x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|
|
EXCHANGE ACT OF 1934
|
||
For the quarterly period ended June 30, 2010
|
||
OR | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|
|
EXCHANGE ACT OF 1934
|
||
For the transition period from to
|
||
Commission file number: 000-51214
|
||
Prudential Bancorp, Inc. of Pennsylvania
|
(Exact Name of Registrant as Specified in Its Charter)
|
Pennsylvania
|
68-0593604
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
1834 Oregon Avenue
Philadelphia, Pennsylvania
|
19145
Zip Code
|
(Address of Principal Executive Offices)
|
(215) 755-1500
|
(Registrant’s Telephone Number, Including Area Code)
|
oYes
|
oNo
|
Non-accelerated filer (Do not check if a smaller reporting company) o
|
Smaller reporting company x
|
PAGE
|
|||
PART I
|
FINANCIAL INFORMATION:
|
||
Item 1.
|
Consolidated Financial Statements
|
||
Unaudited Consolidated Statements of Financial Condition June 30, 2010 and September 30, 2009
|
2
|
||
Unaudited Consolidated Statements of Operations for the Three And Nine Months Ended June 30, 2010 and 2009
|
3 | ||
Unaudited Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income for the Nine Months Ended June 30, 2010 and 2009
|
4
|
||
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2010 and 2009
|
5
|
||
Notes to Unaudited Consolidated Financial Statements
|
6
|
||
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
24
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
38
|
|
Item 4T.
|
Controls and Procedures
|
38
|
|
PART II
|
OTHER INFORMATION
|
||
Item 1.
|
Legal Proceedings
|
39
|
|
Item 1A.
|
Risk Factors
|
39
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
39
|
|
Item 3.
|
Defaults Upon Senior Securities
|
40
|
|
Item 4.
|
(Removed and Reserved)
|
40
|
|
Item 5.
|
Other Information
|
40
|
|
Item 6.
|
Exhibits
|
40
|
|
SIGNATURES
|
41
|
PRUDENTIAL BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES
|
||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
||||||||
June 30,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
(Dollars in Thousands)
|
||||||||
ASSETS
|
||||||||
Cash and amounts due from depository institutions
|
$ | 16,989 | $ | 4,088 | ||||
Interest-bearing deposits
|
39,638 | 9,581 | ||||||
Total cash and cash equivalents
|
56,627 | 13,669 | ||||||
Investment and mortgage-backed securities held to maturity (fair value—
|
||||||||
June 30, 2010, $134,198; September 30, 2009, $161,968)
|
130,102 | 160,126 | ||||||
Investment and mortgage-backed securities available for sale (amortized cost—
|
||||||||
June 30, 2010, $71,157; September 30, 2009, $63,000)
|
72,893 | 62,407 | ||||||
Loans receivable—net of allowance for loan losses (June 30, 2010, $2,536;
|
||||||||
September 30, 2009, $2,732)
|
254,168 | 256,694 | ||||||
Accrued interest receivable:
|
||||||||
Loans receivable
|
1,428 | 1,419 | ||||||
Mortgage-backed securities
|
351 | 390 | ||||||
Investment securities
|
1,166 | 1,496 | ||||||
Real estate owned
|
3,197 | 3,622 | ||||||
Federal Home Loan Bank stock—at cost
|
3,545 | 3,545 | ||||||
Office properties and equipment—net
|
1,975 | 1,992 | ||||||
Bank owned life insurance
|
5,939 | 5,786 | ||||||
Prepaid expenses and other assets
|
5,133 | 1,272 | ||||||
Deferred tax asset-net
|
1,736 | 2,343 | ||||||
TOTAL ASSETS
|
$ | 538,260 | $ | 514,761 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
LIABILITIES:
|
||||||||
Deposits:
|
||||||||
Noninterest-bearing
|
$ | 2,565 | $ | 2,848 | ||||
Interest-bearing
|
459,824 | 429,526 | ||||||
Total deposits
|
462,389 | 432,374 | ||||||
Advances from Federal Home Loan Bank
|
13,626 | 19,659 | ||||||
Accrued interest payable
|
2,310 | 3,463 | ||||||
Advances from borrowers for taxes and insurance
|
1,837 | 1,214 | ||||||
Accounts payable and accrued expenses
|
1,159 | 1,703 | ||||||
Accrued dividend payable
|
502 | 491 | ||||||
|
||||||||
Total liabilities
|
481,823 | 458,904 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 8)
|
||||||||
STOCKHOLDERS' EQUITY:
|
||||||||
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued
|
- | - | ||||||
Common stock, $.01 par value, 40,000,000 shares authorized, issued 12,563,750;
|
||||||||
outstanding - 10,031,472 at June 30, 2010; 10,331,866 at September 30, 2009
|
126 | 126 | ||||||
Additional paid-in capital
|
53,389 | 52,938 | ||||||
Unearned ESOP shares
|
(3,290 | ) | (3,457 | ) | ||||
Treasury stock, at cost: 2,532,278 shares at June 30, 2010;
|
||||||||
2,231,884 shares at September 30, 2009
|
(31,576 | ) | (28,652 | ) | ||||
Retained earnings
|
36,642 | 35,293 | ||||||
Accumulated other comprehensive income (loss)
|
1,146 | (391 | ) | |||||
Total stockholders' equity
|
56,437 | 55,857 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 538,260 | $ | 514,761 | ||||
See notes to unaudited consolidated financial statements.
|
Three Months Ended June 30,
|
Nine Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(Dollars in Thousands Except Per
Share Amounts)
|
(Dollars in Thousands Except Per
Share Amounts)
|
|||||||||||||||
INTEREST INCOME:
|
||||||||||||||||
Interest on loans
|
$ | 3,706 | $ | 3,806 | $ | 11,176 | $ | 11,396 | ||||||||
Interest on mortgage-backed securities
|
1,164 | 1,329 | 3,575 | 4,648 | ||||||||||||
Interest and dividends on investments
|
1,442 | 1,485 | 4,338 | 4,708 | ||||||||||||
Total interest income
|
6,312 | 6,620 | 19,089 | 20,752 | ||||||||||||
INTEREST EXPENSE:
|
||||||||||||||||
Interest on deposits
|
2,152 | 2,972 | 6,509 | 9,333 | ||||||||||||
Interest on borrowings
|
192 | 216 | 609 | 743 | ||||||||||||
Total interest expense
|
2,344 | 3,188 | 7,118 | 10,076 | ||||||||||||
NET INTEREST INCOME
|
3,968 | 3,432 | 11,971 | 10,676 | ||||||||||||
PROVISION FOR LOAN LOSSES
|
110 | 810 | 495 | 1,173 | ||||||||||||
NET INTEREST INCOME AFTER PROVISION
|
||||||||||||||||
FOR LOAN LOSSES
|
3,858 | 2,622 | 11,476 | 9,503 | ||||||||||||
NON-INTEREST INCOME (LOSS):
|
||||||||||||||||
Fees and other service charges
|
130 | 114 | 373 | 369 | ||||||||||||
Total other-than-temporary impairment loss
|
(91 | ) | (28 | ) | (467 | ) | (5,338 | ) | ||||||||
Portion of loss recognized in other
|
||||||||||||||||
comprehensive income, before taxes
|
5 | (228 | ) | 43 | 2,281 | |||||||||||
Net impairment loss recognized in earnings
|
(86 | ) | (256 | ) | (424 | ) | (3,057 | ) | ||||||||
Other
|
125 | 87 | 301 | 251 | ||||||||||||
Total non-interest income (loss)
|
169 | (55 | ) | 250 | (2,437 | ) | ||||||||||
NON-INTEREST EXPENSE:
|
||||||||||||||||
Salaries and employee benefits
|
1,330 | 1,249 | 4,014 | 3,578 | ||||||||||||
Data processing
|
118 | 126 | 378 | 427 | ||||||||||||
Professional services
|
107 | 159 | 391 | 578 | ||||||||||||
Office occupancy
|
90 | 89 | 293 | 294 | ||||||||||||
Depreciation
|
91 | 79 | 268 | 245 | ||||||||||||
Payroll taxes
|
61 | 63 | 223 | 205 | ||||||||||||
Director compensation
|
65 | 80 | 215 | 201 | ||||||||||||
Deposit insurance
|
195 | 467 | 532 | 763 | ||||||||||||
Real estate owned expense
|
289 | 12 | 362 | 233 | ||||||||||||
Advertising
|
107 | 116 | 319 | 323 | ||||||||||||
Other
|
336 | 342 | 1,009 | 1,067 | ||||||||||||
Total non-interest expense
|
2,789 | 2,782 | 8,004 | 7,914 | ||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
1,238 | (215 | ) | 3,722 | (848 | ) | ||||||||||
INCOME TAXES:
|
||||||||||||||||
Current expense
|
291 | 259 | 1,100 | 1,112 | ||||||||||||
Deferred expense benefit
|
(332 | ) | (248 | ) | (185 | ) | (693 | ) | ||||||||
Total income tax (benefit) expense
|
(41 | ) | 11 | 915 | 419 | |||||||||||
NET INCOME (LOSS)
|
$ | 1,279 | $ | (226 | ) | $ | 2,807 | $ | (1,267 | ) | ||||||
BASIC INCOME (LOSS) PER SHARE
|
$ | 0.13 | $ | (0.02 | ) | $ | 0.29 | $ | (0.12 | ) | ||||||
DILUTED INCOME (LOSS) PER SHARE
|
$ | 0.13 | $ | (0.02 | ) | $ | 0.29 | $ | (0.12 | ) | ||||||
See notes to unaudited consolidated financial statements.
