e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20429
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended June 30, 2011 |
OR
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o |
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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 0-29709
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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Pennsylvania
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23-3028464 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
271 Main Street, Harleysville, Pennsylvania 19438
(Address of principal executive offices) (Zip Code)
(215) 256-8828
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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 þ No o
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). o Yes þ No
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date:
Common Stock, $.01 Par Value, 3,747,920 shares outstanding as of August 12, 2011.
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
Index
Harleysville Savings Financial Corporation
Unaudited Consolidated Statements of Financial Condition
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June 30, |
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September 30, |
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(In thousands, except share data) |
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2011 |
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2010 |
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Assets |
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Cash and amounts due from depository institutions |
|
$ |
4,166 |
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$ |
4,052 |
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Interest bearing deposits |
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18,825 |
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16,138 |
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Total cash and cash equivalents |
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22,991 |
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20,190 |
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Investments and mortgage-backed securities: |
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Available for sale (amortized cost June 30, $17,243; September 30,
$21,401) |
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17,293 |
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21,413 |
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Held to maturity (fair value June 30, $267,243; September 30, $264,448) |
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261,363 |
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256,088 |
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Loans receivable (net of allowance for loan losses
June 30, $2,652; September 30, $2,504) |
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509,467 |
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510,093 |
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Accrued interest receivable |
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|
3,077 |
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|
3,210 |
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Federal Home Loan Bank stock at cost |
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13,800 |
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16,096 |
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Foreclosed real estate |
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324 |
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186 |
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Office properties and equipment, net |
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12,043 |
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12,158 |
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Prepaid expenses and other assets |
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17,221 |
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|
17,706 |
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TOTAL ASSETS |
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$ |
857,579 |
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$ |
857,140 |
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Liabilities and Stockholders Equity |
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Liabilities: |
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Deposits |
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$ |
531,102 |
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$ |
528,100 |
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Long-term debt |
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261,900 |
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|
272,047 |
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Accrued interest payable |
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|
1,356 |
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|
1,407 |
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Advances from borrowers for taxes and insurance |
|
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5,643 |
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|
1,247 |
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Accounts payable and accrued expenses |
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1,027 |
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|
988 |
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Total liabilities |
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801,028 |
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803,789 |
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Commitments and contingencies |
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Stockholders equity: |
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Preferred Stock: $.01 par value;
7,500,000 shares authorized; none issued |
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Common stock: $.01 par value; 15,000,000 shares authorized;
3,921,177 shares issued; outstanding June 30, 2011 3,747,920 shares
September 30, 2010 3,687,409 shares |
|
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39 |
|
|
|
39 |
|
Additional paid-in capital |
|
|
8,286 |
|
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|
8,126 |
|
Treasury
stock, at cost (June 30, 2011, 173,257 shares; September 30, 2010, 233,768 shares) |
|
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(2,553 |
) |
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|
(3,383 |
) |
Retained earnings partially restricted |
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50,746 |
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48,562 |
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Accumulated other comprehensive income |
|
|
33 |
|
|
|
7 |
|
|
|
|
|
|
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Total stockholders equity |
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56,551 |
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53,351 |
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
|
$ |
857,579 |
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$ |
857,140 |
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See notes to unaudited consolidated financial statements.
page -1-
Harleysville Savings Financial Corporation
Unaudited Consolidated Statements of Income
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For the Three Months Ended |
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For the Nine Months Ended |
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June 30, |
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June 30, |
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(In thousands, except per share data) |
|
2011 |
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2010 |
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2011 |
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2010 |
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Interest Income: |
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Interest on mortgage loans |
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$ |
4,724 |
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$ |
5,043 |
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$ |
14,215 |
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$ |
15,118 |
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Interest on commercial loans |
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1,276 |
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|
1,108 |
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|
3,758 |
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|
|
3,023 |
|
Interest on mortgage-backed securities |
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|
1,476 |
|
|
|
1,657 |
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|
4,210 |
|
|
|
5,335 |
|
Interest on consumer and other loans |
|
|
995 |
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|
1,080 |
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|
3,055 |
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|
3,307 |
|
Interest on other taxable investments |
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|
807 |
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|
802 |
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|
2,342 |
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|
2,562 |
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Interest on tax-exempt investments |
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|
215 |
|
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|
260 |
|
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|
634 |
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|
804 |
|
Dividends on investment securities |
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1 |
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1 |
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2 |
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|
2 |
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|
|
|
|
|
|
|
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|
Total interest income |
|
|
9,494 |
|
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|
9,951 |
|
|
|
28,216 |
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|
30,151 |
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Interest Expense: |
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Interest on deposits |
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1,866 |
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|
2,121 |
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5,778 |
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|
6,929 |
|
Interest on borrowings |
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|
2,870 |
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|
3,169 |
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|
8,697 |
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|
9,655 |
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Total interest expense |
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|
4,736 |
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|
5,290 |
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|
14,475 |
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|
|
16,584 |
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|
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|
|
|
|
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|
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|
|
|
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|
|
|
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|
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|
|
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Net Interest Income |
|
|
4,758 |
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|
|
4,661 |
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|
13,741 |
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|
|
13,567 |
|
Provision for loan losses |
|
|
165 |
|
|
|
150 |
|
|
|
490 |
|
|
|
450 |
|
|
|
|
|
|
|
|
|
|
|
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|
Net Interest Income after Provision for Loan Losses |
|
|
4,593 |
|
|
|
4,511 |
|
|
|
13,251 |
|
|
|
13,117 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Other Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Customer service fees |
|
|
137 |
|
|
|
176 |
|
|
|
402 |
|
|
|
488 |
|
Income on bank-owned life insurance |
|
|
1,163 |
|
|
|
122 |
|
|
|
1,407 |
|
|
|
365 |
|
Other income |
|
|
220 |
|
|
|
210 |
|
|
|
644 |
|
|
|
615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income |
|
|
1,520 |
|
|
|
508 |
|
|
|
2,453 |
|
|
|
1,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
1,905 |
|
|
|
1,743 |
|
|
|
5,529 |
|
|
|
5,174 |
|
Occupancy and equipment |
|
|
326 |
|
|
|
356 |
|
|
|
1,039 |
|
|
|
985 |
|
Deposit insurance premiums |
|
|
234 |
|
|
|
229 |
|
|
|
724 |
|
|
|
682 |
|
Data processing |
|
|
199 |
|
|
|
167 |
|
|
|
529 |
|
|
|
489 |
|
Other |
|
|
722 |
|
|
|
710 |
|
|
|
2,067 |
|
|
|
2,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses |
|
|
3,386 |
|
|
|
3,205 |
|
|
|
9,888 |
|
|
|
9,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before Income Taxes |
|
|
2,727 |
|
|
|
1,814 |
|
|
|
5,816 |
|
|
|
5,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
739 |
|
|
|
500 |
|
|
|
1,518 |
|
|
|
1,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
1,988 |
|
|
$ |
1,314 |
|
|
$ |
4,298 |
|
|
$ |
3,688 |
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share |
|
$ |
0.53 |
|
|
$ |
0.36 |
|
|
$ |
1.16 |
|
|
$ |
1.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share |
|
$ |
0.53 |
|
|
$ |
0.36 |
|
|
$ |
1.15 |
|
|
$ |
1.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Dividends Per Share |
|
$ |
0.19 |
|
|
$ |
0.19 |
|
|
$ |
0.57 |
|
|
$ |
0.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements.
page -2-
Harleysville Savings Financial Corporation
Unaudited Consolidated Statements of Comprehensive Income
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Three Months Ended |
|
|
|
June 30, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
Net Income |
|
$ |
1,988 |
|
|
$ |
1,314 |
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
Unrealized loss on securities available for sale, net of tax (benefit)
expense 2011, $12; 2010, $19 and reclassifications |
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|
(24 |
)(1) |
|
|
(39 |
)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
$ |
1,964 |
|
|
$ |
1,275 |
|
|
|
|
|
|
|
|
Unaudited Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
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|
2011 |
|
|
2010 |
|
(1) Disclosure of reclassification amount, net of tax for the three months ended: |
|
|
|
|
|
|
|
|
Net unrealized loss arising during the three months ended |
|
$ |
(36 |
) |
|
$ |
(58 |
) |
Reclassification adjustment for net losses (gains) included in net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36 |
) |
|
|
(58 |
) |
Tax benefit (expense) |
|
|
12 |
|
|
|
19 |
|
|
|
|
|
|
|
|
Net unrealized loss on securities available for sale |
|
$ |
(24 |
) |
|
$ |
(39 |
) |
|
|
|
|
|
|
|
Unaudited Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
June 30, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
4,298 |
|
|
$ |
3,688 |
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain on securities available for sale, net of tax (benefit) expense 2011, ($13); 2010, ($10) and reclassifications |
|
|
26 |
(1) |
|
|
18 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
$ |
4,324 |
|
|
$ |
3,706 |
|
|
|
|
|
|
|
|
Unaudited Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(1) Disclosure of reclassification amount, net of tax for the three months ended: |
|
|
|
|
|
|
|
|
Net unrealized gain arising during the three months ended |
|
$ |
39 |
|
|
$ |
28 |
|
Reclassification adjustment for net losses (gains) included in net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
|
28 |
|
Tax expense |
|
|
(13 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
Net unrealized gain on securities available for sale |
|
$ |
26 |
|
|
$ |
18 |
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements.
