Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 – Organization
PSB Holdings, Inc. (the “Company”) is a federally chartered holding company formed on May 27, 2003 for the purpose of acquiring all of the common stock of Putnam Bank (the “Bank”) concurrent with the Bank’s reorganization from a mutual savings institution to the mutual holding company form of organization. No shares were offered to the public as part of this reorganization.
On October 4, 2004, the Company issued 6,943,125 shares of common stock, 3,729,846 shares (53.7%) of which were issued to Putnam Bancorp, MHC and 3,089,691 shares (44.5%) of which were sold to eligible depositors of the Bank and others at $10.00 per share. In addition, the Company issued 123,588 shares (1.8%) to a charitable foundation established by the Bank.
NOTE 2 – Basis of Presentation
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and the instructions to Form 10-Q, and accordingly do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments necessary, consisting of only normal recurring accruals and the elimination of all significant intercompany accounts, to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The interim results of operations are not necessarily indicative of the operating results to be expected for future periods, including the year ending June 30, 2014. These financial statements should be read in conjunction with the 2013 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on September 25, 2013.
NOTE 3 – Recent Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11,
Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.
This Update
provides that an unrecognized tax benefit (or a portion of an unrecognized tax benefit) should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This Update is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013 with retrospective application and early adoption permitted. This Update is not expected to have a significant impact on the Company’s Consolidated Financial Statements.
Note 4 -
Critical Accounting Policies
Critical accounting policies are those that involve significant judgments and assumptions by management that have, or could have, a material impact on our income or the carrying value of our assets. Our critical accounting policies are those related to our loans, allowance for loan losses, income taxes, goodwill and the impairment of securities.
Loans
. The Company’s loan portfolio includes residential real estate, commercial real estate, construction, commercial and consumer/other segments. Residential real estate loans include classes for one-to four-family owner occupied, second mortgages and equity lines of credit. Consumer/other loans include personal loans. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.
The accrual of interest on all loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual if collection of principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on non-accrual is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses
. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed.
The allowance for loan losses is evaluated on a quarterly basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, specific and unallocated components, as further described below.
General component
The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, commercial and consumer/other. Residential real estate loans include classes for one-to four-family owner occupied, second mortgages and equity lines of credit. Consumer/other loans include personal loans. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; concentrations; changes in lending policies and procedures; experience/ability/depth of lending management and staff; loan rating migration; the effect of other external factors; changes in the value of underlying collateral; changes in the loan review system and national and local economic trends and conditions.
The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:
Residential real estate - The Company does not originate loans with a loan-to-value ratio greater than 100% and does not originate subprime loans. Loans originated with a loan-to-value ratio greater than 80% generally require private mortgage insurance. All loans in this segment are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.
Commercial real estate - Loans in this segment are primarily income-producing properties throughout New England. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management obtains rent rolls annually and continually monitors the cash flows of these loans.
Construction – Loans in this segment primarily include speculative real estate development loans for which payment is derived from sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.
Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.
Consumer/other - Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.
Specific component
The specific component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent or foreclosure is probable. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer/other and residential real estate loans for impairment disclosures, unless such loans are 90 days or more past due or subject to a troubled debt restructuring (“TDR”) agreement.
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a TDR. All TDRs are initially classified as impaired.
Unallocated component
An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general reserves in the portfolio.
Goodwill
. The Company’s goodwill was recorded as a result of business acquisitions and combinations. The Company’s goodwill (the amount paid in excess of fair value of acquired net assets) is reviewed at least annually to ensure that there have been no events or circumstances resulting in an impairment of the recorded amount of excess purchase price. Adverse changes in the economic environment, operations of the Company or other factors could result in a decline in projected fair values. If the estimated fair value is less than the carrying amount, a loss would be recognized to reduce the carrying amount to implied fair value.
Other-Than-Temporary Impairment of Securities.
Management periodically reviews all investment securities with significant declines in fair value for potential other-than-temporary impairment pursuant to the guidance provided by ASC 320-10 “Investments-Debt and Equity Securities”. The guidance addresses the determination as to when an investment is considered impaired, whether the impairment is other-than-temporary, and the measurement of an impairment loss. It also includes accounting considerations subsequent to the recognition of other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. Management evaluates the Company’s investment portfolio on an ongoing basis and recorded $3,000 and $89,000 of other-than-temporary impairment charges through income during the three months ended September 30, 2013 and 2012, respectively.
Income Taxes.
The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are established for the temporary differences between the accounting basis and the tax basis of the Company’s assets and liabilities at enacted rates expected to be in effect when the amounts related to such temporary differences are realized or settled.
Management has discussed the development and selection of these critical accounting policies with the Audit Committee.
NOTE 5 – Earnings Per Share (EPS)
As presented below, basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. If rights to dividends on unvested options/awards are non-forfeitable, these unvested awards/options are considered outstanding in the computation of basic earnings per share. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. For purposes of computing diluted EPS, the treasury stock method is used.
The following information was used in the computation of EPS on both a basic and diluted basis for the three months ended September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
September 30, 2013
|
|
|
September 30, 2012
|
|
Net income
|
|
$
|
243,000
|
|
|
$
|
503,000
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares applicable to EPS
|
|
|
6,397,826
|
|
|
|
6,372,349
|
|
Effect of dilutive potential common shares
(1)
|
|
|
-
|
|
|
|
-
|
|
Weighted average common shares applicable to diluted EPS
|
|
|
6,397,826
|
|
|
|
6,372,349
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.04
|
|
|
$
|
0.08
|
|
Diluted
|
|
$
|
0.04
|
|
|
$
|
0.08
|
|
(1) For the three months ended September 30, 2013 and 2012, options to purchase 199,106 and 222,921, respectively, shares of common stock were outstanding but not included in the computation of earnings per share because they were anti-dilutive.
