UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2017September 30, 2022
OR
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☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-38065
PCSB Financial Corporation
(Exact Name of Registrant as Specified in its Charter)
Maryland | 81-4710738 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
2651 Strang Blvd, Suite 100 Yorktown Heights, NY | 10598 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (914) (914) 248-7272
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.01 par value per share | PCSB | The NASDAQ Stock Market, LLC |
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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-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☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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| Accelerated filer |
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Non-accelerated filer |
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| Small reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for completing with any 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 Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
18,165,11015,334,323 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding as of February 9, 2018.November 4, 2022.
Table of Contents
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| Page |
PART I. | FINANCIAL INFORMATION |
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Item 1. |
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| 8 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. | OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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12
PART I—FINANCIAL INFORMATION
PCSB Financial Corporation and Subsidiaries
Consolidated Balance Sheets (unaudited)
(amountsDollars in thousands, except per share data)
|
| December 31, |
|
| June 30, |
|
| September 30, |
| June 30, |
| |||||
|
| 2017 |
|
| 2017 |
|
| 2022 |
|
| 2022 |
| ||||
ASSETS |
|
|
|
|
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|
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| |||
Cash and due from banks |
| $ | 75,778 |
|
| $ | 59,115 |
|
| $ | 48,747 |
|
| $ | 116,522 |
|
Federal funds sold |
|
| 1,328 |
|
|
| 1,371 |
|
|
| 2,006 |
|
|
| 1,935 |
|
Total cash and cash equivalents |
|
| 77,106 |
|
|
| 60,486 |
|
|
| 50,753 |
|
|
| 118,457 |
|
Investment Securities: |
|
|
|
|
|
|
|
| ||||||||
Held to maturity investment securities, at amortized cost (fair value of $363,457 and $383,588, respectively) |
|
| 367,646 |
|
|
| 383,551 |
| ||||||||
Available for sale securities, at fair value |
|
| 102,714 |
|
|
| 111,889 |
| ||||||||
Held to maturity debt securities, at amortized cost (fair value of $339,143 and |
|
| 406,250 |
|
|
| 412,449 |
| ||||||||
Available for sale debt securities, at fair value |
|
| 32,431 |
|
|
| 34,621 |
| ||||||||
Total investment securities |
|
| 470,360 |
|
|
| 495,440 |
|
|
| 438,681 |
|
|
| 447,070 |
|
Loans receivable, net of allowance for loan losses of $4,471 and $5,150, respectively |
|
| 838,120 |
|
|
| 809,648 |
| ||||||||
Loans receivable, net of allowance for loan losses of $9,048 and |
|
| 1,350,197 |
|
|
| 1,329,372 |
| ||||||||
Accrued interest receivable |
|
| 4,001 |
|
|
| 3,693 |
|
|
| 7,074 |
|
|
| 6,396 |
|
Federal Home Loan Bank stock |
|
| 2,395 |
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|
| 3,132 |
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FHLB stock |
|
| 2,865 |
|
|
| 3,766 |
| ||||||||
Premises and equipment, net |
|
| 12,625 |
|
|
| 12,959 |
|
|
| 19,084 |
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|
| 19,358 |
|
Deferred tax asset, net |
|
| 2,832 |
|
|
| 4,770 |
|
|
| 4,403 |
|
|
| 4,132 |
|
Foreclosed real estate |
|
| - |
|
|
| 977 |
| ||||||||
Bank-owned life insurance |
|
| 23,473 |
|
|
| 23,179 |
|
|
| 36,513 |
|
|
| 36,322 |
|
Goodwill |
|
| 6,106 |
|
|
| 6,106 |
|
|
| 6,106 |
|
|
| 6,106 |
|
Other intangible assets |
|
| 495 |
|
|
| 559 |
|
|
| 77 |
|
|
| 89 |
|
Other assets |
|
| 5,755 |
|
|
| 5,509 |
|
|
| 24,816 |
|
|
| 18,064 |
|
Total assets |
| $ | 1,443,268 |
|
| $ | 1,426,458 |
|
| $ | 1,940,569 |
|
| $ | 1,989,132 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
|
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Interest bearing deposits |
| $ | 963,495 |
|
| $ | 952,109 |
|
| $ | 1,365,631 |
|
| $ | 1,380,953 |
|
Non-interest bearing deposits |
|
| 150,834 |
|
|
| 136,352 |
|
|
| 227,635 |
|
|
| 245,297 |
|
Total deposits |
|
| 1,114,329 |
|
|
| 1,088,461 |
|
|
| 1,593,266 |
|
|
| 1,626,250 |
|
Mortgage escrow funds |
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| 8,229 |
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| 8,084 |
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| 7,302 |
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| 11,173 |
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Advances from Federal Home Loan Bank |
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| 30,720 |
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| 42,598 |
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Advances from FHLB |
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| 28,288 |
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| 48,323 |
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Other liabilities |
|
| 7,579 |
|
|
| 7,469 |
|
|
| 30,576 |
|
|
| 26,224 |
|
Total liabilities |
|
| 1,160,857 |
|
|
| 1,146,612 |
|
|
| 1,659,432 |
|
|
| 1,711,970 |
|
Commitments and contingencies |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of December 31, 2017 and June 30, 2017) |
|
| - |
|
|
| - |
| ||||||||
Common stock ($0.01 par value, 200,000,000 shares authorized, 18,165,110 shares issued and outstanding as of December 31, 2017 and June 30, 2017) |
|
| 182 |
|
|
| 182 |
| ||||||||
Shareholders' equity: |
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Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of September 30, 2022 and June 30, 2022) |
|
| - |
|
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| - |
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Common stock ($0.01 par value, 200,000,000 shares authorized, 18,703,577 shares issued as of both September 30, 2022 and June 30, 2022, and 15,334,323 and 15,334,857 shares outstanding as of September 30, 2022 and June 30, 2022, respectively) |
|
| 187 |
|
|
| 187 |
| ||||||||
Additional paid in capital |
|
| 178,556 |
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| 177,993 |
|
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| 194,935 |
|
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| 193,893 |
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Retained earnings |
|
| 122,906 |
|
|
| 121,148 |
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| 166,033 |
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| 162,262 |
|
Unallocated common stock of Employee Stock Ownership Plan ("ESOP") |
|
| (13,563 | ) |
|
| (14,262 | ) | ||||||||
Unearned compensation - ESOP |
|
| (8,963 | ) |
|
| (9,208 | ) | ||||||||
Accumulated other comprehensive loss, net of income taxes |
|
| (5,670 | ) |
|
| (5,215 | ) |
|
| (9,702 | ) |
|
| (8,629 | ) |
Treasury stock, at cost (3,369,254 and 3,368,720 shares as of September 30, 2022 and June 30, 2022, respectively) |
|
| (61,353 | ) |
|
| (61,343 | ) | ||||||||
Total shareholders' equity |
|
| 282,411 |
|
|
| 279,846 |
|
|
| 281,137 |
|
|
| 277,162 |
|
Total liabilities and shareholders' equity |
| $ | 1,443,268 |
|
| $ | 1,426,458 |
|
| $ | 1,940,569 |
|
| $ | 1,989,132 |
|
See accompanying notes to the consolidated financial statements (unaudited)
23
PCSB Financial Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
(amountsDollars in thousands, except share and per share data)
|
| Three Months Ended |
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| Three Months Ended December 31, |
|
| Six Months Ended December 31, |
|
| September 30, |
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|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
|
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Interest and dividend income |
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||||
Loans receivable |
| $ | 9,171 |
|
| $ | 8,238 |
|
| $ | 17,989 |
|
| $ | 16,763 |
|
| $ | 13,849 |
|
| $ | 12,107 |
|
|
Investment securities |
|
| 2,269 |
|
|
| 1,530 |
|
|
| 4,514 |
|
|
| 3,010 |
|
|
| 2,420 |
|
|
| 2,011 |
|
|
Federal funds and other |
|
| 217 |
|
|
| 82 |
|
|
| 451 |
|
|
| 186 |
|
|
| 487 |
|
|
| 109 |
|
|
Total interest and dividend income |
|
| 11,657 |
|
|
| 9,850 |
|
|
| 22,954 |
|
|
| 19,959 |
|
|
| 16,756 |
|
|
| 14,227 |
|
|
Interest expense |
|
|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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Deposits |
|
| 1,307 |
|
|
| 1,292 |
|
|
| 2,574 |
|
|
| 2,576 |
| |||||||||
Deposits and escrow interest |
|
| 1,664 |
|
|
| 1,354 |
|
| ||||||||||||||||
FHLB advances |
|
| 164 |
|
|
| 31 |
|
|
| 318 |
|
|
| 81 |
|
|
| 235 |
|
|
| 338 |
|
|
Total interest expense |
|
| 1,471 |
|
|
| 1,323 |
|
|
| 2,892 |
|
|
| 2,657 |
|
|
| 1,899 |
|
|
| 1,692 |
|
|
Net interest income |
|
| 10,186 |
|
|
| 8,527 |
|
|
| 20,062 |
|
|
| 17,302 |
|
|
| 14,857 |
|
|
| 12,535 |
|
|
Provision for loan losses |
|
| 200 |
|
|
| 562 |
|
|
| 335 |
|
|
| 588 |
|
|
| 82 |
|
|
| 13 |
|
|
Net interest income after provision for loan losses |
|
| 9,986 |
|
|
| 7,965 |
|
|
| 19,727 |
|
|
| 16,714 |
|
|
| 14,775 |
|
|
| 12,522 |
|
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Fees and service charges |
|
| 293 |
|
|
| 360 |
|
|
| 569 |
|
|
| 602 |
|
|
| 453 |
|
|
| 401 |
|
|
Gain on sale of securities, net |
|
| - |
|
|
| - |
|
|
| 173 |
|
|
| - |
| |||||||||
Bank-owned life insurance |
|
| 145 |
|
|
| 160 |
|
|
| 294 |
|
|
| 328 |
|
|
| 191 |
|
|
| 192 |
|
|
Settlement on acquired loan |
|
| - |
|
|
| 1,615 |
|
|
| - |
|
|
| 1,615 |
| |||||||||
Swap income |
|
| 141 |
|
|
| - |
|
| ||||||||||||||||
Other |
|
| 254 |
|
|
| 124 |
|
|
| 370 |
|
|
| 266 |
|
|
| 8 |
|
|
| 20 |
|
|
Total noninterest income |
|
| 692 |
|
|
| 2,259 |
|
|
| 1,406 |
|
|
| 2,811 |
|
|
| 793 |
|
|
| 613 |
|
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Salaries and employee benefits |
|
| 4,823 |
|
|
| 4,444 |
|
|
| 9,636 |
|
|
| 8,694 |
|
|
| 5,985 |
|
|
| 5,773 |
|
|
Occupancy and equipment |
|
| 1,296 |
|
|
| 1,844 |
|
|
| 2,578 |
|
|
| 3,135 |
|
|
| 1,403 |
|
|
| 1,353 |
|
|
Communication and data processing |
|
| 610 |
|
|
| 527 |
|
| ||||||||||||||||
Professional fees |
|
| 379 |
|
|
| 276 |
|
|
| 792 |
|
|
| 585 |
|
|
| 335 |
|
|
| 393 |
|
|
Merger-related expenses |
|
| 311 |
|
|
| - |
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Postage, printing, stationery and supplies |
|
| 174 |
|
|
| 143 |
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| ||||||||||||||||
Advertising |
|
| 179 |
|
|
| 90 |
|
|
| 344 |
|
|
| 229 |
|
|
| 128 |
|
|
| 100 |
|
|
Postage, printing, stationary and supplies |
|
| 142 |
|
|
| 131 |
|
|
| 274 |
|
|
| 264 |
| |||||||||
FDIC assessment |
|
| 64 |
|
|
| 106 |
|
|
| 142 |
|
|
| 321 |
|
|
| 125 |
|
|
| 125 |
|
|
Amortization of intangible assets |
|
| 33 |
|
|
| 37 |
|
|
| 65 |
|
|
| 73 |
|
|
| 12 |
|
|
| 16 |
|
|
Other operating expenses |
|
| 1,209 |
|
|
| 866 |
|
|
| 2,188 |
|
|
| 1,691 |
|
|
| 474 |
|
|
| 194 |
|
|
Total noninterest expense |
|
| 8,125 |
|
|
| 7,794 |
|
|
| 16,019 |
|
|
| 14,992 |
|
|
| 9,557 |
|
|
| 8,624 |
|
|
Net income before income tax expense |
|
| 2,553 |
|
|
| 2,430 |
|
|
| 5,114 |
|
|
| 4,533 |
|
|
| 6,011 |
|
|
| 4,511 |
|
|
Income tax expense |
|
| 2,551 |
|
|
| 758 |
|
|
| 3,356 |
|
|
| 1,405 |
|
|
| 1,235 |
|
|
| 897 |
|
|
Net income |
| $ | 2 |
|
| $ | 1,672 |
|
| $ | 1,758 |
|
| $ | 3,128 |
|
| $ | 4,776 |
|
| $ | 3,614 |
|
|
Earnings per common share: |
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|
|
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Basic |
| $ | 0.00 |
|
| n/a |
|
| $ | 0.10 |
|
| n/a |
|
| $ | 0.34 |
|
| $ | 0.25 |
|
| ||
Diluted |
| $ | 0.00 |
|
| n/a |
|
| $ | 0.10 |
|
| n/a |
|
|
| 0.33 |
|
|
| 0.25 |
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| ||
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|
|
|
|
|
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|
|
|
|
|
|
|
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Weighted average common shares outstanding - basic and diluted |
|
| 16,791,305 |
|
| n/a |
|
|
| 16,773,883 |
|
| n/a |
| |||||||||||
Weighted average common shares outstanding: | Weighted average common shares outstanding: |
|
|
|
| ||||||||||||||||||||
Basic |
|
| 14,214,313 |
|
|
| 14,337,543 |
|
| ||||||||||||||||
Diluted |
|
| 14,301,600 |
|
|
| 14,405,816 |
|
|
See accompanying notes to the consolidated financial statements (unaudited)
34
PCSB Financial Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (unaudited)
(amountsDollars in thousands)
|
| Three Months Ended December 31, |
|
| Six Months Ended December 31, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| Three Months Ended |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| |||||
Net Income |
| $ | 2 |
|
| $ | 1,672 |
|
| $ | 1,758 |
|
| $ | 3,128 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2022 |
|
| 2021 |
| ||
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net income |
| $ | 4,776 |
|
| $ | 3,614 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
| |||
Unrealized gains (losses) on available for sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other comprehensive income: |
|
|
|
|
| |||||||||||||||||||
Unrealized (losses) gains on available for sale debt securities: |
|
|
|
|
| |||||||||||||||||||
Net change in unrealized gains/losses before reclassification adjustment |
|
| (717 | ) |
|
| (1,262 | ) |
|
| (930 | ) |
|
| (1,109 | ) |
|
| (1,519 | ) |
|
| (187 | ) |
Reclassification adjustment for gains realized in net income |
|
| - |
|
|
| - |
|
|
| (139 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Net change in unrealized gains/losses |
|
| (717 | ) |
|
| (1,262 | ) |
|
| (1,069 | ) |
|
| (1,109 | ) |
|
| (1,519 | ) |
|
| (187 | ) |
Tax effect |
|
| 243 |
|
|
| 429 |
|
|
| 363 |
|
|
| 377 |
|
|
| 319 |
|
|
| 40 |
|
Net of tax |
|
| (474 | ) |
|
| (833 | ) |
|
| (706 | ) |
|
| (732 | ) |
|
| (1,200 | ) |
|
| (147 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Defined benefit pension plan: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net gain arising during the period |
|
| - |
|
|
| - |
| ||||||||||||||||
Reclassification adjustment for amortization of prior service cost and net gain included in net periodic pension cost |
|
| 181 |
|
|
| 577 |
|
|
| 362 |
|
|
| 577 |
|
|
| 141 |
|
|
| 38 |
|
Net change in unrealized gains/losses |
|
| 141 |
|
|
| 38 |
| ||||||||||||||||
Tax effect |
|
| (61 | ) |
|
| (196 | ) |
|
| (123 | ) |
|
| (196 | ) |
|
| (30 | ) |
|
| (9 | ) |
Net of tax |
|
| 120 |
|
|
| 381 |
|
|
| 239 |
|
|
| 381 |
|
|
| 111 |
|
|
| 29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Supplemental retirement plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net gain arising during the period |
|
| - |
|
|
| - |
| ||||||||||||||||
Reclassification adjustment for amortization of prior service cost and net gain included in net periodic pension cost |
|
| 8 |
|
|
| 47 |
|
|
| 16 |
|
|
| 47 |
|
|
| 20 |
|
|
| 16 |
|
Net change in unrealized gains/losses |
|
| 20 |
|
|
| 16 |
| ||||||||||||||||
Tax effect |
|
| (2 | ) |
|
| (16 | ) |
|
| (4 | ) |
|
| (16 | ) |
|
| (4 | ) |
|
| (3 | ) |
Net of tax |
|
| 6 |
|
|
| 31 |
|
|
| 12 |
|
|
| 31 |
|
|
| 16 |
|
|
| 13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total other comprehensive (loss) |
|
| (348 | ) |
|
| (421 | ) |
|
| (455 | ) |
|
| (320 | ) | ||||||||
Total other comprehensive loss |
|
| (1,073 | ) |
|
| (105 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Comprehensive (loss) income |
| $ | (346 | ) |
| $ | 1,251 |
|
| $ | 1,303 |
|
| $ | 2,808 |
| ||||||||
Comprehensive income |
| $ | 3,703 |
|
| $ | 3,509 |
|
See accompanying notes to the consolidated financial statements (unaudited)
45
PCSB Financial Corporation and Subsidiaries
(amountsDollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
| Unallocated |
|
| Other |
|
|
|
|
| |||
| Number of |
|
| Common |
|
| Paid-In |
|
| Retained |
|
| Common Stock |
|
| Comprehensive |
|
| Total |
| |||||||
| Shares |
|
| Stock |
|
| Capital |
|
| Earnings |
|
| of ESOP |
|
| Loss |
|
| Equity |
| |||||||
Balance at July 1, 2017 |
| 18,165,110 |
|
| $ | 182 |
|
| $ | 177,993 |
|
| $ | 121,148 |
|
| $ | (14,262 | ) |
| $ | (5,215 | ) |
| $ | 279,846 |
|
Net Income |
| - |
|
|
| - |
|
|
| - |
|
|
| 1,758 |
|
|
| - |
|
|
| - |
|
|
| 1,758 |
|
Other comprehensive loss |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (455 | ) |
|
| (455 | ) |
Issuance of common stock(1) |
| - |
|
|
| - |
|
|
| (17 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (17 | ) |
ESOP shares committed to be released (69,906 shares) |
| - |
|
|
| - |
|
|
| 580 |
|
|
| - |
|
|
| 699 |
|
|
| - |
|
|
| 1,279 |
|
Balance at December 31, 2017 |
| 18,165,110 |
|
| $ | 182 |
|
| $ | 178,556 |
|
| $ | 122,906 |
|
| $ | (13,563 | ) |
| $ | (5,670 | ) |
| $ | 282,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 1, 2016 |
| - |
|
| $ | - |
|
| $ | - |
|
| $ | 117,919 |
|
| $ | - |
|
| $ | (7,970 | ) |
| $ | 109,949 |
|
Net Income |
| - |
|
|
| - |
|
|
| - |
|
|
| 3,128 |
|
|
| - |
|
|
| - |
|
|
| 3,128 |
|
Other comprehensive loss |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (320 | ) |
|
| (320 | ) |
Balance at December 31, 2016 |
| - |
|
| $ | - |
|
| $ | - |
|
| $ | 121,047 |
|
| $ | - |
|
| $ | (8,290 | ) |
| $ | 112,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents costs incurred in connection with the Company's initial public offering completed in the prior period. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| ||||||||
| Number of |
|
|
| Additional |
|
|
| Unallocated |
| Other |
| Treasury |
| Total |
| ||||||||
| Common |
| Common |
| Paid-In |
| Retained |
| Common Stock |
| Comprehensive |
| Stock, |
| Shareholders' |
| ||||||||
| Shares |
| Stock |
| Capital |
| Earnings |
| of ESOP |
| Loss |
| at cost |
| Equity |
| ||||||||
Balance at July 1, 2022 |
| 15,334,857 |
| $ | 187 |
| $ | 193,893 |
| $ | 162,262 |
| $ | (9,208 | ) | $ | (8,629 | ) | $ | (61,343 | ) | $ | 277,162 |
|
Net income |
| - |
|
| - |
|
| - |
|
| 4,776 |
|
| - |
|
| - |
|
| - |
|
| 4,776 |
|
Other comprehensive loss |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (1,073 | ) |
| - |
|
| (1,073 | ) |
Common stock dividends declared ($0.07 per share) |
| - |
|
| - |
|
| - |
|
| (1,005 | ) |
| - |
|
| - |
|
| - |
|
| (1,005 | ) |
Shares withheld related to income tax withholding |
| (534 | ) |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (10 | ) |
| (10 | ) |
Stock-based compensation |
| - |
|
| - |
|
| 820 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 820 |
|
ESOP shares committed to be released (24,419 shares) |
| - |
|
| - |
|
| 222 |
|
| - |
|
| 245 |
|
| - |
|
| - |
|
| 467 |
|
Balance at September 30, 2022 |
| 15,334,323 |
| $ | 187 |
| $ | 194,935 |
| $ | 166,033 |
| $ | (8,963 | ) | $ | (9,702 | ) | $ | (61,353 | ) | $ | 281,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| ||||||||
| Number of |
|
|
| Additional |
|
|
| Unallocated |
| Other |
| Treasury |
| Total |
| ||||||||
| Common |
| Common |
| Paid-In |
| Retained |
| Common Stock |
| Comprehensive |
| Stock, |
| Shareholders' |
| ||||||||
| Shares |
| Stock |
| Capital |
| Earnings |
| of ESOP |
| Loss |
| at cost |
| Equity |
| ||||||||
Balance at July 1, 2021 |
| 15,770,645 |
| $ | 187 |
| $ | 189,926 |
| $ | 150,987 |
| $ | (10,176 | ) | $ | (3,099 | ) | $ | (53,265 | ) | $ | 274,560 |
|
Net income |
| - |
|
| - |
|
| - |
|
| 3,614 |
|
| - |
|
| - |
|
| - |
|
| 3,614 |
|
Other comprehensive income |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (105 | ) |
| - |
|
| (105 | ) |
Common stock dividends declared ($0.06 per share) |
| - |
|
| - |
|
| - |
|
| (876 | ) |
| - |
|
| - |
|
| - |
|
| (876 | ) |
Repurchase of common stock |
| (204,261 | ) |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (3,720 | ) |
| (3,720 | ) |
Restricted stock awards granted |
| 8,000 |
|
| - |
|
| (145 | ) |
| - |
|
| - |
|
| - |
|
| 145 |
|
| - |
|
Shares withheld related to income tax withholding |
| (74 | ) |
|
|
|
|
|
|
|
|
|
|
| (1 | ) |
| (1 | ) | |||||
Stock-based compensation |
| - |
|
| - |
|
| 810 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 810 |
|
ESOP shares committed to be released (24,419 shares) |
| - |
|
| - |
|
| 202 |
|
| - |
|
| 244 |
|
| - |
|
| - |
|
| 446 |
|
Balance at September 30, 2021 |
| 15,574,310 |
| $ | 187 |
| $ | 190,793 |
| $ | 153,725 |
| $ | (9,932 | ) | $ | (3,204 | ) | $ | (56,841 | ) | $ | 274,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements (unaudited)
56
PCSB Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(amountsDollars in thousands)
|
| Six Months Ended December 31, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income |
| $ | 1,758 |
|
| $ | 3,128 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Provision for loan loss |
|
| 335 |
|
|
| 588 |
|
Depreciation and amortization |
|
| 760 |
|
|
| 705 |
|
Amortization of net premiums on securities and net deferred loan origination costs |
|
| 941 |
|
|
| 607 |
|
Net (increase) decrease in accrued interest receivable |
|
| (308 | ) |
|
| 65 |
|
Net loss (gain) on sale of foreclosed real estate |
|
| 21 |
|
|
| (30 | ) |
Net gains on sales of securities |
|
| (173 | ) |
|
| - |
|
ESOP Compensation |
|
| 1,279 |
|
|
| - |
|
Earnings from cash surrender value of BOLI |
|
| (294 | ) |
|
| (328 | ) |
Net accretion of purchase account adjustments |
|
| (361 | ) |
|
| (438 | ) |
Other adjustments, principally net changes in other assets and liabilities |
|
| 2,416 |
|
|
| (3,106 | ) |
Net cash provided by operating activities |
|
| 6,374 |
|
|
| 1,191 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchases of investment securities: |
|
|
|
|
|
|
|
|
Held to maturity |
|
| (27,463 | ) |
|
| (52,229 | ) |
Available for sale |
|
| (15,651 | ) |
|
| (9,073 | ) |
Sales of investment securities available for sale |
|
| 6,100 |
|
|
| - |
|
Maturities and calls of investment securities: |
|
|
|
|
|
|
|
|
Held to maturity |
|
| 43,060 |
|
|
| 50,043 |
|
Available for sale |
|
| 17,603 |
|
|
| 24,816 |
|
Principal repayments net of disbursement for loan originations |
|
| 17,792 |
|
|
| 19,715 |
|
Purchase of loans |
|
| (46,657 | ) |
|
| (6,041 | ) |
Net redemption of FHLB stock |
|
| 737 |
|
|
| 723 |
|
Purchase of bank premises and equipment |
|
| (362 | ) |
|
| (1,431 | ) |
Proceeds from sale of foreclosed real estate |
|
| 956 |
|
|
| 254 |
|
Net cash (used in) provided by investing activities |
|
| (3,885 | ) |
|
| 26,777 |
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits |
|
| 25,881 |
|
|
| (4,874 | ) |
Net decrease in short-term FHLB advances |
|
| (11,818 | ) |
|
| - |
|
Repayment of long-term FHLB advances |
|
| (60 | ) |
|
| (16,059 | ) |
Net increase (decrease) in mortgage escrow funds |
|
| 145 |
|
|
| (286 | ) |
Issuance of common stock |
|
| (17 | ) |
|
| - |
|
Net cash provided by (used in) financing activities |
|
| 14,131 |
|
|
| (21,219 | ) |
Net increase in cash and cash equivalents |
|
| 16,620 |
|
|
| 6,749 |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
| 60,486 |
|
|
| 41,578 |
|
Cash and cash equivalents at end of period |
| $ | 77,106 |
|
| $ | 48,327 |
|
|
| Three Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net income |
| $ | 4,776 |
|
| $ | 3,614 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
| ||
Provision for loan losses |
|
| 82 |
|
|
| 13 |
|
Depreciation and amortization |
|
| 749 |
|
|
| 738 |
|
Amortization of net premiums on securities and net deferred loan origination costs |
|
| 237 |
|
|
| 20 |
|
Net increase in accrued interest receivable |
|
| (678 | ) |
|
| (152 | ) |
Stock-based compensation |
|
| 820 |
|
|
| 810 |
|
ESOP compensation |
|
| 467 |
|
|
| 446 |
|
Earnings from cash surrender value of BOLI |
|
| (191 | ) |
|
| (192 | ) |
Net accretion of purchase accounting adjustments |
|
| (19 | ) |
|
| (35 | ) |
Other adjustments, principally net changes in other assets and liabilities |
|
| (2,224 | ) |
|
| (1,080 | ) |
Net cash provided by operating activities |
|
| 4,019 |
|
|
| 4,182 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
| ||
Purchases of investment securities held to maturity |
|
| (1,500 | ) |
|
| (75,504 | ) |
Maturities, calls and amortization of investment securities: |
|
|
|
|
|
| ||
Held to maturity |
|
| 7,579 |
|
|
| 24,415 |
|
Available for sale |
|
| 641 |
|
|
| 12,134 |
|
Loan (originations) repayments, net |
|
| (20,975 | ) |
|
| 19,021 |
|
Net redemption of FHLB stock |
|
| 901 |
|
|
| 1 |
|
Net purchase of bank premises and equipment |
|
| (464 | ) |
|
| (159 | ) |
Net cash used in investing activities |
|
| (13,818 | ) |
|
| (20,092 | ) |
FINANCING ACTIVITIES |
|
|
|
|
|
| ||
Net (decrease) increase in deposits |
|
| (32,984 | ) |
|
| 12,955 |
|
Repayment of long-term FHLB advances |
|
| (20,035 | ) |
|
| (33 | ) |
Net decrease in mortgage escrow funds |
|
| (3,871 | ) |
|
| (3,708 | ) |
Common stock dividends paid |
|
| (1,005 | ) |
|
| (876 | ) |
Repurchase of shares from employees for income tax withholding purpose |
|
| (10 | ) |
|
| (1 | ) |
Repurchase of common stock |
|
| - |
|
|
| (3,720 | ) |
Net cash (used in) provided by financing activities |
|
| (57,905 | ) |
|
| 4,617 |
|
Net decrease in cash and cash equivalents |
|
| (67,704 | ) |
|
| (11,293 | ) |
Cash and cash equivalents at beginning of period |
|
| 118,457 |
|
|
| 159,305 |
|
Cash and cash equivalents at end of period |
| $ | 50,753 |
|
| $ | 148,012 |
|
|
|
|
|
|
|
| ||
Supplemental information: |
|
|
|
|
|
| ||
Cash paid for: |
|
|
|
|
|
| ||
Interest |
| $ | 1,940 |
|
| $ | 1,694 |
|
Income taxes |
|
| 1,160 |
|
|
| 917 |
|
See accompanying notes to the consolidated financial statements (unaudited)
67
PCSB Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited) - (Continued)
(amounts in thousands)
Supplemental information: |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
| $ | 2,844 |
|
| $ | 2,671 |
|
Income taxes |
|
| 2,010 |
|
|
| 134 |
|
Loans transferred to foreclosed real estate and other assets |
|
| - |
|
|
| 1,533 |
|
See accompanying notes to the consolidated financial statements (unaudited)
7
PCSB Financial Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements (unaudited)
Note 1. Basis of Presentation
Nature of Operations: PCSB Financial Corporation (the “Holding Company” and together with its direct and indirect subsidiaries, the “Company”) is a Maryland corporation organized by PCSB Bank (the “Bank”) for the purpose of acquiring all of the capital stock of the Bank issued in the Bank's conversion to stock ownership on April 20, 2017. At December 31, 2017,September 30, 2022, the significant assets of the Holding Company were the capital stock of the Bank, investments retained bycash deposited in the Holding Company,Bank, and a loan to the PCSB Bank Employee Stock Ownership Plan (“ESOP”). The liabilities of the Holding Company were insignificant. The Company is subject to the financial reporting requirements of the Securities Exchange Act of 1934, as amended. The Company is subject toamended, and regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the New York State Department of Financial Services (the “NYSDFS”).
