UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-K

For the fiscal year ended: June 30, 20162019

OR

For the transition period from                    to                    

Commission File No.:0-22444

WVS Financial Corp.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (412)364-1911

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨☐    No  x☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨☐    No  x☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x☒    No   ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x☒    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitionthe definitions of “accelerated filer”, “large accelerated filer”filer,” “accelerated filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act).    Yes   ¨☐    No  x☒

As of December 31, 2015,2018, the aggregate value of the 1,475,3211,493,729 shares of Common Stock of the registrant issued and outstanding on such date, which excludes 563,808499,073 shares held by all directors, officers and officersaffiliates of the registrant as a group, was approximately $18.15$22.5 million. This figure is based on the last known trade price of $12.30$14.77 per share of the registrant’s Common Stock on December 31, 2015.2018.

Number of shares of Common Stock outstanding as of September 9, 2016: 2,008,1447, 2019: 1,943,116

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents incorporated by reference and the Part of the Form10-K into which the document is incorporated:

FORWARD-LOOKING STATEMENTS

In the normal course of business, we, in an effort to help keep our shareholders and the public informed about our operations, may from time to time issue or make certain statements, either in writing or orally, that are or contain forward-looking statements, as that term is defined in the U.S. federal securities laws. Generally, these statements relate to business plans or strategies, projected or anticipated benefits from acquisitions made by or to be made by us, projections involving anticipated revenues, earnings, profitability or other aspects of operating results or other future developments in our affairs or the industry in which we conduct business. Forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology such as “anticipated,” “believe,” “expect,” “intend,” “plan,” “estimate” or similar expressions.

Although we believe that the anticipated results or other expectations reflected in our forward-looking statements are based on reasonable assumptions, we can give no assurance that those results or expectations will be attained. Forward-looking statements involve risks, uncertainties and assumptions (some of which are beyond our control), and as a result actual results may differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include, but are not limited to, the following, as well as those discussed elsewhere herein:

You should not put undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new or future events except to the extent required by federal securities laws.

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PART I.

WVS Financial Corp. (“WVS”, the “Company”, “us” or “we”) is the parent holding company of West View Savings Bank (“West View” or the “Savings Bank”). The Company was organized in July 1993 as a Pennsylvania-chartered unitary bank holding company and acquired 100% of the common stock of the Savings Bank in November 1993.

West View Savings Bank is a Pennsylvania-chartered, FDIC-insured stock savings bank conducting business from six offices in the North Hills suburbs of Pittsburgh. The Savings Bank converted from the mutual to the stock form of ownership in November 1993. The Savings Bank had no subsidiaries at June 30, 2016.2019.

Lending Activities

General. At June 30, 2016,2019, the Company’s net portfolio of loans receivable totaled $64.7$90.6 million, as compared to $46.2$84.7 million at June 30, 2015.2018. Net loans receivable comprised 19.3%25.5% of the Company’s total assets at June 30, 2016,2019, as compared to 14.0%24.0% at June 30, 2015.2018. Net loans also comprised 45.8%were 61.9% of the Company’s deposits at June 30, 20162019 as compared to 33.2%58.4% at June 30, 2015.2018. The principal categories of loans in the Company’s portfolio are single-family and multi-family residential real estate loans, commercial real estate loans, construction loans, consumer loans, land acquisition and development loans and commercial loans. Substantially all of the Company’s mortgage loan portfolio consists of conventional mortgage loans, which are loans that are neither insured by the Federal Housing Administration (“FHA”) nor partially guaranteed by the Department of Veterans Affairs (“VA”). Historically, the Company’s lending activities have been concentrated in single-family residential and land development and construction loans secured by properties located in its primary market area of northern Allegheny County, southern Butler County and eastern Beaver County, Pennsylvania.

All of the Company’s mortgage loans are secured by properties located in Pennsylvania. Moreover, substantially all of the Company’snon-mortgage loan portfolio consists of loans made to residents and businesses located in the Company’s primary market area.