NOTE 6 – Investment Securities
The carrying value and estimated market values of investment securities by maturity are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Gross Unrealized
|
|
|
Fair
|
|
|
|
Cost Basis
|
|
|
Gain
|
|
|
(Loss)
|
|
|
Value
|
|
|
|
(in thousands)
|
|
September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government-sponsored securities:
|
|
|
|
|
|
|
|
|
|
|
Due from five through ten years
|
|
$
|
1,000
|
|
|
$
|
-
|
|
|
$
|
(35
|
)
|
|
$
|
965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and other securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
5,999
|
|
|
|
-
|
|
|
|
(1,189
|
)
|
|
|
4,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored and guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
|
49
|
|
|
|
3
|
|
|
|
-
|
|
|
|
52
|
|
From one through five years
|
|
|
995
|
|
|
|
55
|
|
|
|
-
|
|
|
|
1,050
|
|
From five through ten years
|
|
|
13,280
|
|
|
|
124
|
|
|
|
-
|
|
|
|
13,404
|
|
After ten years
|
|
|
14,458
|
|
|
|
470
|
|
|
|
(86
|
)
|
|
|
14,842
|
|
|
|
|
28,782
|
|
|
|
652
|
|
|
|
(86
|
)
|
|
|
29,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
7,287
|
|
|
|
286
|
|
|
|
(389
|
)
|
|
|
7,184
|
|
Total debt securities
|
|
|
43,068
|
|
|
|
938
|
|
|
|
(1,699
|
)
|
|
|
42,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate preferred
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
53,068
|
|
|
$
|
938
|
|
|
$
|
(1,699
|
)
|
|
$
|
52,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government-sponsored securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due from one through five years
|
|
$
|
5,258
|
|
|
$
|
-
|
|
|
$
|
(54
|
)
|
|
$
|
5,204
|
|
From five through ten years
|
|
|
941
|
|
|
|
85
|
|
|
|
-
|
|
|
|
1,026
|
|
|
|
|
6,199
|
|
|
|
85
|
|
|
|
(54
|
)
|
|
|
6,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored and guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in five through ten years
|
|
|
5,486
|
|
|
|
188
|
|
|
|
-
|
|
|
|
5,674
|
|
After ten years
|
|
|
115,497
|
|
|
|
1,775
|
|
|
|
(1,727
|
)
|
|
|
115,545
|
|
|
|
|
120,983
|
|
|
|
1,963
|
|
|
|
(1,727
|
)
|
|
|
121,219
|
|
Total held-to-maturity securities
|
|
$
|
127,182
|
|
|
$
|
2,048
|
|
|
$
|
(1,781
|
)
|
|
$
|
127,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Gross Unrealized
|
|
|
Fair
|
|
|
|
Cost Basis
|
|
|
Gain
|
|
|
(Loss)
|
|
|
Value
|
|
|
|
(in thousands)
|
|
June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government-sponsored securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Due from five through ten years
|
|
$
|
1,000
|
|
|
$
|
-
|
|
|
$
|
(39
|
)
|
|
$
|
961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and other securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
5,999
|
|
|
|
-
|
|
|
|
(1,126
|
)
|
|
|
4,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored and guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
|
21
|
|
|
|
1
|
|
|
|
-
|
|
|
|
22
|
|
From one through five years
|
|
|
1,217
|
|
|
|
71
|
|
|
|
-
|
|
|
|
1,288
|
|
From five through ten years
|
|
|
143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
143
|
|
After ten years
|
|
|
13,108
|
|
|
|
593
|
|
|
|
(89
|
)
|
|
|
13,612
|
|
|
|
|
14,489
|
|
|
|
665
|
|
|
|
(89
|
)
|
|
|
15,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
7,757
|
|
|
|
269
|
|
|
|
(475
|
)
|
|
|
7,551
|
|
Total debt securities
|
|
|
29,245
|
|
|
|
934
|
|
|
|
(1,729
|
)
|
|
|
28,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate preferred
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
39,245
|
|
|
$
|
934
|
|
|
$
|
(1,729
|
)
|
|
$
|
38,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government-sponsored securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one through five years
|
|
$
|
5,259
|
|
|
$
|
3
|
|
|
$
|
(76
|
)
|
|
$
|
5,186
|
|
From five through ten years
|
|
|
939
|
|
|
|
96
|
|
|
|
-
|
|
|
|
1,035
|
|
|
|
|
6,198
|
|
|
|
99
|
|
|
|
(76
|
)
|
|
|
6,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored and guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in five through ten years
|
|
|
4,652
|
|
|
|
133
|
|
|
|
-
|
|
|
|
4,785
|
|
After ten years
|
|
|
124,139
|
|
|
|
2,004
|
|
|
|
(1,731
|
)
|
|
|
124,412
|
|
|
|
|
128,791
|
|
|
|
2,137
|
|
|
|
(1,731
|
)
|
|
|
129,197
|
|
Total held-to-maturity securities
|
|
$
|
134,989
|
|
|
$
|
2,236
|
|
|
$
|
(1,807
|
)
|
|
$
|
135,418
|
|
There were no realized gains or losses on sales of available-for-sale securities for the three months ended September 30, 2013 and September 30, 2012. Gains and losses on the sales of securities are recorded on the trade date and are determined using the specific identification method. There were other-than-temporary impairment charges on available-for-sale securities of $3,000 and $89,000 realized in income during the three months ended September 30, 2013 and 2012, respectively. The write-downs of securities included total other-than-temporary impairment losses of $11,000 and $282,000, net of $8,000 and $193,000 recognized in other comprehensive income/loss for the three months ended September 30, 2013 and 2012, respectively, before taxes. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Overview.”