PCSB Bank is a community-oriented financial institution that provides financial services to individuals and businesses within its market area of Putnam, Southern Dutchess, Rockland and Westchester Counties in New York. The Bank is a state-chartered stock savingscommercial bank, and its deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s primary regulators are the FDIC and the New York State Department of Financial Services.NYSDFS.
Basis of Presentation: The unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and include the accounts of the Holding Company, the Bank and the Bank's threetwo subsidiaries – PCSB Funding Corp., PCSB Commercial Bank and UpCounty Realty Corp. (formerly PCSB Realty Ltd.). PCSB Funding Corp. is a real estate investment trust that holds certain mortgage assets. PCSB Commercial Bank is a state-chartered commercial bank authorized to accept the deposits of local governments in New York State. UpCounty Realty Corp. is a corporation that holds certain properties foreclosed upon by the Bank. All intercompany transactions and balances have been eliminated in consolidation. Financial information for the periods before the Company’s initial public offering (“IPO”) on April 20, 2017 is that of the Bank only.
The unaudited consolidated financial statements contained herein reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments reflected in the consolidated financial statements contained herein. The annualized results of operations for the current period presented are not necessarily indicative of the results of operations that may be expected for the entire current fiscal year. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2017,2022, included in the Company's annual reportAnnual Report on Form 10-K.10-K for the fiscal year ended June 30, 2022.
Certain prior period amounts have been reclassified to conform to the current presentation. Reclassifications had no effect on prior period net income or equity.
Risks and Uncertainties:
In preparing these consolidated financial statements, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and disclosure of contingent assets and liabilities. Actual results could differ from those estimates based upon changing conditions, including economic conditions and future events, such as continued interest rate volatility, prolonged periods of inflation, continued trade and supply chain disruptions, economic recession and increased unemployment. Such conditions could cause the Company to experience a material adverse effect on our business operations, asset valuations, financial condition, and results of operations. Material adverse impacts may include, but are not limited to, the valuation impairments of the Company’s intangible assets, investments, loans receivable, or deferred tax assets. Additionally, it is reasonably possible that the Company’s allowance for loan loss estimate as of September 30, 2022 could change in the near term and could result in a material change to the Company’s provision for loan losses, earnings and capital.
Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America,GAAP management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.
8
Note 2.2. Recent Accounting Pronouncements
The pronouncements discussed below are not intended to be an all-inclusive list, but rather only those pronouncements that the Company has determined could potentially have a material impact on ourits consolidated financial position and results of operations or on its disclosures.
There were no accounting standards adopted in the current period.
Future Application of Accounting Pronouncements Previously Issued
In May 2014,June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers.” The amendments in ASU 2014-09 provide a comprehensive framework for addressing revenue recognition issues that can be applied to all contracts with customers. The amendments in ASU 2014-09 also include improved disclosures to enable users of financial statements to better understand the nature, amount, timing and uncertainty of revenue that is recognized. For public entities, ASU 2014-09, as amended, is effective for interim and annual reporting periods beginning after December 15, 2017. While the guidance in ASU 2014-09 supersedes most existing industry-specific revenue recognition accounting guidance, much of PCSB Bank’s revenue comes from financial instruments such as debt securities and loans that are outside the scope of the guidance. ASU 2014-09 is not expected to have a material impact on the Company’s consolidated financial position or results of operations. The impact on disclosures is currently being evaluated by management.
8
In January 2016, the FASB issued ASU 2016-01 “Financial Instruments – Overall.” The amendments in ASU 2016-01 are intended to improve the recognition, measurement, presentation and disclosure of financial assets and liabilities to provide users of financial statements with information that is more useful for decision-making purposes. Among other changes, ASU 2016-01 would require equity securities to be measured at fair value with changes in fair value recognized through net income but would allow equity securities that do not have readily determinable fair values to be re-measured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments would simplify the impairment assessment of such equity securities and would require enhanced disclosure about these investments. ASU 2016-01 would also require separate presentation of financial assets and liabilities by measurement category and type of instrument, such as securities or loans, on the balance sheet or in the notes, and would eliminate certain other disclosures relating to the methods and assumptions used to estimate fair value. For public entities, the amendments in ASU 2016-01 are effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. ASU 2016-01 is not expected to have a material impact on the Company’s consolidated financial position or results of operations. The impact on disclosures is currently being evaluated by management.
In February 2016, the FASB issued ASU 2016-02 “Leases.” ASU 2016-02 affects any entity that enters into a lease and is intended to increase the transparency and comparability of financial statements among organizations. The ASU requires, among other changes, a lessee to recognize on its balance sheet a lease asset and a lease liability for those leases previously classified as operating leases. The lease asset would represent the right to use the underlying asset for the lease term and the lease liability would represent the discounted value of the required lease payments to the lessor. The ASU would also require entities to disclose key information about leasing arrangements. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company currently leases eleven branches and two administrative offices. ASU 2016-02 will result in the establishment of a right to use asset and corresponding lease obligation, the materiality of which has yet to be determined by management, however the ASU is not expected to have a material impact on the Company’s consolidated results of operations or disclosures.
In June 2016, the FASB issued ASU 2016-13 “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 which affects entities holding financial assets that are not accounted for at fair value through net income, including loans, debt securities, and other financial assets. The ASU requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected by recording an allowance for current expected credit losses. ASU 2016-13In October 2019, the FASB unanimously voted to delay the implementation of the standard for three years for certain companies, including small reporting companies (as defined by the SEC), non-SEC public companies and private companies. The Company currently qualifies as a small reporting company and is subject to the delayed implementation. Therefore, the amendments in this update will be effective for interim and annual reporting periodsthe Company for the fiscal year beginning after December 15, 2019. Early adoption is permitted beginning after December 15, 2018,on July 1, 2023, including interim periods within thosethat fiscal years.year. The Company is actively working through the provisions of the Update. Management has established a steering committee which is identifying the methodologies and the additional data requirements necessary to implement the Update and has engaged a third-party software service provider to assist in the Company's implementation. On March 31, 2022 the FASB issued ASU 2022-02 "Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures." The ASU eliminates the current accounting guidance on troubled debt restructurings ("TDRs") for creditors, enhances disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty and amends the guidance on vintage disclosures with respect to current period gross charge-offs. For entities that have not yet adopted ASU 2016-13, the amendments in ASU 2022-02 are effective upon the adoption of ASU 2016-13. Management is currently evaluating the impact that ASU 2016-13 and ASU 2022-02 will have on the Company’s consolidated financial position, results of operations and disclosures.
In January 2017, theThe FASB issued ASU 2017-04 “Intangibles – Goodwill2020-04 “Reference Rate Reform” and Other (Topic 350).” ASU 2017-04 simplifies2021-01 “Reference Rate Reform Scope” which collectively address accounting considerations related to the testexpected discontinuation of LIBOR as a reference rate for goodwill impairment, which eliminates the second stepfinancial contracts. These Updates provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform (codified in the goodwill impairment test which requiresASC 848). They include optional expedients related to contract modifications that allow an entity to determineaccount for modifications (if certain criteria are met) as if the implied fair valuemodifications were only minor (assets within the scope of ASC 310, Receivables), were not substantial (assets within the scope of ASC 470, Debt) and/or did not result in remeasurements or reclassifications (assets within the scope of ASC 842, Leases, and other Topics) of the reporting unit’s goodwill. Instead, an entity should recognize an impairment loss ifexisting contract. They also include optional expedients and exceptions for contract modifications and hedge accounting that apply to derivative instruments impacted by the carrying valuemarket-wide discounting transition. The Updates also allow for a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020. The guidance in these ASUs are effective as of March 12, 2020 through December 31, 2022. The Company has not yet elected to apply the net assets assignedpractical expedients contained in these Updates and does not expect significant impact to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. ASU 2017-14 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted for interim or annual goodwill impairment testing performed on testing dates after January 1, 2017. Management expects ASU 2017-04 will not have a significant impact on its consolidated financial statements.statements upon adoption.
In March 2017, the FASB issued ASU 2017-08 "Receivables - Non-Refundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities." The ASU requires premiums on callable debt securities to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2017-08 will not have a material impact on the Company’s consolidated financial position, results of operations or disclosures.
9
Note 3. Shareholders' Equity
The Company completed its initial public offering (“IPO”) on April 20, 2017, in connection with the Bank’s mutual-to-stock conversion, resulting in gross proceeds of $178.3 million, through the sale of 17,826,408 shares, including 1,453,209 shares sold to the PCSB Bank Employee Stock Ownership Plan (ESOP), at the offering price of $10.00 per share. In addition, the Company also contributed 338,702 shares of its common stock and $1.6 million in cash to the PCSB Community Foundation. Expenses related to the offering were $3.7 million, which resulted in net proceeds of $174.6 million prior to the contribution to PCSB Community Foundation. The Company lent $14.5 million to the ESOP and contributed $87.3 million to the Bank, with the remainder of the net proceeds of the offering prior to the contribution to PCSB Community Foundation being retained at the holding company.
Prior to the IPO, the Company had no outstanding shares.
Note 4. Investment Securities
The amortized cost, gross unrealized/unrecognized gains and losses and fair value of available for sale and held to maturity debt securities at December 31, 2017September 30, 2022 and June 30, 20172022 were as follows:follows (in thousands):
|
| December 31, 2017 |
| |||||||||||||
|
| Amortized |
|
| Gross Unrealized/Unrecognized |
|
| Fair |
| |||||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
|
|
|
|
|
| (in thousands) |
|
|
|
|
| |||||
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency obligations |
| $ | 55,569 |
|
| $ | - |
|
| $ | (545 | ) |
| $ | 55,024 |
|
Corporate and other debt securities |
|
| 8,433 |
|
|
| 6 |
|
|
| (77 | ) |
|
| 8,362 |
|
Mortgage-backed securities – residential |
|
| 39,692 |
|
|
| 134 |
|
|
| (530 | ) |
|
| 39,296 |
|
Equity securities |
|
| 32 |
|
|
| - |
|
|
| - |
|
|
| 32 |
|
Total available for sale |
| $ | 103,726 |
|
| $ | 140 |
|
| $ | (1,152 | ) |
| $ | 102,714 |
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency obligations |
| $ | 136,060 |
|
| $ | - |
|
| $ | (1,377 | ) |
| $ | 134,683 |
|
Corporate and other debt securities |
|
| 4,000 |
|
|
| - |
|
|
| (129 | ) |
|
| 3,871 |
|
Mortgage-backed securities – residential |
|
| 140,411 |
|
|
| 141 |
|
|
| (1,771 | ) |
|
| 138,781 |
|
Mortgage-backed securities – collateralized mortgage obligations |
|
| 55,829 |
|
|
| 4 |
|
|
| (892 | ) |
|
| 54,941 |
|
Mortgage-backed securities – commercial |
|
| 31,346 |
|
|
| 166 |
|
|
| (331 | ) |
|
| 31,181 |
|
Total held to maturity |
| $ | 367,646 |
|
| $ | 311 |
|
| $ | (4,500 | ) |
| $ | 363,457 |
|
|
| September 30, 2022 |
| |||||||||||||
|
| Amortized |
|
| Gross Unrealized/Unrecognized |
|
| Fair |
| |||||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Available for sale debt securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Government and agency obligations |
| $ | 10,945 |
|
| $ | - |
|
| $ | (1,502 | ) |
| $ | 9,443 |
|
Corporate |
|
| 5,000 |
|
|
| - |
|
|
| (235 | ) |
|
| 4,765 |
|
State and municipal |
|
| 7,040 |
|
|
| - |
|
|
| (2,706 | ) |
|
| 4,334 |
|
Mortgage-backed securities – residential |
|
| 13,695 |
|
|
| 2 |
|
|
| (2,074 | ) |
|
| 11,623 |
|
Mortgage-backed securities – commercial |
|
| 2,398 |
|
|
| - |
|
|
| (132 | ) |
|
| 2,266 |
|
Total available for sale debt securities |
| $ | 39,078 |
|
| $ | 2 |
|
| $ | (6,649 | ) |
| $ | 32,431 |
|
Held to maturity debt securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Government and agency obligations |
| $ | 59,995 |
|
| $ | - |
|
| $ | (5,088 | ) |
| $ | 54,907 |
|
Corporate |
|
| 52,068 |
|
|
| - |
|
|
| (3,558 | ) |
|
| 48,510 |
|
State and municipal |
|
| 88,490 |
|
|
| 64 |
|
|
| (27,580 | ) |
|
| 60,974 |
|
Mortgage-backed securities – residential |
|
| 97,886 |
|
|
| - |
|
|
| (13,727 | ) |
|
| 84,159 |
|
Mortgage-backed securities – collateralized |
|
| 22,916 |
|
|
| - |
|
|
| (3,047 | ) |
|
| 19,869 |
|
Mortgage-backed securities – commercial |
|
| 84,895 |
|
|
| - |
|
|
| (14,171 | ) |
|
| 70,724 |
|
Total held to maturity debt securities |
| $ | 406,250 |
|
| $ | 64 |
|
| $ | (67,171 | ) |
| $ | 339,143 |
|
|
| June 30, 2022 |
| |||||||||||||
|
| Amortized |
|
| Gross Unrealized/Unrecognized |
|
| Fair |
| |||||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Available for sale debt securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Government and agency obligations |
| $ | 10,942 |
|
| $ | - |
|
| $ | (1,014 | ) |
| $ | 9,928 |
|
Corporate |
|
| 5,000 |
|
|
| 4 |
|
|
| (150 | ) |
|
| 4,854 |
|
State and municipal |
|
| 7,040 |
|
|
| - |
|
|
| (2,244 | ) |
|
| 4,796 |
|
Mortgage-backed securities – residential |
|
| 14,351 |
|
|
| 5 |
|
|
| (1,644 | ) |
|
| 12,712 |
|
Mortgage-backed securities – commercial |
|
| 2,416 |
|
|
| - |
|
|
| (85 | ) |
|
| 2,331 |
|
Total available for sale debt securities |
| $ | 39,749 |
|
| $ | 9 |
|
| $ | (5,137 | ) |
| $ | 34,621 |
|
Held to maturity debt securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Government and agency obligations |
| $ | 59,995 |
|
| $ | 6 |
|
| $ | (3,046 | ) |
| $ | 56,955 |
|
Corporate |
|
| 52,076 |
|
|
| 111 |
|
|
| (2,796 | ) |
|
| 49,391 |
|
State and municipal |
|
| 87,111 |
|
|
| - |
|
|
| (22,307 | ) |
|
| 64,804 |
|
Mortgage-backed securities – residential |
|
| 101,525 |
|
|
| 4 |
|
|
| (9,746 | ) |
|
| 91,783 |
|
Mortgage-backed securities – collateralized |
|
| 24,198 |
|
|
| - |
|
|
| (2,124 | ) |
|
| 22,074 |
|
Mortgage-backed securities – commercial |
|
| 87,544 |
|
|
| - |
|
|
| (10,943 | ) |
|
| 76,601 |
|
Total held to maturity debt securities |
| $ | 412,449 |
|
| $ | 121 |
|
| $ | (50,962 | ) |
| $ | 361,608 |
|
|
| June 30, 2017 |
| |||||||||||||
|
| Amortized |
|
| Gross Unrealized/Unrecognized |
|
| Fair |
| |||||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
|
|
|
|
|
| (in thousands) |
|
|
|
|
| |||||
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency obligations |
| $ | 63,630 |
|
| $ | 31 |
|
| $ | (216 | ) |
| $ | 63,445 |
|
Corporate and other debt securities |
|
| 8,460 |
|
|
| 58 |
|
|
| (36 | ) |
|
| 8,482 |
|
Mortgage-backed securities – residential |
|
| 39,710 |
|
|
| 363 |
|
|
| (143 | ) |
|
| 39,930 |
|
Equity securities |
|
| 32 |
|
|
| - |
|
|
| - |
|
|
| 32 |
|
Total available for sale |
| $ | 111,832 |
|
| $ | 452 |
|
| $ | (395 | ) |
| $ | 111,889 |
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency obligations |
| $ | 155,559 |
|
| $ | 23 |
|
| $ | (574 | ) |
| $ | 155,008 |
|
Corporate and other debt securities |
|
| 999 |
|
|
| - |
|
|
| - |
|
|
| 999 |
|
Mortgage-backed securities – residential |
|
| 143,452 |
|
|
| 828 |
|
|
| (497 | ) |
|
| 143,783 |
|
Mortgage-backed securities – collateralized mortgage obligations |
|
| 59,476 |
|
|
| 146 |
|
|
| (235 | ) |
|
| 59,387 |
|
Mortgage-backed securities – commercial |
|
| 24,065 |
|
|
| 412 |
|
|
| (66 | ) |
|
| 24,411 |
|
Total held to maturity |
| $ | 383,551 |
|
| $ | 1,409 |
|
| $ | (1,372 | ) |
| $ | 383,588 |
|
10
DuringNo securities were sold during the sixthree months ended December 31, 2017, the Company sold securities with a carrying amount of $6.6 million, resulting in $173,000 of net realized gains. Included was the disposal of $681,000 of securities classified as held to maturity, resulting in net realized gains of $34,000. These securities were comprised of seasoned mortgage-backed securities where the Company collected a substantial portion (at least 85%) of the principal outstanding at acquisition due to prepaymentsSeptember 30, 2022 or scheduled payments payable in equal installments, comprising both principal and interest, over the terms. There was no sales of or realized gains or losses on investment securities for the three or six months ended December 31, 2016.2021.
The following table presents the fair value and carrying amount of debt securities at December 31, 2017,September 30, 2022, by contractual maturity.maturity (in thousands). Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.
10
|
| Held to maturity |
|
| Available for sale |
| ||||||||||
|
| Carrying |
|
| Fair |
|
| Amortized |
|
| Fair |
| ||||
|
| Amount |
|
| Value |
|
| Cost |
|
| Value |
| ||||
|
| (in thousands) |
| |||||||||||||
December 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 year or less |
| $ | 37,492 |
|
| $ | 37,402 |
|
| $ | 11,018 |
|
| $ | 10,981 |
|
1 to 5 years |
|
| 98,568 |
|
|
| 97,280 |
|
|
| 50,984 |
|
|
| 50,444 |
|
5 to 10 years |
|
| - |
|
|
| - |
|
|
| 2,000 |
|
|
| 1,961 |
|
Mortgage-backed securities and other |
|
| 231,586 |
|
|
| 228,775 |
|
|
| 39,692 |
|
|
| 39,296 |
|
Total |
| $ | 367,646 |
|
| $ | 363,457 |
|
| $ | 103,694 |
|
| $ | 102,682 |
|
|
| Held to maturity |
|
| Available for sale |
| ||||||||||
|
| Carrying |
|
| Fair |
|
| Amortized |
|
| Fair |
| ||||
|
| Amount |
|
| Value |
|
| Cost |
|
| Value |
| ||||
1 year or less |
| $ | 5,280 |
|
| $ | 5,265 |
|
| $ | - |
|
| $ | - |
|
1 to 5 years |
|
| 66,230 |
|
|
| 60,805 |
|
|
| 12,944 |
|
|
| 11,440 |
|
5 to 10 years |
|
| 45,100 |
|
|
| 41,303 |
|
|
| 3,001 |
|
|
| 2,768 |
|
over 10 years |
|
| 80,102 |
|
|
| 53,753 |
|
|
| 7,040 |
|
|
| 4,334 |
|
Mortgage-backed securities and other |
|
| 209,538 |
|
|
| 178,017 |
|
|
| 16,093 |
|
|
| 13,889 |
|
Total |
| $ | 406,250 |
|
| $ | 339,143 |
|
| $ | 39,078 |
|
| $ | 32,431 |
|
Securities pledged had carrying amounts of $78.2$211.4 million and $95.5$202.9 million at December 31, 2017September 30, 2022 and June 30, 2017,2022, respectively, and were pledged principally to secure FHLB advances and public deposits.
The following table provides information regarding investment securities with unrealized/unrecognized losses, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position at December 31, 2017September 30, 2022 and June 30, 20172022 (in thousands):
|
| December 31, 2017 |
| |||||||||||||||||||||
|
| Less than 12 months |
|
| 12 months or greater |
|
| Total |
| |||||||||||||||
|
|
|
|
| Unrealized/ |
|
|
|
|
| Unrealized/ |
|
|
|
|
| Unrealized/ |
| ||||||
|
| Fair |
|
| Unrecognized |
|
| Fair |
|
| Unrecognized |
|
| Fair |
|
| Unrecognized |
| ||||||
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency obligations |
| $ | 34,231 |
|
| $ | (267 | ) |
| $ | 20,793 |
|
| $ | (278 | ) |
| $ | 55,024 |
|
| $ | (545 | ) |
Corporate and other debt securities |
|
| 6,336 |
|
|
| (77 | ) |
|
| - |
|
|
| - |
|
|
| 6,336 |
|
|
| (77 | ) |
Mortgage-backed securities – residential |
|
| 20,847 |
|
|
| (300 | ) |
|
| 10,604 |
|
|
| (230 | ) |
|
| 31,451 |
|
|
| (530 | ) |
Total available for sale |
| $ | 61,414 |
|
| $ | (644 | ) |
| $ | 31,397 |
|
| $ | (508 | ) |
| $ | 92,811 |
|
| $ | (1,152 | ) |
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency obligations |
| $ | 60,450 |
|
| $ | (587 | ) |
| $ | 67,232 |
|
| $ | (790 | ) |
| $ | 127,682 |
|
| $ | (1,377 | ) |
Corporate and other debt securities |
|
| 3,871 |
|
|
| (129 | ) |
|
| - |
|
|
| - |
|
|
| 3,871 |
|
|
| (129 | ) |
Mortgage-backed securities – residential |
|
| 95,903 |
|
|
| (993 | ) |
|
| 27,052 |
|
|
| (778 | ) |
|
| 122,955 |
|
|
| (1,771 | ) |
Mortgage-backed securities – collateralized mortgage obligations |
|
| 41,965 |
|
|
| (561 | ) |
|
| 11,973 |
|
|
| (331 | ) |
|
| 53,938 |
|
|
| (892 | ) |
Mortgage-backed securities – commercial |
|
| 11,089 |
|
|
| (126 | ) |
|
| 8,887 |
|
|
| (205 | ) |
|
| 19,976 |
|
|
| (331 | ) |
Total held to maturity |
| $ | 213,278 |
|
| $ | (2,396 | ) |
| $ | 115,144 |
|
| $ | (2,104 | ) |
| $ | 328,422 |
|
| $ | (4,500 | ) |
|
| June 30, 2017 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| Less than 12 months |
|
| 12 months or greater |
|
| Total |
|
| September 30, 2022 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
| Unrealized/ |
|
|
|
|
| Unrealized/ |
|
|
|
|
| Unrealized/ |
|
| Less than 12 months |
|
| 12 months or greater |
|
| Total |
| |||||||||||||||||||||
|
| Fair |
|
| Unrecognized |
|
| Fair |
|
| Unrecognized |
|
| Fair |
|
| Unrecognized |
|
|
|
| Unrealized/ |
|
|
|
| Unrealized/ |
|
|
|
| Unrealized/ |
| |||||||||||||||
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Fair |
| Unrecognized |
|
| Fair |
| Unrecognized |
|
| Fair |
| Unrecognized |
| |||||||||||||||
|
| (in thousands) |
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
| |||||||||||||||||||||||||||
Available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
U.S. Government and agency obligations |
| $ | 41,900 |
|
| $ | (200 | ) |
| $ | 3,993 |
|
| $ | (16 | ) |
| $ | 45,893 |
|
| $ | (216 | ) |
| $ | - |
|
| $ | - |
|
| $ | 9,443 |
|
| $ | (1,502 | ) |
| $ | 9,443 |
|
| $ | (1,502 | ) |
Corporate and other debt securities |
|
| 1,964 |
|
|
| (36 | ) |
|
| - |
|
|
| - |
|
|
| 1,964 |
|
|
| (36 | ) | ||||||||||||||||||||||||
Corporate |
|
| 4,765 |
|
|
| (235 | ) |
|
| - |
|
|
| - |
|
|
| 4,765 |
|
|
| (235 | ) | ||||||||||||||||||||||||
State and municipal |
|
| 2,563 |
|
|
| (1,460 | ) |
|
| 1,771 |
|
|
| (1,246 | ) |
|
| 4,334 |
|
|
| (2,706 | ) | ||||||||||||||||||||||||
Mortgage-backed securities – residential |
|
| 18,861 |
|
|
| (111 | ) |
|
| 3,200 |
|
|
| (32 | ) |
|
| 22,061 |
|
|
| (143 | ) |
|
| 3,624 |
|
|
| (104 | ) |
|
| 7,822 |
|
|
| (1,970 | ) |
|
| 11,446 |
|
|
| (2,074 | ) |
Mortgage-backed securities – commercial |
|
| 2,266 |
|
|
| (132 | ) |
|
| - |
|
|
| - |
|
|
| 2,266 |
|
|
| (132 | ) | ||||||||||||||||||||||||
Total available for sale |
| $ | 62,725 |
|
| $ | (347 | ) |
| $ | 7,193 |
|
| $ | (48 | ) |
| $ | 69,918 |
|
| $ | (395 | ) |
| $ | 13,218 |
|
| $ | (1,931 | ) |
| $ | 19,036 |
|
| $ | (4,718 | ) |
| $ | 32,254 |
|
| $ | (6,649 | ) |
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
U.S. Government and agency obligations |
| $ | 113,511 |
|
| $ | (531 | ) |
| $ | 5,981 |
|
| $ | (43 | ) |
| $ | 119,492 |
|
| $ | (574 | ) |
| $ | 31,488 |
|
| $ | (2,012 | ) |
| $ | 23,419 |
|
| $ | (3,076 | ) |
| $ | 54,907 |
|
| $ | (5,088 | ) |
Corporate and other debt securities |
|
| 999 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 999 |
|
|
| - |
| ||||||||||||||||||||||||
Corporate |
|
| 48,510 |
|
|
| (3,558 | ) |
|
| - |
|
|
| - |
|
|
| 48,510 |
|
|
| (3,558 | ) | ||||||||||||||||||||||||
State and municipal |
|
| 26,953 |
|
|
| (9,722 | ) |
|
| 32,457 |
|
|
| (17,858 | ) |
|
| 59,410 |
|
|
| (27,580 | ) | ||||||||||||||||||||||||
Mortgage-backed securities – residential |
|
| 39,754 |
|
|
| (467 | ) |
|
| 1,626 |
|
|
| (30 | ) |
|
| 41,380 |
|
|
| (497 | ) |
|
| 62,389 |
|
|
| (8,570 | ) |
|
| 21,770 |
|
|
| (5,157 | ) |
|
| 84,159 |
|
|
| (13,727 | ) |
Mortgage-backed securities – collateralized mortgage obligations |
|
| 26,622 |
|
|
| (141 | ) |
|
| 4,444 |
|
|
| (94 | ) |
|
| 31,066 |
|
|
| (235 | ) |
|
| 10,344 |
|
|
| (717 | ) |
|
| 9,525 |
|
|
| (2,330 | ) |
|
| 19,869 |
|
|
| (3,047 | ) |
Mortgage-backed securities – commercial |
|
| 9,092 |
|
|
| (66 | ) |
|
| - |
|
|
| - |
|
|
| 9,092 |
|
|
| (66 | ) |
|
| 27,763 |
|
|
| (3,546 | ) |
|
| 42,961 |
|
|
| (10,625 | ) |
|
| 70,724 |
|
|
| (14,171 | ) |
Total held to maturity |
| $ | 189,978 |
|
| $ | (1,205 | ) |
| $ | 12,051 |
|
| $ | (167 | ) |
| $ | 202,029 |
|
| $ | (1,372 | ) |
| $ | 207,447 |
|
| $ | (28,125 | ) |
| $ | 130,132 |
|
| $ | (39,046 | ) |
| $ | 337,579 |
|
| $ | (67,171 | ) |
11
|
| June 30, 2022 |
| |||||||||||||||||||||
|
| Less than 12 months |
|
| 12 months or greater |
|
| Total |
| |||||||||||||||
|
|
|
|
| Unrealized/ |
|
|
|
|
| Unrealized/ |
|
|
|
|
| Unrealized/ |
| ||||||
|
| Fair |
|
| Unrecognized |
|
| Fair |
|
| Unrecognized |
|
| Fair |
|
| Unrecognized |
| ||||||
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
| ||||||
Available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. Government and agency obligations |
| $ | 2,774 |
|
| $ | (226 | ) |
| $ | 7,154 |
|
| $ | (788 | ) |
| $ | 9,928 |
|
| $ | (1,014 | ) |
Corporate |
|
| 2,850 |
|
|
| (150 | ) |
|
| - |
|
|
| - |
|
|
| 2,850 |
|
|
| (150 | ) |
State and municipal |
|
| 2,860 |
|
|
| (1,162 | ) |
|
| 1,936 |
|
|
| (1,082 | ) |
|
| 4,796 |
|
|
| (2,244 | ) |
Mortgage-backed securities – residential |
|
| 3,616 |
|
|
| (81 | ) |
|
| 8,394 |
|
|
| (1,563 | ) |
|
| 12,010 |
|
|
| (1,644 | ) |
Mortgage-backed securities – commercial |
|
| 2,331 |
|
|
| (85 | ) |
|
| - |
|
|
| - |
|
|
| 2,331 |
|
|
| (85 | ) |
Total available for sale |
| $ | 14,431 |
|
| $ | (1,704 | ) |
| $ | 17,484 |
|
| $ | (3,433 | ) |
| $ | 31,915 |
|
| $ | (5,137 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. Government and agency obligations |
| $ | 39,883 |
|
| $ | (2,616 | ) |
| $ | 5,066 |
|
| $ | (430 | ) |
| $ | 44,949 |
|
| $ | (3,046 | ) |
Corporate |
|
| 39,758 |
|
|
| (2,796 | ) |
|
| - |
|
|
| - |
|
|
| 39,758 |
|
|
| (2,796 | ) |
State and municipal |
|
| 61,847 |
|
|
| (20,696 | ) |
|
| 2,957 |
|
|
| (1,611 | ) |
|
| 64,804 |
|
|
| (22,307 | ) |
Mortgage-backed securities – residential |
|
| 87,364 |
|
|
| (9,063 | ) |
|
| 3,994 |
|
|
| (683 | ) |
|
| 91,358 |
|
|
| (9,746 | ) |
Mortgage-backed securities – collateralized |
|
| 13,611 |
|
|
| (642 | ) |
|
| 8,390 |
|
|
| (1,482 | ) |
|
| 22,001 |
|
|
| (2,124 | ) |
Mortgage-backed securities – commercial |
|
| 50,434 |
|
|
| (5,515 | ) |
|
| 26,166 |
|
|
| (5,428 | ) |
|
| 76,600 |
|
|
| (10,943 | ) |
Total held to maturity |
| $ | 292,897 |
|
| $ | (41,328 | ) |
| $ | 46,573 |
|
| $ | (9,634 | ) |
| $ | 339,470 |
|
| $ | (50,962 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017,September 30, 2022, the Company’s securitysecurities portfolio consisted of $470.4$438.7 million in securities, of which 227314 securities with a fair value of $421.2$369.8 million were in an unrealizedunrealized/unrecognized loss position. Non-U.S. government and agency obligations are internally pass rated and are subject to quarterly credit monitoring.
