Company Quick10K Filing
WVS Financial
Price16.06 EPS2
Shares2 P/E10
MCap29 P/FCF12
Net Debt-7 EBIT9
TEV21 TEV/EBIT2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-15
10-Q 2019-12-31 Filed 2020-02-13
10-Q 2019-09-30 Filed 2019-11-13
10-K 2019-06-30 Filed 2019-09-13
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 2018-09-13
10-Q 2018-03-31 Filed 2018-05-11
10-Q 2017-12-31 Filed 2018-02-12
10-Q 2017-09-30 Filed 2017-11-09
10-K 2017-06-30 Filed 2017-09-14
10-Q 2017-03-31 Filed 2017-05-12
10-Q 2016-12-31 Filed 2017-02-13
10-Q 2016-09-30 Filed 2016-11-14
10-K 2016-06-30 Filed 2016-09-15
10-Q 2016-03-31 Filed 2016-05-16
10-Q 2015-12-31 Filed 2016-02-12
10-Q 2015-09-30 Filed 2015-11-13
10-K 2015-06-30 Filed 2015-09-17
10-Q 2015-03-31 Filed 2015-05-14
10-Q 2014-12-31 Filed 2015-02-13
10-Q 2014-09-30 Filed 2014-11-14
10-K 2014-06-30 Filed 2014-09-18
10-Q 2014-03-31 Filed 2014-05-15
10-Q 2013-12-31 Filed 2014-02-14
10-Q 2013-09-30 Filed 2013-11-14
10-K 2013-06-30 Filed 2013-09-19
10-Q 2013-03-31 Filed 2013-05-13
10-Q 2012-12-31 Filed 2013-02-13
10-Q 2012-09-30 Filed 2012-11-13
10-K 2012-06-30 Filed 2012-09-18
10-Q 2012-03-31 Filed 2012-05-11
10-Q 2011-09-30 Filed 2011-11-09
10-K 2011-06-30 Filed 2011-09-13
10-Q 2011-03-31 Filed 2011-05-13
10-Q 2010-12-31 Filed 2011-02-09
10-Q 2010-09-30 Filed 2010-11-04
10-K 2010-06-30 Filed 2010-09-14
10-Q 2010-03-31 Filed 2010-05-14
10-Q 2009-12-31 Filed 2010-02-12
8-K 2020-04-30
8-K 2020-04-27
8-K 2020-03-24
8-K 2020-01-28
8-K 2020-01-27
8-K 2019-10-29
8-K 2019-10-29
8-K 2019-10-25
8-K 2019-07-29
8-K 2019-07-25
8-K 2019-04-30
8-K 2019-04-29
8-K 2019-04-29
8-K 2019-01-30
8-K 2019-01-28
8-K 2018-10-30
8-K 2018-10-30
8-K 2018-10-24
8-K 2018-07-30
8-K 2018-07-27
8-K 2018-04-27
8-K 2018-04-23
8-K 2018-04-23
8-K 2018-01-29
8-K 2018-01-26

WVFC 10Q Quarterly Report

Item 2.
Item 3.
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 d924382dex311.htm
EX-31.2 d924382dex312.htm
EX-32.1 d924382dex321.htm
EX-32.2 d924382dex322.htm
EX-99 d924382dex99.htm

WVS Financial Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

10-Q 1 d924382d10q.htm FORM 10-Q Form 10-Q
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

[X]

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               

Commission File Number: 0-22444

 

                           WVS Financial Corp.                          
(Exact name of registrant as specified in its charter)
Pennsylvania        25-1710500

(State or other jurisdiction of

incorporation or organization)

      

(I.R.S. Employer

Identification Number)

9001 Perry Highway

Pittsburgh, Pennsylvania

       15237
    (Address of principal executive offices)            (Zip Code)
                                     (412) 364-1911                                     

(Registrant’s telephone number, including area code)

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 requirement for the past 90 days.      YES  X    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 and post such files).      YES  X        NO    

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

 

Large accelerated filer                Accelerated filer         
Non-accelerated filer                Smaller reporting company   X  
      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 12 b-2 of the Exchange Act).       YES        NO X 

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    WVFC    NASDAQ

Shares outstanding as of May 08, 2020: 1,918,840 shares Common Stock, $.01 par value.


Table of Contents

WVS FINANCIAL CORP. AND SUBSIDIARY

INDEX

 

PART I.

       

Financial Information

  

Page

    
Item 1.      Financial Statements      
     Consolidated Balance Sheet as of
March 31, 2020 and June 30, 2019
(Unaudited)
   3   
     Consolidated Statement of Income
for the Three and Nine Months Ended
March 31, 2020 and 2019 (Unaudited)
   4   
     Consolidated Statement of Comprehensive
Income for the Three and Nine Months Ended
March 31, 2020 and 2019 (Unaudited)
   5   
     Consolidated Statement of Changes in
Stockholders’ Equity for the Three and Nine Months
Ended March 31, 2020 and 2019 (Unaudited)
   6   
     Consolidated Statement of Cash Flows
for the Nine Months Ended March 31, 2020
and 2019 (Unaudited)
   8   
     Notes to Unaudited Consolidated
Financial Statements
   10   
Item 2.      Management’s Discussion and Analysis of
Financial Condition and Results of
Operations for the Three and Nine Months
Ended March 31, 2020
   41   
Item 3.      Quantitative and Qualitative Disclosures
about Market Risk
   49   
Item 4.      Controls and Procedures    53   

PART II.

        Other Information   

Page

    
Item 1.      Legal Proceedings    54   
Item 1A.      Risk Factors    54   
Item 2.      Unregistered Sales of Equity Securities
and Use of Proceeds
   55   
Item 3.      Defaults Upon Senior Securities    55   
Item 4.      Mine Safety Disclosures    55   
Item 5.      Other Information    55   
Item 6.      Exhibits    56   
     Signatures    57   

 

2


Table of Contents

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(In thousands, except share and per share data)

 

        March 31, 2020             June 30, 2019      

Assets

   

Cash and due from banks

                $       2,293       $       1,849  

Interest-earning demand deposits

    79       2,530  
 

 

 

   

 

 

 

Total cash and cash equivalents

    2,372       4,379  

Certificates of deposit

    1,592       1,843  

Commercial paper (amortized cost of $16,902)

    16,902       -  

Investment securities available-for-sale (amortized cost of $147,872 and $132,673)

    141,429       132,780  

Investment securities held-to-maturity (fair value of $3,625 and $4,080)

    3,495       3,995  

Mortgage-backed securities held-to-maturity (fair value of $100,681 and $108,708)

    102,310       108,331  

Net loans receivable (allowance for loan losses of $523 and $548)

    90,652       90,588  

Accrued interest receivable

    1,045       1,219  

Federal Home Loan Bank (FHLB) stock, at cost

    6,889       7,010  

Premises and equipment, net

    535       346  

Bank owned life insurance

    4,878       4,789  

Deferred tax assets, net

    1,733       368  

Other assets

    215       170  
 

 

 

   

 

 

 

TOTAL ASSETS

    $  374,047       $  355,818  
 

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

   

Liabilities:

   

Deposits

   

Non-interest-bearing accounts

    $    19,013       $    19,770  

Interest-earning checking accounts

    22,725       23,541  

Savings accounts

    43,319       43,740  

Money market accounts

    19,769       19,958  

Certificates of deposit

    46,849       37,361  

Advance payments by borrowers for taxes and insurance

    1,780       2,065  
 

 

 

   

 

 

 

Total deposits

    153,455       146,435  

Federal Home Loan Bank advances: short-term

    60,802       70,828  

Federal Home Loan Bank advances: long-term – fixed rate

    15,000       15,000  

Federal Home Loan Bank advances: long-term – variable rate

    85,000       85,000  

Other short-term borrowings

    24,800       -  

Accrued interest payable

    661       823  

Other liabilities

    2,057       1,683  
 

 

 

   

 

 

 

TOTAL LIABILITIES

    341,775       319,769  
 

 

 

   

 

 

 

Stockholders’ equity:

   

Preferred stock:

   

5,000,000 shares, no par value per share, authorized; none issued

    -       -  

Common stock:

   

10,000,000 shares, $.01 par value per share, authorized; 3,805,636 shares issued

    38       38  

Additional paid-in capital

    21,575       21,550  

Treasury stock: 1,886,796 and 1,862,520 shares at cost, respectively

    (28,616     (28,269

Retained earnings, substantially restricted

    46,420       44,807  

Accumulated other comprehensive (loss) income

    (5,149     15  

Unallocated Employee Stock Ownership Plan (“ESOP”) shares

    (1,996     (2,092
 

 

 

   

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

    32,272       36,049  
 

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

    $  374,047       $  355,818  
 

 

 

   

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

3


Table of Contents

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

(In thousands, except share and per share data)

 