page -3-
Harleysville Savings Financial Corporation
Unaudited Consolidated Statements of Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
Additional |
|
|
Earnings- |
|
|
Other |
|
|
|
|
|
|
Total |
|
|
|
Shares |
|
|
Common |
|
|
Paid-in |
|
|
Partially |
|
|
Comprehensive |
|
|
Treasury |
|
|
Stockholders |
|
(In thousands, except share and per share data) |
|
Outstanding |
|
|
Stock |
|
|
Capital |
|
|
Restricted |
|
|
(Loss) / Income |
|
|
Stock |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 1, 2010 |
|
|
3,687,409 |
|
|
$ |
39 |
|
|
$ |
8,126 |
|
|
$ |
48,562 |
|
|
$ |
7 |
|
|
$ |
(3,383 |
) |
|
$ |
53,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,298 |
|
|
|
|
|
|
|
|
|
|
|
4,298 |
|
Dividends $.57 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,114 |
) |
|
|
|
|
|
|
|
|
|
|
(2,114 |
) |
Stock option compensation |
|
|
|
|
|
|
|
|
|
|
158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158 |
|
Treasury stock delivered under ESOP |
|
|
10,000 |
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
137 |
|
|
|
147 |
|
Treasury stock delivered under reinvestment plan |
|
|
30,709 |
|
|
|
|
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
421 |
|
|
|
460 |
|
Employee options exercised |
|
|
19,802 |
|
|
|
|
|
|
|
(47 |
) |
|
|
|
|
|
|
|
|
|
|
272 |
|
|
|
225 |
|
Change in unrealized holding gain on
available-for-sale securities, net of
reclassification and tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2011 |
|
|
3,747,920 |
|
|
$ |
39 |
|
|
$ |
8,286 |
|
|
$ |
50,746 |
|
|
$ |
33 |
|
|
$ |
(2,553 |
) |
|
$ |
56,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Consolidated Statements of Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
Additional |
|
|
Earnings- |
|
|
Other |
|
|
|
|
|
|
Total |
|
|
|
Shares |
|
|
Common |
|
|
Paid-in |
|
|
Partially |
|
|
Comprehensive |
|
|
Treasury |
|
|
Stockholders |
|
(In thousands, except share and per share data) |
|
Outstanding |
|
|
Stock |
|
|
Capital |
|
|
Restricted |
|
|
(Loss) / Income |
|
|
Stock |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 1, 2009 |
|
|
3,627,696 |
|
|
$ |
39 |
|
|
$ |
8,002 |
|
|
$ |
46,329 |
|
|
$ |
(29 |
) |
|
$ |
(4,202 |
) |
|
$ |
50,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,688 |
|
|
|
|
|
|
|
|
|
|
|
3,688 |
|
Dividends $.57 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,077 |
) |
|
|
|
|
|
|
|
|
|
|
(2,077 |
) |
Stock option compensation |
|
|
|
|
|
|
|
|
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124 |
|
Treasury stock purchase |
|
|
(5,659 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77 |
) |
|
|
(77 |
) |
Treasury stock delivered under ESOP |
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137 |
|
|
|
137 |
|
Treasury stock delivered under reinvestment plan |
|
|
31,200 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
427 |
|
|
|
430 |
|
Employee options exercised |
|
|
10,950 |
|
|
|
|
|
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
|
150 |
|
|
|
106 |
|
Change in unrealized holding loss
on available-for-sale securities, net of
reclassification and tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010 |
|
|
3,674,187 |
|
|
$ |
39 |
|
|
$ |
8,085 |
|
|
$ |
47,940 |
|
|
$ |
(11 |
) |
|
$ |
(3,565 |
) |
|
$ |
52,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements.
page -4-
Harleysville Savings Financial Corporation
Unaudited Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
Operating Activities: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
4,298 |
|
|
$ |
3,688 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
462 |
|
|
|
416 |
|
Provision for loan losses |
|
|
490 |
|
|
|
450 |
|
Loss on sale of foreclosed real estate |
|
|
|
|
|
|
159 |
|
Amortization of deferred loan fees |
|
|
155 |
|
|
|
62 |
|
Net (accretion) amortization of premiums and discounts |
|
|
(165 |
) |
|
|
127 |
|
Increase in cash surrender value of bank owned life insurance |
|
|
(365 |
) |
|
|
(365 |
) |
Gain on death benefit on bank owned life insurance policy |
|
|
(1,042 |
) |
|
|
|
|
Compensation charge on stock options |
|
|
158 |
|
|
|
124 |
|
Changes in assets and liabilities which provided (used) cash: |
|
|
|
|
|
|
|
|
Increase (decrease) in accounts payable and accrued expenses |
|
|
39 |
|
|
|
(261 |
) |
Decrease in prepaid expenses and other assets |
|
|
(19 |
) |
|
|
(1,139 |
) |
Increase in accrued interest receivable |
|
|
133 |
|
|
|
352 |
|
Decrease in accrued interest payable |
|
|
(51 |
) |
|
|
(131 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
4,093 |
|
|
|
3,482 |
|
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
Purchase of mortgage-backed securities held to maturity |
|
|
(51,062 |
) |
|
|
(14,986 |
) |
Purchase of investment securities held to maturity |
|
|
(49,232 |
) |
|
|
(84,956 |
) |
Purchase of investment securities available-for-sale |
|
|
(59,083 |
) |
|
|
(71,301 |
) |
Net redemption FHLB stock |
|
|
2,296 |
|
|
|
|
|
Proceeds from the redemption of investment securities
available-for-sale |
|
|
63,229 |
|
|
|
74,529 |
|
Proceeds from maturities of investment securities held to maturity |
|
|
63,049 |
|
|
|
50,529 |
|
Proceeds from sale of foreclosed real estate |
|
|
|
|
|
|
588 |
|
Purchase of bank owned life insurance |
|
|
(191 |
) |
|
|
|
|
Proceeds on bank owned life insurance |
|
|
2,102 |
|
|
|
|
|
Principal collected on mortgage-backed securities held to maturity |
|
|
32,135 |
|
|
|
33,758 |
|
Principal collected on long term loans |
|
|
86,063 |
|
|
|
85,411 |
|
Long term loans originated or acquired |
|
|
(86,220 |
) |
|
|
(103,341 |
) |
Purchases of premises and equipment |
|
|
(347 |
) |
|
|
(2,159 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
2,739 |
|
|
|
(31,928 |
) |
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
Net increase
in demand deposits, NOW accounts and savings accounts |
|
|
16,373 |
|
|
|
71,307 |
|
Net decrease in certificates of deposit |
|
|
(13,371 |
) |
|
|
(15,138 |
) |
Cash dividends |
|
|
(1,654 |
) |
|
|
(1,647 |
) |
Repayment of long-term debt |
|
|
(10,147 |
) |
|
|
(25,316 |
) |
Acquisition of treasury stock |
|
|
|
|
|
|
(77 |
) |
Sale of treasury stock delivered under employee stock plans |
|
|
372 |
|
|
|
243 |
|
Net increase in advances from borrowers for taxes and insurance |
|
|
4,396 |
|
|
|
4,292 |
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(4,031 |
) |
|
|
33,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
2,801 |
|
|
|
5,218 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
|
|
20,190 |
|
|
|
9,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR |
|
$ |
22,991 |
|
|
$ |
14,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest (credited and paid) |
|
$ |
14,526 |
|
|
$ |
16,715 |
|
Income taxes |
|
|
1,370 |
|
|
|
1,175 |
|
Foreclosed real estate acquired in settlement of loans |
|
|
138 |
|
|
|
|
|
See notes to consolidated financial statements.
page -5-
Harleysville Savings Financial Corporation
Notes to Unaudited Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -The unaudited consolidated financial statements include the accounts of
Harleysville Savings Financial Corporation (the Company) and its subsidiary. Harleysville
Savings Bank (the Bank) is the wholly owned subsidiary of the Company. The accompanying
consolidated financial statements include the accounts of the Company, the Bank, and the Banks
wholly owned subsidiaries, HSB Inc, a Delaware corporation which was formed in order to hold
certain assets, Freedom Financial LLC, a Pennsylvania limited liability Company that allows the
Company to offer non deposit products, and HARL LLC, a limited liability Company that allows the
Bank to invest in equity investments. All significant intercompany accounts and transactions have
been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared in accordance with
the instructions for Form 10-Q and therefore do not include information or footnotes necessary for
a complete presentation of financial condition, results of operations and cash flows in conformity
with accounting principles generally accepted in the United States of America. However, all
adjustments (consisting only of normal recurring adjustments) which, in the opinion of management,
are necessary for a fair presentation of the consolidated financial statements have been included.
The results of operations for the three and nine-months ended June 30, 2011 are not necessarily
indicative of the results which may be expected for the entire fiscal year ending September 30,
2011 or any other period. The financial information should be read in conjunction with the
Companys Annual Report on Form 10-K for the period ended September 30, 2010.
Use of Estimates in Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of income
and expenses during the reporting period. The most significant of these estimates is the allowance
for loan losses, the determination of other-than-temporary impairment on securities and the
valuation of deferred tax assets. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the prior periods financial statements have been reclassified to conform with
the current years classifications. The reclassifications had no effect on net income.
Subsequent Events
The Company has evaluated events and transactions occurring subsequent to the balance sheet date of
June 30, 2011 for items that should potentially be recognized or disclosed in these financial
statements. The evaluation was conducted through the date these financial statements were issued.
page -6-
Recent Accounting Pronouncements In October 2009, the FASB issued Accounting Standards Update
(ASU) 2009-16, (Transfers and Servicing (Topic 860) Accounting for Transfers of Financial
Assets). This Update amends the Accounting Standards (Codification) for the issuance of FASB
Statement No. 166, Accounting for Transfers of Financial Assets-an amendment of FASB Statement No.
140. The amendments in this Update improve financial reporting by eliminating the exceptions for
qualifying special-purpose entities from the consolidation guidance and the exception that
permitted sale accounting for certain mortgage securitizations when a transferor has not
surrendered control over the transferred financial assets. In addition, the amendments require
enhanced disclosures about the risks that a transferor continues to be exposed to because of its
continuing involvement in transferred financial assets. Comparability and consistency in
accounting for transferred financial assets will also be improved through clarifications of the
requirements for isolation and limitations on portions of financial assets that are eligible for
sale accounting. This Update is effective at the start of a reporting entitys first fiscal year
beginning after November 15, 2009. The adoption of this new guidance did not have an impact on our
financial position or result of operations.