As of June 30, 2017, the Company’s security portfolio consisted of $495.4 million in securities, of which 156 securities with a fair value of $271.9 million were in an unrealized loss position.
There were no securities for which the Company believes it is not probable that it will collect all amounts due according to the contractual terms of the security as of December 31, 2017 andSeptember 30, 2022 or June 30, 2017.2022. Management believes the unrealized losses are primarily a result of changes in market interest rates. The Company has determined that it does not intend to sell, or it is not more likely than not that it will be required to sell, its securities that are in an unrealized loss position prior to the recovery of its amortized cost basis. Therefore, the Company did not consider any securities to be other-than-temporarily impaired as of December 31, 2017 andSeptember 30, 2022 or June 30, 2017.2022.
12
Loans receivable are summarized as follows (in thousands):
|
| December 31, |
|
| June 30, |
| September 30, |
|
| June 30, |
| ||||
|
| 2017 |
|
| 2017 |
| 2022 |
|
| 2022 |
| ||||
Mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Residential |
| $ | 213,716 |
|
| $ | 217,778 |
| $ | 214,586 |
|
| $ | 214,167 |
|
Commercial |
|
| 481,169 |
|
|
| 437,651 |
|
| 953,539 |
|
|
| 942,130 |
|
Construction |
|
| 16,379 |
|
|
| 22,404 |
|
| 25,307 |
|
|
| 20,896 |
|
Net deferred loan origination costs |
|
| 210 |
|
|
| 397 |
| |||||||
Total mortgages |
|
| 711,474 |
|
|
| 678,230 |
| |||||||
Net deferred loan origination fees |
| (145 | ) |
|
| (100 | ) | ||||||||
Total mortgage loans |
| 1,193,287 |
|
|
| 1,177,093 |
| ||||||||
Commercial and consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Commercial loans |
|
| 31,276 |
|
|
| 33,297 |
|
| 141,902 |
|
|
| 136,304 |
|
Other loans secured |
|
| 46,056 |
|
|
| 46,802 |
| |||||||
Home equity lines of credit |
|
| 40,158 |
|
|
| 41,927 |
|
| 22,955 |
|
|
| 23,688 |
|
Consumer and installment loans |
|
| 12,860 |
|
|
| 13,765 |
| |||||||
Consumer and overdrafts |
| 508 |
|
|
| 594 |
| ||||||||
Net deferred loan origination costs |
|
| 767 |
|
|
| 777 |
|
| 593 |
|
|
| 620 |
|
Total commercial and consumer loans |
|
| 131,117 |
|
|
| 136,568 |
|
| 165,958 |
|
|
| 161,206 |
|
Total loans receivable |
|
| 842,591 |
|
|
| 814,798 |
|
| 1,359,245 |
|
|
| 1,338,299 |
|
Allowance for loan losses |
|
| (4,471 | ) |
|
| (5,150 | ) |
| (9,048 | ) |
|
| (8,927 | ) |
Loans receivable, net |
| $ | 838,120 |
|
| $ | 809,648 |
| $ | 1,350,197 |
|
| $ | 1,329,372 |
|
In 2015, the Company completed a merger with CMS Bancorp and its wholly owned subsidiary, CMS Bank. References to acquired loans in this note pertain only to those loans acquired as part of the merger.
13
The following tables present the activity in the allowance for loan losses by portfolio segment for the three and six months ended December 31, 2017September 30, 2022 and 20162021 (in thousands):
12
| Three Months Ended September 30, 2022 |
| |||||||||||||||||
| Beginning |
|
| Provision |
|
| Charge-offs |
|
| Recoveries |
|
| Ending |
| |||||
Residential mortgages | $ | 323 |
|
| $ | (3 | ) |
| $ | - |
|
| $ | 2 |
|
| $ | 322 |
|
Commercial mortgages |
| 7,351 |
|
|
| 5 |
|
|
| - |
|
|
| - |
|
|
| 7,356 |
|
Construction |
| 209 |
|
|
| 25 |
|
|
| - |
|
|
| - |
|
|
| 234 |
|
Commercial loans |
| 982 |
|
|
| 32 |
|
|
| (15 | ) |
|
| 74 |
|
|
| 1,073 |
|
Home equity lines of credit |
| 51 |
|
|
| (9 | ) |
|
| - |
|
|
| 1 |
|
|
| 43 |
|
Consumer and overdrafts |
| 11 |
|
|
| 32 |
|
|
| (24 | ) |
|
| 1 |
|
|
| 20 |
|
Total | $ | 8,927 |
|
| $ | 82 |
|
| $ | (39 | ) |
| $ | 78 |
|
| $ | 9,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| Three Months Ended September 30, 2021 |
| |||||||||||||||||
| Beginning |
|
| Provision |
|
| Charge-offs |
|
| Recoveries |
|
| Ending |
| |||||
Residential mortgages | $ | 337 |
|
| $ | (13 | ) |
| $ | - |
|
| $ | 2 |
|
| $ | 326 |
|
Commercial mortgages |
| 6,435 |
|
|
| 134 |
|
|
| - |
|
|
| - |
|
|
| 6,569 |
|
Construction |
| 102 |
|
|
| 25 |
|
|
| - |
|
|
| - |
|
|
| 127 |
|
Commercial loans |
| 948 |
|
|
| (143 | ) |
|
| (100 | ) |
|
| 367 |
|
|
| 1,072 |
|
Home equity lines of credit |
| 54 |
|
|
| (3 | ) |
|
| - |
|
|
| 2 |
|
|
| 53 |
|
Consumer and overdrafts |
| 5 |
|
|
| 13 |
|
|
| (7 | ) |
|
| 1 |
|
|
| 12 |
|
Total | $ | 7,881 |
|
| $ | 13 |
|
| $ | (107 | ) |
| $ | 372 |
|
| $ | 8,159 |
|
13
|
| Three Months Ended December 31, 2017 |
| |||||||||||||||||
|
| Beginning Allowance |
|
| Provision (credit) |
|
| Charge-offs |
|
| Recoveries |
|
| Ending Allowance |
| |||||
Originated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 407 |
|
| $ | (5 | ) |
| $ | - |
|
| $ | - |
|
| $ | 402 |
|
Commercial |
|
| 2,709 |
|
|
| (23 | ) |
|
| - |
|
|
| - |
|
|
| 2,686 |
|
Construction |
|
| 1,160 |
|
|
| 237 |
|
|
| (997 | ) |
|
| - |
|
|
| 400 |
|
Commercial loans |
|
| 345 |
|
|
| (23 | ) |
|
| - |
|
|
| - |
|
|
| 322 |
|
Other loans secured |
|
| 404 |
|
|
| (15 | ) |
|
| - |
|
|
| - |
|
|
| 389 |
|
Home equity lines of credit |
|
| 77 |
|
|
| (3 | ) |
|
| - |
|
|
| - |
|
|
| 74 |
|
Consumer and installment loans |
|
| 140 |
|
|
| (7 | ) |
|
| - |
|
|
| - |
|
|
| 133 |
|
Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
| 26 |
|
|
| 39 |
|
|
| - |
|
|
| - |
|
|
| 65 |
|
Total |
| $ | 5,268 |
|
| $ | 200 |
|
| $ | (997 | ) |
| $ | - |
|
| $ | 4,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended December 31, 2016 |
| |||||||||||||||||
|
| Beginning Allowance |
|
| Provision (credit) |
|
| Charge-offs |
|
| Recoveries |
|
| Ending Allowance |
| |||||
Originated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 238 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 238 |
|
Commercial |
|
| 2,121 |
|
|
| 909 |
|
|
| - |
|
|
| 1 |
|
|
| 3,031 |
|
Construction |
|
| 302 |
|
|
| 34 |
|
|
| - |
|
|
| - |
|
|
| 336 |
|
Commercial loans |
|
| 559 |
|
|
| (458 | ) |
|
| - |
|
|
| 400 |
|
|
| 501 |
|
Other loans secured |
|
| 361 |
|
|
| (22 | ) |
|
| - |
|
|
| - |
|
|
| 339 |
|
Home equity lines of credit |
|
| 70 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 70 |
|
Consumer and installment loans |
|
| 414 |
|
|
| 97 |
|
|
| (398 | ) |
|
| - |
|
|
| 113 |
|
Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
| - |
|
|
| 2 |
|
|
| (2 | ) |
|
| - |
|
|
| - |
|
Total |
| $ | 4,065 |
|
| $ | 562 |
|
| $ | (400 | ) |
| $ | 401 |
|
| $ | 4,628 |
|
14
| Six Months Ended December 31, 2017 |
| ||||||||||||||||||
|
| Beginning Allowance |
|
| Provision (credit) |
|
| Charge-offs |
|
| Recoveries |
|
| Ending Allowance |
| |||||
Originated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 360 |
|
| $ | 59 |
|
| $ | (17 | ) |
| $ | - |
|
| $ | 402 |
|
Commercial |
|
| 2,589 |
|
|
| 97 |
|
|
| - |
|
|
| - |
|
|
| 2,686 |
|
Construction |
|
| 1,150 |
|
|
| 247 |
|
|
| (997 | ) |
|
| - |
|
|
| 400 |
|
Commercial loans |
|
| 440 |
|
|
| (118 | ) |
|
| - |
|
|
| - |
|
|
| 322 |
|
Other loans secured |
|
| 365 |
|
|
| 24 |
|
|
| - |
|
|
| - |
|
|
| 389 |
|
Home equity lines of credit |
|
| 76 |
|
|
| (2 | ) |
|
| - |
|
|
| - |
|
|
| 74 |
|
Consumer and installment loans |
|
| 144 |
|
|
| (11 | ) |
|
| - |
|
|
| - |
|
|
| 133 |
|
Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
| 26 |
|
|
| 39 |
|
|
| - |
|
|
| - |
|
|
| 65 |
|
Total |
| $ | 5,150 |
|
| $ | 335 |
|
| $ | (1,014 | ) |
| $ | - |
|
| $ | 4,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended December 31, 2016 |
| |||||||||||||||||
|
| Beginning Allowance |
|
| Provision (credit) |
|
| Charge-offs |
|
| Recoveries |
|
| Ending Allowance |
| |||||
Originated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 237 |
|
| $ | (69 | ) |
| $ | - |
|
| $ | 70 |
|
| $ | 238 |
|
Commercial |
|
| 2,149 |
|
|
| 863 |
|
|
| - |
|
|
| 19 |
|
|
| 3,031 |
|
Construction |
|
| 269 |
|
|
| 67 |
|
|
| - |
|
|
| - |
|
|
| 336 |
|
Commercial loans |
|
| 604 |
|
|
| (676 | ) |
|
| - |
|
|
| 573 |
|
|
| 501 |
|
Other loans secured |
|
| 397 |
|
|
| 168 |
|
|
| (324 | ) |
|
| 98 |
|
|
| 339 |
|
Home equity lines of credit |
|
| 73 |
|
|
| (3 | ) |
|
| - |
|
|
| - |
|
|
| 70 |
|
Consumer and installment loans |
|
| 313 |
|
|
| 198 |
|
|
| (398 | ) |
|
| - |
|
|
| 113 |
|
Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Residential |
|
| - |
|
|
| 38 |
|
|
| (38 | ) |
|
| - |
|
|
| - |
|
Commercial loans |
|
| - |
|
|
| 2 |
|
|
| (2 | ) |
|
| - |
|
|
| - |
|
Total |
| $ | 4,042 |
|
| $ | 588 |
|
| $ | (762 | ) |
| $ | 760 |
|
| $ | 4,628 |
|
15
The following tables present the balance in the allowance for loan losses and the recorded investment in loans, excluding net deferred fees and accrued interest, by portfolio segment, and based on impairment method as of December 31, 2017September 30, 2022 and June 30, 20172022 (in thousands):
|
| December 31, 2017 |
| |||||||||||||||||||||||||||||
|
| Loans |
|
| Allowance for Loan Losses |
| ||||||||||||||||||||||||||
|
| Individually Evaluated for Impairment |
|
| Collectively Evaluated for Impairment |
|
| Acquired With Deteriorated Credit Quality |
|
| Total |
|
| Individually Evaluated for Impairment |
|
| Collectively Evaluated for Impairment |
|
| Acquired With Deteriorated Credit Quality |
|
| Total |
| ||||||||
Residential |
| $ | 3,499 |
|
| $ | 208,900 |
|
| $ | 1,317 |
|
| $ | 213,716 |
|
| $ | 190 |
|
| $ | 212 |
|
| $ | 65 |
|
| $ | 467 |
|
Commercial |
|
| 2,438 |
|
|
| 477,238 |
|
|
| 1,493 |
|
|
| 481,169 |
|
|
| - |
|
|
| 2,686 |
|
|
| - |
|
|
| 2,686 |
|
Construction |
|
| 2,260 |
|
|
| 14,119 |
|
|
| - |
|
|
| 16,379 |
|
|
| 276 |
|
|
| 124 |
|
|
| - |
|
|
| 400 |
|
Commercial loans |
|
| 351 |
|
|
| 30,925 |
|
|
| - |
|
|
| 31,276 |
|
|
| 75 |
|
|
| 247 |
|
|
| - |
|
|
| 322 |
|
Other loans secured |
|
| 4,165 |
|
|
| 41,891 |
|
|
| - |
|
|
| 46,056 |
|
|
| 2 |
|
|
| 387 |
|
|
| - |
|
|
| 389 |
|
Home equity lines of credit |
|
| 480 |
|
|
| 39,505 |
|
|
| 173 |
|
|
| 40,158 |
|
|
| 5 |
|
|
| 69 |
|
|
| - |
|
|
| 74 |
|
Consumer and installment loans |
|
| - |
|
|
| 12,840 |
|
|
| 20 |
|
|
| 12,860 |
|
|
| - |
|
|
| 133 |
|
|
| - |
|
|
| 133 |
|
Total |
| $ | 13,193 |
|
| $ | 825,418 |
|
| $ | 3,003 |
|
| $ | 841,614 |
|
| $ | 548 |
|
| $ | 3,858 |
|
| $ | 65 |
|
| $ | 4,471 |
|
|
| June 30, 2017 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Loans |
|
| Allowance for Loan Losses |
|
| September 30, 2022 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Individually Evaluated for Impairment |
|
| Collectively Evaluated for Impairment |
|
| Acquired With Deteriorated Credit Quality |
|
| Total |
|
| Individually Evaluated for Impairment |
|
| Collectively Evaluated for Impairment |
|
| Acquired With Deteriorated Credit Quality |
|
| Total |
|
| Loans |
|
| Allowance for Loan Losses |
| ||||||||||||||||||||||||||||||||||
Residential |
| $ | 4,471 |
|
| $ | 211,983 |
|
| $ | 1,324 |
|
| $ | 217,778 |
|
| $ | 131 |
|
| $ | 229 |
|
| $ | 26 |
|
| $ | 386 |
| ||||||||||||||||||||||||||||||||
Commercial |
|
| 2,411 |
|
|
| 433,416 |
|
|
| 1,824 |
|
|
| 437,651 |
|
|
| - |
|
|
| 2,589 |
|
|
| - |
|
|
| 2,589 |
| ||||||||||||||||||||||||||||||||
|
| Individually |
|
| Collectively |
|
| Acquired With |
|
| Total |
|
| Individually |
|
| Collectively |
|
| Acquired With |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||||
Residential mortgages |
| $ | 1,664 |
|
| $ | 212,704 |
|
| $ | 218 |
|
| $ | 214,586 |
|
| $ | 109 |
|
| $ | 213 |
|
| $ | - |
|
| $ | 322 |
| ||||||||||||||||||||||||||||||||
Commercial mortgages |
|
| 3,504 |
|
|
| 949,185 |
|
|
| 850 |
|
|
| 953,539 |
|
|
| - |
|
|
| 7,356 |
|
|
| - |
|
|
| 7,356 |
| ||||||||||||||||||||||||||||||||
Construction |
|
| 3,661 |
|
|
| 18,743 |
|
|
| - |
|
|
| 22,404 |
|
|
| 997 |
|
|
| 153 |
|
|
| - |
|
|
| 1,150 |
|
|
| 2,792 |
|
|
| 22,515 |
|
|
| - |
|
|
| 25,307 |
|
|
| - |
|
|
| 234 |
|
|
| - |
|
|
| 234 |
|
Commercial loans |
|
| 356 |
|
|
| 32,941 |
|
|
| - |
|
|
| 33,297 |
|
|
| 7 |
|
|
| 433 |
|
|
| - |
|
|
| 440 |
|
|
| 781 |
|
|
| 141,121 |
|
|
| - |
|
|
| 141,902 |
|
|
| - |
|
|
| 1,073 |
|
|
| - |
|
|
| 1,073 |
|
Other loans secured |
|
| 5,813 |
|
|
| 40,989 |
|
|
| - |
|
|
| 46,802 |
|
|
| 2 |
|
|
| 363 |
|
|
| - |
|
|
| 365 |
| ||||||||||||||||||||||||||||||||
Home equity lines of credit |
|
| 610 |
|
|
| 41,140 |
|
|
| 177 |
|
|
| 41,927 |
|
|
| 5 |
|
|
| 71 |
|
|
| - |
|
|
| 76 |
|
|
| 400 |
|
|
| 22,469 |
|
|
| 86 |
|
|
| 22,955 |
|
|
| 2 |
|
|
| 41 |
|
|
| - |
|
|
| 43 |
|
Consumer and installment loans |
|
| - |
|
|
| 13,723 |
|
|
| 42 |
|
|
| 13,765 |
|
|
| - |
|
|
| 144 |
|
|
| - |
|
|
| 144 |
| ||||||||||||||||||||||||||||||||
Consumer and overdrafts |
|
| - |
|
|
| 508 |
|
|
| - |
|
|
| 508 |
|
|
| - |
|
|
| 20 |
|
|
| - |
|
|
| 20 |
| ||||||||||||||||||||||||||||||||
Total |
| $ | 17,322 |
|
| $ | 792,935 |
|
| $ | 3,367 |
|
| $ | 813,624 |
|
| $ | 1,142 |
|
| $ | 3,982 |
|
| $ | 26 |
|
| $ | 5,150 |
|
| $ | 9,141 |
|
| $ | 1,348,502 |
|
| $ | 1,154 |
|
| $ | 1,358,797 |
|
| $ | 111 |
|
| $ | 8,937 |
|
| $ | - |
|
| $ | 9,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
| June 30, 2022 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Loans |
|
| Allowance for Loan Losses |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Individually |
|
| Collectively |
|
| Acquired With |
|
| Total |
|
| Individually |
|
| Collectively |
|
| Acquired With |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||||
Residential mortgages |
| $ | 1,613 |
|
| $ | 212,333 |
|
| $ | 221 |
|
| $ | 214,167 |
|
| $ | 110 |
|
| $ | 213 |
|
| $ | - |
|
| $ | 323 |
| ||||||||||||||||||||||||||||||||
Commercial mortgages |
|
| 4,778 |
|
|
| 936,493 |
|
|
| 859 |
|
|
| 942,130 |
|
|
| - |
|
|
| 7,351 |
|
|
| - |
|
|
| 7,351 |
| ||||||||||||||||||||||||||||||||
Construction |
|
| 2,792 |
|
|
| 18,104 |
|
|
| - |
|
|
| 20,896 |
|
|
| - |
|
|
| 209 |
|
|
| - |
|
|
| 209 |
| ||||||||||||||||||||||||||||||||
Commercial loans |
|
| 783 |
|
|
| 135,521 |
|
|
| - |
|
|
| 136,304 |
|
|
| - |
|
|
| 982 |
|
|
| - |
|
|
| 982 |
| ||||||||||||||||||||||||||||||||
Home equity lines of credit |
|
| 452 |
|
|
| 23,147 |
|
|
| 89 |
|
|
| 23,688 |
|
|
| 9 |
|
|
| 42 |
|
|
| - |
|
|
| 51 |
| ||||||||||||||||||||||||||||||||
Consumer and overdrafts |
|
| - |
|
|
| 594 |
|
|
| - |
|
|
| 594 |
|
|
| - |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
| ||||||||||||||||||||||||||||||||
Total |
| $ | 10,418 |
|
| $ | 1,326,192 |
|
| $ | 1,169 |
|
| $ | 1,337,779 |
|
| $ | 119 |
|
| $ | 8,808 |
|
| $ | - |
|
| $ | 8,927 |
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
The following tables present information related to loans individually evaluated for impairment (excluding loans acquired with deteriorated credit quality) by class of loansportfolio segment as of December 31, 2017September 30, 2022 and June 30, 20172022 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| December 31, 2017 |
| September 30, 2022 |
|
| June 30, 2022 |
| |||||||||||||||||||||||||||
|
| Unpaid Principal Balance |
|
| Recorded Investment |
|
| Allowance for Loan Losses |
| Unpaid |
|
| Recorded Investment |
|
| Allowance for Loan Losses |
|
| Unpaid |
|
| Recorded Investment |
|
| Allowance for Loan Losses |
| |||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Residential |
| $ | 2,940 |
|
| $ | 2,721 |
|
| $ | - |
| |||||||||||||||||||||||
Commercial |
|
| 2,948 |
|
|
| 2,438 |
|
|
| - |
| |||||||||||||||||||||||
Other loans secured |
|
| 7,558 |
|
|
| 3,088 |
|
|
| - |
| |||||||||||||||||||||||
Home equity lines of credit |
|
| 473 |
|
|
| 469 |
|
|
| - |
| |||||||||||||||||||||||
With a related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Residential |
|
| 747 |
|
|
| 778 |
|
|
| 190 |
| |||||||||||||||||||||||
Residential mortgages | $ | 1,382 |
|
| $ | 1,313 |
|
| $ | - |
|
| $ | 1,262 |
|
| $ | 1,197 |
|
| $ | - |
| ||||||||||||
Commercial mortgages |
| 3,582 |
|
|
| 3,504 |
|
|
| - |
|
|
| 4,789 |
|
|
| 4,778 |
|
|
| - |
| ||||||||||||
Construction |
|
| 3,257 |
|
|
| 2,260 |
|
|
| 276 |
|
| 2,792 |
|
|
| 2,792 |
|
|
| - |
|
|
| 2,792 |
|
|
| 2,792 |
|
|
| - |
|
Commercial loans |
|
| 351 |
|
|
| 351 |
|
|
| 75 |
|
| 793 |
|
|
| 781 |
|
|
| - |
|
|
| 795 |
|
|
| 783 |
|
|
| - |
|
Other loans secured |
|
| 1,077 |
|
|
| 1,077 |
|
|
| 2 |
| |||||||||||||||||||||||
Home equity lines of credit |
| 383 |
|
|
| 376 |
|
|
| - |
|
|
| 379 |
|
|
| 399 |
|
|
| - |
| ||||||||||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Residential mortgages |
| 351 |
|
|
| 351 |
|
|
| 109 |
|
|
| 353 |
|
|
| 416 |
|
|
| 110 |
| ||||||||||||
Home equity lines of credit |
|
| 11 |
|
|
| 11 |
|
|
| 5 |
|
| 31 |
|
|
| 24 |
|
|
| 2 |
|
|
| 60 |
|
|
| 53 |
|
|
| 9 |
|
Total |
| $ | 19,362 |
|
| $ | 13,193 |
|
| $ | 548 |
| $ | 9,314 |
|
| $ | 9,141 |
|
| $ | 111 |
|
| $ | 10,430 |
|
| $ | 10,418 |
|
| $ | 119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2017 |
| |||||||||
|
| Unpaid Principal Balance |
|
| Recorded Investment |
|
| Allowance for Loan Losses |
| |||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 4,216 |
|
| $ | 4,014 |
|
| $ | - |
|
Commercial |
|
| 2,935 |
|
|
| 2,411 |
|
|
| - |
|
Construction |
|
| 404 |
|
|
| 404 |
|
|
| - |
|
Commercial loans |
|
| 276 |
|
|
| 277 |
|
|
| - |
|
Other loans secured |
|
| 9,157 |
|
|
| 4,702 |
|
|
| - |
|
Home equity lines of credit |
|
| 599 |
|
|
| 599 |
|
|
| - |
|
With a related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
| 395 |
|
|
| 457 |
|
|
| 131 |
|
Construction |
|
| 3,257 |
|
|
| 3,257 |
|
|
| 997 |
|
Commercial loans |
|
| 79 |
|
|
| 79 |
|
|
| 7 |
|
Other loans secured |
|
| 1,111 |
|
|
| 1,111 |
|
|
| 2 |
|
Home equity lines of credit |
|
| 11 |
|
|
| 11 |
|
|
| 5 |
|
Total |
| $ | 22,440 |
|
| $ | 17,322 |
|
| $ | 1,142 |
|
The tabletables below presentspresent the average recorded investment and interest income recognized on loans individually evaluated for impairment, by class of loans,portfolio segment, for the three and six months ended December 31, 2017September 30, 2022 and 20162021 (in thousands):
| Three months ended |
|
| Three months ended |
| |||||||||||||||||||||||||
| December 31, 2017 |
|
| December 31, 2016 |
| |||||||||||||||||||||||||
| Average Recorded Investment |
|
| Interest Income Recognized |
|
| Average Recorded Investment |
|
| Interest Income Recognized |
| |||||||||||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Residential | $ | 3,027 |
|
| $ | 124 |
|
| $ | 3,725 |
|
| $ | 3 |
| |||||||||||||||
Commercial |
| 2,454 |
|
|
| 27 |
|
|
| 2,303 |
|
|
| 31 |
| |||||||||||||||
Commercial loans |
| - |
|
|
| - |
|
|
| 91 |
|
|
| 1 |
| |||||||||||||||
Other loans secured |
| 3,488 |
|
|
| 77 |
|
|
| 5,489 |
|
|
| 66 |
| |||||||||||||||
Home equity lines of credit |
| 571 |
|
|
| 20 |
|
|
| 551 |
|
|
| - |
| |||||||||||||||
With a related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Residential |
| 778 |
|
|
| 3 |
|
|
| - |
|
|
| - |
| |||||||||||||||
Commercial |
| - |
|
|
| - |
|
|
| 3,132 |
|
|
| 25 |
| |||||||||||||||
Construction |
| 3,008 |
|
|
| - |
|
|
| 131 |
|
|
| - |
| |||||||||||||||
Commercial loans |
| 352 |
|
|
| - |
|
|
| - |
|
|
| - |
| |||||||||||||||
Other loans secured |
| 1,087 |
|
|
| 13 |
|
|
| - |
|
|
| - |
| |||||||||||||||
Home equity lines of credit |
| 11 |
|
|
| - |
|
|
| - |
|
|
| - |
| |||||||||||||||
Total | $ | 14,776 |
|
| $ | 264 |
|
| $ | 15,422 |
|
| $ | 126 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| Six Months Ended |
|
| Six Months Ended |
|
|
|
|
|
| ||||||||||||||||||||
| December 31, 2017 |
|
| December 31, 2016 |
| September 30, 2022 |
|
| September 30, 2021 |
| ||||||||||||||||||||
| Average Recorded Investment |
|
| Interest Income Recognized |
|
| Average Recorded Investment |
|
| Interest Income Recognized |
| Average |
|
| Interest |
|
| Average |
|
| Interest |
| ||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Residential | $ | 3,431 |
|
| $ | 166 |
|
| $ | 3,753 |
|
| $ | 6 |
| |||||||||||||||
Commercial |
| 2,447 |
|
|
| 54 |
|
|
| 2,311 |
|
|
| 63 |
| |||||||||||||||
Residential mortgages | $ | 1,318 |
|
| $ | 9 |
|
| $ | 1,936 |
|
| $ | 7 |
| |||||||||||||||
Commercial mortgages |
| 3,543 |
|
|
| - |
|
|
| 3,582 |
|
|
| - |
| |||||||||||||||
Construction |
| 173 |
|
|
| 17 |
|
|
| - |
|
|
| - |
|
| 2,792 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Commercial loans |
| - |
|
|
| - |
|
|
| 92 |
|
|
| 2 |
|
| 782 |
|
|
| 4 |
|
|
| 980 |
|
|
| 191 |
|
Other loans secured |
| 4,002 |
|
|
| 160 |
|
|
| 5,513 |
|
|
| 134 |
| |||||||||||||||
Home equity lines of credit |
| 593 |
|
|
| 20 |
|
|
| 551 |
|
|
| (2 | ) |
| 378 |
|
|
| - |
|
|
| 350 |
|
|
| 2 |
|
With a related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Residential |
| 686 |
|
|
| 7 |
|
|
| - |
|
|
| - |
| |||||||||||||||
Commercial |
| - |
|
|
| - |
|
|
| 3,141 |
|
|
| 52 |
| |||||||||||||||
Construction |
| 3,115 |
|
|
| - |
|
|
| 131 |
|
|
| - |
| |||||||||||||||
Commercial loans |
| 353 |
|
|
| 4 |
|
|
| - |
|
|
| - |
| |||||||||||||||
Other loans secured |
| 1,095 |
|
|
| 27 |
|
|
| - |
|
|
| - |
| |||||||||||||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Residential mortgages |
| 352 |
|
|
| 3 |
|
|
| 424 |
|
|
| 3 |
| |||||||||||||||
Home equity lines of credit |
| 11 |
|
|
| - |
|
|
| - |
|
|
| - |
|
| 27 |
|
|
| - |
|
|
| 33 |
|
|
| - |
|
Total | $ | 15,906 |
|
| $ | 455 |
|
| $ | 15,492 |
|
| $ | 255 |
| $ | 9,192 |
|
| $ | 16 |
|
| $ | 7,305 |
|
| $ | 203 |
|
The following table presents the recorded investment in nonaccrual loans and in loans past due over 90 days and still on accrual status, by class of loansportfolio segment, as of December 31, 2017September 30, 2022 and June 30, 20172022 (in thousands):
|
|
|
|
|
|
|
|
|
| Loans Past Due Over 90 Days |
| |||||
|
| Nonaccrual |
|
| and Still Accruing |
| ||||||||||
|
| December 31, |
|
| June 30, |
|
| December 31, |
|
| June 30, |
| ||||
|
| 2017 |
|
| 2017 |
|
| 2017 |
|
| 2017 |
| ||||
Originated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 1,772 |
|
| $ | 2,581 |
|
| $ | - |
|
| $ | - |
|
Commercial |
|
| 258 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Construction |
|
| 2,260 |
|
|
| 3,661 |
|
|
| - |
|
|
| - |
|
Commercial loans |
|
| 275 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other loans secured |
|
| 1,368 |
|
|
| 2,959 |
|
|
| - |
|
|
| - |
|
Home equity lines of credit |
|
| 100 |
|
|
| 302 |
|
|
| - |
|
|
| - |
|
Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
| 1,281 |
|
|
| 1,776 |
|
|
| - |
|
|
| - |
|
Commercial |
|
| 508 |
|
|
| 497 |
|
|
| - |
|
|
| - |
|
Home equity lines of credit |
|
| 369 |
|
|
| 296 |
|
|
| - |
|
|
| - |
|
Total |
| $ | 8,191 |
|
| $ | 12,072 |
|
| $ | - |
|
| $ | - |
|
|
|
|
| Loans Past Due Over 90 Days |
| ||||||||||
| Nonaccrual |
|
| and Still Accruing |
| ||||||||||
| September 30, |
|
| June 30, |
|
| September 30, |
|
| June 30, |
| ||||
| 2022 |
|
| 2022 |
|
| 2022 |
|
| 2022 |
| ||||
Residential mortgages | $ | 791 |
|
| $ | 671 |
|
| $ | - |
|
| $ | - |
|
Commercial mortgages |
| 3,504 |
|
|
| 4,778 |
|
|
| - |
|
|
| - |
|
Construction |
| 2,792 |
|
|
| 2,792 |
|
|
| - |
|
|
| - |
|
Commercial loans |
| 534 |
|
|
| 539 |
|
|
| - |
|
|
| - |
|
Home equity lines of credit |
| 368 |
|
|
| 416 |
|
|
| - |
|
|
| - |
|
Consumer and overdrafts |
| - |
|
|
| - |
|
|
| - |
|
|
| 39 |
|
Total | $ | 7,989 |
|
| $ | 9,196 |
|
| $ | - |
|
| $ | 39 |
|
Nonperforming loans include both smaller-balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. The table above excludes nonaccrual acquired loans that are accounted for as purchased credit impaired loans totaling $1.8 million$133,000 and $2.7 million$137,000 as of December 31, 2017September 30, 2022 and June 30, 2017,2022, respectively. Such loans are excluded because the loans are in pools that are considered performing. The discounts arising from recording these loans at fair value upon acquisition were due in part to credit quality and the accretable yield is being recognized as interest income over the life of the loans based on expected cash flows.
