See accompanying notes to unaudited consolidated financial statements.
See accompanying notes to unaudited consolidated financial statements.
See accompanying notes to unaudited consolidated financial statements.
See accompanying notes to unaudited consolidated financial statements.
See accompanying notes to unaudited consolidated financial statements.
See accompanying notes to unaudited consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of WVS Financial Corp. (the Company) and subsidiary 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, 2022, 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 January 1, 2022. 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. As of January 1, 2022, West View Savings Bank (the Savings Bank) had no loans remaining in deferral.
| 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 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 affected 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
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 March 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 January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides optional temporary guidance for entities transitioning away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic 848. ASU 2021-01 clarifies that the derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. ASU 2021-01 is effective immediately for all entities. Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The amendments in this update do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. This Update is not expected to have a significant impact on the Company’s financial statements, OR 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 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures. The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an entity disclose current-period gross writeoffs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for entities that have adopted the amendments in Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption using prospective application, including adoption in an interim period where the guidance should be applied as of the beginning of the fiscal year. This Update is not expected to have a significant impact on the Company’s financial statements, OR the Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.
The Company recognizes revenue in accordance with ASC 606, Revenue from contracts with Customers – Topic 606. 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. 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.
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, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| Weighted average common shares outstanding | | | 3,805,636 | | | | 3,805,636 | | | | 3,805,636 | | | | 3,805,636 | |
| Average treasury stock shares | | | (1,923,257 | ) | | | (1,902,946 | ) | | | (1,922,092 | ) | | | (1,902,562 | ) |
| Average unallocated ESOP shares | | | (140,933 | ) | | | (150,841 | ) | | | (143,427 | ) | | | (153,335 | ) |
| Weighted average common shares and common stock equivalents used to calculate basic earnings per share | | | 1,741,446 | | | | 1,751,849 | | | | 1,740,117 | | | | 1,749,739 | |
| Weighted average common shares and common stock equivalents used to calculate diluted earnings per share | | | 1,741,446 | | | | 1,751,849 | | | | 1,740,117 | | | | 1,749,739 | |
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.
The unallocated shares controlled by the ESOP are not considered in the weighted-average shares outstanding until the shares are committed for allocation to an employee’s individual account.
The amortized cost, gross unrealized gains and losses, and fair values of investments are as follows:
| | | | | | | Gross | | | Gross | | | | | |
| | | Amortized | | | Unrealized | | | Unrealized | | | Fair | |
| | | Cost | | | Gains | | | Losses | | | Value | |
| | | (Dollars in Thousands) | |
| March 31, 2022 | | | | | | | | | | | | | | | | |
| AVAILABLE FOR SALE | | | | | | | | | | | | | | | | |
| U.S. government agency securities | | $ | 3,198 | | | $ | - | | | $ | (151 | ) | | $ | 3,047 | |
| Corporate debt securities | | | 98,551 | | | | 157 | | | | (623 | ) | | | 98,085 | |
| Foreign debt securities1 | | | 33,656 | | | | 44 | | | | (226 | ) | | | 33,474 | |
| Obligations of states and political subdivisions | | | 721 | | | | - | | | | (40 | ) | | | 681 | |
| Total | | $ | 136,126 | | | $ | 201 | | | $ | (1,040 | ) | | $ | 135,287 | |
| | | | | | | Gross | | | Gross | | | | | |
| | | Amortized | | | Unrealized | | | Unrealized | | | Fair | |
| | | Cost | | | Gains | | | Losses | | | Value | |
| | | (Dollars in Thousands) | |
| March 31, 2022 | | | | | | | | | | | | | | | | |
| HELD TO MATURITY | | | | | | | | | | | | | | | | |
| U.S. government agency securities | | $ | 7,749 | | | $ | - | | | $ | (437 | ) | | $ | 7,312 | |
| Obligations of states and political subdivisions | | | 2,205 | | | | 28 | | | | - | | | | 2,233 | |
| Total | | $ | 9,954 | | | $ | 28 | | | $ | (437 | ) | | $ | 9,545 | |
| | | | | | | Gross | | | Gross | | | | | |
| | | Amortized | | | Unrealized | | | Unrealized | | | Fair | |
| | | Cost | | | Gains | | | Losses | | | Value | |
| | | (Dollars in Thousands) | |
| June 30, 2021 | | | | | | | | | | | | | | | | |
| AVAILABLE FOR SALE | | | | | | | | | | | | | | | | |
| U.S. government agency securities | | $ | 3,215 | | | $ | - | | | $ | (1 | ) | | $ | 3,214 | |
| Corporate debt securities | | | 109,501 | | | | 546 | | | | (7 | ) | | | 110,040 | |
| Foreign debt securities1 | | | 37,440 | | | | 179 | | | | (21 | ) | | | 37,598 | |
| Obligations of states and political subdivisions | | | 730 | | | | - | | | | (5 | ) | | | 725 | |
| Total | | $ | 150,886 | | | $ | 725 | | | $ | (34 | ) | | $ | 151,577 | |
| | | | | | | Gross | | | Gross | | | | | |
| | | Amortized | | | Unrealized | | | Unrealized | | | Fair | |
| | | Cost | | | Gains | | | Losses | | | Value | |
| | | (Dollars in Thousands) | |
| June 30, 2021 | | | | | | | | | | | | | | | | |
| HELD TO MATURITY | | | | | | | | | | | | | | | | |
| U.S. government agency securities | | $ | 12,744 | | | $ | 5 | | | $ | - | | | $ | 12,749 | |
| Obligations of states and political subdivisions | | | 2,745 | | | | 98 | | | | - | | | | 2,843 | |
| Total | | $ | 15,489 | | | $ | 103 | | | $ | - | | | $ | 15,592 | |
1 U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.
The Company recorded gross realized investment security gains of $0 and $74 thousand during the three and nine months ended March 31, 2022, respectively. Proceeds from the sales of investment securities totaled $0 and $9.1 million during the same periods.
