Item 1. Financial Statements
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
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March 31, 2014
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|
|
September 30, 2013
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(Dollars in thousands,
|
|
|
|
except per share data)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and amounts due from depository institutions
|
|
$
|
1,167
|
|
|
$
|
2,219
|
|
Interest-bearing deposits
|
|
|
3,032
|
|
|
|
258
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
4,199
|
|
|
|
2,477
|
|
Securities available for sale
|
|
|
39,750
|
|
|
|
40,420
|
|
Loans held for sale
|
|
|
|
|
|
|
337
|
|
Loans receivable, net of allowance for loan losses of $657 and $923, respectively
|
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215,902
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|
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|
207,996
|
|
Other real estate owned
|
|
|
235
|
|
|
|
|
|
Premises and equipment
|
|
|
2,680
|
|
|
|
2,742
|
|
Federal Home Loan Bank of New York stock, at cost
|
|
|
1,102
|
|
|
|
1,262
|
|
Accrued interest receivable
|
|
|
904
|
|
|
|
954
|
|
Other assets
|
|
|
2,708
|
|
|
|
2,067
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
267,480
|
|
|
$
|
258,255
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS EQUITY
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Liabilities:
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|
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|
|
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Deposits
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|
$
|
224,028
|
|
|
$
|
212,312
|
|
Advances from Federal Home Loan Bank of New York
|
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|
16,337
|
|
|
|
19,889
|
|
Advance payments by borrowers for taxes and insurance
|
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|
1,860
|
|
|
|
1,221
|
|
Other liabilities
|
|
|
1,996
|
|
|
|
2,098
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
244,221
|
|
|
|
235,520
|
|
|
|
|
|
|
|
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Commitments and Contingencies
|
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Stockholders equity:
|
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Preferred stock, $.01 par value, 1,000,000 shares authorized, 1,500 shares issued and outstanding (liquidation preference value $1,000
per share)
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|
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|
Common stock, $.01 par value, authorized shares: 7,000,000; shares issued: 2,055,165; shares outstanding: 1,862,803
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21
|
|
|
|
21
|
|
Additional paid-in capital
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20,318
|
|
|
|
20,283
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|
Retained earnings
|
|
|
7,318
|
|
|
|
7,007
|
|
Treasury stock, 192,362 shares
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|
|
(1,660
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)
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|
|
(1,660
|
)
|
Unearned Employee Stock Ownership Plan (ESOP) shares
|
|
|
(1,261
|
)
|
|
|
(1,288
|
)
|
Accumulated other comprehensive (loss)
|
|
|
(1,477
|
)
|
|
|
(1,628
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
23,259
|
|
|
|
22,735
|
|
|
|
|
|
|
|
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|
Total liabilities and stockholders equity
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|
$
|
267,480
|
|
|
$
|
258,255
|
|
|
|
|
|
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|
See notes to consolidated financial statements.
3
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months
Ended
March 31,
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|
Six Months
Ended
March 31,
|
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2014
|
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|
2013
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2014
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2013
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(Dollars in thousands, except per share data)
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|
Interest income:
|
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|
|
|
|
|
|
|
|
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|
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Loans
|
|
$
|
2,588
|
|
|
$
|
2,595
|
|
|
$
|
5,175
|
|
|
$
|
5,172
|
|
Securities
|
|
|
180
|
|
|
|
224
|
|
|
|
362
|
|
|
|
451
|
|
Other interest-earning assets
|
|
|
19
|
|
|
|
23
|
|
|
|
35
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total interest income
|
|
|
2,787
|
|
|
|
2,842
|
|
|
|
5,572
|
|
|
|
5,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest expense:
|
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|
|
|
|
|
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|
|
|
|
|
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|
Deposits
|
|
|
361
|
|
|
|
367
|
|
|
|
720
|
|
|
|
746
|
|
Mortgage escrow funds
|
|
|
6
|
|
|
|
12
|
|
|
|
16
|
|
|
|
28
|
|
Borrowings, short term
|
|
|
10
|
|
|
|
11
|
|
|
|
15
|
|
|
|
29
|
|
Borrowings, long term
|
|
|
170
|
|
|
|
173
|
|
|
|
342
|
|
|
|
347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Total interest expense
|
|
|
547
|
|
|
|
563
|
|
|
|
1,093
|
|
|
|
1,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
2,240
|
|
|
|
2,279
|
|
|
|
4,479
|
|
|
|
4,522
|
|
Provision for loan losses
|
|
|
75
|
|
|
|
268
|
|
|
|
175
|
|
|
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Net interest income after provision for loan losses
|
|
|
2,165
|
|
|
|
2,011
|
|
|
|
4,304
|
|
|
|
4,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees and service charges
|
|
|
36
|
|
|
|
43
|
|
|
|
77
|
|
|
|
84
|
|
Net gain on sale of loans
|
|
|
31
|
|
|
|
37
|
|
|
|
71
|
|
|
|
177
|
|
Other
|
|
|
1
|
|
|
|
2
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total non-interest income
|
|
|
68
|
|
|
|
82
|
|
|
|
152
|
|
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Salaries and employee benefits
|
|
|
978
|
|
|
|
969
|
|
|
|
1,914
|
|
|
|
2,080
|
|
Net occupancy
|
|
|
345
|
|
|
|
324
|
|
|
|
678
|
|
|
|
633
|
|
Equipment
|
|
|
198
|
|
|
|
191
|
|
|
|
392
|
|
|
|
386
|
|
Professional fees
|
|
|
165
|
|
|
|
117
|
|
|
|
305
|
|
|
|
258
|
|
Advertising
|
|
|
25
|
|
|
|
7
|
|
|
|
39
|
|
|
|
15
|
|
Federal insurance premiums
|
|
|
52
|
|
|
|
56
|
|
|
|
106
|
|
|
|
110
|
|
Directors fees
|
|
|
55
|
|
|
|
58
|
|
|
|
102
|
|
|
|
102
|
|
Other
|
|
|
177
|
|
|
|
184
|
|
|
|
337
|
|
|
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
|
1,995
|
|
|
|
1,906
|
|
|
|
3,873
|
|
|
|
3,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
238
|
|
|
|
187
|
|
|
|
583
|
|
|
|
486
|
|
Income tax expense
|
|
|
93
|
|
|
|
68
|
|
|
|
227
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
145
|
|
|
|
119
|
|
|
|
356
|
|
|
|
301
|
|
Preferred stock dividends
|
|
|
22
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders
|
|
$
|
123
|
|
|
$
|
119
|
|
|
$
|
311
|
|
|
$
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.07
|
|
|
$
|
0.07
|
|
|
$
|
0.18
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,736,753
|
|
|
|
1,731,272
|
|
|
|
1,736,060
|
|
|
|
1,730,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
1,738,788
|
|
|
|
1,731,272
|
|
|
|
1,737,441
|
|
|
|
1,730,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
4
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
Six Months
Ended
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Net income
|
|
$
|
145
|
|
|
$
|
119
|
|
|
$
|
356
|
|
|
$
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross unrealized holding gains (losses) on securities available for sale, net of deferred income (tax) benefit of $(233), $84,
$(118) and $124
|
|
|
355
|
|
|
|
(126
|
)
|
|
|
179
|
|
|
|
(185
|
)
|
Retirement plan, net of deferred income tax of $9, $2, $18, and $4 (a)
|
|
|
(14
|
)
|
|
|
(3
|
)
|
|
|
(28
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
341
|
|
|
|
(129
|
)
|
|
|
151
|
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
486
|
|
|
$
|
(10
|
)
|
|
$
|
507
|
|
|
$
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Retirement plan amortization and related income tax are reflected in the consolidated statements of income within the salaries and benefits and income tax expense lines, respectively.
|
See notes to consolidated financial statements.
5
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
356
|
|
|
$
|
301
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation of premises and equipment
|
|
|
180
|
|
|
|
180
|
|
Amortization and accretion, net
|
|
|
109
|
|
|
|
56
|
|
Provision for loan losses
|
|
|
175
|
|
|
|
368
|
|
Deferred income taxes
|
|
|
112
|
|
|
|
103
|
|
ESOP expense
|
|
|
24
|
|
|
|
22
|
|
Stock option expense
|
|
|
20
|
|
|
|
27
|
|
Restricted stock award expense
|
|
|
18
|
|
|
|
43
|
|
Net gain on sale of loans
|
|
|
(71
|
)
|
|
|
(177
|
)
|
Loans originated for sale
|
|
|
(3,485
|
)
|
|
|
(3,510
|
)
|
Proceeds from sale of loans originated for sale
|
|
|
3,893
|
|
|
|
6,113
|
|
Decrease in interest receivable
|
|
|
50
|
|
|
|
24
|
|
(Increase) decrease in other assets
|
|
|
(853
|
)
|
|
|
2,911
|
|
Decrease in accrued interest payable
|
|
|
(21
|
)
|
|
|
(7
|
)
|
(Decrease) in other liabilities
|
|
|
(127
|
)
|
|
|
(389
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
380
|
|
|
|
6,065
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Principal repayments and calls on securities available for sale
|
|
|
918
|
|
|
|
4,657
|
|
Net (increase) in loans receivable
|
|
|
(8,376
|
)
|
|
|
(10,160
|
)
|
Additions to premises and equipment
|
|
|
(118
|
)
|
|
|
(22
|
)
|
Redemption of Federal Home Loan Bank of N.Y. stock
|
|
|
160
|
|
|
|
685
|
|
|
|
|
|
|
|
|
|
|
Net cash (used by) investing activities
|
|
|
(7,416
|
)
|
|
|
(4,840
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
11,716
|
|
|
|
12,956
|
|
Repayment of advances from Federal Home Loan Bank of N.Y.
|
|
|
(3,552
|
)
|
|
|
(15,237
|
)
|
Net increase in payments by borrowers for taxes and insurance
|
|
|
639
|
|
|
|
950
|
|
Preferred stock dividends
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used by) financing activities
|
|
|
8,758
|
|
|
|
(1,331
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
1,722
|
|
|
|
(106
|
)
|
Cash and cash equivalents-beginning
|
|
|
2,477
|
|
|
|
1,841
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents-ending
|
|
$
|
4,199
|
|
|
$
|
1,735
|
|
|
|
|
|
|
|
|
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,014
|
|
|
$
|
1,157
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
204
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
6
CMS Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Principles of Consolidation
The consolidated financial statements include the accounts of CMS Bancorp, Inc. (the Company) and its wholly-owned subsidiary,
CMS Bank (the Bank). The Companys business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified
in the consolidated financial statements to conform to the current presentation.
2. Description of Business, Nature of Operations and Merger Termination
The Bank was originally chartered in 1887 as Community Savings and Loan, a New York State-chartered savings and loan association. In 1980,
it converted to a New York State-chartered savings bank and changed its name to Community Mutual Savings Bank of Southern New York. In 1983, Community Mutual Savings Bank of Southern New York changed its name to Community Mutual Savings Bank. In
2007, the Bank reorganized to a federally-chartered mutual savings bank and simultaneously converted from a federally-chartered mutual savings bank to a federally-chartered stock savings bank, with the concurrent formation of the Company. The
Company, a stock holding company for the Bank, conducted a public offering of its common stock in connection with the conversion. After the 2007 conversion and offering, all of the Banks stock became owned by the Company. In June 2012, the
Bank completed its conversion from a federally-chartered savings bank to a New York state-chartered savings bank after receiving approval from the New York State Department of Financial Services (NYSDFS) and non-objection from the Office
of the Comptroller of the Currency (OCC), and changed its name to CMS Bank. The Company will continue to be regulated as a savings and loan holding company by the Federal Reserve Bank of Philadelphia as long as the Bank continues to meet
the requirements to remain a qualified thrift lender under the Home Owners Loan Act.
The Bank is a community and customer-oriented
retail savings bank offering residential mortgage loans and traditional deposit products and commercial real estate, small business and consumer loans in Westchester County, New York, and the surrounding areas. The Bank also invests in various types
of assets, including securities of various government-sponsored enterprises, corporations, municipalities and mortgage-backed securities. The Banks revenues are derived principally from interest on loans, interest and dividends received from
its investment securities and fees for bank services. The Banks primary sources of funds are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of investment securities,
funds provided by operations and borrowings from the Federal Home Loan Bank of New York (FHLB).
Effective as of December 31, 2013, the
Company terminated the previously announced Agreement and Plan of Merger dated as of August 10, 2012 by and between the Company and Customers Bancorp, Inc. (Customers), as amended effective as of April 22, 2013 (Merger
Agreement), due to non-receipt by Customers of required government approvals to consummate the merger. The Merger Agreement, as amended, had called for an initial termination date by December 31, 2013 if the contemplated merger of the
Company and Customers was not completed by that time.
