Item 1.
|
Financial Statements
|
OBA Financial Services, Inc. and Subsidiary
Consolidated Statements of Condition (Unaudited)
|
|
|
|
|
|
|
|
|
(In thousands, except share data)
|
|
March 31,
2014
|
|
|
June 30,
2013
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
30,324
|
|
|
$
|
16,006
|
|
Federal funds sold
|
|
|
2,299
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
32,623
|
|
|
|
16,173
|
|
Interest bearing deposits with other banks
|
|
|
3,612
|
|
|
|
6,692
|
|
Securities available for sale
|
|
|
42,107
|
|
|
|
37,174
|
|
Securities held to maturity (fair value of $1,224 and $1,520)
|
|
|
1,146
|
|
|
|
1,445
|
|
Federal Home Loan Bank stock, at cost
|
|
|
1,050
|
|
|
|
1,160
|
|
Loans held for sale
|
|
|
|
|
|
|
414
|
|
Loans
|
|
|
306,299
|
|
|
|
303,276
|
|
Less: allowance for loan losses
|
|
|
3,521
|
|
|
|
3,473
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
|
302,778
|
|
|
|
299,803
|
|
Premises and equipment, net
|
|
|
5,235
|
|
|
|
5,624
|
|
Bank owned life insurance
|
|
|
9,380
|
|
|
|
9,182
|
|
Other assets
|
|
|
4,186
|
|
|
|
3,944
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
402,117
|
|
|
$
|
381,611
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
47,115
|
|
|
$
|
42,422
|
|
Interest-bearing
|
|
|
256,371
|
|
|
|
240,841
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
303,486
|
|
|
|
283,263
|
|
Securities sold under agreements to repurchase
|
|
|
7,416
|
|
|
|
8,544
|
|
Federal Home Loan Bank advances
|
|
|
15,528
|
|
|
|
15,623
|
|
Advance payments from borrowers for taxes and insurance
|
|
|
851
|
|
|
|
1,324
|
|
Other liabilities
|
|
|
1,833
|
|
|
|
1,553
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
329,114
|
|
|
|
310,307
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
Preferred stock (par value $.01); authorized 50,000,000 shares; no shares issued or outstanding
|
|
|
|
|
|
|
|
|
Common stock (par value $.01); authorized 100,000,000 shares; issued and outstanding 4,038,006 and 4,048,436 shares at March 31,
2014 and June 30, 2013, respectively
|
|
|
40
|
|
|
|
40
|
|
Additional paid-in capital
|
|
|
34,435
|
|
|
|
33,726
|
|
Unearned ESOP shares
|
|
|
(2,916
|
)
|
|
|
(3,055
|
)
|
Retained earnings
|
|
|
41,363
|
|
|
|
40,531
|
|
Accumulated other comprehensive income (loss)
|
|
|
81
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
73,003
|
|
|
|
71,304
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
402,117
|
|
|
$
|
381,611
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
5
OBA Financial Services, Inc. and Subsidiary
Consolidated Statements of Income (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
(In thousands, except share and per share data)
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Interest and Dividend Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, including fees
|
|
$
|
3,533
|
|
|
$
|
3,712
|
|
|
$
|
10,820
|
|
|
$
|
10,997
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interesttaxable
|
|
|
271
|
|
|
|
237
|
|
|
|
731
|
|
|
|
784
|
|
Dividends
|
|
|
13
|
|
|
|
10
|
|
|
|
30
|
|
|
|
31
|
|
Federal funds sold
|
|
|
8
|
|
|
|
5
|
|
|
|
42
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income
|
|
|
3,825
|
|
|
|
3,964
|
|
|
|
11,623
|
|
|
|
11,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
312
|
|
|
|
287
|
|
|
|
930
|
|
|
|
953
|
|
Federal Home Loan Bank advances
|
|
|
165
|
|
|
|
216
|
|
|
|
504
|
|
|
|
673
|
|
Securities sold under agreements to repurchase
|
|
|
4
|
|
|
|
37
|
|
|
|
16
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
481
|
|
|
|
540
|
|
|
|
1,450
|
|
|
|
1,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
3,344
|
|
|
|
3,424
|
|
|
|
10,173
|
|
|
|
10,083
|
|
Provision for loan losses
|
|
|
4
|
|
|
|
229
|
|
|
|
24
|
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
3,340
|
|
|
|
3,195
|
|
|
|
10,149
|
|
|
|
9,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer service fees
|
|
|
65
|
|
|
|
79
|
|
|
|
244
|
|
|
|
262
|
|
Loan servicing fees
|
|
|
4
|
|
|
|
3
|
|
|
|
13
|
|
|
|
13
|
|
Bank owned life insurance income
|
|
|
67
|
|
|
|
69
|
|
|
|
199
|
|
|
|
213
|
|
Net gains (losses)
|
|
|
5
|
|
|
|
59
|
|
|
|
37
|
|
|
|
35
|
|
Other non-interest income
|
|
|
46
|
|
|
|
33
|
|
|
|
135
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
|
187
|
|
|
|
243
|
|
|
|
628
|
|
|
|
618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
1,802
|
|
|
|
1,826
|
|
|
|
5,435
|
|
|
|
5,330
|
|
Occupancy and equipment
|
|
|
397
|
|
|
|
390
|
|
|
|
1,181
|
|
|
|
1,158
|
|
Data processing
|
|
|
258
|
|
|
|
204
|
|
|
|
769
|
|
|
|
590
|
|
Directors fees
|
|
|
105
|
|
|
|
83
|
|
|
|
297
|
|
|
|
266
|
|
FDIC assessments
|
|
|
51
|
|
|
|
68
|
|
|
|
129
|
|
|
|
206
|
|
Other non-interest expense
|
|
|
554
|
|
|
|
450
|
|
|
|
1,537
|
|
|
|
1,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
|
3,167
|
|
|
|
3,021
|
|
|
|
9,348
|
|
|
|
8,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
360
|
|
|
|
417
|
|
|
|
1,429
|
|
|
|
1,527
|
|
Income tax expense
|
|
|
153
|
|
|
|
180
|
|
|
|
597
|
|
|
|
633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
207
|
|
|
$
|
237
|
|
|
$
|
832
|
|
|
$
|
894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.22
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.05
|
|
|
$
|
0.06
|
|
|
$
|
0.22
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
3,741,817
|
|
|
|
3,762,584
|
|
|
|
3,737,914
|
|
|
|
3,796,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
3,779,676
|
|
|
|
3,881,893
|
|
|
|
3,777,794
|
|
|
|
3,885,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
6
OBA Financial Services, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
(In thousands)
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Net income
|
|
$
|
207
|
|
|
$
|
237
|
|
|
$
|
832
|
|
|
$
|
894
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on available for sale securities, net of tax expense (benefit) of $102, ($77), $12 and ($80),
respectively
|
|
|
159
|
|
|
|
(122
|
)
|
|
|
19
|
|
|
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
159
|
|
|
|
(122
|
)
|
|
|
19
|
|
|
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
366
|
|
|
$
|
115
|
|
|
$
|
851
|
|
|
$
|
768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
7
OBA Financial Services, Inc. and Subsidiary
Consolidated Statements of Stockholders Equity (Unaudited)
Nine Months Ended March 31, 2014 and 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Unearned
ESOP
Shares
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Total
|
|
Balances at July 1, 2013
|
|
$
|
40
|
|
|
$
|
33,726
|
|
|
$
|
(3,055
|
)
|
|
$
|
40,531
|
|
|
$
|
62
|
|
|
$
|
71,304
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
832
|
|
|
|
|
|
|
|
832
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
19
|
|
Purchase and retirement of 1,000 shares of Company stock
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
Retirement of 9,430 shares for tax payments
|
|
|
|
|
|
|
(173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(173
|
)
|
Share-based compensation expense
|
|
|
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
712
|
|
Tax benefit of 49,985 restricted shares vesting
|
|
|
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
|
|
ESOP shares committed to be released (13,886 shares)
|
|
|
|
|
|
|
118
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2014
|
|
$
|
40
|
|
|
|
34,435
|
|
|
$
|
(2,916
|
)
|
|
$
|
41,363
|
|
|
$
|
81
|
|
|
$
|
73,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at July 1, 2012
|
|
$
|
43
|
|
|
$
|
38,695
|
|
|
$
|
(3,240
|
)
|
|
$
|
39,409
|
|
|
$
|
808
|
|
|
$
|
75,715
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
894
|
|
|
|
|
|
|
|
894
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(126
|
)
|
|
|
(126
|
)
|
Purchase and retirement of 135,255 shares of Company stock
|
|
|
|
|
|
|
(2,244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,244
|
)
|
Share-based compensation expense
|
|
|
|
|
|
|
699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
699
|
|
Tax benefit of 49,485 restricted shares vesting
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
ESOP shares committed to be released (13,886 shares)
|
|
|
|
|
|
|
94
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2013
|
|
$
|
43
|
|
|
$
|
37,265
|
|
|
$
|
(3,101
|
)
|
|
$
|
40,303
|
|
|
$
|
682
|
|
|
$
|
75,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
8
OBA Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
March 31,
|
|
(in thousands)
|
|
2014
|
|
|
2013
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
832
|
|
|
$
|
894
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
24
|
|
|
|
324
|
|
Depreciation and amortization of premises and equipment
|
|
|
451
|
|
|
|
493
|
|
Net amortization of securities premiums and discounts
|
|
|
177
|
|
|
|
295
|
|
Proceeds from sales of loans held for sale
|
|
|
1,825
|
|
|
|
2,489
|
|
Originated loans held for sale
|
|
|
(1,374
|
)
|
|
|
(3,003
|
)
|
Net gains on sales of loans
|
|
|
(37
|
)
|
|
|
(43
|
)
|
Amortization of net deferred loan fees
|
|
|
(188
|
)
|
|
|
(40
|
)
|
Loss on other real estate owned
|
|
|
|
|
|
|
8
|
|
Bank owned life insurance income
|
|
|
(199
|
)
|
|
|
(213
|
)
|
ESOP expense
|
|
|
257
|
|
|
|
233
|
|
Share-based compensation expense
|
|
|
712
|
|
|
|
699
|
|
Amortization of mortgage servicing rights
|
|
|
3
|
|
|
|
8
|
|
Amortization of brokered deposit premiums
|
|
|
23
|
|
|
|
|
|
Tax benefit from vesting of restricted shares
|
|
|
(70
|
)
|
|
|
(21
|
)
|
Changes in other assets and liabilities, net
|
|
|
71
|
|
|
|
162
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
1,675
|
|
|
|
1,391
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
2,507
|
|
|
|
2,285
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
Principal collections and maturities of securities available for sale
|
|
|
5,885
|
|
|
|
10,807
|
|
Principal collections and maturities of securities held to maturity
|
|
|
298
|
|
|
|
755
|
|
Purchases of securities available for sale
|
|
|
(10,963
|
)
|
|
|
(17,979
|
)
|
Redemption of Federal Home Loan Bank stock, net
|
|
|
110
|
|
|
|
748
|
|
Decrease in interest bearing deposits with other banks, net
|
|
|
3,080
|
|
|
|
1,056
|
|
Loan originations less principal collections, net
|
|
|
(2,811
|
)
|
|
|
(4,725
|
)
|
Purchases of premises and equipment
|
|
|
(62
|
)
|
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(4,463
|
)
|
|
|
(9,425
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
Increase (decrease) in deposits
|
|
|
20,223
|
|
|
|
(588
|
)
|
Decrease in securities sold under agreements to repurchase
|
|
|
(1,128
|
)
|
|
|
(9,377
|
)
|
Proceeds from FHLB advances
|
|
|
|
|
|
|
29,400
|
|
Repayment of FHLB advances
|
|
|
(95
|
)
|
|
|
(34,992
|
)
|
Net decrease in advance payments from borrowers for taxes and insurance
|
|
|
(473
|
)
|
|
|
(841
|
)
|
Tax benefit from vesting of restricted shares
|
|
|
70
|
|
|
|
21
|
|
Purchase and retirement of Company stock
|
|
|
(191
|
)
|
|
|
(2,244
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
18,406
|
|
|
|
(18,621
|
)
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
16,450
|
|
|
|
(25,761
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
16,173
|
|
|
|
31,525
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
32,623
|
|
|
$
|
5,764
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,396
|
|
|
$
|
1,807
|
|
Income taxes paid, net
|
|
|
720
|
|
|
|
494
|
|
See notes to consolidated financial statements.