Federal regulations impose limitations on the aggregate amount of loans that a savings institution can make to any one borrower, including related entities. The permissible amount ofloans-to-one borrower follows the national bank standard for all loans made by savings institutions, which generally does not permitloans-to-one borrower to exceed 15% of unimpaired capital and surplus. Loans in an amount equal to an additional 10% of unimpaired capital and surplus also may be made to a borrower if the loans are fully secured by readily marketable securities. At June 30, 2016,2019, the Savings Bank’s limit onloans-to-one borrower was approximately $5.0$4.9 million. The Company’s general policy has been to limitloans-to-one borrower, including related entities, to $2.0 million although this general limit may be exceeded based on the merit of a particular credit. At June 30, 2016,2019, the Company’s five largest loans or groups ofloans-to-one borrower, including related entities, ranged from an aggregate of $1.1$1.5 million to $4.0 million, with a $2.3$4.4 million. The $4.4 million group ofloans-to-one borrower was secured by real estate located in the Company’s primary market area and investments pledged by the borrower. Related outstanding disbursed principal balances on the Company’s five largest loans or group ofloans-to-one borrower, including related entities, ranged from an aggregate of $885 thousand$0.5 million to $4.0$4.4 million. The remainder of the groups ofloans-to-one borrower are secured primarily by real estate located in the Company’s primary market area. Included in this range are undisbursed loan proceeds (i.e. loans in process) ranging from $0 to $1.2$1.0 million.

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Loan Portfolio Composition. The following table sets forth the composition of the Company’s net loans receivable portfolio by type of loan at the dates indicated.

Contractual Maturities. The following table sets forth the scheduled contractual maturities of the Company’s loans and mortgage-backed securities at June 30, 2016.2019. The amounts shown for each period do not take into account loan prepayments and normal amortization of the Company’s loan portfolio.

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Scheduled contractual principal repayments do not reflect the actual maturities of loans. The average maturity of loans is substantially less than their average contractual terms because of prepayments anddue-on-sale clauses. The average life of mortgage loans tends to increase when current mortgage loan rates are substantially higher than rates on existing mortgage loans and, conversely, decrease when rates on existing mortgages are substantially higher than current mortgage loan rates (due to refinancings of adjustable-rate and fixed-rate loans at lower rates).

The Company has from time to time renewed commercial real estate loans and speculative construction (single-family) loans due to slower than expected sales of the underlying collateral. Commercial real estate loans are generally renewed at a contract rate that is the greater of the market rate at the time of the renewal or the original contract rate. Loans secured by speculative single-family construction or developed lots are generally renewed for an additional twelve month term with monthly payments of interest. Subsequent renewals, if necessary, are generally granted for an additional twelve month term; principal amortization is required. Land acquisition and development loans are generally renewed for an additional twelve month term with monthly payments of interest.

At June 30, 2016,2019, the Company had approximately $709 thousand of renewedno construction loans. The $709 thousand in aggregate disbursed principal that has been renewed is comprised of: single-family speculative construction loans. Management believes that the renewed construction loans will self-liquidate during the normal course of business, though some additional rollovers may be necessary. All of the loans that have been rolled over are in compliance with all loan terms, including the receipt of all required payments, and are considered performing loans.over.

Origination, Purchase andSale of Loans. Applications for residential real estate loans and consumer loans are accepted at all of the Company’s offices. Applications for commercial real estate loans are taken only at the Company’s Franklin Park office. Loan applications are primarily attributable to existing customers, builders,walk-in customers and referrals from both real estate loan brokers and existing customers.

All processing and underwriting of real estate and commercial business loans is performed solely at the Company’s loan division at the Franklin Park office. The Company believes this centralized approach to approving such loan applications allows it to process and approve such applications faster and with greater efficiency. The Company also believes that this approach increases its ability to service the loans. The Savings Bank’s Director of Retail Lending hasand the Savings Bank’s President have lending authorities ranging from $5 thousand (unsecured loans) to $300 thousand (loans secured by first mortgage liens). With the approval of the Savings Bank’s President, the individualjoint lending authorities range from $25 thousand (unsecured), $500 thousand (loans secured bynon-real estate collateral), $1.5 million (first mortgages), $750 thousand (first and second(second mortgages) and $2 million on commercial and secured builder lines of credit. All loan applications are required to be ratified by the Company’s Loan Committee, comprised of both outside directors and management, which meets at least monthly.