In October 2009, the FASB issued ASU 2009-17, (Consolidations (Topic 810) Improvements to
Financial Reporting by Enterprises Involved with Variable Interest Entities). This Update amends
the Codification for the
issuance of FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). The amendments in
this Update replace the quantitative-based risks and rewards calculation for determining which
reporting entity, if any, has a controlling financial interest in a variable interest entity with
an approach focused on identifying which reporting entity has the power to direct the activities of
a variable interest entity that most significantly impact the entitys economic performance and (1)
the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity.
An approach that is expected to be primarily qualitative will be more effective for identifying
which reporting entity has a controlling financial interest in a variable interest entity. The
amendments in this Update also require additional disclosures about a reporting entitys
involvement in variable interest entities, which will enhance the information provided to users of
financial statements. This Update is effective at the start of a reporting entitys first fiscal
year beginning after November 15, 2009. The adoption of this new guidance did not have an impact
on our financial position or result of operations.
The FASB has issued ASU 2010-06, (Fair Value Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements). This ASU requires some new disclosures and clarifies
some existing disclosure requirements about fair value measurement as set forth in Codification
Subtopic 820-10. The FASBs objective is to improve these disclosures and, thus, increase the
transparency in financial reporting. Specifically, ASU 2010-06 amends Codification Subtopic 820-10
to now require:
|
|
|
A reporting entity to disclose separately the amounts of significant transfers in and
out of Level 1 and Level 2 fair value measurements and describe the reasons for the
transfers; and |
|
|
|
In the reconciliation for fair value measurements using significant unobservable inputs,
a reporting entity should present separately information about purchases, sales, issuances,
and settlements. |
In addition, ASU 2010-06 clarifies the requirements of the following existing disclosures:
|
|
|
For purposes of reporting fair value measurement for each class of assets and
liabilities, a reporting entity needs to use judgment in determining the appropriate
classes of assets and liabilities; and |
|
|
|
A reporting entity should provide disclosures about the valuation techniques and inputs
used to measure fair value for both recurring and nonrecurring fair value measurements. |
page -7-
ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 15, 2010, and for interim periods within those fiscal years. Early
adoption is permitted. The adoption of this standard did not have an impact on our financial
position or results of operations.
ASU 2010-20, Receivables (Topic 310): (Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses), will help investors assess the credit risk of a
companys receivables portfolio and the adequacy of its allowance for credit losses held against
the portfolios by expanding credit risk disclosures.
This ASU requires more information about the credit quality of financing receivables in the
disclosures to financial statements, such as aging information and credit quality indicators. Both
new and existing disclosures must be disaggregated by portfolio segment or class. The
disaggregation of information is based on how a company develops its allowance for credit losses
and how it manages its credit exposure.
The amendments in this update apply to all public and nonpublic entities with financing
receivables. Financing receivables include loans and trade accounts receivable. However,
short-term trade accounts receivable, receivables measured at fair value or lower of cost or fair
value, and debt securities are exempt from these disclosure amendments.
The effective date of ASU 2010-20 differs for public and nonpublic companies. For public
companies, the amendments that require disclosures as of the end of a reporting period are
effective for periods ending on or after December 15, 2010. The amendments that require
disclosures about activity that occurs during a reporting period
are effective for periods beginning on or after December 15, 2010. For nonpublic companies, the
amendments are effective for annual reporting periods ending on or after December 15, 2011. The
Company has provided the required credit quality disclosures as of the end of the reporting periods
December 31, 2010 and June 30, 2011 and disclosures about the activity for the six months ended
June 30, 2011.
ASU 2011 01 (Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in
Update No. 2010-20). The amendments in this Update temporarily delay the effective date of the
disclosures about troubled debt restructurings in Update 2010-20 for public entities. Under the
existing effective date in Update 2010-20, public-entity creditors would have provided disclosures
about troubled debt restructurings for periods beginning on or after December 15, 2010. The delay
was intended to allow FASB time to complete its deliberations on what constitutes a troubled debt
restructuring. FASB issued this new standard as discussed in the following paragraph. The
effective date of the new disclosures about troubled debt restructurings for public entities is
coordinated with the adoption of this new standard.
In April 2011, the FASB issued Accounting Standard Update (ASU) No. 2011-02, Receivables (Topic
310): (A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring), to
clarify the accounting principles applied to loan modifications. ASU No. 2011-02 was issued to
address the recording of an impairment loss in FASB ASC 310, Receivables. ASU No. 2011-02 adds
text to the scope guidance Section 310-40-15 that is meant to help determine when a lender has
granted a concession on their terms of a loan. The added material also provides criteria that
should be used to help determine when the loan restructuring delays a payment by a length of time
that is considered insignificant and when the borrower is having financial problems. For public
companies the effective date is for fiscal quarters and years that start June 15, 2011, or later
with the retrospective application to the beginning of the fiscal year for loans that are
restructured during the year in which the changes are adopted. The Company is in the process of
evaluating the effect of adoption of this update will have on its financial condition or statement
of operations.
page -8-
In April 2011, the FASB issued Accounting Standard Update (ASU) 2011-03 (Reconsideration of
Effective Control for Repurchase Agreements). The FASB has issued this Update to clarify the
accounting principles applied to repurchase agreements, as set forth by FASB ASC Topic 860,
Transfers and Servicing. This update, entitled Reconsideration of Effective Control for Repurchase
Agreements, amends one of three criteria used to determine whether or not a transfer of assets may
be treated as a sale by the transferor. Under Topic 860, the transferor may not maintain effective
control over the transferred assets in order to qualify as a sale. This Update eliminates the
criteria under which the transferor must retain collateral sufficient to repurchase or redeem the
collateral on substantially agreed upon terms as a method of maintaining effective control. This
Update is effective for both public and nonpublic entities for interim and annual reporting periods
beginning on or after December 31, 2011, and requires prospective application to transactions or
modifications of transactions which occur on or after the effective date. Early adoption is not
permitted. The Company is in the process of evaluating the adoption of this update will have on
their financial condition or statement of operations.
In May 2011, the FASB issued Accounting Standard Update (ASU) 2011-04 (Amendments to Achieve Common
Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs). This update amends FASB
ASC Topic 820, Fair Value Measurements, to bring U.S. GAAP for fair value measurements in line with
International Accounting Standards. The Update clarifies existing guidance for items such as: the
application of the highest and best use concept to non-financial assets and liabilities; the
application of fair value measurement to financial instruments classified in a reporting entitys
stockholders equity; and disclosure requirements regarding quantitative information about
unobservable inputs used in the fair value measurements of level 3 assets. The Update also creates
an exception to Topic 820 for entities which carry financial instruments within a portfolio or
group, under which the entity is now permitted to base the price used for fair valuation upon a
price that would be received to sell the net asset position or transfer a net liability position in
an orderly transaction. The Update also allows for the application of premiums and discounts in a
fair value measurement if the financial instrument is categorized in level 2 or 3 of the fair value
hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts
categorized as level 3 in the fair value hierarchy such as: disclosure of the valuation process
used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for
purposes other than their highest and best use when
that is the basis of the disclosed fair value; and categorization by level of items disclosed at
fair value, but not measured at fair value for financial statement purposes. For public entities,
this Update is effective for interim and annual periods beginning after December 15, 2011. For
nonpublic entities, the Update is effective for annual periods beginning after December 15, 2011.
Early adoption is not permitted. The Company is in the process of evaluating the adoption of this
update will have on their financial condition or statement of operations.
In June 2011, The FASB issued Accounting Standard Update (ASU) 2011-05 (Presentation of
Comprehensive Income). The provisions of this update amend FASB ASC Topic 220, Comprehensive
Income, to facilitate the continued alignment of U.S. GAAP with International Accounting Standards.
The Update prohibits the presentation of the components of comprehensive income in the statement of
stockholders equity. Reporting entities are allowed to present either: a statement of
comprehensive income, which reports both net income and other comprehensive income; or separate,
but consecutive, statements of net income and other comprehensive income. Under previous GAAP, all
3 presentations were acceptable. Regardless of the presentation selected, the Reporting Entity is
required to present all reclassifications between other comprehensive and net income on the face of
the new statement or statements. The provisions of this Update are effective for fiscal years and
interim periods beginning after December 31, 2011 for public entities. For nonpublic entities, the
provisions are effective for fiscal years ending after December 31, 2012, and for interim and
annual periods thereafter. The Company is in the process of evaluating the adoption of this update
will have on their financial condition or statement of operations.