The following is a summary of the estimated fair value and related unrealized losses segregated by category and length of time that individual securities have been in a continuous unrealized loss position at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013:
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
Available-for-sale:
|
|
(in thousands)
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and other securities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,810
|
|
|
$
|
1,189
|
|
|
$
|
4,810
|
|
|
$
|
1,189
|
|
U.S. Government and government-sponsored
|
|
|
965
|
|
|
|
35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
965
|
|
|
|
35
|
|
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored and guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed securities
|
|
|
5,476
|
|
|
|
72
|
|
|
|
1,358
|
|
|
|
14
|
|
|
|
6,834
|
|
|
|
86
|
|
Total temporarily impaired available-for-sale
|
|
|
6,441
|
|
|
|
107
|
|
|
|
1,358
|
|
|
|
1,203
|
|
|
|
7,799
|
|
|
|
1,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and government-sponsored
|
|
|
5,204
|
|
|
|
54
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,204
|
|
|
|
54
|
|
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored and guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed securities
|
|
|
57,768
|
|
|
|
1,501
|
|
|
|
6,304
|
|
|
|
226
|
|
|
|
64,072
|
|
|
|
1,727
|
|
Total temporarily impaired held-to-maturity
|
|
|
62,972
|
|
|
|
1,555
|
|
|
|
6,304
|
|
|
|
226
|
|
|
|
69,276
|
|
|
|
1,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporarily impaired debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency mortgage-backed securities
|
|
|
2,322
|
|
|
|
135
|
|
|
|
1,917
|
|
|
|
254
|
|
|
|
4,239
|
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired and other-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
than-temporarily impaired securities
|
|
$
|
71,735
|
|
|
$
|
1,797
|
|
|
$
|
9,579
|
|
|
$
|
1,683
|
|
|
$
|
81,314
|
|
|
$
|
3,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013:
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
Available-for-sale:
|
|
(in thousands)
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and other obligations
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,873
|
|
|
$
|
1,126
|
|
|
$
|
4,873
|
|
|
$
|
1,126
|
|
U.S. Government and government-sponsored
securities
|
|
|
961
|
|
|
|
39
|
|
|
|
-
|
|
|
|
-
|
|
|
|
961
|
|
|
|
39
|
|
U.S. Government-sponsored and guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed securities
|
|
|
3,004
|
|
|
|
77
|
|
|
|
1,449
|
|
|
|
12
|
|
|
|
4,453
|
|
|
|
89
|
|
Total temporarily impaired available-for-sale
|
|
|
3,965
|
|
|
|
116
|
|
|
|
6,322
|
|
|
|
1,138
|
|
|
|
10,287
|
|
|
|
1,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and government-sponsored
|
|
|
3,183
|
|
|
|
76
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,183
|
|
|
|
76
|
|
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored and guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed securities
|
|
|
68,663
|
|
|
|
1,731
|
|
|
|
-
|
|
|
|
-
|
|
|
|
68,663
|
|
|
|
1,731
|
|
Total temporarily impaired held-to-maturity
|
|
|
71,846
|
|
|
|
1,807
|
|
|
|
-
|
|
|
|
-
|
|
|
|
71,846
|
|
|
|
1,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporarily impaired debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency mortgage-backed securities
|
|
|
2,525
|
|
|
|
190
|
|
|
|
1,958
|
|
|
|
285
|
|
|
|
4,483
|
|
|
|
475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily-impaired and other-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
than-temporarily impaired securities
|
|
$
|
78,336
|
|
|
$
|
2,113
|
|
|
$
|
8,280
|
|
|
$
|
1,423
|
|
|
$
|
86,616
|
|
|
$
|
3,536
|
|
(1) Includes other-than-temporary impaired available-for-sale debt securities in which a portion of the other-than-temporary
impairment loss remains in accumulated other comprehensive income (loss).
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.
At September 30, 2013 and June 30, 2013, there were 52 and 36 individual investment securities, respectively, with aggregate depreciation of 3.9% at both periods from the Company’s amortized cost basis. Management has the intent and ability to hold these securities until cost recovery occurs and considers these declines to be temporary.
The unrealized losses on the Company’s investment in U.S. Government-sponsored agency bonds and U.S. government guaranteed and government-sponsored residential mortgage-backed securities were primarily caused by interest rate fluctuations. These investments are guaranteed or sponsored by the U.S. government or an agency thereof. Accordingly, it is expected that the securities would not be settled at a price less than the par value of the investment. Because the decline in market value is attributable to changes in interest rates and not to credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2013.
The Company’s unrealized losses on investments in corporate bonds and other securities relate to investments in companies within the financial services sector. As of September 30, 2013, the Company had five investments in corporate single-issuer trust preferred securities (TRUPs) with a total book value of $6.0 million and total fair value of $4.8 million, all of which were classified as available-for-sale. The single-issuer trust preferred investments are evaluated for other-than-temporary impairment by performing a present value of cash flows each quarter. None of the issuers have deferred interest payments or announced the intention to defer interest payments. The Company believes the decline in fair value is related to the spread over three month LIBOR, on which the quarterly interest payments are based, as the spread over LIBOR being received is significantly lower than current market spreads. Management concluded the impairment of these investments was considered temporary and asserts that the Company does not have the intent to sell these investments and that it is more likely than not it will not have to sell the investments before recovery of their cost basis which may be at maturity.
For the quarter ended September 30, 2013, securities with other-than-temporary impairment losses recognized in earnings consisted of non-agency mortgage-backed securities. For these debt securities, the Company estimated the portion of loss attributable to credit loss using a discounted cash flow model. Significant inputs included the estimated cash flows of the underlying loans based on key assumptions, such as default rate, loss severity and prepayment rate. Assumptions can vary widely from security to security, and are influenced by such factors as loan interest rate, geographical location of the borrower, borrower characteristics and collateral type. The present value of the expected cash flows was compared to the Company’s amortized cost basis to determine the credit-related impairment loss. Based on the expected cash flows derived from the model, the Company expects to recover the remaining unrealized losses on these securities.