As provided under the terms of the Merger Agreement, Customers was required to pay to the Company a
termination fee of $1,000,000 (Termination Fee) in the event the Merger Agreement is terminated under provisions which relate to failure to consummate the merger due to non-receipt of required government approvals by Customers. The
Merger Agreement required Customers to pay the Termination Fee within 15 business days of December 31, 2013 (the termination date). To date, the Company has not received the Termination Fee and on March 24, 2014, the Company filed suit in
the Eastern District of Pennsylvania to recover the Termination Fee from Customers.
Notwithstanding the termination of the Merger Agreement, Customers
continues to hold shares of the Companys Series A Noncumulative Perpetual Preferred Stock (Series A Preferred Stock) pursuant to the terms of such preferred stock as set forth in the Certificate of Designations establishing the
designations, powers, preferences, limitations, restrictions, and relative rights of the Series A Preferred Stock filed with the Secretary of State of Delaware on May 21, 2013. For additional information on the Series A Preferred Stock, see the
Companys Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on May 24, 2013.
For information about
the original Merger Agreement dated August 10, 2012, the amendment to the Merger Agreement dated April 22, 2013 and the Termination of the Merger Agreement, see the Companys Current Reports on Form 8-K filed with the SEC on
August 10, 2012, April 24, 2013, January 6, 2014 and March 26, 2014, respectively.
3. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and Regulation S-X
and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (U.S.
GAAP). However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and six months
ended March 31, 2014 are not necessarily indicative of the results which may be expected for the entire fiscal year. These consolidated financial statements should be read in conjunction with the Companys audited consolidated financial
statements and notes thereto which are in the Companys Annual Report for the fiscal year ended September 30, 2013, filed with the SEC on December 23, 2013.
7
4. Critical Accounting Policies
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of
America (GAAP). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the statements of financial
condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.
It is managements
opinion that accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity required in making these estimates.
Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the potential impairment of FHLB stock, the determination of other-than-temporary impairment on securities, and
the assessment of whether deferred taxes are more likely than not to be realized. Management believes that the allowance for loan losses represents its best estimate of losses known and inherent in the loan portfolio that are both probable and
reasonable to estimate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in market and economic conditions in the Companys market
area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Companys allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for
loan losses based on their judgments about information available to them at the time of their examination.
Managements determination of whether
investments, including FHLB stock, are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. Managements assessment as to the amount of deferred taxes more
likely than not to be realized is based upon estimates of future taxable income, which is subject to revision upon receipt of updated information.
The
Company follows Financial Accounting Standards Board (FASB) guidance on subsequent events, which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before the financial
statements are issued. This guidance sets forth the period after the balance sheet date during which management of the reporting entity should evaluate events or transactions that occur for potential recognition in the financial statements. This
guidance identifies the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosure that should be made about events or transactions that occur
after the balance sheet date. In preparing these consolidated financial statements, the Company evaluated the events that occurred after December 31, 2013 and through the date these consolidated financial statements were issued.
5. Net Income Per Share
Basic net income per share was computed by dividing the net income available to common stockholders by the weighted average number of shares
of common stock outstanding, adjusted for unearned shares of the Companys employee stock ownership plan, or ESOP. Stock options granted are considered common stock equivalents and are therefore considered in diluted net income per
share calculations, if dilutive, using the treasury stock method. 166,179 of the 186,479 stock options outstanding were anti-dilutive and therefore excluded from the computation of diluted net income per share for the three months ended
March 31, 2014. 172,179 of the 186,479 stock options outstanding were anti-dilutive and therefore excluded from the computation of diluted net income per share for the six months ended March 31, 2014. All outstanding stock options were
anti-dilutive and therefore excluded from the computation of diluted net income per share for the three months and six months ended March 31, 2013. Unallocated common shares held by the ESOP are not included in the weighted average number of
common shares outstanding for purposes of calculating both basic and diluted net income per share until they are committed to be released.
8
6. Retirement Plan Components of Net Periodic Pension Cost
The components of periodic pension expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
Six Months
Ended
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Service cost
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Interest cost
|
|
|
62
|
|
|
|
64
|
|
|
|
124
|
|
|
|
128
|
|
Expected return on plan assets
|
|
|
(73
|
)
|
|
|
(66
|
)
|
|
|
(146
|
)
|
|
|
(132
|
)
|
Amortization of unrecognized loss
|
|
|
23
|
|
|
|
5
|
|
|
|
46
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12
|
|
|
$
|
3
|
|
|
$
|
24
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Stock Based Compensation
At a special meeting of the stockholders of the Company held on November 9, 2007, the stockholders approved the CMS Bancorp, Inc. 2007
Stock Option Plan and the CMS Bancorp, Inc. 2007 Recognition and Retention Plan (collectively the Plans). The Plans authorize the award of up to 205,516 stock options and 82,206 shares of restricted stock. The stock options and
restricted stock awarded under the Plans vest over a five year service period based on the anniversary of the grant date.
The Company recorded
compensation expense with respect to stock options of $10,000 and $7,000 during the three month periods ended March 31, 2014 and 2013, respectively, and $20,000 and $27,000 during the six month periods ended March 31, 2014 and 2013,
respectively. Unrecognized compensation expense associated with stock option grants as of March 31, 2014 was $108,000.
The Company recorded
compensation expense with respect to restricted stock of $9,000 and $12,000 during the three month periods ended March 31, 2014 and 2013, respectively, and $18,000 and $43,000 during the six month periods ended March 31, 2014 and 2013,
respectively. Unrecognized compensation expense associated with grants of restricted stock as of March 31, 2014 was $74,000.
8. Securities
Securities available for sale as of March 31, 2014 and September 30, 2013 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
(In thousands)
|
|
U.S. Government Agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after five but within ten years
|
|
$
|
14,991
|
|
|
$
|
|
|
|
$
|
618
|
|
|
$
|
14,373
|
|
Due after ten years but within fifteen years
|
|
|
5,000
|
|
|
|
|
|
|
|
323
|
|
|
|
4,677
|
|
Corporate bonds due after five years but within ten years
|
|
|
4,374
|
|
|
|
3
|
|
|
|
27
|
|
|
|
4,350
|
|
Municipal bonds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after one but within five years
|
|
|
1,287
|
|
|
|
3
|
|
|
|
4
|
|
|
|
1,286
|
|
Due after five years but within ten years
|
|
|
2,442
|
|
|
|
36
|
|
|
|
15
|
|
|
|
2,463
|
|
Mortgage-backed securities
|
|
|
12,551
|
|
|
|
199
|
|
|
|
149
|
|
|
|
12,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40,645
|
|
|
$
|
241
|
|
|
$
|
1,136
|
|
|
$
|
39,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
(In thousands)
|
|
U.S. Government Agencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after five but within ten years
|
|
$
|
14,990
|
|
|
$
|
|
|
|
$
|
760
|
|
|
$
|
14,230
|
|
Due after ten years but within fifteen years
|
|
|
5,000
|
|
|
|
|
|
|
|
404
|
|
|
|
4,596
|
|
Corporate bonds due after five years but within ten years
|
|
|
4,384
|
|
|
|
|
|
|
|
78
|
|
|
|
4,306
|
|
Municipal bonds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within five years
|
|
|
988
|
|
|
|
|
|
|
|
8
|
|
|
|
980
|
|
Due after five years but within ten years
|
|
|
2,753
|
|
|
|
32
|
|
|
|
38
|
|
|
|
2,747
|
|
Mortgage-backed securities
|
|
|
13,497
|
|
|
|
203
|
|
|
|
139
|
|
|
|
13,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
41,612
|
|
|
$
|
235
|
|
|
$
|
1,427
|
|
|
$
|
40,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
The age of unrealized losses and fair value of related securities available for sale at March 31, 2014 and
September 30, 2013 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
March 31, 2014
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(In thousands)
|
|
U.S. Government Agencies
|
|
$
|
9,568
|
|
|
$
|
429
|
|
|
$
|
9,482
|
|
|
$
|
512
|
|
|
$
|
19,050
|
|
|
$
|
941
|
|
Corporate bonds
|
|
|
2,299
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
2,299
|
|
|
|
27
|
|
Municipal bonds
|
|
|
1,615
|
|
|
|
17
|
|
|
|
465
|
|
|
|
2
|
|
|
|
2,080
|
|
|
|
19
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
3,953
|
|
|
|
149
|
|
|
|
3,953
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,482
|
|
|
$
|
473
|
|
|
$
|
13,900
|
|
|
$
|
663
|
|
|
$
|
27,382
|
|
|
$
|
1,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
September 30, 2013
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(In thousands)
|
|
U.S. Government Agencies
|
|
$
|
18,826
|
|
|
$
|
1,164
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
18,826
|
|
|
$
|
1,164
|
|
Corporate bonds
|
|
|
4,306
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
4,306
|
|
|
|
78
|
|
Municipal bonds
|
|
|
2,625
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
2,625
|
|
|
|
46
|
|
Mortgage-backed securities
|
|
|
4,353
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
4,353
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,110
|
|
|
$
|
1,427
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
30,110
|
|
|
$
|
1,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
When the fair value of security is below its amortized cost, and depending on the length of time the condition exists,
additional analysis is performed to determine whether an other-than-temporary impairment condition exists. Securities are analyzed quarterly for possible other-than-temporary impairment. The analysis considers (i) whether the Company has the
intent to sell the securities prior to recovery and/or maturity and (ii) whether it is more likely than not that the Company will have to sell the securities prior to recovery and/or maturity. Often, the information available to conduct these
assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than estimated, the extent of the impairment of the security may be different than previously
estimated, which could have a material effect on the Companys consolidated financial statements.
The unrealized losses reported on securities at
March 31, 2014 relate to four securities issued by U.S. Government Agencies, two Corporate bonds, two Municipal bonds and one Mortgage-backed security. These unrealized losses were due to changes in interest rates. The unrealized losses
reported on securities at September 30, 2013 relate to four securities issued by U.S. Government Agencies, three Corporate bonds, four Municipal bonds and one Mortgage-backed security. These unrealized losses were due to changes in interest
rates.
All mortgage-backed securities are U.S. Government Agencies backed and collateralized by residential mortgages.
There were no sales of securities available for sale during the six month periods ended March 31, 2013 or 2014, respectively.
9. Loans
Loans receivable are carried at unpaid principal balances and net deferred loan origination costs less the allowance for loan losses.
The Company defers loan origination fees and certain direct loan origination costs and accretes net amounts as an adjustment of yield over the contractual
lives of the related loans. Unamortized net fees and costs are written off if the loan is repaid before its stated maturity date.
Recognition of interest
income is discontinued and existing accrued interest receivable is reversed on loans that are more than ninety days delinquent and where management, through its loan review process, feels such loan should be classified as non-accrual. Income is
subsequently recognized only to the extent that cash payments are received until the obligation has been brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate
collectability of the total contractual principal and interest is no longer in doubt, in which case the loan is returned to an accrual status. The past due status of all classes of loans receivable is determined based on the contractual due dates
for loan payments.
10
Loan balances as of March 31, 2014 and September 30, 2013 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
September 30, 2013
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
90,317
|
|
|
$
|
90,177
|
|
Multi-family
|
|
|
25,442
|
|
|
|
25,771
|
|
Non-residential
|
|
|
55,551
|
|
|
|
50,655
|
|
Construction
|
|
|
|
|
|
|
935
|
|
Home equity and second mortgages
|
|
|
8,531
|
|
|
|
8,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179,841
|
|
|
|
175,707
|
|
Commercial
|
|
|
36,634
|
|
|
|
33,089
|
|
Consumer
|
|
|
57
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
|
216,532
|
|
|
|
208,899
|
|
Allowance for loan losses
|
|
|
(657
|
)
|
|
|
(923
|
)
|
Net deferred loan origination fees and costs
|
|
|
27
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
215,902
|
|
|
$
|
207,996
|
|
|
|
|
|
|
|
|
|
|
An allowance for loan and lease losses (ALLL) is maintained to absorb losses from the loan portfolio. The
ALLL is based on managements continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and
anticipated loss experience, and the amount of non-performing loans.
The Banks methodology for determining the ALLL is based on the requirements of
the FASBs Accounting Standards Codification (ASC) Sub-Topic 450-20 for loans collectively evaluated for impairment, ASC Section 310-10-35 for loans individually evaluated for impairment, as well as the Interagency Policy
Statement on the Allowance for Loan and Lease Losses, and other bank regulatory guidance.
Loans that are collectively evaluated for impairment are
analyzed with general allowances being made as appropriate. For general allowances, historical loss trends and Federal Deposit Insurance Corporation Uniform Bank Performance Report (UBPR) loss experience for the Banks Peer
Group are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors.