page -9-
2. INVESTMENT AND MORTGAGE-BACKED SECURITIES
The amortized cost and fair value of the Companys securities gross unrealized gains and losses, as
of June 30, 2011 and September 30, 2010 are as follows:
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
Equity securities |
|
$ |
355 |
|
|
$ |
65 |
|
|
$ |
(57 |
) |
|
$ |
363 |
|
Collateralized mortgage obligations |
|
|
785 |
|
|
|
42 |
|
|
|
|
|
|
|
827 |
|
U.S. Government money market funds |
|
|
16,103 |
|
|
|
|
|
|
|
|
|
|
|
16,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Available for Sale Securities |
|
$ |
17,243 |
|
|
$ |
107 |
|
|
$ |
(57 |
) |
|
$ |
17,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
Equity securities |
|
$ |
355 |
|
|
$ |
42 |
|
|
$ |
(54 |
) |
|
$ |
343 |
|
Collateralized mortgage obligations |
|
|
785 |
|
|
|
24 |
|
|
|
|
|
|
|
809 |
|
U.S. Government money market funds |
|
|
20,261 |
|
|
|
|
|
|
|
|
|
|
|
20,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Available for Sale Securities |
|
$ |
21,401 |
|
|
$ |
66 |
|
|
$ |
(54 |
) |
|
$ |
21,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities- U.S. Government
Sponsored Enterprises (GSEs) |
|
$ |
125,374 |
|
|
$ |
6,595 |
|
|
$ |
(42 |
) |
|
$ |
131,927 |
|
Collateralized mortgage obligations |
|
|
24,468 |
|
|
|
199 |
|
|
|
(15 |
) |
|
|
24,652 |
|
Municipal bonds |
|
|
18,129 |
|
|
|
593 |
|
|
|
(68 |
) |
|
|
18,654 |
|
U.S. Government Agencies |
|
|
93,392 |
|
|
|
109 |
|
|
|
(1,491 |
) |
|
|
92,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Held to Maturity Securities |
|
$ |
261,363 |
|
|
$ |
7,496 |
|
|
$ |
(1,616 |
) |
|
$ |
267,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
Mortgage-backed securities- U.S. Government
Sponsored Enterprises (GSEs) |
|
$ |
110,732 |
|
|
$ |
6,755 |
|
|
$ |
|
|
|
$ |
117,487 |
|
Collateralized mortgage obligations |
|
|
20,087 |
|
|
|
193 |
|
|
|
(37 |
) |
|
|
20,243 |
|
Municipal bonds |
|
|
16,462 |
|
|
|
773 |
|
|
|
(47 |
) |
|
|
17,188 |
|
U.S. Government Agencies |
|
|
108,807 |
|
|
|
768 |
|
|
|
(45 |
) |
|
|
109,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Held to Maturity Securities |
|
$ |
256,088 |
|
|
$ |
8,489 |
|
|
$ |
(129 |
) |
|
$ |
264,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -10-
A summary of securities with unrealized losses, aggregated by category, at June 30, 2011 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
12 Months or Longer |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
|
Total |
|
|
Unrealized |
|
(In Thousands) |
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
Collateralized mortgage obligations |
|
$ |
7,407 |
|
|
$ |
(15 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
7,407 |
|
|
$ |
(15 |
) |
Municipal bonds |
|
|
469 |
|
|
|
(1 |
) |
|
|
1,472 |
|
|
|
(67 |
) |
|
|
1,941 |
|
|
|
(68 |
) |
U.S. Government Agencies and GSEs |
|
|
76,004 |
|
|
|
(1,533 |
) |
|
|
|
|
|
|
|
|
|
|
76,004 |
|
|
|
(1,533 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal debt securities |
|
|
83,880 |
|
|
|
(1,549 |
) |
|
|
1,472 |
|
|
|
(67 |
) |
|
|
85,352 |
|
|
|
(1,616 |
) |
Equity securities |
|
|
24 |
|
|
|
|
|
|
|
155 |
|
|
|
(57 |
) |
|
|
179 |
|
|
|
(57 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities |
|
$ |
83,904 |
|
|
$ |
(1,549 |
) |
|
$ |
1,627 |
|
|
$ |
(124 |
) |
|
$ |
85,532 |
|
|
$ |
(1,673 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2011, debt securities in a gross unrealized loss position consisted of 30
securities that at such date had an aggregate depreciation of 1.86% from the Companys amortized
cost basis. Management believes that the estimated fair value of the securities disclosed above is
primarily dependent upon the movement in market interest rates. Management evaluated the length of
time and the extent to which the fair value has been less than cost; the financial condition and
near term prospects of the issuer, including any specific events which may influence the operations
of the issuer. The Company has the ability and intent to hold these securities until maturity and
the Company does not believe it will be required to sell such securities prior to the recovery of
the amortized cost basis. Management does not believe any individual unrealized loss as of June
30, 2011 represents an other-than-temporary impairment.
As of June 30, 2011, there were three equity securities in an unrealized loss position. Management
evaluated the length of time and the extent to which the market value has been less than cost; the
financial condition and near term prospects of the issuer, including any specific events which may
influence the operations of the issuer such as changes in technology that may impair the earnings
potential of the investment or the discontinuance of a segment of the business that may effect the
future earnings potential. The Company has the ability and intent to hold these securities until
the anticipated recovery of fair value occurs. Management does not believe any individual
unrealized loss of June 30, 2011 represents an other-than-temporary impairment.
A summary of securities with unrealized losses, aggregated by category, at September 30, 2010 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
12 Months or Longer |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
|
Total |
|
|
Unrealized |
|
(In Thousands) |
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
Collateralized mortgage obligations |
|
$ |
8,262 |
|
|
$ |
(4 |
) |
|
$ |
1,530 |
|
|
$ |
(33 |
) |
|
$ |
9,792 |
|
|
$ |
(37 |
) |
Municipal bonds |
|
|
378 |
|
|
|
|
|
|
|
1,494 |
|
|
|
(47 |
) |
|
|
1,872 |
|
|
|
(47 |
) |
U.S. Government Agencies and GSEs |
|
|
6,955 |
|
|
|
(45 |
) |
|
|
|
|
|
|
|
|
|
|
6,955 |
|
|
|
(45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal debt securities |
|
|
15,595 |
|
|
|
(49 |
) |
|
|
3,024 |
|
|
|
(80 |
) |
|
|
18,619 |
|
|
|
(129 |
) |
Equity Securities |
|
|
55 |
|
|
|
(3 |
) |
|
|
160 |
|
|
|
(51 |
) |
|
|
215 |
|
|
|
(54 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities |
|
$ |
15,650 |
|
|
$ |
(52 |
) |
|
$ |
3,184 |
|
|
$ |
(131 |
) |
|
$ |
18,834 |
|
|
$ |
(183 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -11-
The following table sets forth the stated maturities of the investment and mortgage-backed
securities at June 30, 2011. Money market funds and equity securities are not included in the table
based on lack of maturity.
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
|
Amortized |
|
|
|
|
(In Thousands) |
|
Cost |
|
|
Fair Value |
|
Available for sale: |
|
|
|
|
|
|
|
|
Due in one year or less |
|
$ |
785 |
|
|
$ |
827 |
|
Due after one year through five years |
|
|
|
|
|
|
|
|
Due after five years through ten years |
|
|
|
|
|
|
|
|
Due after ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
785 |
|
|
$ |
827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
Due in one year or less |
|
$ |
125,767 |
|
|
$ |
124,927 |
|
Due after one year through five years |
|
|
92,938 |
|
|
|
98,119 |
|
Due after five years through ten years |
|
|
41,821 |
|
|
|
43,256 |
|
Due after ten years |
|
|
837 |
|
|
|
941 |
|
|
|
|
|
|
|
|
Total |
|
$ |
261,363 |
|
|
$ |
267,243 |
|
|
|
|
|
|
|
|
Certain of the Companys investment securities, totaling $15.5 million and $10.3 million at
June 30, 2011 and September 30, 2010, respectively, were pledged as collateral to secure deposit
sweep accounts and public deposits as required or permitted by law. Other securities, totaling $60
million and $60.6 million at June 30, 2011 and September 30, 2010, respectively, were pledged for
long-term advances of $50 million as described in Note 8.
3. LOANS RECEIVABLE
Loans receivable consists of the following:
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
June 30, 2011 |
|
|
September 30, 2010 |
|
Residential Mortgages |
|
$ |
336,426 |
|
|
$ |
339,874 |
|
Construction |
|
|
6,883 |
|
|
|
4,752 |
|
Home Equity |
|
|
85,276 |
|
|
|
90,511 |
|
Commercial Mortgages |
|
|
82,909 |
|
|
|
75,450 |
|
Commercial Business Loans |
|
|
7,274 |
|
|
|
4,327 |
|
Consumer Non-Real Estate |
|
|
1,218 |
|
|
|
1,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
519,986 |
|
|
|
516,894 |
|
Undisbursed portion of loans in process |
|
|
(6,883 |
) |
|
|
(3,426 |
) |
Deferred loan fees |
|
|
(984 |
) |
|
|
(871 |
) |
Allowance for loan losses |
|
|
(2,652 |
) |
|
|
(2,504 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Receivable net |
|
$ |
509,467 |
|
|
$ |
510,093 |
|
|
|
|
|
|
|
|
The total amount of loans being serviced for the benefit of others was approximately $1.72
million and $1.76 million at June 30, 2011 and September 30, 2010, respectively.
page -12-
The loans receivable portfolio is segmented into consumer and commercial loans. Consumer loans
consist of the following classes: residential mortgage loans, construction loans, home equity loans
and other consumer loans. Commercial loans consist of the following classes: commercial mortgages
and commercial business loans. For all classes of loans receivable, the accrual of interest is
discontinued when the contractual payment of principal or interest has become 90 days past due or
management has serious doubts about further collectability of principal or interest, even though
the loan is currently performing. A loan may remain on accrual status if it is in the process of
collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status,
unpaid interest credited to income in the current year is reversed and unpaid interest accrued in
prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans
including impaired loans generally is either applied against principal or reported as interest
income, according to managements judgment as to the collectability of principal. Generally, loans
are restored to accrual status when the obligation is brought current, has performed in accordance
with the contractual terms for a reasonable period of time (generally six months) and the ultimate
collectability of the total contractual principal and interest is no longer in doubt. The past due
status of all classes of loans receivable is determined based on contractual due dates for loan
payments.
The allowance for credit losses consists of the allowance for loan losses and the reserve for
unfunded lending commitments. The allowance for loan losses represents managements estimate of
losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction
to loans. The reserve for unfunded lending commitments represents managements estimate of losses
inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated
balance sheet. The allowance for credit losses is increased by the provision for loan losses, and
decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against
the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.
All, or part, of the principal balance of loans receivable are charged off to the allowance as soon
as it is determined that the repayment of all, or part, of the principal balance is highly
unlikely. Because all identified losses are immediately charged off, no portion of the allowance
for loan losses is restricted to any individual loan or groups of loans, and the entire allowance
is available to absorb any and all loan losses.