         Three Months Ended             Nine Months Ended      
     March 31,     March 31,  
     2020     2019     2020     2019  

INTEREST AND DIVIDEND INCOME:

        

Loans, including fees

         $                875           $                847           $                2,629           $              2,475  

Commercial paper and investment securities

     941       1,188       3,018       3,276  

Mortgage-backed securities

     685       973       2,327       2,789  

Certificates of deposit

     7       7       38       12  

Interest-earning demand deposits

     1       1       3       10  

FHLB Stock

     131       142       383       370  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and dividend income

     2,640       3,158       8,398       8,932  
  

 

 

   

 

 

   

 

 

   

 

 

 

INTEREST EXPENSE:

        

Deposits

     224       253       705       505  

Federal Home Loan Bank advances – long-term – fixed rate

     116       114       342       348  

Federal Home Loan Bank advances – long-term – variable rate

     402       586       1,376       993  

Federal Home Loan Bank advances – short-term

     247       373       860       1,719  

Other short-term borrowings

     1       -       1       -  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     990       1,326       3,284       3,565  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME

     1,650       1,832       5,114       5,367  

(CREDIT) PROVISION FOR LOAN LOSSES

     (7     10       (25     42  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

     1,657       1,822       5,139       5,325  
  

 

 

   

 

 

   

 

 

   

 

 

 

NON-INTEREST INCOME:

        

Service charges on deposits

     25       30       85       86  

Earnings on Bank Owned Life Insurance

     29       30       89       91  

Investment securities gains (losses)

     -       -       32       (2

Other than temporary impairment losses

     (32     122       (50     122  

Portion of loss recognized in other comprehensive income

     -       (148     -       (148
  

 

 

   

 

 

   

 

 

   

 

 

 

Net impairment loss recognized in earnings

     (32     (26     (50     (26

ATM fee income

     38       38       116       123  

Other

     10       15       30       36  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest income

     70       87       302       307  
  

 

 

   

 

 

   

 

 

   

 

 

 

NON-INTEREST EXPENSE:

        

Salaries and employee benefits

     559       575       1,638       1,695  

Occupancy and equipment

     63       66       183       192  

Data processing

     55       56       164       171  

Correspondent bank service charges

     7       9       25       24  

Federal deposit insurance premium

     9       24       (14     75  

ATM network expense

     24       21       64       83  

Other

     167       146       541       512  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest expense

     884       897       2,601       2,752  
  

 

 

   

 

 

   

 

 

   

 

 

 

INCOME BEFORE INCOME TAXES

     843       1,012       2,840       2,880  

INCOME TAX EXPENSE

     218       265       695       701  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

     $               625       $               747       $               2,145       $               2,179  
  

 

 

   

 

 

   

 

 

   

 

 

 

EARNINGS PER SHARE:

        

Basic

     $               0.35       $               0.42       $               1.21       $               1.22  

Diluted

     $               0.35       $               0.42       $               1.21       $               1.22  

AVERAGE SHARES OUTSTANDING:

        

Basic

     1,771,722       1,772,165       1,772,918       1,782,512  

Diluted

     1,771,722       1,772,165       1,772,918       1,782,584  

See accompanying notes to unaudited consolidated financial statements.

 

4


Table of Contents

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands)

 

         Three Months Ended             Nine Months Ended      
     March 31,     March 31,  
     2020     2019     2020     2019  

NET INCOME

   $ 625     $ 747     $ 2,145     $ 2,179  

OTHER COMPREHENSIVE INCOME (LOSS)

        

Investment securities available for sale not other-than-temporarily impaired:

        

Gains (losses) arising during the year

     (6,961     1,479       (6,518     (392

Less: Income tax effect

     1,462       (311     1,370       82  
  

 

 

   

 

 

   

 

 

   

 

 

 
     (5,499     1,168       (5,148     (310

(Gains) losses recognized in earnings

     -       -       (32     2  

Less: Income tax effect

     -       -       7       -  
  

 

 

   

 

 

   

 

 

   

 

 

 
     -       -       (25     2  

Unrealized holdings gains (losses) on securities available for sale not other-than-temporarily impaired, net of tax

     (5,499     1,168       (5,173     (308
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment securities held to maturity other-than-temporarily impaired:

        

Total losses

     32       122       50       122  

Losses recognized in earnings

     32       26       50       26  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gains (losses) recognized in comprehensive income

     -       148       -       148  

Income tax effect

     -       (31     -       (31
  

 

 

   

 

 

   

 

 

   

 

 

 
     -       117       -       117  

Accretion of other comprehensive loss on other-than-temporarily impaired securities held to maturity

     4       12       12       (14

Less: Income tax effect

     (1     (2     (3     3  
  

 

 

   

 

 

   

 

 

   

 

 

 

Unrealized holding gains on other-than-temporarily impaired securities held to maturity, net of tax

     3       10       9       (11
  

 

 

   

 

 

   

 

 

   

 

 

 
     3       127       9       106  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     (5,496     1,295       (5,164     (202
  

 

 

   

 

 

   

 

 

   

 

 

 

COMPREHENSIVE INCOME (LOSS)

         $   (4,871         $   2,042           $   (3,019         $   1,977  
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

5


Table of Contents

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)

 

    Common
    Stock    
    Additional
Paid-in
    Capital    
    Treasury
    Stock    
    Retained
Earnings –
    Substantially    
Restricted
    Accumulated
Other
    Comprehensive    
Income (Loss)
        Unallocated    
ESOP
Shares
          Total        

Balance December 31, 2019

  $     38     $  21,568     $  (28,382     $  45,973       $  347       $     (2,031     $ 37,513  

Net income

          625           625  

Other comprehensive loss

            (5,496       (5,496

Purchase of treasury stock (16,801 shares)

        (234           (234

Amortization of unallocated ESOP shares

      7             35       42  

Cash dividends declared ($0.10 per share)

          (178         (178
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance March 31, 2020

  $     38       $  21,575       $  (28,616     $  46,420       $  (5,149     $  (1,996     $ 32,272  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Common
    Stock    
    Additional
Paid-in
    Capital    
    Treasury
    Stock    
    Retained
Earnings –
    Substantially    
Restricted
    Accumulated
Other
    Comprehensive    
Income (Loss)
        Unallocated    
ESOP
Shares
          Total        

Balance June 30, 2019

  $     38       $  21,550       $  (28,269     $  44,807       $  15       $  (2,092     $  36,049  

Net income

          2,145           2,145  

Other comprehensive loss

            (5,164       (5,164

Purchase of treasury stock (24,276 shares)

        (347           (347

Amortization of unallocated ESOP shares

      25             96       121  

Cash dividends declared

($0.30 per share)

          (532         (532
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance March 31, 2020

  $     38       $  21,575       $  (28,616     $  46,420       $  (5,149     $  (1,996     $  32,272  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

6


Table of Contents

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)

 

        Common    
Stock
    Additional
Paid-in
    Capital    
    Treasury
    Stock    
    Retained
Earnings –
    Substantially    
Restricted
    Accumulated
Other
    Comprehensive    
Income (Loss)
        Unallocated    
ESOP
Shares
        Total      

Balance December 31, 2018

      $    38         $ 21,530         $ (28,258       $ 43,941         $    (1,685       $    (2,179       $ 33,387  

Net income

          747           747  

Other comprehensive income

            1,295         1,295  

Amortization of unallocated ESOP Shares

      15             29       44  

Cash dividends declared ($0.10 per share)

          (177         (177
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance March 31, 2019

      $    38         $ 21,545         $ (28,258       $ 44,511         $    (390       $    (2,150       $ 35,296  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Common
Stock
    Additional
Paid-in
Capital
    Treasury
Stock
    Retained
Earnings –
Substantially
Restricted
    Accumulated Other
Comprehensive
Loss
    Unallocated
ESOP
Shares
    Total  

Balance June 30, 2018

      $    38         $ 21,516         $ (27,886       $ 42,795         $ (188       $ (2,258       $ 34,017  

Net income

          2,179           2,179  

Other comprehensive loss

            (202       (202

Purchase of treasury stock (25,717 shares)

        (372           (372

Amortization of unallocated ESOP shares

      29             108       137  

Cash dividends declared

($0.26 per share)

          (463         (463
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance March 31, 2019

    $    38         $ 21,545         $ (28,258       $ 44,511         $ (390       $ (2,150       $ 35,296  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

     Nine Months Ended
March 31,
 
           2020                 2019        

OPERATING ACTIVITIES

    

Net income

   $ 2,145     $ 2,179  

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

    