9
OBA Financial Services, Inc. and Subsidiary
Notes to the Consolidated Financial Statements (Unaudited)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
OBA Bank (Bank) is a community-oriented banking institution providing a variety of financial services to individuals and small
businesses through its offices in Montgomery, Anne Arundel, and Howard Counties, Maryland. Its primary deposits are checking, money market, and time certificate accounts and its primary lending products are commercial mortgage, commercial business,
construction, and residential mortgage loans.
In December 2007, the Bank reorganized into a three-tier mutual holding company structure.
As part of the reorganization, the Bank converted from a mutual savings bank into a federally chartered stock savings bank and formed OBA Bancorp, Inc., a federally chartered mid-tier stock holding company, and OBA Bancorp, MHC, a federally
chartered mutual holding company. The Bank became a wholly-owned subsidiary of OBA Bancorp, Inc. and OBA Bancorp, Inc. became a wholly-owned subsidiary of OBA Bancorp, MHC.
On January 21, 2010, OBA Bancorp, MHC completed its plan of conversion and reorganization from a mutual holding company to a stock
holding company. In accordance with the plan, OBA Bancorp, MHC and OBA Bancorp, Inc. ceased to exist and a newly formed stock holding company, OBA Financial Services, Inc. (of which OBA Bank became a wholly owned subsidiary) sold shares of capital
stock to eligible depositors of OBA Bank. OBA Financial Services, Inc.s common stock is quoted on the NASDAQ Capital Market under the symbol OBAF.
In accordance with applicable regulations at the time of the conversion from a mutual holding company to a stock holding company, the Bank
substantially restricted retained earnings by establishing a liquidation account. The liquidation account is maintained for the benefit of eligible account holders who keep their accounts at the Bank after conversion. The liquidation account is
reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holders interest in the liquidation account. In the event of a complete liquidation
of the Bank, and only in such event, each account holder will be entitled to receive a distribution from the liquidation account in an amount proportionate to the adjusted qualifying account balances then held. The Bank may not pay dividends if
those dividends would reduce equity capital below the required liquidation account amount.
Basis of Presentation
The consolidated financial statements include the accounts of OBA Financial Services Inc. and OBA Bank. All significant intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with U.S. GAAP for interim financial information and are presented in accordance with instructions for Form 10-Q and Rule 10-01 of the SEC Regulation S-X. Accordingly, they do not include all of the information
and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation are of a normal and recurring nature and have been included.
Operating results for the three and nine months ended March 31, 2014 are not necessarily indicative of the results that may be expected
for the fiscal year ending June 30, 2014 or any other interim period. The consolidated financial statements presented in this report should be read in conjunction with the audited consolidated financial statements and the accompanying
notes filed on Form 10-K for the fiscal year ended June 30, 2013.
In preparing the accompanying consolidated financial
statements, the Company has evaluated subsequent events through the financial statement issue date. OBA Financial Services, Inc. announced the signing of a merger agreement between OBA Financial Services, Inc. and F.N.B. Corporation. For further
detail regarding the merger agreement, see Note 10 Subsequent Events in the accompanying financial statements.
Use of Estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the Consolidated Statement of Condition and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Material
estimates that are particularly sensitive to change in the near term relates to the determination of the allowance for loan losses, values related to the share-based incentive plans, and other than temporary impairment of investment securities.
10
Reclassifications
From time to time, certain amounts in the prior period consolidated financial statements are reclassified to conform with current period
presentation. Such reclassifications, if any, have no material impact on consolidated net income or total stockholders equity.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that have had or are expected to have a material impact to the Companys consolidated
financial statements that have not been previously disclosed.
NOTE 2 COMPREHENSIVE INCOME (LOSS)
U.S. GAAP requires that recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the stockholders equity section of the Consolidated Statement of Condition, such items, along with net income, are
components of comprehensive income and accumulated other comprehensive income. The components of accumulated other comprehensive income and related tax effects are as follows:
11
Accumulated other comprehensive income (loss) consists of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
2014
|
|
|
June 30,
2013
|
|
|
|
(In thousands)
|
|
Unrealized gains (losses) on available for sale securities
|
|
$
|
133
|
|
|
$
|
102
|
|
Tax effect
|
|
|
52
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
81
|
|
|
$
|
62
|
|
|
|
|
|
|
|
|
|
|
NOTE 3 SECURITIES
The amortized cost and fair value of securities with gross unrealized gains and losses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
(In thousands)
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
(1)
|
|
$
|
41,895
|
|
|
$
|
641
|
|
|
$
|
(508
|
)
|
|
$
|
42,028
|
|
Trust preferred security
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities available for sale
|
|
|
41,924
|
|
|
|
641
|
|
|
|
(508
|
)
|
|
|
42,057
|
|
Equity securities
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
|
41,974
|
|
|
|
641
|
|
|
|
(508
|
)
|
|
|
42,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
(1)
|
|
|
1,146
|
|
|
|
78
|
|
|
|
|
|
|
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities held to maturity
|
|
|
1,146
|
|
|
|
78
|
|
|
|
|
|
|
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
$
|
43,120
|
|
|
$
|
719
|
|
|
$
|
(508
|
)
|
|
$
|
43,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
(1)
|
|
$
|
36,981
|
|
|
$
|
616
|
|
|
$
|
(513
|
)
|
|
$
|
37,084
|
|
Trust preferred security
|
|
|
41
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities available for sale
|
|
|
37,022
|
|
|
|
616
|
|
|
|
(514
|
)
|
|
|
37,124
|
|
Equity securities
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
|
37,072
|
|
|
|
616
|
|
|
|
(514
|
)
|
|
|
37,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
(1)
|
|
|
1,445
|
|
|
|
75
|
|
|
|
|
|
|
|
1,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities held to maturity
|
|
|
1,445
|
|
|
|
75
|
|
|
|
|
|
|
|
1,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
$
|
38,517
|
|
|
$
|
691
|
|
|
$
|
(514
|
)
|
|
$
|
38,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All residential mortgage-backed securities were issued by FNMA, FHLMC, or GNMA.
|
12
The amortized cost and fair value of debt securities by contractual maturity at March 31, 2014 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
|
|
|
Held to Maturity
|
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
|
(In thousands)
|
|
Due after ten years
|
|
$
|
29
|
|
|
$
|
29
|
|
|
$
|
|
|
|
$
|
|
|
Residential mortgage-backed securities
|
|
|
41,895
|
|
|
|
42,028
|
|
|
|
1,146
|
|
|
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
41,924
|
|
|
$
|
42,057
|
|
|
$
|
1,146
|
|
|
$
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2014 the market value of securities securing customer repurchase agreements was $15.3 million. There were no
dealer repurchase agreements. At June 30, 2013, the market value of securities securing customer repurchase agreements was $12.5 million.
Information pertaining to securities with gross unrealized losses at the dates listed aggregated by investment category and length of time
that individual securities have been in a continuous loss position, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Number
|
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
of
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Securities
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
418
|
|
|
$
|
14,849
|
|
|
$
|
90
|
|
|
$
|
2,135
|
|
|
|
6
|
|
|
$
|
508
|
|
|
$
|
16,984
|
|
Trust preferred security
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
418
|
|
|
$
|
14,878
|
|
|
$
|
90
|
|
|
$
|
2,135
|
|
|
|
7
|
|
|
$
|
508
|
|
|
$
|
17,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
513
|
|
|
$
|
18,870
|
|
|
$
|
|
|
|
$
|
|
|
|
|
6
|
|
|
$
|
513
|
|
|
$
|
18,870
|
|
Trust preferred security
|
|
|
1
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
514
|
|
|
$
|
18,910
|
|
|
$
|
|
|
|
$
|
|
|
|
|
7
|
|
|
$
|
514
|
|
|
$
|
18,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2014 and at June 30, 2013, all residential mortgage backed securities and their contractual cash flows
were guaranteed by FNMA, FHLMC, or GNMA. The Companys sole trust preferred security is a variable rate pool of trust preferred securities issued by insurance companies or their holding companies. These positions and the related unrealized
losses are not material to the Companys consolidated financial position or results of operations. The decline in the residential mortgage backed securities has been primarily caused by the movement in market interest rates. The Company has no
intent or requirement to sell these securities.
NOTE 4 CREDIT QUALITY OF LOANS AND ALLOWANCE FOR LOAN LOSSES
Various Bank policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that
are considered to be of lesser quality as substandard, doubtful, or loss assets. A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.
Substandard loans include those loans characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans classified as doubtful have all of the weaknesses inherent in those classified as
substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans, or portions of loans,
classified as loss are those considered uncollectible and of such little value that their continuance as a loan is not warranted. Since such loans are written off in full, the Bank will not have any such loans classified as loss at the end of a
reporting period. Loans that do not expose the Bank to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve close attention, are required to be designated as Special
Mention.
The Bank maintains an allowance for loan losses at an amount estimated to equal all credit losses in the loan portfolio that are
both probable and reasonably estimable at the consolidated statement of condition date. The Banks determination as to the classification of loans is subject to review by the Banks primary federal regulator, the Office of the Comptroller
of the Currency (OCC). The Bank regularly reviews the loan portfolio to determine whether any loans require classification in accordance with applicable regulations.
13
Management evaluates the allowance for loan losses based upon the combined total of the specific,
general, and unallocated components as discussed below. Generally, when the loan portfolio increases, absent other factors, the allowance for loan loss methodology results in a higher dollar amount of estimated probable losses than would be the case
without the increase. Generally, when the loan portfolio decreases, absent other factors, the allowance for loan loss methodology results in a lower dollar amount of estimated probable losses than would be the case without the decrease.
Commercial real estate loans generally have greater credit risk compared to residential mortgage loans, as they typically involve larger loan
balances concentrated with single borrowers or groups of related borrowers. In addition, the payment expectations on loans secured by income-producing properties typically depend on the successful operation of the related business and thus may be
subject to a greater extent to adverse conditions in the real estate market and in the general economy.
Commercial business loans
generally have greater credit risk compared to residential mortgage loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment expectations on commercial business
loans typically depend on the successful operation of the related business and thus may be subject to a greater extent to adverse conditions in the real estate market and in the general economy.
Construction loans generally have greater credit risk compared to residential mortgage loans, as they typically involve larger loan balances
concentrated with single borrowers or groups of related borrowers. In addition, the payment expectations on construction loans typically depend on the successful completion of the project and the operation of the related business and thus may be
subject to a greater extent to adverse conditions in the real estate market and in the general economy.
Generally, the Bank underwrites
commercial real estate loans at a loan-to-value ratio of 75% or less and residential mortgage loans at a loan-to-value ratio not exceeding 80%. In the event that a loan becomes past due, management will conduct visual inspections of collateral
properties and/or review publicly available information, such as online databases, to estimate property values. The Bank may request a formal third party appraisal for various reasons including, but not limited to, age of previous appraisal, changes
in market condition, and changes in borrowers condition. In addition, changes in the appraised value of properties securing loans can result in an increase or decrease in the general allowance for loan losses as an adjustment to the historical
loss experience due to qualitative and environmental factors.
The loan portfolio is evaluated on a quarterly basis and the allowance is
adjusted accordingly. While the best information available is used to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an
integral part of their examination process, the OCC will periodically review the allowance for loan losses. The OCC may require the Bank to recognize additions to the allowance based on its analysis of information available at the time of the
examination.