The following table represents a roll-forward of the amount of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income (in thousands):
|
|
|
|
|
Balance as of June 30, 2012
|
|
$
|
15,271
|
|
Credit losses on securities for which other-than-temporary impairment
|
|
|
|
|
was not previously recorded
|
|
|
-
|
|
Additional credit losses on securities for which an other-than-temporary
|
|
|
|
|
impairment charge was previously recorded
|
|
|
462
|
|
Reductions for securities sold during the period
|
|
|
-
|
|
|
|
|
|
|
Balance as of June 30, 2013
|
|
|
15,733
|
|
|
|
|
|
|
Credit losses on securities for which other-than-temporary impairment
|
|
|
|
|
was not previously recorded
|
|
|
-
|
|
Additional credit losses on securities for which an other-than-temporary
|
|
|
|
|
impairment charge was previously recorded
|
|
|
3
|
|
Reductions for securities sold during the period
|
|
|
-
|
|
|
|
|
|
|
Balance as of September 30, 2013
|
|
$
|
15,736
|
|
NOTE 7 – Loans
The following table sets forth the composition of our loan portfolio at September 30, 2013 and June 30, 2013:
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2013
|
|
|
2013
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
Residential (1)
|
|
$
|
186,263
|
|
|
$
|
187,116
|
|
Commercial
|
|
|
42,158
|
|
|
|
43,423
|
|
Residential construction
|
|
|
2,517
|
|
|
|
2,775
|
|
Commercial
|
|
|
1,959
|
|
|
|
1,980
|
|
Consumer and other
|
|
|
730
|
|
|
|
707
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
233,627
|
|
|
|
236,001
|
|
|
|
|
|
|
|
|
|
|
Unadvanced construction loans
|
|
|
(1,230
|
)
|
|
|
(1,745
|
)
|
|
|
|
232,397
|
|
|
|
234,256
|
|
Net deferred loan costs
|
|
|
620
|
|
|
|
608
|
|
Allowance for loan losses
|
|
|
(2,573
|
)
|
|
|
(2,693
|
)
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
230,444
|
|
|
$
|
232,171
|
|
(1) Residential real estate loans include one- to four-family mortgage loans, second mortgage loans, and home equity lines of credit.
Credit Quality Information
The Company utilizes a nine grade internal loan rating system as follows:
Loans rated 1 -5 are considered “pass” rated loans with low to average risk.
Loans rated 6 are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.
Loans rated 7 are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.
Loans rated 8 are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.
Loans rated 9 are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.
On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial loans. Annually, the Company engages an independent third-party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. Credit quality for residential real estate and consumer/other loans is determined by monitoring loan payment history and ongoing communications with the borrower.
The following table presents the Company’s loan segments by internally assigned grades at September 30, 2013 and June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
|
Consumer
|
|
|
|
|
September 30, 2013
|
|
Real Estate
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Commercial
|
|
|
and other
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
183,233
|
|
|
$
|
30,641
|
|
|
$
|
1,438
|
|
|
$
|
1,534
|
|
|
$
|
730
|
|
|
$
|
217,576
|
|
Special Mention
|
|
|
326
|
|
|
|
4,052
|
|
|
|
-
|
|
|
|
348
|
|
|
|
-
|
|
|
|
4,726
|
|
Substandard
|
|
|
2,535
|
|
|
|
5,653
|
|
|
|
-
|
|
|
|
77
|
|
|
|
-
|
|
|
|
8,265
|
|
Doubtful
|
|
|
169
|
|
|
|
1,661
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,830
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
186,263
|
|
|
$
|
42,007
|
|
|
$
|
1,438
|
|
|
$
|
1,959
|
|
|
$
|
730
|
|
|
$
|
232,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
June 30, 2013
|
|
Real Estate
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Commercial
|
|
|
and other
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
183,403
|
|
|
$
|
30,477
|
|
|
$
|
1,706
|
|
|
$
|
1,667
|
|
|
$
|
707
|
|
|
$
|
217,960
|
|
Special Mention
|
|
|
329
|
|
|
|
4,784
|
|
|
|
-
|
|
|
|
233
|
|
|
|
-
|
|
|
|
5,346
|
|
Substandard
|
|
|
2,968
|
|
|
|
5,598
|
|
|
|
-
|
|
|
|
80
|
|
|
|
-
|
|
|
|
8,646
|
|
Doubtful
|
|
|
416
|
|
|
|
1,888
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,304
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
187,116
|
|
|
$
|
42,747
|
|
|
$
|
1,706
|
|
|
$
|
1,980
|
|
|
$
|
707
|
|
|
$
|
234,256
|
|
The following table represents modifications that were deemed to be troubled debt restructures for the three months ended September 30, 2012. There were no modifications deemed to be troubled debt restructures for the three months ended September 30, 2013.
September 30, 2012
|
|
|
|
|
Pre-Modifcation
|
|
|
Post-Modification
|
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
|
Number of
|
|
|
Recorded
|
|
|
Recorded
|
|
|
|
Contracts
|
|
|
Investment
|
|
|
Investment
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1
|
|
|
$
|
80
|
|
|
$
|
113
|
|
The modification provided a reduced rate for five years plus the capitalization of real estate taxes. A tax escrow account has also been established. Management performs a discounted cash flow calculation to determine the amount of impaired reserve required on each of the troubled debt restructures. Any reserve required is recorded through the provision for loan losses.
The following is a summary of troubled debt restructurings that have subsequently defaulted (defined as 30 or more days past due subsequent to restructuring) within one year of modification during the three months ended September 30, 2013 and September 30, 2012.
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Three months ended
|
|
|
|
September 30, 2013
|
|
|
September 30, 2012
|
|
|
|
Number of
|
|
Recorded
|
|
|
Number of
|
|
Recorded
|
|
|
|
Contracts
|
|
Investment
|
|
|
Contracts
|
|
Investment
|
|
|
|
(Dollars in thousands)
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
1
|
|
|
$
|
495
|
|
|
|
1
|
|
|
$
|
190
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
222
|
|
|
|
|
1
|
|
|
|
495
|
|
|
|
2
|
|
|
$
|
412
|
|
The defaults were the result of the borrower’s delinquent loan payments during the period. The Company evaluates the levels/trends in delinquencies and non-accruals as part of the qualitative factors within the allowance for loan loss framework.