The Company recorded gross realized investment security gains of $56 thousand and $93 thousand during the three and nine months ended March 31, 2021, respectively. Proceeds from the sales of investment securities totaled $1.0 million and $8.1 million during the same periods.
The amortized cost and fair values of debt securities at March 31, 2022, 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 | | $ | 61,935 | | | $ | 73,723 | | | $ | 468 | | | $ | - | | | $ | 136,126 | |
| Fair value | | | 61,835 | | | | 73,016 | | | | 436 | | | | - | | | | 135,287 | |
| HELD TO MATURITY | | | | | | | | | | | | | | | | | | | | |
| Amortized cost | | $ | 1,185 | | | $ | 1,020 | | | $ | 7,749 | | | $ | - | | | $ | 9,954 | |
| Fair value | | | 1,198 | | | | 1,035 | | | | 7,312 | | | | - | | | | 9,545 | |
At March 31, 2022 investment securities with amortized costs of $13.2 million and $29.1 million and fair values of $12.6 million and $29.2 million were pledged to secure borrowings with the Federal Home Loan Bank (“FHLB”) of Pittsburgh and the Federal Reserve Bank of Cleveland (“FRB”), respectively. Of the securities pledged to the FHLB, $142.3 million of amortized cost, and $138.0 million of fair value was excess collateral. Of the securities pledged to the FRB, $29.1 million of amortized cost, and $29.2 million of fair value, was excess collateral. Excess collateral is maintained to support future borrowings and may be withdrawn by the Company at any time.
| 6. | 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, 2022, the Company’s Agency CMOs totaled $129.1 million as compared to $82.1 million at June 30, 2021. The Company’s Private-Label CMOs totaled $359 thousand at March 31, 2022 as compared to $400 thousand at June 30, 2021. The $47.0 million increase in the Agency CMO segment of our MBSportfolio was due to purchases of Agency CMOs which totaled $79.2 million, partially offset by repayments totaling $32.3 million. During the three and nine months ended March 31, 2022, the Company received principal payments totaling $25 thousand and $96 thousand on its Private-Label CMOs. At March 31, 2022 and June 30, 2021, all of the Company’s MBS portfolio was comprised of adjustable or floating rate investments. 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 MBS 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 six previously recorded other-than-temporary impairments at March 31, 2022. During the three and nine months ended March 31, 2022, the Company recorded no additional credit impairment charge on its Private-Label CMO portfolio.
The Company believes that the data and assumptions used to determine the fair values of its securities 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.
The following table sets forth information with respect to the Company’s Private-Label CMO portfolio as of March 31, 2022. 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, 2022 | |
| | | | | Rating | | Book Value | | | Fair Value2 | | | Life to Date Impairment Recorded in Earnings | |
| Cusip # | | Security Description | | S&P | | Moody’s | | Fitch | | (Dollars in Thousands) | |
| 126694CP1 | | CWHL SER 21 A11 | | NR | | WR | | D | | $ | 222 | | | $ | 253 | | | $ | 271 | |
| 126694KF4 | | CWHL SER 24 A15 | | NR | | NR | | D | | | 98 | | | | 127 | | | | 181 | |
| 126694MP0 | | CWHL SER 26 1A5 | | NR | | NR | | WD | | | 39 | | | | 42 | | | | 48 | |
| | | | | | | | | | | $ | 359 | | | $ | 422 | | | $ | 500 | |
The amortized cost 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, 2022 | | | | | | | | | | | | | | | | |
| HELD TO MATURITY | | | | | | | | | | | | | | | | |
| Collateralized mortgage obligations: | | | | | | | | | | | | | | | | |
| Agency | | $ | 129,054 | | | $ | 144 | | | $ | (3,696 | ) | | $ | 125,502 | |
| Private-label | | | 359 | | | | 63 | | | | - | | | | 422 | |
| Total | | $ | 129,413 | | | $ | 207 | | | $ | (3,696 | ) | | $ | 125,924 | |
| | | Amortized Cost | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Fair Value | |
| | | (Dollars in Thousands) | |
| June 30, 2021 | | | | | | | | | | | | | | | | |
| HELD TO MATURITY | | | | | | | | | | | | | | | | |
| Collateralized mortgage obligations: | | | | | | | | | | | | | | | | |
| Agency | | $ | 82,059 | | | $ | 283 | | | $ | (140 | ) | | $ | 82,202 | |
| Private-label | | | 400 | | | | 57 | | | | - | | | | 457 | |
| Total | | $ | 82,459 | | | $ | 340 | | | $ | (140 | ) | | $ | 82,659 | |
The amortized cost and fair value of the Company’s mortgage-backed securities at March 31, 2022, 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 | | $ | - | | | $ | 27 | | | $ | - | | | $ | 129,386 | | | $ | 129,413 | |
| Fair value | | | - | | | | 27 | | | | - | | | | 125,897 | | | | 125,924 | |
At March 31, 2022, mortgage-backed securities with amortized costs of $129.1 million and fair values of $125.5 million were pledged to secure public deposits and borrowings with the FHLB. Of the securities pledged, $13.1 million of fair value was excess collateral. At June 30, 2021, mortgage-backed securities with anamortized cost of $78.9 million and fair values of $79.0 million, were pledged to secure public deposits and borrowings with the FHLB. Of the securities pledged, $5.0 million of fair value was excess collateral. Excess collateral is maintained to support future borrowings and may be withdrawn by the Company at any time.