The classes of loans are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
2014
|
|
|
June 30,
2013
|
|
|
|
(In thousands)
|
|
Commercial business
|
|
$
|
39,375
|
|
|
$
|
42,321
|
|
Commercial real estate
|
|
|
153,909
|
|
|
|
140,104
|
|
Construction
|
|
|
14,402
|
|
|
|
13,044
|
|
Residential mortgage
|
|
|
73,772
|
|
|
|
80,529
|
|
Home equity loans and lines of credit
|
|
|
24,857
|
|
|
|
27,336
|
|
|
|
|
|
|
|
|
|
|
Total loans, gross
|
|
|
306,315
|
|
|
|
303,334
|
|
Net deferred commercial loan fees
|
|
|
(239
|
)
|
|
|
(320
|
)
|
Net deferred home equity costs
|
|
|
223
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
Loans net of deferred (fees) costs
|
|
|
306,299
|
|
|
|
303,276
|
|
Allowance for loan losses
|
|
|
(3,521
|
)
|
|
|
(3,473
|
)
|
|
|
|
|
|
|
|
|
|
Total loans, net
|
|
$
|
302,778
|
|
|
$
|
299,803
|
|
|
|
|
|
|
|
|
|
|
14
The following tables present the classes of the loan portfolio summarized by loan rating within the Banks
internal risk rating system:
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
34,950
|
|
|
$
|
2,148
|
|
|
$
|
2,277
|
|
|
$
|
|
|
|
$
|
39,375
|
|
Commercial real estate
|
|
|
135,373
|
|
|
|
4,191
|
|
|
|
14,345
|
|
|
|
|
|
|
|
153,909
|
|
Construction
|
|
|
14,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,402
|
|
Residential mortgage
|
|
|
71,761
|
|
|
|
|
|
|
|
2,011
|
|
|
|
|
|
|
|
73,772
|
|
Home equity loans and lines of credit
|
|
|
24,752
|
|
|
|
74
|
|
|
|
31
|
|
|
|
|
|
|
|
24,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
281,238
|
|
|
$
|
6,413
|
|
|
$
|
18,664
|
|
|
$
|
|
|
|
$
|
306,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
38,149
|
|
|
$
|
3,302
|
|
|
$
|
870
|
|
|
$
|
|
|
|
$
|
42,321
|
|
Commercial real estate
|
|
|
133,711
|
|
|
|
1,578
|
|
|
|
4,815
|
|
|
|
|
|
|
|
140,104
|
|
Construction
|
|
|
13,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,044
|
|
Residential mortgage
|
|
|
78,393
|
|
|
|
|
|
|
|
2,136
|
|
|
|
|
|
|
|
80,529
|
|
Home equity loans and lines of credit
|
|
|
26,833
|
|
|
|
75
|
|
|
|
428
|
|
|
|
|
|
|
|
27,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
290,130
|
|
|
$
|
4,955
|
|
|
$
|
8,249
|
|
|
$
|
|
|
|
$
|
303,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans are generally placed on non-accrual status when payment of principal or interest is over 90 days
delinquent or if collection of principal or interest, in full, is in doubt. When loans are placed on a non-accrual status, unpaid accrued interest is fully reversed and further income is recognized only when full repayment of the loan is complete,
at which point income is recognized to the extent received, or the loan returns to accrual status. The loan may be returned to accrual status if both principal and interest payments are brought current, there has been a period of sustained
performance (generally, six months), and full payment of principal and interest is expected.
The performance and credit quality of the
loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due and
non-accrual status:
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31-60 Days
Past Due
|
|
|
61-90 Days
Past Due
|
|
|
Over
90 Days
Past Due
|
|
|
Total
Past Due
|
|
|
Current
|
|
|
Total
Loans
Receivable
|
|
|
Total
Non-Accrual
Loans
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
39,375
|
|
|
$
|
39,375
|
|
|
$
|
748
|
|
Commercial real estate
|
|
|
287
|
|
|
|
|
|
|
|
|
|
|
|
287
|
|
|
|
153,622
|
|
|
|
153,909
|
|
|
|
2,840
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,402
|
|
|
|
14,402
|
|
|
|
|
|
Residential mortgage
|
|
|
152
|
|
|
|
|
|
|
|
513
|
|
|
|
665
|
|
|
|
73,107
|
|
|
|
73,772
|
|
|
|
513
|
|
Home equity loans and lines of credit
|
|
|
60
|
|
|
|
167
|
|
|
|
|
|
|
|
227
|
|
|
|
24,630
|
|
|
|
24,857
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
499
|
|
|
$
|
167
|
|
|
$
|
513
|
|
|
$
|
1,179
|
|
|
$
|
305,136
|
|
|
$
|
306,315
|
|
|
$
|
4,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31-60 Days
Past Due
|
|
|
61-90 Days
Past Due
|
|
|
Over
90 Days
Past Due
|
|
|
Total
Past Due
|
|
|
Current
|
|
|
Total Loans
Receivable
|
|
|
Total
Non-Accrual
Loans
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
42,321
|
|
|
$
|
42,321
|
|
|
$
|
|
|
Commercial real estate
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
140,022
|
|
|
|
140,104
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,044
|
|
|
|
13,044
|
|
|
|
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
622
|
|
|
|
622
|
|
|
|
79,907
|
|
|
|
80,529
|
|
|
|
622
|
|
Home equity loans and lines of credit
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
27,261
|
|
|
|
27,336
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
157
|
|
|
$
|
|
|
|
$
|
622
|
|
|
$
|
779
|
|
|
$
|
302,555
|
|
|
$
|
303,334
|
|
|
$
|
697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
There are no loans over 90 days past due that are still accruing at the dates indicated.
The Bank provides for loan losses based upon the consistent application of the documented allowance for loan loss methodology. All loan losses
are charged to the allowance for loan losses and all recoveries are credited to the same. Additions to the allowance for loan losses are provided by charges to income based on various factors which, in Managements judgment, deserve current
recognition in estimating probable losses. Management regularly reviews the loan portfolio and makes provisions for loan losses in order to maintain the allowance for loan losses in accordance with U.S. GAAP. The Bank considers residential mortgage
loans and home equity loans and lines of credit as small, homogeneous loans, which are evaluated for impairment collectively based on historical loss experience. Commercial real estate and commercial business loans are reviewed individually.
Loans are considered impaired if the probability exists that the Bank will be unable to collect contractually obligated principal and interest cash flows. The allowance for loan losses consists primarily of three components:
|
(1)
|
specific allowances established for impaired loans (as defined by U.S. GAAP). For a non-collateral dependent loan, the amount of impairment, if any, is estimated as the difference between the estimated present value
based on Managements assumptions regarding future cash flows and discounted at the loans original yield and the carrying value of the loan. Impaired loans for which the estimated present value of the loan exceeds the carrying value of
the loan do not reduce specific allowances;
|
|
(2)
|
general allowances established for loan losses on a portfolio basis for loans that do not meet the definition of impaired loans. The portfolio is grouped into similar risk characteristics, primarily loan type. The Bank
applies an estimated loss rate to each loan group. The loss rates applied are based upon loss experience adjusted, as appropriate, for the environmental factors discussed below. This evaluation is inherently subjective, as it requires material
estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions; and
|
|
(3)
|
unallocated allowances established to provide for probable losses that have been incurred as of the reporting date but are not reflected in the allocated allowance.
|
Actual loan losses may be significantly more than the allowance for loan losses established, which could have a material negative effect on
financial results.
The adjustments to historical loss experience are based on Managements evaluation of several qualitative and
environmental factors, including, but not limited to:
|
|
|
changes in any concentration of credit (including, but not limited to, concentrations by geography, industry, or collateral type);
|
|
|
|
changes in the number and amount of non-accrual loans, watch list loans, and past due loans;
|
|
|
|
changes in national, state, and local economic trends;
|
|
|
|
changes to other external influences including, but not limited to, legal, accounting, peer, and regulatory changes;
|
|
|
|
changes in the types of loans in the loan portfolio;
|
|
|
|
changes in the experience and ability of personnel and management in the loan origination and loan servicing departments;
|
|
|
|
changes in the value of underlying collateral for collateral dependent loans;
|
|
|
|
changes in lending strategies; and
|
|
|
|
changes in lending policies and procedures.
|
The following table summarizes activity in the
allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
(In thousands)
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Balance at beginning of period
|
|
$
|
3,494
|
|
|
$
|
3,125
|
|
|
$
|
3,473
|
|
|
$
|
3,035
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Recoveries
|
|
|
23
|
|
|
|
1
|
|
|
|
24
|
|
|
|
4
|
|
Provision for loan losses
|
|
|
4
|
|
|
|
229
|
|
|
|
24
|
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
3,521
|
|
|
$
|
3,355
|
|
|
$
|
3,521
|
|
|
$
|
3,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
The following tables set forth the activity in and allocation of the allowance for loan losses by
loan portfolio class for the periods as listed:
Three Months Ended March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
business
|
|
|
Commercial
real estate
|
|
|
Construction
|
|
|
Residential
mortgage
|
|
|
Home equity
loans and
lines of credit
|
|
|
Unallocated
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
420
|
|
|
$
|
1,710
|
|
|
$
|
117
|
|
|
$
|
801
|
|
|
$
|
274
|
|
|
$
|
172
|
|
|
$
|
3,494
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Provisions
|
|
|
(1
|
)
|
|
|
(89
|
)
|
|
|
30
|
|
|
|
(12
|
)
|
|
|
(35
|
)
|
|
|
111
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
419
|
|
|
$
|
1,644
|
|
|
$
|
147
|
|
|
$
|
789
|
|
|
$
|
239
|
|
|
$
|
283
|
|
|
$
|
3,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
business
|
|
|
Commercial
real estate
|
|
|
Construction
|
|
|
Residential
mortgage
|
|
|
Home equity
loans and
lines of credit
|
|
|
Unallocated
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
429
|
|
|
$
|
1,573
|
|
|
$
|
122
|
|
|
$
|
847
|
|
|
$
|
270
|
|
|
$
|
232
|
|
|
$
|
3,473
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Provisions
|
|
|
(10
|
)
|
|
|
47
|
|
|
|
25
|
|
|
|
(58
|
)
|
|
|
(31
|
)
|
|
|
51
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
419
|
|
|
$
|
1,644
|
|
|
$
|
147
|
|
|
$
|
789
|
|
|
$
|
239
|
|
|
$
|
283
|
|
|
$
|
3,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2013
|
|
|
|
Commercial
business
|
|
|
Commercial
real estate
|
|
|
Construction
|
|
|
Residential
mortgage
|
|
|
Home equity
loans and
lines of credit
|
|
|
Unallocated
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
782
|
|
|
$
|
1,077
|
|
|
$
|
13
|
|
|
$
|
718
|
|
|
$
|
375
|
|
|
$
|
160
|
|
|
$
|
3,125
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Provisions
|
|
|
(363
|
)
|
|
|
419
|
|
|
|
59
|
|
|
|
139
|
|
|
|
(72
|
)
|
|
|
47
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
419
|
|
|
$
|
1,497
|
|
|
$
|
72
|
|
|
$
|
857
|
|
|
$
|
303
|
|
|
$
|
207
|
|
|
$
|
3,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended March 31, 2013
|
|
|
|
Commercial
business
|
|
|
Commercial
real estate
|
|
|
Construction
|
|
|
Residential
mortgage
|
|
|
Home equity
loans and
lines of credit
|
|
|
Unallocated
|
|
|
Total
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
670
|
|
|
$
|
955
|
|
|
$
|
7
|
|
|
$
|
772
|
|
|
$
|
390
|
|
|
$
|
241
|
|
|
$
|
3,035
|
|
Charge-offs
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Recoveries
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Provisions
|
|
|
(251
|
)
|
|
|
546
|
|
|
|
65
|
|
|
|
85
|
|
|
|
(87
|
)
|
|
|
(34
|
)
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
419
|
|
|
$
|
1,497
|
|
|
$
|
72
|
|
|
$
|
857
|
|
|
$
|
303
|
|
|
$
|
207
|
|
|
$
|
3,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
The following tables present the balance in the allowance for loan losses and the recorded in
investment in loans by portfolio class and based on impairment method:
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
business
|
|
|
Commercial
real estate
|
|
|
Construction
|
|
|
Residential
mortgage
|
|
|
Home equity
loans and
lines of credit
|
|
|
Unallocated
|
|
|
Total loans
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance related to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
147
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
147
|
|
Collectively evaluated for impairment
|
|
|
419
|
|
|
|
1,644
|
|
|
|
147
|
|
|
|
642
|
|
|
|
239
|
|
|
|
283
|
|
|
|
3,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
419
|
|
|
$
|
1,644
|
|
|
$
|
147
|
|
|
$
|
789
|
|
|
$
|
239
|
|
|
$
|
283
|
|
|
$
|
3,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending loan balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
751
|
|
|
$
|
4,162
|
|
|
$
|
|
|
|
$
|
1,498
|
|
|
$
|
31
|
|
|
|
|
|
|
$
|
6,442
|
|
Collectively evaluated for impairment
|
|
|
38,624
|
|
|
|
149,747
|
|
|
|
14,402
|
|
|
|
72,274
|
|
|
|
24,826
|
|
|
|
|
|
|
|
299,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loan balance
|
|
$
|
39,375
|
|
|
$
|
153,909
|
|
|
$
|
14,402
|
|
|
$
|
73,772
|
|
|
$
|
24,857
|
|
|
|
|
|
|
$
|
306,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
business
|
|
|
Commercial
real estate
|
|
|
Construction
|
|
|
Residential
mortgage
|
|
|
Home equity
loans and
lines of credit
|
|
|
Unallocated
|
|
|
Total loans
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance related to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
148
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
148
|
|