|
|
Accumulated
|
|||||||||||||||||||||||||||||||
Additional
|
Unearned
|
|
Other
|
Total
|
||||||||||||||||||||||||||||
Common
|
Paid-In
|
ESOP
|
Treasury
|
Retained
|
Comprehensive
|
Stockholders'
|
Comprehensive
|
|||||||||||||||||||||||||
Stock
|
Capital
|
Shares
|
Stock
|
Earnings
|
Income (Loss)
|
Equity
|
Income
|
|||||||||||||||||||||||||
(Dollars in Thousands except per share amounts)
|
||||||||||||||||||||||||||||||||
BALANCE, OCTOBER 1, 2009
|
$ | 126 | $ | 52,938 | $ | (3,457 | ) | $ | (28,652 | ) | $ | 35,293 | $ | (391 | ) | $ | 55,857 | |||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||
Net income
|
2,807 | 2,807 | 2,807 | |||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Net unrealized holding gain on
|
||||||||||||||||||||||||||||||||
available for sale securities
|
||||||||||||||||||||||||||||||||
arising during the period, net
|
||||||||||||||||||||||||||||||||
of income tax of $648
|
1,257 | 1,257 | 1,257 | |||||||||||||||||||||||||||||
Reclassification adjustment for
|
||||||||||||||||||||||||||||||||
other than temporary impairment
|
||||||||||||||||||||||||||||||||
recognized in earnings
|
||||||||||||||||||||||||||||||||
net of tax of $144
|
280 | 280 | 280 | |||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Comprehensive income
|
$ | 4,344 | ||||||||||||||||||||||||||||||
Cash dividends declared
|
||||||||||||||||||||||||||||||||
($.15 per share)
|
(1,458 | ) | (1,458 | ) | ||||||||||||||||||||||||||||
Treasury stock purchased (300,394 shares)
|
(2,924 | ) | (2,924 | ) | ||||||||||||||||||||||||||||
Excess tax benefit from stock compensation
|
70 | 70 | ||||||||||||||||||||||||||||||
Stock option expense
|
163 | 163 | ||||||||||||||||||||||||||||||
Recognition and Retention Plan expense
|
236 | 236 | ||||||||||||||||||||||||||||||
ESOP shares committed to
|
||||||||||||||||||||||||||||||||
be released (16,965 shares)
|
- | (18 | ) | 167 | - | - | - | 149 | ||||||||||||||||||||||||
BALANCE, June 30, 2010
|
$ | 126 | $ | 53,389 | $ | (3,290 | ) | $ | (31,576 | ) | $ | 36,642 | $ | 1,146 | $ | 56,437 |
|
Accumulated
|
|||||||||||||||||||||||||||||||
Additional
|
Unearned
|
|
Other
|
Total
|
||||||||||||||||||||||||||||
Common
|
Paid-In
|
ESOP
|
Treasury
|
Retained
|
Comprehensive
|
Stockholders'
|
Comprehensive
|
|||||||||||||||||||||||||
Stock
|
Capital
|
Shares
|
Stock
|
Earnings
|
Income (Loss)
|
Equity
|
Income (Loss)
|
|||||||||||||||||||||||||
(Dollars in Thousands except per share amounts)
|
||||||||||||||||||||||||||||||||
BALANCE, OCTOBER 1, 2008
|
$ | 126 | $ | 54,925 | $ | (3,680 | ) | $ | (19,481 | ) | $ | 37,288 | $ | (691 | ) | $ | 68,487 | |||||||||||||||
Cumulative adjustment related to
|
||||||||||||||||||||||||||||||||
the adoption of EITF 06-10,
|
(256 | ) | (256 | ) | ||||||||||||||||||||||||||||
net of tax
|
||||||||||||||||||||||||||||||||
Cumulative adjustment related to
|
||||||||||||||||||||||||||||||||
the adoption of Reognition and Presentation,
|
||||||||||||||||||||||||||||||||
of other-than-temporary impairment, net
|
||||||||||||||||||||||||||||||||
of income tax benefit of $390.
|
1,148 | (758 | ) | 390 | ||||||||||||||||||||||||||||
Comprehensive income (loss):
|
||||||||||||||||||||||||||||||||
Net loss
|
(1,267 | ) | (1,267 | ) | (1,267 | ) | ||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Net unrealized holding loss on
|
||||||||||||||||||||||||||||||||
available for sale securities
|
||||||||||||||||||||||||||||||||
arising during the period, net
|
||||||||||||||||||||||||||||||||
of income tax benefit of $1,272
|
(2,081 | ) | (2,081 | ) | (2,081 | ) | ||||||||||||||||||||||||||
Reclassification adjustment for
|
||||||||||||||||||||||||||||||||
other than temporary impairment
|
||||||||||||||||||||||||||||||||
recognized in earnings
|
||||||||||||||||||||||||||||||||
net of tax of $1,039
|
2,018 | 2,018 | 2,018 | |||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Comprehensive loss
|
$ | (1,330 | ) | |||||||||||||||||||||||||||||
Treasury stock purchased (738,000 shares)
|
(9,171 | ) | (9,171 | ) | ||||||||||||||||||||||||||||
Cash dividends declared
|
||||||||||||||||||||||||||||||||
($.15 per share)
|
(1,565 | ) | (1,565 | ) | ||||||||||||||||||||||||||||
Excess tax benefit and stock compensation
|
72 | 72 | ||||||||||||||||||||||||||||||
Stock option expense
|
105 | 105 | ||||||||||||||||||||||||||||||
Recognition and Retention Plan expense
|
121 | 121 | ||||||||||||||||||||||||||||||
Acquisition of restricted stock plan shares
|
||||||||||||||||||||||||||||||||
(226,148 shares)
|
(2,465 | ) | (2,465 | ) | ||||||||||||||||||||||||||||
ESOP shares committed to
|
||||||||||||||||||||||||||||||||
be released (16,965 shares)
|
- | 17 | 167 | - | - | - | 184 | |||||||||||||||||||||||||
BALANCE, June 30, 2009
|
$ | 126 | $ | 52,775 | $ | (3,513 | ) | $ | (28,652 | ) | $ | 35,348 | $ | (1,512 | ) | $ | 54,572 | |||||||||||||||
See notes to unuadited consolidated financial statements
|
Nine Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
OPERATING ACTIVITIES:
|
(Dollars in Thousands)
|
|||||||
Net income (loss)
|
$ | 2,807 | $ | (1,267 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in
|
||||||||
operating activities:
|
||||||||
Provision for loan losses
|
495 | 1,173 | ||||||
Depreciation
|
268 | 245 | ||||||
Net accretion of premiums/discounts
|
(267 | ) | (1,127 | ) | ||||
Net accretion of deferred loan fees and costs
|
(88 | ) | (90 | ) | ||||
Impairment charge on investment and mortgage-backed securities
|
424 | 3,057 | ||||||
Share-based compensation expense
|
469 | 298 | ||||||
Real estate owned writedown
|
18 | 186 | ||||||
Compensation related to ESOP
|
148 | 184 | ||||||
Income from bank owned life insurance
|
(153 | ) | (156 | ) | ||||
Deferred income tax benefit
|
(185 | ) | (693 | ) | ||||
Excess tax benefit related to stock compensation
|
(70 | ) | (72 | ) | ||||
Changes in assets and liabilities which used cash:
|
||||||||
Accrued interest receivable
|
360 | (165 | ) | |||||
Prepaid expenses and other assets
|
(3,862 | ) | 256 | |||||
Accrued interest payable
|
(1,153 | ) | (371 | ) | ||||
Accounts payable and accrued expenses
|
(544 | ) | (4,796 | ) | ||||
Net cash used in operating activities
|
(1,333 | ) | (3,338 | ) | ||||
INVESTING ACTIVITIES:
|
||||||||
Purchase of investment and mortgage-backed securities held to maturity
|
(33,989 | ) | (91,992 | ) | ||||
Purchase of investment and mortgage-backed securities available for sale
|
(18,886 | ) | (10,792 | ) | ||||
Loans originated or acquired
|
(40,431 | ) | (51,453 | ) | ||||
Principal collected on loans
|
40,858 | 38,582 | ||||||
Principal payments received on investment and mortgage-backed securities:
|
||||||||
Held-to-maturity
|
64,044 | 89,079 | ||||||
Available-for-sale
|
10,542 | 6,807 | ||||||
Acquisition of FHLB stock, net
|
- | (925 | ) | |||||
Proceeds from sale of real estate owned
|
2,100 | - | ||||||
Purchases of equipment
|
(251 | ) | (16 | ) | ||||
Net cash provided by (used in) investing activities
|
23,987 | (20,710 | ) | |||||
FINANCING ACTIVITIES:
|
||||||||
Net increase in demand deposits, NOW accounts,
|
||||||||
and savings accounts
|
6,039 | 6,980 | ||||||
Net increase in certificates of deposit
|
23,976 | 48,407 | ||||||
Net repayment of advances from Federal Home Loan Bank
|
(6,033 | ) | (12,031 | ) | ||||
Increase in advances from borrowers for taxes and insurance
|
623 | 571 | ||||||
Excess tax benefit related to stock compensation
|
70 | 72 | ||||||
Acquisition of stock for Recognition and Retention Plan
|
- | (2,465 | ) | |||||
Purchase of treasury stock
|
(2,924 | ) | (9,171 | ) | ||||
Cash dividend paid
|
(1,447 | ) | (1,595 | ) | ||||
Net cash provided by financing activities
|
20,304 | 30,768 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
42,958 | 6,720 | ||||||
CASH AND CASH EQUIVALENTS—Beginning of period
|
13,669 | 9,454 | ||||||
CASH AND CASH EQUIVALENTS—End of period
|
$ | 56,627 | $ | 16,174 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
|
||||||||
INFORMATION:
|
||||||||
Interest paid on deposits and advances from Federal
|
||||||||
Home Loan Bank
|
$ | 8,271 | $ | 10,447 | ||||
Income taxes paid
|
$ | 1,431 | $ | 1,779 | ||||
SUPPLEMENTAL DISCLOSURES OF NONCASH ITEMS:
|
||||||||
Real estate acquired in settlement of loans
|
$ | 1,692 | $ | 3,142 | ||||
See notes to unaudited consolidated financial statements.
|
1.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Basis of presentation –The accompanying unaudited consolidated financial statements were prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim information and therefore do not include all the information or footnotes necessary for a complete presentation of financial condition, results of operations, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the financial statements have been included. The results for the three and nine months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2010, or any other period. These financial statements should be read in conjunction with the audited consolidated financial statements of Prudential Bancorp, Inc. of Pennsylvania (the “Company”) and the accompanying notes thereto for the fiscal year ended September 30, 2009 included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009.