The
classes described below, which are based on the Federal Thrift Financial Report classifications, provide the starting point for the ALLL analysis. Management tracks the historical net charge-off activity at the reporting class level. A
historical charge-off factor is calculated utilizing one year to five year averages, depending on the trend of losses and other factors. In addition, the UBPR Peer Group charge-off factor is determined. The Bank uses Bank specific charge-off
experience adjusted for recent loss trends and economic conditions as well as Peer Group charge-off experience to establish its historical charge-off factor.
Pass rated credits are segregated from Classified credits for the application of qualitative factors. Management has identified a
number of additional qualitative factors that it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss
experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; levels of and trends in
delinquency rates and non-accrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type,
industry and/or geographic standpoint.
An allowance for loan losses is maintained at a level that represents managements best estimate of losses
known and inherent in the loan portfolio that are both probable and reasonably estimable. The allowance is decreased by loan charge-offs, increased by subsequent recoveries of loans previously charged off, and then adjusted, via either a charge or
credit to operations, to an amount determined by management to be necessary. Loans or portions thereof are charged off when, after collection efforts are exhausted, they are determined to be uncollectible. Management of the Company, in determining
the allowance for loan losses, considers the losses inherent in its loan portfolio and changes in the nature and volume inherent in its loan activities, along with the general economic and real estate market conditions. The total of the two
components represents the Banks ALLL. The Company utilizes a two tier approach: (1) identification of impaired loans and establishment of specific loss allowances on such loans; and (2) establishment of general valuation allowances
on the remainder of its loan portfolio. The Company maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potential impaired loans.
Such system takes into consideration, among other things, delinquency status, size of loans, and type of collateral and financial condition of the borrowers.
Specific loan loss allowances are established for identified loans based on a review of such information and/or appraisals of the underlying collateral. General loan losses are determined based upon a combination of factors including, but not
limited
11
to, actual loan loss experience, composition of the loan portfolio, current economic conditions and managements judgment. Although management believes that specific and general loan losses
are established in accordance with managements best estimate, actual losses are dependent upon future events and, as such, further additions to the level of loan loss allowances may be necessary.
The segments of the Banks loan portfolio are disaggregated to a level that allows management to monitor risk and performance. Loans secured by real
estate consist of one-to-four-family, multi-family, non-residential, construction and home equity and second mortgage loans. Substantially all of the commercial loans are secured and consumer loans are principally secured.
Management uses a six category internal risk rating system to monitor the credit quality of the overall loan portfolio that generally follows bank regulatory
definitions. Pass graded loans are considered to have average or better than average risk characteristics. They demonstrate satisfactory debt service capacity and coverage along with a generally stable financial position. These loans are performing
in accordance with the terms of their loan agreement. The Watch category, a non-bank regulatory category, includes assets that, while performing, demonstrate above average risk through a pattern of declining earnings trends, strained cash flow,
increasing leverage, and/or weakening market fundamentals. The Special Mention category includes assets that are currently protected but exhibit potential credit weakness or a downward trend which, if not checked or corrected, will weaken the
Banks asset or inadequately protect the Banks position. Loans in the Substandard category have a well-defined weakness that jeopardizes the orderly liquidation of the debt. For loans in this category, normal repayment from the borrower
is in jeopardy and there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. All loans greater than 90 days past due are considered Substandard. Loans in the Doubtful category
have weaknesses inherent in those classified Substandard with the added provision that the weakness makes collection of debt in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. The portion of
any loan that represents a specific allocation of the allowance for loan losses is placed in the special valuation category. Loans that are deemed incapable of repayment where continuance as an active asset of the Bank is not warranted are charged
off as a Loss. The classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off the asset even though partial recovery may be achieved in the future.
To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured
loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as delinquency, bankruptcy, repossession, or death
occurs to raise awareness of a possible credit event. The Banks Senior Lending Officer is responsible for the timely and accurate risk rating of the loans in the portfolios at origination and on an ongoing basis. The Bank has an
experienced outsourced Loan Review function that on a quarterly basis, reviews and assesses loans within the portfolio and the adequacy of the Banks allowance for loan losses. Detailed reviews, including plans for resolution, are
performed on loans classified as Substandard or Doubtful on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the
allowance.
Management evaluates individual loans in all of the segments for possible impairment if the loan is either in nonaccrual status, or is risk
rated Substandard or Doubtful. Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to
the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when
due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrowers prior payment record, and the amount of any shortfall in relation to the principal and interest owed.
Once the
determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three
methods: (a) the present value of expected future cash flows discounted at the loans effective interest rate; (b) the loans observable market price; or (c) the fair value of the collateral less selling costs. The method is
selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is
made on a quarterly basis. The Banks policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition. A loan evaluated for impairment is deemed to be impaired when, based on current
information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as impaired are evaluated independently. The Company does not aggregate
such loans for evaluation purposes. A reserve for losses related to unfunded lending commitments is also maintained. This reserve represents managements estimate of losses inherent in unfunded credit commitments.
12
The following table summarizes the primary segments of the loan portfolio, including net deferred loan
origination fees and costs, as of March 31, 2014 and September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
Individually
Evaluated for
Impairment
|
|
|
Collectively
Evaluated for
Impairment
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
6,183
|
|
|
$
|
84,145
|
|
|
$
|
90,328
|
|
Multi-family
|
|
|
|
|
|
|
25,445
|
|
|
|
25,445
|
|
Non-residential
|
|
|
|
|
|
|
55,557
|
|
|
|
55,557
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and second mortgages
|
|
|
391
|
|
|
|
8,141
|
|
|
|
8,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,574
|
|
|
|
173,288
|
|
|
|
179,862
|
|
Commercial
|
|
|
546
|
|
|
|
36,092
|
|
|
|
36,638
|
|
Consumer
|
|
|
|
|
|
|
59
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,120
|
|
|
$
|
209,439
|
|
|
$
|
216,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
Individually
Evaluated for
Impairment
|
|
|
Collectively
Evaluated for
Impairment
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
6,693
|
|
|
$
|
83,493
|
|
|
$
|
90,186
|
|
Multi-family
|
|
|
|
|
|
|
25,773
|
|
|
|
25,773
|
|
Non-residential
|
|
|
|
|
|
|
50,660
|
|
|
|
50,660
|
|
Construction
|
|
|
|
|
|
|
935
|
|
|
|
935
|
|
Home equity and second mortgages
|
|
|
471
|
|
|
|
7,699
|
|
|
|
8,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,164
|
|
|
|
168,560
|
|
|
|
175,724
|
|
Commercial
|
|
|
873
|
|
|
|
32,219
|
|
|
|
33,092
|
|
Consumer
|
|
|
|
|
|
|
103
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,037
|
|
|
$
|
200,882
|
|
|
$
|
208,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents impaired loans by class, segregated by those for which a specific allowance was required and
those for which a specific allowance was not necessary as of March 31, 2014 and September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans with
Specific Allowance
|
|
|
Impaired
Loans with
No Specific
Allowance
|
|
|
Total Impaired Loans
|
|
March 31, 2014
|
|
Recorded
Investment
|
|
|
Related
Allowance
|
|
|
Recorded
Investment
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,183
|
|
|
$
|
6,183
|
|
|
$
|
6,150
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and second mortgages
|
|
|
|
|
|
|
|
|
|
|
391
|
|
|
|
391
|
|
|
|
384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,574
|
|
|
|
6,574
|
|
|
|
6,534
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
546
|
|
|
|
546
|
|
|
|
545
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,120
|
|
|
$
|
7,120
|
|
|
$
|
7,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans with
Specific Allowance
|
|
|
Impaired
Loans with
No Specific
Allowance
|
|
|
Total Impaired Loans
|
|
September 30, 2013
|
|
Recorded
Investment
|
|
|
Related
Allowance
|
|
|
Recorded
Investment
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,693
|
|
|
$
|
6,693
|
|
|
$
|
6,658
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and second mortgages
|
|
|
|
|
|
|
|
|
|
|
471
|
|
|
|
471
|
|
|
|
462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,164
|
|
|
|
7,164
|
|
|
|
7,120
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
873
|
|
|
|
873
|
|
|
|
873
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,037
|
|
|
$
|
8,037
|
|
|
$
|
7,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the average recorded investment in impaired loans and related interest income recognized for the
three month periods ended March 31, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
One-to-
four-
family
|
|
|
Home Equity
and Second
Mortgages
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Average investment in impaired loans
|
|
$
|
6,324
|
|
|
$
|
393
|
|
|
$
|
544
|
|
|
$
|
|
|
|
$
|
7,261
|
|
Interest income recognized on an accrual basis on impaired loans
|
|
|
21
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Interest income recognized on a cash basis on impaired loans
|
|
|
12
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
March 31, 2013
|
|
One-to-
four-
family
|
|
|
Home Equity
and Second
Mortgages
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Average investment in impaired loans
|
|
$
|
10,519
|
|
|
$
|
613
|
|
|
$
|
|
|
|
$
|
12
|
|
|
$
|
11,144
|
|
Interest income recognized on an accrual basis on impaired loans
|
|
|
35
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
Interest income recognized on a cash basis on impaired loans
|
|
|
7
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
The following table presents the average recorded investment in impaired loans and related interest income recognized for the
six month periods ended March 31, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
One-to-
four-
family
|
|
|
Home Equity
and Second
Mortgages
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Average investment in impaired loans
|
|
$
|
6,452
|
|
|
$
|
413
|
|
|
$
|
625
|
|
|
$
|
|
|
|
$
|
7,490
|
|
Interest income recognized on an accrual basis on impaired loans
|
|
|
42
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
Interest income recognized on a cash basis on impaired loans
|
|
|
28
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
March 31, 2013
|
|
One-to-
four-
family
|
|
|
Home Equity
and Second
Mortgages
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Average investment in impaired loans
|
|
$
|
10,589
|
|
|
$
|
615
|
|
|
$
|
|
|
|
$
|
13
|
|
|
$
|
11,217
|
|
Interest income recognized on an accrual basis on impaired loans
|
|
|
77
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
83
|
|
Interest income recognized on a cash basis on impaired loans
|
|
|
11
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
14
The following table presents the classes of the loan portfolio summarized by the aggregate Pass (including loans
graded Watch) and the classified ratings of Special Mention, Substandard and Doubtful within the internal risk rating system as of March 31, 2014 and September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
86,918
|
|
|
$
|
|
|
|
$
|
3,410
|
|
|
$
|
|
|
|
$
|
90,328
|
|
Multi-family
|
|
|
24,692
|
|
|
|
753
|
|
|
|
|
|
|
|
|
|
|
|
25,445
|
|
Non-residential
|
|
|
55,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,557
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and second mortgages
|
|
|
8,432
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
8,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,599
|
|
|
|
753
|
|
|
|
3,510
|
|
|
|
|
|
|
|
179,862
|
|
Commercial
|
|
|
32,230
|
|
|
|
3,868
|
|
|
|
540
|
|
|
|
|
|
|
|
36,638
|
|
Consumer
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
207,888
|
|
|
$
|
4,621
|
|
|
$
|
4,050
|
|
|
$
|
|
|
|
$
|
216,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
86,077
|
|
|
$
|
|
|
|
$
|
4,109
|
|
|
$
|
|
|
|
$
|
90,186
|
|
Multi-family
|
|
|
25,018
|
|
|
|
755
|
|
|
|
|
|
|
|
|
|
|
|
25,773
|
|
Non-residential
|
|
|
50,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,660
|
|
Construction
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
935
|
|
Home equity and second mortgages
|
|
|
7,999
|
|
|
|
|
|
|
|
171
|
|
|
|
|
|
|
|
8,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,689
|
|
|
|
755
|
|
|
|
4,280
|
|
|
|
|
|
|
|
175,724
|
|
Commercial
|
|
|
28,498
|
|
|
|
3,721
|
|
|
|
873
|
|
|
|
|
|
|
|
33,092
|
|
Consumer
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
199,290
|
|
|
$
|
4,476
|
|
|
$
|
5,153
|
|
|
$
|
|
|
|
$
|
208,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management further monitors the performance and credit quality of the loan portfolio by analyzing the delinquency aging of the
portfolio as determined by the length of time a recorded payment is past due.