Historically, the Company has originated substantially all of the loans retained in its portfolio. Substantially all of the residential real estate loans originated by the Company have been under terms, conditions and documentation which permit their sale to the Fannie Mae and other investors in the secondary market. The Company has held most of the loans it originates in its own portfolio until maturity, due, in part, to competitive pricing conditions in the marketplace for origination by nationwide lenders and portfolio lenders. The Company has not originatedsub-prime, no documentation or limited documentation loans.

Historically, theThe Company has not been anmore aggressive purchaser of loans from third parties. Beginning in fiscal 2015, the Company began to more aggressively purchasepurchasing single-family loans to augment its own originations of such loans. All of the loans purchased were single-family whole loans in ourits primary market area or the greater Pittsburgh Metropolitan Statistical Area (MSA). All purchased loans meet or exceed the Company’s underwriting criteria.

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The Company requires that all purchased loans be underwritten in accordance with its underwriting guidelines and standards. The Company reviews loans, particularly scrutinizing the borrower’s ability to repay the obligation, the appraised value and theloan-to-value ratio. The Company services substantially all of its purchased loans. Loan participations purchased or sold by the Company may be serviced by either the Company or the seller as mutually agreed on a deal by deal basis. At June 30, 2016, $2072019, $154 thousand or 0.3%0.2% of the Company’s net loans receivable were being serviced for the Company by others.

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The following table shows origination, purchase and sale activity of the Company with respect to loans on a consolidated basis during the periods indicated.

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Real Estate Lending Standards. All financial institutions are required to adopt and maintain comprehensive written real estate lending policies that are consistent with safe and sound banking practices. These lending policies must reflect consideration of the Interagency Guidelines for Real Estate Lending Policies (“Guidelines”) adopted by the federal banking agencies in December 1992. The Guidelines set forth uniform regulations prescribing standards for real estate lending. Real estate lending is defined as an extension of credit secured by liens on interests in real estate or made for the purpose of financing the construction of a building or other improvements to real estate, regardless of whether a lien has been taken on the property.

The policies must address certain lending considerations set forth in the Guidelines, includingloan-to-value (“LTV”) limits, loan administration procedures, underwriting standards, portfolio diversification standards, and documentation, approval and reporting requirements. These policies must also be appropriate to the size of the institution and the nature and scope of its operations, and must be reviewed and approved by the Board of Directors at least annually. The LTV ratio framework, with aan LTV ratio being the total amount of credit to be extended divided by the appraised value of the property at the time the credit is originated, must be established for each category of real estate loans. If not a first lien, the lender must combine all senior liens when calculating this ratio. The Guidelines, among other things, establish the following supervisory LTV limits: raw land (65%); land development (75%); construction (commercial, multi-family andnon-residential) (80%); improved property (85%); andone-to-four family residential (owner-occupied) (no maximum ratio; however any LTV ratio in excess of 90% should require appropriate mortgage insurance or readily marketable collateral). Consistent with its conservative lending philosophy, the Company’s LTV limits are generally more restrictive than those in the Guidelines: raw land (60%); land development (70%); construction (commercial - 75%; multi-family - 75%; speculative residential - 75%); 1 – 2 family residential properties (80%); multi-family residential (75%); and commercial real estate (75%).

Single-Family Residential Real Estate Loans. Historically, savings institutions such as the Company have concentrated their lending activities on the origination of loans secured primarily by first mortgage liens on existing single-family residences. At June 30, 2016 $49.42019, $76.8 million or 76.3%84.7% of the Company’s total loan portfolio consisted of single-family residential real estate loans, substantially all of which are conventional loans. The increase of $20.8$4.6 million in single-family residential real estate loans during fiscal 20162019 was primarily the result of originations and loan purchases in excess of pay downs on single-family residential real estate loans. During fiscal 2015, the Company began to purchase single-family loans to augment its own originations. Single-family loan purchases totaled $22.1$11.5 million in fiscal 2016,2019, and $16.7$11.1 million in fiscal 2015.2018. Substantially all of the loans purchased were in the greater Pittsburgh area.MSA. Single-family loan originations totaled $5.2$2.5 million and increased $1.5 milliondecreased $486 thousand or 39.5%16.4% during the fiscal year ended June 30, 2016,2019, when compared to fiscal 2015.2018. The Company continued to actively originate single-family loans in order to make single-family loans available to the public and in order to generate interest income. All single-family loans originated were maintained on the Company’s balance sheet. The Company continued to offer shorter duration consumer, home equity, construction loans, land acquisition and development loans and commercial loans.