(Credit) provision for loan losses

     (25     42  

Depreciation

     26       38  

(Gains) losses on sale of investment securities

     (32     2  

Net impairment loss recognized in earnings

     50       26  

Amortization of discounts, premiums and deferred loan costs, net

     85       130  

Amortization of unallocated ESOP shares

     121       137  

Deferred income taxes

     104       (131

Increase in prepaid/accrued income taxes

     226       271  

Earnings on bank owned life insurance

     (89     (91

(Increase) decrease in accrued interest receivable

     174       (54

(Decrease) increase in accrued interest payable

     (162     419  

Increase in deferred director compensation payable

     40       33  

Other, net

     (32     194  
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,631       3,195  
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Available-for-sale:

    

Purchases of commercial paper and investment securities

     (45,268     (40,658

Proceeds from repayments of commercial paper and investments

     3,980       33,450  

Proceeds from sale of commercial paper investment securities

     9,055       1,364  

Held-to-maturity:

    

Proceeds from repayments of investments

     500       2,180  

Proceeds from repayments of mortgage-backed securities

     5,996       6,706  

Purchase of certificates of deposit

     (2,334     (1,096

Maturities/redemptions of certificates of deposit

     2,585       100  

Purchase of loans

     (8,056     (7,208

Net decrease in net loans receivable

     8,083       3,037  

Purchase of FHLB stock

     (5,420     (5,537

Redemption of FHLB stock

     5,541       5,638  

Acquisition of premises and equipment

     (215     (1
  

 

 

   

 

 

 

Net cash used for investing activities

     (25,553     (2,025
  

 

 

   

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

     Nine Months Ended
March 31,
 
           2020                 2019        

FINANCING ACTIVITIES

    

Net (decrease) increase in transaction and savings accounts

   $ (2,183   $ 593  

Net increase in certificates of deposit

     9,488       548  

Net decrease in advance payments by borrowers for taxes and insurance

     (285     (232

Proceeds (repayments) of FHLB long-term advances – fixed rate

     -       15,000  

Proceeds (repayments) of FHLB long-term advances – variable rate

     -       85,000  

Proceeds from other short-term borrowings

     24,800       -  

Net decrease in FHLB short-term advances

     (10,026     (99,481

Purchase of treasury stock

     (347     (372

Cash dividends paid

     (532     (463
  

 

 

   

 

 

 

Net cash provided by financing activities

     20,915       593  
  

 

 

   

 

 

 

(Decrease) increase in cash and cash equivalents

     (2,007     1,763  

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD

     4,379       2,441  
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD

   $ 2,372     $ 4,204  
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

    

Cash paid during the period for:

    

Interest on deposits and borrowings

   $ 3,446     $ 3,146  

Income taxes

   $ 461     $ 478  

Non-cash items:

    

Educational Improvement Tax Credit

   $ 45     $ 45  

Unfunded securities commitments

   $ -     $ 519  

 

See accompanying notes to unaudited consolidated financial statements.

 

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WVS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1.

BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (GAAP). However, all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation have been included. The results of operations for the three and nine months ended March 31, 2020, are not necessarily indicative of the results which may be expected for the entire fiscal year.

The coronavirus (COVID-19) pandemic has negatively impacted the global economy, disrupted global supply chains and increased unemployment levels. The resulting temporary closure of many businesses and the implementation of social distancing and sheltering-in-place policies has and may continue to impact many of the Company’s customers. While the full effects of the pandemic remain unknown, the Company is committed to supporting its customers, employees and communities during this difficult time. The Company has given hardship relief assistance to customers, including the consideration of various loan payment deferral and fee waiver options, and encourages customers to reach out for assistance to support their individual circumstances. The pandemic could result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, the impact on the global economy worsens, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize impairments on the securities we hold. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed by the President of the United States. Certain provisions within the CARES Act encourage financial institutions to practice prudent efforts to work with borrowers impacted by COVID-19. Under these provisions, loan modifications deemed to be COVID-19-related would not be considered a troubled debt restructuring (TDR) if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of termination of the COVID-19 national emergency or December 31, 2020. The banking regulators issued similar guidance, which also clarified that a COVID-19-related modification should not be considered a TDR if the borrower was current on payments at the time the underlying loan modification program was implemented and if the modification is considered to be short term. Under these terms, as of March 31, 2020, the Company had processed payment deferrals for no loans. Through April 30, 2020, the number of deferrals increased to 14 with an aggregate balance of $5.5 million, and an aggregate appraised value of approximately $8.9 million, to become effective for payments beginning on May 1, 2020. Substantially all of these deferrals were generally 90 days in duration, with full collection of taxes and insurance, partial to full collection of interest, and no or partial collection of principal during the deferral period. As of March 31, 2020 through April 30, 2020 all of these loans were current.

 

2.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other

 

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organizations. The underlying premise of the ASU is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. 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. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

In August 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 is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In November, 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, which amended the effective date of ASU 2016-13 for entities other than public business entities (PBEs), by requiring non-PBEs to adopt the standard for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Therefore, the revised effective dates of ASU 2016-13 for PBEs that are SEC filers will be fiscal years beginning after December 15, 2019, including interim periods within those years, PBEs other than SEC filers will be for fiscal years beginning after December 15, 2020, including interim periods within those years, and all other entities (non-PBEs) will be for fiscal years beginning after December 15, 2021, including interim periods within those years. The ASU also clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Rather, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The effective date and transition requirements for ASU 2018-19 are the same as those in ASU 2016-13, as amended by ASU 2018-19. In November, 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). The 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. This Update is not expected to have a significant impact on the Company’s 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. Topic 815, Derivatives and Hedging amendments are effective for

 

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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.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses, Topic 326, which allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of the new credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for applying the fair value option in ASC 825-10.3. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. For entities that elect the fair value option, the difference between the carrying amount and the fair value of the financial asset would be recognized through a cumulative-effect adjustment to opening retained earnings as of the date an entity adopted ASU 2016-13. Changes in fair value of that financial asset would subsequently be reported in current earnings. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been 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). The 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. The Company qualifies as a smaller reporting company and does not expect to early adopt ASU 2016-13.

In November 2019, the FASB issued ASU 2019-08, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), which requires entities to measure and classify share-based payments to a customer, in accordance with the guidance in ASC 718, Compensation – Stock Compensation. The amendments in that Update expanded the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and, in doing so, superseded guidance in Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The amount that would be recorded as a reduction in revenue would be measured based on the grant date fair value of the share-based payment, in accordance with Topic 718. The grant date is the date at which a supplier and customer reach a mutual understanding of the award’s key terms and conditions. The award’s classification and subsequent measurement would be subject to ASC 718 unless the award is modified or the grantee is no longer a customer. For entities that have not yet adopted the amendments in Update 2018-07, the amendments in this Update are effective for (1) public business entities in fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and (2) other than public business entities in fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. For entities that have adopted the amendments in Update 2018-07, the amendments in this Update are effective in fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. An entity may early adopt the amendments in this Update, but not before it adopts the amendments in Update 2018-07. This Update is not expected to have a significant impact on the Company’s financial statements.

 

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In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). The Update defers the effective dates 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. This Update also amends the mandatory effective date for the elimination of Step 2 from the goodwill impairment test under ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (Goodwill), to align with those used for credit losses. Furthermore, the ASU provides a one-year deferral of the effective dates of the ASUs on derivatives and hedging and leases 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.

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, to clarify its new credit impairment guidance in ASC 326, based on implementation issues raised by stakeholders. This Update clarified, among other things, that expected recoveries are to be included in the allowance for credit losses for these financial assets; an accounting policy election can be made to adjust the effective interest rate for existing troubled debt restructurings based on the prepayment assumptions instead of the prepayment assumptions applicable immediately prior to the restructuring event; and extends the practical expedient to exclude accrued interest receivable from all additional relevant disclosures involving amortized cost basis. The effective dates in this Update are the same as those applicable for ASU 2019-10. The Company qualifies as a smaller reporting company and does not expect to early adopt these ASUs.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), to simplify the accounting for income taxes, change the accounting for certain tax transactions, and make minor improvements to the codification. This Update provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax and provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction. The Update also changes current guidance for making an intra-period allocation, if there is a loss in continuing operations and gains outside of continuing operations; determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting; accounting for tax law changes and year-to-date losses in interim periods; and determining how to apply the income tax guidance to franchise taxes that are partially based on income. For public business entities, the amendments in this Update are effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In January 2020, the FASB issued ASU 2020-02, Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), February 2020, to add and amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 119, related to the new credit losses standard, and comments by the SEC staff related to the revised effective date of the new leases standard. This ASU is effective upon issuance. This did not have a significant impact on the Company’s financial statements.

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. This ASU was issued to improve and clarify various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. The ASU includes seven issues that describe the areas of improvement and the related amendments to GAAP; they are intended to make the standards easier to understand and apply and to eliminate inconsistencies, and they are narrow in scope and are not expected to significantly change practice for most entities. Among its provisions, the ASU clarifies that all entities, other than public business entities that elected the fair value option, are required to provide certain fair value disclosures under ASC 825, Financial Instruments, in both interim and annual financial statements. It also clarifies that the contractual term of a net investment in a lease under Topic 842 should be the contractual term used to measure expected credit losses under Topic 326.