The following table presents the classes of the loan portfolio summarized by
the aging categories of performing loans and nonaccrual loans as of March 31, 2014 and September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
Current
|
|
|
30-59
Days
Past
Due
|
|
|
60-89
Days
Past
Due
|
|
|
90 Days or
More Past
Due and
Accruing
|
|
|
90 Days or
More Past
Due and
Non-Accrual
|
|
|
Total Past
Total Due
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
86,697
|
|
|
$
|
|
|
|
$
|
480
|
|
|
$
|
|
|
|
$
|
3,151
|
|
|
$
|
3,631
|
|
|
$
|
90,328
|
|
Multi-family
|
|
|
25,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,445
|
|
Non-residential
|
|
|
55,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
545
|
|
|
|
545
|
|
|
|
55,557
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and second mortgages
|
|
|
8,433
|
|
|
|
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
99
|
|
|
|
8,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,587
|
|
|
|
|
|
|
|
579
|
|
|
|
|
|
|
|
3,696
|
|
|
|
4,275
|
|
|
|
179,862
|
|
Commercial
|
|
|
36,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,638
|
|
Consumer
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
212,284
|
|
|
$
|
|
|
|
$
|
579
|
|
|
$
|
|
|
|
$
|
3,696
|
|
|
$
|
4,275
|
|
|
$
|
216,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
Current
|
|
|
30-59
Days
Past
Due
|
|
|
60-89
Days
Past
Due
|
|
|
90 Days or
More Past
Due and
Accruing
|
|
|
90 Days or
More Past
Due and
Non-Accrual
|
|
|
Total
Past Due
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
86,125
|
|
|
$
|
|
|
|
$
|
237
|
|
|
$
|
|
|
|
$
|
3,824
|
|
|
$
|
4,061
|
|
|
$
|
90,186
|
|
Multi-family
|
|
|
25,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,773
|
|
Non-residential
|
|
|
50,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,660
|
|
Construction
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
935
|
|
Home equity and second mortgages
|
|
|
8,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
72
|
|
|
|
8,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171,591
|
|
|
|
|
|
|
|
237
|
|
|
|
|
|
|
|
3,896
|
|
|
|
4,133
|
|
|
|
175,724
|
|
Commercial
|
|
|
32,206
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
873
|
|
|
|
886
|
|
|
|
33,092
|
|
Consumer
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
203,900
|
|
|
$
|
|
|
|
$
|
250
|
|
|
$
|
|
|
|
$
|
4,769
|
|
|
$
|
5,019
|
|
|
$
|
208,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company was not committed to lend additional funds on nonaccrual loans at March 31, 2014.
Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments
to the ALLL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALLL. Management utilizes an internally developed spreadsheet to track and apply the various components
of the allowance.
The following table summarizes the primary segments of the 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, 2014 and September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
ALLL
Balance
|
|
|
Collectively
Evaluated for
Impairment
|
|
|
Individually
Evaluated for
Impairment
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
242
|
|
|
$
|
242
|
|
|
$
|
|
|
Multi-family
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
Non-residential
|
|
|
269
|
|
|
|
269
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and second mortgages
|
|
|
82
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
595
|
|
|
|
595
|
|
|
|
|
|
Commercial
|
|
|
59
|
|
|
|
59
|
|
|
|
|
|
Consumer
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
657
|
|
|
$
|
657
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
ALLL
Balance
|
|
|
Collectively
Evaluated for
Impairment
|
|
|
Individually
Evaluated for
Impairment
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
225
|
|
|
$
|
225
|
|
|
$
|
|
|
Multi-family
|
|
|
48
|
|
|
|
48
|
|
|
|
|
|
Non-residential
|
|
|
374
|
|
|
|
374
|
|
|
|
|
|
Construction
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
Home equity and second mortgages
|
|
|
82
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
736
|
|
|
|
736
|
|
|
|
|
|
Commercial
|
|
|
187
|
|
|
|
187
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
923
|
|
|
$
|
923
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
The following table summarizes activity in the primary segments of the ALLL for the three month periods ended
March 31, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
Balance
December 31, 2013
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance
March 31, 2014
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
227
|
|
|
$
|
(55
|
)
|
|
$
|
|
|
|
$
|
70
|
|
|
$
|
242
|
|
Multi-family
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
2
|
|
Non-residential
|
|
|
262
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
16
|
|
|
|
269
|
|
Construction
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
Home equity and second mortgages
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
588
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
71
|
|
|
|
595
|
|
Commercial
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
59
|
|
Consumer
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
646
|
|
|
$
|
(64
|
)
|
|
$
|
|
|
|
$
|
75
|
|
|
$
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
Balance
December 31, 2012
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance
March 31, 2013
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
610
|
|
|
$
|
(296
|
)
|
|
$
|
|
|
|
$
|
(70
|
)
|
|
$
|
244
|
|
Multi-family
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
49
|
|
Non-residential
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
319
|
|
|
|
358
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
7
|
|
Home equity and second mortgages
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
769
|
|
|
|
(296
|
)
|
|
|
|
|
|
|
270
|
|
|
|
743
|
|
Commercial
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
76
|
|
Consumer
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
849
|
|
|
$
|
(296
|
)
|
|
$
|
|
|
|
$
|
268
|
|
|
$
|
821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes activity in the primary segments of the ALLL for the six month periods ended March 31,
2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
Balance
September 30, 2013
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance
March 31, 2014
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
225
|
|
|
$
|
(99
|
)
|
|
$
|
|
|
|
$
|
116
|
|
|
$
|
242
|
|
Multi-family
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
2
|
|
Non-residential
|
|
|
374
|
|
|
|
(333
|
)
|
|
|
|
|
|
|
228
|
|
|
|
269
|
|
Construction
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
Home equity and second mortgages
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
736
|
|
|
|
(432
|
)
|
|
|
|
|
|
|
291
|
|
|
|
595
|
|
Commercial
|
|
|
187
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(119
|
)
|
|
|
59
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
923
|
|
|
$
|
(441
|
)
|
|
$
|
|
|
|
$
|
175
|
|
|
$
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
Balance
September 30, 2012
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance
March 31, 2013
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
$
|
625
|
|
|
$
|
(514
|
)
|
|
$
|
|
|
|
$
|
133
|
|
|
$
|
244
|
|
Multi-family
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
49
|
|
Non-residential
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
291
|
|
|
|
358
|
|
Construction
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
7
|
|
Home equity and second mortgages
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
801
|
|
|
|
(514
|
)
|
|
|
|
|
|
|
456
|
|
|
|
743
|
|
Commercial
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
|
|
76
|
|
Consumer
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
967
|
|
|
$
|
(514
|
)
|
|
$
|
|
|
|
$
|
368
|
|
|
$
|
821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has adopted Accounting Standards Update (ASU) No. 2011-02, which provides additional guidance to creditors
for evaluating whether a modification or restructuring of a receivable is a troubled debt restructuring (TDR). A TDR is a loan that has been modified whereby the Bank has agreed to make certain concessions that would otherwise not be
granted to a borrower experiencing or expected to experience financial difficulties in order to maximize the ultimate recovery of a loan. The types of concessions granted generally include, but are not limited to interest rate reductions,
limitations on the accrued interest charged, term extensions, and deferment of principal. In evaluating whether a restructuring constitutes a TDR, ASU No. 2011-02 requires that a creditor must separately conclude that the restructuring
constitutes a concession and the borrower is experiencing financial difficulties. In conjunction with the Banks adoption of ASU No. 2011-02, it determined that no loans were TDRs other than those previously considered as such prior to the
adoption. The concessions granted on these loans consisted of interest rate reductions and/or extensions of the loan term. The following table summarizes the TDR during the three month and six month periods ended March 31, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Loans
|
|
|
Recorded Investment
Before Modification
|
|
|
Recorded Investment
After Modification
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
Three Months Ended March 31, 2014
|
|
|
|
|
One-to-four-family
|
|
|
1
|
|
|
$
|
339
|
|
|
$
|
346
|
|
Commercial
|
|
|
1
|
|
|
$
|
864
|
|
|
$
|
881
|
|
Three Months Ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
|
2
|
|
|
$
|
513
|
|
|
$
|
521
|
|
|
|
|
|
|
|
Number of Loans
|
|
|
Recorded Investment
Before Modification
|
|
|
Recorded Investment
After Modification
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
Six Months Ended March 31, 2014
|
|
|
|
|
One-to-four-family
|
|
|
2
|
|
|
$
|
862
|
|
|
$
|
869
|
|
Commercial
|
|
|
1
|
|
|
$
|
864
|
|
|
$
|
881
|
|
Six Months Ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family
|
|
|
2
|
|
|
$
|
513
|
|
|
$
|
521
|
|
A default on a troubled debt restructured loan for purposes of disclosure occurs when a borrower is 90 days past due or a
foreclosure or repossession of the applicable collateral has occurred. During the three month and six month periods ended March 31, 2014 and 2013, no defaults occurred on troubled debt restructured loans that were modified as a TDR within the
previous 12 months.
10. Fair Value Measurements
U.S. GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy
are as follows:
|
|
|
Level 1:
|
|
Quoted prices in active markets for identical assets or liabilities.
|
|
|
Level 2:
|
|
Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
|
|
|
Level 3:
|
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is
determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
|
18
An assets or liabilitys level within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement.
In general, fair value is based upon quoted market prices, where available. If such quoted market
prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.
These adjustments may include amounts to reflect counterparty credit quality and counterparty creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The
Companys valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective value or reflective of future values. While management believes the Companys valuation methodologies
are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
In addition, the guidance requires the Company to disclose the fair value for financial assets on both a recurring and non-recurring basis.
For financial
assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy at March 31, 2014 and September 30, 2013 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Fair
Value
|
|
|
(Level 1)
Quoted Prices in
Active Markets for
Identical Assets
|
|
|
(Level 2)
Significant Other
Observable Inputs
|
|
|
(Level 3)
Significant
Unobservable Inputs
|
|
|
|
(In thousands)
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
19,050
|
|
|
$
|
|
|
|
$
|
19,050
|
|
|
$
|
|
|
Corporate bonds
|
|
|
4,350
|
|
|
|
|
|
|
|
4,350
|
|
|
|
|
|
Municipal bonds
|
|
|
3,749
|
|
|
|
|
|
|
|
3,749
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
12,601
|
|
|
|
|
|
|
|
12,601
|
|
|
|
|
|
September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
18,826
|
|
|
$
|
|
|
|
$
|
18,826
|
|
|
$
|
|
|
Corporate bonds
|
|
|
4,306
|
|
|
|
|
|
|
|
4,306
|
|
|
|
|
|
Municipal bonds
|
|
|
3,727
|
|
|
|
|
|
|
|
3,727
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
13,561
|
|
|
|
|
|
|
|
13,561
|
|
|
|
|
|
The Company had no financial assets measured on a non-recurring basis as of September 30, 2013.
For financial assets measured at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy are summarized
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Fair
Value
|
|
|
(Level 1)
Quoted Prices in
Active Markets for
Identical Assets
|
|
|
(Level 2)
Significant Other
Observable Inputs
|
|
|
(Level 3)
Significant
Unobservable Inputs
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
1,636
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,636
|
|
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis
and for which Level 3 inputs were used to determine fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
thousands)
|
|
Impaired loans
|
|
Fair value
estimate
|
|
|
Valuation
techniques
|
|
Unobservable input
|
|
Range
|
|
|
Weighted
average
|
|
March 31, 2014:
Impaired Loans
|
|
$
|
1,636
|
|
|
Appraisal or
discounted cash
flows (1)
|
|
Liquidation
expenses (2)
|
|
|
11.1% to 37.8%
|
|
|
|
22.8%
|
|
19
(1)
|
Fair value is generally determined through discounted cash flows or independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.
|
(2)
|
Includes estimated liquidation expenses.
|
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments at March 31, 2014 and September 30, 2013:
Cash and Cash Equivalents, Interest Receivable and
Interest Payable
.
The carrying amounts for cash and cash equivalents, interest receivable and interest payable approximate fair value because they mature in three months or less.
Securities.
The fair value for debt securities are based on quoted market prices or dealer prices (Level 1), if available. If quoted market prices are
not available, fair values are determined by obtaining 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 (Level 2 inputs).
Loans Receivable.
The fair value of loans
receivable is estimated by discounting the future cash flows, using the current market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, of such loans.
Loans Held for Sale.
Loans held for sale are carried at estimated fair value in the aggregate, determined based on actual amounts subsequently realized
after the balance sheet date, or estimates of amounts to be subsequently realized, based on actual amounts realized for similar loans.
Deposits
.
The fair value of demand, savings and club accounts is equal to the amount payable on demand at the reporting date. The fair
value of certificates of deposit is estimated using market rates currently offered for deposits of similar remaining maturities. The fair value estimates do not include the benefit that results from the low-cost funding provided by deposit
liabilities compared to the cost of borrowing funds in the market.
Advances from FHLB.
Fair value is estimated using rates currently offered for
advances of similar remaining maturities.
Commitments to Extend Credits.
The fair value of commitments to fund credit lines and originate or
participate in loans is estimated using fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair
value also considers the difference between current levels of interest and the committed rates. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the
remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, was not considered material at March 31, 2014 or September 30, 2013.