2 Fair value estimate provided by the Company’s independent third-party valuation consultant.
| 7. | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
The following tables present the changes in accumulated other comprehensive income (loss) by component, for the three and nine months ended March 31, 2022 and 2021.
| | | Three Months Ended March 31, 2022 | |
| | | (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, 2021 | | $ | 40 | | | $ | (40 | ) | | $ | - | |
| Other comprehensive (loss) before reclassifications | | | (702 | ) | | | 1 | | | | (701 | ) |
| Amounts reclassified from accumulated other comprehensive (loss) income | | | - | | | | - | | | | - | |
| Net current-period other comprehensive (loss) income | | | (702 | ) | | | 1 | | | | (701 | ) |
| Ending Balance – March 31, 2022 | | $ | (662 | ) | | $ | (39 | ) | | $ | (701 | ) |
| | | Nine Months Ended March 31, 2022 | |
| | | (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, 2021 | | $ | 546 | | | $ | (44 | ) | | $ | 502 | |
| Other comprehensive (loss) before reclassifications | | | (1,149 | ) | | | 5 | | | | (1,144 | ) |
| Amounts reclassified from accumulated other comprehensive (loss) income | | | (59 | ) | | | - | | | | (59 | ) |
| Net current-period other comprehensive (loss) income | | | (1,208 | ) | | | 5 | | | | (1,203 | ) |
| Ending Balance – March 31, 2022 | | $ | (662 | ) | | $ | (39 | ) | | $ | (701 | ) |
| | | Three Months Ended March 31, 2021 | |
| | | (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, 2020 | | $ | 561 | | | $ | (51 | ) | | $ | 510 | |
| Other comprehensive (loss) income before reclassifications | | | (15 | ) | | | 3 | | | | (12 | ) |
| Amounts reclassified from accumulated other comprehensive (loss) income | | | (44 | ) | | | - | | | | (44 | ) |
| Net current-period other comprehensive (loss) income | | | (59 | ) | | | 3 | | | | (56 | ) |
| Ending Balance – March 31, 2021 | | $ | 502 | | | $ | (48 | ) | | $ | 454 | |
| | | Nine Months Ended March 31, 2021 | |
| | | (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, 2020 | | $ | (499 | ) | | $ | (57 | ) | | $ | (556 | ) |
| Other comprehensive income before reclassifications | | | 1,074 | | | | 9 | | | | 1,083 | |
| Amounts reclassified from accumulated other comprehensive (loss) income | | | (73 | ) | | | - | | | | (73 | ) |
| Net current-period other comprehensive income | | | 1,001 | | | | 9 | | | | 1,010 | |
| Ending Balance – March 31, 2021 | | $ | 502 | | | $ | (48 | ) | | $ | 454 | |
| 8. | 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, 2022 and June 30, 2021.
| | | March 31, 2022 | |
| | | 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) | |
| U.S. government securities | | $ | 10,359 | | | $ | (588 | ) | | $ | - | | | $ | - | | | $ | 10,359 | | | $ | (588 | ) |
| Corporate debt securities | | | 43,529 | | | | (623 | ) | | | - | | | | - | | | | 43,529 | | | | (623 | ) |
| Foreign debt securities3 | | | 8,425 | | | | (144 | ) | | | 4,345 | | | | (82 | ) | | | 12,770 | | | | (226 | ) |
| Obligations of states and political subdivisions | | | 436 | | | | (32 | ) | | | 245 | | | | (8 | ) | | | 681 | | | | (40 | ) |
| Collateralized mortgage obligations | | | 114,507 | | | | (3,552 | ) | | | 5,933 | | | | (144 | ) | | | 120,440 | | | | (3,696 | ) |
| Total | | $ | 177,256 | | | $ | (4,939 | ) | | $ | 10,523 | | | $ | (234 | ) | | $ | 187,779 | | | $ | (5,173 | ) |
| | | June 30, 2021 | |
| | | 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) | |
| U.S. government agency securities | | $ | 3,214 | | | $ | (1 | ) | | $ | - | | | $ | - | | | $ | 3,214 | | | $ | (1 | ) |
| Corporate debt securities | | | 17,111 | | | | (7 | ) | | | - | | | | - | | | | 17,111 | | | | (7 | ) |
| Foreign debt securities3 | | | 10,929 | | | | (21 | ) | | | - | | | | - | | | | 10,929 | | | | (21 | ) |
| Obligations of states and political subdivisions | | | 725 | | | | (5 | ) | | | - | | | | - | | | | 725 | | | | (5 | ) |
| Collateralized mortgage obligations | | | 22,810 | | | | (42 | ) | | | 10,407 | | | | (98 | ) | | | 33,217 | | | | (140 | ) |
| Total | | $ | 54,789 | | | $ | (76 | ) | | $ | 10,407 | | | $ | (98 | ) | | $ | 65,196 | | | $ | (174 | ) |
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 (“NRSRO”); 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.