The allowance for credit losses is maintained at a level considered adequate to provide for losses
that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of
the allowance. The allowance is based on the Companys past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the borrowers ability to
repay, the estimated value of any underlying collateral, composition of the loan portfolio, current
economic conditions and other relevant factors. This evaluation is inherently subjective as it
requires material estimates that may be susceptible to significant revision as more information
becomes available.
The allowance consists of specific, general and unallocated components. The specific component
relates to loans that are classified as impaired. For loans that are classified as impaired, an
allowance is established when the discounted cash flows (or collateral value or observable market
price) of the impaired loan is lower than the carrying value of that loan. The general component
covers pools of loans by loan class. These pools of loans are evaluated for loss exposure based
upon historical loss rates for each of these categories of loans, adjusted for qualitative factors.
These significant factors may include changes in lending policies and procedures, changes in
existing general economic and business conditions affecting our primary lending areas, credit
quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio,
recent loss experience in particular segments of the portfolio, duration of the current business
cycle and bank regulatory examination results. The applied loss factors are reevaluated quarterly
to ensure their relevance in the current economic environment.
Residential mortgage lending generally entails a lower risk of default than other types of lending.
Other consumer loans and commercial real estate loans generally involve more risk of
collectability because of the type and nature of the collateral and, in certain cases, the absence
of collateral. It is the Companys policy to establish specific reserves for losses on delinquent
consumer loans and commercial loans when it determines that losses are probable.
page -13-
An unallocated component is maintained to cover uncertainties that could affect managements
estimate of probable losses. The unallocated component of the allowance reflects the margin of
imprecision inherent in the underlying assumptions used in the methodologies for estimating
specific and general losses in the portfolio.
A loan is considered impaired when, based on current information and events, it is probable that
the Company will be unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value and the probability of collecting
scheduled principal and interest payments when due. Loans that experience insignificant payment
delays and payment shortfalls generally are not classified as impaired. Management determines the
significance of payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower, including the length
of the delay, the reasons for the delay, the borrowers prior payment record and the amount of the
shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan
basis for loans by either the present value of expected future cash flows discounted at the loans
effective interest rate or the fair value of the collateral if the loan is collateral dependent.
An allowance for loan losses is established for an impaired loan if its carrying value exceeds its
estimated fair value. The estimated fair values of substantially all of the Companys impaired
loans are measured based on the estimated fair value of the loans collateral. Interest payments
on impaired loans and non-accrual loans are applied to principal unless the ability to collect the
principal amount is fully secured, in which case interest is recognized on the cash basis.
For residential mortgage loans, home equity loans and commercial loans secured by real estate,
estimated fair values are determined primarily through third-party appraisals. When a real estate
secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal
of the real estate is necessary. This decision is based on various considerations, including the
age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the
condition of the property. Appraised values are discounted to arrive at the estimated selling price
of the collateral, which is considered to be the estimated fair value. The discounts also include
estimated costs to sell the property.
For commercial business loans secured by non-real estate collateral, such as accounts receivable,
inventory and equipment, estimated fair values are determined based on the borrowers financial
statements, inventory reports, accounts receivable aging or equipment appraisals or invoices.
Indications of value from these sources are generally discounted based on the age of the financial
information or the quality of the assets.
The allowance calculation methodology includes further segregation of loan classes into risk rating
categories. The borrowers overall financial condition, repayment sources, guarantors and value of
collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies
arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk
ratings include regulatory classifications of special mention, substandard, doubtful and loss.
Loans criticized special mention have potential weaknesses that deserve managements close
attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment
prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize
the liquidation of the debt. They include loans that are inadequately protected by the current
sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans
classified doubtful have all the weaknesses inherent in loans classified substandard with the added
characteristic that collection or liquidation in full, on the basis of current conditions and
facts, is highly improbable. Loans classified as a loss are considered uncollectible and are
charged to the allowance for loan losses. Loan not classified are rated pass.
page -14-
In addition, Federal regulatory agencies, as an integral part of their examination process,
periodically review the Companys allowance for loan losses and may require the Company to
recognize additions to the allowance based on their judgments about information available to them
at the time of their examination, which may not be currently available to management. Based on
managements comprehensive analysis of the loan portfolio, management believes the current level of
the allowance for loan losses is adequate.
The following table presents the classes of the loan portfolio summarized by the aggregate pass
rating and the classified ratings of special mention, substandard and doubtful within the Companys
internal risk rating system as of June 30, 2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
|
|
|
|
|
Special |
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
Pass |
|
|
Mention |
|
|
Substandard |
|
|
Doubtful |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
333,420 |
|
|
$ |
|
|
|
$ |
2,740 |
|
|
$ |
266 |
|
|
$ |
336,426 |
|
Construction |
|
|
6,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,883 |
|
Home Equity |
|
|
85,122 |
|
|
|
|
|
|
|
89 |
|
|
|
65 |
|
|
|
85,276 |
|
Commercial Mortgages |
|
|
78,586 |
|
|
|
4,196 |
|
|
|
|
|
|
|
127 |
|
|
|
82,909 |
|
Commercial Business Loans |
|
|
7,174 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
7,274 |
|
Consumer Non-Real Estate |
|
|
1,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
512,403 |
|
|
$ |
4,296 |
|
|
$ |
2,829 |
|
|
$ |
458 |
|
|
$ |
519,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
Special |
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
Pass |
|
|
Mention |
|
|
Substandard |
|
|
Doubtful |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
330,283 |
|
|
$ |
|
|
|
$ |
1,974 |
|
|
$ |
641 |
|
|
$ |
332,898 |
|
Construction |
|
|
5,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,420 |
|
Home Equity |
|
|
88,759 |
|
|
|
|
|
|
|
103 |
|
|
|
65 |
|
|
|
88,927 |
|
Commercial Mortgages |
|
|
76,096 |
|
|
|
2,214 |
|
|
|
|
|
|
|
312 |
|
|
|
78,622 |
|
Commercial Business Loans |
|
|
6,498 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
6,598 |
|
Consumer Non-Real Estate |
|
|
1,194 |
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
1,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
508,250 |
|
|
$ |
2,314 |
|
|
$ |
2,077 |
|
|
$ |
1,024 |
|
|
$ |
513,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -15-
The following table summarizes information in regards to impaired loans by loan portfolio class as
of June 30, 2011 and December 31, 2010 and for the three-months then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
|
|
|
|
|
Unpaid |
|
|
|
|
|
|
Average |
|
|
Interest |
|
|
|
Recorded |
|
|
Principal |
|
|
Related |
|
|
Recorded |
|
|
Income |
|
(In Thousands) |
|
Investment |
|
|
Balance |
|
|
Allowance |
|
|
Investment |
|
|
Recognized |
|
With no related allowance
recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
1,564 |
|
|
$ |
1,564 |
|
|
$ |
|
|
|
$ |
1,131 |
|
|
$ |
21 |
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
65 |
|
|
|
65 |
|
|
|
|
|
|
|
65 |
|
|
|
|
|
Commercial Mortgages |
|
|
127 |
|
|
|
232 |
|
|
|
|
|
|
|
228 |
|
|
|
|
|
Commercial Business Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Non-Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
1,442 |
|
|
$ |
1,545 |
|
|
$ |
(196 |
) |
|
$ |
1,587 |
|
|
$ |
22 |
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
89 |
|
|
|
89 |
|
|
|
(89 |
) |
|
|
98 |
|
|
|
1 |
|
Commercial Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Business Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
Non-Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
3,006 |
|
|
$ |
3,109 |
|
|
$ |
(196 |
) |
|
$ |
2,718 |
|
|
$ |
43 |
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
154 |
|
|
|
154 |
|
|
|
(89 |
) |
|
|
163 |
|
|
|
1 |
|
Commercial Mortgages |
|
|
127 |
|
|
|
232 |
|
|
|
|
|
|
|
228 |
|
|
|
|
|
Commercial Business Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
Non-Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
page -16-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
Unpaid |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Recorded |
|
|
Principal |
|
|
Related |
|
|
Recorded |
|
|
Interest Income |
|
(In Thousands) |
|
Investment |
|
|
Balance |
|
|
Allowance |
|
|
Investment |
|
|
Recognized |
|
With no related allowance
recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