NOTE 8 – Non-performing Assets, Past Due and Impaired Loans
The table below sets forth the amounts and categories of non-performing assets at the dates indicated:
|
|
At September 30,
|
|
|
At June 30,
|
|
|
|
2013
|
|
|
2013
|
|
|
|
(Dollars in thousands)
|
|
Non-accrual loans:
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
Residential
|
|
$
|
2,704
|
|
|
$
|
2,865
|
|
Commercial
|
|
|
3,120
|
|
|
|
3,365
|
|
Total non-accrual loans
|
|
|
5,824
|
|
|
|
6,230
|
|
|
|
|
|
|
|
|
|
|
Accruing loans past due 90 days or more:
|
|
|
-
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
Total non-performing loans
|
|
|
5,824
|
|
|
|
6,342
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
1,762
|
|
|
|
1,665
|
|
Total non-performing assets
|
|
$
|
7,586
|
|
|
$
|
8,007
|
|
|
|
|
|
|
|
|
|
|
Total non-performing loans to total loans
|
|
|
2.51
|
%
|
|
|
2.71
|
%
|
Total non-performing assets to total assets
|
|
|
1.68
|
%
|
|
|
1.76
|
%
|
The balance in non-performing loans is a direct correlation to the deterioration experienced in the real estate climate over the past several years. Management is focused on working with borrowers and guarantors to resolve these trends by restructuring or liquidating assets when prudent. Many of our commercial relationships are secured by development loans, in particular condominiums which have experienced a significant reduction in demand. The Bank reviews the strength of the guarantors; requires face to face discussions and offers restructuring suggestions that provide the borrowers with short term relief and exit strategies. Overall, we expect to see improvement as solutions are identified and executed. The Bank obtains a current appraisal on all real estate secured loans that are 180 days or more past due if the appraisal on file is older than one year. If the determination is made that there is the potential for collateral shortfall, an allocated reserve will be assigned to the loan for the expected deficiency. It is the policy of the Bank to charge off or write down loans or other assets when, in the opinion of the Credit Committee and Loan Review, the ultimate amount recoverable is less than the carrying value, or the collection of the amount is expected to be unduly prolonged. The level of non-performing assets is expected to fluctuate in response to changing economic and market conditions, and the relative sizes of the respective loan portfolios, along with management’s degree of success in resolving problem assets. Management takes a proactive approach with respect to the identification and resolution of problem loans.
The following table sets forth information regarding past due loans at September 30, 2013 and June 30, 2013:
Age Analysis of Past Due Financing Receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 days
|
|
|
|
|
|
|
30–59 Days
|
|
|
60–89 Days
|
|
|
or greater
|
|
|
Total
|
|
At September 30, 2013
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
|
(in thousands)
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
239
|
|
|
$
|
978
|
|
|
$
|
1,386
|
|
|
$
|
2,603
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
2,476
|
|
|
|
2,476
|
|
Consumer and other
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
Total
|
|
$
|
242
|
|
|
$
|
978
|
|
|
$
|
3,862
|
|
|
$
|
5,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
447
|
|
|
$
|
195
|
|
|
$
|
1,844
|
|
|
$
|
2,486
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
2,876
|
|
|
|
2,876
|
|
Commercial
|
|
|
9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
Consumer and other
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
Total
|
|
$
|
460
|
|
|
$
|
195
|
|
|
$
|
4,720
|
|
|
$
|
5,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of information pertaining to impaired loans at September 30, 2013 and June 30, 2013:
|
|
At September 30, 2013
|
|
|
At June 30, 2013
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
Impaired loans without a valuation allowance:
|
|
(in thousands)
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
1,151
|
|
|
$
|
1,346
|
|
|
|
|
|
$
|
1,497
|
|
|
$
|
1,630
|
|
|
|
|
Commercial
|
|
|
3,355
|
|
|
|
3,858
|
|
|
|
|
|
|
3,297
|
|
|
|
3,800
|
|
|
|
|
Consumer and other
|
|
|
16
|
|
|
|
16
|
|
|
|
|
|
|
17
|
|
|
|
17
|
|
|
|
|
Total impaired with no valuation allowance
|
|
|
4,522
|
|
|
|
5,220
|
|
|
|
|
|
|
4,811
|
|
|
|
5,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with a valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
2,498
|
|
|
|
2,646
|
|
|
$
|
139
|
|
|
|
2,515
|
|
|
|
2,663
|
|
|
$
|
156
|
|
Commercial
|
|
|
176
|
|
|
|
176
|
|
|
|
2
|
|
|
|
180
|
|
|
|
180
|
|
|
|
2
|
|
Total impaired with a valuation allowance
|
|
|
2,674
|
|
|
|
2,822
|
|
|
|
141
|
|
|
|
2,695
|
|
|
|
2,843
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
3,649
|
|
|
|
3,992
|
|
|
|
139
|
|
|
|
4,012
|
|
|
|
4,293
|
|
|
|
156
|
|
Commercial
|
|
|
3,531
|
|
|
|
4,034
|
|
|
|
2
|
|
|
|
3,477
|
|
|
|
3,980
|
|
|
|
2
|
|
Consumer and other
|
|
|
16
|
|
|
|
16
|
|
|
|
-
|
|
|
|
17
|
|
|
|
17
|
|
|
|
-
|
|
Total impaired loans
|
|
$
|
7,196
|
|
|
$
|
8,042
|
|
|
$
|
141
|
|
|
$
|
7,506
|
|
|
$
|
8,290
|
|
|
$
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of additional information pertaining to impaired loans:
|
|
Three months ended
|
|
|
Three months ended
|
|
|
|
September 30, 2013
|
|
|
September 30, 2012
|
|
|
|
Average
|
|
|
Interest
|
|
|
Interest Income
|
|
|
Average
|
|
|
Interest
|
|
|
Interest Income
|
|
|
|
Recorded
|
|
|
Income
|
|
|
Recognized
|
|
|
Recorded
|
|
|
Income
|
|
|
Recognized
|
|
|
|
Investment
|
|
|
Recognized
|
|
|
on Cash Basis
|
|
|
Investment
|
|
|
Recognized
|
|
|
on Cash Basis
|
|
|
|
(in thousands)
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
3,831
|
|
|
$
|
19
|
|
|
$
|
7
|
|
|
$
|
4,826
|
|
|
$
|
31
|
|
|
$
|
17
|
|
Commercial
|
|
|
3,504
|
|
|
|
3
|
|
|
|
-
|
|
|
|
7,306
|
|
|
|
62
|
|
|
|
14
|
|