|
|
Use of Estimates in the Preparation of Financial Statements—The preparation of financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. The most significant estimates and assumptions in the Company’s consolidated financial statements are recorded in the allowance for loan losses, deferred income taxes, and the fair value measurement for investment securities available for sale. Actual results could differ from those estimates.
|
|
Dividend Payable – On June 16, 2010, the Company’s Board of Directors declared a quarterly cash dividend of $.05 on the common stock of the Company payable on July 30, 2010 to the shareholders of record at the close of business on July 16, 2010 which resulted in a payable of $502,000 at June 30, 2010. A portion of the cash dividend was payable to Prudential Mutual Holding Company (the “MHC”) due to its ownership of shares of the Company’s common stock and totaled $371,000.
|
|
Employee Stock Ownership Plan – The Company maintains an employee stock ownership plan (“ESOP”) for substantially all of its full-time employees. Using a loan from the Company, the ESOP purchased 452,295 shares of the Company’s common stock for an aggregate cost of approximately $4.5 million in fiscal 2005. Shares of the Company’s common stock purchased by the ESOP are held in a suspense account until released for allocation to participants. Shares are allocated to each eligible participant based on the ratio of each such participant’s compensation, as defined in the ESOP, to the total compensation of all eligible plan participants for a given plan year. As the unearned shares are released from the suspense account as the loan is repaid, the Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they become committed to be released. To the extent that the fair value of the ESOP shares released differs from the cost of such shares, the difference is charged or credited to equity as additional paid-in capital. As of June 30, 2010, the Company had allocated a total of 107,445 shares from the suspense account to participants and committed to release an additional 11,310 shares. In addition, at such date the total number of shares of Company common stock held by the ESOP was 450,200. For the nine months ended June 30, 2010, the Company recognized $135,000 in compensation expense.
|
|
Share-Based Compensation – The Company accounts for stock-based compensation issued to employees, and, where appropriate, non-employees, based on fair value. Under fair value provisions, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the appropriate vesting period using the straight-line method. The amount of stock-based compensation recognized at any date must at least equal the portion of the grant date fair value of the award that is vested at that date and as a result it may be necessary to recognize the expense using a ratable method. Determining the fair value of stock-based awards at the date of grant requires judgment, including estimating the expected term of the stock options and the expected volatility of the Company’s stock. In addition, judgment is required in estimating the amount of stock-based awards that are expected to be forfeited. If actual results differ significantly from these estimates or different key assumptions were used, it could have a material effect on the Company’s Consolidated Financial Statements.
|
Dividends with respect to non-vested share awards granted pursuant to the Company’s Recognition and Retention Plan (“Plan”) Trust (the “Trust”) are held by the Trust for the benefit of the recipients and are paid out proportionately by the Trust to the recipients of stock awards granted pursuant to the Plan as soon as practicable after the stock awards are earned.
|
|
Treasury Stock – Stock held in treasury by the Company is accounted for using the cost method, which treats stock held in treasury as a reduction to total stockholders’ equity. During February 2010, the Company completed its seventh stock repurchase program. Additionally, the Company repurchased an additional 271,000 shares during March 2010 in a separate transaction. The average cost per share of the approximately 2.5 million shares which have been repurchased by the Company through June 30, 2010 was $12.47. The repurchased shares are available for general corporate purposes. In addition, the MHC completed its third stock purchase plan during February 2010 and in June 2010 announced the its fourth stock purchase program covering 50,000 shares. As of June 30, 2010, the MHC had purchased a total of 505,564 shares at an average cost of $10.07 per share.
|
|
Comprehensive Income (Loss) —The Company presents in the unaudited consolidated statement of changes in stockholders’ equity and comprehensive income those amounts arising from transactions and other events which currently are excluded from the statements of operations and are recorded directly to stockholders’ equity. For the nine months ended June 30, 2010 and 2009, the only components of comprehensive income were net income (loss), unrealized holding gains and losses, net of income tax expense and benefit, on available for sale securities and reclassifications related to realized loss due to other than temporary impairment, net of tax.
|
|
FHLB Stock – Federal Home Loan Bank (“FHLB”) stock is classified as a restricted equity security because ownership is restricted and there is not an established market for its resale. FHLB stock is carried at cost and is evaluated for impairment when certain conditions warrant further consideration. While the FHLB has recognized losses in recent periods, it is currently not probable that the Company will not realize its cost basis since the FHLB has maintained capital levels in excess of regulatory requirements. Management concluded that no impairment existed as of June 30, 2010.
|
|
Recent Accounting Pronouncements – In December 2009, the Financial Accounting Standards Board (“FASB”) issued ASU 2009-16, Accounting for Transfer of Financial Assets. ASU 2009-16 provides guidance to improve the relevance, representational faithfulness, and comparability of the information that an entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. ASU 2009-16 is effective for annual periods beginning after November 15, 2009 and for interim periods within those fiscal years. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.
|
|
In September 2009, the FASB issued new guidance impacting Topic 820 “Fair Value Measurement and Disclosures”. This creates a practical expedient to measure the fair value of an alternative investment that does not have a readily determinable fair value. This guidance also requires certain additional disclosures. This guidance is effective for interim and annual periods ending after December 15, 2009. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operation.
|
|
In January 2010, the FASB issued ASU 2010-04, Accounting for Various Topics – Technical Corrections to SEC Paragraphs. ASU 2010-04 makes technical corrections to existing SEC guidance including the following topics: accounting for subsequent investments, termination of an interest rate swap, issuance of financial statements - subsequent events, use of residential method to value acquired assets other than goodwill, adjustments in assets and liabilities for holding gains and losses, and selections of discount rate used for measuring defined benefit obligation. ASU 2010-04 became effective January 15, 2010. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operation.
|
In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, that describes amendments that require some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in ASC Topic 820-10. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting. The amendments are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.
|
|
In February 2010, the FASB issued ASU 2010-08, Technical Corrections to Various Topics. ASU 2010-08 clarifies guidance on embedded derivatives and hedging. ASU 2010-08 is effective for interim and annual periods beginning after December 15, 2009. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operation.
|
|
In March 2010, the FASB issued ASU 2010-11, Derivatives and Hedging. ASU 2010-11 provides clarification and related additional examples to improve financial reporting by resolving potential ambiguity about the breadth of the embedded credit derivative scope exception in ASC 815-15-15-8. ASU 2010-11 is effective at the beginning of the first fiscal quarter beginning after June 15, 2010. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.
|
|
In April 2010, the FASB issued ASU 2010-13, Compensation – Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. ASU 2010-13 provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. ASU 2010-13 is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2010 and is not expected to have a significant impact on the Company’s financial statements.
|
|
In April 2010, the FASB issued ASU 2010-18, Receivables (Topic 310): Effect of a Loan Modification When the Loan is a Part of a Pool That is Accounted for as a Single Asset – a consensus of the FASB Emerging Issues Task Force. ASU 2010-18 clarifies the treatment for a modified loan that was acquired as part of a pool of assets. Refinancing or restructuring the loan does not make it eligible for removal from the pool, the FASB said. The amendment will be effective for loans that are part of an asset pool and are modified during financial reporting periods that end July 15, 2010 or later. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.
|
|
In July 2010, FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The Company is currently evaluating the impact the adoption of this guidance will have on the Company’s financial position or results of operations.
|
2.
|
EARNINGS PER SHARE
|
Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding, net of any treasury shares, during the period. Diluted earnings per share is calculated by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding, net of any treasury shares, after consideration of the potential dilutive effect of common stock equivalents ("CSEs"), based upon the treasury stock method using an average market price for the period.
|
|
The calculated basic and diluted earnings per share are as follows:
|
Quarter Ended June 30,
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Basic
|
Diluted
|
Basic
|
Diluted
|
|||||||||||||
(Dollars in Thousands Except Per Share Data)
|
||||||||||||||||
Net income (loss)
|
$ | 1,279 | $ | 1,279 | $ | (226 | ) | $ | (226 | ) | ||||||
Weighted average shares outstanding
|
9,502,722 | 9,502,722 | 10,359,243 | 10,359,243 | ||||||||||||
Effect of common stock equivalents
|
- | 88,742 | - | 200,852 | ||||||||||||
Adjusted weighted average shares used in earnings
|
||||||||||||||||
per share computation
|
$ | 9,502,722 | $ | 9,591,464 | $ | 10,359,243 | $ | 10,560,095 | ||||||||
Income (loss) per share - basic and diluted
|
$ | 0.13 | $ | 0.13 | $ | (0.02 | ) | $ | (0.02 | ) |
Nine Months Ended June 30,
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Basic
|
Diluted
|
Basic
|
Diluted
|
|||||||||||||
(Dollars in Thousands Except Per Share Data)
|
||||||||||||||||
Net income (loss)
|
$ | 2,807 | $ | 2,807 | $ | (1,267 | ) | $ | (1,267 | ) | ||||||
Weighted average shares outstanding
|
9,648,737 | 9,648,737 | 10,531,671 | 10,531,671 | ||||||||||||
Effect of common stock equivalents
|
- | 127,041 | - | 24,568 | ||||||||||||
Adjusted weighted average shares used in earnings
|
||||||||||||||||
per share computation
|
$ | 9,648,737 | $ | 9,775,778 | $ | 10,531,671 | $ | 10,556,239 | ||||||||
Income (loss) per share - basic and diluted
|
$ | 0.29 | $ | 0.29 | $ | (0.12 | ) | $ | (0.12 | ) |
3.
|
INVESTMENT AND MORTGAGE-BACKED SECURITIES
|
The amortized cost and fair value of investment and mortgage-backed securities, with gross unrealized gains and losses, are as follows:
|
|
June 30, 2010
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Value
|
|||||||||||||
Securities held to maturity:
|
(Dollars in Thousands)
|
|||||||||||||||
U.S. Government agency obligations
|
$ | 101,245 | $ | 1,884 | $ | - | $ | 103,129 | ||||||||
Municipal obligations
|
475 | 1 | - | 476 | ||||||||||||
Mortgage-backed securities - U.S.
|
||||||||||||||||
Government agencies
|
28,382 | 2,211 | - | 30,593 | ||||||||||||
Total securities held to maturity
|
$ | 130,102 | $ | 4,096 | $ | - | $ | 134,198 | ||||||||
Securities available for sale:
|
||||||||||||||||
U.S. Government agency obligations
|
$ | 10,994 | $ | 218 | $ | - | $ | 11,212 | ||||||||
Mortgage-backed securities - U.S.