 

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Amendments related to ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is not permitted before an entity’s adoption of ASU 2016-01. Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU 2016-13. Early adoption is not permitted before an entity’s adoption of ASU 2016-13. Amendments related to ASU 2016-13 for entities that have adopted that guidance are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. Other amendments are effective upon issuance of this ASU. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In March 2020, in accordance with provisions in the CARES Act, the Corporation has elected not to apply the guidance in ASC 310-40 on accounting for TDRs to loan modifications related to COVID-19 made between March 1, 2020 and the earlier of (1) December 31, 2020 or (2) 60 days after the end of the COVID-19 national emergency. This relief was only applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and may include payment deferrals, fee waivers, extension of repayments or other delays in payment.

 

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3.

REVENUE RECOGNITION

Effective July 1, 2018, the Company adopted Accounting Standards Update ASU 2014-09, Revenue from contracts with Customers – Topic 606, and all subsequent ASUs that modified ASC 606. The Company has elected to apply the standard to all prior periods presented utilizing the full retrospective approach. The implementation of the new standard had no material impact to the measurement or recognition of revenue of prior periods. Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment security gains, and earnings on bank owned life insurances are not within the scope of ASC 606. As a result, no changes were made during the period related to these sources of revenue. The main types of noninterest income within the scope of the standard are as follows: Service Charges on deposit accounts – the Company has contracts with its deposit customers where fees are charged if certain parameters are not met. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific transactions or activities resulting from a customer request or activity that include overdraft fees, online banking fees, interchange fees, ATM fees and other transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time upon the completion of the requested service/transaction.

 

4.

EARNINGS PER SHARE

The following table sets forth the computation of the weighted-average common shares used to calculate basic and diluted earnings per share.

 

     Three Months Ended      Nine Months Ended  
     March 31,      March 31,  
             2020                      2019                      2020                      2019          

Weighted average common shares issued

     3,805,636        3,805,636        3,805,636        3,805,636  

Average treasury stock shares

     (1,872,228      (1,861,840      (1,868,532      (1,849,296

Average unallocated ESOP shares

     (161,686      (171,631      (164,186      (173,828
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares and common stock equivalents used to calculate basic earnings per share

     1,771,722        1,772,165        1,772,918        1,782,512  

Additional common stock equivalents (stock options) used to calculate diluted earnings per share

     -        -        -        72  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares and common stock equivalents used to calculate diluted earnings per share

     1,771,722        1,772,165        1,772,918        1,782,584  
  

 

 

    

 

 

    

 

 

    

 

 

 

There are no convertible securities that would affect the numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statement of Income is used. At March 31, 2020, and March 31, 2019, all options had expired.

 

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5.

STOCK BASED COMPENSATION DISCLOSURE

The Company’s 2008 Stock Incentive Plan (the “Plan”), which was approved by shareholders in October 2008, permitted the grant of stock options or restricted shares to its directors and employees for up to 152,000 shares (up to 38,000 restricted shares may be issued). Option awards were generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vested over five years of continuous service and had ten-year contractual terms. The Plan expired by its terms in September 2018.

During the three and nine month periods ended March 31, 2020 and 2019, the Company recorded no compensation expense related to our share-based compensation awards. As of March 31, 2020, there was no unrecognized compensation cost related to unvested share-based compensation awards granted in fiscal 2009.

All of the Company’s outstanding stock options were vested at March 31, 2018 and were expired as of March 31, 2019. There were no stock options exercised or issued during the nine months ended March 31, 2020 and 2019.

 

6.

COMMERCIAL PAPER AND INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair values of commercial paper investments are as follows:

 

                          Gross             Gross               
                Amortized                     Unrealized                     Unrealized                    Fair      
            Cost             Gains             Losses            Value  
     (Dollars in Thousands)  
March 31, 2020                                                       

AVAILABLE FOR SALE

                      

Corporate debt securities

   $          115,287      $          -      $          (5,144   $          110,143  

Foreign debt securities 1

        32,585           -           (1,299        31,286  

Commercial paper

        16,902           -           -          16,902  
     

 

 

       

 

 

       

 

 

      

 

 

 

Total

   $          164,774      $          -      $          (6,443   $          158,331  
     

 

 

       

 

 

       

 

 

      

 

 

 
                          Gross             Gross               
            Amortized             Unrealized             Unrealized            Fair  
            Cost             Gains             Losses            Value  
     (Dollars in Thousands)  
March 31, 2020                                                       

HELD TO MATURITY

                      

Obligations of states and political subdivisions

   $          3,495      $          130      $          -     $          3,625  
     

 

 

       

 

 

       

 

 

      

 

 

 

Total

   $          3,495      $          130      $          -     $          3,625  
     

 

 

       

 

 

       

 

 

      

 

 

 

  

 

1 U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.

 

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Table of Contents
                          Gross             Gross               
                Amortized                     Unrealized                     Unrealized                Fair  
            Cost             Gains             Losses                Value      
            (Dollars in Thousands)  
June 30, 2019                                                       

AVAILABLE FOR SALE

                      

Corporate debt securities

   $          104,760      $          355      $          (207   $          104,908  

Foreign debt securities 1

        26,583           35           (75        26,543  

Commercial paper

        -           -           -          -  

Obligations of states and political subdivisions

        1,330           -           (1        1,329  
     

 

 

       

 

 

       

 

 

      

 

 

 

Total

   $          132,673      $          390      $          (283   $          132,780  
     

 

 

       

 

 

       

 

 

      

 

 

 
                          Gross             Gross               
            Amortized             Unrealized             Unrealized            Fair  
            Cost             Gains             Losses            Value  
            (Dollars in Thousands)  
June 30, 2019                                                       

HELD TO MATURITY

                      

Obligations of states and political subdivisions

   $          3,995      $          85      $          -     $          4,080  
     

 

 

       

 

 

       

 

 

      

 

 

 

Total

   $          3,995      $          85      $          -     $          4,080  
     

 

 

       

 

 

       

 

 

      

 

 

 

Proceeds from sales of commercial paper and investments during the nine month period ending March 31, 2020 were $9.1 million and the Company recorded gross realized investment gains of $32 thousand during this same period. There were no sales of commercial paper and investment securities during the quarter ended March 31, 2020.

Proceeds from sales of commercial paper and investments during the nine month period ending March 31, 2019 were $1.4 million and the Company recorded gross realized investment losses of $2 thousand during this same period. There were no sales of commercial paper and investment securities during the quarter ended March 31, 2019.

The amortized cost and fair values of debt securities at March 31, 2020, by contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because issuers may have the right to call securities prior to their final maturities.

 

            Due in
one year
or less
            Due after
one through
five years
            Due after
five through
ten years
            Due after
ten years
            Total  
            (Dollars in Thousands)  

AVAILABLE FOR SALE

                             

Amortized cost

   $          46,960      $          117,814      $          -      $          -      $          164,774  

Fair value

        46,185           112,146           -           -           158,331  

HELD TO MATURITY

                             

Amortized cost

   $          750      $          2,745      $          -      $          -      $          3,495  

Fair value

        759           2,866           -           -           3,625  

 

1 U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.

 

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At March 31, 2020, commercial paper and investment securities with amortized costs of $3.5 million and fair values of $3.6 million were pledged to secure borrowings with the Federal Home Loan Bank (“FHLB”).

As of March 31, 2020, investment securities with amortized costs of $58.6 million and fair values of $55.6 million were pledged to secure borrowings with the Federal Reserve Bank of Cleveland (FRBC).

Of the investment securities pledged, $33.8 million of amortized costs, and $30.8 million of fair value was excess collateral at the FRBC. Excess collateral is used to support future borrowings and may be withdrawn at any time.

 

7.

MORTGAGE-BACKED SECURITIES

Mortgage-backed securities (“MBS”) include mortgage pass-through certificates (“PCs”) and collateralized mortgage obligations (“CMOs”). With a pass-through security, investors own an undivided interest in the pool of mortgages that collateralize the PCs. Principal and interest is passed through to the investor as it is generated by the mortgages underlying the pool. PCs and CMOs may be insured or guaranteed by Freddie Mac (“FHLMC”), Fannie Mae (“FNMA”) and the Government National Mortgage Association (“GNMA”). CMOs may also be privately issued with varying degrees of credit enhancements. A CMO reallocates mortgage pool cash flow to a series of bonds (called traunches) with varying stated maturities, estimated average lives, coupon rates and prepayment characteristics.

The Company’s CMO portfolio is comprised of two segments: CMOs backed by U.S. Government Agencies (“Agency CMOs”) and CMOs backed by single-family whole loans not guaranteed by a U.S. Government Agency (“private-label CMOs”).