Collectively evaluated for impairment
|
|
|
429
|
|
|
|
1,573
|
|
|
|
122
|
|
|
|
699
|
|
|
|
270
|
|
|
|
232
|
|
|
|
3,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
429
|
|
|
$
|
1,573
|
|
|
$
|
122
|
|
|
$
|
847
|
|
|
$
|
270
|
|
|
$
|
232
|
|
|
$
|
3,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending loan balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
121
|
|
|
$
|
1,329
|
|
|
$
|
|
|
|
$
|
1,515
|
|
|
$
|
428
|
|
|
|
|
|
|
$
|
3,393
|
|
Collectively evaluated for impairment
|
|
|
42,200
|
|
|
|
138,775
|
|
|
|
13,044
|
|
|
|
79,014
|
|
|
|
26,908
|
|
|
|
|
|
|
|
299,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loan balance
|
|
$
|
42,321
|
|
|
$
|
140,104
|
|
|
$
|
13,044
|
|
|
$
|
80,529
|
|
|
$
|
27,336
|
|
|
|
|
|
|
$
|
303,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
The following tables summarize information in regards to impaired loans by portfolio class as of and for the
periods ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
|
At March 31, 2014
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
|
Investment
|
|
|
Recognized
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With No Related Allowance Recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
751
|
|
|
$
|
751
|
|
|
$
|
|
|
|
$
|
434
|
|
|
$
|
|
|
|
$
|
436
|
|
|
$
|
|
|
Commercial real estate
|
|
|
4,162
|
|
|
|
4,251
|
|
|
|
|
|
|
|
3,349
|
|
|
|
18
|
|
|
|
2,745
|
|
|
|
56
|
|
Commercial construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
543
|
|
|
|
543
|
|
|
|
|
|
|
|
544
|
|
|
|
6
|
|
|
|
547
|
|
|
|
28
|
|
Home equity loans and lines of credit
|
|
|
31
|
|
|
|
31
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
230
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with no allowance recorded
|
|
$
|
5,487
|
|
|
$
|
5,576
|
|
|
$
|
|
|
|
$
|
4,358
|
|
|
$
|
24
|
|
|
$
|
3,958
|
|
|
$
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an Allowance Recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
955
|
|
|
|
955
|
|
|
|
147
|
|
|
|
957
|
|
|
|
13
|
|
|
|
886
|
|
|
|
30
|
|
Home equity loans and lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with allowance recorded
|
|
$
|
955
|
|
|
$
|
955
|
|
|
$
|
147
|
|
|
$
|
957
|
|
|
$
|
13
|
|
|
$
|
886
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
751
|
|
|
$
|
751
|
|
|
$
|
|
|
|
$
|
434
|
|
|
$
|
|
|
|
$
|
436
|
|
|
$
|
|
|
Commercial real estate
|
|
|
4,162
|
|
|
|
4,251
|
|
|
|
|
|
|
|
3,349
|
|
|
|
18
|
|
|
|
2,745
|
|
|
|
56
|
|
Commercial construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
1,498
|
|
|
|
1,498
|
|
|
|
147
|
|
|
|
1,501
|
|
|
|
19
|
|
|
|
1,433
|
|
|
|
58
|
|
Home equity loans and lines of credit
|
|
|
31
|
|
|
|
31
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
230
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,442
|
|
|
$
|
6,531
|
|
|
$
|
147
|
|
|
$
|
5,315
|
|
|
$
|
37
|
|
|
$
|
4,844
|
|
|
$
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
|
At March 31, 2013
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
|
Investment
|
|
|
Recognized
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With No Related Allowance Recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
123
|
|
|
$
|
123
|
|
|
$
|
|
|
|
$
|
65
|
|
|
$
|
|
|
|
$
|
8
|
|
|
$
|
|
|
Commercial real estate
|
|
|
5,067
|
|
|
|
5,156
|
|
|
|
|
|
|
|
5,749
|
|
|
|
18
|
|
|
|
5,521
|
|
|
|
56
|
|
Commercial construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
75
|
|
|
|
75
|
|
|
|
|
|
|
|
75
|
|
|
|
2
|
|
|
|
266
|
|
|
|
13
|
|
Home equity loans and lines of credit
|
|
|
32
|
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
33
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with no allowance recorded
|
|
$
|
5,297
|
|
|
$
|
5,386
|
|
|
$
|
|
|
|
$
|
5,921
|
|
|
$
|
20
|
|
|
$
|
5,828
|
|
|
$
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an Allowance Recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
967
|
|
|
|
967
|
|
|
|
149
|
|
|
|
968
|
|
|
|
14
|
|
|
|
896
|
|
|
|
33
|
|
Home equity loans and lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with allowance recorded
|
|
$
|
967
|
|
|
$
|
967
|
|
|
$
|
149
|
|
|
$
|
968
|
|
|
$
|
14
|
|
|
$
|
896
|
|
|
$
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
123
|
|
|
$
|
123
|
|
|
$
|
|
|
|
$
|
65
|
|
|
$
|
|
|
|
$
|
8
|
|
|
$
|
|
|
Commercial real estate
|
|
|
5,067
|
|
|
|
5,156
|
|
|
|
|
|
|
|
5,749
|
|
|
|
18
|
|
|
|
5,521
|
|
|
|
56
|
|
Commercial construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
1,042
|
|
|
|
1,042
|
|
|
|
149
|
|
|
|
1,043
|
|
|
|
16
|
|
|
|
1,162
|
|
|
|
46
|
|
Home equity loans and lines of credit
|
|
|
32
|
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
33
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,264
|
|
|
$
|
6,353
|
|
|
$
|
149
|
|
|
$
|
6,889
|
|
|
$
|
34
|
|
|
$
|
6,724
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
|
|
At June 30, 2013
|
|
|
For the year ended
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With No Related Allowance Recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business loans
|
|
$
|
121
|
|
|
$
|
121
|
|
|
$
|
|
|
|
$
|
65
|
|
|
$
|
|
|
Commercial real estate
|
|
|
1,329
|
|
|
|
1,418
|
|
|
|
|
|
|
|
3,886
|
|
|
|
|
|
Commercial construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
551
|
|
|
|
551
|
|
|
|
|
|
|
|
542
|
|
|
|
33
|
|
Home equity loans and lines of credit
|
|
|
428
|
|
|
|
428
|
|
|
|
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with no allowance recorded
|
|
$
|
2,429
|
|
|
$
|
2,518
|
|
|
$
|
|
|
|
$
|
4,723
|
|
|
$
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an Allowance Recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business loans
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
Commercial construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
964
|
|
|
|
964
|
|
|
|
148
|
|
|
|
895
|
|
|
|
13
|
|
Home equity loans and lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with allowance recorded
|
|
$
|
964
|
|
|
$
|
964
|
|
|
$
|
148
|
|
|
$
|
895
|
|
|
$
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business loans
|
|
$
|
121
|
|
|
$
|
121
|
|
|
$
|
|
|
|
$
|
65
|
|
|
$
|
|
|
Commercial real estate
|
|
|
1,329
|
|
|
|
1,418
|
|
|
|
|
|
|
|
3,886
|
|
|
|
72
|
|
Commercial construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
1,515
|
|
|
|
1,515
|
|
|
|
148
|
|
|
|
1,437
|
|
|
|
46
|
|
Home equity loans and lines of credit
|
|
|
428
|
|
|
|
428
|
|
|
|
|
|
|
|
230
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,393
|
|
|
$
|
3,482
|
|
|
$
|
148
|
|
|
$
|
5,618
|
|
|
$
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents troubled debt restructurings occurring during the three and nine month periods listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
|
Number of
Contracts
|
|
|
Pre-Modification
Outstanding
Recorded
Investments
|
|
|
Post-Modification
Outstanding
Recorded
Investments
|
|
|
Number of
Contracts
|
|
|
Pre-Modification
Outstanding
Recorded
Investments
|
|
|
Post-Modification
Outstanding
Recorded
Investments
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
468
|
|
|
|
467
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Troubled Debt Restructurings
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
1
|
|
|
$
|
468
|
|
|
$
|
467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Commercial real estate
|
|
|
1
|
|
|
|
1,188
|
|
|
|
1,202
|
|
|
|
1
|
|
|
|
468
|
|
|
|
467
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Troubled Debt Restructurings
|
|
|
1
|
|
|
$
|
1,188
|
|
|
$
|
1,202
|
|
|
|
1
|
|
|
$
|
468
|
|
|
$
|
467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generally, the Bank does not forgive principal or interest on loans or modify the interest rate on loans to rates that are
below market rates based on the risks associated with the modified loans. Although, loans can be modified to make concessions to help a borrower remain current on the loan and to avoid foreclosure. These troubled debt restructurings include
deferrals of interest and/or principal payments and temporary or permanent reductions in interest rates due to financial difficulties of the borrower. During the three and nine months ended March 31, 2014 and 2013, no loans previously
classified as troubled debt restructurings subsequently defaulted.
20
NOTE 5 FAIR VALUE MEASUREMENTS AND DISCLOSURES
Management uses its best judgment in estimating the fair value of the Companys assets and liabilities; however, there are inherent
weaknesses in any estimation technique. Therefore, for substantially all assets and liabilities, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates
indicated. The estimated fair value amounts have been measured as of their respective reporting dates and have not been re-evaluated or updated subsequent to those respective dates. As such, the estimated fair values of these assets and liabilities
subsequent to the respective reporting dates may be different than the amounts reported at each reporting date. Accounting guidance related to fair value measurements and disclosures establishes 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) and the lowest priority to unobservable inputs (Level 3). The three
levels of the fair value hierarchy are as follows:
|
|
|
Level 1:
|
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
|
|
|
Level 2:
|
|
Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
|
|
|
Level 3:
|
|
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).
|
An asset or liabilitys level within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement. Transfers between fair value hierarchy levels are recognized as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers between fair value
hierarchy levels for the three and nine months ended March 31, 2014 or 2013.
For assets measured at fair value on a recurring basis, the fair value
measurements by level within the fair value hierarchy used at the dates listed are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
(Level 1)
|
|
|
|
|
|
|
|
Description
|
|
March 31,
2014
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
(Level 2)
Significant
Other
Observable
Inputs
|
|
|
(Level 3)
Significant
Unobservable
Inputs
|
|
Residential mortgage-backed securities
(1)
|
|
$
|
42,028
|
|
|
$
|
|
|
|
$
|
42,028
|
|
|
$
|
|
|
Trust preferred security
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
Equity securities
|
|
|
50
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
42,107
|
|
|
$
|
|
|
|
$
|
42,078
|
|
|
$
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
June 30,
2013
|
|
|
(Level 1)
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
(Level 2)
Significant
Other
Observable
Inputs
|
|
|
(Level 3)
Significant
Unobservable
Inputs
|
|
Residential mortgage-backed securities
(1)
|
|
$
|
37,084
|
|
|
$
|
|
|
|
$
|
37,084
|
|
|
$
|
|
|
Trust preferred security
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
Equity securities
|
|
|
50
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
37,174
|
|
|
$
|
|
|
|
$
|
37,134
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
The following table presents a reconciliation of the securities available for sale measured at
fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended March 31, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
(In thousands)
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Beginning balance
|
|
$
|
32
|
|
|
$
|
48
|
|
|
$
|
40
|
|
|
$
|
54
|
|
Principal repayments
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(11
|
)
|
|
|
(25
|
)
|
Unrealized gains included in other comprehensive income
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
29
|
|
|
$
|
46
|
|
|
$
|
29
|
|
|
$
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 securities consist of one trust preferred security at March 31, 2014 and 2013 and June 30,
2013.
For assets measured at fair value on a nonrecurring basis at the dates listed, the fair value measurements by level within the fair
value hierarchy are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
(Level 1)
|
|
|
|
|
|
|
|
Description
|
|
March 31,
2014
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
(Level 2)
Significant
Other
Observable
Inputs
|
|
|
(Level 3)
Significant
Unobservable
Inputs
|
|
Impaired loans
|
|
$
|
808
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
|
|
|
|
|
Description
|
|
June 30,
2013
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
(Level 2)
Significant
Other
Observable
Inputs
|
|
|
(Level 3)
Significant
Unobservable
Inputs
|
|
Impaired loans
|
|
$
|
816
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The methods and assumptions used to estimate the fair values included in the above tables are included in the disclosures and
tables that follow.
The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value
calculation is only provided for a limited portion of the Companys assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Companys
disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate fair values at March 31, 2014 and June 30, 2013:
Cash and Cash Equivalents and Interest Bearing Deposits with Other Banks (Carried at Cost)
The carrying amounts of cash and short-term instruments approximate fair value and are classified within level 1 of the fair value hierarchy.
22
Securities Available for Sale (Carried at Fair Value)
The fair values of securities available for sale, excluding trust preferred securities, are determined by matrix pricing (Level 2), which is a
mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities relationship to other benchmark quoted prices.