The carrying amounts and estimated fair values of financial instruments at March 31, 2014 and September 30, 2013 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
(Level 1)
Quoted Prices in
Active Markets for
Identical Assets
|
|
|
(Level 2)
Significant Other
Observable Inputs
|
|
|
(Level 3)
Significant
Unobservable Inputs
|
|
|
|
(In thousands)
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,199
|
|
|
$
|
4,199
|
|
|
$
|
4,199
|
|
|
$
|
|
|
|
$
|
|
|
Securities available-for-sale
|
|
|
39,750
|
|
|
|
39,750
|
|
|
|
|
|
|
|
39,750
|
|
|
|
|
|
Loans receivable
|
|
|
215,902
|
|
|
|
235,622
|
|
|
|
|
|
|
|
|
|
|
|
235,622
|
|
Accrued interest receivable
|
|
|
904
|
|
|
|
904
|
|
|
|
|
|
|
|
904
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
224,028
|
|
|
|
225,333
|
|
|
|
|
|
|
|
225,333
|
|
|
|
|
|
FHLB-NY advances
|
|
|
16,337
|
|
|
|
16,611
|
|
|
|
|
|
|
|
16,611
|
|
|
|
|
|
Accrued interest payable
|
|
|
109
|
|
|
|
109
|
|
|
|
|
|
|
|
109
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
(Level 1)
Quoted Prices in
Active Markets for
Identical Assets
|
|
|
(Level 2)
Significant Other
Observable Inputs
|
|
|
(Level 3)
Significant
Unobservable Inputs
|
|
|
|
(In thousands)
|
|
September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,477
|
|
|
$
|
2,477
|
|
|
$
|
2,477
|
|
|
$
|
|
|
|
$
|
|
|
Securities available-for-sale
|
|
|
40,420
|
|
|
|
40,420
|
|
|
|
|
|
|
|
40,420
|
|
|
|
|
|
Loans held for sale
|
|
|
337
|
|
|
|
337
|
|
|
|
|
|
|
|
337
|
|
|
|
|
|
Loans receivable
|
|
|
207,996
|
|
|
|
224,884
|
|
|
|
|
|
|
|
|
|
|
|
224,884
|
|
Accrued interest receivable
|
|
|
954
|
|
|
|
954
|
|
|
|
|
|
|
|
954
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
212,312
|
|
|
|
213,595
|
|
|
|
|
|
|
|
213,595
|
|
|
|
|
|
FHLB-NY advances
|
|
|
19,889
|
|
|
|
20,976
|
|
|
|
|
|
|
|
20,976
|
|
|
|
|
|
Accrued interest payable
|
|
|
130
|
|
|
|
130
|
|
|
|
|
|
|
|
130
|
|
|
|
|
|
Limitations
The fair
value estimates are made at a discrete point in time based on relevant market information about the financial instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions
could significantly affect the estimates. Further, the foregoing estimates may not reflect the actual amount that could be realized if all of the financial instruments were offered for sale.
In addition, the fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to value the anticipated future
business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment and advances from
borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.
Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous
estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.
11. Federal Home Loan Bank of New York Stock
The Companys required investment in the common stock of the FHLB is carried at cost as of March 31, 2014 and September 30,
2013. Management evaluates this common stock for impairment in accordance with the FASB guidance on accounting by certain entities that lend to or finance the activities of others. Managements determination of whether this investment is
impaired is based on its assessment of the ultimate recoverability of the investments cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced
by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments
required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB, and
(4) the liquidity position of the FHLB. Management believes no impairment charge related to the FHLB stock was necessary as of March 31, 2014 or September 30, 2013.
12. Recent Accounting Pronouncements
In January 2014, the FASB issued ASU 2014-04 ReceivablesTroubled Debt Restructurings by Creditors (Subtopic 310-40)
Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received
physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the
borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and
annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the
process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after
December 15, 2014. An entity can elect to adopt the amendments in this Update using either a modified retrospective transition method or a prospective transition method. Under the modified retrospective transition method, an entity should apply
the amendments in this Update by means of a cumulative-effect adjustment to residential consumer mortgage loans and foreclosed residential real estate properties existing as of the beginning of the
21
annual period for which the amendments are effective. Assets reclassified from real estate to loans as a result of adopting the amendments in this Update should be measured at the carrying value
of the real estate at the date of adoption. Assets reclassified from loans to real estate as a result of adopting the amendments in this Update should be measured at the lower of the net amount of loan receivable or the real estates fair value
less costs to sell at the time of adoption. For prospective transition, an entity should apply the amendments in this Update to all instances of an entity receiving physical possession of residential real estate property collateralized by consumer
mortgage loans that occur after the date of adoption. Early adoption is permitted. This update is not expected to have a material effect on the financial statements of the Company.
13. Commitments and Contingencies
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of
its customers. These financial instruments primarily include commitments to extend credit. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the statements of
financial condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Companys exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.
As provided under the Merger Agreement, Customers was required to pay to the Company a termination fee of $1,000,000 (Termination Fee) when the
Merger Agreement was terminated effective December 31, 2013. To date, the Company has not received the Termination Fee and on March 24, 2014, the Company filed suit in the Eastern District of Pennsylvania to recover the Termination Fee
from Customers. Given that litigation is subject to inherent risk, there can be no assurances that the Termination fee will ultimately be collected or when the Termination fee will be collected.
22
Item 2. - Managements Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
This Form 10-Q contains forward-looking statements, which may be identified by the use of such words as believe, expect,
anticipate, should, planned, estimated, potential and similar expressions that are intended to identify forward-looking statements. Examples of forward-looking statements include, but are
not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors including those set forth in Part 1, Item 1A Risk Factors of our Form 10-K for the year ended
September 30, 2013 which was filed with the SEC on December 23, 2013, which could cause actual results to differ materially from these estimates. These factors include, but are not limited to:
|
|
|
risks relating to the collection of the Termination Fee owed to CMS by Customers;
|
|
|
|
changes in interest rates;
|
|
|
|
our allowance for loan losses may not be sufficient to cover actual loan losses;
|
|
|
|
the risk of loss associated with our loan portfolio;
|
|
|
|
lower demand for loans;
|
|
|
|
changes in our asset quality;
|
|
|
|
other-than-temporary impairment charges for investments;
|
|
|
|
the soundness of other financial institutions;
|
|
|
|
changes in the real estate market or local economy;
|
|
|
|
operational challenges or increased costs we may experience in the course of full transition to our new regulators as a result of the complete transfer of the OTSs functions under the Dodd-Frank Act and the
subsequent conversion of CMS Banks charter to that of a New York state-chartered savings bank;
|
|
|
|
our ability to retain our executive officers and other key personnel;
|
|
|
|
competition in our primary market area;
|
|
|
|
risk of noncompliance with laws and regulations, including changes in laws and regulations to which we are subject;
|
|
|
|
changes in the Federal Reserves monetary or fiscal policies;
|
|
|
|
our ability to maintain effective internal controls over financial reporting;
|
|
|
|
the inclusion of certain anti-takeover provisions in our organizational documents;
|
|
|
|
the low trading volume in our stock;
|
|
|
|
recent developments affecting the financial markets, including the actual and threatened downgrade of U.S. government securities; and
|
|
|
|
risks related to use of technology and cybersecurity.
|
Any or all of our forward-looking statements in this
Report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. We
disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events.
General
The results of operations of the Company depend
primarily on its net interest income, which is the difference between the interest income it earns on its loans, investments and other interest-earning assets and the interest it pays on its deposits, borrowings and other interest-bearing
liabilities. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. The Companys operations are also affected by non-interest
income, the provision for loan losses and non-interest expenses such as salaries and employee benefits, occupancy costs, and other general and administrative expenses. In general, financial institutions such as the Company are significantly affected
by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending activities are influenced by the demand for and supply of housing, competition among lenders, interest rate conditions, and funds
availability. The Companys operations and lending activities, which are primarily conducted through the Bank, are principally concentrated in Westchester County, New York, and its operations and earnings are influenced by the economics of the
communities in which it operates. Deposit balances and cost of funds are influenced by prevailing market rates on competing investments, customer preferences, and levels of personal income and savings in the Companys primary market area.
Executive Overview
The purpose of this overview is to
provide a summary of the items management focuses on when evaluating the condition of the Company and our success in implementing our business and shareholder value strategies. The Companys business strategy is to operate the Bank as a
well-capitalized, profitable and community-oriented savings bank. The profitability of the Company depends primarily on its level of net interest income, which is the difference between interest earned on the Companys interest-earning assets
and the interest paid on interest-bearing liabilities. The Companys net interest income may be affected by market interest rate changes. Local market conditions and liquidity needs of other financial institutions can have a dramatic impact on
the interest rates offered to attract deposits. In recent periods, interest rates have declined to historically low levels and changes in short-term interest rates did not result in corresponding changes in long-term interest rates, and local market
conditions resulted in relatively high certificate of deposit interest
23
rates and lower interest rates on loans. The effect of this interest rate environment did, and could in the future, continue to decrease the Companys ability to invest deposits and reinvest
proceeds from loan and investment repayments at higher interest rates. The primary goals of the Companys interest rate management strategy are to determine the appropriate level of risk given the business strategy and then manage that risk so
as to reduce the exposure of the Companys net interest income to fluctuations in interest rates. Despite the challenges of the ever-changing banking and regulatory environment, we have continued to grow our assets through increases in our
local deposits, particularly non-interest bearing commercial demand deposits and higher levels of non-residential loan originations. In order to grow and diversify, the Company seeks to continue to increase its multi-family, non-residential,
construction, home equity and commercial loans by targeting these markets in Westchester County and the surrounding areas as a means to increase the yield on and diversify its loan portfolio as well as build transactional deposit account
relationships. In addition, depending on market conditions, the Company may sell the fixed-rate residential real estate loan originations to a third party in order to diversify its loan portfolio, increase non-interest income and reduce interest
rate risk. As a result of these ongoing efforts, we were able to increase our net interest income by maximizing the yield on interest earning assets while minimizing the cost of our interest bearing liabilities through our consistent in-depth market
analysis and constant oversight of our liquidity and cash flow position.
To the extent the Company increases its investment in construction or
development, consumer and commercial loans, which are considered greater risks than one-to-four-family residential loans, the Companys provision for loan losses may increase to reflect this increased risk, which could cause a reduction in the
Companys earnings.
Terminated Merger with Customers Bancorp
On December 20, 2013, the Company announced its decision to not further extend the termination date of the Merger Agreement, as amended, which had called
for a termination date by December 31, 2013 if the contemplated merger of the Company and Customers was not completed by that time. On January 6, 2014, the Company filed a Form 8-K announcing that it had terminated the Merger agreement
effective December 31, 2013 as a result of Customers not having met its obligation to receive required regulatory approvals to consummate the merger and not satisfying conditions for extension of the agreement.
Customers issued its own press release on December 20, 2013 announcing termination of the Merger Agreement. The press release contained a misstatement
that the Merger Agreement had been terminated by mutual consent of the parties, thereby releasing Customers of its obligation to pay a One Million Dollar ($1,000,000) termination fee to the Company that the parties had previously agreed to if the
merger could not close due to Customers failure to receive the required regulatory approvals.
The Company did not waive its right to the
termination fee, nor did it agree to any terms of mutual termination with Customers, and views Customers attempt to evade its obligation to pay the termination fee as an intentional breach of the Merger Agreement. Customers did not have any
unilateral right to terminate the Merger Agreement. Customers public misstatements about termination of the Merger Agreement prior to December 31, 2013 by mutual consent, and its non-liability for the $1,000,000 terminate fee owed to the
Company, are not only false and misleading, but also constitute an intentional breach of the Merger Agreement. As the termination fee has not been paid by Customers in accordance with the Merger Agreement, as amended, the Company, on March 24,
2014, filed suit in the Eastern District of Pennsylvania to recover the Termination Fee from Customers. Litigation is subject to inherent risk, and therefore, the Companys success as to the outcome of litigation cannot be guaranteed. For
additional discussion about this risk factor, see Item 1A.
Risk Factors
of the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2013, filed with the U.S. Securities and Exchange Commission on
December 23, 2013.
24
Business Strategy
The Company seeks to differentiate itself from its competition by providing superior, highly personalized and prompt service, local decision making and
competitive fees and rates to its customers. Historically, the Bank has been a community-oriented retail savings bank offering residential mortgage loans and traditional deposit products and, to a lesser extent, commercial real estate, small
business and consumer loans in Westchester County and the surrounding areas. The Company has adopted a strategic plan that focuses on growth in the loan portfolio into higher yield multi-family, non-residential, construction and commercial loan
markets. The Companys strategic plan also calls for increasing deposit relationships and broadening its product lines and services. The Company believes that this business strategy complements its existing commitment to high quality customer
service.