|
||||||||||||||||
Government agencies
|
51,567 | 3,059 | (13 | ) | 54,613 | |||||||||||
Mortgage-backed securities - Non-agency
|
8,585 | 140 | (1,668 | ) | 7,057 | |||||||||||
Total debt securities
|
71,146 | 3,417 | (1,681 | ) | 72,882 | |||||||||||
FHLMC preferred stock
|
11 | - | - | 11 | ||||||||||||
Total securities available for sale
|
$ | 71,157 | $ | 3,417 | $ | (1,681 | ) | $ | 72,893 |
September 30, 2009
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Value
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Securities Held to Maturity:
|
||||||||||||||||
U.S. Government agency obligations
|
$ | 123,923 | $ | 881 | $ | (645 | ) | $ | 124,159 | |||||||
Municipal obligations
|
1,970 | 6 | - | 1,976 | ||||||||||||
Mortgage-backed securities - U.S.
|
||||||||||||||||
Government agencies
|
34,233 | 1,600 | - | 35,833 | ||||||||||||
Total securities held to maturity
|
$ | 160,126 | $ | 2,487 | $ | (645 | ) | $ | 161,968 | |||||||
Securities Available for Sale:
|
||||||||||||||||
U.S. Government agency obligations
|
$ | 2,000 | $ | - | $ | (18 | ) | $ | 1,982 | |||||||
Mortgage-backed securities - U.S.
|
||||||||||||||||
Government agencies
|
50,659 | 2,009 | (57 | ) | 52,611 | |||||||||||
Mortgage-backed securities - Non-agency
|
10,325 | 6 | (2,564 | ) | 7,767 | |||||||||||
Total debt securities
|
62,984 | 2,015 | (2,639 | ) | 62,360 | |||||||||||
FHLMC preferred stock
|
16 | 31 | - | 47 | ||||||||||||
Total securities available for sale
|
$ | 63,000 | $ | 2,046 | $ | (2,639 | ) | $ | 62,407 |
The following table shows the gross unrealized losses and related fair values of the Company’s investment securities, aggregated by investment category and length of time that individual securities had been in a continuous loss position at June 30, 2010:
|
Less than 12 months
|
More than 12 months
|
Total
|
||||||||||||||||||||||
Gross
|
Gross
|
Gross
|
||||||||||||||||||||||
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
|||||||||||||||||||
Losses
|
Value
|
Losses
|
Value
|
Losses
|
Value
|
|||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Securities Available for Sale:
|
||||||||||||||||||||||||
Mortgage-backed securities - U.S.
|
||||||||||||||||||||||||
Government agencies
|
$ | (13 | ) | $ | 1,924 | $ | - | $ | - | $ | (13 | ) | $ | 1,924 | ||||||||||
Mortgage-backed securities - Non-agency
|
(33 | ) | 204 | (1,635 | ) | 4,480 | (1,668 | ) | 4,684 | |||||||||||||||
Total securities available for sale
|
(46 | ) | 2,128 | (1,635 | ) | 4,480 | (1,681 | ) | 6,608 |
All equity securities, U.S. Government agency obligations, municipal bonds and mortgage-backed securities held to maturity were in an unrealized gain position as of June 30, 2010.
|
|
The following table shows the gross unrealized losses and related fair values of the Company’s investment securities, aggregated by investment category and length of time that individual securities had been in a continuous loss position at September 30, 2009:
|
Less than 12 months
|
More than 12 months
|
Total
|
||||||||||||||||||||||
Gross
|
Gross
|
Gross
|
||||||||||||||||||||||
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
|||||||||||||||||||
Losses
|
Value
|
Losses
|
Value
|
Losses
|
Value
|
|||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Securities Held to Maturity:
|
||||||||||||||||||||||||
U.S. Government and agency obligations
|
$ | (643 | ) | $ | 52,854 | $ | (2 | ) | $ | 1,993 | $ | (645 | ) | $ | 54,847 | |||||||||
Total securities held to maturity
|
(643 | ) | 52,854 | (2 | ) | 1,993 | (645 | ) | 54,847 | |||||||||||||||
Securities Available for Sale:
|
||||||||||||||||||||||||
U.S. Government and agency obligations
|
- | - | (18 | ) | 1,982 | (18 | ) | 1,982 | ||||||||||||||||
Mortgage-backed securities - U.S.
|
||||||||||||||||||||||||
Government agencies
|
(48 | ) | 2,886 | (9 | ) | 400 | (57 | ) | 3,286 | |||||||||||||||
Mortgage-backed securities - Non-agency
|
(1,310 | ) | 2,757 | (1,254 | ) | 4,381 | (2,564 | ) | 7,138 | |||||||||||||||
Total securities available for sale
|
(1,358 | ) | 5,643 | (1,281 | ) | 6,763 | (2,639 | ) | 12,406 | |||||||||||||||
Total
|
$ | (2,001 | ) | $ | 58,497 | $ | (1,283 | ) | $ | 8,756 | $ | (3,284 | ) | $ | 67,253 |
All equity securities, municipal bonds and mortgage-backed securities held to maturity were in an unrealized gain position as of September 30, 2009.
|
|
Management has reviewed its investment securities and determined that for the nine months ended June 30, 2010 unrealized losses of $424,000 on a pre-tax basis for certain securities in the non-agency mortgage-backed portfolio classified as available for sale were deemed other than temporary.
|
|
Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company determines whether the unrealized losses are temporary. The evaluation is based upon factors such as the creditworthiness of the issuers/guarantors, the underlying collateral, if applicable, and the continuing performance of the securities. Management also evaluates other facts and circumstances that may be indicative of an OTTI condition. This includes, but is not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost, and near-term prospects of the issuer.
|
The Company assesses whether the credit loss existed by considering whether (1) the Company has the intent to sell the security, (2) it is more likely than not that it will be required to sell the security before recovery, or (3) it does not expect to recover the entire amortized cost basis of the security. The Company bifurcates the OTTI impact on impaired securities where impairment in value was deemed to be other than temporary between the component representing credit loss and the component representing loss related to other factors. The portion of the fair value decline attributable to credit loss must be recognized through a charge to earnings. The credit component is determined by comparing the present value of the cash flows expected to be collected, discounted at the rate in effect before recognizing any OTTI with the amortized cost basis of the debt security. The Company uses the cash flow expected to be realized from the security, which includes assumptions about interest rates, timing and severity of defaults, estimates of potential recoveries, the cash flow distribution from the bond indenture and other factors, then applies a discount rate equal to the effective yield of the security. The difference between the present value of the expected cash flows and the amortized book value is considered a credit loss. The fair market value of the security is determined using the same expected cash flows; the discount rate is a rate the Company determines from the open market and other sources as appropriate for the security. The difference between the fair market value and the security’s remaining amortized cost is recognized in other comprehensive income.
|
|
The following is a rollforward for the nine months ended June 30, 2010 of the amounts recognized in earnings related to credit losses on securities which the Company has recorded OTTI charges through earnings and other comprehensive income.
|
(Dollars in thousands)
|
||||
Credit component of OTTI as of October 1, 2009
|
$ | 2,859 | ||
Additions for credit-related OTTI charges on previously unimpaired securities
|
7 | |||
Reduction for securities liquidated
|
(106 | ) | ||
Additional increases as a result of impairment charges recognized on investments for which an OTTI charge was previously recognized
|
417 | |||
Credit component of OTTI as of June 30, 2010
|
$ | 3,177 |
United States Treasury and Government Sponsored Enterprise and Agency Notes - The Company’s investments in the preceding table in United States Government sponsored enterprise notes consist of debt obligations of the Federal Home Loan Bank (“FHLB”), Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”), and Federal Farm Credit System (“FFCS”). FHLB debt securities are rated by both Moody's and Standard & Poor's. All long-term debt issued by the FHLB banks is rated Aaa by Moody's and AAA by Standard and Poor's. All short-term debt is rated “Prime-1” by Moody's and A-1+ by Standard & Poor's. FNMA and FHLMC senior debt securities are also currently rated "Aaa" by Moody’s , short-term debt is rated "Prime-1", subordinated debt is rated "Aa2" and preferred stock ratings are currently "Aa3" with "Stable" outlooks. Farm Credit Designated Bonds are high credit quality, liquid and callable securities. None of U.S. treasury and government agency obligations were in an unrealized loss position as of June 30, 2010.
|
|
State and Municipal Obligations – The municipal bonds consist of obligations of entities located in Pennsylvania. None of the municipal bonds were in an unrealized loss position as of June 30, 2010.
|
US Agency Issued Mortgage-Backed Securities - At June 30, 2010, the gross unrealized loss in U.S. agency issued mortgage-backed securities in the category of less than 12 months was $13,000 or 0.03% from the Company’s amortized cost basis and consisted of two securities. There were no gross unrealized losses in the category of more than 12 months. These securities represent asset-backed issues that are issued or guaranteed by a U.S. Government sponsored agency or carry the full faith and credit of the United States through a government agency and are currently rated AAA by at least one bond credit rating agency. In September 2008, the U.S. Department of the Treasury announced the establishment of the Government-Sponsored Enterprise Credit Facility to ensure credit availability to FNMA and FHLMC. The Treasury also entered into senior preferred stock purchase agreements, which ensure that each entity maintains a positive net worth and effectively support the holders of debt and mortgage-backed securities (“MBS”) issued or guaranteed by FNMA and FHLMC. The Agreements enhance market stability by providing additional security to debt holders, senior and subordinated, thereby alleviating the concern of the credit driven impairment of the securities. The unrealized loss on these debt securities relates principally to the changes in market interest rates and a lack of liquidity currently in the financial markets and are not as a result of projected shortfall in cash flows. In addition, the Company does not intend to sell the securities and it is more likely than not that the Company will not be required to sell the securities. As such, the Company expects to recover the entire amortized cost basis of the securities. As a result, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2010.