The Company historically has originated fixed-rate loans with terms of up to 30 years. Although such loans are originated with the expectation that they will be maintained in the portfolio, these loans are originated generally under terms, conditions and documentation that permit their sale in the secondary market. The Company also makes available single-family residential adjustable-rate mortgages (“ARMs”), which provide for periodic adjustments to the interest rate, but such loans have never been as widely accepted in the Company’s market area as the fixed-rate mortgage loan products. The ARMs currently offered by the Company have up to30-year terms and an interest rate, which adjusts in accordance with one of several indices.

At June 30, 2016,2019, approximately $47.9$74.0 million or 96.9%96.3% of the single-family residential loans in the Company’s loan portfolio consisted of loans with fixed rates of interest. Although these loans generally provide for repayments of principal over a fixed period of 15 to 30 years, it is the Company’s experience that because of prepayments anddue-on-sale clauses, such loans generally remain outstanding for a substantially shorter period of time.

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The Company is permitted to lend up to 100% of the appraised value of real property securing a residential loan; however, if the amount of a residential loan originated or refinanced exceeds 90% of the appraised value, the Company is required by state banking regulations to obtain private mortgage insurance on the portion of the principal amount that exceeds 75% of the appraised value of the security property. Prior to the global financial crisis experienced during fiscal 2009 and continuing throughout fiscal 2014, and

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pursuant to underwriting guidelines adopted by the Board of Directors, private mortgage insurance (“PMI”) was obtained on residential loans for whichloan-to-value ratios exceed 80% according to the following schedule: loans exceeding 80% but less than 90% - 25% coverage; loans exceeding 90% but less than 95% - 30% coverage; and loans at 95% through 100% - 35% coverage. Since the beginning of the global financial crisis of fiscal 2009, the major PMI companies were downgraded by the rating agencies with respect to financial capacity and claims payment ability. Accordingly, the Board of Directors amended the Company’s underwriting guidelines to preclude the use of PMI until the PMI companies regained their financial footing. Effective July 1, 2014, the Board of Directors amended the Company’s underwriting guidelines to permit the use of PMI. Generally the Company does not make loans in excess of 95% of the appraised value of real property even with PMI. No loans are made in excess of 80% of appraised value without PMI.

Property appraisals on the real estate and improvements securing the Company’s single-family residential loans are made by independent appraisers approved by the Board of Directors. Appraisals are performed in accordance with federal regulations and policies. The Company obtains title insurance policies on most of the first mortgage real estate loans originated. If title insurance is not obtained or is unavailable, the Company obtains an abstract of title and a title opinion. Borrowers also must obtain hazard insurance prior to closing and, when required by the United States Department of Housing and Urban Development, flood insurance. Borrowers may be required to advance funds, with each monthly payment of principal and interest, to a loan escrow account from which the Company makes disbursements for items such as real estate taxes, homeowners and mortgage insurance premiums as they become due.

Multi-Family Residential and Commercial Real Estate Loans. The Company originates mortgage loans for the acquisition and refinancing of existing multi-family residential and commercial real estate properties. At June 30, 2016, $4.02019, $3.1 million or 6.1%3.4% of the Company’s total loan portfolio consisted of loans secured by existing multi-family residential real estate properties, which represented a decrease of $2.1 million$267 thousand or 34.9%7.9% from fiscal 2015. Approximately $2.2 million of the net $2.1 millionJune 30, 2018. The decrease ofin multi-family loans during fiscal 20162019 was attributable to the repayment of one loan. Of the $4.0 million, approximately $3.5 million or 88.6% provide for an adjustable rate of interest, while approximately $500 thousand or 11.4% are fixed rate loans.principal repayments.