Residential Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
426
|
|
|
|
-
|
|
|
|
-
|
|
Consumer and other
|
|
|
16
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22
|
|
|
|
-
|
|
|
|
-
|
|
Total impaired loans
|
|
$
|
7,351
|
|
|
$
|
22
|
|
|
$
|
7
|
|
|
$
|
12,580
|
|
|
$
|
93
|
|
|
$
|
31
|
|
NOTE 9 – Allowance for Loan Losses
An analysis of the allowance for loan losses for the three months ended September 30, 2013 and 2012 is as follows:
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
Residential
|
|
|
|
Commercial
|
|
|
|
Residential
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
|
Real Estate
|
|
|
|
Construction
|
|
|
|
Commercial
|
|
|
|
and Other
|
|
|
|
Unallocated
|
|
|
|
Total
|
|
Allowance for loan losses:
|
|
(in thousands)
|
|
Beginning balance
|
|
$
|
1,201
|
|
|
$
|
1,315
|
|
|
$
|
22
|
|
|
$
|
17
|
|
|
$
|
36
|
|
|
$
|
102
|
|
|
$
|
2,693
|
|
Charge-offs
|
|
|
(141
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
(154
|
)
|
Recoveries
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
|
|
3
|
|
|
|
5
|
|
|
|
-
|
|
|
|
14
|
|
Provision (credit)
|
|
|
175
|
|
|
|
(151
|
)
|
|
|
(10
|
)
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
6
|
|
|
|
20
|
|
Ending Balance
|
|
$
|
1,238
|
|
|
$
|
1,164
|
|
|
$
|
15
|
|
|
$
|
19
|
|
|
$
|
29
|
|
|
$
|
108
|
|
|
$
|
2,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
Residential
|
|
|
|
Commercial
|
|
|
|
Residential
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
|
Real Estate
|
|
|
|
Construction
|
|
|
Commercial
|
|
|
|
and Other
|
|
|
|
Unallocated
|
|
|
|
Total
|
|
Allowance for loan losses:
|
|
(in thousands)
|
|
Beginning balance
|
|
$
|
1,485
|
|
|
$
|
1,347
|
|
|
$
|
20
|
|
|
$
|
17
|
|
|
$
|
37
|
|
|
$
|
7
|
|
|
$
|
2,913
|
|
Charge-offs
|
|
|
(41
|
)
|
|
|
(123
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(17
|
)
|
|
|
-
|
|
|
|
(181
|
)
|
Recoveries
|
|
|
37
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
7
|
|
|
|
-
|
|
|
|
45
|
|
Provision (credit)
|
|
|
55
|
|
|
|
5
|
|
|
|
(1
|
)
|
|
|
14
|
|
|
|
9
|
|
|
|
168
|
|
|
|
250
|
|
Ending Balance
|
|
$
|
1,536
|
|
|
$
|
1,229
|
|
|
$
|
19
|
|
|
$
|
32
|
|
|
$
|
36
|
|
|
$
|
175
|
|
|
$
|
3,027
|
|
Further information pertaining to the allowance for loan losses at September 30, 2013 and June 30, 2013 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2013
|
|
Residential
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Commercial
|
|
|
and Other
|
|
|
Unallocated
|
|
|
Total
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: Amount of allowance for loan losses for impaired loans
|
|
$
|
139
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: Amount of allowance for loan
losses for non-impaired loans
|
|
$
|
1,099
|
|
|
$
|
1,162
|
|
|
$
|
15
|
|
|
$
|
19
|
|
|
$
|
29
|
|
|
$
|
108
|
|
|
$
|
2,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: Impaired loans
|
|
$
|
3,649
|
|
|
$
|
3,531
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16
|
|
|
$
|
-
|
|
|
$
|
7,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: Non-impaired loans
|
|
$
|
182,614
|
|
|
$
|
38,476
|
|
|
$
|
1,438
|
|
|
$
|
1,959
|
|
|
$
|
714
|
|
|
$
|
-
|
|
|
$
|
225,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2013
|
|
Residential
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Commercial
|
|
|
and Other
|
|
|
Unallocated
|
|
|
Total
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: Amount of allowance for loan losses for impaired loans
|
|
$
|
156
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: Amount of allowance for loan
losses for non-impaired loans
|
|
$
|
1,045
|
|
|
$
|
1,313
|
|
|
$
|
22
|
|
|
$
|
17
|
|
|
$
|
36
|
|
|
$
|
102
|
|
|
$
|
2,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: Impaired loans
|
|
$
|
4,012
|
|
|
$
|
3,477
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
17
|
|
|
$
|
-
|
|
|
$
|
7,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: Non-impaired loans
|
|
$
|
183,104
|
|
|
$
|
39,270
|
|
|
$
|
1,706
|
|
|
$
|
1,980
|
|
|
$
|
690
|
|
|
$
|
-
|
|
|
$
|
226,750
|
|
NOTE 10 – Accumulated Other Comprehensive Income (Loss)
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the equity section of the consolidated balance sheets, such items are components of accumulated other comprehensive income (loss).
The components of accumulated other comprehensive income (loss) and related tax effects are as follows:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2013
|
|
|
2013
|
|
|
|
(in thousands)
|
Net unrealized loss on securities available-for-sale
|
|
$
|
(761
|
)
|
|
$
|
(795
|
)
|
Tax effect
|
|
|
260
|
|
|
|
272
|
|
Accumulated other comprehensive loss
|
|
$
|
(501
|
)
|
|
$
|
(523
|
)
|
NOTE 11 – FAIR VALUE MEASUREMENTS
The Company groups its assets measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:
Level 1 – Valuations for assets traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 – Valuations for assets traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.
Level 3 – Valuations for assets that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s assets carried at fair value for September 30, 2013.
The Company’s mortgage-backed securities and other debt securities available-for-sale are generally classified within Level 2 of the fair value hierarchy. For these securities, we obtain fair value measurements from independent pricing services. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U. S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions.
Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalization and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows.
The Company’s impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based upon appraisals of similar properties obtained from a third party.
The Company did not have any transfers of assets between Levels 1 and 2 of the fair value hierarchy during the three months ended September 30, 2013.