| | | Three Months Ended | | | Nine Months Ended | |
| | | March 31, | | | March 31, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | (Dollars in Thousands) | | | (Dollars in Thousands) | |
| Beginning balance | | $ | 322 | | | $ | 324 | | | $ | 322 | | | $ | 311 | |
| Initial credit impairment | | | - | | | | - | | | | - | | | | - | |
| Subsequent credit impairment | | | - | | | | - | | | | - | | | | 13 | |
| Reductions for amounts recognized in earnings due to intent or requirement to sell | | | - | | | | - | | | | - | | | | - | |
| Reductions for securities sold | | | - | | | | - | | | | - | | | | - | |
| Reduction for actual realized losses | | | - | | | | (2 | ) | | | - | | | | (2 | ) |
| Reduction for increase in cash flows expected to be collected | | | - | | | | - | | | | - | | | | - | |
| Ending balance | | $ | 322 | | | $ | 322 | | | $ | 322 | | | $ | 322 | |
3 U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.
During the three and nine months ended March 31, 2022, the Company did not record any subsequent credit impairment charge and non-credit unrealized holding losses to accumulated other comprehensive income. During the three and nine months ended March 31, 2022, the Company accreted back out of othercomprehensive income $2 thousand (net of income tax effect of $1 thousand) and $5 thousand (net of income tax effect of $1 thousand), 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 accordance with ASC Topic 820, 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 analyses 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, 2022 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 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 88 positions that were temporarily impaired at March 31, 2022. Based on its analysis, management has concluded that three Private-Label CMOs are OTTI, 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.
| 9. | LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES |
The following table summarizes the primary segments of the loan portfolio as of March 31, 2022 and June 30, 2021.
| | | March 31, 2022 | | | June 30, 2021 | |
| | | 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 | | $ | 62,449 | | | $ | - | | | $ | 62,449 | | | $ | 67,410 | | | $ | - | | | $ | 67,410 | |
| Construction | | | 1,914 | | | | - | | | | 1,914 | | | | 2,612 | | | | - | | | | 2,612 | |
| Land acquisition & development | | | 516 | | | | - | | | | 516 | | | | 666 | | | | - | | | | 666 | |
| Multi-family dwellings | | | 3,342 | | | | - | | | | 3,342 | | | | 3,469 | | | | - | | | | 3,469 | |
| Commercial | | | 4,722 | | | | - | | | | 4,722 | | | | 3,939 | | | | - | | | | 3,939 | |
| Consumer Loans: | | | | | | | | | | | | | | | | | | | | | | | | |
| Home equity | | | 2,144 | | | | - | | | | 2,144 | | | | 1,340 | | | | - | | | | 1,340 | |
| Home equity lines of credit | | | 1,339 | | | | - | | | | 1,339 | | | | 1,508 | | | | - | | | | 1,508 | |
| Other | | | 15 | | | | - | | | | 15 | | | | 27 | | | | - | | | | 27 | |
| Commercial Loans | | | 30 | | | | - | | | | 30 | | | | - | | | | - | | | | - | |
| | | $ | 76,471 | | | $ | - | | | $ | 76,471 | | | $ | 80,971 | | | $ | - | | | $ | 80,971 | |
| Plus: Deferred loan costs | | | 208 | | | | | | | | | | | | 278 | | | | | | | | | |
| Allowance for loan losses | | | (513 | ) | | | | | | | | | | | (565 | ) | | | | | | | | |
| Total | | $ | 76,166 | | | | | | | | | | | $ | 80,684 | | | | | | | | | |
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.
As of March 31, 2022 and June 30, 2021, there were no loans considered to be impaired and no nonaccrual loans.
| | | Three Months Ended | | | Nine Months Ended | |
| | | March 31, 2022 | | | March 31, 2021 | | | March 31, 2022 | | | March 31, 2021 | |
| | | (Dollars in Thousands) | |
| Average nonaccrual loans | | | | | | | | | | | | | | | | |
| 1 – 4 family dwellings | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Construction | | | - | | | | - | | | | - | | | | - | |
| Land acquisition & development | | | - | | | | - | | | | - | | | | - | |
| Commercial real estate | | | - | | | | - | | | | - | | | | - | |
| Home equity lines of credit | | | - | | | | - | | | | - | | | | - | |
| Total | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Income that would have been recognized | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Interest income recognized | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Interest income foregone | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
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.
During the three and nine months ended March 31, 2022 and 2021, 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 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.
The Federal Deposit Insurance Corporation (“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 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 principals (“GAAP”). The revised policy statement updates 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, 2022, is adequate.