15
The following tables present the aging of the recorded investment in past due loans by class of loansportfolio segment as of December 31, 2017September 30, 2022 and June 30, 20172022 (in thousands):
|
| December 31, 2017 |
| |||||||||||||||||||||
|
| 30-59 |
|
| 60-89 |
|
| 90 Days or |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Days Past |
|
| Days Past |
|
| More Past |
|
| Total Past |
|
|
|
|
|
|
|
|
| ||||
|
| Due |
|
| Due |
|
| Due |
|
| Due |
|
| Current |
|
| Total |
| ||||||
Originated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | - |
|
| $ | - |
|
| $ | 1,632 |
|
| $ | 1,632 |
|
| $ | 153,476 |
|
| $ | 155,108 |
|
Commercial |
|
| - |
|
|
| - |
|
|
| 258 |
|
|
| 258 |
|
|
| 404,223 |
|
|
| 404,481 |
|
Construction |
|
| - |
|
|
| - |
|
|
| 2,260 |
|
|
| 2,260 |
|
|
| 14,119 |
|
|
| 16,379 |
|
Commercial loans |
|
| - |
|
|
| - |
|
|
| 275 |
|
|
| 275 |
|
|
| 30,412 |
|
|
| 30,687 |
|
Other loans secured |
|
| - |
|
|
| - |
|
|
| 544 |
|
|
| 544 |
|
|
| 45,344 |
|
|
| 45,888 |
|
Home equity lines of credit |
|
| - |
|
|
| - |
|
|
| 100 |
|
|
| 100 |
|
|
| 34,306 |
|
|
| 34,406 |
|
Consumer and installment loans |
|
| 10 |
|
|
| - |
|
|
| - |
|
|
| 10 |
|
|
| 12,661 |
|
|
| 12,671 |
|
Total originated |
|
| 10 |
|
|
| - |
|
|
| 5,069 |
|
|
| 5,079 |
|
|
| 694,541 |
|
|
| 699,620 |
|
Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
| - |
|
|
| - |
|
|
| 1,778 |
|
|
| 1,778 |
|
|
| 56,830 |
|
|
| 58,608 |
|
Commercial |
|
| - |
|
|
| - |
|
|
| 1,087 |
|
|
| 1,087 |
|
|
| 75,601 |
|
|
| 76,688 |
|
Commercial loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 589 |
|
|
| 589 |
|
Other loans secured |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| �� |
| 168 |
|
|
| 168 |
|
Home equity lines of credit |
|
| 46 |
|
|
| - |
|
|
| 296 |
|
|
| 342 |
|
|
| 5,410 |
|
|
| 5,752 |
|
Consumer and installment loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 189 |
|
|
| 189 |
|
Total acquired |
|
| 46 |
|
|
| - |
|
|
| 3,161 |
|
|
| 3,207 |
|
|
| 138,787 |
|
|
| 141,994 |
|
Total |
| $ | 56 |
|
| $ | - |
|
| $ | 8,230 |
|
| $ | 8,286 |
|
| $ | 833,328 |
|
| $ | 841,614 |
|
| September 30, 2022 |
| |||||||||||||||||||||
| 30-59 |
|
| 60-89 |
|
| 90 Days or |
|
|
|
|
|
|
|
|
|
| ||||||
| Days Past |
|
| Days Past |
|
| More Past |
|
| Total Past |
|
|
|
|
|
|
| ||||||
| Due |
|
| Due |
|
| Due |
|
| Due |
|
| Current |
|
| Total |
| ||||||
Residential mortgages | $ | - |
|
| $ | 104 |
|
| $ | 427 |
|
| $ | 531 |
|
| $ | 214,055 |
|
| $ | 214,586 |
|
Commercial mortgages |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 953,539 |
|
|
| 953,539 |
|
Construction |
| - |
|
|
| - |
|
|
| 2,792 |
|
|
| 2,792 |
|
|
| 22,515 |
|
|
| 25,307 |
|
Commercial loans |
| - |
|
|
| 51 |
|
|
| 533 |
|
|
| 584 |
|
|
| 141,318 |
|
|
| 141,902 |
|
Home equity lines of credit |
| - |
|
|
| - |
|
|
| 296 |
|
|
| 296 |
|
|
| 22,659 |
|
|
| 22,955 |
|
Consumer and overdrafts |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 508 |
|
|
| 508 |
|
Total | $ | - |
|
| $ | 155 |
|
| $ | 4,048 |
|
| $ | 4,203 |
|
| $ | 1,354,594 |
|
| $ | 1,358,797 |
|
| June 30, 2022 |
| |||||||||||||||||||||
| 30-59 |
|
| 60-89 |
|
| 90 Days or |
|
|
|
|
|
|
|
|
|
| ||||||
| Days Past |
|
| Days Past |
|
| More Past |
|
| Total Past |
|
|
|
|
|
|
| ||||||
| Due |
|
| Due |
|
| Due |
|
| Due |
|
| Current |
|
| Total |
| ||||||
Residential mortgages | $ | - |
|
| $ | - |
|
| $ | 367 |
|
| $ | 367 |
|
| $ | 213,800 |
|
| $ | 214,167 |
|
Commercial mortgages |
| - |
|
|
| - |
|
|
| 1,197 |
|
|
| 1,197 |
|
|
| 940,933 |
|
|
| 942,130 |
|
Construction |
| - |
|
|
| - |
|
|
| 1,113 |
|
|
| 1,113 |
|
|
| 19,783 |
|
|
| 20,896 |
|
Commercial loans |
| - |
|
|
| 16 |
|
|
| 400 |
|
|
| 416 |
|
|
| 135,888 |
|
|
| 136,304 |
|
Home equity lines of credit |
| - |
|
|
| - |
|
|
| 399 |
|
|
| 399 |
|
|
| 23,289 |
|
|
| 23,688 |
|
Consumer and overdrafts |
| - |
|
|
| - |
|
|
| 39 |
|
|
| 39 |
|
|
| 555 |
|
|
| 594 |
|
Total | $ | - |
|
| $ | 16 |
|
| $ | 3,515 |
|
| $ | 3,531 |
|
| $ | 1,334,248 |
|
| $ | 1,337,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2017 |
| |||||||||||||||||||||
|
| 30-59 |
|
| 60-89 |
|
| 90 Days or |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Days Past |
|
| Days Past |
|
| More Past |
|
| Total Past |
|
|
|
|
|
|
|
|
| ||||
|
| Due |
|
| Due |
|
| Due |
|
| Due |
|
| Current |
|
| Total |
| ||||||
Originated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 94 |
|
| $ | 275 |
|
| $ | 1,973 |
|
| $ | 2,342 |
|
| $ | 153,390 |
|
| $ | 155,732 |
|
Commercial |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 355,247 |
|
|
| 355,247 |
|
Construction |
|
| - |
|
|
| - |
|
|
| 3,661 |
|
|
| 3,661 |
|
|
| 18,743 |
|
|
| 22,404 |
|
Commercial loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 31,613 |
|
|
| 31,613 |
|
Other loans secured |
|
| - |
|
|
| - |
|
|
| 544 |
|
|
| 544 |
|
|
| 43,612 |
|
|
| 44,156 |
|
Home equity lines of credit |
|
| - |
|
|
| 199 |
|
|
| 103 |
|
|
| 302 |
|
|
| 35,246 |
|
|
| 35,548 |
|
Consumer and installment loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 13,435 |
|
|
| 13,435 |
|
Total originated |
|
| 94 |
|
|
| 474 |
|
|
| 6,281 |
|
|
| 6,849 |
|
|
| 651,286 |
|
|
| 658,135 |
|
Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
| 237 |
|
|
| 463 |
|
|
| 1,472 |
|
|
| 2,172 |
|
|
| 59,874 |
|
|
| 62,046 |
|
Commercial |
|
| - |
|
|
| - |
|
|
| 1,054 |
|
|
| 1,054 |
|
|
| 81,350 |
|
|
| 82,404 |
|
Commercial loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,684 |
|
|
| 1,684 |
|
Other loans secured |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,646 |
|
|
| 2,646 |
|
Home equity lines of credit |
|
| - |
|
|
| - |
|
|
| 296 |
|
|
| 296 |
|
|
| 6,083 |
|
|
| 6,379 |
|
Consumer and installment loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 330 |
|
|
| 330 |
|
Total acquired |
|
| 237 |
|
|
| 463 |
|
|
| 2,822 |
|
|
| 3,522 |
|
|
| 151,967 |
|
|
| 155,489 |
|
Total |
| $ | 331 |
|
| $ | 937 |
|
| $ | 9,103 |
|
| $ | 10,371 |
|
| $ | 803,253 |
|
| $ | 813,624 |
|
Troubled Debt Restructurings
The terms of certain loans werehave been modified as troubled debt restructurings.restructurings (“TDRs”). The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. All TDRs are considered impaired loans.
As of December 31, 2017both September 30, 2022 and June 30, 2017,2022, the Company had 17 and 209 loans, classified as troubled debt restructuringsTDRs totaling $7.1$1.4 million, and $9.9including $1.2 million respectively.of loans still accruing interest. The Company has allocated $211,000$111,000 and $145,000,$119,000, respectively, of specific reserves to customers whose loan terms have been modified in troubled debt restructuringsTDRs as of December 31, 2017September 30, 2022 and June 30, 2017, and2022. As of September 30, 2022, the Company has not committedno commitments to lend additional amountsfunds to customers with outstanding loans that are classified as troubled debt restructurings.TDRs.
The Company did notnot modify any loans as troubled debt restructuring during the three or six months ended December 31, 2017September 30, 2022 or 2016.2021 that were classified as TDRs.
The Company had two troubled debt restructurings with a total carrying amountThere were no defaults of $1.1 million at December 31, 2017 for which there was a payment defaultTDRs occurring in the sixthree months ended December 31, 2017September 30, 2022 or 2021 that were modified in the twelve months prior to default, resulting in a $66,000 increase to the allowance for loan loss. One default, with a carrying amount of $0.8 million, has been cured as of December 31, 2017. There were no such defaults during the three months ended December 31, 2017 or the three or six months ended December 31, 2016.default.
In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” provides banks the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. On December 27, 2020, the Consolidated Appropriations Act 2021 was signed into law. Section 541 of this legislation, “Extension of Temporary Relief From Troubled Debt Restructurings and Insurer Clarification,” extends Section 4013 of the CARES Act to the earlier of January 1, 2022 or 60 days after the termination of the national emergency declared relating to COVID-19. This extension expired as of January 1, 2022. Additionally, on April 7, 2020, the banking agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, issued a statement, “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)” (“Interagency Statement”), to encourage banks to work prudently with borrowers
16
and to describe the agencies’ interpretation of how accounting rules under ASC 310-40, “Troubled Debt Restructurings by Creditors,” apply to certain COVID-19-related modifications.
During the three months ended September 30, 2022, no loan payment deferrals were granted or extended by the Company. During the three months ended September 30, 2021, the Company granted or extended loan payment deferrals for 5 residential mortgage, construction and commercial loans totaling $3.7 million. In accordance with either the CARES Act (as amended) or Interagency Statement, these modifications are not considered TDRs. The Company had no loans on loan payment deferral as of September 30, 2022 nor June 30, 2022.
Credit Quality Indicators
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a monthly basis. The Company utilizedutilizes the same grading
process for acquired loans as it does for originated loans. The Company uses the following definitions for risk ratings:
Special Mention – Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.
Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful – Loans classified as doubtful have all the weaknesses inherent in 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, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above-described process and loans in groups of homogenous loans are considered to be pass rated loans. These loans are monitored based on delinquency and performance. Based on the most recent analysis performed, the risk category of loans by class of loansportfolio segment is as follows (in thousands):
| September 30, 2022 |
| |||||||||||||
| Pass |
|
| Special |
|
| Substandard |
|
| Total |
| ||||
Residential mortgages | $ | 213,581 |
|
| $ | 383 |
|
| $ | 622 |
|
| $ | 214,586 |
|
Commercial mortgages |
| 944,482 |
|
|
| 1,538 |
|
|
| 7,519 |
|
|
| 953,539 |
|
Construction |
| 22,515 |
|
|
| 1,679 |
|
|
| 1,113 |
|
|
| 25,307 |
|
Commercial loans |
| 141,295 |
|
|
| 145 |
|
|
| 462 |
|
|
| 141,902 |
|
Home equity lines of credit |
| 22,587 |
|
|
| - |
|
|
| 368 |
|
|
| 22,955 |
|
Consumer and overdrafts |
| 508 |
|
|
| - |
|
|
| - |
|
|
| 508 |
|
Total | $ | 1,344,968 |
|
| $ | 3,745 |
|
| $ | 10,084 |
|
| $ | 1,358,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2022 |
| |||||||||||||
| Pass |
|
| Special |
|
| Substandard |
|
| Total |
| ||||
Residential mortgages | $ | 212,810 |
|
| $ | 154 |
|
| $ | 1,203 |
|
| $ | 214,167 |
|
Commercial mortgages |
| 931,178 |
|
|
| 1,548 |
|
|
| 9,404 |
|
|
| 942,130 |
|
Construction |
| 18,104 |
|
|
| 1,679 |
|
|
| 1,113 |
|
|
| 20,896 |
|
Commercial loans |
| 135,725 |
|
|
| 156 |
|
|
| 423 |
|
|
| 136,304 |
|
Home equity lines of credit |
| 23,220 |
|
|
| 43 |
|
|
| 425 |
|
|
| 23,688 |
|
Consumer and overdrafts |
| 594 |
|
|
| - |
|
|
| - |
|
|
| 594 |
|
Total | $ | 1,321,631 |
|
| $ | 3,580 |
|
| $ | 12,568 |
|
| $ | 1,337,779 |
|
17
|
| December 31, 2017 |
| |||||||||||||||||
|
| Pass |
|
| Special Mention |
|
| Substandard |
|
| Doubtful |
|
| Total |
| |||||
Originated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 152,995 |
|
| $ | 271 |
|
| $ | 1,842 |
|
| $ | - |
|
| $ | 155,108 |
|
Commercial |
|
| 401,371 |
|
|
| - |
|
|
| 3,110 |
|
|
| - |
|
|
| 404,481 |
|
Construction |
|
| 14,119 |
|
|
| - |
|
|
| 2,260 |
|
|
| - |
|
|
| 16,379 |
|
Commercial loans |
|
| 28,024 |
|
|
| - |
|
|
| 2,663 |
|
|
| - |
|
|
| 30,687 |
|
Other loans secured |
|
| 40,657 |
|
|
| - |
|
|
| 5,231 |
|
|
| - |
|
|
| 45,888 |
|
Home equity lines of credit |
|
| 34,306 |
|
|
| 55 |
|
|
| 45 |
|
|
| - |
|
|
| 34,406 |
|
Consumer and installment loans |
|
| 12,661 |
|
|
| 10 |
|
|
| - |
|
|
| - |
|
|
| 12,671 |
|
Total originated |
|
| 684,133 |
|
|
| 336 |
|
|
| 15,151 |
|
|
| - |
|
|
| 699,620 |
|
Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
| 57,864 |
|
|
| 109 |
|
|
| 635 |
|
|
| - |
|
|
| 58,608 |
|
Commercial |
|
| 74,687 |
|
|
| - |
|
|
| 2,001 |
|
|
| - |
|
|
| 76,688 |
|
Commercial loans |
|
| 589 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 589 |
|
Other loans secured |
|
| 168 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 168 |
|
Home equity lines of credit |
|
| 5,286 |
|
|
| - |
|
|
| 466 |
|
|
| - |
|
|
| 5,752 |
|
Consumer and installment loans |
|
| 189 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 189 |
|
Total acquired |
|
| 138,783 |
|
|
| 109 |
|
|
| 3,102 |
|
|
| - |
|
|
| 141,994 |
|
Total |
| $ | 822,916 |
|
| $ | 445 |
|
| $ | 18,253 |
|
| $ | - |
|
| $ | 841,614 |
|
|
| June 30, 2017 |
| |||||||||||||||||
|
| Pass |
|
| Special Mention |
|
| Substandard |
|
| Doubtful |
|
| Total |
| |||||
Originated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 153,165 |
|
| $ | - |
|
| $ | 2,567 |
|
| $ | - |
|
| $ | 155,732 |
|
Commercial |
|
| 352,203 |
|
|
| 134 |
|
|
| 2,910 |
|
|
| - |
|
|
| 355,247 |
|
Construction |
|
| 18,743 |
|
|
| - |
|
|
| 3,661 |
|
|
| - |
|
|
| 22,404 |
|
Commercial loans |
|
| 28,944 |
|
|
| - |
|
|
| 2,669 |
|
|
| - |
|
|
| 31,613 |
|
Other loans secured |
|
| 37,267 |
|
|
| - |
|
|
| 6,889 |
|
|
| - |
|
|
| 44,156 |
|
Home equity lines of credit |
|
| 35,246 |
|
|
| 58 |
|
|
| 244 |
|
|
| - |
|
|
| 35,548 |
|
Consumer and installment loans |
|
| 13,405 |
|
|
| - |
|
|
| 30 |
|
|
| - |
|
|
| 13,435 |
|
Total originated |
|
| 638,973 |
|
|
| 192 |
|
|
| 18,970 |
|
|
| - |
|
|
| 658,135 |
|
Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
| 58,665 |
|
|
| - |
|
|
| 3,381 |
|
|
| - |
|
|
| 62,046 |
|
Commercial |
|
| 80,082 |
|
|
| - |
|
|
| 2,322 |
|
|
| - |
|
|
| 82,404 |
|
Commercial loans |
|
| 1,684 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,684 |
|
Other loans secured |
|
| 2,646 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,646 |
|
Home equity lines of credit |
|
| 5,906 |
|
|
| - |
|
|
| 473 |
|
|
| - |
|
|
| 6,379 |
|
Consumer and installment loans |
|
| 330 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 330 |
|
Total acquired |
|
| 149,313 |
|
|
| - |
|
|
| 6,176 |
|
|
| - |
|
|
| 155,489 |
|
Total |
| $ | 788,286 |
|
| $ | 192 |
|
| $ | 25,146 |
|
| $ | - |
|
| $ | 813,624 |
|
Purchased Credit Impaired Loans
The Company has acquired loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans as of December 31, 2017September 30, 2022 and June 30, 20172022 is as follows (in thousands):
| September 30, |
|
| June 30, |
| ||
| 2022 |
|
| 2022 |
| ||
Residential mortgages | $ | 218 |
|
| $ | 221 |
|
Commercial mortgages |
| 850 |
|
|
| 859 |
|
Home equity lines of credit |
| 86 |
|
|
| 89 |
|
Carrying amount, net of allowance of $0 | $ | 1,154 |
|
| $ | 1,169 |
|
|
| December 31, |
|
| June 30, |
| ||
|
| 2017 |
|
| 2017 |
| ||
Residential |
| $ | 1,252 |
|
| $ | 1,298 |
|
Commercial |
|
| 1,493 |
|
|
| 1,824 |
|
Home equity lines of credit |
|
| 173 |
|
|
| 177 |
|
Consumer and installment loans |
|
| 20 |
|
|
| 42 |
|
Carrying amount, net of allowance of $65 and $26, respectively |
| $ | 2,938 |
|
| $ | 3,341 |
|
The allowanceThere was no provision for loan losslosses on purchased credit impaired loans increased $39,000 during the three and six months ended December 31, 2017.September 30, 2022 or 2021.