1,047 |
|
|
$ |
1,047 |
|
|
$ |
|
|
|
$ |
1,050 |
|
|
$ |
10 |
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
65 |
|
|
|
65 |
|
|
|
|
|
|
|
65 |
|
|
|
|
|
Commercial Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Business Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Non-Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
1,568 |
|
|
$ |
1,568 |
|
|
$ |
(269 |
) |
|
$ |
1,568 |
|
|
$ |
2 |
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
103 |
|
|
|
103 |
|
|
|
(103 |
) |
|
|
104 |
|
|
|
|
|
Commercial Mortgages |
|
|
312 |
|
|
|
312 |
|
|
|
(127 |
) |
|
|
312 |
|
|
|
|
|
Commercial Business Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Non-Real Estate |
|
|
6 |
|
|
|
6 |
|
|
|
(6 |
) |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
2,615 |
|
|
$ |
2,615 |
|
|
$ |
(269 |
) |
|
$ |
2,618 |
|
|
$ |
12 |
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
168 |
|
|
|
168 |
|
|
|
(103 |
) |
|
|
169 |
|
|
|
|
|
Commercial Mortgages |
|
|
312 |
|
|
|
312 |
|
|
|
(127 |
) |
|
|
312 |
|
|
|
|
|
Commercial Business Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Non-Real Estate |
|
|
6 |
|
|
|
6 |
|
|
|
(6 |
) |
|
|
6 |
|
|
|
|
|
page -17-
The performance and credit quality of the loan portfolio is also monitored by the analyzing the age
of the loans receivable as determined by the length of time a recorded payment is past due. The
following table presents the classes of the loan portfolio summarized by the past due status as of
June 30, 2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivable |
|
|
|
|
|
|
|
Greater |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days |
|
|
|
30-89 Days Past |
|
|
than 90 |
|
|
Total |
|
|
|
|
|
|
Total Loans |
|
|
and |
|
(In Thousands) |
|
Due |
|
|
Days |
|
|
Past Due |
|
|
Current |
|
|
Receivables |
|
|
Accruing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
5,762 |
|
|
$ |
2,907 |
|
|
$ |
8,669 |
|
|
$ |
327,757 |
|
|
$ |
336,426 |
|
|
$ |
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,883 |
|
|
|
6,883 |
|
|
|
|
|
Home Equity |
|
|
676 |
|
|
|
111 |
|
|
|
787 |
|
|
|
84,489 |
|
|
|
85,276 |
|
|
|
|
|
Commercial Mortgages |
|
|
1,991 |
|
|
|
127 |
|
|
|
2,118 |
|
|
|
80,791 |
|
|
|
82,909 |
|
|
|
|
|
Commercial Business
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,274 |
|
|
|
7,274 |
|
|
|
|
|
Consumer
Non-Real
Estate |
|
|
25 |
|
|
|
|
|
|
|
25 |
|
|
|
1,193 |
|
|
|
1,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8,454 |
|
|
$ |
3,145 |
|
|
$ |
11,599 |
|
|
$ |
508,387 |
|
|
$ |
519,986 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
|
|
|
|
|
|
Greater |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivable > |
|
|
|
30-89 Days Past |
|
|
than 90 |
|
|
Total |
|
|
|
|
|
|
Total Loans |
|
|
90 Days and |
|
(In Thousands) |
|
Due |
|
|
Days |
|
|
Past Due |
|
|
Current |
|
|
Receivables |
|
|
Accruing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages |
|
$ |
2,691 |
|
|
$ |
2,447 |
|
|
$ |
5,138 |
|
|
$ |
327,760 |
|
|
$ |
332,898 |
|
|
$ |
380 |
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,420 |
|
|
|
5,420 |
|
|
|
|
|
Home Equity |
|
|
57 |
|
|
|
12 |
|
|
|
69 |
|
|
|
88,858 |
|
|
|
88,927 |
|
|
|
12 |
|
Commercial Mortgages |
|
|
|
|
|
|
312 |
|
|
|
312 |
|
|
|
78,310 |
|
|
|
78,622 |
|
|
|
|
|
Commercial Business Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,598 |
|
|
|
6,598 |
|
|
|
|
|
Consumer Non-Real Estate |
|
|
31 |
|
|
|
6 |
|
|
|
37 |
|
|
|
1,163 |
|
|
|
1,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,779 |
|
|
$ |
2,777 |
|
|
$ |
5,556 |
|
|
$ |
508,109 |
|
|
$ |
513,665 |
|
|
$ |
392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -18-
The following table provides the activity in the allowance for loan losses by loan class for three
and six-months ended June 30, 2011 and the balance in the allowance for loan losses at June 30,
2011 disaggregated on the basis of the Companys impairment method by loan class along with the
balance of loans receivable by class disaggregated on the basis of the Companys impairment
methodology.
Allowance for Loan Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
Consumer |
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
Home |
|
|
Commercial |
|
|
Business |
|
|
Non-Real |
|
|
|
|
|
|
|
|
|
Mortgages |
|
|
Construction |
|
|
Equity |
|
|
Mortgages |
|
|
Loans |
|
|
Estate |
|
|
Unallocated |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months ended June 30, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance, March 31, 2011 |
|
$ |
992 |
|
|
$ |
9 |
|
|
$ |
500 |
|
|
$ |
960 |
|
|
$ |
117 |
|
|
$ |
10 |
|
|
$ |
207 |
|
|
$ |
2,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs |
|
|
(199 |
) |
|
|
|
|
|
|
|
|
|
|
(105 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(310 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions |
|
|
87 |
|
|
|
1 |
|
|
|
(59 |
) |
|
|
43 |
|
|
|
27 |
|
|
|
(1 |
) |
|
|
67 |
|
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, June 30, 2011 |
|
$ |
880 |
|
|
$ |
10 |
|
|
$ |
441 |
|
|
$ |
898 |
|
|
$ |
144 |
|
|
$ |
5 |
|
|
$ |
274 |
|
|
$ |
2,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -19-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
Consumer |
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
Home |
|
|
Commercial |
|
|
Business |
|
|
Non-Real |
|
|
|
|
|
|
|
|
|
Mortgages |
|
|
Construction |
|
|
Equity |
|
|
Mortgages |
|
|
Loans |
|
|
Estate |
|
|
Unallocated |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months ended June 30, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance, December
31, 2010 |
|
$ |
947 |
|
|
$ |
8 |
|
|
$ |
457 |
|
|
$ |
983 |
|
|
$ |
130 |
|
|
$ |
10 |
|
|
$ |
104 |
|
|
$ |
2,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs |
|
|
(214 |
) |
|
|
|
|
|
|
|
|
|
|
(105 |
) |
|
|
|
|
|
|
(11 |
) |
|
|
|
|
|
|
(330 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions |
|
|
147 |
|
|
|
2 |
|
|
|
(16 |
) |
|
|
20 |
|
|
|
14 |
|
|
|
2 |
|
|
|
170 |
|
|
|
339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, June 30, 2011 |
|
$ |
880 |
|
|
$ |
10 |
|
|
$ |
441 |
|
|
$ |
898 |
|
|
$ |
144 |
|
|
$ |
5 |
|
|
$ |
274 |
|
|
$ |
2,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for
impairment |
|
$ |
196 |
|
|
$ |
|
|
|
$ |
89 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for
impairment |
|
$ |
684 |
|
|
$ |
10 |
|
|
$ |
352 |
|
|
$ |
898 |
|
|
$ |
144 |
|
|
$ |
5 |
|
|
$ |
274 |
|
|
$ |
2,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: |
|
$ |
336,426 |
|
|
$ |
6,883 |
|
|
$ |
85,276 |
|
|
$ |
82,909 |
|
|
$ |
7,274 |
|
|
$ |
1,218 |
|
|
$ |
|
|
|
$ |
519,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for
impairment |
|
$ |
3,006 |
|
|
$ |
|
|
|
$ |
154 |
|
|
$ |
127 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for
impairment |
|
$ |
333,420 |
|
|
$ |
6,883 |
|
|
$ |
85,122 |
|
|
$ |
82,782 |
|
|
$ |
7,274 |
|
|
$ |
1,218 |
|
|
$ |
|
|
|
$ |
516,699 |
|
page -20-
The following table presents nonaccrual loans by classes of the loan portfolio as of June 30, 2011
and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Residential Mortgages |
|
$ |
3,049 |
|
|
$ |
2,392 |
|
Construction |
|
|
|
|
|
|
|
|
Home Equity |
|
|
111 |
|
|
|
|
|
Commercial Mortgages |
|
|
127 |
|
|
|
312 |
|
Commercial Business Loans |
|
|
|
|
|
|
|
|
Consumer Non-Real Estate |
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
Total |
|
$ |
3,287 |
|
|
$ |
2,710 |
|
|
|
|
|
|
|
|
4. Federal Home Loan Bank Stock
Federal law requires a member institution of the Federal Home Loan Bank (FHLB) to hold stock of
its district FHLB according to a predetermined formula. The restricted stock is carried at cost. In
December 2008, the FHLB of Pittsburgh notified member banks that it was suspending dividend
payments and the repurchase of capital stock. During 2010 and 2011, the FHLB allowed certain
redemptions.
Managements determination of whether these investments are impaired is based on their assessment
of the ultimate recoverability of their cost rather than by recognizing temporary declines in
value. The determination of whether a decline affects the ultimate recoverability of their cost is
influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as
compared to the capital stock amount for the FHLB and the length of time this situation has
persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level
of such payments in relation to the operating performance of the FHLB, and (3) the impact of
legislative and regulatory changes on institutions and, accordingly, on the customer base of the
FHLB.
Management believes no impairment charge is necessary related to the FHLB restricted stock as of
June 30, 2011.
5. DEPOSITS
Deposits are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
|
|
June 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
Non-interest bearing checking accounts |
|
$ |
20,080 |
|
|
$ |
17,015 |
|
Now accounts |
|
|
31,802 |
|
|
|
21,320 |
|
Interest bearing checking accounts |
|
|
37,747 |
|
|
|
32,577 |
|
Money market deposit accounts |
|
|
133,268 |
|
|
|
136,079 |
|
Passbook and club accounts |
|
|
4,206 |
|
|
|
3,739 |
|
Certificate of deposits |
|
|
303,999 |
|
|
|
317,370 |
|
|
|
|
|
|
|
|
Total Deposits |
|
$ |
531,102 |
|
|
$ |
528,100 |
|
|
|
|
|
|
|
|
The aggregate amount of certificate accounts in denominations of $100,000 or more at June 30,
2011 and September 30, 2010 amounted to approximately $63.3 million and $59.2 million,
respectively.
page -21-
6. COMMITMENTS
At June 30, 2011, the following commitments were outstanding:
|
|
|
|
|
|
|
(In thousands) |
|
Letters of credit |
|
$ |
405 |
|
Commitments to originate loans |
|
|
25,446 |
|
Unused portion of home equity lines of credits |
|
|
55,719 |
|
Unused portion of commercial lines of credits |
|
|
9,088 |
|
Undisbursed portion of construction loans in process |
|
|
3,186 |
|
|
|
|
|
Total |
|
$ |
93,844 |
|
|
|
|
|
Outstanding letters of credit written are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The majority of these standby letters of
credit expire within the next twelve months. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending other loan commitments. The Company requires
collateral supporting these letters of credit as deemed necessary. Management believes that the
proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum
potential amount of future payments required under the corresponding guarantees. The current
amount of the liability as of June 30, 2011 for guarantees under standby letters of credit issued
is not material.