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, 2022 and June 30, 2021:
| | | 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, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| First mortgage loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1 – 4 family dwellings | | $ | 62,449 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 62,449 | |
| Construction | | | 1,914 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,914 | |
| Land acquisition & development | | | 516 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 516 | |
| Multi-family dwellings | | | 3,342 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 3,342 | |
| Commercial | | | 4,722 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,722 | |
| Consumer Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Home equity | | | 2,144 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2,144 | |
| Home equity lines of credit | | | 1,339 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,339 | |
| Other | | | 15 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 15 | |
| Commercial Loans | | | 30 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 30 | |
| | | $ | 76,471 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 76,471 | |
| Deferred loan costs | | | | | | | | | | | | | | | | | | | | | | | | | | | 208 | |
| Allowance for loan losses | | | | | | | | | | | | | | | | | | | | | | | | | | | (513 | ) |
| Net Loans Receivable | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 76,166 | |
| | | 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, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| First mortgage loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1 – 4 family dwellings | | $ | 67,410 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 67,410 | |
| Construction | | | 2,612 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2,612 | |
| Land acquisition & development | | | 666 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 666 | |
| Multi-family dwellings | | | 3,469 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 3,469 | |
| Commercial | | | 3,939 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 3,939 | |
| Consumer Loans | | | | | | | | | | | | | | | | | | | | | | | - | | | | | |
| Home equity | | | 1,340 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,340 | |
| Home equity lines of credit | | | 1,508 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,508 | |
| Other | | | 27 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 27 | |
| Commercial Loans | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| | | $ | 80,971 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 80,971 | |
| Deferred loan costs | | | | | | | | | | | | | | | | | | | | | | | | | | | 278 | |
| Allowance for loan losses | | | | | | | | | | | | | | | | | | | | | | | | | | | (565 | ) |
| Net Loans Receivable | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 80,684 | |
Credit quality information
The following tables represent credit exposure by internally assigned grades for the periods ended March 31, 2022 and June 30, 2021. 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 residential, commercial real estate and commercial (not secured by real estate) loans at March 31, 2022 and June 30, 2021.
| | | March 31, 2022 | |
| | | Construction | | | Land Acquisition & Development Loans | | | Multi-family Residential | | | Commercial Real Estate | | | Commercial | |
| | | (Dollars in Thousands) | |
| Pass | | $ | 1,914 | | | $ | 516 | | | $ | 3,342 | | | $ | 4,722 | | | $ | 30 | |
| Special Mention | | | - | | | | - | | | | - | | | | - | | | | - | |
| Substandard | | | - | | | | - | | | | - | | | | - | | | | - | |
| Doubtful | | | - | | | | - | | | | - | | | | - | | | | - | |
| Ending Balance | | $ | 1,914 | | | $ | 516 | | | $ | 3,342 | | | $ | 4,722 | | | $ | 30 | |
| | | June 30, 2021 | |
| | | Construction | | | Land Acquisition & Development Loans | | | Multi-family Residential | | | Commercial Real Estate | | | Commercial | |
| | | (Dollars in Thousands) | |
| Pass | | $ | 2,612 | | | $ | 666 | | | $ | 3,469 | | | $ | 3,939 | | | $ | - | |
| Special Mention | | | - | | | | - | | | | - | | | | - | | | | - | |
| Substandard | | | - | | | | - | | | | - | | | | - | | | | - | |
| Doubtful | | | - | | | | - | | | | - | | | | - | | | | - | |
| Ending Balance | | $ | 2,612 | | | $ | 666 | | | $ | 3,469 | | | $ | 3,939 | | | $ | - | |
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, 2022 and June 30, 2021.
| | | March 31, 2022 | |
| | | 1 – 4 Family | | | Consumer | |
| | | (Dollars in Thousands) | |
| Performing | | $ | 62,449 | | | $ | 3,498 | |
| Non-performing | | | - | | | | - | |
| Total | | $ | 62,449 | | | $ | 3,498 | |
| | | June 30, 2021 | |
| | | 1 – 4 Family | | | Consumer | |
| | | (Dollars in Thousands) | |
| Performing | | $ | 67,410 | | | $ | 2,875 | |
| Non-performing | | | - | | | | - | |
| Total | | $ | 67,410 | | | $ | 2,875 | |
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 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 balance at March 31, 2022.
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.
The following tables summarize the primary segments of the allowance for loan losses, 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, 2022 and 2021. Activity in the allowance is presented for the three and nine months ended March 31, 2022 and 2021.