Level 2 debt securities are valued by a third-party pricing service commonly used in the banking industry. Level 2 fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield
curve, live trading levels, trade execution date, market consensus prepayment speeds, credit information, and the securitys terms and conditions, among other pieces of information.
The market for pooled trust preferred securities is inactive. A significant widening of the bid/ask spreads in the markets in which these
securities trade was followed by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive and no new pooled trust preferred securities have been issued since 2007. Since there were limited
observable market-based Level 1 and Level 2 inputs for trust preferred securities, the fair value of these securities was estimated using primarily unobservable Level 3 inputs. Fair value estimates for trust preferred securities were based on
discounting expected cash flows using a risk-adjusted discount rate. The Company develops the risk-adjusted discount rate by considering the time value of money (risk-free rate) adjusted for an estimated risk premium for bearing the uncertainty in
future cash flows and, given current adverse market conditions, a liquidity adjustment based on an estimate of the premium that a market participant would require assuming an orderly transaction. Management determined that sensitivity to inputs is
not significant due to the immaterial nature of trust preferred securities as a level 3 asset.
Securities Held to Maturity (Carried
at Amortized Cost)
The fair values of securities held to maturity are determined by matrix pricing (Level 2), which is a
mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities relationship to other benchmark quoted prices.
Level 2 debt securities are valued by a third-party pricing service commonly used in the banking industry. Level 2 fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield
curve, live trading levels, trade execution date, market consensus prepayment speeds, credit information, and the securitys terms and conditions, among other pieces of information.
Federal Home Loan Bank Stock (Carried at Cost)
The carrying amount of Federal Home Loan Bank stock approximates fair value and considers the limited marketability of such securities.
Loans Receivable (Generally Carried at Cost)
The fair values of loans (except impaired loans) are estimated using discounted cash flow analyses which use market rates at the statement of
condition date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments, and prepayments of principal. Generally, for
variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. Loans are classified within Level 3 of the fair value hierarchy.
Loans Held for Sale (Carried at Cost)
The carrying amount of Loans Held for Sale approximates fair value and considers secondary market offerings for loans with similar
characteristics. Loans Held for Sale are classified within Level 3 of the fair value hierarchy.
Impaired Loans (Generally Carried
at Fair Value)
Generally, impaired loans are those which the Company has measured impairment based on the fair value of the
loans collateral. Fair value of real estate collateral is generally determined based upon independent third-party appraisals of the properties, which consider sales prices of similar properties in the proximate vicinity or by discounting
expected cash flows from the properties by an appropriate risk adjusted discount rate. Fair value of collateral other than real estate is based on an estimate of the liquidation proceeds. Impaired loans are included as Level 3 fair values, based
upon the lowest level of input that is significant to the fair value measurements. The fair value consists of loan balances net of valuation allowances and loan balances on impaired loans in which the loan has been charged-off to its fair value.
23
Mortgage Servicing Rights (Carried at Lower of Cost or Fair Value)
At origination, the Company estimates the fair value of mortgage servicing rights at 1% of the principal balances of loans sold. The Company
amortizes that amount over the estimated period of servicing revenues or charges the entire amount to income upon prepayment of the related loan. Due to the immaterial balance of mortgage servicing rights, the Company did not perform any further
analysis or estimate their fair values. Therefore, the Company has disclosed that the carrying amounts of mortgage servicing rights approximate fair value. Mortgage servicing rights are classified within Level 3 of the fair value hierarchy.
Management determined that sensitivity to inputs is not significant due to the immaterial nature of the mortgage servicing rights as a Level 3 asset.
Deposit Liabilities (Carried at Cost)
The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market
accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates
currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities. Demand deposits and certificates of deposit are classified within Level 2 of the fair value hierarchy.
Federal Home Loan Bank Advances (Carried at Cost)
Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar
credit risk characteristics, terms, and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. Federal Home Loan Bank
Advances are classified within Level 2 of the fair value hierarchy.
Securities Sold Under Agreement to Repurchase (Carried at Cost)
The carrying amounts of securities sold under agreements to repurchase approximate fair value for short-term obligations. The fair
values for longer term repurchase agreements are based on current market interest rates for similar transactions. Securities sold under agreement to repurchase are classified within Level 2 of the fair value hierarchy.
Accrued Interest Receivable and Payable (Carried at Cost)
The carrying amounts of accrued interest approximate fair value. Accrued Interest Receivable and Payable are classified within Level 2 of the
fair value hierarchy.
Off-Balance-Sheet Credit-Related Instruments (Disclosures at Cost)
Fair values for off-balance-sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the
market to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standing. The fair value of these instruments is not material.
Quantitative information about Level 3 Fair Value Measurement is included in the tables below:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Quantitative Information about Level 3 Fair Value Measurements
|
March 31, 2014
|
|
Fair Value
Estimate
|
|
|
Valuation
Techniques
|
|
Unobservable
Inputs
|
|
Estimated
Range
(weighted average)
|
Impaired loans
|
|
$
|
808
|
|
|
Appraisal of
|
|
Appraisal
|
|
0.0% to -25.0%
|
|
|
|
|
|
|
collateral
|
|
adjustments
|
|
(-6.5%)
|
|
|
|
|
|
|
|
|
Liquidation
|
|
-3.0% to -5.0%
|
|
|
|
|
|
|
|
|
expenses
|
|
(-3.3%)
|
|
|
(In thousands)
|
|
Quantitative Information about Level 3 Fair Value Measurements
|
June 30, 2013
|
|
Fair Value
Estimate
|
|
|
Valuation
Techniques
|
|
Unobservable
Inputs
|
|
Estimated
Range
(weighted average)
|
Impaired loans
|
|
$
|
816
|
|
|
Appraisal of
|
|
Appraisal
|
|
0.0% to -25.0%
|
|
|
|
|
|
|
collateral
|
|
adjustments
|
|
(-6.5%)
|
|
|
|
|
|
|
|
|
Liquidation
|
|
-3.0% to -5.0%
|
|
|
|
|
|
|
|
|
expenses
|
|
(-3.3%)
|
24
The estimated fair values of the Companys financial instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy at
March 31, 2014
|
|
|
|
March 31, 2014
|
|
|
Quoted Prices in
Active Markets
For Identical
|
|
|
Significant Other
Observable
|
|
|
Significant
Unobservable
|
|
(In thousands)
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Assets
(Level 1)
|
|
|
Inputs
(Level 2)
|
|
|
Inputs
(Level 3)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
32,623
|
|
|
$
|
32,623
|
|
|
$
|
32,623
|
|
|
$
|
|
|
|
$
|
|
|
Interest bearing deposits with other banks
|
|
|
3,612
|
|
|
|
3,612
|
|
|
|
3,612
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
42,107
|
|
|
|
42,107
|
|
|
|
|
|
|
|
42,078
|
|
|
|
29
|
|
Securities held to maturity
|
|
|
1,146
|
|
|
|
1,224
|
|
|
|
|
|
|
|
1,224
|
|
|
|
|
|
Federal Home Loan Bank stock
|
|
|
1,050
|
|
|
|
1,050
|
|
|
|
|
|
|
|
1,050
|
|
|
|
|
|
Loans held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
|
302,778
|
|
|
|
307,869
|
|
|
|
|
|
|
|
|
|
|
|
307,869
|
|
Accrued interest receivable
|
|
|
1,048
|
|
|
|
1,048
|
|
|
|
|
|
|
|
1,048
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
24
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
303,486
|
|
|
|
303,580
|
|
|
|
|
|
|
|
303,580
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
|
7,416
|
|
|
|
7,415
|
|
|
|
|
|
|
|
7,415
|
|
|
|
|
|
Federal Home Loan Bank Advances
|
|
|
15,528
|
|
|
|
16,794
|
|
|
|
|
|
|
|
16,794
|
|
|
|
|
|
Accrued interest payable
|
|
|
165
|
|
|
|
165
|
|
|
|
|
|
|
|
165
|
|
|
|
|
|
Off-Balance sheet financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy at
June 30, 2013
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
Active Markets
|
|
|
Significant
Other
|
|
|
Significant
|
|
|
|
June 30, 2013
|
|
|
For Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
(In thousands)
|
|
Amount
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,173
|
|
|
$
|
16,173
|
|
|
$
|
16,173
|
|
|
$
|
|
|
|
$
|
|
|
Interest bearing deposits with other banks
|
|
|
6,692
|
|
|
|
6,692
|
|
|
|
6,692
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
37,174
|
|
|
|
37,174
|
|
|
|
|
|
|
|
37,134
|
|
|
|
40
|
|
Securities held to maturity
|
|
|
1,445
|
|
|
|
1,520
|
|
|
|
|
|
|
|
1,520
|
|
|
|
|
|
Federal Home Loan Bank stock
|
|
|
1,160
|
|
|
|
1,160
|
|
|
|
|
|
|
|
1,160
|
|
|
|
|
|
Loans held for sale
|
|
|
414
|
|
|
|
414
|
|
|
|
|
|
|
|
|
|
|
|
414
|
|
Loans receivable, net
|
|
|
299,803
|
|
|
|
303,770
|
|
|
|
|
|
|
|
|
|
|
|
303,770
|
|
Accrued interest receivable
|
|
|
1,111
|
|
|
|
1,111
|
|
|
|
|
|
|
|
1,111
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
28
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
283,263
|
|
|
|
283,215
|
|
|
|
|
|
|
|
283,215
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
|
8,544
|
|
|
|
8,543
|
|
|
|
|
|
|
|
8,543
|
|
|
|
|
|
Federal Home Loan Bank Advances
|
|
|
15,623
|
|
|
|
17,223
|
|
|
|
|
|
|
|
17,223
|
|
|
|
|
|
Accrued interest payable
|
|
|
111
|
|
|
|
111
|
|
|
|
|
|
|
|
111
|
|
|
|
|
|
Off-Balance sheet financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 6 GUARANTEES
The Company has not issued any guarantees that would require liability recognition or disclosure other than its letters of credit. Letters of
credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, letters of credit, when issued, have expiration dates within one year. The credit risks involved in issuing letters of
credit are essentially the same as those that are involved in extending loan facilities to customers. The Company generally holds collateral and/or personal guarantees supporting these commitments. As of March 31, 2014, the Company had $1.2
million of outstanding letters of credit. Management believes the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the
corresponding guarantees. Management believes the current amount of the liability as of March 31, 2014 for guarantees under letters of credit issued is not material.
NOTE 7 EMPLOYEE STOCK OWNERSHIP PLAN
Effective January 1, 2010, the Company adopted an Employee Stock Ownership Plan (ESOP) for eligible employees. The ESOP
borrowed $3.7 million from the Company and used those funds to acquire 370,300 shares, or 8.0%, of the total number of shares issued by the Company in its initial public offering. The shares were acquired at a price of $10.00 per share.
The loan is secured by the shares purchased with the loan proceeds and will be repaid by the ESOP over the 20 year term of the loan with funds
from the Banks contributions to the ESOP and dividends payable on the stock, if any. The interest rate on the ESOP loan adjusts annually and is the prime rate on the first business day of the calendar year, as published in The Wall Street
Journal.
Shares purchased by the ESOP are held by a trustee in an unallocated suspense account and shares are released annually from the
suspense account on a pro-rata basis as principal and interest payments are made by the ESOP to the Company. The trustee allocates the shares released among participants on the basis of each participants proportional share of compensation
relative to all participants. Total ESOP shares may be reduced as a result of employees leaving the Company as shares that have previously been released to those exiting employees may be removed from the plan and transferred to that employee. As
shares are committed to be released from the suspense account, the Bank reports compensation expense based on the average fair value of shares committed to be released with a corresponding credit to stockholders equity. Compensation expense
relating to the ESOP recognized for the nine months ended March 31, 2014 and 2013 amounted to $257 thousand and $233 thousand, respectively. Compensation expense recognized for the three months ended March 31, 2014 and 2013 amounted to $84
thousand and $87 thousand, respectively.
26
Shares held by the ESOP trust at the dates listed were as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Allocated shares
|
|
|
75,292
|
|
|
|
58,574
|
|
Unallocated shares
|
|
|
291,611
|
|
|
|
310,126
|
|
|
|
|
|
|
|
|
|
|
Total ESOP shares
|
|
|
366,903
|
|
|
|
368,700
|
|
|
|
|
|
|
|
|
|
|
Fair value of unallocated shares, in thousands
|
|
$
|
5,331
|
|
|
$
|
5,892
|
|
|
|
|
|
|
|
|
|
|
NOTE 8 SHARE BASED COMPENSATION
In May 2011, the Companys stockholders approved the OBA Financial Services, Inc. 2011 Equity Incentive Plan (Plan) which
provides for awards of stock options and restricted stock to key officers and outside directors. Compensation expense is based on the fair value of the awards on the grant date. The fair value of restricted stock awards is based on the closing price
of the Companys stock on the grant date. The fair value of stock options is estimated using a Black-Scholes option pricing model using assumptions for dividend yield, stock price volatility, risk-free interest rate, and option term. These
assumptions are based on managements judgments regarding future events, are subjective in nature, and contain uncertainties inherent in an estimate. The cost of the awards are being recognized on a straight-line basis over the five-year
vesting period during which participants are required to provide services in exchange for the awards. A portion of the restricted stock award vesting is contingent upon meeting certain Company-wide performance goals.