7. EARNINGS PER SHARE
The following shares were used for the computation of earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Basic |
|
|
3,737,439 |
|
|
|
3,667,319 |
|
|
|
3,717,906 |
|
|
|
3,651,495 |
|
Diluted |
|
|
3,771,917 |
|
|
|
3,700,510 |
|
|
|
3,752,059 |
|
|
|
3,671,977 |
|
The difference between the number of shares used for computation of basic earnings per share
and diluted earnings per share represents the dilutive effect of stock options. There were 230,820
stock options that were anti-dilutive for the three- months and nine-months ended June 30, 2011,
respectively. There were 192,083 and 194,583 stock options that were anti-dilutive for the three
and nine-months periods ended June 30, 2010, respectively.
page -22-
8. LONG-TERM DEBT
Advances consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
Interest |
|
Maturing Period |
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 to 12 months |
|
$ |
52,366 |
|
|
|
4.59 |
% |
|
$ |
15,923 |
|
|
|
4.37 |
% |
13 to 24 months |
|
|
29,571 |
|
|
|
3.80 |
% |
|
|
54,440 |
|
|
|
4.50 |
% |
25 to 36 months |
|
|
42,858 |
|
|
|
4.27 |
% |
|
|
35,022 |
|
|
|
4.03 |
% |
37 to 48 months |
|
|
2,834 |
|
|
|
3.58 |
% |
|
|
28,729 |
|
|
|
4.10 |
% |
49 to 60 months |
|
|
20,000 |
|
|
|
4.13 |
% |
|
|
18,356 |
|
|
|
3.83 |
% |
61 to 72 months |
|
|
30,000 |
|
|
|
4.86 |
% |
|
|
10,000 |
|
|
|
4.71 |
% |
73 to 84 months |
|
|
69,271 |
|
|
|
4.38 |
% |
|
|
45,000 |
|
|
|
4.52 |
% |
85 to 120 months |
|
|
15,000 |
|
|
|
3.93 |
% |
|
|
64,577 |
|
|
|
4.38 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
261,900 |
|
|
|
4.34 |
% |
|
$ |
272,047 |
|
|
|
4.33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank (FHLB) advances are collateralized by Federal Home Loan Bank stock and
substantially all first mortgage loans. The Company has a line of credit with the FHLB of which $0
out of $75.0 million was used at June 30, 2011 and September 30, 2010, respectively. Included in
the table above at June 30, 2011 and September 30, 2010 are convertible advances whereby the FHLB
has the option at a predetermined strike rate to convert the fixed interest rate to an adjustable
rate tied to London Interbank Offered Rate (LIBOR). The Company then has the option to repay
these advances if the FHLB converts the interest rate. These advances are included in the periods
in which they mature. The Company has a total FHLB borrowing capacity of $332.9 million of which
$211.9 million was used as of June 30, 2011. In addition, there are four long-term advances from
other financial institutions totaling $50 million that are secured by investment and
mortgage-backed securities.
9. REGULATORY CAPITAL REQUIREMENTS
The Company and the Bank are subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Companys financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Banks assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices. The Banks capital
amounts and classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors. Quantitative measures established by regulation to
ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set
forth in the table below) of total Tier 1 capital (as defined in the regulations) to risk weighted
assets (as defined), and of Tier 1 capital (as defined) to assets (as defined). Management
believes, as of June 30, 2011, that the Bank meets all capital adequacy requirements to which it is
subject.
page -23-
As of June 30, 2011, the most recent notification from the Federal Deposit Insurance Corporation
categorized the Company and Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have changed the Banks
category.
The Banks actual capital amounts and ratios at June 30, 2011 and September 30, 2011 are also
presented in the table below. The Companys capital ratios are not significantly different than
the Banks disclosed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Be Considered Well |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized Under |
|
|
|
|
|
|
|
|
|
|
|
For Capital |
|
|
Prompt Corrective |
|
|
|
Actual |
|
|
Adequacy Purposes |
|
|
Action Provisions |
|
(Dollars in Thousands) |
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to assets) |
|
$ |
56,458 |
|
|
|
6.60 |
% |
|
$ |
34,197 |
|
|
|
4.00 |
% |
|
$ |
42,746 |
|
|
|
5.00 |
% |
Tier 1 Capital (to risk weighted assets) |
|
|
56,458 |
|
|
|
12.00 |
% |
|
|
18,856 |
|
|
|
4.00 |
% |
|
|
28,239 |
|
|
|
6.00 |
% |
Total Capital (to risk weighted assets) |
|
|
59,114 |
|
|
|
12.56 |
% |
|
|
37.651 |
|
|
|
8.00 |
% |
|
|
47,064 |
|
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to assets) |
|
$ |
53,330 |
|
|
|
6.19 |
% |
|
$ |
34,440 |
|
|
|
4.00 |
% |
|
$ |
43,050 |
|
|
|
5.00 |
% |
Tier 1 Capital (to risk weighted assets) |
|
|
55,330 |
|
|
|
11.35 |
% |
|
|
18,799 |
|
|
|
4.00 |
% |
|
|
28,199 |
|
|
|
6.00 |
% |
Total Capital (to risk weighted assets) |
|
|
55,834 |
|
|
|
11.88 |
% |
|
|
37,599 |
|
|
|
8.00 |
% |
|
|
46,999 |
|
|
|
10.00 |
% |
10. FAIR VALUE MEASUREMENTS AND DISCLOSURES
The Company uses fair value measurements to record fair value adjustments to certain assets and
liabilities and to determine fair value disclosures. In accordance with accounting guidance, the
fair value of a financial instrument is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement
date. Fair value is best determined based upon quoted market prices. However, in many instances,
there are no quoted market prices for the Companys various financial instruments. In cases where
quoted market prices are not available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Accordingly, the fair value
estimates may not be realized in an immediate settlement of the instrument.
The fair value guidance provides a consistent definition of fair value, which focuses on exit price
in an orderly transaction (that is, not a forced liquidation or distressed sale) between market
participants at the measurement date under current market conditions. If there has been a
significant decrease in the volume and level of activity for the asset or liability, a change in
valuation technique or the use of multiple valuation techniques may be appropriate. In such
instances, determining the price at which willing market participants would transact at the
measurement date under current market conditions depends on the facts and circumstances and
requires the use of significant judgment. The fair value is determined at a reasonable point
within the range that is most representative of fair value under current market conditions.
page -24-
The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation methods
used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements). The three levels of the fair value
hierarchy under are as follows:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for
identical, unrestricted assets or liabilities.
Level 2: Quoted prices in markets that are not active, or inputs that are observable either
directly or indirectly, for substantially the full term of the asset or liability.
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair
value measurement and unobservable (i.e., supported with little or no market activity).
An assets or liabilitys level within the fair value hierarchy is based on the lowest level of
input that is significant to the fair value measurement.
For financial assets measured at fair value on a recurring basis, the fair value measurements by
level within the fair value hierarchy used at June 30, 2011 and September 30, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant |
|
|
(Level 3) |
|
|
|
|
|
|
|
Active Markets |
|
|
Other |
|
|
Significant |
|
|
|
June 30, |
|
|
for Identical |
|
|
Observable |
|
|
Unobservable |
|
Description |
|
2011 |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
(In Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
$ |
363 |
|
|
$ |
363 |
|
|
$ |
|
|
|
$ |
|
|
U.S. Government money market funds |
|
|
16,103 |
|
|
|
16,103 |
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
|
827 |
|
|
|
|
|
|
|
827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale securities |
|
$ |
17,293 |
|
|
$ |
16,466 |
|
|
$ |
827 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Level 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
|
Active Markets |
|
|
Significant Other |
|
|
Significant |
|
|
|
September 30, |
|
|
for Identical |
|
|
Observable |
|
|
Unobservable |
|
Description |
|
2010 |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
(In Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
$ |
343 |
|
|
$ |
343 |
|
|
$ |
|
|
|
$ |
|
|
U.S. Government money market funds |
|
|
20,261 |
|
|
|
20,261 |
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
|
809 |
|
|
|
|
|
|
|
809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale securities |
|
$ |
21,413 |
|
|
$ |
20,604 |
|
|
$ |
809 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no transfers in and out of Level 1 and Level 2 fair value measurements for the
quarter ended June 30, 2011.
page -25-
For assets measured at fair value on a nonrecurring basis, the fair value measurements by level
within the fair value hierarchy used at June 30, 2011 and September 30, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Level 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
|
Active Markets |
|
|
Significant Other |
|
|
Significant |
|
|
|
June 30, |
|
|
for Identical |
|
|
Observable |
|
|
Unobservable |
|
Description |
|
2011 |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
(In Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans |
|
$ |
1,246 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
(Level 3) |
|
|
|
September 30, |
|
|
Active Markets for |
|
|
Observable |
|
|
Significant |
|
Description |
|
2010 |
|
|
Identical Assets |
|
|
Inputs |
|
|
Unobservable Inputs |
|
(In Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans |
|
$ |
186 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following valuation techniques were used to measure fair value of the Companys financial
instruments in the tables above and below:
Cash and Cash Equivalents (Carried at Cost)
The carrying amounts for cash and cash equivalents approximate those assets fair values.
Securities
The fair value of securities available for sale (carried at fair value) and held to maturity
(carried at amortized cost) are determined by obtaining quoted market prices on nationally
recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical
technique used widely 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 prices.
Loans Receivable (Carried at Cost)
The fair values of loans are estimated using discounted cash flow analyses, using market rates at
the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.
Projected future cash flows are calculated based upon contractual maturity or call dates, projected
repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently
and with no significant change in credit risk, fair values are based on carrying values.