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
All financial institutions, including the Company and the Bank, continue to experience the impact of major financial reform legislation, known as the
Dodd-Frank Act, that was signed into law by the President on July 21, 2010. Among other things, the Dodd-Frank Act impacts the rules governing the provision of consumer financial products and services, and implementation of the many
requirements of the legislation requires new mandatory and discretionary rulemakings by numerous federal regulatory agencies over the next several years. Many of the provisions of the Dodd-Frank Act affecting the Company and Bank have effective
dates ranging from immediately upon enactment of the legislation to several years following enactment of the Dodd-Frank Act.
Critical Accounting
Policies
The consolidated financial statements included in this Report have been prepared in conformity with accounting principles generally accepted
in the United States of America (GAAP). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the
statements of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.
It is managements opinion that accounting estimates covering certain aspects of the business have more significance than others due to the relative
importance of those areas to overall performance, or the level of subjectivity required in making these estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan
losses and the assessment of whether deferred tax assets are more likely than not to be realized.
Management believes that the allowance for loan losses
represents its best estimate of losses known and inherent in the loan portfolio that are both probable and reasonable to estimate. While management uses available information to recognize losses on loans, future additions to the allowance for loan
losses may be necessary based on changes in market and economic conditions in the Companys market area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Companys
allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their examination. Managements assessment as
to the amount of deferred tax assets that are more likely than not to be realized is based upon future taxable income, which is subject to revision upon receipt of updated information.
Comparison of Financial Condition at March 31, 2014 to September 30, 2013
Total assets increased by $9.2 million, or 3.6%, to $267.5 million at March 31, 2014 from $258.3 million at September 30, 2013. Increases in loan
balances and decreases in advances from the FHLB were funded from increases in retail deposits.
Loans receivable were $215.9 million and $208.0 million
at March 31, 2014 and September 30, 2013, respectively, representing an increase of $7.9 million, or 3.8%. The increase in loans resulted principally from increases in non-residential and commercial loans.
As of March 31, 2014 and September 30, 2013, the Bank had $3.7 million and $4.8 million of non-performing loans, respectively, which have been
placed on non-accrual status. At March 31, 2014 and September 30, 2013, the Bank had $7.1 million and $8.0 million of loans classified as impaired. At March 31, 2014 and September 30, 2013, none of these impaired loans required
specific loss allowances. The impaired loans were primarily the result of difficult general economic conditions, increased unemployment and declines in the local real estate market in prior years. As of March 31, 2014 and September 30,
2013, the allowance for loan losses was 0.30% and 0.44% of loans outstanding, respectively. The allowance for loan losses contains two components; the specific allowance for impaired loans individually evaluated, and the allowance for loans
collectively evaluated for impairment. There was no need for any specific allowance for loans individually evaluated for impairment at March 31, 2013 or September 30, 2013. The allowance for loans collectively evaluated for impairment was
$657,000 at March 31, 2014 compared to $923,000 at September 30, 2013. The decrease of $266,000 was the result of the write off of $441,000 of loans in the six months ended March 31, 2014, net of a provision for loan losses of
$175,000. The allowance allocation, or loss percentages are based on historical charge offs, adjusted for the trend of losses, current economic conditions including unemployment, real estate markets and other factors. Allowance allocation
percentages can also be adjusted for trends as evidenced by the Federal Deposit Insurance Corporation Uniform Bank Performance Report (UBPR) loss experience for the Banks Peer Group. As a result of decreases in actual loan losses
in the proceeding periods, changes in the mix and volume of the loan portfolio, changing economic conditions, unemployment trends, and changing real estate values in the Banks primary market area, the allowance declined from September 30,
2013 to March 31, 2014.
25
Deposits increased by $11.7 million, or 5.5%, from $212.3 million as of September 30, 2013 to $224.0 million
as of March 31, 2014. The Bank participates in the Certificate of Deposit Account Registry Service, or CDARS network. Increases in retail deposits of $9.3 million and an increase in CDARS deposits of $2.4 million accounted for the
majority of the change. Increases in retail deposits resulted from a certificate of deposit promotion, the continued emphasis on developing commercial deposit relationships and local market conditions and higher savings balances, partially offset by
money market decreases. Under the CDARS network, the Bank can transfer deposits into the network (a one way sell transaction), request that the network deposit funds at the Bank (a one way buy transaction), or deposit funds into the network and
receive an equal amount of deposits from the network (a reciprocal transfer). The network provides the Bank with an investment vehicle in the case of a one way sell, a liquidity or funding source in the case of a one way buy and the ability to
access additional FDIC insurance for customers in the case of a reciprocal transfer. The Bank had $12.2 million and $9.8 million, respectively, of CDARS deposits as of March 31, 2014 and September 30, 2013 and otherwise had no brokered
deposits as of March 31, 2014 and September 30, 2013.
Stockholders equity increased by $524,000 from September 30, 2013 to
March 31, 2014 as a result of net income of $356,000 and additions to equity resulting from accounting for stock-based compensation and the Companys ESOP, and other comprehensive income of $151,000, net of dividends on preferred stock of
$45,000. The other comprehensive income in the six months ended March 31, 2014 resulted primarily from the decrease in unrealized losses on available for sale securities due to changes in market interest rates.
26
Comparison of Operating Results for the Three Months Ended March 31, 2014 and 2013
General.
The Company recorded net income of $145,000 for the three months ended March 31, 2014, compared to net income of $119,000 for the three
months ended March 31, 2013. The change was primarily due to a lower provision for loan losses ($75,000 in the three months ended March 31, 2014 compared to $268,000 in the three months ended March 31, 2013), partially offset by
higher non-interest expenses ($2.0 million in the three months ended March 31, 2014 compared to $1.9 million in the three months ended March 31, 2013. The three months ended March 31, 2014 also included a dividend on preferred stock
of $22,000 compared to none in the three months ended March 31, 2013.
Average Balances, Interest and Average Yields/Costs.
The following
table sets forth certain information relating to the Companys average balance sheets and reflects the average annual yield on interest-earning assets and average annual cost of interest-bearing liabilities, interest earned and interest paid
for the periods indicated. Such yields and costs are derived by dividing annualized income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods presented. Average balances are
derived from daily balances over the periods indicated. The average balances for loans are net of allowance for loan losses.
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Three Months Ended March 31,
|
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|
2014
|
|
|
2013
|
|
|
|
(Dollars in thousands)
|
|
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|
Average
|
|
|
|
|
|
Yield/
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Cost
|
|
|
Balance
|
|
|
Interest
|
|
|
Cost
|
|
Interest-earning assets:
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(1)
|
|
$
|
213,619
|
|
|
$
|
2,588
|
|
|
|
4.85
|
%
|
|
$
|
208,807
|
|
|
$
|
2,595
|
|
|
|
4.97
|
%
|
Securities(2)
|
|
|
39,295
|
|
|
|
180
|
|
|
|
1.83
|
%
|
|
|
46,554
|
|
|
|
224
|
|
|
|
1.92
|
%
|
Other interest-earning assets(3)
|
|
|
3,861
|
|
|
|
19
|
|
|
|
1.97
|
%
|
|
|
4,116
|
|
|
|
23
|
|
|
|
2.24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
256,775
|
|
|
|
2,787
|
|
|
|
4.34
|
%
|
|
|
259,477
|
|
|
|
2,842
|
|
|
|
4.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest-earning assets
|
|
|
6,249
|
|
|
|
|
|
|
|
|
|
|
|
6,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
263,024
|
|
|
|
|
|
|
|
|
|
|
$
|
265,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
$
|
47,375
|
|
|
|
35
|
|
|
|
0.30
|
%
|
|
$
|
48,563
|
|
|
|
47
|
|
|
|
0.39
|
%
|
Savings and club accounts
|
|
|
44,583
|
|
|
|
27
|
|
|
|
0.24
|
%
|
|
|
42,314
|
|
|
|
25
|
|
|
|
0.24
|
%
|
Certificates of deposit
|
|
|
97,415
|
|
|
|
299
|
|
|
|
1.23
|
%
|
|
|
94,002
|
|
|
|
295
|
|
|
|
1.26
|
%
|
Borrowed money(4)
|
|
|
20,747
|
|
|
|
186
|
|
|
|
3.59
|
%
|
|
|
27,919
|
|
|
|
196
|
|
|
|
2.81
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
210,120
|
|
|
|
547
|
|
|
|
1.04
|
%
|
|
|
212,798
|
|
|
|
563
|
|
|
|
1.06
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest-bearing deposits
|
|
|
28,790
|
|
|
|
|
|
|
|
|
|
|
|
30,243
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
1,558
|
|
|
|
|
|
|
|
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
240,468
|
|
|
|
|
|
|
|
|
|
|
|
243,416
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
22,556
|
|
|
|
|
|
|
|
|
|
|
|
22,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
263,024
|
|
|
|
|
|
|
|
|
|
|
$
|
265,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
$
|
2,240
|
|
|
|
3.30
|
%
|
|
|
|
|
|
$
|
2,279
|
|
|
|
3.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets/net interest margin
|
|
$
|
46,655
|
|
|
|
|
|
|
|
3.49
|
%
|
|
$
|
46,679
|
|
|
|
|
|
|
|
3.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest-earning assets to interest-bearing liabilities
|
|
|
|
|
|
|
1.22x
|
|
|
|
|
|
|
|
|
|
|
|
1.22x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Net of allowance for loan losses and net deferred costs and fees.
|
(2)
|
Available for sale securities included at fair value.
|
(3)
|
Includes interest-earning cash equivalents, FHLB-NY stock and loans held for sale, which are held for a short period of time.
|
(4)
|
Includes mortgage escrow funds and FHLB-NY advances.
|
Interest Income.
Interest income of $2.8 million
for the three months ended March 31, 2014, was $55,000 lower than interest income for the three months ended March 31, 2013. The decrease in interest income was primarily due to a decrease of $44,000 in interest from securities.
Interest income from loans decreased by $7,000 in the three months ended March 31, 2014 compared to the three months ended March 31, 2013. The
decrease was due to a $4.8 million, or 2.3%, increase in the average balance of loans from $208.8 million in the three months ended March 31, 2013 to $213.6 million in the three months ended March 31, 2013, more than offset by a 12 basis
point decrease
27
in the average interest rate earned on those loans. The increase in average loan balances includes loans in the non-residential real estate and commercial loan categories, net of a decrease in
one-to-four-family residential mortgages. The decrease in the average yield resulted principally from lower market interest rates. The Company continues to sell a portion of conventional one-to-four-family residential mortgage originations into the
secondary market to generate non-interest income and reduce interest rate risk. Higher loan volume increased interest income by $58,000 while the effect of lower interest rates decreased interest income by $65,000.
Interest income from securities decreased by $44,000 in the three months ended March 31, 2014 compared to the three months ended March 31, 2013.
Interest income from securities declined by $34,000 as a result of lower average balances in the three months ended March 31, 2014 compared to the three months ended March 31, 2013, and declined by $10,000 as a result of lower yields on
the securities portfolio. Average balances were lower in the three months ended March 31, 2014 compared to the three months ended March 31, 2013 as the repayments of securities and calls were used to fund loan growth. Other
interest-earning assets consist of cash equivalents, FHLB stock and loans originated for resale. Interest on these assets declined by $4,000 in the three months ended March 31, 2014 compared to the three months ended March 31, 2013,
principally due to lower FHLB dividends.
Overall declines in interest rates reduced the average interest rate on interest-earning assets from 4.38% in
the quarter ended March 31, 2013 to 4.34% in the quarter ended March 31, 2014. Of the $55,000 decrease in interest income in the three months ended March 31, 2014 compared to the three months ended March 31, 2013, higher average
balances of interest-earning assets caused an increase of $23,000 in interest income, while lower interest rates caused a decrease in interest income of $78,000.
Interest Expense.
Interest expense decreased by $16,000, or 2.8%, to $547,000 in the three months ended March 31, 2014 compared to $563,000 in the
three months ended March 31, 2013. The decrease in average balances of interest bearing-liabilities in the 2014 period reduced interest expense by $45,000, while changes in the mix of borrowed money caused an overall increase in interest
expense related to mix and rate of $29,000.
Rate/Volume Analysis.