Until such time as awards of stock are granted and vest or options are exercised, shares of the Companys common stock under the Plan
shall be authorized but unissued shares. The maximum number of shares authorized under the plan is 648,025. Total share-based compensation expense for the nine months ended March 31, 2014 and 2013 was $712 thousand and $699 thousand,
respectively. Total share-based compensation expense for the three months ended March 31, 2014 and 2013 was $234 thousand and $230 thousand, respectively.
Stock Options
The table below
presents the stock option activity for the period shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Weighted
average
exercise
price
|
|
|
Remaining
contractual
life (years)
|
|
Options outstanding at June 30, 2013
|
|
|
281,150
|
|
|
$
|
14.92
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at March 31, 2014
|
|
|
281,150
|
|
|
$
|
14.92
|
|
|
|
7.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Weighted
average
exercise
price
|
|
|
Remaining
contractual
life (years)
|
|
Options outstanding at June 30, 2012
|
|
|
272,150
|
|
|
$
|
14.79
|
|
|
|
|
|
Granted
|
|
|
9,000
|
|
|
|
18.75
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at March 31, 2013
|
|
|
281,150
|
|
|
$
|
14.92
|
|
|
|
8.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
As of March 31, 2014, the Company had $478 thousand of unrecognized compensation costs
related to stock options. The cost of stock options will be amortized in equal annual installments over the five-year vesting period, of which three years remain. There were 56,230 options vested during the nine months ended March 31, 2014.
Stock option expense for the nine months ended March 31, 2014 and 2013 was $153 thousand and $148 thousand, respectively. Stock option expense for the three months ended March 31, 2014 and 2013 was $50 thousand and $49 thousand,
respectively.
Restricted Stock Awards
Restricted stock awards are accounted for as fixed grants using the fair value of the Companys stock at the time of grant. Unvested
restricted stock awards may not be disposed of or transferred during the vesting period. Restricted stock awards carry with them the right to receive dividends.
The table below presents the restricted stock award activity for the period shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service-Based
Restricted
stock awards
|
|
|
Weighted
average
grant date
fair value
|
|
|
Performance-Based
Restricted stock
awards
|
|
|
Weighted
average
grant date
fair value
|
|
|
Total
Restricted
stock
awards
|
|
|
Weighted
average
grant date
fair value
|
|
Non-vested at June 30, 2013
|
|
|
111,596
|
|
|
$
|
14.86
|
|
|
|
88,872
|
|
|
$
|
14.81
|
|
|
|
200,468
|
|
|
$
|
14.84
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
27,767
|
|
|
$
|
14.84
|
|
|
|
22,218
|
|
|
$
|
14.81
|
|
|
|
49,985
|
|
|
$
|
14.83
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at March 31, 2014
|
|
|
83,829
|
|
|
$
|
14.87
|
|
|
|
66,654
|
|
|
$
|
14.81
|
|
|
|
150,483
|
|
|
$
|
14.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service-Based
Restricted
stock awards
|
|
|
Weighted
average
grant date
fair value
|
|
|
Performance-Based
Restricted stock
awards
|
|
|
Weighted
average
grant date
fair value
|
|
|
Total
Restricted
stock
awards
|
|
|
Weighted
average
grant date
fair value
|
|
Non-vested at June 30, 2012
|
|
|
136,363
|
|
|
$
|
14.77
|
|
|
|
111,090
|
|
|
$
|
14.81
|
|
|
|
247,453
|
|
|
$
|
14.79
|
|
Granted
|
|
|
2,500
|
|
|
$
|
18.75
|
|
|
|
|
|
|
$
|
|
|
|
|
2,500
|
|
|
$
|
18.75
|
|
Vested
|
|
|
27,267
|
|
|
$
|
14.77
|
|
|
|
22,218
|
|
|
$
|
14.81
|
|
|
|
49,485
|
|
|
$
|
14.79
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at March 31, 2013
|
|
|
111,596
|
|
|
$
|
14.86
|
|
|
|
88,872
|
|
|
$
|
14.81
|
|
|
|
200,468
|
|
|
$
|
14.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2014, the Company had $1.7 million of unrecognized compensation cost related to
restricted stock awards. The cost of the restricted stock awards will be amortized in equal annual installments over the five-year vesting period, of which three remain. The vesting of the performance-based stock awards is contingent upon meeting
certain Company-wide performance goals. If such goals are not met, no compensation cost is recognized and any recognized compensation cost is reversed. Restricted stock expense for the nine months ended March 31, 2014 and 2013 was $559 thousand
and $551 thousand, respectively. Restricted stock expense for the three months ended March 31, 2014 and 2013 was $184 thousand and $181 thousand, respectively.
28
NOTE 9 EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares
outstanding for the period exclusive of unallocated ESOP shares and unvested restricted stock. Stock options and unvested restricted stock are regarded as potential common stock and are considered in the diluted earnings per share calculations to
the extent they would have a dilutive effect if converted to common stock, computed using the Treasury Stock method. The table below sets forth the dilutive effect of the stock options and unvested restricted shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
(Dollars in thousands, except share data)
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Net income
|
|
$
|
207
|
|
|
$
|
237
|
|
|
$
|
832
|
|
|
$
|
894
|
|
Weighted average number of shares used in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
3,741,817
|
|
|
|
3,762,584
|
|
|
|
3,737,914
|
|
|
|
3,796,105
|
|
Diluted common stock equivalents
|
|
|
37,859
|
|
|
|
119,309
|
|
|
|
39,880
|
|
|
|
89,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
3,779,676
|
|
|
|
3,881,893
|
|
|
|
3,777,794
|
|
|
|
3,885,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share, basic
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.22
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share, diluted
|
|
$
|
0.05
|
|
|
$
|
0.06
|
|
|
$
|
0.22
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 10 SUBSEQUENT EVENTS
On April 7, 2014, F.N.B. Corporation (F.N.B.), the parent company of First National Bank of Pennsylvania, and the Company,
entered into an Agreement and Plan of Merger, pursuant to which the Company will merge with and into F.N.B. As a result of the merger, the separate corporate existence of the Company will cease and F.N.B. will continue as the surviving corporation.
The merger is expected to be completed in the third quarter of 2014, subject to approval of the merger by the Companys shareholders, receipt of required regulatory and other approvals and satisfaction of customary closing conditions.
Immediately after the merger is completed, the Bank is to merge with and into First National Bank of Pennsylvania, a national association, with First National Bank of Pennsylvania being the surviving entity. In the merger between the Company
and F.N.B., all of the outstanding shares of the Companys common stock will be cancelled, and holders of the Companys common stock (excluding F.N.B., the Company and their respective subsidiaries, if applicable) will receive 1.781 shares
of F.N.B. common stock for each share of the Companys common stock they own. The exchange ratio is fixed and the transaction is expected to qualify as a tax-free exchange for shareholders of the Company.
ITEM 2.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
FINANCIAL
REVIEW
The principal objective of this financial review is to provide an overview of the financial condition and results of operations of OBA
Financial Services Inc., and its subsidiary, OBA Bank. The discussion and tabular presentations should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes.
Overview of Income and Expenses
Income
The Company has two primary
sources of income; net interest income and non-interest income. Net interest income is the difference between interest income, which is the income the Company earns on its loans and investments, and interest expense, which is the interest the
Company pays on its deposits and borrowings.
Non-interest income is received from providing products and services and from other income. Non-interest
income is primarily earned from service charges on deposit accounts, bank owned life insurance income, and loan servicing fees. The Company also earns income from the sale of residential mortgage loans and other fees and charges.
29
The Company recognizes gains or losses as a result of the sale of investment securities, foreclosed property, and
premises and equipment. In addition, the Company recognizes losses on investment securities that are considered other-than-temporarily impaired. Gains and losses are not a regular part of the Companys primary sources of income.
Expenses
Non-interest expense consists
primarily of salaries and employee benefits, occupancy and equipment expense, external processing fees, FDIC assessments, director fees, and other non-interest expenses.
Salaries and employee benefits expense consists primarily of the salaries and wages paid to employees and payroll tax, healthcare, retirement, ESOP, Equity
Incentive Plan, and other employee benefit expenses.
Occupancy expense, which is fixed or variable costs associated with premises and equipment, consists
primarily of lease payments, real estate taxes, depreciation charges, maintenance, and cost of utilities.
Equipment expense includes expenses and
depreciation charges related to office and banking equipment.
Data processing fees are paid to third party vendors primarily for various data processing
services.
Other expense includes professional services expenses, including, but not limited to, attorney, accountant and consultant fees, advertising and
marketing, charitable contributions, insurance, office supplies, postage, telephone, and other miscellaneous operating expenses.
Critical Accounting Policies and Estimates
There are no material changes to the critical accounting policies disclosed in OBA Financial Services, Inc.s Annual Report on Form 10-K for the
fiscal year ended June 30, 2013.
Comparison of Financial Condition at March 31, 2014 and June 30, 2013
Assets.
Total assets increased $20.5 million to $402.1 million at March 31, 2014 from $381.6 million at June 30, 2013. The increase was
primarily due to increases in cash and cash equivalents, loans, and securities partially offset by a decrease in interest bearing deposits with other banks.
Cash and Cash Equivalents.
At March 31, 2014, cash and cash equivalents increased $16.4 million to $32.6 million, from $16.2 million, at
June 30, 2013. The increase in cash and cash equivalents was primarily due to an increase of $20.2 million in total deposits during the same period.
Loans.
At March 31, 2014, total gross loans were $306.3 million, an increase of $3.0 million, as compared to $303.3 million at
June 30, 2013. The commercial loan portfolio increased $12.2 million to $207.7 million at March 31, 2014 from $195.5 million at June 30, 2013 as the Company continued its focus on originating commercial loans. The commercial real
estate loan portfolio increased $13.8 million, to $153.9 million, at March 31, 2014 from $140.1 million at June 30, 2013. The commercial construction portfolio increased $1.4 million, to $14.4 million, at March 31, 2014 from $13.0
million at June 30, 2013. These increases were offset by decreases of $2.9 million, to $39.4 million, in the commercial business portfolio, $6.8 million, to $73.8 million, in the residential mortgage portfolio, and $2.5 million, to $24.9
million in the home equity loans and lines of credit portfolio. For further detail, see Note 4 Credit Quality of Loans and Allowance for Loan Losses in the accompanying consolidated financial statements.
Allowance for Loan Losses.
The
following table summarizes activity in the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
(in thousands)
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Balance at beginning of period
|
|
$
|
3,494
|
|
|
$
|
3,125
|
|
|
$
|
3,473
|
|
|
$
|
3,035
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Recoveries
|
|
|
23
|
|
|
|
1
|
|
|
|
24
|
|
|
|
4
|
|
Provision for loan losses
|
|
|
4
|
|
|
|
229
|
|
|
|
24
|
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
3,521
|
|
|
$
|
3,355
|
|
|
$
|
3,521
|
|
|
$
|
3,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs (recoveries) to average loans
|
|
|
(0.03
|
)%
|
|
|
|
%
|
|
|
(0.01
|
)%
|
|
|
|
%
|
Allowance for loan losses to loans
|
|
|
1.15
|
|
|
|
1.11
|
|
|
|
1.15
|
|
|
|
1.11
|
|
30
At March 31, 2014, the allowance for loan losses was $3.5 million compared with $3.4 million at
March 31, 2013 and $3.5 million at June 30, 2013. The allowance for loan losses as a percentage of total loans at March 31, 2014 was 1.15% compared to 1.15% at December 31, 2013, 1.15% at June 30, 2013 and 1.11% at
March 31, 2013. There were effectively no net recoveries or charge-offs as a percentage of average loans for the three months and nine months ended March 31, 2014 and March 31, 2013. The Bank had $6.4 million in impaired loans at
March 31, 2014 as compared to $3.4 million at June 30, 2013. The increase was due to two commercial loan relationships which include a $748 thousand commercial business loan and $2.8 million in three commercial real estate loans. These
loans have collateral values in excess of the loan values. For further detail, see Note 4 Credit Quality of Loans and Allowance for Loan Losses in the accompanying financial statements.