|
|
Non-Agency Issued Mortgage-Backed Securities and Collateralized Mortgage Obligations - This portfolio was acquired through the redemption-in-kind of a mutual fund during 2008 and includes 70 collateralized mortgage obligations (“CMO”) and MBS securities issued by large commercial financial institutions. For the nine months ended June 30, 2010 management recognized an OTTI charge related to a portion of the portfolio securities in the amount of $467,000 on a pre-tax basis due to the fact that, in management’s judgment, the credit quality of the collateral pool underlying such securities had deteriorated during recent periods to the point that full recovery of the entire amortized cost of the investment was considered to be uncertain. This portfolio consists primarily of securities with underlying collateral of Alt-A loans and those collateralized by home equity lines of credit and other receivables as well as whole loans with more significant exposure to the declining markets accountable for the balance of the OTTI charges. For the overall portfolio of the securities, there was exposure to the declining real estate markets such as California, Nevada, Arizona and Florida and consequently, an additional OTTI charge was deemed to be warranted as of June 30, 2010. Of the recorded charge, a total of $424,000 was concluded to be credit related and recognized currently in earnings and $43,000 was concluded to be attributable to other factors and recognized in other accumulated comprehensive income.
|
|
As of June 30, 2010, with the exception of securities discussed above, there are no securities for which the Company currently believes it is not probable that it will collect all amounts due according to the contractual terms of the investment. Management concluded that an other-than-temporary impairment did not exist and the decline in value was attributed to the illiquidity in the financial markets. With respect to the $1.7 million in gross unrealized losses related to this portfolio, 41 securities had been in a loss position for longer than 12 months while six securities had been in a loss position for less than 12 months. However, the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities.
|
|
The amortized cost and fair value of debt securities, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
June 30, 2010
|
||||||||||||||||
Held to Maturity
|
Available for Sale
|
|||||||||||||||
Amortized
|
Fair
|
Amortized
|
Fair
|
|||||||||||||
Cost
|
Value
|
Cost
|
Value
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Due within one year
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Due after one through five years
|
475 | 476 | - | - | ||||||||||||
Due after five through ten years
|
25,260 | 26,034 | 6,996 | 7,165 | ||||||||||||
Due after ten years
|
75,985 | 77,095 | 3,998 | 4,047 | ||||||||||||
Total
|
$ | 101,720 | $ | 103,605 | $ | 10,994 | $ | 11,212 |
The maturity table above excludes mortgage-backed securities because the contractual maturities are not indicative of actual maturities due to significant prepayments.
|
|
4.
|
LOANS RECEIVABLE
|
Loans receivable consist of the following:
|
June 30,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
(Dollars in Thousands)
|
||||||||
One-to-four family residential
|
$ | 197,763 | $ | 201,396 | ||||
Multi-family residential
|
4,046 | 4,178 | ||||||
Commercial real estate
|
19,531 | 19,907 | ||||||
Construction and land development
|
41,662 | 36,764 | ||||||
Commercial business
|
715 | 2,232 | ||||||
Consumer
|
600 | 586 | ||||||
Total loans
|
264,317 | 265,063 | ||||||
Undisbursed portion of loans-in-process
|
(8,212 | ) | (6,281 | ) | ||||
Deferred loan costs, net
|
599 | 644 | ||||||
Allowance for loan losses
|
(2,536 | ) | (2,732 | ) | ||||
Net loans
|
$ | 254,168 | $ | 256,694 |
The following schedule summarizes the changes in the allowance for loan losses:
|
Nine Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars in Thousands)
|
||||||||
Balance, beginning of period
|
$ | 2,732 | $ | 1,591 | ||||
Provision for loan losses
|
495 | 1,173 | ||||||
Charge-offs
|
(691 | ) | (262 | ) | ||||
Recoveries
|
- | - | ||||||
Balance, end of period
|
$ | 2,536 | $ | 2,502 |
The Company established a provision for loan losses of $110,000 for the quarter ended June 30, 2010 and $495,000 for the nine month period ended June 30, 2010 as compared to $810,000 and $1.2 million for the comparable periods in 2009. The allowance for loan losses totaled $2.5 million, or 1.0% of total loans and 98.5% of non-performing loans at June 30, 2010.
|
|
At June 30, 2010, the Company’s non-performing assets totaled $5.8 million or 1.1% of total assets as compared to $5.6 million or 1.1% of total assets at September 30, 2009. Non-performing assets consisted of four commercial real estate loans totaling $1.0 million, 12 one-to four-family residential mortgage loans totaling $1.3 million, one construction loan totaling $206,000 and six real estate owned properties totaling $3.2 million. The largest real estate owned property consists of a single-family residence and an adjacent lot with a book value of $1.2 million. This property is actively being marketed for sale. Four of the real estate owned properties totaling $1.7 million consist of four townhouses in the same development project. These properties are being rented at this time at sufficient levels to cover the Company’s cost of operating the properties. The Company anticipates to be marketing the houses for sale when market conditions improve.
|
|
An impaired loan generally is one for which it is probable, based on current information, that the lender will not collect all the amounts due under the contractual terms of the loan. Large groups of smaller balance, homogeneous loans are collectively evaluated for impairment. Loans collectively evaluated for impairment include smaller balance commercial real estate loans, residential real estate loans and consumer loans. These loans are evaluated as a group because they have similar characteristics and performance experience. Larger commercial real estate, construction and commercial business loans are individually evaluated for impairment.
|
|
As of June 30, 2010 and September 30, 2009, the recorded investment in loans that are considered to be impaired was as follows:
|
June 30,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Impaired loans with related allowance
|
$ | 1,024 | $ | 1,661 | ||||
Impaired loans without related allowance
|
$ | - | $ | - | ||||
Related allowance for loan losses
|
$ | 286 | $ | 873 |
Other data for impaired loans as of June 30, 2010 and 2009 is as follow:
|
For the Nine Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Average impaired loans
|
$ | 1,235 | $ | 3,678 | ||||
Interest income recognized on impaired loans
|
$ | 22 | $ | 54 |
5.
|
DEPOSITS
|
Deposits consist of the following major classifications:
|
June 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
|||||||||||||||
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Money market deposit accounts
|
$ | 76,419 | 16.5 | % | $ | 75,349 | 17.4 | % | ||||||||
NOW accounts
|
31,359 | 6.8 | 29,869 | 6.9 | ||||||||||||
Passbook, club and statement savings
|
70,447 | 15.2 | 66,968 | 15.5 | ||||||||||||
Certificates maturing in six months or less
|
74,988 | 16.2 | 120,636 | 27.9 | ||||||||||||
Certificates maturing in more than six months
|
209,176 | 45.3 | 139,552 | 32.3 | ||||||||||||
Total
|
$ | 462,389 | 100.0 | % | $ | 432,374 | 100.0 | % |
Certificates of $100,000 and over totaled $108.5 million as of June 30, 2010 and $91.9 million as of September 30, 2009.
|
|
6.
|
INCOME TAXES
|
Items that gave rise to significant portions of deferred income taxes are as follows:
|
June 30,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
Deferred tax assets:
|
(Dollars in thousands)
|
|||||||
Unrealized loss on available for sale securities
|
$ | - | $ | 201 | ||||
Deposit premium
|
131 | 167 | ||||||
Allowance for loan losses
|
910 | 974 | ||||||
Real estate owned expenses
|
274 | 469 | ||||||
Nonaccrual interest
|
- | 15 | ||||||
Accrued vacation
|
54 | 44 | ||||||
Capital loss carryforward
|
1,873 | 1,873 | ||||||
Impairment loss
|
1,507 | 1,363 | ||||||
Split dollar life insurance
|
80 | 84 | ||||||
Post-retirement benefits
|
150 | 154 | ||||||
Employee benefit plans
|
252 | 246 | ||||||
Total deferred tax assets
|
5,231 | 5,590 | ||||||
Valuation allowance
|
(2,220 | ) | (2,551 | ) | ||||
Total deferred tax assets, net of valuation allowance
|
3,011 | 3,039 | ||||||
Deferred tax liabilities:
|
||||||||
Unrealized gain on available for sale securities
|
591 | - | ||||||
Property
|
478 | 480 | ||||||
Mortgage servicing rights
|
2 | 4 | ||||||
Deferred loan fees
|
204 | 212 | ||||||
Total deferred tax liabilities
|
1,275 | 696 | ||||||
Net deferred tax asset
|
$ | 1,736 | $ | 2,343 |
The Company establishes a valuation allowance for deferred tax assets when management believes that the deferred tax assets are not likely to be realized either through a carry back to taxable income in prior years, future reversals of existing taxable temporary differences, and, to a lesser extent, future taxable income. The tax deduction generated by the redemption in kind of the shares of the mutual fund and the subsequent impairment charge on the assets acquired through the redemption in kind are considered a capital loss and can only be utilized to the extent of capital gains over a five year period, resulting in the establishment of a valuation allowance for the carryforward period which expires beginning in 2013. The valuation allowance totaled $2.2 million at June 30, 2010. The gross deferred asset related to impairment losses decreased by $144,000 during the nine months ended June 30, 2010 while the corresponding valuation allowance decreased by $331,000, resulting in an additional income tax benefit of $475,000 corresponding to the increase in value of available for sale mortgage-backed securities which may be sold in the future to generate capital gains.
|
|
There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Unaudited Consolidated Statement of Operations. During 2009, the Internal Revenue Service concluded an audit of the Company’s tax returns for the year ended September 30, 2007 in which there was no change necessary to the Company’s tax liability. The Company’s federal and state income tax returns for taxable years through September 30, 2006 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.
|
|
7.
|
STOCK COMPENSATION PLANS
|
The Company maintains a Recognition and Retention Plan (“RRP”) which is administered by a committee of the Board of Directors. The RRP provides for the grant of shares of common stock of the Company to certain officers, employees and directors of the Company. In order to fund the grant of shares under the RRP, the RRP Trust purchased 226,148 shares of the Company’s common stock in the open market at a cost of approximately $2.5 million, at an average price per share of $10.85. The Company made sufficient contributions to the RRP Trust to fund these purchases. No additional purchases are expected to be made by the RRP Trust under this plan. Grants covering 178,882 shares have been awarded as part of the RRP; the remaining shares in the RRP Trust will be available for future awards. Shares subject to awards under the RRP will generally vest at the rate of 20% per year over five years. As of June 30, 2010, awards covering 34,646 shares were vested and no awards had been forfeited.