Accretable yield, or income expected to be collected, for acquired loans is as follows (in thousands):
|
| Three Months Ended December 31, |
|
| Six Months Ended December 31, |
| Three Months Ended September 30, |
| |||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2022 |
|
| 2021 |
| ||||||
Beginning balance |
| $ | 375 |
|
| $ | 532 |
|
| $ | 403 |
|
| $ | 578 |
| $ | 89 |
|
| $ | 130 |
|
New loans acquired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| |||||||
Accretion income |
|
| (24 | ) |
|
| (46 | ) |
|
| (52 | ) |
|
| (92 | ) |
| (3 | ) |
|
| (10 | ) |
Reclassification from non-accretable difference |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| |||||||
Disposals |
|
| (113 | ) |
|
| - |
|
|
| (113 | ) |
|
| - |
| |||||||
Ending balance |
| $ | 238 |
|
| $ | 486 |
|
| $ | 238 |
|
| $ | 486 |
| $ | 86 |
|
| $ | 120 |
|
Note 6.5. Accumulated Other Comprehensive (Loss) Income (Loss)
The following is a summary of the accumulated other comprehensive income (loss) balances, net of tax (in thousands):
|
| Net unrealized gain (loss) on available for sale securities |
|
| Unrealized loss on pension benefits |
|
| Unrealized loss on SERP benefits |
|
| Total |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net unrealized |
|
| Unrealized loss |
|
| Unrealized loss |
|
| Total |
| ||||
Balance at October 1, 2017 |
| $ | (195 | ) |
| $ | (4,883 | ) |
| $ | (244 | ) |
| $ | (5,322 | ) | |||||||||||||||
Balance at July 1, 2022 | $ | (4,052 | ) |
| $ | (4,452 | ) |
| $ | (125 | ) |
| $ | (8,629 | ) | ||||||||||||||||
Other comprehensive loss before reclassifications |
|
| (717 | ) |
|
| - |
|
|
| - |
|
|
| (717 | ) |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Amounts reclassified from accumulated other comprehensive income |
|
| - |
|
|
| 181 |
|
|
| 8 |
|
|
| 189 |
|
| (1,519 | ) |
|
| 141 |
|
|
| 20 |
|
|
| (1,358 | ) |
Tax effect |
|
| 243 |
|
|
| (61 | ) |
|
| (2 | ) |
|
| 180 |
|
| 319 |
|
|
| (30 | ) |
|
| (4 | ) |
|
| 285 |
|
Net other comprehensive (loss) income |
|
| (474 | ) |
|
| 120 |
|
|
| 6 |
|
|
| (348 | ) |
| (1,200 | ) |
|
| 111 |
|
|
| 16 |
|
|
| (1,073 | ) |
Balance at December 31, 2017 |
| $ | (669 | ) |
| $ | (4,763 | ) |
| $ | (238 | ) |
| $ | (5,670 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
| Net unrealized gain (loss) on available for sale securities |
|
| Unrealized loss on pension benefits |
|
| Unrealized loss on SERP benefits |
|
| Total |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at October 1, 2016 |
| $ | 624 |
|
| $ | (7,683 | ) |
| $ | (810 | ) |
| $ | (7,869 | ) | |||||||||||||||
Other comprehensive loss before reclassifications |
|
| (1,262 | ) |
|
| - |
|
|
| - |
|
|
| (1,262 | ) | |||||||||||||||
Amounts reclassified from accumulated other comprehensive income |
|
| - |
|
|
| 577 |
|
|
| 47 |
|
|
| 624 |
| |||||||||||||||
Tax effect |
|
| 429 |
|
|
| (196 | ) |
|
| (16 | ) |
|
| 217 |
| |||||||||||||||
Net other comprehensive (loss) income |
|
| (833 | ) |
|
| 381 |
|
|
| 31 |
|
|
| (421 | ) | |||||||||||||||
Balance at December 31, 2016 |
| $ | (209 | ) |
| $ | (7,302 | ) |
| $ | (779 | ) |
| $ | (8,290 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
| Net unrealized gain (loss) on available for sale securities |
|
| Unrealized loss on pension benefits |
|
| Unrealized loss on SERP benefits |
|
| Total |
| |||||||||||||||||||
Balance at July 1, 2017 |
| $ | 37 |
|
| $ | (5,002 | ) |
| $ | (250 | ) |
| $ | (5,215 | ) | |||||||||||||||
Other comprehensive loss before reclassifications |
|
| (930 | ) |
|
| - |
|
|
| - |
|
|
| (930 | ) | |||||||||||||||
Amounts reclassified from accumulated other comprehensive (loss) income |
|
| (139 | ) |
|
| 362 |
|
|
| 16 |
|
|
| 239 |
| |||||||||||||||
Tax effect |
|
| 363 |
|
|
| (123 | ) |
|
| (4 | ) |
|
| 236 |
| |||||||||||||||
Net other comprehensive (loss) income |
|
| (706 | ) |
|
| 239 |
|
|
| 12 |
|
|
| (455 | ) | |||||||||||||||
Balance at December 31, 2017 |
| $ | (669 | ) |
| $ | (4,763 | ) |
| $ | (238 | ) |
| $ | (5,670 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
| Net unrealized gain (loss) on available for sale securities |
|
| Unrealized loss on pension benefits |
|
| Unrealized loss on SERP benefits |
|
| Total |
| |||||||||||||||||||
Balance at July 1, 2016 |
| $ | 523 |
|
| $ | (7,683 | ) |
| $ | (810 | ) |
| $ | (7,970 | ) | |||||||||||||||
Other comprehensive loss before reclassifications |
|
| (1,109 | ) |
|
| - |
|
|
| - |
|
|
| (1,109 | ) | |||||||||||||||
Amounts reclassified from accumulated other comprehensive income |
|
| - |
|
|
| 577 |
|
|
| 47 |
|
|
| 624 |
| |||||||||||||||
Tax effect |
|
| 377 |
|
|
| (196 | ) |
|
| (16 | ) |
|
| 165 |
| |||||||||||||||
Net other comprehensive (loss) income |
|
| (732 | ) |
|
| 381 |
|
|
| 31 |
|
|
| (320 | ) | |||||||||||||||
Balance at December 31, 2016 |
| $ | (209 | ) |
| $ | (7,302 | ) |
| $ | (779 | ) |
| $ | (8,290 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at September 30, 2022 | $ | (5,252 | ) |
| $ | (4,341 | ) |
| $ | (109 | ) |
| $ | (9,702 | ) |
| Net unrealized |
|
| Unrealized loss |
|
| Unrealized loss |
|
| Total |
| ||||
Balance at July 1, 2021 | $ | 137 |
|
| $ | (3,055 | ) |
| $ | (181 | ) |
| $ | (3,099 | ) |
Other comprehensive loss before reclassifications |
| (187 | ) |
|
| - |
|
|
| - |
|
|
| (187 | ) |
Amounts reclassified from accumulated other |
| - |
|
|
| 38 |
|
|
| 16 |
|
|
| 54 |
|
Tax effect |
| 40 |
|
|
| (9 | ) |
|
| (3 | ) |
|
| 28 |
|
Net other comprehensive (loss) income |
| (147 | ) |
|
| 29 |
|
|
| 13 |
|
|
| (105 | ) |
Balance at September 30, 2021 | $ | (10 | ) |
| $ | (3,026 | ) |
| $ | (168 | ) |
| $ | (3,204 | ) |
18
Note 7.6. Post-Retirement Benefits
Employee Pension Plan:
The Company maintains a non-contributory defined benefit pension plan that covers employees meeting specific requirements as to age and length of service. The Company’s contributions to this qualified plan are determined on the basis of (i) the maximum amount that can be deducted for federal income tax purposes, and (ii) the amount determined by a consulting actuary as necessary to avoid an accumulated funding deficiency as defined by the Employee Retirement Income Security Act of 1974 (“ERISA”). Contributions are intended to provide for benefits attributed to service to date. date but also those expected to be earned in the future.On February 15, 2017, the Board of Directors approved the freezing of the defined benefit pension plan effective May 1, 2017.2017.
Supplemental Executive Retirement Plans:
The Company also maintains unfunded and non-qualified supplemental executive retirement plans ("SERP") to provide pension benefits in addition to those provided under the qualified pension plan.
Net periodic benefit cost and other amounts recognized in other comprehensive income for the three and six months ended December 31, 2017September 30, 2022 and 20162021 (in thousands):
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||||||||||||||||||
|
| December 31, 2017 |
|
| December 31, 2016 |
| ||||||||||||||||||||||||||
|
| Defined Benefit Plan |
|
| Supplemental Retirement Plans |
|
| Defined Benefit Plan |
|
| Supplemental Retirement Plans |
| ||||||||||||||||||||
Service cost |
| $ | - |
|
| $ | 107 |
|
| $ | 184 |
|
| $ | 81 |
| ||||||||||||||||
Interest cost |
|
| 242 |
|
|
| 25 |
|
|
| 253 |
|
|
| 29 |
| ||||||||||||||||
Expected return on plan assets |
|
| (503 | ) |
|
| - |
|
|
| (464 | ) |
|
| - |
| ||||||||||||||||
Amortization of prior net loss |
|
| - |
|
|
| - |
|
|
| 361 |
|
|
| 23 |
| ||||||||||||||||
Amortization of prior service cost |
|
| 181 |
|
|
| 8 |
|
|
| (72 | ) |
|
| - |
| ||||||||||||||||
Net periodic (benefit) cost |
| $ | (80 | ) |
| $ | 140 |
|
| $ | 262 |
|
| $ | 133 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| Six Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||||||||||||
|
| December 31, 2017 |
|
| December 31, 2016 |
|
| September 30, 2022 |
|
| September 30, 2021 |
| ||||||||||||||||||||
|
| Defined Benefit Plan |
|
| Supplemental Retirement Plan |
|
| Defined Benefit Plan |
|
| Supplemental Retirement Plan |
|
| Defined |
|
| Supplemental |
|
| Defined |
|
| Supplemental |
| ||||||||
Service cost |
| $ | - |
|
| $ | 220 |
|
| $ | 369 |
|
| $ | 161 |
|
| $ | - |
|
| $ | 82 |
|
| $ | - |
|
| $ | 131 |
|
Interest cost |
|
| 484 |
|
|
| 50 |
|
|
| 507 |
|
|
| 58 |
|
|
| 196 |
|
|
| 26 |
|
|
| 149 |
|
|
| 17 |
|
Expected return on plan assets |
|
| (1,006 | ) |
|
| - |
|
|
| (962 | ) |
|
| - |
|
|
| (410 | ) |
|
| - |
|
|
| (510 | ) |
|
| - |
|
Amortization of prior net loss |
|
| - |
|
|
| - |
|
|
| 721 |
|
|
| 47 |
|
|
| 141 |
|
|
| 20 |
|
|
| 38 |
|
|
| 16 |
|
Amortization of prior service cost |
|
| 362 |
|
|
| 16 |
|
|
| (144 | ) |
|
| - |
| ||||||||||||||||
Net periodic cost |
| $ | (160 | ) |
| $ | 66 |
|
| $ | 491 |
|
| $ | 266 |
| ||||||||||||||||
Settlement charges |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| ||||||||||||||||
Net periodic (benefit) cost |
| $ | (73 | ) |
| $ | 128 |
|
| $ | (323 | ) |
| $ | 164 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company made no contributions to the defined benefit plan during the three and six months ended December 31, 2017 and expects to make no contributions to the plan for the year ending JuneSeptember 30, 2018.2022.
Employee Stock Ownership Plan
On January 1, 2017, the Company established an Employee Stock Ownership Plan (“ESOP”) to provide eligible employees the opportunity to own Company stock. The planESOP is a tax-qualified retirement plan for the benefit of Company employees. TheOn April 20, 2017, the Holding Company granted a loan to the ESOP in the amount of $14.5 million for the purchase of 1,453,209 shares of the Company’s common stock at a price of $10.00$10.00 per share. The loan obtained by the ESOP from the Holding Company to purchase the common stock is payable annually over 15 years at a rate per annum equal to the Prime Rate, reset annually on January 1st (4.00% at December 31, 2017)(3.25% for 2022). Loan payments are principally funded by cash contributions from the Bank. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. The balance of the ESOP loan at December 31, 2017September 30, 2022 was $13.6$9.7 million. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits. The number of shares committed to be released annually is 96,881 through 2032. Dividends on allocated shares increase participant accounts and are used to purchase additional shares of stock. Participants receive the shares at the end of employment.
Shares held by the ESOP include the following:following (Dollars in thousands):
|
| December 31, 2017 |
|
| June 30, 2017 |
| ||
Allocated |
|
| 96,881 |
|
|
| - |
|
Committed to be allocated |
|
| - |
|
|
| 26,975 |
|
Unallocated |
|
| 1,356,328 |
|
|
| 1,426,234 |
|
Total shares |
|
| 1,453,209 |
|
|
| 1,453,209 |
|
| September 30, 2022 |
|
| June 30, 2022 |
| ||
Allocated to participants |
| 541,097 |
|
|
| 518,371 |
|
Unearned |
| 896,348 |
|
|
| 920,767 |
|
Total ESOP shares |
| 1,437,445 |
|
|
| 1,439,138 |
|
|
|
|
|
|
| ||
Fair value of unearned shares | $ | 16,072 |
|
| $ | 17,577 |
|
|
|
|
|
|
|
The fair value of unallocated shares was $25.8 million at December 31, 2017.
Total compensation expense recognized in connection with the ESOP for the three and six months ended December 31, 2017September 30, 2022 and 2021 was $672,000$467,000 and $1.3 million, respectively. There was no ESOP compensation expense for the three or six months ended December 31, 2016.$446,000, respectively.
19
Note 8.7. Fair Value of Financial Instruments
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as general classification of such instruments pursuant to the valuation hierarchy, is set forth below. While management believes the Company’s valuation methodologies are appropriate and consistent with other financial institutions, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Investment Securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs), or a broker's opinion of value (Level 3 inputs).
Impaired Loans: The fair value of collateral-dependent impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. Appraisals are generally obtained annually and may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Management performs a review of all appraisals, including any such adjustments. The fair value of uncollateralized or non-collateral-dependent loans are generally based on discounted cash flows which utilize management’s assumption of discount rates and expected future cash flows, resulting in a Level 3 classification.
Foreclosed Real Estate: Assets acquired through or instead of loan foreclosure are initially recorded at fair value, less estimated costs to sell, when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value, less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Real estate ownedForeclosed properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
Appraisals for both collateral-dependent impaired loans and real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Credit Department, as well as a third-party specialist, where deemed appropriate, reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Once appraisals are considered appropriate, management discounts the appraised value for estimated selling costs, such as legal, broker, and property maintenance and insurance costs. The most recent analysis performed indicated discount rates ranging between 10%10% and 20%20% should be applied to properties with appraisals performed.
Derivatives: The Company’s derivative assets and liabilities consist of transactions undertaken as part of management’s strategy to manage interest rate risk. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of eachderivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest
20
rate curves. The Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy.
Assets and liabilities measured at fair value are summarized below (in thousands):
|
| Fair Value Measurements |
| ||||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| Fair Value Measurements |
| |||||||||||||||||
December 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||||||||||||||
September 30, 2022 |
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Measured on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Available for sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Available for sale debt securities: |
|
|
|
|
|
|
|
| |||||||||||||||||||||||
U.S. Government and agency obligations |
| $ | - |
|
| $ | 55,024 |
|
| $ | - |
|
| $ | 55,024 |
| $ | - |
|
| $ | 9,443 |
|
| $ | - |
|
| $ | 9,443 |
|
Corporate and other debt securities |
|
| - |
|
|
| 8,362 |
|
|
| - |
|
|
| 8,362 |
| |||||||||||||||
Corporate |
| - |
|
|
| 1,997 |
|
|
| 2,768 |
|
|
| 4,765 |
| ||||||||||||||||
State and municipal |
| - |
|
|
| 4,334 |
|
|
| - |
|
|
| 4,334 |
| ||||||||||||||||
Mortgage-backed securities – residential |
|
| - |
|
|
| 39,296 |
|
|
| - |
|
|
| 39,296 |
|
| - |
|
|
| 11,623 |
|
|
| - |
|
|
| 11,623 |
|
Equity securities |
|
| - |
|
|
| 32 |
|
|
| - |
|
|
| 32 |
| |||||||||||||||
Mortgage-backed securities – commercial |
| - |
|
|
| 2,266 |
|
|
| - |
|
|
| 2,266 |
| ||||||||||||||||
Derivatives – interest rate contracts |
| - |
|
|
| 14,774 |
|
|
| - |
|
|
| 14,774 |
| ||||||||||||||||
Total assets at fair value |
| $ | - |
|
| $ | 102,714 |
|
| $ | - |
|
| $ | 102,714 |
| $ | - |
|
| $ | 44,437 |
|
| $ | 2,768 |
|
| $ | 47,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Derivatives – interest rate contracts | $ | - |
|
| $ | 14,774 |
|
| $ | - |
|
| $ | 14,774 |
| ||||||||||||||||
Total liabilities at fair value | $ | - |
|
| $ | 14,774 |
|
| $ | - |
|
| $ | 14,774 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Measured on a non-recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Impaired loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Residential mortgages |
| $ | - |
|
| $ | - |
|
| $ | 265 |
|
| $ | 265 |
| $ | - |
|
| $ | - |
|
| $ | 242 |
|
| $ | 242 |
|
Construction |
|
| - |
|
|
| - |
|
|
| 1,984 |
|
|
| 1,984 |
| |||||||||||||||
Commercial loans |
|
| - |
|
|
| - |
|
|
| 206 |
|
|
| 206 |
| |||||||||||||||
Other loans secured |
|
| - |
|
|
| - |
|
|
| 500 |
|
|
| 500 |
| |||||||||||||||
Home equity lines of credit |
|
| - |
|
|
| - |
|
|
| 72 |
|
|
| 72 |
|
| - |
|
|
| - |
|
|
| 22 |
|
|
| 22 |
|
Total assets at fair value |
| $ | - |
|
| $ | - |
|
| $ | 3,027 |
|
| $ | 3,027 |
| $ | - |
|
| $ | - |
|
| $ | 264 |
|
| $ | 264 |
|
|
|
|
|
|
|
|
|
|
| Fair Value Measurements |
| |||||||||||||
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
| ||||
Measured on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
| ||||
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Government and agency obligations | $ | - |
|
| $ | 9,928 |
|
| $ | - |
|
| $ | 9,928 |
|
Corporate |
| - |
|
|
| 2,004 |
|
|
| 2,850 |
|
|
| 4,854 |
|
State and municipal |
| - |
|
|
| 4,796 |
|
|
| - |
|
|
| 4,796 |
|
Mortgage-backed securities – residential |
| - |
|
|
| 12,712 |
|
|
| - |
|
|
| 12,712 |
|
Mortgage-backed securities – commercial |
| - |
|
|
| 2,331 |
|
|
| - |
|
|
| 2,331 |
|
Derivatives – interest rate contracts |
| - |
|
|
| 8,223 |
|
|
| - |
|
|
| 8,223 |
|
Total assets at fair value | $ | - |
|
| $ | 39,994 |
|
| $ | 2,850 |
|
| $ | 42,844 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives – interest rate contracts | $ | - |
|
| $ | 8,223 |
|
| $ | - |
|
| $ | 8,223 |
|
Total liabilities at fair value | $ | - |
|
| $ | 8,223 |
|
| $ | - |
|
| $ | 8,223 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Measured on a non-recurring basis: |
|
|
|
|
|
|
|
|
|
|
| ||||
Impaired loans: |
|
|
|
|
|
|
|
|
|
|
| ||||
Residential mortgages | $ | - |
|
| $ | - |
|
| $ | 306 |
|
| $ | 306 |
|
Home equity lines of credit |
| - |
|
|
| - |
|
|
| 44 |
|
|
| 44 |
|
Total assets at fair value | $ | - |
|
| $ | - |
|
| $ | 350 |
|
| $ | 350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value Measurements |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
June 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency obligations |
| $ | - |
|
| $ | 63,445 |
|
| $ | - |
|
| $ | 63,445 |
|
Corporate and other debt securities |
|
| - |
|
|
| 8,482 |
|
|
| - |
|
|
| 8,482 |
|
Mortgage-backed securities – residential |
|
| - |
|
|
| 39,930 |
|
|
| - |
|
|
| 39,930 |
|
Equity securities |
|
| - |
|
|
| 32 |
|
|
| - |
|
|
| 32 |
|
Total assets at fair value |
|
| - |
|
| $ | 111,889 |
|
| $ | - |
|
| $ | 111,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured on a non-recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages |
| $ | - |
|
| $ | - |
|
| $ | 1,126 |
|
| $ | 1,126 |
|
Construction |
|
| - |
|
|
| - |
|
|
| 2,260 |
|
|
| 2,260 |
|
Commercial loans |
|
| - |
|
|
| - |
|
|
| 72 |
|
|
| 72 |
|
Other loans secured |
|
|
|
|
|
|
|
|
|
| 1,609 |
|
|
| 1,609 |
|
Home equity lines of credit |
|
| - |
|
|
| - |
|
|
| 5 |
|
|
| 5 |
|
Foreclosed real estate |
|
| - |
|
|
| - |
|
|
| 977 |
|
|
| 977 |
|
Total assets at fair value |
| $ | - |
|
| $ | - |
|
| $ | 6,049 |
|
| $ | 6,049 |
|
There were no transfers between levels within the fair value hierarchy during the three or six months ended December 31, 2017.September 30, 2022 or 2021.
Impaired loans in the preceding table above had a carrying amount of $3.4 million,$375,000 and a remaining valuation allowance of $405,000$111,000, at December 31, 2017,September 30, 2022, as compared to $6.3 million$469,000 and $1.1 million,$119,000, respectively, as of June 30, 2017.2022. Impaired loans measured at fair value incurred $997,000 ofno net charge-offs and resulted in an additional provisiona benefit for loan losses of $405,000$2,000 during the sixthree months ended December 31, 2017.September 30, 2022. Impaired loans measured at fair value as of December 31, 2016September 30, 2021 incurred $38,000 ofno net charge-offs and resulted in an additional provisiona credit for loan losses of $814,000$2,000 during the three months ended December 31, 2016.September 30, 2021.
21
The following tables present quantitative information about Level 3 fair value measurements for selected financial instruments measured at fair value on a non-recurring basis at December 31, 2017September 30, 2022 and June 30, 2017 (dollars2022 (Dollars in thousands):
|
|
|
|
|
| Valuation |
| Unobservable |
| Range or |
| |
|
| Fair Value |
|
| Technique(s) |
| Input(s) |
| Rate Used |
| ||
December 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans - residential mortgages |
| $ | 265 |
|
| Sales comparison |
| Adjustments for differences in sales comparables |
| 4.2% to 21.1% |
| |
Impaired loans - construction |
|
| 1,984 |
|
| Sales contract |
| n/a |
| n/a |
| |
Impaired loans - commercial loans |
|
| 206 |
|
| Discounted cash flow |
| Discount rate |
| 6.0% |
| |
Impaired loans - other loans secured |
|
| 500 |
|
| Sales contract |
| n/a |
| n/a |
| |
Impaired loans - home equity lines of credit |
|
| 72 |
|
| Sales comparison |
| Adjustments for differences in sales comparables |
| 4.2% to 21.1% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans - residential mortgages |
| $ | 1,126 |
|
| Sales comparison |
| Adjustments for differences in sales comparables |
| -5.1% to 7.8% |
| |
|
|
|
|
|
| Discounted cash flow |
| Discount rate |
| 5.4% to 6.3% |
| |
Impaired loans - construction |
|
| 2,260 |
|
| Cost approach |
| Discount for distressed property |
|
| 50.0% |
|
Impaired loans - commercial |
|
| 72 |
|
| Discounted cash flow |
| Adjustments for differences in sales comparables |
| 7.0% to 7.5% |
| |
Impaired loans - other loans secured |
|
| 1,609 |
|
| Discounted cash flow |
| Discount rate |
|
| 6.0% |
|
|
|
|
|
|
| Sales comparison |
| Adjustments for differences in sales comparables |
|
| 0.0% |
|
Impaired loans - home equity lines of credit |
|
| 5 |
|
| Discounted cash flow |
| Discount rate |
|
| 6.3% |
|
Foreclosed real estate |
|
| 977 |
|
| Sales comparison |
| Adjustments for differences in sales comparables |
| -23.4% to 7.2% |
|
|
|
|
| Valuation |
| Unobservable |
| Range or | |
| Fair Value |
|
| Technique(s) |
| Input(s) |
| Rate Used | |
September 30, 2022 |
|
|
|
|
|
|
|
| |
Impaired loans - residential mortgages | $ | 242 |
|
| Discounted cash flow |
| Discount rate |
| 5.4% to 6.3% |
Impaired loans - home equity lines of credit |
| 22 |
|
| Discounted cash flow |
| Discount rate |
| 4.8% to 6.3% |
|
|
|
|
|
|
|
|
| |
June 30, 2022 |
|
|
|
|
|
|
|
| |
Impaired loans - residential mortgages | $ | 306 |
|
| Discounted cash flow |
| Discount rate |
| 5.4% to 6.3% |
Impaired loans - home equity lines of credit |
| 44 |
|
| Discounted cash flow |
| Discount rate |
| 4.8% to 6.3% |
The following is a summary of the carrying amounts and estimated fair values of the Company’s financial assets and liabilities, (in thousands) (nonenone of which are held for trading purposes)purposes (in thousands):
|
| Carrying |
|
| Fair Value Measurements |
| |||||||||||||||||||||||||||||||||
|
| Amount |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| Carrying |
|
| Fair Value Measurements |
| |||||||||||||||||||
December 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| Amount |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| |||||||||||||||||||||||||
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Cash and cash equivalents |
| $ | 77,106 |
|
| $ | 77,106 |
|
| $ | - |
|
| $ | - |
|
| $ | 77,106 |
| $ | 50,753 |
|
| $ | 50,753 |
|
| $ | - |
|
| $ | - |
|
| $ | 50,753 |
|
Investment securities held to maturity |
|
| 367,646 |
|
|
| - |
|
|
| 363,253 |
|
|
| 204 |
|
|
| 363,457 |
| |||||||||||||||||||
Investment securities available for sale |
|
| 102,714 |
|
|
| - |
|
|
| 102,714 |
|
|
| - |
|
|
| 102,714 |
| |||||||||||||||||||
Held to maturity debt securities |
| 406,250 |
|
|
| - |
|
|
| 307,553 |
|
|
| 31,590 |
|
|
| 339,143 |
| ||||||||||||||||||||
Available for sale debt securities |
| 32,431 |
|
|
| - |
|
|
| 29,663 |
|
|
| 2,768 |
|
|
| 32,431 |
| ||||||||||||||||||||
Loans receivable, net |
|
| 838,120 |
|
|
| - |
|
|
| - |
|
|
| 834,729 |
|
|
| 834,729 |
|
| 1,350,197 |
|
|
| - |
|
|
| - |
|
|
| 1,280,789 |
|
|
| 1,280,789 |
|
Accrued interest receivable |
|
| 4,001 |
|
|
| - |
|
|
| 1,291 |
|
|
| 2,710 |
|
|
| 4,001 |
|
| 7,074 |
|
|
| - |
|
|
| 1,845 |
|
|
| 5,229 |
|
|
| 7,074 |
|
Federal Home Loan Bank stock |
|
| 2,395 |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
| |||||||||||||||||||||||
FHLB stock |
| 2,865 |
|
| N/A |
| N/A |
| N/A |
| N/A |
| |||||||||||||||||||||||||||
Derivative assets - interest rate contracts |
| 14,774 |
|
|
| - |
|
|
| 14,774 |
|
|
| - |
|
|
| 14,774 |
| ||||||||||||||||||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Demand, NOW, money market deposits and savings accounts |
|
| 802,782 |
|
|
| 802,782 |
|
|
| - |
|
|
| - |
|
|
| 802,782 |
|
| 1,269,942 |
|
|
| 1,269,942 |
|
|
| - |
|
|
| - |
|
|
| 1,269,942 |
|
Time deposits |
|
| 311,547 |
|
|
| - |
|
|
| 314,386 |
|
|
| - |
|
|
| 314,386 |
|
| 323,324 |
|
|
| - |
|
|
| 324,778 |
|
|
| - |
|
|
| 324,778 |
|
Mortgage escrow funds |
|
| 8,229 |
|
|
| 8,229 |
|
|
| - |
|
|
| - |
|
|
| 8,229 |
|
| 7,302 |
|
|
| 7,302 |
|
|
| - |
|
|
| - |
|
|
| 7,302 |
|
FHLB advances |
|
| 30,720 |
|
|
| - |
|
|
| 30,633 |
|
|
| - |
|
|
| 30,633 |
| |||||||||||||||||||
June 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Cash and cash equivalents |
| $ | 60,486 |
|
| $ | 60,486 |
|
| $ | - |
|
| $ | - |
|
| $ | 60,486 |
| |||||||||||||||||||
Investment securities held to maturity |
|
| 383,551 |
|
|
| - |
|
|
| 383,318 |
|
|
| 270 |
|
|
| 383,588 |
| |||||||||||||||||||
Investment securities available for sale |
|
| 111,889 |
|
|
| - |
|
|
| 111,889 |
|
|
| - |
|
|
| 111,889 |
| |||||||||||||||||||
Loans receivable, net |
|
| 809,648 |
|
|
| - |
|
|
| - |
|
|
| 817,814 |
|
|
| 817,814 |
| |||||||||||||||||||
Accrued interest receivable |
|
| 3,693 |
|
|
| - |
|
|
| 1,243 |
|
|
| 2,450 |
|
|
| 3,693 |
| |||||||||||||||||||
Federal Home Loan Bank stock |
|
| 3,132 |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
| |||||||||||||||||||||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Demand, NOW, money market deposits and savings accounts |
|
| 793,681 |
|
|
| 793,681 |
|
|
| - |
|
|
| - |
|
|
| 793,681 |
| |||||||||||||||||||
Time deposits |
|
| 294,780 |
|
|
| - |
|
|
| 297,508 |
|
|
| - |
|
|
| 297,508 |
| |||||||||||||||||||
Mortgage escrow funds |
|
| 8,084 |
|
|
| 8,084 |
|
|
| - |
|
|
| - |
|
|
| 8,084 |
| |||||||||||||||||||
FHLB advances |
|
| 42,598 |
|
|
| - |
|
|
| 45,504 |
|
|
| - |
|
|
| 45,504 |
| |||||||||||||||||||
Advances from FHLB |
| 28,288 |
|
|
| - |
|
|
| 27,347 |
|
|
| - |
|
|
| 27,347 |
| ||||||||||||||||||||
Accrued interest payable |
| 53 |
|
|
| - |
|
|
| 53 |
|
|
| - |
|
|
| 53 |
| ||||||||||||||||||||
Derivative liabilities - interest rate contracts |
| 14,774 |
|
|
| - |
|
|
| 14,774 |
|
|
| - |
|
|
| 14,774 |
|
| Carrying |
|
| Fair Value Measurements |
| ||||||||||||||
| Amount |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| |||||
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents | $ | 118,457 |
|
| $ | 118,457 |
|
| $ | - |
|
| $ | - |
|
| $ | 118,457 |
|
Held to maturity debt securities |
| 412,449 |
|
|
| - |
|
|
| 331,262 |
|
|
| 30,346 |
|
|
| 361,608 |
|
Available for sale debt securities |
| 34,621 |
|
|
| - |
|
|
| 31,771 |
|
|
| 2,850 |
|
|
| 34,621 |
|
Loans receivable, net |
| 1,329,372 |
|
|
| - |
|
|
| - |
|
|
| 1,261,035 |
|
|
| 1,261,035 |
|
Accrued interest receivable |
| 6,396 |
|
|
| - |
|
|
| 1,751 |
|
|
| 4,645 |
|
|
| 6,396 |
|
FHLB stock |
| 3,766 |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
| ||||
Derivative assets - interest rate contracts |
| 8,223 |
|
|
| - |
|
|
| 8,223 |
|
|
| - |
|
|
| 8,223 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Demand, NOW, money market deposits and savings accounts |
| 1,298,661 |
|
|
| 1,298,661 |
|
|
| - |
|
|
| - |
|
|
| 1,298,661 |
|
Time deposits |
| 327,589 |
|
|
| - |
|
|
| 329,885 |
|
|
| - |
|
|
| 329,885 |
|
Mortgage escrow funds |
| 11,173 |
|
|
| 11,173 |
|
|
| - |
|
|
| - |
|
|
| 11,173 |
|
Advances from FHLB |
| 48,323 |
|
|
| - |
|
|
| 48,094 |
|
|
| - |
|
|
| 48,094 |
|
Accrued interest payable |
| 94 |
|
|
| 1 |
|
|
| 93 |
|
|
| - |
|
|
| 94 |
|
Derivative liabilities - interest rate contracts |
| 8,223 |
|
|
| - |
|
|
| 8,223 |
|
|
| - |
|
|
| 8,223 |
|
The methods and assumptions, not previously presented, used to estimate fair values are described as follows:
Cash and Cash Equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.