31
Non-performing Assets
. Loans are generally placed on non-accrual status when payment of principal
or interest is more than 90 days delinquent unless well secured and in the process of collection. Loans can also be placed on non-accrual status if collection of principal or interest in full is in doubt. When loans are placed on non-accrual
status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if both principal and interest payments are brought current, there has been
a period of sustained performance (generally, six months), and full payment of principal and interest is expected. At March 31, 2014, the Company had $4.2 million in total non-performing assets, an increase of $3.5 million from
June 30, 2013. The increase was due to two commercial loan relationships which include a $748 thousand commercial business loan and $2.8 million in three commercial real estate loans. These loans have collateral values in excess of the loan
values. The remaining balance represents two residential mortgage loans and one home equity line of credit. Of the $4.2 million in non-performing assets at March 31, 2014, $1.2 million was also a troubled debt restructuring.
The following table summarizes non-performing assets:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
March 31,
2014
|
|
|
June 30,
2013
|
|
Non-performing assets
|
|
|
|
|
|
|
|
|
Non-accrual loans:
|
|
|
|
|
|
|
|
|
Commercial business
|
|
$
|
748
|
|
|
$
|
|
|
Commercial real estate
|
|
|
2,840
|
|
|
|
|
|
Residential mortgages
|
|
|
513
|
|
|
|
622
|
|
Home equity loans and lines of credit
|
|
|
75
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
Total non-accrual loans
|
|
|
4,176
|
|
|
|
697
|
|
Other real estate owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing assets
|
|
$
|
4,176
|
|
|
$
|
697
|
|
|
|
|
|
|
|
|
|
|
Asset quality ratios:
|
|
|
|
|
|
|
|
|
Non-performing loans to total loans
|
|
|
1.36
|
%
|
|
|
0.23
|
%
|
Non-performing assets to total assets
|
|
|
1.04
|
|
|
|
0.18
|
|
The non-performing loans to total loans ratio was 1.36% at March 31, 2014 and 0.23% at June 30, 2013. The
non-performing assets to total assets ratio was 1.04% at March 31, 2014 and 0.18% at June 30, 2013. For further detail, see Note 4 Credit Quality of Loans and Allowance for Loan Losses in the accompanying financial
statements.
Troubled Debt Restructurings.
At March 31, 2014 and June 30, 2013, the Company had $4.1 million and $3.5 million of
loans, respectively, which were considered troubled debt restructurings. At March 31, 2014, the Bank had $1.5 million in residential mortgage loans and home equity loans and lines of credit that were considered troubled debt restructurings and
$2.6 million in commercial real estate loans that were considered troubled debt restructurings. At June 30, 2013, the Bank had $1.9 million in residential mortgage loans and home equity loans and lines of credit that were considered troubled
debt restructurings and $1.6 million in commercial real estate loans that were considered troubled debt restructurings. Of the $4.1 million in loans considered troubled debt restructurings at March 31, 2014, $1.2 million was also a
non-performing loan. For further detail, see Note 4 Credit Quality of Loans and Allowance for Loan Losses in the accompanying financial statements.
Securities.
At March 31, 2014, the securities portfolio totaled $43.3 million, or 10.8% of total assets, as compared to $38.6 million, or
10.1% of total assets, at June 30, 2013.
Deposits.
At March 31, 2014, deposits increased $20.2 million to $303.5 million from
$283.3 million at June 30, 2013. Total checking accounts increased $11.5 million to $125.2 million at March 31, 2014. Total certificates of deposits increased $17.0 million to $88.9 million at March 31, 2014. These increases were
primarily offset by a decrease of $8.8 million, to $82.4 million, in money market accounts at March 31, 2014.
Borrowings.
At
March 31, 2014, total borrowings decreased $1.2 million to $22.9 million from $24.2 million at June 30, 2013. Customer repurchase agreements decreased $1.1 million to $7.4 million at March 31, 2014 from $8.5 million at June 30,
2013. At March 31, 2014 and June 30, 2013, Federal Home Loan Bank advances totaled $15.5 million and $15.6 million, respectively
At
March 31, 2014, the Company had access to additional Federal Home Loan Bank advances of up to $94.4 million.
32
Equity.
Equity totaled $73.0 million at March 31, 2014 and $71.3 million at June 30,
2013. At March 31, 2014, the Company had repurchased 160,098 shares of the 210,377 shares of common stock approved in its third share repurchase program. The Companys initial share repurchase program was completed as of May 3, 2012,
pursuant to which the Company repurchased 462,875 shares. The Companys second share repurchase program was completed on April 17, 2012, having repurchased 208,294 shares. The Companys Board of Directors adopted a third share
repurchase program, previously disclosed in the Companys Form 8-K filed on April 29, 2013. The Company terminated the third repurchase program concurrent with the signing of the merger agreement between OBA Financial Services Inc. and
F.N.B. Corporation. For further detail regarding the merger agreement, see Note 10 Subsequent Events in the accompanying financial statements.
Capital and Liquidity.
The Bank intends to maintain a strong capital position that supports its strategic goals while exceeding regulatory
standards. At March 31, 2014, the Bank met the definition of a well-capitalized institution by exceeding all regulatory minimum capital requirements. The following tables summarize the consolidated and Bank capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios at
|
|
|
|
|
|
|
March 31,
2014
|
|
|
June 30,
2013
|
|
|
Well-Capitalized
Minimums
|
|
Consolidated Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to risk-weighted assets
|
|
|
25.63
|
%
|
|
|
25.64
|
%
|
|
|
|
|
Tier 1 Capital to risk-weighted assets
|
|
|
24.45
|
%
|
|
|
24.45
|
%
|
|
|
|
|
Tier 1 Leverage
|
|
|
18.14
|
%
|
|
|
18.67
|
%
|
|
|
|
|
Bank Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to risk-weighted assets
|
|
|
22.66
|
%
|
|
|
22.53
|
%
|
|
|
10.00
|
%
|
Tier 1 Capital to risk-weighted assets
|
|
|
21.48
|
%
|
|
|
21.34
|
%
|
|
|
6.00
|
%
|
Tier 1 Leverage
|
|
|
15.94
|
%
|
|
|
16.30
|
%
|
|
|
5.00
|
%
|
The Companys primary sources of funds are deposits, borrowed funds, amortization, prepayments, and maturities of loans,
investment securities, and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans and investments are a relatively predictable source of funds, deposit flows and loan and
investment prepayments are greatly influenced by general interest rates, economic conditions, and competition. In addition, the Company invests excess funds in short-term interest-earning securities and other assets which provide liquidity to meet
lending requirements.
The Company is a member of the Federal Home Loan Bank of Atlanta, whose competitive advance programs provide the Company with a
safe, reliable, and convenient source of funds. A significant decrease in liquidity could result in the Company seeking other sources of funds, including, but not limited to, additional borrowings, brokered deposits, negotiated time deposits, the
sale of available-for-sale investment securities, and the sale of loans or other assets.
Comparison of Operating Results for the
Three Months Ended March 31, 2014 and 2013
General.
Net income decreased $30 thousand, to $207 thousand, for the three months
ended March 31, 2014 from net income of $237 thousand for the three months ended March 31, 2013. The decrease in net income was primarily a result of an increase in non-interest expense of $146 thousand, lower net interest income of $80
thousand and lower non-interest income of $56 thousand, offset by lower provision for loan losses of $225 thousand and a decrease in tax expense of $27 thousand.
Net Interest Income.
Net interest income decreased $80 thousand to $3.3 million for the three months ended March 31, 2014 as compared to
$3.4 million for the three months ended March 31, 2013. Total interest expense decreased $59 thousand, or 10.9%, to $481 thousand for the three months ended March 31, 2014 as compared to $540 thousand for the three months ended
March 31, 2013. The decrease in interest expense was primarily the result of the Bank decreasing Federal Home Loan Bank advances offset by increases in deposit balances. Interest and dividend income decreased $139 thousand for the three months
ended March 31, 2014 as compared to the three months ended March 31, 2013.
The net interest margin was 3.80% for the three months ended
March 31, 2014 compared to 3.93% for the three months ended March 31, 2013. The decrease in the net interest margin was primarily a result of a 20 basis point decrease in the average yield of interest-earning assets as compared to an 11
basis point decrease in the average yield of interest-bearing liabilities. Net interest-earning assets
33
decreased $3.5 million as average interest-earning assets increased $3.5 million to $356.8 million for the period ended March 31, 2014 compared to $353.3 million for the period ended
March 31, 2013. Average interest-bearing liabilities increased $7.0 million to $271.9 million for the period ended March 31, 2014 as compared to $264.9 million for the period ended March 31, 2013.
Interest and Dividend Income.
Interest and dividend income decreased $139 thousand for the three months ended March 31, 2014 as compared to
March 31, 2013 primarily as the result of a decrease in yields on outstanding loans offset by an increase in yield on the securities portfolio. Interest income on investments increased to $271 thousand for the period ended March 31, 2014
from $237 thousand for the period ended March 31, 2013. Interest income on loans decreased to $3.5 million for the period ended March 31, 2014 from $3.7 million for the period ended March 31, 2013.
The average yield on loans decreased 34 basis points, to 4.69%, for the three months ended March 31, 2014 from 5.03% for the three months ended
March 31, 2013. Total average loans increased $6.4 million to $305.6 million, reflecting an increase in the average balance of commercial loans of $22.3 million to $205.7 million for the three months ended March 31, 2014. The increase in
average commercial loans was offset by a decrease in average residential mortgage loans of $11.8 million to $74.5 million and a decrease in average consumer loans of $4.1 million to $25.4 million for the three months ended March 31, 2014 as
compared to $86.3 million and $29.5 million, respectively, for the three months ended March 31, 2013.
The average yield on securities increased 42
basis points to 2.29% for the three months ended March 31, 2014 from 1.87% for the three months ended March 31, 2013, reflecting an increase in market interest rates that slowed prepayments on the existing portfolio and the use of
investment cash flows to purchase replacement bonds which contain higher yields due to the same increase in market interest rates.
Interest
Expense.
Interest expense decreased $59 thousand to $481 thousand from $540 thousand for the three months ended March 31, 2014 and 2013, respectively. Borrowing expense decreased $84 thousand to $169 thousand for the three months ended
March 31, 2014 from $253 thousand for the three months ended March 31, 2013 as average outstanding Federal Home Loan Bank advances decreased in the current period by $10.0 million. The decrease in borrowing expense was offset by an
increase in deposit expense of $25 thousand to $312 thousand for the three months ended March 31, 2014 as average deposit balances increased $7.0 million.
The average cost of borrowings increased 24 basis points to 3.05% for the three months ended March 31, 2014 as compared to 2.81% at March 31, 2013
as a result of paying off matured lower costing short-term Federal Home Loan Bank advances. The average cost of deposits was unchanged at 51 basis points for the three months ended March 31, 2014 and 2013.
Provision for Loan Losses.
The Companys provision for loan losses for the three months ended March 31, 2014 was $4 thousand, or a
decrease of $225 thousand from $229 thousand for the three months ended March 31, 2013. For further discussion related to the provision for loan losses, see Allowance for Loan Losses in the Comparison of Financial Condition at
March 31, 2014 and June 30, 2013. For further discussions related to loan portfolio performance, see Non-performing Assets in the Comparison of Financial Condition at March 31, 2014 and June 30, 2013
and Note 4 of the notes to the consolidated financial statements.
Non-Interest Income
. The following table summarizes changes in
non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Change
|
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Customer service fees
|
|
$
|
65
|
|
|
$
|
79
|
|
|
$
|
(14
|
)
|
|
|
(17.7
|
)%
|
Loan servicing fees
|
|
|
4
|
|
|
|
3
|
|
|
|
1
|
|
|
|
33.3
|
|
Bank owned life insurance income
|
|
|
67
|
|
|
|
69
|
|
|
|
(2
|
)
|
|
|
(2.9
|
)
|
Other non-interest income
|
|
|
46
|
|
|
|
33
|
|
|
|
13
|
|
|
|
39.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income before net gains (losses)
|
|
|
182
|
|
|
|
184
|
|
|
|
(2
|
)
|
|
|
(1.1
|
)
|
Net gain on sale of loans
|
|
|
5
|
|
|
|
28
|
|
|
|
(23
|
)
|
|
|
(82.1
|
)
|
Recovery (write-down) of other real estate property
|
|
|
|
|
|
|
31
|
|
|
|
(31
|
)
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses)
|
|
|
5
|
|
|
|
59
|
|
|
|
(54
|
)
|
|
|
(91.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
$
|
187
|
|
|
$
|
243
|
|
|
$
|
(56
|
)
|
|
|
(23.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income decreased $56 thousand, to $187 thousand, for the three months ended March 31, 2014 compared to
$243 thousand for the three months ended March 31, 2013. The decrease in total non-interest income was primarily the result of a decrease in net gains (losses) of $54 thousand for the three month period ended March 31, 2014. The decrease
in net gains (losses) was the
34
result of decreases in net gains on the sale of loans of $23 thousand, to $5 thousand and recovery (write-down) of other real estate property of $31 thousand, to zero, for the period ended
March 31, 2014. Non-interest income before net gains (losses) was effectively unchanged as customer service fees decreased $14 thousand, to $65 thousand, and other non-interest income increased $13 thousand, to $46 thousand, due to an increase
in rent income for the period ended March 31, 2014 as compared to March 31, 2013.