At June 30, 2016, $1.62019, $3.7 million or 2.5%4.1% of the Company’s loan portfolio consisted of loans secured by existing commercial real estate properties, which represented a decreasean increase of $1.8 million$245 thousand or 53.1%7.0% from June 30, 2015.2018. The $1.8 million decrease ofincrease in commercial real estate loans during fiscal 20162019 was attributable to the payoff of eleven loans, while one commercial real estate loan totaling $469 thousand was reclassified to commercial (non-real estate) loans. Of the $1.6 million, approximately $970 thousand or 61.0% provide for an adjustable rate of interest, while approximately $622 thousand or 39.0% are fixed rate loans.originations. The Company has not emphasized commercial real estate lending due to the substantial growth in its lower risk single familysingle-family owner occupied loan portfolio. However, the Company will make commercial real estate loans to existing, or seasoned new, customers.

The majority of the Company’s multi-family residential loans are secured primarily by 5 to 20 unit apartment buildings, while commercial real estate loans are secured by office buildings and small retail establishments and a church.establishments. These types of properties constitute the majority of the Company’s commercial real estate loan portfolio. The Company’s multi-family residential and commercial real estate loan portfolio consists primarily of loans secured by properties located in its primary market area.

Although terms vary, multi-family residential and commercial real estate loans generally are amortized over a period of up to 15 years (although some loans amortize over a 20 year period) and mature in 5 to 15 years. The Company will originate these loans either with fixed or adjustable interest rates which generally is negotiated at the time of origination.Loan-to-value ratios on the Company’s commercial real estate loans are currently limited to 75% or lower. As part of the criteria for underwriting multi-family residential and commercial real estate loans, the Company generally imposes a debt coverage ratio (the ratio of net cash from operations before payment of the debt service to debt service) of at least 125%. If the borrower has insufficient stand-alone financial capacity, the Savings Bank will either obtain personal guarantees on its multi-family residential and commercial real estate loans from the principals of the borrower and, if these cannot be obtained, to impose more stringentloan-to-value, debt service and other underwriting requirements.

At June 30, 2016, the Company’s multi-family residential and commercial real estate loan portfolio consisted of approximately 12 loans with an average principal balance of $133 thousand. At June 30, 2016, the Company had no multi-family residential real estate loans or commercial real estate loans that were classified as non-accrual.

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Construction Loans. For many years,The Company may from time to time engage in the Company has been active in originatingorigination of loans to construct primarily single-family residences, and, to a much lesser extent, loans to acquire and develop real estate for construction of residential properties. These construction lending activities generally are limited to the Company’s primary market area. At June 30, 2016,2019, construction loans amounted to approximately $4.8$2.9 million or 7.4%3.2% of the Company’s total loan portfolio, which represented an increase of $1.8$1.1 million or 57.8%64.3% from June 30, 2015.2019. The increase was principally due to increased demand for the constructionhigher volumes of owner occupied single family homes.construction permanent loans in the Company’s primary market area. Generally it takes about nine to eighteen months to complete the construction cycle and to convert from a construction to a permanent loan. As of June 30, 2016,2019, the Company’s portfolio of construction loans consisted primarily of loans for the construction of single-family residential real estate. There were $1.7$2.2 million of construction loan originations during the fiscal year ended June 30, 2016,2019, as compared to $3.8$1.3 million in construction loan originations in fiscal 2015.2018. Purchases of single family construction loans totaled $3.9 million in fiscal 2016, and $3.8 million in fiscal 2015.2019, and $500 thousand in fiscal 2018. Substantially all of the loans purchased were in the greater Pittsburgh area. Due to the stagnant economy, a number of the Company’s small builders had experienced slow sales of their housing inventories during fiscal 2011. During fiscal 2012, many of these small builders were able to liquidate their housing inventories and repay their loans to the Savings Bank. Due to continued economic weaknesses in fiscal 2014, many of the small builders curtailed their building of speculative single-family construction loans. Fiscal 2015 and 2016 saw an increase in speculative single-family construction loans due to an increase in demand and builder confidence. Management continues to monitor housing starts both locally and nationally.