The following table analyzes the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and interest-bearing liabilities. It shows the amount of the change in interest income or expense caused by either changes in outstanding balances (volume) or changes in interest
rates. The effect of a change in volume is measured by applying the average rate during the first period to the volume change between the two periods. The effect of changes in rate is measured by applying the change in rate between the two periods
to the average volume during the first period. Changes attributable to both rate and volume that cannot be segregated have been allocated proportionately to the absolute value of the change due to volume and the change due to rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2014
|
|
|
|
Compared to
|
|
|
|
Three Months Ended March 31, 2013
|
|
|
|
(In thousands)
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable
|
|
$
|
58
|
|
|
$
|
(65
|
)
|
|
$
|
(7
|
)
|
Securities
|
|
|
(34
|
)
|
|
|
(10
|
)
|
|
|
(44
|
)
|
Other interest-earning assets
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
23
|
|
|
|
(78
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
(1
|
)
|
|
|
(11
|
)
|
|
|
(12
|
)
|
Savings and club accounts
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
Certificates of deposit
|
|
|
11
|
|
|
|
(7
|
)
|
|
|
4
|
|
Borrowed money
|
|
|
(56
|
)
|
|
|
46
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
(45
|
)
|
|
|
29
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
(68
|
)
|
|
$
|
107
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income.
Net interest income decreased $39,000, or 1.7%, to $2.2 million for the three months ended
March 31, 2014 compared to the three months ended March 31, 2013. The decrease in net interest income was primarily attributable to lower balances of average interest-earning assets, and lower yields on those assets, lower average balances
of interest-bearing liabilities and changes in the mix of interest-bearing liabilities, and lower interest rates on those liabilities.
Provision for
Loan Losses.
As of March 31, 2014 and September 30, 2013, the Bank had $3.7 million and $4.8 million of non-performing loans, respectively,
which have been placed on non-accrual status. At March 31, 2014 and September 30, 2013, the Bank had $7.1 million and $8.0 million of loans classified as impaired. At March 31, 2014 and September 30, 2013, none of these impaired
loans required specific loss allowances. The
28
impaired loans were primarily the result of difficult general economic conditions, increased unemployment and declines in the local real estate market in prior years. As of March 31, 2014
and September 30, 2013, the allowance for loan losses was 0.30% and 0.44% of loans outstanding, respectively. The allowance for loan losses contains two components; the specific allowance for impaired loans individually evaluated, and the
allowance for loans collectively evaluated for impairment. There was no need for any specific allowance for loans individually evaluated for impairment at March 31, 2014 or September 30, 2013. The allowance for loans collectively evaluated
for impairment was $657,000 at March 31, 2014 compared to $923,000 at September 30, 2013. The decrease of $266,000 was the result of the write off of $441,000 of loans in the six months ended March 31, 2014, net of a provision for
loan losses of $175,000. The allowance allocation, or loss percentages are based on historical charge offs, adjusted for the trend of losses, current economic conditions including unemployment, real estate markets and other factors. Allowance
allocation percentages can also be adjusted for trends as evidenced by the Federal Deposit Insurance Corporation Uniform Bank Performance Report (UBPR) loss experience for the Banks Peer Group. As a result of changes in the
expected recovery of non-performing loans and in the mix and volume of the loan portfolio, economic conditions, unemployment, changes in real estate values in the Banks primary market area, and an analysis commercial real estate cash flows,
$75,000 and $268,000 was provided for loan losses in the three month periods ended March 31, 2014 and 2013, respectively. The Bank has allocated the allowance for loan losses among categories of loan types as well as classification status at
each period end date.
Non-interest Income.
Non-interest income of $68,000 in the three months ended March 31, 2014 was lower than the $82,000
in the comparable 2013 period primarily as a result of lower gains on sale of loans and lower fees and service charges in the three months ended March 31, 2014 compared to the comparable 2013 period.
Non-interest Expenses.
Non-interest expenses increased by $89,000, for the three months ended March 31, 2014, compared to the comparable prior
year period. Non-interest expense in the three months ended March 31, 2014 included higher costs related to occupancy, advertising and legal fees in connection with loan collection efforts and the litigation with Customers Bank.
Income Tax Expense.
The income tax expense was $93,000 in the three months ended March 31, 2014 compared to $68,000 in the comparable 2013 period.
Income tax expense is recorded based on pretax income at the statutory rate for federal tax purposes and the higher of the statutory rate or minimum tax rate for state purposes. The effective tax rate in the three months ended March 31, 2014
and 2013 was different than the statutory rate as a result of certain non-taxable income and expense items.
29
Comparison of Operating Results for the Six Months Ended March 31, 2014 and 2013
General.
The Company recorded net income of $356,000 for the six months ended March 31, 2014, compared to net income of $301,000 for the six months
ended March 31, 2013. The change was primarily due to lower net interest income, a lower provision for loan losses ($175,000 in the six months ended March 31, 2014 compared to $368,000 in the six months ended March 31, 2013) and lower
gain on sale of loans in the 2014 period, net of lower non-interest expenses in the six months ended March 31, 2014, compared to the 2013 period. The six months ended March 31, 2014 also included a dividend on preferred stock of $45,000
compared to none in the three months ended March 31, 2013.
Average Balances, Interest and Average Yields/Costs.
The following table sets
forth certain information relating to the Companys average balance sheets and reflects the average annual yield on interest-earning assets and average annual cost of interest-bearing liabilities, interest earned and interest paid for the
periods indicated. Such yields and costs are derived by dividing annualized income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods presented. Average balances are derived
from daily balances over the periods indicated. The average balances for loans are net of allowance for loan losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(Dollars in thousands)
|
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Cost
|
|
|
Balance
|
|
|
Interest
|
|
|
Cost
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(1)
|
|
$
|
212,300
|
|
|
$
|
5,175
|
|
|
|
4.88
|
%
|
|
$
|
205,703
|
|
|
$
|
5,172
|
|
|
|
5.03
|
%
|
Securities(2)
|
|
|
39,710
|
|
|
|
362
|
|
|
|
1.82
|
%
|
|
|
47,400
|
|
|
|
451
|
|
|
|
1.90
|
%
|
Other interest-earning assets(3)
|
|
|
3,239
|
|
|
|
35
|
|
|
|
2.16
|
%
|
|
|
4,245
|
|
|
|
49
|
|
|
|
2.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
255,249
|
|
|
|
5,572
|
|
|
|
4.37
|
%
|
|
|
257,348
|
|
|
|
5,672
|
|
|
|
4.41
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest-earning assets
|
|
|
6,230
|
|
|
|
|
|
|
|
|
|
|
|
6,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
261,479
|
|
|
|
|
|
|
|
|
|
|
$
|
263,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
$
|
47,962
|
|
|
|
71
|
|
|
|
0.30
|
%
|
|
$
|
47,708
|
|
|
|
92
|
|
|
|
0.39
|
%
|
Savings and club accounts
|
|
|
44,102
|
|
|
|
55
|
|
|
|
0.25
|
%
|
|
|
42,067
|
|
|
|
51
|
|
|
|
0.24
|
%
|
Certificates of deposit
|
|
|
95,088
|
|
|
|
594
|
|
|
|
1.25
|
%
|
|
|
91,619
|
|
|
|
603
|
|
|
|
1.32
|
%
|
Borrowed money(4)
|
|
|
21,957
|
|
|
|
373
|
|
|
|
3.40
|
%
|
|
|
31,174
|
|
|
|
404
|
|
|
|
2.59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
209,109
|
|
|
|
1,093
|
|
|
|
1.05
|
%
|
|
|
212,568
|
|
|
|
1,150
|
|
|
|
1.08
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest-bearing deposits
|
|
|
28,162
|
|
|
|
|
|
|
|
|
|
|
|
28,310
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
1,643
|
|
|
|
|
|
|
|
|
|
|
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
238,914
|
|
|
|
|
|
|
|
|
|
|
|
241,512
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
22,565
|
|
|
|
|
|
|
|
|
|
|
|
21,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
261,479
|
|
|
|
|
|
|
|
|
|
|
$
|
263,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
$
|
4,479
|
|
|
|
3.32
|
%
|
|
|
|
|
|
$
|
4,522
|
|
|
|
3.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets/net interest margin
|
|
$
|
46,140
|
|
|
|
|
|
|
|
3.51
|
%
|
|
$
|
44,780
|
|
|
|
|
|
|
|
3.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest-earning assets to interest-bearing liabilities
|
|
|
|
|
|
|
1.22x
|
|
|
|
|
|
|
|
|
|
|
|
1.21x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Net of allowance for loan losses and net deferred costs and fees.
|
(2)
|
Available for sale securities included at fair value.
|
(3)
|
Includes interest-earning cash equivalents, FHLB-NY stock and loans held for sale, which are held for a short period of time.
|
(4)
|
Includes mortgage escrow funds and FHLB-NY advances.
|
Interest Income.
Interest income of $5.6 million
for the six months ended March 31, 2014, was $100,000 lower than interest income for the six months ended March 31, 2013. The decrease in interest income was primarily due to a decrease of $89,000 in interest from investments.
Interest income from loans was essentially unchanged in the six months ended March 31, 2014 compared to the six months ended March 31, 2013.
Interest income increased by $161,000, as a result of a $6.6 million increase in the average balance of loans to $212.3 million in the six months ended March 31, 2014 from $205.7 million in the six months ended March 31, 2013, net of a
decrease of $158,000 due to
30
a 15 basis point decline in the average interest rate on loans. The increase in average loan balances includes loans in the non-residential real estate and commercial loan categories. The
decrease in the average yield resulted principally from lower market interest rates. The Company continues to sell a portion of conventional one-to-four-family residential mortgage originations into the secondary market to generate non-interest
income and reduce interest rate risk.
Interest income from securities decreased by $89,000 in the six months ended March 31, 2014 compared to the
six months ended March 31, 2013. Interest income from securities declined by $71,000 as a result of lower average balances in the six months ended March 31, 2014 compared to the six months ended March 31, 2013 and declined by $18,000
as a result of lower yields on the securities portfolio. Average balances were lower in the six months ended March 31, 2014 compared to the six months ended March 31, 2013 as the proceeds of security sales and calls were partially used to
fund loan growth. The lower yields in the six months ended March 31, 2014 compared to March 31, 2013 resulted from market conditions. Other interest-earning assets consist of cash equivalents, FHLB-NY stock and loans originated for resale.
Interest on these assets declined by $14,000 in the six months ended March 31, 2014 compared to the six months ended March 31, 2013 due to lower FHLB dividends and lower volume of loans held for sale.
Overall declines in interest rates reduced the average interest rate on interest-earning assets from 4.41% in the quarter ended March 31, 2013 to 4.37%
in the quarter ended March 31, 2014. Of the $100,000 decrease in interest income in the six months ended March 31, 2014 compared to the six months ended March 31, 2013, higher average balances of interest-earning assets caused an
increase of $79,000 in interest income, while lower interest rates caused a decrease in interest income of $179,000.
Interest Expense.
Interest
expense decreased by $57,000, or 5.0%, to $1.1 million in the six months ended March 31, 2014 compared to the six months ended March 31, 2013. Interest expense on deposits decreased by $26,000 in the six months ended March 31, 2014
compared to the six months ended March 31, 2013 principally due to lower interest rates paid on those money market deposits. Interest on certificates of deposit decreased by $9,000 in the six months ended March 31, 2014 compared to the six
months ended March 31, 2013 due to lower interest rates paid on those deposits, offset in part by higher average balances.
Interest expense on
borrowed money decreased by $37,000 in the six months ended March 31, 2014 compared to March 31, 2013. Decreases in the volume of borrowed money reduced interest expense on borrowed money by $137,000, offset in part by an increase in the
average rate from 2.59% in the six months ended March 31, 2013 to 3.40% in the six months ended March 31, 2014. In the six months ended March 31, 2013, borrowed money included a higher portion of low cost short term FHLB borrowings
which reduced the overall interest rate on borrowed money. In the six months ended March 31, 2014, borrowed money included a lower portion of low cost short term FHLB borrowings, effectively raising the interest rate on borrowed money in the
2014 period compared to 2013.
Overall declines in market interest rates reduced the average interest rate on interest-bearing liabilities from 1.08% in
the six months ended March 31, 2013 to 1.05% in the six months ended March 31, 2014. Of the $57,000 decrease in interest expense in the six months ended March 31, 2014 compared to the six months ended March 31, 2013, declines in
the average balance of interest-bearing liabilities reduced interest expense by $112,000, while changes in volume and mix of interest-bearing liabilities caused an increase in interest expense of $55,000.
31
Rate/Volume Analysis.