Loans Receivable, Net: For valuation purposes, the loan portfolio was segregated into its significant categories such as one-to-four family residential mortgage loans, other mortgage loans, consumer loans and commercial loans. These categories were further analyzed, where appropriate, into components based on significant financial characteristics such as type of interest rate (adjustable or fixed). For adjustable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimatedetermining the fair value of loans do not necessarily represent an exit price. The fair value of loans is considered Level 3.
FHLB Stock: It is not practical to determineassets and liabilities presented in the fair value of FHLB stock due to restrictions placed on its transferability.
Accrued Interest Receivable/Payable: The carrying amount of accrued interest approximates fair value.
Deposits: The fair valuestable above are consistent with our methodologies disclosed for demand deposits (e.g., non-interest-bearing demand, NOW, money market, savings deposits and escrow accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) and are considered Level 1. Fair values for time deposits are estimated using a discounted cash flows calculation that applies interest rates currently being offered on time deposits to a schedule of aggregated expected monthly maturities on time deposits, resulting in a Level 2 classification.
FHLB Advances: Fair value of the advances is estimated using a discounted cash flow calculation that applies current FHLB interest rates for advances of similar maturity to the Company's current advances maturities schedule, resultingConsolidated Financial Statements included in a Level 2 classification.the Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
22
Note 9.8. Regulatory CapitalMatters
The following is a summary of the Company’s and Bank’s actual capital amounts and ratios as of December 31, 2017September 30, 2022 and June 30, 2017,2022, compared to the required ratios for minimum capital adequacy and for classification as well capitalized (dollars(Dollars in thousands):.
|
|
|
|
|
|
|
|
|
|
|
|
| To Be Well Capitalized |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Under Prompt |
|
|
|
|
|
|
|
| To Be Well Capitalized |
| |||||||||||||||||||
|
|
|
|
| For Capital Adequacy |
|
| Corrective Action |
|
|
|
|
|
| For Capital |
|
| Under Prompt |
| ||||||||||||||||||||||||||||
|
| Bank Actual |
|
| Purposes |
|
| Provisions |
|
|
|
| Adequacy |
|
| Corrective Action |
| ||||||||||||||||||||||||||||||
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
| Bank Actual |
|
| Purposes |
|
| Provisions |
| |||||||||||||||||||||
December 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
PCSB Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
| ||||||||||||||||||||||||||||||
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Leverage (Tier 1) |
| $ | 195,169 |
|
|
| 13.8 | % |
| $ | 56,400 |
|
|
| 4.0 | % |
| $ | 70,500 |
|
|
| 5.0 | % | $ | 256,469 |
|
|
| 13.0 | % |
| $ | 78,658 |
|
|
| 4.0 | % |
| $ | 98,323 |
|
|
| 5.0 | % |
Risk-based: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common Tier 1 |
|
| 195,169 |
|
|
| 21.6 |
|
|
| 40,591 |
|
|
| 4.5 |
|
|
| 58,632 |
|
|
| 6.5 |
|
| 256,469 |
|
|
| 17.3 |
|
|
| 66,842 |
|
|
| 4.5 |
|
|
| 96,549 |
|
|
| 6.5 |
|
Tier 1 |
|
| 195,169 |
|
|
| 21.6 |
|
|
| 54,122 |
|
|
| 6.0 |
|
|
| 72,162 |
|
|
| 8.0 |
|
| 256,469 |
|
|
| 17.3 |
|
|
| 89,122 |
|
|
| 6.0 |
|
|
| 118,829 |
|
|
| 8.0 |
|
Total |
|
| 199,640 |
|
|
| 22.1 |
|
|
| 72,162 |
|
|
| 8.0 |
|
|
| 90,203 |
|
|
| 10.0 |
|
| 265,517 |
|
|
| 17.9 |
|
|
| 118,829 |
|
|
| 8.0 |
|
|
| 148,537 |
|
|
| 10.0 |
|
PCSB Financial Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Leverage (Tier 1) |
| $ | 282,716 |
|
|
| 19.9 | % |
| $ | 56,713 |
|
|
| 4.0 | % |
| N/A |
|
| N/A |
| $ | 251,144 |
|
|
| 12.8 | % |
| $ | 78,490 |
|
|
| 4.0 | % |
| $ | 98,112 |
|
|
| 5.0 | % | ||
Risk-based: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common Tier 1 |
|
| 282,716 |
|
|
| 31.3 |
|
|
| 40,632 |
|
|
| 4.5 |
|
| N/A |
|
| N/A |
|
| 251,144 |
|
|
| 17.2 |
|
|
| 65,630 |
|
|
| 4.5 |
|
|
| 94,799 |
|
|
| 6.5 |
| ||
Tier 1 |
|
| 282,716 |
|
|
| 31.3 |
|
|
| 54,176 |
|
|
| 6.0 |
|
| N/A |
|
| N/A |
|
| 251,144 |
|
|
| 17.2 |
|
|
| 87,507 |
|
|
| 6.0 |
|
|
| 116,676 |
|
|
| 8.0 |
| ||
Total |
|
| 287,187 |
|
|
| 31.8 |
|
|
| 72,234 |
|
|
| 8.0 |
|
| N/A |
|
| N/A |
|
| 260,071 |
|
|
| 17.8 |
|
|
| 116,676 |
|
|
| 8.0 |
|
|
| 145,845 |
|
|
| 10.0 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
June 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
PCSB Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Leverage (Tier 1) |
| $ | 190,990 |
|
|
| 13.7 | % |
| $ | 55,949 |
|
|
| 4.0 | % |
| $ | 69,936 |
|
|
| 5.0 | % | |||||||||||||||||||||||
Risk-based: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Common Tier 1 |
|
| 190,990 |
|
|
| 21.7 |
|
|
| 39,631 |
|
|
| 4.5 |
|
|
| 57,245 |
|
|
| 6.5 |
| |||||||||||||||||||||||
Tier 1 |
|
| 190,990 |
|
|
| 21.7 |
|
|
| 52,841 |
|
|
| 6.0 |
|
|
| 70,455 |
|
|
| 8.0 |
| |||||||||||||||||||||||
Total |
|
| 196,140 |
|
|
| 22.3 |
|
|
| 70,455 |
|
|
| 8.0 |
|
|
| 88,069 |
|
|
| 10.0 |
| |||||||||||||||||||||||
PCSB Financial Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Leverage (Tier 1) |
| $ | 278,528 |
|
|
| 20.0 | % |
| $ | 55,839 |
|
|
| 4.0 | % |
| N/A |
|
| N/A |
| |||||||||||||||||||||||||
Risk-based: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Common Tier 1 |
|
| 278,528 |
|
|
| 31.6 |
|
|
| 39,631 |
|
|
| 4.5 |
|
| N/A |
|
| N/A |
| |||||||||||||||||||||||||
Tier 1 |
|
| 278,528 |
|
|
| 31.6 |
|
|
| 52,841 |
|
|
| 6.0 |
|
| N/A |
|
| N/A |
| |||||||||||||||||||||||||
Total |
|
| 283,678 |
|
|
| 32.2 |
|
|
| 70,455 |
|
|
| 8.0 |
|
| N/A |
|
| N/A |
|
In addition to the ratios above, the Basel III Capital Rules have established that community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5%2.5% of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonus payments to executive officers. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will be phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019).
Management believes that as of December 31, 2017September 30, 2022 and June 30, 2017,2022, the Bank and Company met all capital adequacy requirements to which they wereit was subject, including the capital conservation buffer of 1.250% as of both December 31, 2017 and June 30, 2017.buffer. Further, the most recent FDIC notification categorized the Bank as a well-capitalized institution under the prompt corrective action regulations. There have been no conditions or events since that notification that management believes have changed the Bank’s capital classification.
Note 10.9. Earnings Per Share (“EPS”)
Basic earnings per share representsEPS is calculated by dividing net income available to common stockholders dividedshareholders by the weighted-averageweighted average number of common shares outstanding during the period. Unallocated ESOP
Diluted EPS is calculated in a similar matter, except that the denominator includes the number of additional common shares are not deemedthat would have been outstanding forif potentially dilutive common shares were issued using the treasury stock method. Dilutive financial instruments include stock options and unvested restricted stock. The following table provides factors used in the earnings per share calculations. There were no potentially dilutivecomputation for the three months ended September 30, 2022 and 2021:
|
| 2022 |
|
| 2021 |
| ||
|
| (Dollars in thousands, except per share data) |
| |||||
Net income applicable to common stock |
| $ | 4,776 |
|
| $ | 3,614 |
|
|
|
|
|
|
|
| ||
Average number of common shares outstanding |
|
| 15,122,732 |
|
|
| 15,342,975 |
|
Less: Average unallocated ESOP shares |
|
| (908,419 | ) |
|
| (1,005,432 | ) |
Average number of common shares outstanding used to calculate basic earnings per common share |
|
| 14,214,313 |
|
|
| 14,337,543 |
|
|
|
|
|
|
|
| ||
Effect of equity-based awards |
|
| 87,287 |
|
|
| 68,273 |
|
Average number of common shares outstanding used to calculate diluted earnings per common share |
|
| 14,301,600 |
|
|
| 14,405,816 |
|
|
|
|
|
|
|
| ||
Earnings per common share: |
|
|
|
|
|
| ||
Basic |
| $ | 0.34 |
|
| $ | 0.25 |
|
Diluted |
| $ | 0.33 |
|
| $ | 0.25 |
|
Stock options for 1,314,963 and 1,325,935 shares of common stock equivalents duringwere not considered in computing diluted earnings per common share for the sixthree months ended December 31, 2017. Earnings per share dataSeptember 30, 2022 and 2021, respectively, because they were antidilutive.
23
Note 10. Derivatives and Hedging
Derivatives not designated as hedges may be used to manage the Company’s exposure to interest rate movements or to provide service to customers. The Company executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that the Company executes with a third party in order to minimize the net risk exposure resulting from such transactions. The Company presents interest rate swap assets and liabilities in other assets and other liabilities, respectively, in the Consolidated Balance Sheets. These interest rate swap agreements do not qualify for hedge accounting treatment, and therefore changes in fair value are reported in current period earnings.
The following table presents summary information about the interest rate swaps as of September 30, 2022 and June 30, 2022 (Dollars in thousands).
| September 30, 2022 |
|
| June 30, 2022 |
| ||
Notional amounts | $ | 287,485 |
|
| $ | 264,462 |
|
Weighted average pay rates |
| 4.31 | % |
|
| 3.57 | % |
Weighted average receive rates |
| 4.31 | % |
|
| 3.57 | % |
Weighted average maturity | 8.14 years |
|
| 8.22 years |
| ||
Fair value of combined interest rate swaps | $ | - |
|
| $ | - |
|
Note 11. Revenue From Contracts With Customers
In accordance with ASC 606, revenue is not applicablerecognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company applies the following five steps to properly recognize revenue:
The following table presents summary information about sources of revenue from contracts with customers for the periods ended December 31, 2016 becauseindicated (in thousands).
| Three months ended September 30, |
| |||||
| 2022 |
|
| 2021 |
| ||
Noninterest income: |
|
|
|
|
| ||
Service charges on deposits | $ | 234 |
|
| $ | 183 |
|
Interchange fees |
| 153 |
|
|
| 156 |
|
Other fees and service charges (1) |
| 66 |
|
|
| 62 |
|
Fees and service charges |
| 453 |
|
|
| 401 |
|
|
|
|
|
|
| ||
Swap income (1) |
| 141 |
|
|
| - |
|
Bank-owned life insurance (1) |
| 191 |
|
|
| 192 |
|
Other noninterest income (1) |
| 8 |
|
|
| 20 |
|
Total noninterest income | $ | 793 |
|
| $ | 613 |
|
|
|
|
|
|
|
Fees and Service Charges on Deposit Accounts. The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payments, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company had not yet been formed and had no shares outstanding at a Company or Bank level.
|
| Three months ended December 31, 2017 |
|
| Six months ended December 31, 2017 |
| ||
|
| (amounts in thousands, except share and per share data) |
| |||||
|
|
|
|
|
|
|
|
|
Net income applicable to common stock |
| $ | 2 |
|
| $ | 1,758 |
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding |
|
| 18,165,110 |
|
|
| 18,165,110 |
|
Less: Average unallocated ESOP shares |
|
| 1,373,805 |
|
|
| 1,391,227 |
|
Average number of common shares outstanding used to calculate basic earnings per common share |
|
| 16,791,305 |
|
|
| 16,773,883 |
|
|
|
|
|
|
|
|
|
|
Earnings per Common share: |
|
|
|
|
|
|
|
|
Basic |
| $ | 0.00 |
|
| $ | 0.10 |
|
Diluted |
| $ | 0.00 |
|
| $ | 0.10 |
|
Note 11. Income Taxes
On December 22, 2017, as partfulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the Tax Cutsmonth, representing the period over which the Company satisfied the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.
24
Interchange Income. The Company earns interchange fees from debit cardholder transactions conducted through various payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and Jobs Act,are recognized daily, concurrently with the federal government enacted comprehensive tax reform containing provisions withtransaction processing services provided to the cardholder.
Gain on Sales of Foreclosed Real Estate. The Company records a gain or loss from the sale of foreclosed real estate when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of foreclosed real estate to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the foreclosed real estate asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.
Note 12. Stock-Based Compensation
On October 24, 2018, the Company’s shareholders approved the PCSB Financial Corporation 2018 Equity Incentive Plan (the “Plan”), which permits the grant of stock options and restricted stock and/or restricted stock units. The total number of impacts on corporate income taxes,shares that may be granted under the most significantPlan is 2,543,115, of which provides1,816,511 shares may be granted as stock options and 726,604 shares may be granted as restricted stock and restricted stock units. Total compensation cost that has been charged against income for the Plan was $820,000 and $810,000 for the three months ended September 30, 2022 and 2021, respectively.
Restricted Stock Awards (“RSAs”)
RSAs awarded under the Plan provide for the issuance of shares to both employees and non-employee directors. These awards generally vest over a decrease in5-year period, with 20% vesting each year on the corporate income tax rate from 34%anniversary of the award. All awards were made at the fair value of common stock on the grant date. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at grant date. The fair value of the stock was determined to 21%be the closing price of the stock on the NASDAQ exchange. Total shares available for tax years beginning on or after January 1, 2018. The Company is required to re-measuregrant under the Plan are 726,000, of which 549,467 shares were granted as of September 30, 2022.
The following table presents a summary of RSA activity during the dateperiod ended September 30, 2022.
| Number of |
|
| Weighted-Average |
| ||
Unvested granted shares outstanding at July 1, 2022 |
| 223,450 |
|
| $ | 18.89 |
|
Shares granted |
| - |
|
|
| - |
|
Shares vested |
| (2,200 | ) |
|
| 16.21 |
|
Shares forfeited |
| - |
|
|
| - |
|
Unvested granted shares at September 30, 2022 |
| 221,250 |
|
| $ | 18.92 |
|
As of September 30, 2022, there was $2.4 million of total unrecognized compensation cost related to non-vested shares granted under the lawPlan. The cost is enacted, its net deferred tax assets to reflect the income tax rate expected to be effective when deferred tax positions will be realized. Asrecognized over a result,weighted-average period of 1.4 years.
Stock Option Awards
Stock options awarded to employees under the Plan are considered incentive stock options (ISOs), up to applicable limits. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant. Those issued to non-employee directors, as well as those exceeding ISO limitations, are considered non-qualified stock options (NQSOs). Options generally vest over a 5-year period, with 20% vesting each year on the anniversary of the award, however, may not vest more rapidly than over a three-year period, and have a contractual term of 10 years. The Company has a policy of using shares held as a treasury stock to satisfy share option exercises. Currently, the Company recordedhas a re-measurement charge throughsufficient number of treasury shares to satisfy the current level of exercisable share options.
The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatilities of a peer group of publicly traded financial institutions. The expected term of options granted is based on the simplified
25
“mid-point” approach which utilizes the weighted average vesting period and contractual term. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.
Total options available for grant under the Plan are 1,816,511, of which 1,320,963 options were granted as of September 30, 2022. The following table presents a summary of activity related to stock options granted under the Plan, and changes during the period then ended:
| Number of |
|
| Weighted- |
|
| Weighted- |
|
| Aggregate |
| ||||
| (Dollars in thousands, except per share data) |
| |||||||||||||
Options outstanding at July 1, 2022 |
| 1,320,963 |
|
| $ | 18.98 |
|
|
| 6.4 |
|
| $ | 411 |
|
Options granted |
| - |
|
|
| - |
|
|
|
|
|
|
| ||
Options expired |
| - |
|
|
| - |
|
|
|
|
|
|
| ||
Options forfeited |
| - |
|
|
| - |
|
|
|
|
|
|
| ||
Options exercised |
| - |
|
|
| - |
|
|
|
|
|
|
| ||
Options outstanding at September 30, 2022 |
| 1,320,963 |
|
| $ | 18.98 |
|
|
| 6.1 |
|
| $ | 37 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Exercisable at September 30, 2022 |
| 786,578 |
|
| $ | 19.00 |
|
|
| 6.1 |
|
| $ | 14 |
|
As of September 30, 2022, there was $1.4 million of total unrecognized compensation cost related to non-vested stock options granted under the Plan. The cost is expected to be recognized over a weighted-average period of 1.4 years.
Note 13. Leases
As of September 30, 2022, the Company leases real estate for eleven branch offices and one administrative office, including its corporate headquarters, under various operating lease agreements. The Company’s leases have maturities which range from 2023 to 2041, some of which include lessee options to extend the lease term. The weighted average remaining life of the lease terms for these leases was 9.4 years as of September 30, 2022.
The operating lease asset and lease liability are determined at the commencement date of the lease based on the present value of the lease payments. As most of our leases do not provide an implicit rate, the Company used its incremental borrowing rate, the rate of interest to borrow on a collateralized basis for a similar term, at the lease commencement date. The Company utilized a weighted average discount rate of 2.49% in determining the lease liability as of September 30, 2022.
The Company made a policy election to exclude the recognition requirements of ASC 842 to short-term leases, those leases with original terms of 12 months or less. Short-term lease payments are recognized in the income tax expense of $1.8 millionstatement on a straight-line basis over the lease term. The Company had no short-term lease cost for the three and six months ended December 31, 2017.
Although managementSeptember 30, 2022 or 2021. Certain leases may include one or more options to renew. The exercise of lease renewal options is typically at the Company’s discretion and are included in the operating lease liability if it is reasonably certain that the renewal option will be exercised. Certain real estate leases may contain lease and non-lease components, such as common area maintenance charges, real estate taxes, and insurance, which are generally accounted for separately and are not included in the measurement of the lease liability since they are generally able to be segregated. The Company does not expectsublease any of its leased properties. There were no sale and leaseback transactions, leveraged leases or lease transactions with related parties during the $1.8three months ended September 30, 2022 or 2021.
Total operating lease cost was $505,000 for the three months ended September 30, 2022 and 2021, respectively. The right-of-use asset, included in premises and equipment, net, was $8.1 million re-measurement chargeand the corresponding lease liability, included in other liabilities was $8.4 million as of September 30, 2022.
Future minimum lease payments for the fiscal years ending June 30th and a reconciliation of undiscounted lease cash flows and the lease liability recognized in the consolidated balance sheet as of September 30, 2022 is shown below (in thousands):
26
2023 | $ | 1,550 |
|
2024 |
| 1,719 |
|
2025 |
| 1,426 |
|
2026 |
| 907 |
|
2027 |
| 547 |
|
Thereafter |
| 3,442 |
|
Total future minimum lease payments (undiscounted) |
| 9,591 |
|
Discounting effect on cash flows |
| (1,228 | ) |
Lease liability (discounted) | $ | 8,363 |
|
Note 14. Pending Merger With and Into Brookline Bancorp, Inc.
On May 23, 2022, the Company and Brookline Bancorp, Inc (“Brookline”), the holding company of Brookline Bank and Bank Rhode Island, entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to change materially, the charge is provisionalMerger Agreement, the Company will merge with and into Brookline, with Brookline as the Company continuessurviving corporation (the “Merger”). Following the Merger, PCSB Bank will operate as a separate bank subsidiary of Brookline. Pursuant to finalize its analysisthe terms of the Company’s deferred tax inventory, as well as other facts and circumstances that existed asMerger Agreement, at the effective time of the law’s enactment date that is neededMerger, each stockholder of PCSB will receive, at the holder’s election, either $22.00 in order to complete the accounting requirements under ASC Topic 740 Income Taxes; and iscash consideration or 1.3284 shares of Brookline common stock for each share of PCSB common stock, subject to revision during the measurement period for upallocation procedures to one year from the dateensure that 60% of the tax law change.outstanding shares of PCSB common stock will be converted to Brookline common stock. On September 21, 2022, the Company's shareholders approved the Merger Agreement. The consummation of the Merger remains subject to customary closing conditions, including the receipt of regulatory approvals. The Merger is currently expected to be completed in the fourth calendar quarter of 2022.
For the three months ended September 30, 2022, the Company recognized $311,000 of merger-related expenses. No merger-related expenses were recognized for the three months ended September 30, 2021.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
Management’s discussion and analysis of financial condition at December 31, 2017September 30, 2022 and June 30, 2017,2022, and results of operations for the three and six months ended December 31, 2017September 30, 2022 and 20162021 is intended to assist in understanding the consolidated financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this quarterly report on Form 10-Q and with the audited consolidated financial statements included in the annual report on Form 10-K for the fiscal year ended June 30, 2017.2022.
Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:
statements of our goals, intentions and expectations;
statements regarding our business plans, prospects, growth and operating strategies;
statements regarding the quality of our loan and investment portfolios; and
estimates of our risks and future costs and benefits.
These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
extent, duration and severity of the COVID-19 pandemic and government action in response to the pandemic, including their impact on our business and operations, including the impact on lost fee revenue and operating expenses, as well as their effects on our customers and issuers of securities, including their ability to make timely payments on obligations, service providers, and on economies and markets more generally;
changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for loan losses;
our ability to access cost-effective funding;
fluctuations in real estate values and both residential and commercial real estate market conditions;
demand for loans and deposits in our market area;
our ability to continue to implement our business strategies;
competition among depository and other financial institutions;
inflation and changes in the interest rate environment that reduce our margins and yields, reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary markets;
adverse changes in the securities or credit markets;
changes in laws or government regulations or policies affecting financial institutions, including changes in tax laws, regulatory fees and capital requirements, including as a result of Basel III;
our ability to manage market risk, credit risk and operational risk in the current economic conditions;
our ability to enter new markets successfully and capitalize on growth opportunities;
28
our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;
changes in consumer spending, borrowing and savings habits;
our ability to retain key employees;
our compensation expense associated with equity allocated or awarded to our employees; and
changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Additional factors that may affect our results are discussed in the Prospectusannual report on Form 10-K for the fiscal year ended June 30, 2022, under the heading “Risk Factors.”Factors” and in this quarterly report on Form 10-Q under Part II, Item 1A.
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.
Critical Accounting Policies and Critical Accounting Estimates
Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments, estimates and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes that the mostFor additional information regarding critical accounting policies, refer to the section captioned “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the June 30, 2022 Form 10-K. There have been no significant changes in our application of critical accounting policies for the three months ended September 30, 2022.
Overview
PCSB Financial Corporation (the “Holding Company” and together with its direct and indirect subsidiaries, the “Company”) is a Maryland corporation organized by PCSB Bank (the “Bank”) for the purpose of acquiring all of the capital stock of the Bank issued in the Bank's conversion to stock ownership on April 20, 2017. At September 30, 2022, the significant assets of the Holding Company were the capital stock of the Bank, cash deposited in the Bank, and a loan to the PCSB Bank Employee Stock Ownership Plan (“ESOP”). The liabilities of the Holding Company were insignificant. The Company is subject to the financial reporting requirements of the Securities Exchange Act of 1934, as amended, and regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the New York State Department of Financial Services (the “NYSDFS”).
PCSB Bank is a community-oriented financial institution that provides financial services to individuals and businesses within its market area of Putnam, Southern Dutchess, Rockland and Westchester Counties in New York. The Bank is a state-chartered commercial bank, and its deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s primary regulators are the FDIC and the NYSDFS.
The Company's primary market area encompasses all of Putnam and Westchester Counties and parts of Dutchess and Rockland Counties in New York, which involveare the most complexcounties in which our offices are located, and the surrounding areas. It is considered a primary area for growth, particularly for commercial lending and deposit opportunities. Westchester County includes a high concentration of office, medical, retail, industrial, mixed use and multi-family real estate buildings and businesses. Our primary focus in this marketplace is small to middle market businesses in these segments. Rising real estate values and lack of available commercial space in Brooklyn and Manhattan have caused businesses to migrate to central and lower Westchester County, which has increased the demand for flex-industrial and multi-family property loans in our market area. Dutchess, Putnam and Rockland Counties offer similar commercial opportunities to Westchester County, but on a significantly smaller scale, and provide greater opportunities in residential mortgage lending and consumer lending and in retail deposit gathering. The close proximity of Bronx County, New York City, Fairfield County, Connecticut, and Bergen County, New Jersey, to our market area also creates a secondary area of opportunity for office, industrial and multi-family property loans.