The following summarizes assets measured at fair value on a recurring basis at September 30, 2013 and June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
At September 30, 2013
|
|
Total Fair
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
(in thousands)
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government-sponsored securities
|
|
$
|
965
|
|
|
$
|
-
|
|
|
$
|
965
|
|
|
$
|
-
|
|
Corporate bonds and other securities
|
|
|
4,810
|
|
|
|
-
|
|
|
|
4,810
|
|
|
|
-
|
|
U.S. Government-sponsored and guaranteed
mortgage-backed securities
|
|
|
29,348
|
|
|
|
-
|
|
|
|
29,348
|
|
|
|
-
|
|
Non-agency mortgage-backed securities
|
|
|
7,184
|
|
|
|
-
|
|
|
|
7,184
|
|
|
|
-
|
|
Equity securities
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Total
|
|
$
|
52,307
|
|
|
$
|
-
|
|
|
$
|
42,307
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
At June 30, 2013
|
|
Total Fair
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
(in thousands)
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government-sponsored securities
|
|
$
|
961
|
|
|
$
|
-
|
|
|
$
|
961
|
|
|
$
|
-
|
|
Corporate bonds and other securities
|
|
|
4,873
|
|
|
|
-
|
|
|
|
4,873
|
|
|
|
-
|
|
U.S. Government-sponsored and guaranteed
mortgage-backed securities
|
|
|
15,065
|
|
|
|
-
|
|
|
|
15,065
|
|
|
|
-
|
|
Non-agency mortgage-backed securities
|
|
|
7,551
|
|
|
|
-
|
|
|
|
7,551
|
|
|
|
-
|
|
Equity securities
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Total
|
|
$
|
38,450
|
|
|
$
|
-
|
|
|
$
|
28,450
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below represents the changes in level 3 assets measured at fair value for the three months ended September 30, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, June 30, 2013
|
|
|
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
Unrealized gains included in other comprehensive income
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Ending balance, September 30, 2013
|
|
|
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
The following summarizes assets measured at fair value on a non-recurring basis and the adjustments to the carrying value at and for the three months ended September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
Total Losses
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Significant
|
|
|
for the three
|
|
At September 30, 2013
|
|
Total Fair
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
months ended
|
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
September 30, 2013
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
121
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
121
|
|
|
$
|
(31
|
)
|
Other real estate owned
|
|
|
276
|
|
|
|
-
|
|
|
|
-
|
|
|
|
276
|
|
|
|
(66
|
)
|
|
|
$
|
397
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
397
|
|
|
$
|
(97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
Total Losses
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Significant
|
|
|
for the three
|
|
At September 30, 2012
|
|
Total Fair
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
months ended
|
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
September 30, 2012
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
290
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
290
|
|
|
$
|
(48
|
)
|
The amount of loans represents the carrying value of impaired loans net of related write-downs and valuation allowances for which adjustments are based on the estimated fair value of the underlying collateral. The other real estate owned amount represents the carrying value for which write-downs are based on the estimated fair value of the property.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because a market may not readily exist for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
There were no liabilities measured at fair value on a recurring or non-recurring basis at September 30, 2013 and 2012 or June 30, 2013.
The following methods and assumptions were used by the Company in estimating fair values of its financial instruments:
Cash and Cash Equivalents.
The carrying amounts of cash and cash equivalents approximate fair values based on the short-term nature of the assets.
Investment Securities and FHLBB Stock.
The fair value of securities held-to-maturity and available-for-sale is estimated based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Ownership of Federal Home Loan Bank of Boston (“FHLBB”) stock is restricted to member banks; therefore, the stock is not traded. The estimated fair value of FHLBB stock is equal to its carrying value, which represents the price at which the FHLBB is obligated to redeem its stock.
Loans.
For valuation purposes, the loan portfolio was segregated into its significant categories, which are residential, commercial real estate, residential construction, commercial and consumer and other loans. These categories were further segregated, where appropriate, into components based on significant financial characteristics such as type of interest rate (fixed or adjustable). Fair values were estimated for each component using assumptions developed by management and a valuation model provided by a third party specialist.
The fair values of residential, commercial real estate, residential construction, commercial and consumer and other loans were estimated by discounting the anticipated cash flows from the respective portfolios. Estimates of the timing and amount of these cash flows considered factors such as future loan prepayments. The discount rates reflected current market rates for loans with similar terms to borrowers of similar credit quality. The fair value of home equity lines of credit was based on the outstanding loan balances. Fair values for non-performing loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.
Loans held for sale:
Loans held for sale are accounted for at the lower of cost or market and the fair value of loans held for sale based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted as required for changes in loan characteristics.
Deposits and Mortgagors’ Escrow.
The fair value of deposits with no stated maturity such as demand deposits, NOW, regular savings, and money market deposit accounts and mortgagors’ escrow accounts, is equal to the amount payable on demand. The fair value estimates do not include the benefit that results from the generally lower cost of funding provided by the deposit liabilities compared to the cost of borrowing funds in the market. The fair value estimate of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits having similar remaining maturities.
Federal Home Loan Bank Advances.
The fair values of the Company’s Federal Home Loan Bank advances are estimated using discounted cash flow analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.
Securities Sold Under Agreements to Repurchase.
The Company enters into overnight repurchase agreements with its customers. Since these agreements are short-term instruments, the fair value of these agreements approximates their recorded balance. The Company also secures term repurchase agreements through other financial institutions. The fair value of these agreements are determined by discounting the anticipated future cash payments using rates currently available to the Bank for debt with similar terms and remaining maturities.
Accrued Interest.
The carrying amounts of accrued interest approximate fair value.
Off-Balance Sheet Instruments.
The fair value of off-balance-sheet mortgage lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. In the case of the commitments discussed in Note 13, the fair value equals the carrying amounts which are not significant.
Summary of Fair Values of Financial Instruments.
The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows. Certain financial instruments and all nonfinancial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying fair value of the Company.