Non-Interest Expense.
The following table
summarizes changes in non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
Change
|
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
1,802
|
|
|
$
|
1,826
|
|
|
$
|
(24
|
)
|
|
|
(1.3
|
)%
|
Occupancy and equipment
|
|
|
397
|
|
|
|
390
|
|
|
|
7
|
|
|
|
1.8
|
|
Data processing
|
|
|
258
|
|
|
|
204
|
|
|
|
54
|
|
|
|
26.5
|
|
Directors fees
|
|
|
105
|
|
|
|
83
|
|
|
|
22
|
|
|
|
26.5
|
|
FDIC assessments
|
|
|
51
|
|
|
|
68
|
|
|
|
(17
|
)
|
|
|
(25.0
|
)
|
Other non-interest expense
|
|
|
554
|
|
|
|
450
|
|
|
|
104
|
|
|
|
23.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
$
|
3,167
|
|
|
$
|
3,021
|
|
|
$
|
146
|
|
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense increased $146 thousand, to $3.2 million, for the three months ended March 31, 2014 compared
to $3.0 million for the three months ended March 31, 2013. Data processing expenses increased $54 thousand, to $258 thousand, for the three months ended March 31, 2014 as compared to $204 thousand for the three months ended March 31,
2013 primarily due to the recent core system conversion undertaken by the Company. Directors fees increased $22 thousand, to $105 thousand, due to special meetings regarding the merger agreement, between OBA Financial Services, Inc. and F.N.B.
Corporation. Other non-interest expense increased $104 thousand, to $554 thousand, for the period ended March 31, 2014 from $450 thousand primarily due to costs associated with legal, regulatory, and accounting expenses associated with the
merger agreement, between OBA Financial Services, Inc. and F.N.B. Corporation. FDIC assessments decreased $17 thousand, to $51 thousand, for the period ended March 31, 2014 compared to $68 thousand for the period ended March 31, 2013 as a
result of lower non-performing loans and its positive impact on the FDIC assessment calculation. For further detail regarding the merger agreement, see Note 10 Subsequent Events in the accompanying financial statements.
Income Taxes.
The Company recorded income tax expense of $153 thousand for the three months ended March 31, 2014, reflecting an effective
tax rate of 42.5%, compared to income tax expense of $180 thousand for the three months ended March 31, 2013, reflecting an effective tax rate of 43.2%. The difference from the effective tax rate to statutory tax rates reflects the amount
of income received from bank-owned life insurance, which is tax-exempt for federal and state tax purposes, relative to total pre-tax income for each period.
Comparison of Operating Results for the Nine Months Ended March 31, 2014 and 2013
General.
Net income decreased $62 thousand to $832 thousand for the nine months ended March 31, 2014 from net income of $894 thousand for
the nine months ended March 31, 2013. The decrease in net income was primarily a result of an increase in non-interest expense of $498 thousand partially offset by an increase in net interest income of $90 thousand and a decrease in the
provision for loan losses of $300 thousand.
Net Interest Income.
Net interest income increased by $90 thousand, to $10.2 million for the
nine months ended March 31, 2014 as compared to $10.1 million for the nine months ended March 31, 2013. Total interest expense decreased $307 thousand, or 17.5%, to $1.5 million for the nine months ended March 31, 2014 as compared to
$1.8 million for the nine months ended March 31, 2013. The decrease in interest expense was primarily the result of the Bank decreasing deposit rates while maintaining its competitive position within the local market, paying off several matured
Federal Home Loan Bank advances, and reducing the rate on customer repurchase agreements. Interest and dividend income decreased by $217 thousand to $11.6 million for the nine months ended March 31, 2014 as compared to $11.8 million for the
nine months ended March 31, 2013. This decrease is primarily due to lower yields in the loan and securities portfolios.
The net interest margin was
3.83% for the nine months ended March 31, 2014 compared to 3.78% for the nine months ended March 31, 2013. The increase in the net interest margin was primarily a result of a 17 basis point decrease in the average yield of interest-bearing
liabilities as compared to a five basis point decrease in the average yield on interest-earning assets. Net interest-earning assets decreased $7.3 million as average interest-earning assets decreased $2.2 million to $353.4 million for the nine
months ended March 31, 2014 compared to $355.6 million for the nine months ended March 31, 2013. Average interest-bearing liabilities increased $5.1 million to $272.8 million for the nine months ended March 31, 2014 as compared to
$267.7 million for the nine months ended March 31, 2013.
35
Interest and Dividend Income.
Interest and dividend income decreased $217 thousand to $11.6 million
from $11.8 million for the nine months ended March 31, 2014 and 2013, respectively, as continued low market interest rates resulted in lower yields on new loan production and securities purchased. The decrease in interest and dividend income
was primarily the result of a decrease in interest income on loans and securities of $177 thousand to $10.8 million from $11.0 million and $53 thousand to $731 thousand from $784 thousand, respectively, for the periods ended March 31, 2014 and
2013, respectively, as low market interest rates produced continued pressure on loan and investment security yields.
The average yield on loans decreased
19 basis points, to 4.74%, for the nine months ended March 31, 2014 from 4.93% for the nine months ended March 31, 2013. Total average loans increased $6.8 million to $303.6 million, reflecting an increase in the average balance of
commercial loans of $23.8 million to $200.5 million for the nine months ended March 31, 2014. The increase in average commercial loans was offset by a decrease in average residential mortgage loans of $12.5 million to $76.8 million and a
decrease in average consumer loans of $4.5 million to $26.5 million for the nine months ended March 31, 2014 as compared to $89.3 million and $31.0 million, respectively, for the nine months ended March 31, 2013.
The average yield on securities increased 19 basis points to 2.21% for the nine months ended March 31, 2014 from 2.03% for the nine months ended
March 31, 2013, due to the increase in market interest rates that slowed prepayments on the existing portfolio and the use of investment cash flows to purchase replacement bonds which contain higher yields due to the same increase in market
interest rates.
Interest Expense.
Interest expense decreased $307 thousand to $1.5 million from $1.8 million for the nine months ended
March 31, 2014 and 2013, respectively. Deposit expense decreased by $23 thousand to $930 thousand for the nine months ended March 31, 2014 as the average rate paid on deposits decreased five basis points to 0.50% for the nine months ended
March 31, 2014 from 0.55% for nine months ended March 31, 2013.
Interest expense on borrowings decreased $284 thousand to $520 thousand for the
nine months ended March 31, 2014 from $804 thousand for the nine months ended March 31, 2013. The average cost of borrowings decreased five basis points to 2.71% for the nine months ended March 31, 2014 as a result of paying off
higher costing Federal Home Loan Bank advances and reducing the rate on customer repurchase agreements.
Provision for Loan Losses.
The
Companys provision for loan losses for the nine months ended March 31, 2014 was $24 thousand, a decrease of $300 thousand from $324 thousand, for the nine months ended March 31, 2013. For further discussion related to the provision
for loan losses, see Allowance for Loan Losses in the Comparison of Financial Condition at March 31, 2014 and June 30, 2013. For further discussions related to loan portfolio performance, see Non-performing
Assets in the Comparison of Financial Condition at March 31, 2014 and June 30, 2013 and Note 4 of the notes to the consolidated financial statements.
36
Non-Interest Income
. The following table summarizes changes in non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
March 31,
|
|
|
Change
|
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Customer service fees
|
|
$
|
244
|
|
|
$
|
262
|
|
|
$
|
(18
|
)
|
|
|
(6.9
|
)%
|
Loan servicing fees
|
|
|
13
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
Bank owned life insurance income
|
|
|
199
|
|
|
|
213
|
|
|
|
(14
|
)
|
|
|
(6.6
|
)
|
Other non-interest income
|
|
|
135
|
|
|
|
95
|
|
|
|
40
|
|
|
|
42.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income before net gains (losses)
|
|
|
591
|
|
|
|
583
|
|
|
|
8
|
|
|
|
1.4
|
|
Net gain on sale of loans
|
|
|
37
|
|
|
|
43
|
|
|
|
(6
|
)
|
|
|
(14.0
|
)
|
Recovery (write-down) of other real estate property
|
|
|
|
|
|
|
(8
|
)
|
|
|
8
|
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses)
|
|
|
37
|
|
|
|
35
|
|
|
|
2
|
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
$
|
628
|
|
|
$
|
618
|
|
|
$
|
10
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income increased to $628 thousand for the nine months ended March 31, 2014, an increase of $10
thousand, as compared to $618 thousand for the nine months ended March 31, 2013. The increase in non-interest income before net gains (losses) was the result of an increase in other non-interest income of $40 thousand, to $135 thousand, for the
period ended March 31, 2014 primarily offset by a decrease in Bank owned life insurance income of $14 thousand, to $199 thousand. The increase in other non-interest income was primarily the result of an increase of $31 thousand in rental income
for the period ended March 31, 2014.
Non-Interest Expense.
The following table summarizes changes in non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
March 31,
|
|
|
Change
|
|
|
|
2014
|
|
|
2013
|
|
|
$
|
|
|
%
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
5,435
|
|
|
$
|
5,330
|
|
|
$
|
105
|
|
|
|
2.0
|
%
|
Occupancy and equipment
|
|
|
1,181
|
|
|
|
1,158
|
|
|
|
23
|
|
|
|
2.0
|
|
Data processing
|
|
|
769
|
|
|
|
590
|
|
|
|
179
|
|
|
|
30.3
|
|
Directors fees
|
|
|
297
|
|
|
|
266
|
|
|
|
31
|
|
|
|
11.7
|
|
FDIC assessments
|
|
|
129
|
|
|
|
206
|
|
|
|
(77
|
)
|
|
|
(37.4
|
)
|
Other non-interest expense
|
|
|
1,537
|
|
|
|
1,300
|
|
|
|
237
|
|
|
|
18.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
$
|
9,348
|
|
|
$
|
8,850
|
|
|
$
|
498
|
|
|
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense increased $498 thousand to $9.3 million for the nine months ended March 31, 2014 from $8.9
million for the nine months ended March 31, 2013. Data processing expenses increased $179 thousand, or 30.3%, to $769 thousand for the nine months ended March 31, 2014 as compared to $590 thousand for the nine months ended March 31,
2013 primarily as a result of the recent core system conversion undertaken by the Company. Other non-interest expense increased $237 thousand, to $1.5 million, for the period ended March 31, 2014 from $1.3 million for the period ended
March 31, 2013 primarily due to costs associated with increased legal and regulatory costs associated with the Companys annual stockholders meeting, legal, regulatory, and accounting expense expenses associated with merger
agreement, between OBA Financial Services, Inc. and F.N.B. Corporation, and a fraud perpetrated on a Bank customer in which the Bank reimbursed the customer. FDIC assessments decreased $77 thousand, to $129 thousand, for the nine months ended
March 31, 2014 compared to $206 thousand for the nine months ended March 31, 2013 as a result of lower non-performing loans and its positive impact on the FDIC assessment calculation. Salaries and employee benefits increased $105 thousand,
to $5.4 million, for the nine months ended March 31, 2014 from $5.3 million for the nine months ended March 31, 2013 primarily as a result of the addition of one new lender and higher ESOP compensation expense as a result of the
Companys higher market price for its common stock. For further detail regarding the merger agreement, see Note 10 Subsequent Events in the accompanying financial statements.
37
Income Taxes.
The Company recorded income tax expense of $597 thousand for the nine months ended
March 31, 2014, reflecting an effective tax rate of 41.8%, compared to income tax expense of $633 thousand for the nine months ended March 31, 2013, reflecting an effective tax rate of 41.5%. The difference from the effective tax rate
to statutory tax rates reflects the amount of income received from bank-owned life insurance, which is tax-exempt for federal and state tax purposes, relative to total pre-tax income for each period.