At March 31, 2020, the Company’s Agency CMOs totaled $101.6 million as compared to $107.4 million at June 30, 2019. The Company’s private-label CMOs totaled $695 thousand at March 31, 2020 as compared to $883 thousand at June 30, 2019. The $6.0 million decrease in the CMO segment of our MBS portfolio was primarily due to repayments on our Agency and private-label CMOs which totaled $5.8 million and $150 thousand, respectively. At March 31, 2020 and June 30, 2019, the Company’s MBS portfolio, including CMOs, were comprised of adjustable or floating rate investments. Substantially all of the Company’s floating rate MBSs adjust monthly based upon changes in the one month LIBOR. The Company has no investment in multi-family or commercial real estate based MBS.

Due to prepayments of the underlying loans, and the prepayment characteristics of the CMO traunches, the actual maturities of the Company’s MBSs are expected to be substantially less than the scheduled maturities.

The Company retains an independent third party to assist it in the determination of a fair value for its three private-label CMOs. This valuation is meant to be a “Level Three” valuation as defined by ASC Topic 820, Fair Value Measurements and Disclosures. The valuation does not represent the actual terms or prices at which any party could purchase the securities. There is currently no active secondary market for private-label CMOs and there can be no assurance that any secondary market for private-label CMOs will develop. The private-label CMO portfolio had three previously recorded other-than-temporary impairments at March 31, 2020. During the three months ended March 31, 2020, the Company recorded $32 thousand of additional credit impairment charges on its private-label CMO portfolio.

The Company believes that the data and assumptions used to determine the fair values are reasonable. The fair value calculations reflect relevant facts and market conditions. Events and conditions occurring after the valuation date could have a material effect on the private-label CMO segment’s fair value.

 

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Table of Contents

The following table sets forth information with respect to the Company’s private-label CMO portfolio as of March 31, 2020. At the time of purchase, all of our private-label CMOs were rated in the highest investment category by at least two ratings agencies.

 

            At March 31, 2020  
                       Rating      Amortized
Cost
     Fair
  Value2  
     Life to Date
Impairment
  Recorded in  
Earnings
 

      Cusip #      

         Security Description                S&P              Moody’s              Fitch          (in thousands)  

126694CP1

     CWHL SER 21 A11        WR        WR        D          $ 397          $ 380              $ 236  

126694KF4

     CWHL SER 24 A15        NR        NR        D        230        223        168  

126694MP0

     CWHL SER 26 1A5        NR        NR        D        68        70        45  
              

 

 

    

 

 

    

 

 

 
                   $ 695          $ 673              $ 449  
              

 

 

    

 

 

    

 

 

 

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s mortgage-backed securities are as follows:

 

                Amortized    
Cost
            Gross
    Unrealized    
Gains
            Gross
    Unrealized    
Losses
           Fair
    Value    
 
     

 

 

 
            (Dollars in Thousands)  

March 31, 2020

                      

HELD TO MATURITY

                      

Collateralized mortgage obligations:

                      

Agency

   $          101,615      $          213      $          (1,820   $          100,008  

Private-label

        695           2           (24        673  
     

 

 

       

 

 

       

 

 

      

 

 

 

Total

   $          102,310      $          215      $          (1,844   $          100,681  
     

 

 

       

 

 

       

 

 

      

 

 

 
            Amortized
Cost
            Gross
Unrealized
Gains
            Gross
Unrealized
Losses
          

Fair

Value

 
     

 

 

 
            (Dollars in Thousands)  

June 30, 2019

                      

HELD TO MATURITY

                      

Collateralized mortgage obligations:

                      

Agency

   $          107,448      $          954      $          (570   $          107,832  

Private-label

        883           5           (12        876  
     

 

 

       

 

 

       

 

 

      

 

 

 

Total

   $          108,331      $          959      $          (582   $          108,708  
     

 

 

       

 

 

       

 

 

      

 

 

 

 

2 Fair value estimate provided by the Company’s independent third party valuation consultant.

 

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Table of Contents

The amortized cost and fair value of the Company’s mortgage-backed securities at March 31, 2020, by contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

            Due in
     one year     
or less
            Due after
 one through 
five years
            Due after
  five through  
ten years
            Due after
    ten years    
                Total      
            (Dollars in Thousands)  

HELD TO MATURITY

                             

Amortized cost

   $          -      $          102      $          -      $          102,208      $          102,310  

Fair value

        -           104           -           100,577           100,681  

At March 31, 2020, mortgage-backed securities with amortized costs of $105.1 million and fair values of $103.6 million were pledged to secure public deposits and borrowings with the FHLB. Of the securities pledged, $12.3 million of fair value was excess collateral. At June 30, 2019 mortgage-backed securities with an amortized cost of $107.4 million and fair values of $107.8 million, were pledged to secure public deposits and borrowings with the FHLB. Of the mortgage-backed securities pledged, $2.4 million of amortized cost was excess collateral at the FHLB. Excess collateral is maintained to support future borrowings and may be withdrawn by the Company at any time.

 

8.

ACCUMULATED OTHER COMPREHENSIVE GAIN (LOSS)

The following tables present the changes in accumulated other comprehensive gain (loss) by component, for the three and nine months ended March 31, 2020 and 2019.

 

     Three Months Ended March 31, 2020  
     (Dollars in Thousands – net of tax)  
         Unrealized Gains    
and Losses on
Available-for-Sale
Securities
        Unrealized Gains    
and Losses on
Held-to-Maturity
Securities
                Total              

Beginning Balance – December 31, 2019

     $ 411       $ (64     $ 347  

Other comprehensive (loss) income before reclassifications

     (5,499     3       (5,496

Amounts reclassified from accumulated other comprehensive loss

     -       -       -  
  

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive (loss) income

     (5,499     3       (5,496
  

 

 

   

 

 

   

 

 

 

Ending Balance – March 31, 2020

     $ (5,088     $ (61     $ (5,149
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents
     Nine Months Ended March 31, 2020  
     (Dollars in Thousands – net of tax)  
         Unrealized Gains    
and Losses on
Available-for-Sale
Securities
        Unrealized Gains    
and Losses on
Held-to-Maturity
Securities
                Total              

Beginning Balance – June 30, 2019

     $ 85       $ (70     $ 15  

Other comprehensive (loss) income before reclassifications

     (5,148     9       (5,139

Amounts reclassified from accumulated other comprehensive loss

     (25     -       (25
  

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive (loss) Income

     (5,173     9       (5,164
  

 

 

   

 

 

   

 

 

 

Ending Balance – March 31, 2020

     $ (5,088     $ (61     $ (5,149
  

 

 

   

 

 

   

 

 

 
     Three Months Ended March 31, 2019  
     (Dollars in Thousands – net of tax)  
         Unrealized Gains    
and Losses on
Available-for-Sale
Securities
        Unrealized Gains    
and Losses on
Held-to-Maturity
Securities
                Total              

Beginning Balance – December 31, 2018

     $ (1,486)       $ (199)       $ (1,685)  

Other comprehensive income before reclassifications

     1,168       127       1,295  

Amounts reclassified from accumulated other comprehensive loss

     -       -       -  
  

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income

     1,168       127       1,295  
  

 

 

   

 

 

   

 

 

 

Ending Balance – March 31, 2019

     $ (318     $ (72     $ (390
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents
     Nine Months Ended March 31, 2019  
     (Dollars in Thousands – net of tax)  
         Unrealized Gains    
and Losses on
Available-for-Sale
Securities
        Unrealized Gains    
and Losses on
Held-to-Maturity
Securities
                Total              

Beginning Balance – June 30, 2018

     $ (10)       $ (178     $ (188)  

Other comprehensive income (loss) before reclassifications

     (310     106       (204

Amounts reclassified from accumulated other comprehensive loss

     2       -       2  
  

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive (loss) Income

     (308     106       (202
  

 

 

   

 

 

   

 

 

 

Ending Balance – March 31, 2019

     $ (318   $ (72     $ (390
  

 

 

   

 

 

   

 

 

 

 

9.

UNREALIZED LOSSES ON SECURITIES

The following tables show the Company’s gross unrealized losses and fair value, aggregated by category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2020 and June 30, 2019.