|
|
Compensation expense related to the shares subject to awards granted is recognized ratably over the five-year vesting period in an amount which totals the fair market value as of the grant date. During the three months and nine months ended June 30, 2010, $97,000 and $290,000, respectively, was recognized in compensation expense for the RRP. Tax benefits of $33,000 and $54,000, respectively, were recognized during the three and nine months ended June 30, 2010. During the three and nine months ended June 30, 2009, approximately $97,000 and $184,000, respectively, was recognized in compensation expense for the RRP. Tax benefits of $33,000 and $63,000, respectively, were recognized during the three and nine months ended June 30, 2009. At June 30, 2010, approximately $1.4 million in additional compensation expense for the shares awarded to date under the terms of the RRP remained unrecognized which is expected to be recognized over approximately the next 3.5 years.
|
A summary of the Company’s non-vested stock award activity for the six months ended June 30, 2010 is presented in the following table:
|
Nine Months Ended
June 30, 2010
|
||||||||
Number of
Shares
|
Weighted Average
Grant Date Fair
Value
|
|||||||
Nonvested stock awards at beginning of fiscal year
|
173,228 | $ | 11.17 | |||||
Issued
|
5,654 | 9.53 | ||||||
Vested
|
(34,646 | ) | 11.17 | |||||
Nonvested stock awards at the end of the period
|
144,236 | $ | 11.11 |
The Company also maintains a Stock Option Plan. The Stock Option Plan authorizes the grant of stock options to officers, employees and directors of the Company to acquire shares of common stock with an exercise price at least equal to the market value of the common stock on the grant date. Options will generally become vested and exercisable at the rate of 20% per year over five years and are generally exercisable for a period of ten years after the grant date. A total of 565,369 shares of common stock are available for future issuance pursuant to the Stock Option Plan. As of June30, 2010, 315,194 incentive stock options and 127,206 non-qualified stock options have been awarded under the plan. As of June 30, 2010, options covering 85,653 shares were vested and exercisable, while none had been forfeited.
|
|
A summary of the status of the Company’ stock options under the Stock Option Plan as of June 30, 2010 and changes during the nine month period ended June 30, 2010 are presented below:
|
Nine Months Ended
June 30, 2010
|
||||||||
Number of
Shares
|
Weighted Average
Exercise Price
|
|||||||
Outstanding at beginning of fiscal year
|
428,266 | $ | 11.17 | |||||
Granted
|
14,134 | 9.53 | ||||||
Exercised
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Outstanding at the end of the period
|
442,400 | $ | 11.12 | |||||
Exercisable at the end of the period
|
85,653 | $ | 11.17 |
The weighted average remaining contractual term was approximately 8.5 years for options outstanding as of June 30, 2010.
|
|
The estimated fair value of options granted during fiscal 2010 was $2.76 per share. The fair value was estimated on the date of grant in accordance with FASB ASC Topic 718 using the Black-Scholes pricing model with the following weighted average assumptions used:
|
June 30, 2010
|
|
Dividend yield
|
2.10%
|
Expected volatility
|
28.95%
|
Risk-free interest rate
|
3.10%
|
Expected life of options
|
6.5 years
|
Compensation expense related to the Stock Option Plan is recognized ratably over the five-year vesting period in an amount which totals the fair value at the date of grant. During the three months and nine months ended June 30, 2010, $61,000 and $181,000, respectively, was recognized in compensation expense. A tax benefit of $6,000 and $17,000, respectively, was recognized during the three and nine months ended June 30, 2010. During the three and nine months ended June 30, 2009, $59,000 and $115,000, respectively, was recognized in compensation expense for the Stock Option Plan. Tax benefits of $5,000 and $10,000, respectively, were recognized during the three and nine months ended June 30, 2009. At June 30, 2010, approximately $863,000 in additional compensation expense for options granted to date pursuant to the terms of the Stock Option Plan remained unrecognized. The weighted average period over which this expense will be recognized is approximately 3.5 years.
|
|
8.
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
At June 30, 2010, the Company had $7.3 million in outstanding commitments to originate fixed and variable-rate loans with market interest rates ranging from 5.00% to 7.00%. At September 30, 2009, the Company had $11.0 million in outstanding commitments to originate fixed and variable-rate loans with market interest rates ranging from 5.00% to 6.50%.
|
|
The aggregate undisbursed portion of loans-in-process amounted to $8.2 million and $6.3 million, at June 30, 2010 and September 30, 2009, respectively.
|
|
The Company also had commitments under unused lines of credit of $7.3 million and $7.7 million at June 30, 2010 and September 30, 2009, respectively, and letters of credit outstanding of $676,000 and $621,000 at June 30, 2010 and September 30, 2009, respectively.
|
|
Among the Company’s contingent liabilities are exposures to limited recourse arrangements with respect to the Company’s sales of whole loans and participation interests. At June 30, 2010, the exposure, which represents a portion of credit risk associated with the interests sold, amounted to $64,000. This exposure is for the life of the related loans and payables, on our proportionate share, as actual losses are incurred.
|
|
The Company is involved in various legal proceedings occurring in the ordinary course of business. Management of the Company, based on discussions with litigation counsel, believes that such proceedings will not have a material adverse effect on the financial condition, operations or cash flows of the Company. There can be no assurance that any of the outstanding legal proceedings to which the Company is a party will not be decided adversely to the Company's interests and have a material adverse effect on the financial condition and operations of the Company.
|
|
9.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
The fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data to develop the estimates of fair value.
|
Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
|
June 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
Amount
|
Value
|
Amount
|
Value
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 56,627 | $ | 56,627 | $ | 13,669 | $ | 13,669 | ||||||||
Investment and mortgage-backed
|
||||||||||||||||
securities held to maturity
|
130,102 | 134,198 | 160,126 | 161,968 | ||||||||||||
Investment securities and mortgage-
|
||||||||||||||||
backed securities available for sale
|
72,893 | 72,893 | 62,407 | 62,407 | ||||||||||||
Loans receivable, net
|
254,168 | 261,458 | 256,694 | 262,000 | ||||||||||||
Accrued interest receivable:
|
||||||||||||||||
Loans receivable
|
1,428 | 1,428 | 1,419 | 1,419 | ||||||||||||
Mortgage-backed securities
|
351 | 351 | 390 | 390 | ||||||||||||
Investment securities
|
1,166 | 1,166 | 1,496 | 1,496 | ||||||||||||
Federal Home Loan Bank stock
|
3,545 | 3,545 | 3,545 | 3,545 | ||||||||||||
Liabilities:
|
||||||||||||||||
NOW accounts
|
31,359 | 31,359 | 29,869 | 29,869 | ||||||||||||
Money market deposit accounts
|
76,419 | 76,419 | 75,349 | 75,349 | ||||||||||||
Passbook, club and statement
|
||||||||||||||||
savings accounts
|
70,447 | 70,447 | 66,968 | 66,968 | ||||||||||||
Certificates of deposit
|
284,164 | 290,190 | 260,188 | 266,192 | ||||||||||||
Advances from Federal Home
|
||||||||||||||||
Loan Bank
|
13,626 | 13,757 | 19,659 | 20,294 | ||||||||||||
Accrued interest payable
|
2,310 | 2,310 | 3,463 | 3,463 |
Cash and Cash Equivalents—For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value.
|
|
Investments and Mortgage-Backed Securities—The fair value of investment securities and mortgage-backed securities is based on quoted market prices, dealer quotes, and prices obtained from independent pricing services that may be derivable from observable and unobservable market inputs.
|
|
Loans Receivable—The fair value of loans is estimated based on present value using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
|
|
Accrued Interest Receivable – For accrued interest receivable, the carrying amount is a reasonable estimate of fair value.
|
|
Federal Home Loan Bank (FHLB) Stock—Although FHLB stock is an equity interest in an FHLB, it is carried at cost because it does not have a readily determinable fair value as its ownership is restricted and it lacks a market. The estimated fair value approximates the carrying amount.
|
|
NOW Accounts, Money Market Deposit Accounts, Passbook Accounts, Club Accounts, Statement Savings Accounts, and Certificates of Deposit—The fair value of passbook accounts, club accounts, statement savings accounts, NOW accounts, and money market deposit accounts is the amount reported in the financial statements. The fair value of certificates of deposit is based on a present value estimate using rates currently offered for deposits of similar remaining maturity.
|
|
Advances from Federal Home Loan Bank—The fair value of advances from FHLB is the amount payable on demand at the reporting date.
|
Accrued Interest Payable – For accrued interest payable, the carrying amount is a reasonable estimate of fair value.
|
|
Commitments to Extend Credit and Letters of Credit—The majority of the Bank’s commitments to extend credit and letters of credit carry current market interest rates if converted to loans. Because commitments to extend credit and letters of credit are generally unassignable by either the Bank or the borrower, they only have value to the Bank and the borrower. The estimated fair value approximates the recorded deferred fee amounts, which are not significant.
|
|
10.
|
FAIR VALUE MEASUREMENT
|
The fair value estimates presented herein are based on pertinent information available to management as of June 30, 2010 and September 30, 2009, respectively. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.
|
|
FASB ASC Topic 820 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.
|
|
The three broad levels defined by FASB ASC Topic 820 hierarchy are as follows:
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities.
|
|
Level 2
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
|
Those assets which will continue to be measured at fair value on a recurring basis as of June 30, 2010 are as follows:
|
|
Category Used for Fair Value Measurement
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Securities available for sale:
|
||||||||||||||||
U.S. Government agency obligations
|
$ | - | $ | 11,212 | $ | - | $ | 11,212 | ||||||||
Mortgage-backed securities - U.S. Government agencies
|
- | 54,613 | - | $ | 54,613 | |||||||||||
Mortgage-backed securities - Non-agency
|
- | 6,982 | 75 | 7,057 | ||||||||||||
FNMA and FHLMC preferred stock
|
11 | - | - | 11 | ||||||||||||
Total
|
$ | 11 | $ | 72,807 | $ | 75 | $ | 72,893 |
Those assets which continued to be measured at fair value on a recurring basis as of September 30, 2009 were as follows:
|
Category Used for Fair Value Measurement
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Securities available for sale:
|
||||||||||||||||
U.S. Government agency obligations
|
$ | - | $ | 1,982 | $ | - | $ | 1,982 | ||||||||
Mortgage-backed securities - U.S. Government agencies
|
- | 52,611 | - | $ | 52,611 | |||||||||||
Mortgage-backed securities - Non-agency
|
- | 7,685 | 82 | 7,767 | ||||||||||||
FNMA and FHLMC preferred stock
|
47 | - | - | 47 | ||||||||||||
Total
|
$ | 47 | $ | 62,278 | $ | 82 | $ | 62,407 |
As a result of general market conditions and the illiquidity in the market for certain non-agency mortgage-backed securities, management deemed it necessary to classify certain securities as Level 3 assets. These securities were priced by a third party specialist utilizing recent prices for similar securities as inputs in the standard discounted cash flow model, adjusted for assumptions unobservable in the market.