| | | As of March 31, 2022 | |
| | | 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, 2021 | | $ | 342 | | | $ | 49 | | | $ | 20 | | | $ | 21 | | | $ | 62 | | | $ | 35 | | | $ | - | | | $ | 529 | |
| Charge-offs | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Recoveries | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Provisions | | | (18 | ) | | | 15 | | | | (6 | ) | | | (1 | ) | | | (7 | ) | | | (1 | ) | | | 2 | | | | (16 | ) |
| Ending ALLL Balance at March 31, 2022 | | $ | 324 | | | $ | 64 | | | $ | 14 | | | $ | 20 | | | $ | 55 | | | $ | 34 | | | $ | 2 | | | $ | 513 | |
| Individually evaluated for impairment | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Collectively evaluated for impairment | | | 324 | | | | 64 | | | | 14 | | | | 20 | | | | 55 | | | | 34 | | | | 2 | | | | 513 | |
| | | $ | 324 | | | $ | 64 | | | $ | 14 | | | $ | 20 | | | $ | 55 | | | $ | 34 | | | $ | 2 | | | $ | 513 | |
| | | As of March 31, 2022 | |
| | | 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, 2021 | | $ | 389 | | | $ | 50 | | | $ | 11 | | | $ | 24 | | | $ | 59 | | | $ | 32 | | | $ | - | | | $ | 565 | |
| Charge-offs | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Recoveries | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Provisions | | | (65 | ) | | | 14 | | | | 3 | | | | (4 | ) | | | (4 | ) | | | 2 | | | | 2 | | | | (52 | ) |
| Ending ALLL Balance at March 31, 2022 | | $ | 324 | | | $ | 64 | | | $ | 14 | | | $ | 20 | | | $ | 55 | | | $ | 34 | | | $ | 2 | | | $ | 513 | |
| Individually evaluated for impairment | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Collectively evaluated for impairment | | | 324 | | | | 64 | | | | 14 | | | | 20 | | | | 55 | | | | 34 | | | | 2 | | | | 513 | |
| | | $ | 324 | | | $ | 64 | | | $ | 14 | | | $ | 20 | | | $ | 55 | | | $ | 34 | | | $ | 2 | | | $ | 513 | |
| | | As of March 31, 2021 | |
| | | 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, 2020 | | $ | 446 | | | $ | 34 | | | $ | 6 | | | $ | 25 | | | $ | 62 | | | $ | 36 | | | $ | 2 | | | $ | 611 | |
| Charge-offs | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Recoveries | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Provisions | | | (29 | ) | | | 22 | | | | 5 | | | | - | | | | (1 | ) | | | (3 | ) | | | (2 | ) | | | (8 | ) |
| Ending ALLL Balance at March 31, 2021 | | $ | 417 | | | $ | 56 | | | $ | 11 | | | $ | 25 | | | $ | 61 | | | $ | 33 | | | $ | - | | | $ | 603 | |
| Individually evaluated for impairment | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Collectively evaluated for impairment | | | 417 | | | | 56 | | | | 11 | | | | 25 | | | | 61 | | | | 33 | | | | - | | | | 603 | |
| | | $ | 417 | | | $ | 56 | | | $ | 11 | | | $ | 25 | | | $ | 61 | | | $ | 33 | | | $ | - | | | $ | 603 | |
| | | As of March 31, 2021 | |
| | | 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, 2020 | | $ | 449 | | | $ | 38 | | | $ | 6 | | | $ | 26 | | | $ | 66 | | | $ | 32 | | | $ | 1 | | | $ | 618 | |
| Charge-offs | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Recoveries | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Provisions | | | (32 | ) | | | 18 | | | | 5 | | | | (1 | ) | | | (5 | ) | | | 1 | | | | (1 | ) | | | (15 | ) |
| Ending ALLL Balance at March 31, 2021 | | $ | 417 | | | $ | 56 | | | $ | 11 | | | $ | 25 | | | $ | 61 | | | $ | 33 | | | $ | - | | | $ | 603 | |
| Individually evaluated for impairment | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Collectively evaluated for impairment | | | 417 | | | | 56 | | | | 11 | | | | 25 | | | | 61 | | | | 33 | | | | - | | | | 603 | |
| | | $ | 417 | | | $ | 56 | | | $ | 11 | | | $ | 25 | | | $ | 61 | | | $ | 33 | | | $ | - | | | $ | 603 | |
During the three and nine months ended March 31, 2022, the Company’s ALLL decreased by $16 thousand and $52 thousand, respectively. The decrease in the ALLL for the three months ended March 31, 2022 was primarily attributable to a $23 thousand decrease associated with reversing a portion of the Company's previously recorded COVID-19 provision and a $4 thousand decrease attributable to lower balances of land acquisition and development loans which were offset by a $10 thousand increase in the ALLL attributable to higher balances of 1-4 family loans.
The decrease in the ALLL for the nine months ended March 31, 2022 was primarily attributable to a $63 thousand decrease associated with reversing a portion of the Company's previously recorded COVID-19 provision which was partially offset by non-COVID-19 provisions related to the Company's loan segments. The Company anticipates reversing the remaining COVID-19 provision quarterly over the remainder of fiscal 2022, which totaled approximately $22 thousand at March 31, 2022.
| 10. | FEDERAL HOME LOAN BANK (FHLB) ADVANCES |
The following table presents contractual maturities of FHLB long-term advances as of March 31, 2022 and June 30, 2021.