Construction loans are made for the purpose of constructing a single-family residence. The Company will underwrite such loans to individuals on a construction/permanent mortgage loan basis or to a builder/developer on a speculative (not pre-sold) construction mortgage loan basis. At June 30, 2016, total outstanding construction loans comprised approximately 7.4% of the Company’s total loan portfolio and were made to local real estate builders and developers with whom the Company has worked for a number of years for the purpose of constructing primarily single-family residences.

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Upon application, credit review and analysis of personal and corporate financial statements, the Company may grant local builders lines of credit up to designated amounts. These credit lines may be used for the purpose of construction of speculative residential properties. In some instances, lines of credit will also be granted for purposes of acquiring finished residential lots and developing speculative residential properties thereon. Such lines generally have not exceeded $1.0 million, with the largest line totaling approximately $1.4 million. As of June 30, 2019, there were no lines of credit granted to builders. Once approved for a construction line, a builder or developer must still submit plans and specifications and receive the Company’s authorization, including an appraisal of the collateral satisfactory to the Company, in order to begin utilizing the line for a particular project. As of June 30, 2016,2019, the Company also had $666$694 thousand or 1.0% of the total loan portfolio invested in land development loans, which consisted of two loans to two borrowers.loans.

Speculative construction loans generally have maturities of 18 months including one 6 month extension, with payments being made monthly on an interest-only basis. Thereafter, the permanent financing arrangements will generally provide for either an adjustable or fixed interest rate, consistent with the Company’s policies with respect to residential and commercial real estate financing.

The Company intends to maintain its involvement in construction lending within its primary market area. Such loans afford the Company the opportunity to increase the interest rate sensitivity of its loan portfolio. Commercial real estate and construction lending is generally considered to involve a higher level of risk as compared to single-family residential lending, due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on real estate developers and managers. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. The nature of these loans is such that they are generally more difficult to evaluate and monitor. In addition, speculative construction loans to a builder are not necessarilypre-sold and thus pose a greater potential risk to the Company than construction loans to individuals on their personal residences. Depending upon local real estate market conditions, the Company may begin to apply more stringent underwriting criteria on new construction loans and renewals. Specifically, the Company may reduce its overall portfolio of construction loans through alteration, reduce loan to value ratios to below 75%, or require a higher credit profile of guarantors.

The Company has attempted to minimize the foregoing risks by, among other things, limiting the extent of its commercial real estate lending generally and by limiting its construction lending to primarily residential properties. In addition, the Company has adopted underwriting guidelines which impose stringentloan-to-value, debt service and other requirements for loans which are believed to involve higher elements of credit risk, by generally limiting the geographic area in which the Company will do business to its primary market area and by working with builders with whom it has established relationships.

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Consumer Loans. The Company offers consumer loans, although such lending activity has not historically been a large part of its business. At June 30, 2016, $2.92019, $3.0 million or 4.4%3.3% of the Company’s total loan portfolio consisted of consumer loans, which represented a decrease of $451$192 thousand or 13.7%6.1% from fiscal 2015.June 30, 2018. The $451 thousand decrease was primarily attributable to repayments on such loans in excess of originations. The consumer loans offered by the Company include home equity loans, home equity lines of credit, automobile loans, loans secured by deposit accounts, personal loans, and education loans. Approximately 96.6%96.2% of the Company’s consumer loans are secured by real estate and are primarily obtained through existing andwalk-in customers.

The Company will originate either a fixed-rate, fixed term home equity loan, or a home equity line of credit with a variable rate. At June 30, 2016,2019, approximately 29.7%31.7% of the Company’s home equity loans were at a fixed rate for a fixed term. Although there have been a few exceptions with greaterloan-to-value ratios, substantially all of such loans are originated with aloan-to-value ratio which, when coupled with the outstanding first mortgage loan, does not exceed 80%.