29
Selected Financial Ratios
The summary information presented below as of and for the three months ended September 30, 2022 and 2021 is derived in part from and should be read in conjunction with the consolidated financial statements of the Company presented in Part I (Dollars in thousands, except per share data).
|
| Three Months Ended |
| |||||
|
| September 30, |
|
| September 30, |
| ||
Performance Ratios (1): |
|
|
|
| ||||
Return on average assets |
|
| 0.98 | % |
|
| 0.78 | % |
Return on average equity |
|
| 6.90 | % |
|
| 5.29 | % |
Interest rate spread |
|
| 3.06 | % |
|
| 2.71 | % |
Net interest margin |
|
| 3.19 | % |
|
| 2.82 | % |
Efficiency ratio |
|
| 61.07 | % |
|
| 65.59 | % |
|
|
|
|
|
|
| ||
Noninterest income to average assets |
|
| 0.16 | % |
|
| 0.13 | % |
Noninterest expense to average assets |
|
| 1.96 | % |
|
| 1.85 | % |
|
|
|
|
|
|
| ||
Average interest-earning assets to average interest-bearing liabilities |
|
| 131.62 | % |
|
| 131.14 | % |
Average equity to average assets |
|
| 14.17 | % |
|
| 14.66 | % |
Dividend payout ratio (2) |
|
| 21.04 | % |
|
| 24.24 | % |
|
| As of or for the three months ended |
| |||||
|
| September 30, |
|
| September 30, |
| ||
Loans to deposits |
|
| 84.74 | % |
|
| 80.46 | % |
|
|
|
|
|
|
| ||
Share Data: |
|
|
|
|
|
| ||
Shares outstanding |
|
| 15,334,323 |
|
|
| 15,574,310 |
|
Book value per common share |
| $ | 18.33 |
|
| $ | 17.64 |
|
Tangible book value per common share (3) |
| $ | 17.93 |
|
| $ | 17.24 |
|
|
|
|
|
|
|
| ||
Asset Quality Ratios: |
|
|
|
|
|
| ||
Non-performing loans receivable |
| $ | 7,989 |
|
| $ | 5,732 |
|
Non-performing assets |
| $ | 7,989 |
|
| $ | 5,732 |
|
Allowance for loan losses as a percent of total loans receivable (4) |
|
| 0.67 | % |
|
| 0.68 | % |
Allowance for loan losses as a percent of non-performing loans receivable |
|
| 113.26 | % |
|
| 142.34 | % |
Non-performing loans as a percent of total loans receivable, net (4) |
|
| 0.59 | % |
|
| 0.48 | % |
Non-performing assets as a percent of total assets |
|
| 0.41 | % |
|
| 0.31 | % |
Net recoveries |
| $ | (39 | ) |
| $ | (265 | ) |
Net recoveries to average outstanding loans during the period (1) |
|
| (0.01 | %) |
|
| (0.09 | %) |
|
|
|
|
|
|
| ||
Capital Ratios (5): |
|
|
|
|
|
| ||
Tier 1 capital (to adjusted total assets) |
|
| 13.02 | % |
|
| 12.72 | % |
Common equity Tier 1 capital (to risk-weighted assets) |
|
| 17.27 | % |
|
| 17.84 | % |
Tier 1 capital (to risk-weighted assets) |
|
| 17.27 | % |
|
| 17.84 | % |
Total capital (to risk-weighted assets) |
|
| 17.88 | % |
|
| 18.46 | % |
30
Non-GAAP Financial Measures
The following table is a reconciliations of book value per share (GAAP measure) to tangible book value per share (non-GAAP measure) (Dollars in thousands, except share and per share data).
|
| As of |
| |||||
|
| September 30, |
|
| June 30, |
| ||
Computation of Tangible Book Value per Common Share |
|
| ||||||
Total shareholders' equity (GAAP) |
| $ | 281,137 |
|
| $ | 277,162 |
|
Adjustments: |
|
|
|
|
|
| ||
Goodwill |
|
| (6,106 | ) |
|
| (6,106 | ) |
Other intangible assets |
|
| (77 | ) |
|
| (89 | ) |
Tangible common shareholders' equity (Non-GAAP) |
| $ | 274,954 |
|
| $ | 270,967 |
|
|
|
|
|
|
|
| ||
Common shares outstanding |
|
| 15,334,323 |
|
|
| 15,334,857 |
|
|
|
|
|
|
|
| ||
Book value per share (GAAP) |
| $ | 18.33 |
|
| $ | 18.07 |
|
Adjustments: |
|
|
|
|
|
| ||
Effects of intangible assets |
|
| (0.40 | ) |
|
| (0.40 | ) |
|
|
|
|
|
|
| ||
Tangible book value per common share (Non-GAAP) |
| $ | 17.93 |
|
| $ | 17.67 |
|
Financial Condition
Cash and Cash Equivalents. Cash and cash equivalents decreased $67.7 million, or subjective decisions or assessments, are57.2%, to $50.8 million at September 30, 2022 from $118.5 million at June 30, 2022. The decrease is primarily due to a $33.0 million decrease in deposits, a $20.8 million increase in net loans receivable, and a $20.0 million decrease in FHLB advances, partially offset by an $8.4 million decrease in total investment securities.
Investment Securities Portfolio. The following table is a summary of the Company's investment securities portfolio, at carrying value, as follows:of September 30, 2022 and June 30, 2022 (Dollars in thousands):
|
| September 30, |
|
| June 30, |
|
| Increase / (Decrease) |
| ||||||
|
| 2022 |
|
| 2022 |
|
| $ |
| % |
| ||||
Available for sale debt securities |
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Government and agency obligations |
| $ | 9,443 |
|
| $ | 9,928 |
|
| $ | (485 | ) |
| -4.9 | % |
Corporate |
|
| 4,765 |
|
|
| 4,854 |
|
|
| (89 | ) |
| -1.8 |
|
State and municipal |
|
| 4,334 |
|
|
| 4,796 |
|
|
| (462 | ) |
| -9.6 |
|
Mortgage-backed securities – residential |
|
| 11,623 |
|
|
| 12,712 |
|
|
| (1,089 | ) |
| -8.6 |
|
Mortgage-backed securities – commercial |
|
| 2,266 |
|
|
| 2,331 |
|
|
| (65 | ) |
| -2.8 |
|
Total available for sale debt securities |
| $ | 32,431 |
|
| $ | 34,621 |
|
| $ | (2,190 | ) |
| -6.3 | % |
Held to maturity debt securities |
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Government and agency obligations |
| $ | 59,995 |
|
| $ | 59,995 |
|
| $ | - |
|
| 0.0 | % |
Corporate |
|
| 52,068 |
|
|
| 52,076 |
|
|
| (8 | ) |
| 0.0 |
|
State and municipal |
|
| 88,490 |
|
|
| 87,111 |
|
|
| 1,379 |
|
| 1.6 |
|
Mortgage-backed securities – residential |
|
| 97,886 |
|
|
| 101,525 |
|
|
| (3,639 | ) |
| -3.6 |
|
Mortgage-backed securities – collateralized |
|
| 22,916 |
|
|
| 24,198 |
|
|
| (1,282 | ) |
| -5.3 |
|
Mortgage-backed securities – commercial |
|
| 84,895 |
|
|
| 87,544 |
|
|
| (2,649 | ) |
| -3.0 |
|
Total held to maturity debt securities |
| $ | 406,250 |
|
| $ | 412,449 |
|
| $ | (6,199 | ) |
| -1.5 | % |
The decrease in investment securities was primarily the result of principal payments in mortgage-backed securities.
Loans Receivable Portfolio. The following table is a summary of the Company's loan portfolio, as of September 30, 2022 and June 30, 2022 (Dollars in thousands):
31
|
| September 30, |
|
| June 30, |
|
| Increase / (Decrease) |
| ||||||
|
| 2022 |
|
| 2022 |
|
| $ |
| % |
| ||||
Mortgage loans |
|
|
|
|
|
|
|
|
|
|
| ||||
Residential |
| $ | 214,586 |
|
| $ | 214,167 |
|
| $ | 419 |
|
| 0.2 | % |
Commercial |
|
| 953,539 |
|
|
| 942,130 |
|
|
| 11,409 |
|
| 1.2 |
|
Construction |
|
| 25,307 |
|
|
| 20,896 |
|
|
| 4,411 |
|
| 21.1 |
|
Net deferred loan origination (fees) costs |
|
| (145 | ) |
|
| (100 | ) |
|
| (45 | ) |
| 45.0 |
|
Total mortgage loans |
|
| 1,193,287 |
|
|
| 1,177,093 |
|
|
| 16,194 |
|
| 1.4 |
|
Commercial and consumer loans: |
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial loans |
|
| 141,902 |
|
|
| 136,304 |
|
|
| 5,598 |
|
| 4.1 |
|
Home equity lines of credit |
|
| 22,955 |
|
|
| 23,688 |
|
|
| (733 | ) |
| -3.1 |
|
Consumer and overdrafts |
|
| 508 |
|
|
| 594 |
|
|
| (86 | ) |
| -14.5 |
|
Net deferred loan origination costs (fees) |
|
| 593 |
|
|
| 620 |
|
|
| (27 | ) |
| -4.4 |
|
Total commercial and consumer loans |
|
| 165,958 |
|
|
| 161,206 |
|
|
| 4,752 |
|
| 2.9 |
|
Total loans receivable |
|
| 1,359,245 |
|
|
| 1,338,299 |
|
|
| 20,946 |
|
| 1.6 |
|
Allowance for loan losses |
|
| (9,048 | ) |
|
| (8,927 | ) |
|
| (121 | ) |
| 1.4 |
|
Loans receivable, net |
| $ | 1,350,197 |
|
| $ | 1,329,372 |
|
| $ | 20,825 |
|
| 1.6 | % |
Allowance for Loan Losses.Losses. The allowance for loan losses is established asmaintained at a level considered adequate by management to provide for probable incurred loan losses are estimated to have occurred through a provisioninherent in the loan portfolio at the consolidated balance sheet reporting dates. The allowance for loan losses charged to earnings. Loan losses are charged againstis based on management’s assessment of various factors affecting the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
Income Taxes. We recognize income taxes under the assetportfolio, including portfolio composition, delinquent and liability method. Under this method, deferred tax assetsnon-accrual loans, national and liabilities are established for the temporary differences between the accounting basislocal business conditions, loss experience and the tax basis of our assets and liabilities at enacted tax rates expected to be in effect when the amounts related to such temporary differences are realized or settled.
Goodwill. Goodwill resulting from business combination transactions is generally determined as the excessan overall evaluation of the fair valuequality of the consideration transferred, plus the fair value of any non-controlling interests in the acquired, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. We recognized goodwill in connection with our acquisition of CMS Bancorp, Inc.underlying collateral.
Comparison of Financial Condition at December 31, 2017 and June 30, 2017
Total Assets. Total assetsThe allowance for loan losses increased $16.8 million,$121,000, or 1.2%1.4%, to $1.44 billion at December 31, 2017 from $1.43 billion at June 30, 2017. The increase is primarily the result of increases of $28.5 million in net loans and $16.6 million in cash and cash equivalents, partially offset by decreases of $25.1 million in total investment securities, $1.9 million in deferred tax assets, and $977,000 in foreclosed real estate.
Cash and Cash Equivalents. Cash and cash equivalents increased $16.6 million, or 27.5%, to $77.1$9.0 million at December 31, 2017September 30, 2022 from $60.5$8.9 million at June 30, 2017. The increase was primarily attributable to a $25.1 million decrease in total investment securities and a $14.2 million increase in liabilities, partially offset by a $28.5 million increase in net loans and a $3.4 million decrease in all other assets.
Securities Held-to-Maturity. Total securities held to maturity decreased $15.9 million, or 4.1%, to $367.7 million at December 31, 2017 from $383.6 million at June 30, 2017. This decrease was primarily caused by $19.5 million of net maturities of U.S. government and agency obligations, partially offset by net purchases of $3.0 million of corporate and other debt securities and $593,000 of mortgage-backed securities.
Securities Available for Sale. Total securities available for sale decreased $9.2 million, or 8.2%, to $102.7 million at December 31, 2017 from $111.9 million at June 30, 2017. This decline was primarily due to $8.1 million of net
maturities of U.S. government and agency obligations, $6.0 million in sales of mortgage backed securities, and a $1.1 million increase in net unrealized losses driven primarily by an increase in market interest rates, partially offset by $6.0 million of net purchases of mortgage backed securities.
Net Loans Receivable. Net loans receivable increased $28.5 million, or 3.5%, to $838.1 million at December 31, 2017 from $809.6 million at June 30, 2017.2022. The increase is primarily due to an increaseloan portfolio growth. Non-performing loans as a percent of $43.5 million in commercial mortgagetotal loans partially offset by decreasesreceivable were 0.59% as of $6.0 million in construction loans, $4.1 million in residential mortgage loans, $2.0 million in commercial loans and $1.8 million in home equity credit lines. The Company purchased $46.7 millionSeptember 30, 2022, a decrease from 0.69% as of commercial mortgage loans during the six months ended December 31, 2017.
Deposits. Total deposits increased $25.9 million, or 2.4%, to $1.11 billion at December 31, 2017 from $1.09 billion at June 30, 2017. This increase primarily reflects2022.
Deposits. Deposits have traditionally been our primary source of funds for our lending and investment activities. The substantial majority of our deposits are from depositors who reside in our primary market area. Deposits are attracted through the offering of a $16.8 million increasebroad selection of deposit instruments for both individuals and businesses.
The following table is a summary of the Company's deposits, as of September 30, 2022 and June 30, 2022 (Dollars in time deposits and a $17.4 million increase in demand deposits and NOW accounts, partially offset by an $8.3 million decrease in savings and money market accounts.thousands):
|
| September 30, |
|
| June 30, |
|
| Increase / (Decrease) |
| ||||||
|
| 2022 |
|
| 2022 |
|
| $ |
| % |
| ||||
Demand |
| $ | 227,635 |
|
| $ | 245,297 |
|
| $ | (17,662 | ) |
| -7.2 | % |
NOW accounts |
|
| 253,857 |
|
|
| 243,006 |
|
|
| 10,851 |
|
| 4.5 |
|
Money market accounts |
|
| 385,470 |
|
|
| 399,026 |
|
|
| (13,556 | ) |
| -3.4 |
|
Savings |
|
| 402,980 |
|
|
| 411,332 |
|
|
| (8,352 | ) |
| -2.0 |
|
Time deposits |
|
| 323,324 |
|
|
| 327,589 |
|
|
| (4,265 | ) |
| -1.3 |
|
Total deposits |
| $ | 1,593,266 |
|
| $ | 1,626,250 |
|
| $ | (32,984 | ) |
| -2.0 | % |
Federal Home Loan Bank Advances. Federal Home Loan Bank FHLB advances decreased $11.9$20.0 million, or 27.9%41.5%, to $30.7$28.3 million at December 31, 2017 from $42.6September 30, 2022 as compared to $48.3 million at June 30, 2017, primarily2022. This decrease is due to $11.8 million in maturities of short-term advances.and principal paydowns.
Total Shareholder’sShareholders’ Equity. Total shareholders’ equity increased $2.6$3.9 million, or 0.9%1.4%, to $282.4$281.1 million at December 31, 2017September 30, 2022 from $279.8$277.2 million at June 30, 2017.2022. This increase was primarily due to net income of $1.8$4.8 million and a $1.3 million of stock-based compensation and reduction in unearned ESOP shares for plan shares earned during the period.period, partially offset by $1.1 million of other comprehensive losses related primarily to unrealized losses on available for sale investment securities driven by higher market interest rates and $1.0 million of cash dividends declared and paid. We would expect that further increases in market interest rates would lead to additional unrealized losses on available for sale investment securities. At December 31, 2017, the Company’s book value per share was $15.55, compared to $15.41 at JuneSeptember 30, 2017. At December 31, 2017,2022, the Bank was considered “well capitalized” under applicable regulatory guidelines.
32
ComparisonResults of Operating ResultsOperations for the Three Months Ended December 31, 2017September 30, 2022 and 2016September 30, 2021
General.Net Income. Net income decreased $1.7increased $1.2 million, or 99.9%32.2%, to $2,000 for the three months ended December 31, 2017 compared to $1.7$4.8 million for the three months ended December 31, 2016. The decrease was primarily dueSeptember 30, 2022 compared to a $1.8 million increase in income tax expense, a $1.6 million decrease in non-interest income, and a $331,000 increase in non-interest expenses, partially offset by $1.7 million increase in net interest income and a $362,000 decrease in the provision for loan losses.
Net Interest Income. Net interest income increased $1.7 million, or 19.5%, to $10.2$3.6 million for the three months ended December 31, 2017 compared to a $8.5 million for the three months ended December 31, 2016.September 30, 2021. The increase primarily reflects a $170.4 million increase in average net interest-earning assets and an 11-basis point increase in the net interest margin to 3.00% for the three months ended December 31, 2017 compared to 2.89% for the three months ended December 31, 2016. The increase in average net interest-earning assets primarily reflects the investment of the net proceeds received in the Company’s initial public offering completed in April 2017.
Interest and Dividend Income. Interest and dividend income increased $1.8 million, or 18.3%, to $11.7 million for the three months ended December 31, 2017 compared to a $9.9 million for the three months ended December 31, 2016. The increase primarily reflects a $174.1 million increase in total average interest-earning assets and an 11-basis point increase in the yield on total interest-earning assets.
Interest income on loans receivable increased $933,000, or 11.3%, primarily due to a $65.1 million increase in the average balance of loans receivable to $827.6 million for the three months ended December 31, 2017 from $762.5 million for the same period last year, and an 11-basis point increase in the average yield on loans to 4.43% for the three months ended December 31, 2017 from 4.32% for the same period last year.
Interest income on securities increased $739,000, or 48.3%, primarily due to a $110.7 million increase in the average balance of securities and a 23-basis point increase in the average yield on securities to 1.92% for the current-year period from 1.69% for the same period last year. The increase in the yield on securities was due primarily to an increase in market interest rates as well as an increase in the percentage of the portfolio being invested in generally higher-yielding mortgage-backed securities.
Interest income on other interest-earning assets increased $135,000, or 164.6%, primarily due to a 100-basis point increase in the average yield on other interest-earning assets to 1.58% for the three months ended December 31,
2017 from 0.58% for the same period last year, partially offset by a $1.7 million decrease in the average balance to $54.3 million for the three months ended December 31, 2017 compared to a $56.0 million for the same period last year. The increase in the yield on other interest-earning assets was due primarily to an increase in market interest rates.
Interest Expense. Interest expense increased $148,000, or 11.2%, to $1.5 million for the three months ended December 31, 2017 compared to $1.3 million for the three months ended December 31, 2016. The increase primarily reflects a $3.7 million increase in the average balance on interest bearing liabilities and a 6-basis point increase in the average cost to 0.59% for the three months ended December 31, 2017 from 0.53% for the same period last year.
Interest expense on interest-bearing deposits increased $15,000, or 1.2%, primarily due to a 2-basis point increase in the average cost of deposits to 0.54% for the three months ended December 31, 2017 from 0.52% for the same period last year, partially offset by a $25.3 million decrease in the average balance to $957.8 million for the three months ended December 31, 2017 from $983.1 million for the three months ended December 31, 2016. The increase in the average rate paid on interest-bearing deposits was caused primarily by an 8-basis point increase in the average rate paid on time deposits as the Bank offered special rates and terms to attract customers.
Interest expense on Federal Home Loan Bank advances increased $133,000, or 429.0%, primarily due to a $28.9 million increase in the average balance to $35.3 million for the three months ended December 31, 2017 from $6.4 million for the same period last year, partially offset by an 11-basis point decrease in the average cost to 1.85% for the three months ended December 31, 2017 from 1.96% for the same period last year. The decrease in the average cost is primarily due to a shorter average term on advances in the current year compared to the same period last year.
Provision for Loan Losses. The provision for loan losses decreased by $362,000 to $200,000 for the three months ended December 31, 2017, compared to $562,000 for the three months ended December 31, 2016 primarily due to increases in specific reserves on impaired loans in the prior year period. Charge-offs, net of recoveries, were $997,000 for the three months ended December 31, 2017 compared to net recoveries of $1,000 for the three months ended December 31, 2016. In the current period, the Company recorded a $997,000 charge-off of a specific reserve recorded in a prior period on a construction loan.
Non-Interest Income. Non-interest income decreased $1.6 million, or 69.4% to $692,000 for the three months ended December 31, 2017 compared to a $2.3 million for the three months ended December 31, 2016. The decrease was caused primarily by a one-time settlement on an acquired loan of $1.6 million in the prior year.
Non-Interest Expense. Non-interest expense increased $331,000, or 4.2%, to $8.1 million for the three months ended December 31, 2017 compared to $7.8 million for the three months ended December 31, 2016. The increase was caused primarily by increases of $379,000 in salaries and benefits, $343,000 in other operating expenses, $103,000 in professional fees, and $89,000 in advertising expense, partially offset by a $548,000 decrease in occupancy and equipment expense and a $42,000 decrease in FDIC assessment. The increase in salaries and benefits was due primarily to a $301,000 increase in retirement expenses, resulting primarily from ESOP compensation expense not incurred in the prior period, and a $159,000 increase due to increased staffing, partially offset by a $97,000 decrease in benefits expense due primarily to lower health care costs. The increase in other operating expenses was caused primarily by increases in Director and Officer insurance and data processing fees. The increase in professional fees was due primarily to expenses related to being a public company. The decrease in occupancy and equipment expense was due primarily to a $521,000 lease obligation write-off recorded in the prior year.
Income Tax Expense. Income tax expense increased $1.8 million, or 236.5%, to $2.6 million for the three months ended December 31, 2017 from $758,000 for the three months ended December 31, 2016. The increase was caused primarily by the $1.8 million estimated re-measurement charge recorded in the current quarter required in connection with tax law changes contained in the Tax Cuts and Jobs Act, however the Company expects to benefit in the future from the decrease in the federal corporate tax rate from 34% to 21%. The effective income tax rate was 99.9% for the three months ended December 31, 2017 compared to 31.2% for the three months ended December 31, 2016.
Comparison of Operating Results for the Six Months Ended December 31, 2017 and 2016
General. Net income decreased $1.4 million, or 43.8%, to $1.8 million for the six months ended December 31, 2017 compared to $3.1 million for the six months ended December 31, 2016. The decrease was primarily due to a $2.0increases of $2.3 million increase in income tax expense, a $1.4 million decrease in non-interest income, and a $1.0 million increase in non-interest expenses, partially offset by a $2.8 million increase in net interest income and a $253,000 decrease$180,000 in thenoninterest income, partially offset by increases of $933,000 in noninterest expense, $338,000 in income tax expense and $69,000 in provision for loan losses.
Net Interest Income. Net interest income increased $2.8 million, or 16.0%, to $20.1 million for the six months ended December 31, 2017 compared to a $17.3 million for the six months ended December 31, 2016. The increase primarily reflects a $167.0 million increase in average net interest-earning assets and a 6-basis point increase in the net interest margin to 2.95% for the six months ended December 31, 2017 compared to 2.89% for the six months ended December 31, 2016. The increase in average net interest-earning assets primarily reflects the investment of the net proceeds received in the Company’s initial public offering completed in April 2017.
Interest and Dividend Income. Interest and dividend income increased $3.0 million, or 15.0%, to $23.0 million for the six months ended December 31, 2017 compared to $20.0 million for the six months ended December 31, 2016. The increase primarily reflects a $164.1 million increase in total average interest-earning assets and a 4-basis point increase in the yield on total interest-earning assets.
Interest income on loans receivable increased $1.2 million, or 7.3%, primarily due to a $51.1 million increase in the average balance of loans receivable to $820.4 million for the six months ended December 31, 2017 from $769.3 million for the same period last year, and a 3-basis point increase in the average yield on loans to 4.38% for the six months ended December 31, 2017 from 4.35% for the same period last year.
Interest income on securities increased $1.5 million, or 50.0%, primarily due to a $111.0 million increase in the average balance of securities and a 25-basis point increase in the average yield on securities to 1.88% for the current-year period from 1.63% for the same period last year. The increase in the yield on securities was due primarily to an increase in market interest rates as well as an increase in the percentage of the portfolio being invested in generally higher-yielding mortgage-backed securities.
Interest income on other interest-earning assets increased $265,000, or 142.5%, primarily due to a $2.0 million increase in the average balance and an 83-basis point increase in the average yield on other interest-earning assets to 1.45% for the six months ended December 31, 2017 from 0.62% for the same period last year. The increase in the yield on other interest-earning assets was due primarily to an increase in market interest rates.
Interest Expense. Interest expense increased $235,000, or 8.8%, to $2.9 million for the six months ended December 31, 2017 compared to $2.7 million for the six months ended December 31, 2016. The increase primarily reflects a 5-basis point increase in the average cost of interest-bearing liabilities to 0.58% for the three months ended December 31, 2017 from 0.53% for the same period last year, partially offset by a $2.9 million decrease in the average balance on interest-bearing liabilities.
Interest expense on interest-bearing deposits decreased $2,000, or 0.1%, primarily due to a $30.3 million decrease in the average balance to $959.5 million for the six months ended December 31, 2017 from a $989.8 million for the six months ended December 31, 2016, partially offset by a 1-basis point increase in the average cost of deposits to 0.53% for the six months ended December 31, 2017 from 0.52% for the same period last year. The decrease in the average balance of interest-bearing deposits primarily reflects lower average savings and time deposit balances. The increase in the average rate paid on interest-bearing deposits was caused primarily by an 8-basis point increase in the average rate paid on time deposits as the Bank offered special rates and terms to attract customers.
Interest expense on Federal Home Loan Bank advances increased $237,000, or 292.6%, primarily due to a $27.4 million increase in the average balance to $38.3 million for the six months ended December 31, 2016 from $10.9 million for the same period last year, and a 17-basis point increase in the average cost to 1.65% for the six months ended December 31, 2017 from 1.48% for the same period last year. The increase in the average cost is primarily due to a longer average term on advances in the current year compared to the same period last year.
Provision for Loan Losses. The provision for loan losses decreased by $253,000 to $335,000 for the six months ended December 31, 2017, compared to $588,000 for the six months ended December 31, 2016 primarily due to
increases in specific reserves on impaired loans in the prior year period. Charge-offs, net of recoveries, were $1.0 million and $70,000 for the six months ended December 31, 2017 and 2016, respectively.
Non-Interest Income. Non-interest income decreased $1.4 million, or 50.0% to $1.4 million for the six months ended December 31, 2017 compared to $2.8 million for the six months ended December 31, 2016. The decrease was caused primarily by a one-time settlement on an acquired loan of $1.6 million in the prior year partially offset by a $173,000 gain on the sale of securities recognized in the current year.
Non-Interest Expense. Non-interest expense increased $1.0 million, or 6.9%, to $16.0 million for the six months ended December 31, 2017 compared to $15.0 million for the six months ended December 31, 2016. The increase was primarily caused by increases of $942,000 in salaries and benefits, $497,000 in other operating expenses, $207,000 in professional fees and $115,000 in advertising expense, partially offset by a $557,000 decrease in occupancy and equipment expense and a $179,000 decrease in FDIC assessment. The increase in salaries and benefits was due primarily to a $591,000 net increase in retirement expenses and a $385,000 increase due to increased staffing. The increase in other operating expenses was caused primarily by increases in Director and Officer insurance and data processing fees. The increase in professional fees was due primarily to expenses related to being a public company. The decrease in occupancy and equipment expense was caused primarily by a $521,000 lease obligation write-off recorded in the prior year.
Income Tax Expense. Income tax expense increased $2.0 million, or 138.9%, to $3.4 million for the six months ended December 31, 2017 from $1.4 million for the six months ended December 31, 2016. The increase was caused primarily by the $1.8 million estimated re-measurement charge recorded in the current quarter required in connection with tax law changes contained in the Tax Cuts and Jobs Act, however the Company expects to benefit in the future from the decrease in the federal corporate tax rate from 34% to 21%. The effective income tax rate was 65.6% for the six months ended December 31, 2017 as compared to 31.0% for the six months ended December 31, 2016.