The following table analyzes the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and interest-bearing liabilities. It shows the amount of the change in interest income or expense caused by either changes in outstanding balances (volume) or changes in interest
rates. The effect of a change in volume is measured by applying the average rate during the first period to the volume change between the two periods. The effect of changes in rate is measured by applying the change in rate between the two periods
to the average volume during the first period. Changes attributable to both rate and volume that cannot be segregated have been allocated proportionately to the absolute value of the change due to volume and the change due to rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended March 31, 2014
|
|
|
|
Compared to
|
|
|
|
Six Months Ended March 31, 2013
|
|
|
|
(In thousands)
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable
|
|
$
|
161
|
|
|
$
|
(158
|
)
|
|
$
|
3
|
|
Securities
|
|
|
(71
|
)
|
|
|
(18
|
)
|
|
|
(89
|
)
|
Other interest-earning assets
|
|
|
(11
|
)
|
|
|
(3
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
79
|
|
|
|
(179
|
)
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
|
|
|
|
(21
|
)
|
|
|
(21
|
)
|
Savings and club accounts
|
|
|
2
|
|
|
|
2
|
|
|
|
4
|
|
Certificates of deposit
|
|
|
23
|
|
|
|
(32
|
)
|
|
|
(9
|
)
|
Borrowed money
|
|
|
(137
|
)
|
|
|
106
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
(112
|
)
|
|
|
55
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
191
|
|
|
$
|
(234
|
)
|
|
$
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income.
Net interest income decreased $43,000, or 1.0%, to $4.5 million for the six months ended
March 31, 2014 compared to the six months ended March 31, 2013. The decrease in net interest income was primarily attributable to lower balances of average interest-earning assets, and lower yields on those assets, lower average balances
of interest-bearing liabilities and changes in the mix of interest-bearing liabilities, and lower interest rates on those liabilities.
Provision for
Loan Losses.
As of March 31, 2014 and September 30, 2013, the Bank had $3.7 million and $4.8 million of non-performing loans, respectively, which have been placed on non-accrual status. At March 31, 2014 and September 30,
2013, the Bank had $7.1 million and $8.0 million of loans classified as impaired. At March 31, 2014 and September 30, 2013, none of these impaired loans required specific loss allowances. The impaired loans were primarily the result of
difficult general economic conditions, increased unemployment and declines in the local real estate market in prior years. As of March 31, 2014 and September 30, 2013, the allowance for loan losses was 0.30% and 0.44% of loans outstanding,
respectively. The allowance for loan losses contains two components; the specific allowance for impaired loans individually evaluated, and the allowance for loans collectively evaluated for impairment. There was no need for any specific allowance
for loans individually evaluated for impairment at March 31, 2014 or September 30, 2013. The allowance for loans collectively evaluated for impairment was $657,000 at March 31, 2014 compared to $923,000 at September 30, 2013. The
decrease of $266,000 was the result of the write off of $441,000 of loans in the six months ended March 31, 2014, net of a provision for loan losses of $175,000. The allowance allocation, or loss percentages are based on historical charge offs,
adjusted for the trend of losses, current economic conditions including unemployment, real estate markets and other factors. Allowance allocation percentages can also be adjusted for trends as evidenced by the Federal Deposit Insurance Corporation
Uniform Bank Performance Report (UBPR) loss experience for the Banks Peer Group. As a result of changes in the expected recovery of non-performing loans and in the mix and volume of the loan portfolio, economic conditions,
unemployment, changes in real estate values in the Banks primary market area, and an analysis commercial real estate cash flows, $175,000 and $368,000 was provided for loan losses in the six month periods ended March 31, 2014 and 2013,
respectively. The Bank has allocated the allowance for loan losses among categories of loan types as well as classification status at each period end date.
Non-interest Income.
Non-interest income of $152,000 in the six months ended March 31, 2014 was lower than the $265,000 in the comparable 2013
period primarily as a result of market conditions which caused lower gains on sale of loans due to lower volume in the six months ended March 31, 2014.
Non-interest Expenses.
Non-interest expenses decreased by $60,000, for the six months ended March 31, 2014, compared to the prior year period.
Non-interest expense in the six months ended March 31, 2014 included lower costs of salaries and benefits resulting from headcount reductions, lower incentive compensation costs and lower stock based compensation costs, net of higher costs
related to occupancy, advertising and legal fees in connection with loan collection efforts and the litigation with Customers Bank.
32
Income Tax Expense.
The income tax expense was $227,000 in the six months ended March 31, 2014
compared to $185,000 in the comparable 2013 period. Income tax expense is recorded based on pretax income at the statutory rate for federal tax purposes and the higher of the statutory rate or minimum tax rate for state purposes. The effective tax
rate in the six months ended March 31, 2014 and 2013 was different than the statutory rate as a result of certain non-taxable income and expense items.
Management of Market Risk
As a financial institution,
the Companys primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a significant portion of its assets and liabilities. Fluctuations
in interest rates will also affect the market value of interest-earning assets and liabilities, other than those which possess a short-term maturity. Interest rates are highly sensitive to factors that are beyond the Companys control,
including general economic conditions, inflation, changes in the slope of the interest rate yield curve, monetary and fiscal policies of the federal government and the regulatory policies of government authorities. Due to the nature of the
Companys operations, it is not subject to foreign currency exchange or commodity price risk. Instead, the Companys loan portfolio, concentrated in Westchester County, New York, is subject to the risks associated with the economic
conditions prevailing in its market area.
The primary goals of the Companys interest rate management strategy are to determine the appropriate
level of risk given the business strategy and then manage that risk so as to reduce the exposure of the Companys net interest income to fluctuations in interest rates. Historically, the Companys lending activities have been dominated by
one-to-four family real estate mortgage loans, and in more recent periods, such activities have included increases in non-residential real estate mortgage loans, multi-family and secured commercial loans. The primary source of funds has been
deposits, FHLB borrowings, CDARS transactions and brokered certificates of deposit, which have substantially shorter terms to maturity than the loan portfolio. As a result, the Company has employed certain strategies to manage the interest rate risk
inherent in the asset/liability mix, including but not limited to limiting terms of fixed rate one-to-four-family mortgage loan originations which are retained in the Companys portfolio, selling most of the one-to-four family mortgage
originations in the secondary market and focusing on investments with short and intermediate term maturities and borrowing term funds from the FHLB.
In
addition, the actual amount of time before mortgage loans are repaid can be significantly impacted by changes in mortgage prepayment rates and market interest rates. Mortgage prepayment rates will vary due to a number of factors, including the
regional economy in the area where the underlying mortgages were originated, seasonal factors, demographic variables and the assumability of the underlying mortgages. However, the major factors affecting prepayment rates are prevailing interest
rates, related mortgage refinancing opportunities and competition. The Company monitors interest rate sensitivity so that it can make adjustments to its asset and liability mix on a timely basis.
Net Interest Income at Risk
The Company uses a
simulation model to monitor interest rate risk. This model reports the net interest income and net economic value at risk under different interest rate environments. Specifically, an analysis is performed related to changes in net interest income by
assuming changes in interest rates, both up and down, from current rates over the three year period following the financial statements. The changes in interest income and interest expense related to changes in interest rates reflect the interest
rate sensitivity of the Companys interest-earning assets and interest-bearing liabilities.
The table below sets forth the latest available
estimated changes in net interest income, as of December 31, 2013, that would result from various basis point changes in interest rates over a twelve month period.
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Interest Rates In Basis Points (Rate Shock)
|
|
Net Interest Income
|
|
|
|
|
|
|
Dollar
|
|
|
Percent
|
|
|
|
Amount
|
|
|
Change
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
400
|
|
$
|
9,461
|
|
|
$
|
(679
|
)
|
|
|
-6.7
|
%
|
300
|
|
|
9,637
|
|
|
|
(503
|
)
|
|
|
-5.0
|
%
|
200
|
|
|
9,819
|
|
|
|
(321
|
)
|
|
|
-3.2
|
%
|
100
|
|
|
9,980
|
|
|
|
(160
|
)
|
|
|
-1.6
|
%
|
0
|
|
|
10,140
|
|
|
|
|
|
|
|
0.0
|
%
|
(100)
|
|
|
10,077
|
|
|
|
(63
|
)
|
|
|
-0.6
|
%
|
Liquidity
The Company is
required to maintain levels of liquid assets sufficient to ensure the Companys safe and sound operation. Liquidity is defined as the Companys ability to meet current and future financial obligations of a short-term nature. The Company
adjusts its liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes from escrow accounts on mortgage loans, repayment of borrowings and loan funding commitments. The Company also adjusts its liquidity level
as appropriate to meet its asset/liability objectives.
The Companys primary sources of funds are retail deposits, the CDARS network, brokered
certificates of deposit, amortization and prepayments of loans, FHLB advances, repayments and maturities of investment securities and funds provided from operations. While
33
scheduled loan and mortgage-backed securities amortization and maturing investment securities are a relatively predictable source of funds, deposit flow and loan and mortgage-backed securities
repayments are greatly influenced by market interest rates, economic conditions and competition. The Companys liquidity, represented by cash and cash equivalents and investment securities, is a product of its operating, investing and financing
activities. Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments, such as federal funds, available-for-sale securities or cash equivalents and other
interest-earning assets. If the Company requires funds beyond its ability to generate them internally, the Company can acquire brokered certificates of deposit, CDARS deposits and draw upon existing borrowing agreements with the FHLB and the Federal
Reserve which provide an additional source of funds. At March 31, 2014 and September 30, 2013, the Company had $16.3 million and $19.9 million of advances from the FHLB, respectively, and CDARS deposits of $12.2 million and $9.8 million,
respectively and had no brokered certificates of deposit as of either date.
The Company anticipates that it will have sufficient funds available to meet
its current loan and other commitments. As of March 31, 2014, the Company had cash and cash equivalents of $4.2 million and available for sale securities of $39.8 million. At March 31, 2014, the Company had outstanding commitments to
originate loans of $0.7 million and $13.0 million of undisbursed funds from approved lines of credit, homeowners equity lines of credit, and secured commercial lines of credit. Retail certificates of deposit scheduled to mature in one year or
less at March 31, 2014, totaled $34.2 million. Historically, the Companys deposit flow history has been that a significant portion of such deposits remain with the Company.
Cash Flows and Capital Resources
In the six months ended
March 31, 2014, net cash provided by operating activities was $0.4 million compared to net cash provided by operating activities of $6.1 million in the same period in 2013. In the six months ended March 31, 2014 and 2013, the net income
included non-cash expenses (consisting of depreciation, amortization, provision for loan losses, deferred taxes and stock-based compensation) of $638,000 and $799,000, respectively. Net activity from loans originated for sale provided $300,000 and
$2.4 million of cash in the six months ended March 31, 2014 and 2013, respectively.
In the six months ended March 31, 2014 and 2013, investing
activities used $7.4 million and $4.8 million of cash, respectively. In the six months ended March 31, 2014 and 2013, net securities transactions provided $0.9 million and $4.7 million of cash, respectively. Net changes in loans used $8.4
million and $10.2 million of cash in the six months ended March 31, 2014 and 2013, respectively.
Net cash provided by financing activities was $8.8
million in the six months ended March 31, 2014 compared to net cash used by financing activities of $1.3 million in the six months ended March 31, 2013. In the six months ended March 31, 2014 and 2013, repayment of FHLB-NY advances
used $3.6 million and $15.2 million of cash, respectively, and increases in deposit balances provided $11.7 million and $13.0 million of cash, respectively.
The Companys overall credit exposure at the FHLB, including borrowings under the Overnight Advance line of credit and other term borrowings cannot
exceed 50% of its total assets, subject to certain limitations based on the underlying loans and securities pledged as collateral. The Company also has a $4.5 million Fed Funds line of credit with Zions Bank, which was not drawn upon.
The following table sets forth the Banks capital position at March 31, 2014, compared to the minimum regulatory capital requirements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To be Well
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized under
|
|
|
|
|
|
|
|
|
|
For Capital Adequacy
|
|
|
Prompt Corrective
|
|
|
|
Actual
|
|
|
Purposes
|
|
|
Action Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
(Dollars in Thousands)
|
|
Total capital (to risk-weighted assets)
|
|
$
|
23,106
|
|
|
|
12.26
|
%
|
|
|
>
|
|
|
$
|
15,072
|
|
|
|
>
|
|
|
|
8
|
%
|
|
|
>
|
|
|
$
|
18,841
|
|
|
|
>
|
|
|
|
10
|
%
|
Core (Tier 1) capital (to risk-weighted assets)
|
|
|
22,449
|
|
|
|
11.92
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
11,304
|
|
|
|
|
|
|
|
6
|
|
Core (Tier 1) capital (to total adjusted assets)
|
|
|
22,449
|
|
|
|
8.39
|
|
|
|
>
|
|
|
|
10,702
|
|
|
|
>
|
|
|
|
4
|
|
|
|
>
|
|
|
|
13,378
|
|
|
|
>
|
|
|
|
5
|
|
Tangible capital (to total adjusted assets)
|
|
|
22,449
|
|
|
|
8.39
|
|
|
|
>
|
|
|
|
4,013
|
|
|
|
>
|
|
|
|
1.5
|
|
|
|
>
|
|
|
|
N/A
|
|
|
|
>
|
|
|
|
N/A
|
|
34
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Companys
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.