|
|
The following provides details of the fair value measurement activity for Level 3 assets during the three months ended June 30, 2010:
|
Measurements Using Significant
Unobservable Inputs
(Level 3)
|
||||
Non-agency mortgage-
backed securities
|
||||
(Dollars in Thousands)
|
||||
Balance, April 1, 2010:
|
$ | 77 | ||
Total (losses) gains, realized/unrealized:
|
||||
Included in earnings
|
(5 | ) | ||
Included in accumulated other comprehensive loss
|
9 | |||
Purchases, maturities, prepayments and calls, net
|
(6 | ) | ||
Transfers from Level 3, net
|
- | |||
Balance, June 30, 2010:
|
$ | 75 |
The following provides details of the fair value measurement activity for Level 3 assets during the nine months ended June 30, 2010:
|
Measurements Using Significant
Unobservable Inputs
(Level 3)
|
||||
Non-agency mortgage-
backed securities
|
||||
(Dollars in Thousands)
|
||||
Balance, October 1, 2009:
|
$ | 82 | ||
Total (losses) gains, realized/unrealized:
|
||||
Included in earnings
|
(11 | ) | ||
Included in accumulated other comprehensive loss
|
25 | |||
Purchases, maturities, prepayments and calls, net
|
(21 | ) | ||
Transfers from Level 3, net
|
- | |||
Balance, June 30, 2010:
|
$ | 75 |
Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The Company measures impaired loans and loans or properties securing loans transferred into real estate owned at fair value on a non-recurring basis.
|
|
Impaired Loans
|
|
The Company considers loans to be impaired when it becomes probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement. Under ASC 310-10-35 Receivables-Subsequent Measurement, collateral dependent impaired loans are based on the fair value of the collateral which is based on appraisals. In some cases, adjustments are made to the appraised values for various factors including age of the appraisal, age of the comparables included in the appraisal, and known changes in the market and in the collateral These adjustments are based upon unobservable inputs, and therefore, the fair value measurement has been categorized as a Level 2 measurement. Specific reserves were calculated for impaired loans with carrying amounts totaling $1.0 million at June 30, 2010. The collateral underlying these loans had a fair value of $738,000, resulting in specific reserves in the allowance for loan losses of $286,000.
|
|
Transfer of Impaired Loans into Real Estate Owned
|
|
Once an asset is determined to be uncollectible, the underlying collateral is repossessed and reclassified to foreclosed real estate and repossessed assets. These assets are carried at lower of cost or fair value of the collateral, less cost to sell. In some cases, adjustments are made to the appraised values for various factors including age of the appraisal, age of the comparables included in the appraisal, and known changes in the market and in the collateral. These adjustments are based upon unobservable inputs, and therefore, the fair value measurement has been categorized as a Level 2 measurement.
|
|
Summary of Non-Recurring Fair Value Measurements
|
At June 30, 2010
|
||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Impaired loans
|
$ | - | $ | 738 | $ | - | $ | 738 | ||||||||
Real estate owned
|
- | 3,197 | - | $ | 3,197 | |||||||||||
Total
|
$ | - | $ | 3,935 | $ | - | $ | 3,935 |
|
At September 30, 2009
|
|||||||||||||||
|
(Dollars in Thousands)
|
|||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Impaired loans
|
$ | - | $ | 788 | $ | - | $ | 788 | ||||||||
Real estate owned
|
- | 3,622 | - | $ | 3,622 | |||||||||||
Total
|
$ | - | $ | 4,410 | $ | - | $ | 4,410 |
●
|
Levels of past due, classified and non-accrual loans, troubled debt restructurings and modifications
|
|
●
|
Nature and volume of loans
|
|
●
|
Changes in lending policies and procedures, underwriting standards, collections, charge-offs and recoveries and for commercial loans, the level of loans being approved with exceptions to lending policy
|
|
●
|
Experience, ability and depth of management and staff
|
|
●
|
National and local economic and business conditions, including various market segments
|
|
●
|
Quality of the Company’s loan review system and degree of Board oversight
|
|
●
|
Concentrations of credit and changes in levels of such concentrations
|
|
●
|
Effect of external factors on the level of estimated credit losses in the current portfolio
|
Three Months
|
||||||||||||||||||||||||
Ended June 30,
|
||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||
Balance
|
Interest
|
Yield/Rate
|
Balance
|
Interest
|
Yield/Rate
|
|||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Investment securities
|
$ | 123,223 | $ | 1,435 | 4.66 | % | $ | 125,073 | $ | 1,479 | 4.73 | % | ||||||||||||
Mortgage-backed securities
|
91,100 | 1,164 | 5.11 | 93,661 | 1,329 | 5.68 | ||||||||||||||||||
Loans receivable(1)
|
252,876 | 3,706 | 5.86 | 253,435 | 3,806 | 6.01 | ||||||||||||||||||
Other interest-earning assets
|
24,912 | 7 | 0.11 | 16,235 | 6 | 0.15 | ||||||||||||||||||
Total interest-earning assets
|
492,111 | 6,312 | 5.13 | 488,404 | 6,620 | 5.42 | ||||||||||||||||||
Cash and non-interest-bearing balances
|
11,539 | 12,502 | ||||||||||||||||||||||
Other non-interest-earning assets
|
21,608 | 18,454 | ||||||||||||||||||||||
Total assets
|
$ | 525,258 | $ | 519,360 | ||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Savings accounts
|
$ | 69,689 | 300 | 1.72 | $ | 65,083 | 313 | 1.92 | ||||||||||||||||
Money market deposit and NOW accounts
|
105,478 | 283 | 1.07 | 98,892 | 410 | 1.66 | ||||||||||||||||||
Certificates of deposit
|
273,844 | 1,568 | 2.29 | 263,173 | 2,247 | 3.42 | ||||||||||||||||||
Total deposits
|
449,011 | 2,151 | 1.92 | 427,148 | 2,970 | 2.78 | ||||||||||||||||||
Advances from Federal Home Loan Bank
|
13,630 | 192 | 5.63 | 19,673 | 216 | 4.39 | ||||||||||||||||||
Advances from borrowers for taxes and
|
||||||||||||||||||||||||
insurance
|
1,644 | 1 | 0.24 | 1,661 | 2 | 0.48 | ||||||||||||||||||
Total interest-bearing liabilities
|
464,285 | 2,344 | 2.02 | 448,482 | 3,188 | 2.84 | ||||||||||||||||||
Non-interest-bearing liabilities:
|
||||||||||||||||||||||||
Non-interest-bearing demand accounts
|
2,334 | 3,181 | ||||||||||||||||||||||
Other liabilities
|
3,317 | 6,484 | ||||||||||||||||||||||
Total liabilities
|
469,936 | 458,147 | ||||||||||||||||||||||
Stockholders' equity
|
55,322 | 61,213 | ||||||||||||||||||||||
Total liabilities and stockholders' equity
|
$ | 525,258 | $ | 519,360 | ||||||||||||||||||||
Net interest-earning assets
|
$ | 27,826 | $ | 39,922 | ||||||||||||||||||||
Net interest income; interest rate spread
|
$ | 3,968 | 3.11 | % | $ | 3,432 | 2.58 | % | ||||||||||||||||
Net interest margin(2)
|
3.23 | % | 2.81 | % | ||||||||||||||||||||
Average interest-earning assets to average
|
||||||||||||||||||||||||
interest-bearing liabilities
|
105.99 | % | 108.90 | % |
(1)
|
Includes non-accrual loans. Calculated net of unamortized deferred fees, undisbursed portion of loans-in-process and allowance for loan losses.
|
(2)
|
Equals net interest income divided by average interest-earning assets.