Average Balance Sheet and Interest Rates. The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average tax equivalent yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Nonaccrual loans are included in average balances only. Amortization of loanLoan fees isare included in interest income on loans.loans and are not material (Dollars in thousands).
|
| Three Months Ended September 30, |
| |||||||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||
|
| Average |
|
| Interest/ |
|
| Average |
|
| Average |
|
| Interest/ |
|
| Average |
| ||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans receivable (1) |
| $ | 1,346,194 |
|
| $ | 13,849 |
|
|
| 4.12 | % |
| $ | 1,223,532 |
|
| $ | 12,107 |
|
|
| 3.96 | % |
Investment securities (1) |
|
| 445,231 |
|
|
| 2,420 |
|
|
| 2.26 |
|
|
| 404,565 |
|
|
| 2,011 |
|
|
| 2.07 |
|
Other interest-earning assets |
|
| 85,377 |
|
|
| 487 |
|
|
| 2.26 |
|
|
| 160,659 |
|
|
| 109 |
|
|
| 0.27 |
|
Total interest-earning assets |
|
| 1,876,802 |
|
|
| 16,756 |
|
|
| 3.59 |
|
|
| 1,788,756 |
|
|
| 14,227 |
|
|
| 3.20 |
|
Non-interest-earning assets |
|
| 78,342 |
|
|
|
|
|
|
|
|
| 76,375 |
|
|
|
|
|
|
| ||||
Total assets |
| $ | 1,955,144 |
|
|
|
|
|
|
|
| $ | 1,865,131 |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Liabilities and equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
NOW accounts |
| $ | 243,354 |
|
|
| 250 |
|
|
| 0.41 |
|
| $ | 182,531 |
|
|
| 70 |
|
|
| 0.15 |
|
Money market accounts |
|
| 390,619 |
|
|
| 376 |
|
|
| 0.38 |
|
|
| 350,575 |
|
|
| 186 |
|
|
| 0.21 |
|
Savings accounts and escrow |
|
| 422,178 |
|
|
| 186 |
|
|
| 0.18 |
|
|
| 397,292 |
|
|
| 113 |
|
|
| 0.11 |
|
Time deposits |
|
| 323,219 |
|
|
| 852 |
|
|
| 1.05 |
|
|
| 367,641 |
|
|
| 985 |
|
|
| 1.06 |
|
Total interest-bearing deposits |
|
| 1,379,370 |
|
|
| 1,664 |
|
|
| 0.48 |
|
|
| 1,298,039 |
|
|
| 1,354 |
|
|
| 0.41 |
|
FHLB advances |
|
| 46,522 |
|
|
| 235 |
|
|
| 2.00 |
|
|
| 65,935 |
|
|
| 338 |
|
|
| 2.03 |
|
Total interest-bearing liabilities |
|
| 1,425,892 |
|
|
| 1,899 |
|
|
| 0.53 |
|
|
| 1,363,974 |
|
|
| 1,692 |
|
|
| 0.49 |
|
Non-interest-bearing deposits |
|
| 230,076 |
|
|
|
|
|
|
|
|
| 207,806 |
|
|
|
|
|
|
| ||||
Other non-interest-bearing liabilities |
|
| 22,180 |
|
|
|
|
|
|
|
|
| 19,943 |
|
|
|
|
|
|
| ||||
Total liabilities |
|
| 1,678,148 |
|
|
|
|
|
|
|
|
| 1,591,723 |
|
|
|
|
|
|
| ||||
Total shareholders' equity |
|
| 276,996 |
|
|
|
|
|
|
|
|
| 273,408 |
|
|
|
|
|
|
| ||||
Total liabilities and shareholders' equity |
| $ | 1,955,144 |
|
|
|
|
|
|
|
| $ | 1,865,131 |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net interest income |
|
|
|
| $ | 14,857 |
|
|
|
|
|
|
|
| $ | 12,535 |
|
|
|
| ||||
Interest rate spread - tax equivalent (2) |
|
|
|
|
|
|
|
| 3.06 |
|
|
|
|
|
|
|
|
| 2.71 |
| ||||
Net interest margin - tax equivalent (3) |
|
|
|
|
|
|
|
| 3.19 |
|
|
|
|
|
|
|
|
| 2.82 |
| ||||
Average interest-earning assets to interest-bearing liabilities |
|
| 131.62 | % |
|
|
|
|
|
|
|
| 131.14 | % |
|
|
|
|
|
|
|
| Three months ended December 31, |
| |||||||||||||||||||||
|
| 2017 |
|
| 2016 |
| ||||||||||||||||||
|
| Average Balance |
|
| Interest/ Dividends |
|
| Average Rate |
|
| Average Balance |
|
| Interest/ Dividends |
|
| Average Rate |
| ||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
| $ | 827,614 |
|
| $ | 9,171 |
|
|
| 4.43 | % |
| $ | 762,538 |
|
| $ | 8,238 |
|
|
| 4.32 | % |
Securities |
|
| 473,641 |
|
|
| 2,269 |
|
|
| 1.92 |
|
|
| 362,954 |
|
|
| 1,530 |
|
|
| 1.69 |
|
Other interest-earning assets |
|
| 54,388 |
|
|
| 217 |
|
|
| 1.58 |
|
|
| 56,045 |
|
|
| 82 |
|
|
| 0.58 |
|
Total interest-earning assets |
|
| 1,355,643 |
|
|
| 11,657 |
|
|
| 3.44 |
|
|
| 1,181,537 |
|
|
| 9,850 |
|
|
| 3.33 |
|
Non-interest-earning assets |
|
| 58,665 |
|
|
|
|
|
|
|
|
|
|
| 58,604 |
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 1,414,308 |
|
|
|
|
|
|
|
|
|
| $ | 1,240,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts |
| $ | 112,147 |
|
|
| 48 |
|
|
| 0.17 |
|
| $ | 105,647 |
|
|
| 44 |
|
|
| 0.16 |
|
Money market accounts |
|
| 29,014 |
|
|
| 22 |
|
|
| 0.30 |
|
|
| 31,874 |
|
|
| 21 |
|
|
| 0.26 |
|
Savings accounts and escrow |
|
| 509,888 |
|
|
| 309 |
|
|
| 0.24 |
|
|
| 527,779 |
|
|
| 327 |
|
|
| 0.25 |
|
Time deposits |
|
| 306,756 |
|
|
| 928 |
|
|
| 1.20 |
|
|
| 317,757 |
|
|
| 900 |
|
|
| 1.12 |
|
Total interest-bearing deposits |
|
| 957,805 |
|
|
| 1,307 |
|
|
| 0.54 |
|
|
| 983,057 |
|
|
| 1,292 |
|
|
| 0.52 |
|
Federal Home Loan Bank advances |
|
| 35,293 |
|
|
| 164 |
|
|
| 1.85 |
|
|
| 6,354 |
|
|
| 31 |
|
|
| 1.96 |
|
Total interest-bearing liabilities |
|
| 993,098 |
|
|
| 1,471 |
|
|
| 0.59 |
|
|
| 989,411 |
|
|
| 1,323 |
|
|
| 0.53 |
|
Non-interest-bearing deposits |
|
| 130,614 |
|
|
|
|
|
|
|
|
|
|
| 123,135 |
|
|
|
|
|
|
|
|
|
Other non-interest-bearing liabilities |
|
| 7,765 |
|
|
|
|
|
|
|
|
|
|
| 15,101 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 1,131,477 |
|
|
|
|
|
|
|
|
|
|
| 1,127,647 |
|
|
|
|
|
|
|
|
|
Total equity |
|
| 282,831 |
|
|
|
|
|
|
|
|
|
|
| 112,494 |
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
| $ | 1,414,308 |
|
|
|
|
|
|
|
|
|
| $ | 1,240,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
| $ | 10,186 |
|
|
|
|
|
|
|
|
|
| $ | 8,527 |
|
|
|
|
|
Interest rate spread (1) |
|
|
|
|
|
|
|
|
|
| 2.85 |
|
|
|
|
|
|
|
|
|
|
| 2.80 |
|
Net interest margin (2) |
|
|
|
|
|
|
|
|
|
| 3.00 |
|
|
|
|
|
|
|
|
|
|
| 2.89 |
|
Average interest-earning assets to interest-bearing liabilities |
|
| 136.51 | % |
|
|
|
|
|
|
|
|
|
| 119.42 | % |
|
|
|
|
|
|
|
|
|
|
|
|
33
The following table presents information regarding tax equivalent adjustment used in the calculation of certain financial metrics (Dollars in thousands).
|
| Three Months Ended |
|
| |||||
|
| September 30, |
|
| |||||
|
| 2022 |
|
| 2022 |
|
| ||
Total interest income |
| $ | 16,756 |
|
| $ | 14,227 |
|
|
Total interest expense |
|
| 1,899 |
|
|
| 1,692 |
|
|
Net interest income (GAAP) |
|
| 14,857 |
|
|
| 12,535 |
|
|
Tax equivalent adjustment |
|
| 116 |
|
|
| 89 |
|
|
Net interest income - tax equivalent (non-GAAP) |
| $ | 14,973 |
|
| $ | 12,624 |
|
|
|
|
|
|
|
|
|
|
| Six months ended December 31, |
| ||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
| ||||||||||||||||||
|
| Average Balance |
|
| Interest/ Dividends |
|
| Average Rate |
|
| Average Balance |
|
| Interest/ Dividends |
|
| Average Rate |
| ||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
| $ | 820,429 |
|
| $ | 17,989 |
|
|
| 4.38 | % |
| $ | 769,340 |
|
| $ | 16,763 |
|
|
| 4.35 | % |
Securities |
|
| 479,833 |
|
|
| 4,514 |
|
|
| 1.88 |
|
|
| 368,855 |
|
|
| 3,010 |
|
|
| 1.63 |
|
Other interest-earning assets |
|
| 61,822 |
|
|
| 451 |
|
|
| 1.45 |
|
|
| 59,800 |
|
|
| 186 |
|
|
| 0.62 |
|
Total interest-earning assets |
|
| 1,362,084 |
|
|
| 22,954 |
|
|
| 3.37 |
|
|
| 1,197,995 |
|
|
| 19,959 |
|
|
| 3.33 |
|
Non-interest-earning assets |
|
| 58,453 |
|
|
|
|
|
|
|
|
|
|
| 56,929 |
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 1,420,537 |
|
|
|
|
|
|
|
|
|
| $ | 1,254,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts |
| $ | 113,458 |
|
|
| 97 |
|
|
| 0.17 |
|
| $ | 107,803 |
|
|
| 88 |
|
|
| 0.16 |
|
Money market accounts |
|
| 29,557 |
|
|
| 43 |
|
|
| 0.29 |
|
|
| 31,642 |
|
|
| 42 |
|
|
| 0.26 |
|
Savings accounts and escrow |
|
| 514,102 |
|
|
| 633 |
|
|
| 0.25 |
|
|
| 528,580 |
|
|
| 654 |
|
|
| 0.25 |
|
Time deposits |
|
| 302,382 |
|
|
| 1,801 |
|
|
| 1.18 |
|
|
| 321,775 |
|
|
| 1,792 |
|
|
| 1.10 |
|
Total interest-bearing deposits |
|
| 959,499 |
|
|
| 2,574 |
|
|
| 0.53 |
|
|
| 989,800 |
|
|
| 2,576 |
|
|
| 0.52 |
|
Federal Home Loan Bank advances |
|
| 38,346 |
|
|
| 318 |
|
|
| 1.65 |
|
|
| 10,914 |
|
|
| 81 |
|
|
| 1.48 |
|
Total interest-bearing liabilities |
|
| 997,845 |
|
|
| 2,892 |
|
|
| 0.58 |
|
|
| 1,000,714 |
|
|
| 2,657 |
|
|
| 0.53 |
|
Non-interest-bearing deposits |
|
| 132,491 |
|
|
|
|
|
|
|
|
|
|
| 126,951 |
|
|
|
|
|
|
|
|
|
Other non-interest-bearing liabilities |
|
| 8,026 |
|
|
|
|
|
|
|
|
|
|
| 15,394 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 1,138,362 |
|
|
|
|
|
|
|
|
|
|
| 1,143,059 |
|
|
|
|
|
|
|
|
|
Total equity |
|
| 282,175 |
|
|
|
|
|
|
|
|
|
|
| 111,865 |
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
| $ | 1,420,537 |
|
|
|
|
|
|
|
|
|
| $ | 1,254,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
| $ | 20,062 |
|
|
|
|
|
|
|
|
|
| $ | 17,302 |
|
|
|
|
|
Interest rate spread (1) |
|
|
|
|
|
|
|
|
|
| 2.79 |
|
|
|
|
|
|
|
|
|
|
| 2.80 |
|
Net interest margin (2) |
|
|
|
|
|
|
|
|
|
| 2.95 |
|
|
|
|
|
|
|
|
|
|
| 2.89 |
|
Average interest-earning assets to interest-bearing liabilities |
|
| 136.50 | % |
|
|
|
|
|
|
|
|
|
| 119.71 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate/Volume Analysis.The following tables settable sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.volume (Dollars in thousands).
|
| Three months ended December 31, 2017 versus 2016 |
|
| Three Months Ended September 30, |
| ||||||||||||||||||
|
| Rate |
|
| Volume |
|
| Net |
|
| 2022 versus 2022 |
| ||||||||||||
|
| (in thousands) |
|
| Rate |
|
| Volume |
|
| Net |
| ||||||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
| $ | 169 |
|
| $ | 764 |
|
| $ | 933 |
|
| $ | 440 |
|
| $ | 1,302 |
|
| $ | 1,742 |
|
Securities |
|
| 127 |
|
|
| 612 |
|
|
| 739 |
| ||||||||||||
Investment securities |
|
| 224 |
|
|
| 185 |
|
|
| 409 |
| ||||||||||||
Other interest-earning assets |
|
| 136 |
|
|
| (1 | ) |
|
| 135 |
|
|
| 452 |
|
|
| (74 | ) |
|
| 378 |
|
Total interest-earning assets |
|
| 432 |
|
|
| 1,375 |
|
|
| 1,807 |
|
|
| 1,116 |
|
|
| 1,413 |
|
|
| 2,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts |
|
| 2 |
|
|
| 2 |
|
|
| 4 |
|
|
| 150 |
|
|
| 30 |
|
|
| 180 |
|
Money market accounts |
|
| 2 |
|
|
| (1 | ) |
|
| 1 |
|
|
| 166 |
|
|
| 24 |
|
|
| 190 |
|
Savings and escrow accounts |
|
| (9 | ) |
|
| (9 | ) |
|
| (18 | ) |
|
| 66 |
|
|
| 7 |
|
|
| 73 |
|
Time deposits |
|
| 62 |
|
|
| (34 | ) |
|
| 28 |
|
|
| (16 | ) |
|
| (117 | ) |
|
| (133 | ) |
Federal Home Loan Bank advances |
|
| (2 | ) |
|
| 135 |
|
|
| 133 |
| ||||||||||||
FHLB advances |
|
| (5 | ) |
|
| (98 | ) |
|
| (103 | ) | ||||||||||||
Total interest-bearing liabilities |
|
| 55 |
|
|
| 93 |
|
|
| 148 |
|
|
| 361 |
|
|
| (154 | ) |
|
| 207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net increase in net interest income |
| $ | 377 |
|
| $ | 1,282 |
|
| $ | 1,659 |
|
| $ | 755 |
|
| $ | 1,567 |
|
| $ | 2,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended December 31, 2017 versus 2016 |
| |||||||||
|
| Rate |
|
| Volume |
|
| Net |
| |||
|
| (in thousands) |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
| $ | 50 |
|
| $ | 1,176 |
|
| $ | 1,226 |
|
Securities |
|
| 277 |
|
|
| 1,227 |
|
|
| 1,504 |
|
Other interest-earning assets |
|
| 252 |
|
|
| 13 |
|
|
| 265 |
|
Total interest-earning assets |
|
| 579 |
|
|
| 2,416 |
|
|
| 2,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts |
|
| 4 |
|
|
| 5 |
|
|
| 9 |
|
Money market accounts |
|
| 4 |
|
|
| (3 | ) |
|
| 1 |
|
Savings and escrow accounts |
|
| (9 | ) |
|
| (12 | ) |
|
| (21 | ) |
Time deposits |
|
| 120 |
|
|
| (111 | ) |
|
| 9 |
|
Federal Home Loan Bank advances |
|
| 10 |
|
|
| 227 |
|
|
| 237 |
|
Total interest-bearing liabilities |
|
| 129 |
|
|
| 106 |
|
|
| 235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net interest income |
| $ | 450 |
|
| $ | 2,310 |
|
| $ | 2,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses. The provision for loan losses increased for the three months ended September 30, 2022, compared to the same period last year. The increase is primarily due to higher loan portfolio growth in the current period. Recoveries net of charge-offs were $39,000 for the three months ended September 30, 2022, compared to recoveries, net of charge-offs of $265,000 for the same period last year.
Noninterest Income. The following table displays noninterest income for the three months ended September 30, 2022 and 2021 (Dollars in thousands).
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
| Net Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||
Fees and service charges |
| $ | 453 |
|
| $ | 401 |
|
| $ | 52 |
|
|
| 13.0 | % |
Bank-owned life insurance |
|
| 191 |
|
|
| 192 |
|
|
| (1 | ) |
|
| -0.5 | % |
Swap income |
|
| 141 |
|
|
| - |
|
|
| 141 |
|
|
| 100.0 | % |
Other |
|
| 8 |
|
|
| 20 |
|
|
| (12 | ) |
|
| -60.0 | % |
Total noninterest income |
| $ | 793 |
|
| $ | 613 |
|
| $ | 180 |
|
|
| 29.4 | % |
The increase in fees and service charges for the three months ended September 30, 2022 compared to the same period last year was primarily the result of increases in deposit and loan processing fees.
34
Noninterest Expense. The following table displays noninterest expense for the three months ended September 30, 2022 and 2021 (Dollars in thousands).
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
| Net Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||
Salaries and employee benefits |
| $ | 5,985 |
|
| $ | 5,773 |
|
| $ | 212 |
|
|
| 3.7 | % |
Occupancy and equipment |
|
| 1,403 |
|
|
| 1,353 |
|
|
| 50 |
|
|
| 3.7 | % |
Communication and data processing |
|
| 610 |
|
|
| 527 |
|
|
| 83 |
|
|
| 15.7 | % |
Professional fees |
|
| 335 |
|
|
| 393 |
|
|
| (58 | ) |
|
| -14.8 | % |
Merger-related expenses |
|
| 311 |
|
|
| - |
|
|
| 311 |
|
|
| 100.0 | % |
Postage, printing, stationery and supplies |
|
| 174 |
|
|
| 143 |
|
|
| 31 |
|
|
| 21.7 | % |
Advertising |
|
| 128 |
|
|
| 100 |
|
|
| 28 |
|
|
| 28.0 | % |
FDIC assessment |
|
| 125 |
|
|
| 125 |
|
|
| - |
|
|
| 0.0 | % |
Amortization of intangible assets |
|
| 12 |
|
|
| 16 |
|
|
| (4 | ) |
|
| -25.0 | % |
Other operating expenses |
|
| 474 |
|
|
| 194 |
|
|
| 280 |
|
|
| 144.3 | % |
Total noninterest expense |
| $ | 9,557 |
|
| $ | 8,624 |
|
| $ | 933 |
|
|
| 10.8 | % |
The increase in salaries and employee benefits for the three months ended September 30, 2022 compared to the same period last year is primarily driven by higher salary and benefit costs. Merger-related expenses associated with the pending Brookline Bancorp merger largely include professional services fees. The increase in other operating expenses for the three months ended September 30, 2022 compared to the same period last year is primarily due to higher pension costs in the current period.
Income Tax Expense. The effective income tax rate was 20.5% for the three months ended September 30, 2022 as compared to 19.9% for the same period last year.
Management of Market Risk
General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans, and investment securities, have longer maturities than our liabilities, consisting primarily of deposits and FHLB advances.deposits. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates. Accordingly, we have established a management-level Asset/Liability Management Committee, which takes initial responsibility for developing an asset/liability management process and related procedures, establishing and monitoring reporting systems and developing asset/liability strategies. On at least a quarterly basis, the Asset/Liability Management Committee reviews asset/liability management with the Investment Asset/Liability Committee that has been established byof the Board of Directors. This committeeCommittee also reviews any changes in strategies as well as the performance of any specific asset/liability management actions that have been implemented previously. On a quarterly basis, an outside consulting firm provides us with detailed information and analysis as to asset/liability
management, including our interest rate risk profile. Ultimate responsibility for effective asset/liability management rests with our Board of Directors.
We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. The net proceeds fromWe have implemented the offering have increased our capital and provided management with greater flexibilityfollowing strategies to manage our interest rate risk, including the following strategies:risk: originating loans with adjustable interest rates; utilizing interest rate swaps, promoting core deposit products; and adjusting the interest rates and maturities of funding sources, as necessary. By following these strategies, we believe that we are better positioned to react to changes in market interest rates.
Net Portfolio Value Simulation. We analyze our sensitivity to changes in interest rates through a net portfolio value of equity (“NPV”) model. NPV represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities. The NPV ratio represents the dollar amount of our NPV divided by the present value of our total assets for a given interest rate scenario. NPV attempts to quantify our economic value using a discounted cash flow methodology while the NPV ratio reflects that value as a form of capitalequity ratio. We estimate what our NPV would be at a specific date. We then calculate what the NPV would be at the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate NPV under the assumptions that interest rates increase 100 and 200 basis points from current market rates and that interest rates decrease 50 and 100 basis points from current market rates.
35
The following table presents the estimated changes in our NPV that would result from changes in market interest rates at December 31, 2017September 30, 2022 and June 30, 2017.2022 (Dollars in thousands). All estimated changes presented in the table are within the policy limits approved by our Board of Directors.
|
| NPV |
|
| NPV as Percent of Portfolio Value of Assets |
| ||||||||||||||||||||||||||||||||||
|
| (dollars in thousands) |
|
|
|
|
|
|
|
|
|
| NPV |
|
| NPV as Percent of Portfolio |
| |||||||||||||||||||||||
Basis Point Change in Interest Rates |
| Dollar Amount |
|
| Dollar Change |
|
| Percent Change |
|
| EVE Ratio |
|
| Change (in bps) |
|
| Dollar |
|
| Dollar |
|
| Percent |
|
| NPV |
|
| Change |
| ||||||||||
December 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
September 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
200 |
| $ | 289,504 |
|
| $ | (38,771 | ) |
|
| (11.8 | ) | % |
| 21.83 | % |
|
| (148 | ) |
| $ | 256,664 |
|
| $ | (47,850 | ) |
|
| (15.7 | %) |
|
| 15.06 | % |
|
| (188 | ) |
100 |
|
| 311,392 |
|
|
| (16,883 | ) |
|
| (5.1 | ) |
|
| 22.77 |
|
|
| (54 | ) |
|
| 281,394 |
|
|
| (23,120 | ) |
|
| (7.6 | ) |
|
| 16.07 |
|
|
| (87 | ) |
- |
|
| 328,275 |
|
| - |
|
| - |
|
|
| 23.31 |
|
| - |
|
|
| 304,514 |
|
|
| - |
|
|
| - |
|
|
| 16.94 |
|
|
| - |
| |||
(100) |
|
| 336,479 |
|
|
| 8,204 |
|
|
| 2.5 |
|
|
| 23.28 |
|
|
| (3 | ) |
|
| 335,857 |
|
|
| 31,343 |
|
|
| 10.3 |
|
|
| 18.09 |
|
|
| 115 |
|
(200) |
|
| 366,247 |
|
|
| 61,733 |
|
|
| 20.3 |
|
|
| 19.10 |
|
|
| 216 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
June 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
June 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
200 |
| $ | 290,781 |
|
| $ | (35,848 | ) |
|
| (11.0 | ) | % |
| 21.62 | % |
|
| (130 | ) |
| $ | 267,563 |
|
| $ | (50,616 | ) |
|
| (19.9 | %) |
|
| 14.94 | % |
|
| (187 | ) |
100 |
|
| 311,728 |
|
|
| (14,901 | ) |
|
| (4.6 | ) |
|
| 22.49 |
|
|
| (42 | ) |
|
| 294,042 |
|
|
| (24,137 | ) |
|
| (7.6 | ) |
|
| 15.96 |
|
|
| (85 | ) |
- |
|
| 326,629 |
|
| - |
|
| - |
|
|
| 22.92 |
|
| - |
|
|
| 318,179 |
|
| - |
|
|
| - |
|
|
| 16.81 |
|
|
| - |
| ||||
(100) |
|
| 331,139 |
|
|
| 4,510 |
|
|
| 1.4 |
|
|
| 22.69 |
|
|
| (22 | ) |
|
| 349,957 |
|
|
| 31,778 |
|
|
| 10.0 |
|
|
| 17.90 |
|
|
| 109 |
|
(200) |
|
| 382,642 |
|
|
| 64,463 |
|
|
| 20.3 |
|
|
| 18.96 |
|
|
| 215 |
|
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes requiresrequire making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above table assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.
Liquidity and Capital Resources
Liquidity. Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.
We regularly review the need to adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and shortshort- and intermediate-term securities.
Our most liquid assets are cash and cash equivalents. The levels of these assets dependare dependent on our operating, financing, lending and investing activities during any given period. At December 31, 2017,September 30, 2022, cash and cash equivalents totaled $77.1$50.8 million, an increasea decrease from $60.5$118.5 million as of June 30, 2017. Securities2022. Unpledged securities classified as available for sale, which provide an additional source of liquidity, totaled $102.7 $9.5million at December 31, 2017,September 30, 2022, a decrease from $111.9$18.5 million as of June 30, 2017.2022.
We had the ability to borrow up to $332.2 million and $350.7$223.0 million from the Federal Home Loan BankFHLB of New York, at December 31, 2017 and JuneSeptember 30, 2017, $30.7 million and $42.6 million2022 of which $28.3 million was outstanding as of December 31, 2017 and JuneSeptember 30, 2017, respectively. We also2022. Additionally, as of September 30, 2022, we had an available line of credit with the Federal Reserve BankFRB of New York’s discount window program of $87.0$102.8 million, and $85.9$25.0 million of fed funds lines of credit, neither of which had outstanding balances as of December 31, 2017 and JuneSeptember 30, 2017, respectively, none of which was outstanding at either date.2022.
We have no material commitments or demands that are likely to affect our liquidity other than as set forth below. If loan demand was to increase faster than expected, or any unforeseen demand or commitment was to occur, we could access our borrowing capacity with the Federal Home Loan Bank of New York or the Federal Reserve Bank of New York.sources detailed above.
We had $91.4 million and $77.6$14.4 million of loan commitments outstanding as of December 31, 2017September 30, 2022 and June 30, 2017, respectively, and $36.6$171.2 million and $45.4 million as of December 31, 2017 and June 30, 2017, respectively, of approved, but unadvanced, funds to borrowers. We also had $750,000 and $705,000$2.9 million in outstanding letters of credit at December 31, 2017 and JuneSeptember 30, 2017, respectively. 2022.
36
Time deposits due within one year of December 31, 2017September 30, 2022 totaled $116.8 million, an increase of $9.7 million from $107.1 million as of June 30, 2017.$203.0 million. If these deposits do not remain with us, we will be required to seek other sources of funds, including other time deposits and Federal Home Loan BankFHLB of New York advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the time deposits at December 31, 2017.September 30, 2022. We believe, however, based on past experience that a significant portion of our time deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.
The Holding Company is a separate legal entity from the Bank and must provide for its own liquidity to pay any dividends to its stockholdersshareholders, to repurchase shares of its common stock and for other corporate purposes. The Holding Company’s primary source of liquidity is dividend payments it may receive from the Bank. The Bank’s ability to pay dividends to the Holding Company is governed by applicable lawslaw and regulations. At December 31, 2017,September 30, 2022, the Holding Company (on an unconsolidated, stand-alone basis) had liquid assets of $72.8$18.0 million.
Capital Resources. The Company and Bank areis subject to various regulatory capital requirements administered by the New York State Department of Financial ServicesNYSDFS and the Federal Deposit Insurance Corporation.FDIC. At December 31, 2017,September 30, 2022, the Bank exceeded all applicable regulatory capital requirements, and the Bank was considered “well capitalized” under applicable regulatory guidelines. See Note 98 to the accompanying unaudited consolidated financial statementsstatements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item is included in Part I, Item 2 of this report under "Management of Market Risk".Risk."
Item 4. Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of December 31, 2017.September 30, 2022. Based on that evaluation, the
Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrant’sCompany’s disclosure controls and procedures were effective.
During the quarter ended December 31, 2017,September 30, 2022, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business.
In addition, the Company has received demand letters from putative stockholders of the Company regarding the pending merger between the Company and Brookline Bancorp, Inc. In addition, on August 25, 2022, a complaint captioned Stephen Bushansky v. PCSB Financial Corporation et al. was filed in the United States District Court, Southern District of New York, naming as defendants the Company and the members of the Company’s board of directors (the “Complaint”). The complaint and the demand letters allege, among other things, that the proxy statement/prospectus contains materially incomplete and misleading information regarding the process that culminated in the merger agreement and the proposed transaction, the valuation analyses performed by the Company’s financial advisor, and potential conflicts of interest in connection with the proposed merger. The relief sought includes enjoining the consummation of the merger unless and until certain additional and allegedly material information is disclosed to the Company’s stockholders, rescinding and setting aside the merger to the extent already implemented, or granting rescissory damages, and awarding the plaintiff the cost of the action, including reasonable attorneys’ and experts’ fees. The Company believes that all allegations in the demand letters and complaint are without merit and intends to defend against them as appropriate.
We aredo not involved inbelieve that any pending legal proceedings aswould have a plaintiff or a defendant other than routine legal proceedings occurring in the ordinary course of business. At December 31, 2017, we were not involved in any legal proceedings the outcome of which we believe would be material toadverse effect on our consolidated financial condition, or results of operations.operations or cash flows.
Item 1A. Risk Factors
For information regarding the Company’s risk factors, see Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017,2022, filed with the Securities and Exchange Commission. As of December 31, 2017, except for the additional risk factor described below,September 30, 2022, the risk factors of the Company have not changed materially from those disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2017.2022.
We may be adversely affected by recent changes in U.S. tax laws and regulations.
Changes in tax laws contained in the Tax Cuts and Jobs Act, which was enacted in December 2017, include a number of provisions that will have an impact on the banking industry, borrowers and the market for single-family residential real estate. Included in this legislation is a reduction of the corporate income tax rate from 34% to 21%. In addition, other changes include (i) a lower limit on the deductibility of mortgage interest on single-family residential mortgage loans, (ii) the elimination of interest deductions for home equity loans, (iii) a limitation on the deductibility of business interest expense and (iv) a limitation on the deductibility of property taxes and state and local income taxes. These recent changes in the tax laws may have an adverse effect on the market for, and valuation of, residential properties, and on the demand for such loans in the future, and could make it harder for borrowers to make their loan payments. In addition, these recent changes may also have a disproportionate effect on taxpayers in states with high residential home prices and high state and local taxes, such as New York. If home ownership becomes less attractive, demand for mortgage loans could decrease. The value of the properties securing loans in our loan portfolio may be adversely impacted as a result of the changing economics of home ownership, which could require an increase in our provision for loan losses, which would reduce our profitability and could materially adversely affect our business, financial condition and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Registered Securities
NoneThere were no repurchases of PCSB Financial Corporation common stock during the quarter ended September 30, 2022.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
Number |
| Description |
|
|
|
3.1 |
| Articles of Incorporation of PCSB Financial Corporation (1) |
|
|
|
3.2 |
| Amended and Restated Bylaws of PCSB Financial Corporation (2) |
|
|
|
31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2 |
| |
|
|
|
32 |
| |
|
|
|
101 |
| The following materials for the quarter ended |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101. |
38
|
|
|
|
|
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| PCSB FINANCIAL CORPORATION |
|
|
|
Date: |
| /s/ Joseph D. Roberto |
|
| Joseph D. Roberto |
|
| Chairman, President and Chief Executive Officer |
|
|
|
Date: |
| /s/ |
|
|
|
|
|
|
4439