The following table presents the carrying amount and estimated fair values of the Company’s financial instruments, all of which are held or issued for purposes other than trading, as of September 30, 2013 and June 30, 2013:
|
|
September 30, 2013
|
|
|
|
Carrying
|
|
|
Fair Value Hierarchy
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Value
|
|
|
|
(in thousands)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,448
|
|
|
$
|
7,448
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,448
|
|
Securities available-for-sale
|
|
|
52,307
|
|
|
|
-
|
|
|
|
42,307
|
|
|
|
10,000
|
|
|
|
52,307
|
|
Securities held-to-maturity
|
|
|
127,182
|
|
|
|
-
|
|
|
|
127,449
|
|
|
|
-
|
|
|
|
127,449
|
|
Federal Home Loan Bank stock
|
|
|
6,953
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,953
|
|
|
|
6,953
|
|
Loans held-for-sale
|
|
|
180
|
|
|
|
-
|
|
|
|
-
|
|
|
|
180
|
|
|
|
180
|
|
Loans, net
|
|
|
230,444
|
|
|
|
-
|
|
|
|
-
|
|
|
|
233,495
|
|
|
|
233,495
|
|
Accrued interest receivable
|
|
|
1,081
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,081
|
|
|
|
1,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
336,045
|
|
|
|
-
|
|
|
|
-
|
|
|
|
338,078
|
|
|
|
338,078
|
|
Mortgagors
’
escrow accounts
|
|
|
1,063
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,063
|
|
|
|
1,063
|
|
Federal Home Loan Bank advances
|
|
|
56,500
|
|
|
|
-
|
|
|
|
58,381
|
|
|
|
-
|
|
|
|
58,381
|
|
Securities sold under agreements to repurchase
|
|
|
5,925
|
|
|
|
-
|
|
|
|
5,925
|
|
|
|
-
|
|
|
|
5,925
|
|
Accrued interest payable
|
|
|
128
|
|
|
|
-
|
|
|
|
-
|
|
|
|
128
|
|
|
|
128
|
|
|
|
June 30, 2013
|
|
|
|
Carrying
|
|
|
Fair Value Hierarchy
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Value
|
|
|
|
(in thousands)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
12,793
|
|
|
$
|
12,793
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
12,793
|
|
Securities available-for-sale
|
|
|
38,450
|
|
|
|
-
|
|
|
|
28,450
|
|
|
|
10,000
|
|
|
|
38,450
|
|
Securities held-to-maturity
|
|
|
134,989
|
|
|
|
-
|
|
|
|
135,418
|
|
|
|
-
|
|
|
|
135,418
|
|
Federal Home Loan Bank stock
|
|
|
6,953
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,953
|
|
|
|
6,953
|
|
Loans held-for-sale
|
|
|
1,037
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,006
|
|
|
|
1,006
|
|
Loans, net
|
|
|
232,171
|
|
|
|
-
|
|
|
|
-
|
|
|
|
234,923
|
|
|
|
234,923
|
|
Accrued interest receivable
|
|
|
1,013
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,013
|
|
|
|
1,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
341,285
|
|
|
|
-
|
|
|
|
-
|
|
|
|
343,492
|
|
|
|
343,492
|
|
Mortgagors
’
escrow accounts
|
|
|
2,120
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,120
|
|
|
|
2,120
|
|
Federal Home Loan Bank advances
|
|
|
53,500
|
|
|
|
-
|
|
|
|
55,260
|
|
|
|
-
|
|
|
|
55,260
|
|
Securities sold under agreements to repurchase
|
|
|
4,849
|
|
|
|
-
|
|
|
|
4,849
|
|
|
|
-
|
|
|
|
4,849
|
|
Accrued interest payable
|
|
|
143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
143
|
|
|
|
143
|
|
NOTE 12 – Stock-Based Incentive Plan
At the annual meeting of stockholders on October 21, 2005, stockholders of the Company approved the PSB Holdings, Inc. 2005 Stock-Based Incentive Plan (the “Incentive Plan”). Under the Incentive Plan, the Company may grant up to 340,213 stock options and 136,085 shares of restricted stock to its employees, officers and directors for an aggregate amount of up to 476,298 shares of the Company’s common stock for issuance upon the grant or exercise of awards. Both incentive stock options and non-statutory stock options may be granted under the Incentive Plan.
On November 7, 2005, the Company awarded 319,800 options to purchase the Company’s common stock and 129,281 shares of restricted stock. Stock option awards were granted with an exercise price equal to the market price of the Company’s stock at the date of grant ($10.60) with a maximum term of ten years.
On June 7, 2006, the Company awarded 18,000 options to purchase the Company’s common stock and 6,000 shares of restricted stock. Stock option awards were granted with an exercise price equal to the market price of the Company’s stock at the date of grant ($10.78) with a maximum term of ten years.
On May 25, 2007, the Company awarded 29,000 options to purchase the Company’s common stock and 9,500 shares of restricted stock. Stock option awards were granted with an exercise price equal to the market price of the Company’s stock at the date of grant ($10.70) with a maximum term of ten years.
Both stock option and restricted stock awards granted to date vest at 20% per year beginning on the first anniversary of the date of the grant.
Stock options and restricted stock awards are considered common stock equivalents for the purpose of computing earnings per share on a diluted basis.
The Company has recorded share-based compensation expense related to outstanding stock option and restricted stock awards based upon the fair value at the date of grant over the vesting period of such awards on a straight-line basis. The fair value of each restricted stock allocation, based on the market price at the date of grant, is recorded in Unearned stock awards. Compensation expense related to unearned restricted shares is amortized to compensation and benefits expense over the vesting period of the restricted stock awards. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing method which includes several assumptions such as volatility, expected dividends, expected term and risk-free rate for each stock option award. There were no unvested stock awards/options outstanding at or during the three months ended September 30, 2013.
NOTE 13 – Dividends
The Company did not declare a dividend during the three months ended September 30, 2013 and 2012.
NOTE 14 – Commitments to Extend Credit
The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Balance Sheets.
The contractual amounts of outstanding commitments were as follows:
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2013
|
|
|
2013
|
|
|
|
(in thousands)
|
|
Commitments to extend credit:
|
|
|
|
|
|
|
Loan commitments
|
|
$
|
4,683
|
|
|
$
|
3,537
|
|
Unadvanced construction loans
|
|
|
1,230
|
|
|
|
1,745
|
|
Unadvanced lines of credit
|
|
|
12,251
|
|
|
|
11,912
|
|
Standby letters of credit
|
|
|
619
|
|
|
|
746
|
|
Outstanding commitments
|
|
$
|
18,783
|
|
|
$
|
17,940
|
|