to individuals, businesses, nonprofits, states, and municipalities through loans, grants, tax changes, and other types of relief. Some of the applicable provisions of the Cares Act to the Company include, but are not limited to:

 

 

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Accounting for Loan Modifications – Under Section 4013 of the CARES Act, a financial institution may elect to temporarily suspend (1) the requirements under GAAP for certain loan modifications that would

otherwise be categorized as a Troubled Debt Restructuring (“TDR”) and (2) does not need to determine impairment associated with the loan modifications. As of March 31, 2020, the Company entered into four loan modification agreement with an outstanding balance of $1.2 million. As of April 20, 2020, the Company entered into a total of 19 loan modification agreements with respect to $6.9 million of loans outstanding.

 

Paycheck Protection Program - The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”).  In early April 2020, the Company began accepting and processing applications for loans under the Paycheck Protection Program. As of April 30, 2020, the Company had received over 330 applications from new and existing customers and disbursed approximately $48 million in funds with an estimated processing fee income of approximately $1.5 million.

 

Mortgage Forbearance - Under Section 4022 of the CARES Act, through the earlier of December 31, 2020, or the 60th day after the termination date of the COVID-19 national emergency, a borrower with a federally backed mortgage loan that is experiencing a financial hardship due to COVID-19 may request a forbearance, regardless of delinquency status, for up to 180 days, which must be extended for an additional 180 days at the borrower’s request. During this period, no fees, penalties, or interest beyond those scheduled or calculated as if the borrower had made all contractual payments on time and in full will accrue. A multifamily borrower with a federally backed multifamily mortgage loan that was current as of February 1, 2020, and is experiencing financial hardship due to COVID-19 may request forbearance on the loan for up to 30 days, with up to two additional 30-day periods at the borrower’s request. As of March 31, 2020, we received 17 deferral agreements with respect to $10.9 million of loans outstanding. As of April 30, 2020 we received a total of 54 deferral agreements with respect to $20.3 million of loans outstanding.

 

For further discussion, see COVID-19 update section of Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

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.

 

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

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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.

ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. 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. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

 

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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.  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. In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Furthermore, the ASU provides a one-year deferral of the effective dates of the ASUs on derivatives and hedging for companies that are not public business entities. The Company qualifies as a smaller reporting company and does not expect to early adopt these ASUs.

 

 

Adoption of New Accounting Standards

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 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.  The Company adopted the accounting standard on January 1, 2020. As ASU 2018-13 primarily affected disclosure requirements, it did not have a material impact on the Company’s consolidated statement of financial condition. We have included the additional disclosures in Note 6, Fair Value Presentation.

 

 

 

2. INVESTMENT SECURITIES

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

 

 

 

March 31, 2020

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(Dollars in thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Governmental securities

 

$

420

 

 

$

2

 

 

$

 

 

$

422

 

Corporate notes

 

 

9,286

 

 

 

143

 

 

 

(185

)

 

 

9,244

 

Collateralized mortgage obligations - agency residential

 

 

6,168

 

 

 

69

 

 

 

(50

)

 

 

6,187

 

Mortgage-backed securities - agency residential

 

 

3,864

 

 

 

99

 

 

 

 

 

 

3,963

 

Municipal securities

 

 

2,113

 

 

 

5

 

 

 

 

 

 

2,118

 

Bank CDs

 

 

1,248

 

 

 

18

 

 

 

 

 

 

1,266

 

 

 

$

23,099

 

 

$

336

 

 

$

(235

)

 

$

23,200

 

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

 

 

 

December 31, 2019

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

(Dollars in thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Governmental securities

 

$

438

 

 

$

 

 

$

(2

)

 

$

436

 

Corporate notes

 

 

5,500

 

 

 

75

 

 

 

(6

)

 

 

5,569

 

Collateralized mortgage obligations - agency residential

 

 

6,562