Commercial Loans. At June 30, 2016, $1.5 million2019, $418 thousand or 2.2%0.5% of the Company’s total loan portfolio consisted of commercial loans, which include loans secured by accounts receivable, marketable investment securities, business inventory and equipment, and similar collateral, an increasea decrease of $205$215 thousand from $1.3 million$633 thousand of commercial loans at June 30, 2015.2018. The $205 thousand or 16.4% increasedecrease during fiscal 20162019 was principally due to the reclassification of one commercial real estate loan due to the borrower pledging deposits at the Bank in excess of the loan amount, to release the real property originally pledged as collateral.principal repayments. The Company may continue to selectively develop this line of business in order to increase interest income and to attract compensating deposit account balances.

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Loan Fee Income. In addition to interest earned on loans, the Company may receive income from fees in connection with loan originations, loan modifications, late payments, prepayments and for miscellaneous services related to its loans. Income from these activities varies from period to period with the volume and type of loans made and competitive conditions.

The Company’s loan origination fees are generally calculated as a percentage of the amount borrowed. Loan origination and commitment fees and all incremental direct loan origination costs are deferred and recognized over the contractual remaining lives of the related loans on a level yield basis. Discounts and premiums on loans purchased are accreted and amortized in the same manner. In accordance with ASC Topic 310, the Company has recognized $(17)$(60) thousand, $5$(64) thousand and $7$(47) thousand of deferred loan fees (costs) during fiscal 2016, 20152019, 2018 and 2014,2017, respectively, in connection with loan refinancings, payoffs and ongoing amortization of outstanding loans. Loans previously originated with lower or no loan origination fees will reduce the recognition of associated deferred fee balances while loans originated with higher loan origination fees will increase the recognition of associated deferred fee balances. The Company pays premiums on loans purchased. Purchase premiums are amortized to expense over the life of the loan.

Non-Performing Loans, Real Estate Owned, Troubled Debt Restructurings and Potential Problem Loans. When a borrower fails to make a required payment on a loan, the Company attempts to cure the deficiency by contacting the borrower and seeking payment. Contacts are generally made on the fifteenth day after a payment is due. In most cases, deficiencies are cured promptly. If a delinquency extends beyond 15 days, the loan and payment history is reviewed and efforts are made to collect the loan. While the Company generally prefers to work with borrowers to resolve such problems, when the account becomes 90 days delinquent, the Company may institute foreclosure or other proceedings, as necessary, to minimize any potential loss.

Loans are placed onnon-accrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual. When a loan is placed onnon-accrual status, previously accrued but unpaid interest is deducted from interest income. The Company normally does not accrue interest on loans past due 90 days or more. The Company may continue to accrue interest if, in the opinion of management, it believes it will collect principal and interest in full on the loan.

Real estate acquired by the Company as a result of foreclosure or bydeed-in-lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired, it is recorded at the lower of cost or fair value at the date of acquisition. Any subsequent write-down, if necessary, is charged to the allowance for losses on real estate owned. All costs incurred in maintaining the Company’s interest in the property are capitalized between the date the loan becomes delinquent and the date of acquisition. After the date of acquisition, all costs incurred in maintaining the property are expensed and costs incurred for the improvement or development of such property are capitalized.

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Potential problem loans are loans where management has some doubt as to the ability of the borrower to comply with present loan repayment terms.

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The following table sets forth the amounts and categories of the Company’snon-performing assets, troubled debt restructurings and potential problem loans at the dates indicated.

The $55$10 thousand decrease innon-performing assets during the twelve months ended June 30, 20162019 was primarily attributable to the payoff in full of one non-accrual commercial real estate loan totaling $49 thousand and the repayment of principal of $6 thousand on the Company’s one single-family residentialnon-accrual loan.

The Company had onenon-accrual single-family real estate loan totaling approximately $254$225 thousand at June 30, 2016.2019. The loan is collateral dependent and in various stages of collection.

At June 30, 2016,2019 and 2018, the Company had no loans that it considered to be impaired.

During fiscal 2016, 20152019, 2018 and 2014,2017, approximately $17$15 thousand, $25$15 thousand and $51$15 thousand, respectively, of interest would have been recorded on loans accounted for on anon-accrual basis and troubled debt restructurings if such loans had been current according to the original loan agreements for the entire period. These amounts were not included in the Company’s interest income for the respective periods. The amount of interest income on loans accounted for on anon-accrual basis and troubled debt restructurings that was included in income during the same periods amounted to approximately $24$15 thousand, $32$21 thousand and $14$17 thousand, respectively.