 

              March 31, 2020  
   

 

 

 
              Less Than Twelve Months           Twelve Months or Greater           Total  
   

 

 

 
   

Fair

Value

   

Gross
Unrealized
Losses

   

Fair
Value

    Gross
Unrealized
Losses
   

Fair
Value

    Gross
Unrealized
Losses
 
   

 

 

 
              (Dollars in Thousands)  

Corporate debt securities

    $         101,644     $     (4,819   $         8,499     $     (325   $         110,143     $     (5,144

Foreign debt securities1

        31,286         (1,299       -         -         31,286         (1,299

Collateralized mortgage obligations

        57,941         (1,049       22,749         (795       80,690         (1,844
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total

    $         190,871     $     (7,167   $         31,248     $     (1,120   $         222,119     $     (8,287
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

 

 

1 U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.

 

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Table of Contents
              June 30, 2019  
   

 

 

 
              Less Than Twelve Months           Twelve Months or Greater           Total  
   

 

 

 
   

Fair

Value

   

Gross
Unrealized
Losses

   

Fair
Value

   

Gross
Unrealized
Losses

   

Fair
Value

   

Gross
Unrealized
Losses

 
   

 

 

 
              (Dollars in Thousands)  

Corporate debt securities

  $       11,728       $ (86   $         17,077     $     (121   $         28,805     $     (207

Foreign debt securities1

        2,004         (2       5,699         (73       7,703         (75

Obligations of states and political subdivisions

        -         -         1,329         (1       1,329         (1

Collateralized mortgage obligations

        24,368         (182       18,614         (400       42,982         (582
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total

  $       38,100       $ (270   $         42,719     $     (595   $         80,819     $     (865
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

For debt securities, impairment is considered to be other than temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its amortized cost basis, or (3) does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell the security). In addition, impairment is considered to be other than temporary if the present value of cash flows expected to be collected from the debt security is less than the amortized cost basis of the security (any such shortfall is referred to as a credit loss).

The Company evaluates outstanding available-for-sale and held-to-maturity securities in an unrealized loss position (i.e., impaired securities) for other than temporary impairment (“OTTI”) on a quarterly basis. In doing so, the Company considers many factors including, but not limited to: the credit ratings assigned to the securities by the Nationally Recognized Statistical Rating Organizations (NRSROs); other indicators of the credit quality of the issuer; the strength of the provider of any guarantees; the length of time and extent that fair value has been less than amortized cost; and whether the Company has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. In the case of its private label residential MBS, the Company also considers prepayment speeds, the historical and projected performance of the underlying loans and the credit support provided by the subordinate securities. These evaluations are inherently subjective and consider a number of quantitative and qualitative factors.

The following table presents a roll-forward of the credit loss component of the amortized cost of mortgage-backed securities that we have written down for OTTI and the credit component of the loss that is recognized in earnings. OTTI recognized in earnings for credit impaired mortgage-backed securities is presented as additions in two components based upon whether the current period is the first time the mortgage-backed security was credit-impaired (initial credit impairment) or is not the first time the mortgage-backed security was credit impaired (subsequent credit impairments). The credit loss component is reduced if we sell, intend to sell or believe that we will be required to sell previously credit-impaired mortgage-backed securities. Additionally, the credit loss component is reduced if we receive cash flows in excess of what we expected to receive over the remaining life of the credit impaired mortgage-backed securities, the security matures or is fully written down.

 

 

1 U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.

 

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Table of Contents
     Three Months Ended     Nine Months Ended  
     March 31,     March 31,  
             2020                      2019                     2020                     2019          
     (Dollars in Thousands)  

Beginning balance

   $ 242      $ 229     $ 248     $ 239  

Initial credit impairment

     -        -       -       -  

Subsequent credit impairment

     32        26       50       26  

Reductions for amounts recognized in earnings due to intent or requirement to sell

     -        -       -       -  

Reductions for securities sold

     -        -       -       -  

Reduction for actual realized recoveries (losses)

     4        (5     (20     (15

Reduction for increase in cash flows expected to be collected

     -        -       -       -  
  

 

 

    

 

 

   

 

 

   

 

 

 

Ending Balance

   $ 278      $ 250     $ 278     $ 250  
  

 

 

    

 

 

   

 

 

   

 

 

 

During the three months ended March 31, 2020, the Company recorded a $32 thousand credit impairment charge and no non-credit unrealized holding losses to accumulated other comprehensive income. During the three and nine months ended March 31, 2020, the Company accreted back into other comprehensive income $3 thousand and $9 thousand, respectively, (net of income tax effect of $1 thousand and $3 thousand, respectively), based on principal repayments on private-label CMOs previously identified with OTTI.

In the case of its private-label residential CMOs that exhibit adverse risk characteristics, the Company employs models to determine the cash flows that it is likely to collect from the securities. These models consider borrower characteristics and the particular attributes of the loans underlying the securities, in conjunction with assumptions about future changes in home prices and interest rates, to predict the likelihood a loan will default and the impact on default frequency, loss severity and remaining credit enhancement. A significant input to these models is the forecast of future housing price changes for the relevant states and metropolitan statistical areas, which are based upon an assessment of the various housing markets. In general, since the ultimate receipt of contractual payments on these securities will depend upon the credit and prepayment performance of the underlying loans and, if needed, the credit enhancements for the senior securities owned by the Company, the Company uses these models to assess whether the credit enhancement associated with each security is sufficient to protect against likely losses of principal and interest on the underlying mortgage loans. The development of the modeling assumptions requires significant judgment.

In conjunction with our adoption of ASC Topic 820 effective June 30, 2009, the Company retained an independent third party to assist it with assessing its investments within the private-label CMO portfolio. The independent third party utilized certain assumptions for producing the cash flow analysis used in the OTTI assessment. Key assumptions would include interest rates, expected market participant spreads and discount rates, housing prices, projected future delinquency levels and assumed loss rates on any liquidated collateral.

The Company reviewed the independent third party’s assumptions used in the March 31, 2020 OTTI process. Based on the results of this review, the Company deemed the independent third party’s assumptions to be reasonable and adopted them. However, different assumptions could produce materially different results, which could impact the Company’s conclusions as to whether an impairment is considered other-than-temporary and the magnitude of the credit loss.

If the Company intends to sell an impaired debt security, or more likely than not will be required to sell the security before recovery of its amortized cost basis, the impairment is other-than-temporary and is

 

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recognized currently in earnings in an amount equal to the entire difference between fair value and amortized cost. The Company does not anticipate selling its private-label CMO portfolio, nor does Management believe that the Company will be required to sell these securities before recovery of this amortized cost basis.

In instances in which the Company determines that a credit loss exists but the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before the anticipated recovery of its remaining amortized cost basis, the OTTI is separated into (1) the amount of the total impairment related to the credit loss and (2) the amount of the total impairment related to all other factors (i.e., the noncredit portion). The amount of the total OTTI related to the credit loss is recognized in earnings and the amount of the total OTTI related to all other factors is recognized in accumulated other comprehensive loss. The total OTTI is presented in the Consolidated Statement of Income with an offset for the amount of the total OTTI that is recognized in accumulated other comprehensive loss. Absent the intent or requirement to sell a security, if a credit loss does not exist, any impairment is considered to be temporary.

Regardless of whether an OTTI is recognized in its entirety in earnings or if the credit portion is recognized in earnings and the noncredit portion is recognized in other comprehensive income (loss), the estimation of fair values has a significant impact on the amount(s) of any impairment that is recorded.

The noncredit portion of any OTTI losses on securities classified as available-for-sale is adjusted to fair value with an offsetting adjustment to the carrying value of the security. The fair value adjustment could increase or decrease the carrying value of the security. All of the Company’s private-label CMOs were originally, and continue to be classified, as held to maturity.

In periods subsequent to the recognition of an OTTI loss, the other-than-temporarily impaired debt security is accounted for as if it had been purchased on the measurement date of the OTTI at an amount equal to the previous amortized cost basis less the credit-related OTTI recognized in earnings. For debt securities for which credit-related OTTI is recognized in earnings, the difference between the new cost basis and the cash flows expected to be collected is accreted into interest income over the remaining life of the security in a prospective manner based on the amount and timing of future estimated cash flows.

The Company had investments in 125 positions that were impaired at March 31, 2020. Based on its analysis, management has concluded that three private-label CMOs are other-than-temporarily impaired, while the remaining securities portfolio has experienced unrealized losses and a decrease in fair value due to interest rate volatility, illiquidity in the marketplace, or credit deterioration in the U.S. mortgage markets.

 

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10.

LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES

The following table summarizes the primary segments of the loan portfolio as of March 31, 2020 and June 30, 2019.