| | | Maturity range | | | Weighted-average | | | Stated interest rate range | | | March 31, | | | June 30, | |
| Description | | from | | to | | | interest rate4 | | | from | | | to | | | 2022 | | | 2021 | |
| | | | | | | | | | | | | | | | | | | | | (Dollars in Thousands) | |
| Fixed | | 10/1/2021 | | 10/3/2022 | | | | 3.09 | % | | | 2.95 | % | | | 3.09 | % | | $ | 5,000 | | | $ | 10,000 | |
| Adjustable | | 10/1/2021 | | 10/1/2021 | | | | N/A | | | | 0.29 | % | | | 0.36 | % | | | - | | | | 25,000 | |
| Total | | | | | | | | | | | | | | | | | | $ | 5,000 | | | $ | 35,000 | |
| __________________________ |
| 4 As of March 31, 2022 |
Maturities of FHLB long-term advances at March 31, 2022, are summarized as follows:
| Maturing During | | | | | | Weighted- | |
| Fiscal Year Ended | | | | | | Average | |
| June 30: | | Amount | | | Interest Rate5 | |
| | | (Dollars in Thousands) | | | | | |
| 2022 | | $ | - | | | | - | |
| 2023 | | | 5,000 | | | | 3.09 | % |
| 2024 | | | - | | | | - | |
| 2025 | | | - | | | | - | |
| 2026 | | | - | | | | - | |
| 2026 and thereafter | | | - | | | | - | |
| Total | | $ | 5,000 | | | | 3.09 | % |
The Company also utilized revolving and short-term FHLB advances. Short-term FHLB advances generally mature within 90 days, while revolving FHLB advances may be repaid by the Company without penalty. The following table presents information regarding such advances as of March 31, 2022 and June 30, 2021:
| | | March 31, 2022 | | | June 30, 2021 | |
| | | (Dollars in Thousands) | |
| FHLB revolving and short-term advances: | | | | | | | | |
| Ending balance | | $ | 161,823 | | | $ | 113,093 | |
| Average balance | | | 65,095 | | | | 34,715 | |
| Maximum month-end balance | | | 161,824 | | | | 113,093 | |
| Average interest rate | | | 0.33 | % | | | 0.34 | % |
| Weighted-average rate at period end | | | 0.41 | % | | | 0.28 | % |
At March 31, 2022, the Company had remaining borrowing capacity with the FHLB of approximately $13.1 million.
The FHLB advances are secured by the Company’s FHLB stock, loans, and mortgage-backed and investment securities held in safekeeping at the FHLB. FHLB advances are subject to substantial prepayment penalties.
| 11. | OTHER SHORT-TERM BORROWINGS |
The Company periodically utilizes other short-term borrowings comprised of FRB discount window borrowings. FRB discount window borrowings mature within 90 days and may be repaid prior to maturity without penalty, in whole or in part, plus accrued interest. The following table presents information regarding the FRBC borrowings as of March 31, 2022 and June 30, 2021:
FRBC Discount Window Borrowings:
| | | March 31, | | | June 30, | |
| | | 2022 | | | 2021 | |
| | | (Dollars in Thousands) | |
| Ending balance | | $ | - | | | $ | - | |
| Average balance | | | - | | | | 456 | |
| Maximum month-end balance | | | - | | | | 5,875 | |
| Average interest rate | | | - | % | | | 0.25 | % |
| Weighted-average rate at period end | | | - | % | | | - | % |
At March 31, 2022 the Company had remaining borrowing capacity with the FRB of approximately $27.6 million.
| 12. | FAIR VALUE MEASUREMENTS |
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. GAAP established a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
| Level I: | Quoted prices are available in active markets for identical assets or liabilities as of the reported date. |
| | |
| Level II: | Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed. |
| | |
| Level III: | Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. |
Assets Measured at Fair Value on a Recurring Basis
Investment Securities Available-for-Sale
Fair values for securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. The Company has no Level I or Level III investment securities. Level II investment securities were primarily comprised of investment-grade corporate bonds and U.S. dollar-denominated investment-grade corporate bonds of large foreign issuers.
The following tables present the assets reported on a recurring basis on the Consolidated Balance Sheet at their fair value as of March 31, 2022 and June 30, 2021, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| | | March 31, 2022 | |
| | | Level I | | | Level II | | | Level III | | | Total | |
| | | (Dollars in Thousands) | |
| Assets measured on a recurring basis: | | | | | | | | | | | | | | | | |
| Investment securities – available for sale: | | | | | | | | | | | | | | | | |
| U.S. government agency securities | | $ | - | | | $ | 3,047 | | | $ | - | | | $ | 3,047 | |
| Corporate debt securities | | | - | | | | 98,085 | | | | - | | | | 98,085 | |
| Foreign debt securities6 | | | - | | | | 33,474 | | | | - | | | | 33,474 | |
| Obligations of states and political subdivisions | | | - | | | | 681 | | | | - | | | | 681 | |
| | | $ | - | | | $ | 135,287 | | | $ | - | | | $ | 135,287 | |
6 U.S. dollar-denominated investment-grade corporate bonds of large foreign corporate issuers. |
| | | June 30, 2021 | |
| | | Level I | | | Level II | | | Level III | | | Total | |
| | | (Dollars in Thousands) | |
| Assets measured on a recurring basis: | | | | | | | | | | | | | | | | |