Allowances for Loan Losses. The allowance for loan losses (“ALLL”) is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance account. Subsequent recoveries, if any, are credited to the allowance. The allowance is maintained at a level believed adequate by management to absorb estimated potential loan losses.

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Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio considering past experience, current economic conditions, composition of the loan portfolio and other relevant factors. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant change.

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The FDIC’s Revised Interagency Policy Statement on the Allowance for Loan and Lease Losses provides that an institution must maintain an ALLL at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio, and is consistent with generally accepted accounting principles (“GAAP”). The revised policy statement updates the previous guidance that describes the responsibilities of the board of directors, management, and bank examiners regarding the ALLL, factors to be considered in the estimation of the ALLL, and the objectives and elements of an effective loan review system.

Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: “substandard”, “doubtful” and “loss”. Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified as loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. Another category designated “asset watch” is also utilized by the Savings Bank for assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification as substandard, doubtful or loss. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified as loss, the insured institution must either establish specific allowances for loan losses in the amount of 100% of the portion of the asset classified loss, orcharge-off such amount. General loss allowances established to cover possible losses related to assets classified substandard or doubtful may be included in determining an institution’s regulatory capital, while specific valuation allowances for loan losses do not qualify as regulatory capital.

The Company’s general policy is to internally classify its assets on a regular basis and establish prudent general valuation allowances that are adequate to absorb losses that have not been identified but that are inherent in the loan portfolio. The Company maintains general valuation allowances that it believes are adequate to absorb losses in its loan portfolio that are not clearly attributable to specific loans. The Company’s general valuation allowances are within the following general ranges: (1) 0% to 5% of assets subject to special mention; (2) 5.00% to 100% of assets classified substandard; and (3) 50% to 100% of assets classified doubtful. Any loan classified as loss ischarged-off. To further monitor and assess the risk characteristics of the loan portfolio, loan delinquencies are reviewed to consider any developing problem loans. Based upon the procedures in place, considering the Company’s past charge-offs and recoveries, and assessing the current risk elements in the portfolio, management believes that the allowance for loan losses at June 30, 2016,2019 is adequate.

The allowance for loan losses at June 30, 20162019 increased $56$80 thousand to $360$548 thousand, from $304$468 thousand at June 30, 2015.2018. The increase in the allowance for loan losses was primarily attributable to increases in the following ALLL associated with the 1 – 4loan segments:1-4 family residential real estate- $49 thousand, construction loan portfolio and commercial (non-real estate) loans of $97- $22 thousand and $1land acquisition and development - $10 thousand, respectively, which were partially offset by modest decreases in other loan categories. Changes to the ALLL associated with commercial real estate loans, multi-family real estate loans, consumer loans, construction loans, and land acquisition and development loans totaling $18 thousand, $8 thousand, $8 thousand, $6 thousand, and $2 thousand, respectively. The primary reason forduring the increasesfiscal year ended June 30, 2019 in all segments were primarily dependent upon changes in the ALLL associated with 1 – 4 family permanent loans and commercial (non-real estate) loans was the increases in associated loan balances. The decrease in the ALLL associated with the commercial real estate, multi-family real estate, consumer, construction, and land acquisition and development segments was primarily related to the lower loan balances within these segments. During the fiscal year ended June 30, 2016,2019, the Company also increased its ALLL reserve factors due to increases in associated loan balances and qualitative factors throughout fiscal 2016 for the following loan segments:segment: 1 – 4 family residential real estate loans and multi-family residential real estate loans.

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The Company believes that the loan loss reserve levels are prudent and warranted at this time due to the weaknessslowing rate of growth of the national economy. The changes in prior years reflected a number of factors, the most significant of which were the changes in the Company’s level of performing loans,non-performing assets and the industry trend towards greater emphasis on the allowance method of providing for loan losses.

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The following table summarizes changes in the Company’s allowance for loan losses and other selected statistics for the periods indicated.