 

            March 31, 2020      June 30, 2019  
           

Total

Loans

          

Individually

evaluated
for
impairment

            Collectively
evaluated
for
impairment
           

Total

Loans

          

Individually

evaluated
for
impairment

           

Collectively
evaluated

for

impairment

 
     

 

 

 
            (Dollars in Thousands)  

First mortgage loans:

                                 

1 – 4 family dwellings

   $          79,166        $ -         $ 79,166         $ 76,789        $ -         $ 76,789  

Construction

        1,335          -           1,335           2,907          -           2,907  

Land acquisition & development

        446          -           446           694          -           694  

Multi-family dwellings

        2,562          -           2,562           3,123          -           3,123  

Commercial

        4,182          -           4,182           3,727          -           3,727  

Consumer loans

                                 

Home equity

        1,030          -           1,030           906          -           906  

Home equity lines of credit

        1,859          -           1,859           1,953          -           1,953  

Other

        143          -           143           112          -           112  

Commercial loans

        11          -           11           418          -           418  
     

 

 

      

 

 

       

 

 

       

 

 

      

 

 

       

 

 

 
   $          90,734        $             -         $         90,734         $         90,629        $                 -         $             90,629  
          

 

 

       

 

 

            

 

 

       

 

 

 

Plus: Deferred loan costs

        441                      507             

Allowance for loan losses

        (523                    (548           
     

 

 

                  

 

 

            

Total

   $                  90,652                    $ 90,588             
     

 

 

                  

 

 

            

Impaired loans are loans for which it is probable the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. The following loan categories are collectively evaluated for impairment, First mortgage loans: 1 – 4 family dwellings and all consumer loan categories (home equity, home equity lines of credit, and other). The following loan categories are individually evaluated for impairment, First mortgage loans: construction, land acquisition and development, multi-family dwellings, and commercial. The Company evaluates commercial loans not secured by real property individually for impairment.

The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectability, while not classifying the loan as impaired if the loan is not a commercial or commercial real estate loan. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of impaired loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral.

Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case basis taking into consideration all circumstances surrounding the loan and the borrower, including the length of the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed.

 

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At March 31, 2020 and June 30, 2019 there were no loans considered to be impaired.

Total nonaccrual loans as of March 31, 2020 and June 30, 2019 and the related interest income recognized for the three and nine months ended March 31, 2020 and March 31, 2019 are as follows:

 

                    March 31,        
2020
                    June 30,        
2019
 
            (Dollars in Thousands)  

Principal outstanding

           

1 – 4 family dwellings

   $          -      $          225  

Construction

        -           -  

Land acquisition & development

        -           -  

Commercial real estate

        -           -  

Home equity lines of credit

        -           -  
     

 

 

       

 

 

 

Total

   $          -      $          225  
     

 

 

       

 

 

 

 

            Three Months Ended      Nine Months Ended  
              March 31,                 March 31,                 March 31,                 March 31,    
            2020             2019             2020             2019  
            (Dollars in Thousands)  

Average nonaccrual loans

                       

1 – 4 family dwellings

   $          -      $          230      $          62      $          232  

Construction

        -           -           -           -  

Land acquisition & development

        -           -           -           -  

Commercial real estate

        -           -           -           -  

Home equity lines of credit

        -           -           -           -  
     

 

 

       

 

 

       

 

 

       

 

 

 

Total

   $          -      $          230      $          62      $          232  
     

 

 

       

 

 

       

 

 

       

 

 

 

Income that would have been recognized

   $          -      $          5      $          8      $          11  

Interest income recognized

   $          -      $          5      $          8      $          11  

The Company’s loan portfolio may also include troubled debt restructurings (“TDRs”), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. Under the provisions of the CARES Act, as of March 31, 2020, the Company had not received, or granted, any loan modification requests. Through April 30, 2020, the number of modifications increased to 14 loans with an aggregate balance of $5.5 million, or 6.0% of loans outstanding and an aggregate appraised value of approximately $8.9 million. The characteristics of these modifications are considered short-term and do not result in a reclassification of these loans to TDR status. Substantially all of these modification requests provide for full collection of taxes and insurance, partial to full collection of interest and no partial collection of principal during the deferral period. As of March 30, 2020 and through April 30, 2020 all of these loans were current with modified payments to begin on May 1, 2020.

During the three and nine months ended March 31, 2020 and March 31, 2019, there were no troubled debt restructurings, and no troubled debt restructurings that subsequently defaulted.

When the Company modifies a loan, management evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original

 

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loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or a charge-off to the allowance. Segment and class status is determined by the loan’s classification at origination.

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance account. Subsequent recoveries, if any, are credited to the allowance. The allowance is maintained at a level believed adequate by management to absorb estimated potential loan losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio considering past experience, current economic conditions, composition of the loan portfolio and other relevant factors. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant change.

Effective December 13, 2006, the FDIC, in conjunction with the other federal banking agencies adopted a Revised Interagency Policy Statement on the Allowance for Loan and Lease Losses (“ALLL”). The revised policy statement revised and replaced the banking agencies’ 1993 policy statement on the ALLL. The revised policy statement provides that an institution must maintain an ALLL at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio. The banking agencies also revised the policy to ensure consistency with generally accepted accounting principles (“GAAP”). The revised policy statement updates the previous guidance that describes the responsibilities of the board of directors, management, and bank examiners regarding the ALLL, factors to be considered in the estimation of the ALLL, and the objectives and elements of an effective loan review system.

Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: “substandard”, “doubtful” and “loss”. Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified as loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. Another category designated “asset watch” is also utilized by the Bank for assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification as substandard, doubtful or loss. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified as loss, the insured institution must either establish specific allowances for loan losses in the amount of 100% of the portion of the asset classified loss, or charge-off such amount. General loss allowances established to cover possible losses related to assets classified substandard or doubtful may be included in determining an institution’s regulatory capital, while specific valuation allowances for loan losses do not qualify as regulatory capital.

The Company’s general policy is to internally classify its assets on a regular basis and establish prudent general valuation allowances that are adequate to absorb losses that have not been identified but that are inherent in the loan portfolio. The Company maintains general valuation allowances that it believes are adequate to absorb losses in its loan portfolio that are not clearly attributable to specific loans. The Company’s general valuation allowances are within the following general ranges: (1) 0% to 5% of assets subject to special mention; (2) 1.00% to 100% of assets classified substandard; and (3) 50% to 100% of assets classified doubtful. Any loan classified as loss is charged-off. To further monitor and assess the risk characteristics of the loan portfolio, loan delinquencies are reviewed to consider any developing problem loans. Based upon the procedures in place, considering the Company’s past charge-offs and recoveries and assessing the current risk elements in the portfolio, management believes the allowance for loan losses at March 31, 2020, is adequate.

 

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The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2020 and June 30, 2019:

 

          Current           30 – 59
  Days Past  
Due
          60 – 89
  Days Past  
Due
         

  90 Days +  
Past Due

Accruing

         

  90 Days +  
Past Due

Non-accrual

          Total  
Past  
Due  
         

Total

Loans

 
   

 

 

 
          (Dollars in Thousands)  

March 31, 2020

                           

First mortgage loans:

                           

1 – 4 family dwellings

  $           79,166     $           -     $           -     $           -     $           -     $           -     $           79,166  

Construction

      1,335         -         -         -         -         -         1,335  

Land acquisition & development

      446         -         -         -         -         -         446  

Multi-family dwellings

      2,562         -         -         -         -         -         2,562  

Commercial

      4,182         -         -         -         -         -         4,182  

Consumer Loans:

                           

Home equity

      1,030         -         -         -         -         -         1,030  

Home equity lines of credit

      1,859         -         -         -         -         -         1,859  

Other

      143         -         -         -         -         -         143  

Commercial Loans

      11         -         -         -         -         -         11  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
  $           90,734     $           -     $           -     $           -     $           -     $           -         90,734  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

Plus: Deferred loan fees

                              441  

  Allowance for loan losses

                              (523
                           

 

 

 

Net Loans Receivable

                          $           90,652  
                           

 

 

 
          Current           30 – 59
  Days Past  
Due
          60 – 89
  Days Past  
Due
         

  90 Days +  
Past Due

Accruing

         

  90 Days +  
Past Due

Non-accrual

          Total  
Past  
Due  
         

Total

Loans

 
   

 

 

 
          (Dollars in Thousands)  

June 30, 2019

                           

First mortgage loans:

                           

1 – 4 family dwellings

  $           76,564     $           -     $           -     $           -     $           225     $           225     $           76,789  

Construction

      2,907         -         -         -         -         -         2,907  

Land acquisition & development

      694         -         -         -         -         -         694  

Multi-family dwellings

      3,123         -         -         -         -         -         3,123  

Commercial

      3,727         -         -         -         -         -         3,727  

Consumer Loans

                           

Home equity

      906         -         -         -         -         -         906  

Home equity lines of credit

      1,953         -         -         -         -         -         1,953  

Other

      112         -         -         -         -         -         112  

Commercial Loans

      418         -         -         -         -         -         418  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
  $           90,404     $           -     $           -     $           -     $           225     $           225         90,629  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

Plus: Deferred loan costs

                              507  

  Allowance for loan losses

                              (548
                           

 

 

 

Net Loans Receivable

                          $           90,588  
                           

 

 

 

 

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Credit quality information

The following tables represent credit exposure by internally assigned grades for the period ended March 31, 2020. The grading system analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or not at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

Substandard – loans that have a well-defined weakness based on objective evidence and can be characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard loan. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loss – loans classified as loss are considered uncollectible, or of such value that continuance as a loan is not warranted.