| Investment securities – available for sale: | | | | | | | | | | | | | | | | |
| U.S. government agency securities | | $ | - | | | $ | 3,214 | | | $ | - | | | $ | 3,214 | |
| Corporate securities | | | - | | | | 110,040 | | | | - | | | | 110,040 | |
| Foreign debt securities7 | | | - | | | | 37,598 | | | | - | | | | 37,598 | |
| Obligations of states and political subdivisions | | | - | | | | 725 | | | | - | | | | 725 | |
| | | $ | - | | | $ | 151,577 | | | $ | - | | | $ | 151,577 | |
| 13. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
The carrying amounts and estimated fair values of financial instruments are as follows:
| | | March 31, 2022 | |
| | | Carrying Amount | | | Fair Value | | | Level I | | | Level II | | | Level III | |
| | | (Dollars in Thousands) | |
| FINANCIAL ASSETS | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 3,323 | | | $ | 3,323 | | | $ | 3,323 | | | $ | - | | | $ | - | |
| Certificates of deposit | | | 350 | | | | 350 | | | | 350 | | | | - | | | | - | |
| Investment securities – held to maturity | | | 9,954 | | | | 9,545 | | | | - | | | | 9,545 | | | | - | |
| Mortgage-backed securities – held to maturity: | | | | | | | | | | | | | | | | | | | | |
| Agency | | | 129,054 | | | | 125,502 | | | | - | | | | 125,502 | | | | - | |
| Private-label | | | 359 | | | | 422 | | | | - | | | | - | | | | 422 | |
| Net loans receivable | | | 76,166 | | | | 75,035 | | | | - | | | | - | | | | 75,035 | |
| Accrued interest receivable | | | 987 | | | | 987 | | | | 987 | | | | - | | | | - | |
| FHLB stock | | | 6,793 | | | | 6,793 | | | | 6,793 | | | | - | | | | - | |
| Bank owned life insurance | | | 5,104 | | | | 5,104 | | | | 5,104 | | | | - | | | | - | |
| FINANCIAL LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Non-interest bearing deposits | | $ | 27,741 | | | $ | 27,741 | | | $ | 27,741 | | | $ | - | | | $ | - | |
| Interest-earning checking | | | 28,148 | | | | 28,148 | | | | 28,148 | | | | - | | | | - | |
| Savings accounts | | | 50,293 | | | | 50,293 | | | | 50,293 | | | | - | | | | - | |
| Money market accounts | | | 24,062 | | | | 24,062 | | | | 24,062 | | | | - | | | | - | |
| Certificates of deposit | | | 29,972 | | | | 29,856 | | | | - | | | | - | | | | 29,856 | |
| Advance payments by borrowers for taxes and insurance | | | 1,460 | | | | 1,460 | | | | 1,460 | | | | - | | | | - | |
| FHLB advances – fixed rate | | | 5,000 | | | | 5,016 | | | | - | | | | - | | | | 5,016 | |
| FHLB advances – variable rate | | | - | | | | - | | | | - | | | | - | | | | - | |
| FHLB short-term advances | | | 161,823 | | | | 161,823 | | | | 161,823 | | | | - | | | | - | |
| Accrued interest payable | | | 114 | | | | 114 | | | | 114 | | | | - | | | | - | |
7 U.S. dollar-denominated investment-grade corporate bonds of large foreign corporate issuers.
| | | June 30, 2021 | |
| | | Carrying
Amount | | | Fair Value | | | Level I | | | Level II | | | Level III | |
| | | (Dollars in Thousands) | |
| FINANCIAL ASSETS | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 2,551 | | | $ | 2,551 | | | $ | 2,551 | | | $ | - | | | $ | - | |
| Certificates of deposit | | | 350 | | | | 350 | | | | 350 | | | | - | | | | - | |
| Investment securities – held to maturity | | | 15,489 | | | | 15,592 | | | | - | | | | 15,592 | | | | - | |
| Mortgage-backed securities – held to maturity: | | | | | | | | | | | | | | | | | | | | |
| Agency | | | 82,059 | | | | 82,202 | | | | - | | | | 82,202 | | | | - | |
| Private-label | | | 400 | | | | 457 | | | | - | | | | - | | | | 457 | |
| Net loans receivable | | | 80,684 | | | | 82,930 | | | | - | | | | - | | | | 82,930 | |
| Accrued interest receivable | | | 749 | | | | 749 | | | | 749 | | | | - | | | | - | |
| FHLB stock | | | 6,044 | | | | 6,044 | | | | 6,044 | | | | - | | | | - | |
| Bank owned life insurance | | | 5,021 | | | | 5,021 | | | | 5,021 | | | | - | | | | - | |
| FINANCIAL LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Non-interest bearing deposits | | $ | 25,452 | | | $ | 25,452 | | | $ | 25,452 | | | $ | - | | | $ | - | |
| Interest-earning checking | | | 26,881 | | | | 26,881 | | | | 26,881 | | | | - | | | | - | |
| Savings accounts | | | 50,058 | | | | 50,058 | | | | 50,058 | | | | - | | | | - | |
| Money market accounts | | | 22,995 | | | | 22,995 | | | | 22,995 | | | | - | | | | - | |
| Certificates of deposit | | | 29,731 | | | | 29,763 | | | | - | | | | - | | | | 29,763 | |
| Advance payments by borrowers for taxes and insurance | | | 2,050 | | | | 2,050 | | | | 2,050 | | | | - | | | | - | |
| FHLB advances – fixed rate | | | 10,000 | | | | 9,763 | | | | - | | | | - | | | | 9,763 | |
| FHLB advances – variable rate | | | 25,000 | | | | 25,000 | | | | 25,000 | | | | - | | | | - | |
| FHLB short-term advances | | | 113,093 | | | | 113,093 | | | | 113,093 | | | | - | | | | - | |
| Accrued interest payable | | | 155 | | | | 155 | | | | 155 | | | | - | | | | - | |
All financial instruments included in the above tables, with the exception of net loans receivable, certificates of deposit liabilities, and FHLB advances – fixed rate, are carried at cost, which approximates the fair value of the instruments.