|
Nine Months
|
||||||||||||||||||||||||
Ended June 30,
|
||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||
Balance
|
Interest
|
Yield/Rate
|
Balance
|
Interest
|
Yield/Rate
|
|||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Investment securities
|
$ | 123,273 | $ | 4,325 | 4.68 | % | $ | 124,396 | $ | 4,583 | 4.91 | % | ||||||||||||
Mortgage-backed securities (1)
|
93,126 | 3,575 | 5.12 | 92,687 | 4,648 | 6.69 | ||||||||||||||||||
Loans receivable(2)
|
254,765 | 11,176 | 5.85 | 252,597 | 11,396 | 6.02 | ||||||||||||||||||
Other interest-earning assets (3)
|
15,764 | 13 | 0.11 | 13,896 | 125 | 1.20 | ||||||||||||||||||
Total interest-earning assets
|
486,928 | 19,089 | 5.23 | 483,576 | 20,752 | 5.72 | ||||||||||||||||||
Cash and non-interest-bearing balances
|
7,128 | 7,449 | ||||||||||||||||||||||
Other non-interest-earning assets
|
20,258 | 15,377 | ||||||||||||||||||||||
Total assets
|
$ | 514,314 | $ | 506,402 | ||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Savings accounts
|
$ | 69,131 | 957 | 1.85 | $ | 64,937 | 1,186 | 2.44 | ||||||||||||||||
Money market deposit and NOW accounts
|
106,210 | 861 | 1.08 | 95,054 | 1,552 | 2.18 | ||||||||||||||||||
Certificates of deposit
|
256,020 | 4,687 | 2.44 | 242,752 | 6,589 | 3.62 | ||||||||||||||||||
Total deposits
|
431,361 | 6,505 | 2.01 | 402,743 | 9,327 | 3.09 | ||||||||||||||||||
Advances from Federal Home Loan Bank
|
18,956 | 609 | 4.28 | 29,770 | 743 | 3.33 | ||||||||||||||||||
Advances from borrowers for taxes and
|
||||||||||||||||||||||||
insurance
|
1,627 | 4 | 0.33 | 1,733 | 6 | 0.46 | ||||||||||||||||||
Total interest-bearing liabilities
|
451,944 | 7,118 | 2.10 | 434,246 | 10,076 | 3.09 | ||||||||||||||||||
Non-interest-bearing liabilities:
|
||||||||||||||||||||||||
Non-interest-bearing demand accounts
|
2,176 | 3,657 | ||||||||||||||||||||||
Other liabilities
|
4,321 | 3,890 | ||||||||||||||||||||||
Total liabilities
|
458,441 | 441,793 | ||||||||||||||||||||||
Stockholders' equity
|
55,873 | 64,609 | ||||||||||||||||||||||
Total liabilities and stockholders' equity
|
$ | 514,314 | $ | 506,402 | ||||||||||||||||||||
Net interest-earning assets
|
$ | 34,984 | $ | 49,330 | ||||||||||||||||||||
Net interest income; interest rate spread
|
$ | 11,971 | 3.13 | % | $ | 10,676 | 2.63 | % | ||||||||||||||||
Net interest margin(4)
|
3.28 | % | 2.94 | % | ||||||||||||||||||||
Average interest-earning assets to average
|
||||||||||||||||||||||||
interest-bearing liabilities
|
107.74 | % | 111.36 | % |
(1)
|
The decrease in yield of the Company's mortgage-backed securities portfolio is primarily a result of changes in portfolio composition as well as in estimate of prepayment speed assumptions. The Company employs the effective yield method of accounting, which requires retrospective adjustments to the yield on the Company's assets, which in turn directly affects earnings. The Company estimates yield at the time of purchase of each asset. To the extent prepayment speeds assumptions differ from Company’s estimates at the time of purchase, the Company is required to adjust the yield on that asset as well as the amortization of premium or discount taken to date on the asset. This cumulative "true up" of the amortization was taken through earnings in the 2009 period.
|
(2)
|
Includes non-accrual loans. Calculated net of unamortized deferred fees, undisbursed portion of loans-in-process and allowance for loan losses.
|
(3)
|
Yield substantially decreased due to declining overnight investment rates during the 2010 period as compared to the 2009 period.
|
(4)
|
Equals net interest income divided by average interest-earning assets.
|
To Be
|
||||||||||||
Well Capitalized
|
||||||||||||
Required for
|
Under Prompt
|
|||||||||||
Capital Adequacy
|
Corrective Action
|
|||||||||||
Actual Ratio
|
Purposes
|
Provisions
|
||||||||||
June 30, 2010:
|
||||||||||||
Tier 1 capital (to average assets):
|
||||||||||||
Company
|
10.53 | % | 4.0 | % | N/A | |||||||
Bank
|
9.58 | % | 4.0 | % | 5.0 | % | ||||||
Tier 1 capital (to risk weighted assets):
|
||||||||||||
Company
|
22.08 | % | 4.0 | % | N/A | |||||||
Bank
|
20.09 | % | 4.0 | % | 6.0 | % | ||||||
Total capital (to risk weighted assets):
|
||||||||||||
Company
|
23.10 | % | 8.0 | % | N/A | |||||||
Bank
|
21.10 | % | 8.0 | % | 10.0 | % | ||||||
September 30, 2009:
|
||||||||||||
Tier 1 capital (to average assets):
|
||||||||||||
Company
|
10.86 | % | 4.0 | % | N/A | |||||||
Bank
|
9.99 | % | 4.0 | % | 5.0 | % | ||||||
Tier 1 capital (to risk weighted assets):
|
||||||||||||
Company
|
24.59 | % | 4.0 | % | N/A | |||||||
Bank
|
22.61 | % | 4.0 | % | 6.0 | % | ||||||
Total capital (to risk weighted assets):
|
||||||||||||
Company
|
25.79 | % | 8.0 | % | N/A | |||||||
Bank
|
23.81 | % | 8.0 | % | 10.0 | % |
More than
|
More than
|
More than
|
||||||||||||||||||||||
3 Months
|
3 Months
|
1 Year
|
3 Years
|
More than
|
Total
|
|||||||||||||||||||
or Less
|
to 1 Year
|
to 3 Years
|
to 5 Years
|
5 Years
|
Amount
|
|||||||||||||||||||
|
||||||||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Interest-earning assets(1):
|
||||||||||||||||||||||||
Investment and mortgage-backed securities(2)
|
$ | 17,871 | $ | 33,003 | $ | 15,170 | $ | 17,690 | $ | 117,524 | $ | 201,258 | ||||||||||||
Loans receivable(3)
|
28,001 | 62,313 | 79,288 | 46,967 | 39,536 | 256,105 | ||||||||||||||||||
Other interest-earning assets(4)
|
43,183 | - | - | - | - | 43,183 | ||||||||||||||||||
Total interest-earning assets
|
$ | 89,055 | $ | 95,316 | $ | 94,458 | $ | 64,657 | $ | 157,060 | $ | 500,546 | ||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Savings accounts
|
$ | 1,669 | $ | 3,679 | $ | 4,887 | $ | 2,611 | $ | 57,941 | $ | 70,787 | ||||||||||||
Money market deposit and NOW accounts
|
2,557 | 7,673 | 20,464 | 23,584 | 50,595 | 104,873 | ||||||||||||||||||
Certificates of deposit
|
32,790 | 175,989 | 53,139 | 22,246 | - | 284,164 | ||||||||||||||||||
Advances from Federal Home Loan Bank
|
13,032 | 98 | 156 | 340 | - | 13,626 | ||||||||||||||||||
Advances from borrowers for taxes and insurance
|
1,837 | - | - | - | - | 1,837 | ||||||||||||||||||
Total interest-bearing liabilities
|
$ | 51,885 | $ | 187,439 | $ | 78,646 | $ | 48,781 | $ | 108,536 | $ | 475,287 | ||||||||||||
Interest-earning assets
|
||||||||||||||||||||||||
less interest-bearing liabilities
|
$ | 37,170 | $ | (92,123 | ) | $ | 15,812 | $ | 15,876 | $ | 48,524 | $ | 25,259 | |||||||||||
Cumulative interest-rate sensitivity gap (5)
|
$ | 37,170 | $ | (54,953 | ) | $ | (39,141 | ) | $ | (23,265 | ) | $ | 25,259 | |||||||||||
Cumulative interest-rate gap as a
|
||||||||||||||||||||||||
percentage of total assets at June 30, 2010
|
6.91 | % | -10.21 | % | -7.27 | % | -4.32 | % | 4.69 | % | ||||||||||||||
Cumulative interest-earning assets
|
||||||||||||||||||||||||
as a percentage of cumulative interest-
|
||||||||||||||||||||||||
bearing liabilities at June 30, 2010
|
171.64 | % | 77.04 | % | 87.69 | % | 93.66 | % | 105.31 | % |
(1)
|
Interest-earning assets are included in the period in which the balances are expected to be redeployed and/or repriced as a result of anticipated prepayments, scheduled rate adjustments and contractual maturities.
|
(2)
|
For purposes of the gap analysis, investment securities are stated at amortized cost.
|
(3)
|
For purposes of the gap analysis, loans receivable includes non-performing loans and is gross of the allowance for loan losses and unamortized deferred loan fees, but net of the undisbursed portion of loans-in-process.
|
(4)
|
Includes FHLB stock.
|
(5)
|
Cumulative interest-rate sensitivity gap represents the difference between interest-earning assets and interest-bearing liabilities.
|
Change in
|
NPV as % of Portfolio
|
||||||||||||||||||||
Interest Rates
|
Net Portfolio Value
|
Value of Assets
|
|||||||||||||||||||
In Basis Points
|
|||||||||||||||||||||
(Rate Shock)
|
Amount
|
$ Change
|
% Change
|
NPV Ratio
|
Change
|
||||||||||||||||
(Dollars in Thousands)
|
|||||||||||||||||||||
300 | $ | 57,345 | $ | (34,090 | ) | (37.28 | )% | 11.82 | % | (4.81 | )% | ||||||||||
200 | 68,910 | (22,525 | ) | (24.63 | )% | 13.61 | % | (3.02 | )% | ||||||||||||
100 | 81,947 | (9,488 | ) | (10.38 | )% | 15.48 | % | (1.15 | )% | ||||||||||||
Static
|
91,435 | - | - | 16.63 | % | - | |||||||||||||||
(100) | 89,117 | (2,318 | ) | (2.54 | )% | 15.94 | % | (0.69 | )% | ||||||||||||
(200) | 86,105 | (5,330 | ) | (5.83 | )% | 15.21 | % | (1.42 | )% | ||||||||||||
(300) | 83,278 | (8,157 | ) | (8.92 | )% | 14.55 | % | (2.08 | )% |
(a)
|
Not applicable
|
|
(b)
|
Not applicable
|
|
(c)
|
There were no repurchases of common stock made during the quarter ended June 30, 2010
|
|
The Mutual Holding Company’s purchases of Company common stock made during the quarter are set forth in the following table:
|
Period
|
Total Number
of Shares
Purchased
|
Average Price
Paid per Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
Maximum Number of
Shares that May Yet be
Purchased Under the Plan
or Programs
|
||||||||||||
April 1 – April 30, 2010
|
- | $ | - | - | 50,000 | |||||||||||
May 1 – May 31, 2010
|
- | - | - | 50,000 | ||||||||||||
June 1 - June 30, 2010
|
37,654 | 6.57 | 37,564 | 12,346 | ||||||||||||
Total
|
37,654 | $ | 6.57 | 37,564 | 12,346 |
Exhibit No.
|
Description
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|
31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|
32.0
|
Section 1350 Certifications
|
Date: August 16, 2010
|
By: /s/ Thomas A. Vento
|
||
Thomas A. Vento
|
|||
President and Chief Executive Officer
|
|||
Date: August 16, 2010
|
By: /s/ Joseph R. Corrato
|
||
Joseph R. Corrato
|
|||
Executive Vice President and Chief Financial Officer
|