The primary credit quality indicator used by management in the 1 – 4 family and consumer loan portfolios is the performance status of the loans. Payment activity is reviewed by Management on a monthly basis to determine how loans are performing. Loans are considered to be non-performing when they become 90 days delinquent, have a history of delinquency, or have other inherent characteristics which Management deems to be weaknesses.

The following tables present the Company’s internally classified construction, land acquisition and development, multi-family dwellings, commercial real estate and commercial (not secured by real estate) loans at March 31, 2020 and June 30, 2019.

 

            March 31, 2020  
            Construction            

Land

Acquisition

&

Development

           

Multi-

family

Residential

           

Commercial

Real

Estate

            Commercial  
     

 

 

 
            (Dollars in Thousands)  

Pass

   $          1,335      $          446      $          2,562      $          4,182      $          11  

Special Mention

        -           -           -           -           -  

Substandard

        -           -           -           -           -  

Doubtful

        -           -           -           -           -  
     

 

 

       

 

 

       

 

 

       

 

 

       

 

 

 

Ending Balance

   $          1,335      $          446      $          2,562      $          4,182      $          11  
     

 

 

       

 

 

       

 

 

       

 

 

       

 

 

 

 

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            June 30, 2019  
            (Dollars in Thousands)  
       Construction              

Land

Acquisition

&

  Development  

Loans

           

  Multi-family  

Residential

           

  Commercial  
Real

Estate

              Commercial    
  

 

 

 

Pass

   $          2,907      $          694      $          3,123      $          3,727      $          418  

Special Mention

        -           -           -           -           -  

Substandard

        -           -           -           -           -  

Doubtful

        -           -           -           -           -  
     

 

 

       

 

 

       

 

 

       

 

 

       

 

 

 

Ending Balance

   $          2,907      $          694      $          3,123      $          3,727      $          418  
     

 

 

       

 

 

       

 

 

       

 

 

       

 

 

 

The following table presents performing and non-performing 1 – 4 family residential and consumer loans based on payment activity for the periods ended March 31, 2020 and June 30, 2019.

 

            March 31, 2020  
     

 

 

 
                1 – 4 Family                     Consumer      
     

 

 

 
            (Dollars in Thousands)  

Performing

       $            79,166      $          3,032  

Non-performing

        -           -  
     

 

 

       

 

 

 

Total

       $            79,166      $          3,032  
     

 

 

       

 

 

 
            June 30, 2019  
     

 

 

 
                1 – 4 Family                     Consumer      
     

 

 

 
            (Dollars in Thousands)  

Performing

       $            76,564      $          2,971  

Non-performing

        225           -  
     

 

 

       

 

 

 

Total

       $            76,789      $          2,971  
     

 

 

       

 

 

 

The Company determines its allowance for loan losses in accordance with generally accepted accounting principles. The Company uses a systematic methodology as required by Financial Reporting Release No. 28 and the various Federal Financial Institutions Examination Council guidelines. The Company also endeavors to adhere to SEC Staff Accounting Bulletin No. 102 in connection with loan loss allowance methodology and documentation issues.

Our methodology used to determine the allocated portion of the allowance is as follows. For groups of homogenous loans, we apply a loss rate to the groups’ aggregate balance. Our group loss rate reflects our historical loss experience. We may adjust these group rates to compensate for changes in environmental factors; but our adjustments have not been frequent due to a relatively stable charge-off experience. The Company also monitors industry loss experience on similar loan portfolio segments. We then identify loans for individual evaluation under ASC Topic 310. If the individually identified loans are performing, we apply a segment specific loss rate adjusted for relevant environmental factors, if necessary, for those loans reviewed individually and considered individually impaired, we use one of the three methods for measuring impairment mandated by ASC Topic 310. Generally the fair value of collateral is used since our impaired loans are generally real estate based. In connection with the fair value of collateral measurement, the Company

 

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generally uses an independent appraisal and determines costs to sell. The Company’s appraisals for commercial income based loans, such as multi-family and commercial real estate loans, assess value based upon the operating cash flows of the business as opposed to merely “as built” values. The Company then validates the reasonableness of our calculated allowances by: (1) reviewing trends in loan volume, delinquencies, restructurings and concentrations; (2) reviewing prior period (historical) charge-offs and recoveries; and (3) presenting the results of this process, quarterly, to the Asset Classification Committee and the Savings Bank’s Board of Directors. We then tabulate, format and summarize the current loan loss allowance balance for financial and regulatory reporting purposes.

The Company had no unallocated loss allowance balances at March 31, 2020 and June 30, 2019.

The allowance for loan losses represents the amount which management estimates is adequate to provide for probable losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan losses charged to operations. The provision for loan losses is based on management’s periodic evaluation of individual loans, economic factors, past loan loss experience, changes in the composition and volume of the portfolio, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to changes in the near term.

As a result of the recent COVID-19 pandemic, management intends to consider how and to what degree to incorporate factors relating to this contingency. In the future as events unfold and the scope of the pandemic’s expected economic impact on the Company’s loan portfolio become clearer.

The following tables summarize the primary segments of the allowance for loan losses (“ALLL”), segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of March 31, 2020 and 2019. Activity in the allowance is presented for the three and nine months ended March 31, 2020 and 2019.

 

            For the three months ended  
            March 31, 2020  
            First Mortgage Loans                                    
                1 – 4
    Family
             Construction              Land
  Acquisition &  
Development
           

Multi-

  family  

              Commercial                 Consumer  
Loans
             Commercial  
Loans
              Total    
     

 

 

 
            (Dollars in Thousands)  

Beginning ALLL Balance at December 31, 2019

   $          398     $          37     $          4      $          13      $          45      $          32     $          1      $          530  

Charge-offs

        -          -          -           -           -           -          -           -  

Recoveries

        -          -          -           -           -           -          -           -  

Provisions

        (2        (5        -           -           2           (2        -           (7
     

 

 

      

 

 

      

 

 

       

 

 

       

 

 

       

 

 

      

 

 

       

 

 

 

Ending ALLL Balance at March 31, 2020

   $          396     $          32     $          4      $          13      $          47      $          30     $          1      $          523  
     

 

 

      

 

 

      

 

 

       

 

 

       

 

 

       

 

 

      

 

 

       

 

 

 

Individually evaluated for impairment

   $          -     $          -     $          -      $          -      $          -      $          -     $          -      $          -  

Collectively evaluated for impairment

        396          32          4           13           47           30          1           523  
     

 

 

      

 

 

      

 

 

       

 

 

       

 

 

       

 

 

      

 

 

       

 

 

 
   $          396     $          32     $          4      $          13      $          47      $          30     $          1      $          523  
     

 

 

      

 

 

      

 

 

       

 

 

       

 

 

       

 

 

      

 

 

       

 

 

 

 

32


Table of Contents
          For the nine months ended  
          March 31, 2020  
          First Mortgage Loans                                
          1 – 4
  Family  
            Construction             Land
  Acquisition &  
Development
          Multi-
  family  
            Commercial               Consumer  
Loans
            Commercial  
Loans
            Total    
   

 

 

 
          (Dollars in Thousands)  

Beginning ALLL Balance at June 30, 2019

  $         405     $         46     $         10     $         17     $         37     $         30     $         3     $         548  

Charge-offs

      -         -         -         -         -         -         -         -  

Recoveries

      -         -         -         -         -         -         -         -  

Provisions

      (9       (14       (6       (4       10         -         (2       (25
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Ending ALLL Balance at March 31, 2020

  $         396     $         32     $         4     $         13     $         47     $         30     $         1     $         523  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Individually evaluated for impairment

  $         -     $         -     $         -     $         -     $         -     $         -     $         -     $         -  

Collectively evaluated for impairment

      396         32         4         13         47         30         1         523  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
  $         396     $         32     $         4     $         13     $         47     $         30     $         1     $         523  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
          For the three months ended  
          March 31, 2019  
          First Mortgage Loans                                
          1 – 4
  Family  
            Construction             Land
  Acquisition &  
Development
          Multi-
  family  
              Commercial             Consumer  
Loans
            Commercial  
Loans
            Total    
   

 

 

 
          (Dollars in Thousands)  

Beginning ALLL Balance at December 31, 2018

  $         373     $         25     $         10     $         18     $         39     $         33     $         3     $         501  

Charge-offs

      -         -         -         -         -         -         -         -  

Recoveries

      -         -         -         -         -         -         -         -  

Provisions

      6         8         -         (1       (1       (3       -         9  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Ending ALLL Balance at March 31, 2019

  $         379     $         33     $         10     $         17     $         38     $         30     $         3     $         510  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Individually evaluated for impairment

  $         -     $         -     $         -     $         -     $         -     $         -     $         -     $