Impaired loans are those loans which the Company has measured impairment generally based on the
fair value of the loans collateral. Fair value is generally determined based upon independent
third-party appraisals of the properties, or discounted cash flows based upon the expected
proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input
that is significant to the fair value measurements.
Federal Home Loan Bank Stock (Carried at Cost)
The carrying amount of this restricted investment in bank stock approximates fair value, and
considers the limited marketability of such securities.
page -26-
Accrued Interest Receivable and Payable (Carried at Cost)
The carrying amount of accrued interest receivable and accrued interest payable approximates its
fair value.
Deposit Liabilities (Carried at Cost)
The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook
savings and money market accounts) are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit
are estimated using a discounted cash flow calculation that applies interest rates currently being
offered in the market on certificates to a schedule of a aggregated expected monthly maturities on
time deposits.
Borrowings (Carried at Cost)
Fair values of borrowings are estimated using discounted cash flow analysis, based on quoted prices
for new advances with similar credit risk characteristics, terms and remaining maturity. These
prices obtained from this active market represent a market value that is deemed to represent the
transfer price if the liability were assumed by a third party.
Off-Balance Sheet Financial Instruments (Disclosed at Cost)
Fair values for the Companys off-balance sheet financial instruments (lending commitments and
letters of credit) are based on fees currently charged in the market to enter into similar
agreements, taking into account, the remaining terms of the agreements and the counterparties
credit standing. The fair value of these off-balance sheet financial instruments are not considered
material as of June 30, 2011 and September 30, 2010.
The estimated fair value amounts have been determined by the Company using available market
information appropriate valuation methodologies. However, considerable judgment is necessarily
required to interpret the data to develop the estimates.
page -27-
The carrying amounts and estimated fair values of financial instruments as of June 30, 2011 and
September 30, 2010 are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
September 30, 2010 |
|
|
|
Carrying |
|
|
Estimated Fair |
|
|
Carrying |
|
|
Estimated Fair |
|
(In Thousands) |
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
22,991 |
|
|
$ |
22,991 |
|
|
$ |
20,190 |
|
|
$ |
20,190 |
|
Securities held to maturity |
|
|
261,363 |
|
|
|
267,243 |
|
|
|
256,088 |
|
|
|
264,448 |
|
Securities available-for-sale |
|
|
17,293 |
|
|
|
17,293 |
|
|
|
21,413 |
|
|
|
21,413 |
|
Loans receivable net |
|
|
509,467 |
|
|
|
527,490 |
|
|
|
510,093 |
|
|
|
530,294 |
|
Federal Home Loan Bank stock |
|
|
13,800 |
|
|
|
13,800 |
|
|
|
16,096 |
|
|
|
16,096 |
|
Accrued interest receivable |
|
|
3,077 |
|
|
|
3,077 |
|
|
|
3,210 |
|
|
|
3,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking, passbook, club and NOW
deposit accounts |
|
|
93,835 |
|
|
|
93,835 |
|
|
|
74,651 |
|
|
|
74,651 |
|
Money Market deposit accounts |
|
|
133,268 |
|
|
|
133,268 |
|
|
|
136,079 |
|
|
|
136,079 |
|
Certificate of deposit accounts |
|
|
303,999 |
|
|
|
312,376 |
|
|
|
317,370 |
|
|
|
325,881 |
|
Borrowings |
|
|
261,900 |
|
|
|
283,826 |
|
|
|
272,047 |
|
|
|
291,857 |
|
Accrued interest payable |
|
|
1,356 |
|
|
|
1,356 |
|
|
|
1,407 |
|
|
|
1,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off balance sheet financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and
information about the financial instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the Companys entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the Companys financial
instruments, fair value estimates are based on many judgments. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance-sheet financial instruments without
attempting to estimate the value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments. Significant assets and liabilities that
are not considered financial instruments include deferred income taxes and premises and equipment.
In addition, the tax ramifications related to the realization of the unrealized gains and losses
can have a significant effect on fair value estimates and have not been and have not been
considered in the estimate.
page -28-
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations |
This report contains certain forward-looking statements and information relating to the Company
that are based on the beliefs of management as well as assumptions made by and information
currently available to management. In addition, in those and other portions of this document, the
words anticipate, believe, estimate, intend, should and similar expressions, or the
negative thereof, as they relate to the Company or the Companys management, are intended to
identify forward-looking statements. Such statements reflect the current views of the Company with
respect to future-looking
events and are subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual
results may vary materially from those described herein as anticipated, believed, estimated,
expected or intended. The Company does not intend to update these forward-looking statements.
The Companys business consists of attracting deposits from the general public through a variety of
deposit programs and investing such deposits principally in first mortgage loans secured by
residential properties, commercial loans and commercial lines of credit in the Companys primary
market area. The Company also originates a variety of consumer loans, predominately home equity
loans and lines of credit also secured by residential properties in the Companys primary lending
area. The Company serves its customers through its full-service branch network as well as through
remote ATM locations, the internet and telephone banking.
Critical Accounting Policies and Judgments
The Companys consolidated financial statements are prepared based on the application of certain
accounting policies. Certain of these policies require numerous estimates and strategic or
economic assumptions that may prove inaccurate or subject to variations and may significantly
affect the Companys reported results and financial position for the period or in future periods.
Changes in underlying factors, assumptions, or estimates in any of these areas could have a
material impact on the Companys future financial condition and results of operations. The Company
believes the following critical accounting policies affect its more significant judgments and
estimates used in the preparation of the consolidated financial statements: allowance for loan
losses, other-than-temporary security impairment and deferred income taxes.
Allowance for Loan Losses
Analysis and Determination of the Allowance for Loan Losses - The allowance for loan losses is a
valuation allowance for probable losses inherent in the loan portfolio. The Company evaluates the
need to establish allowances against losses on loans on a monthly basis. When additional allowances
are necessary, a provision for loan losses is charged to earnings.
Our methodology for assessing the appropriateness of the allowance for loan losses consists of
three key elements: (1) specific allowances for certain impaired loans; (2) a general valuation
allowance on certain identified problem loans; and (3) a general valuation allowance on the
remainder of the loan portfolio. Although we determine the amount of each element of the allowance
separately, the entire allowance for loan losses is available for the entire portfolio.
Specific Allowance Required for Certain Impaired Loans: We establish an allowance for certain
impaired loans for the amounts by which the collateral value, present value of future cash flows or
observable market price are lower than the carrying value of the loan. Under current accounting
guidelines, a loan is defined as impaired when, based on current information and events, it is
probable that a creditor will be unable to collect all amounts due under the contractual terms of
the loan agreement.
General Valuation Allowance on Certain Identified Problem Loans - We also establish a general
allowance for classified loans that do not have an individual allowance. We segregate these loans
by loan category and assign allowance percentages to each category based on inherent losses
associated with each type of lending and consideration that these loans, in the aggregate,
represent an above-average credit risk and that more of these loans will prove to be uncollectible
compared to loans in the general portfolio.
page -29-
General Valuation Allowance on the Remainder of the Loan Portfolio - We establish another general
allowance for loans that are not classified to recognize the inherent losses associated with
lending activities, but which, unlike specific allowances, has not been allocated to particular
problem assets. This general valuation allowance is determined by segregating the loans by loan
category and assigning allowance percentages based on our historical loss experience, delinquency
trends and managements evaluation of the collectibility of the loan portfolio. The allowance may
be adjusted for significant factors that, in managements judgment, affect the collectability of
the portfolio as of the evaluation date. These significant factors may include changes in lending
policies and procedures, changes in existing general economic and business conditions affecting our
primary lending areas, credit quality trends, collateral value, loan volumes and
concentrations, seasoning of the loan portfolio, recent loss experience in particular segments of
the portfolio, duration of the current business cycle and bank regulatory examination results. The
applied loss factors are reevaluated quarterly to ensure their relevance in the current economic
environment.
Other-than-Temporary Impairment of Investment Securities
Securities are evaluated periodically to determine whether a decline in their value is
other-than-temporary. Management utilizes criteria such as the magnitude and duration of the
decline, in addition to the reasons underlying the decline, to determine whether the loss in value
is other-than-temporary. The term other-than-temporary is not intended to indicate that the
decline is permanent, but indicates that the prospects for a near-term recovery of value are not
necessarily favorable, or that there is a lack of evidence to support realizable value equal to or
greater than the carrying value of the investment.
Deferred Tax Assets
In evaluating our ability to recover deferred tax assets, management considers all available
positive and negative evidence, including our past operating results and our forecast of future
taxable income. In determining future taxable income, management makes assumptions for the amount
of taxable income, the reversal of temporary differences and the implementation of feasible and
prudent tax planning strategies. These assumptions require us to make judgments about our future
taxable income and are consistent with the plans and estimates we use to manage our business. Any
reduction in estimated future taxable income may require us to record a valuation allowance against
our deferred tax assets. An increase in the valuation allowance would result in additional income
tax expense in the period and could have a significant impact on our future earnings.
Changes in Financial Position for the Nine-Month Period Ended June 30, 2011
Total assets at June 30, 2011 were $857.6 million, an increase of $439,000 for the nine-month
period then ended. The increase was primarily due to an increase in cash and investments held to
maturity of $8.1 million. The increase in assets was partially offset by a decrease in loans
receivable of approximately $626,000, investments available for sale of $4.1 million and repurchase
of Federal Home Loan Bank Stock of $2.3 million.
There was a growth in deposits during the nine-month period ended June 30, 2011. Total deposits
increased $3.0 million to $531.1 million. Advances from borrowers for taxes and insurance also
increased by $4.4 million due to the timing of property tax payments. The increase was primarily
offset by a decrease in borrowings of $10.1 million due to normal repayments for the period.
page -30-
Comparisons of Results of Operations for the Three-Month and Nine-Month Period Ended June 30,
2011 with the Three-Month and Nine-Month Period Ended June 30, 2010
Net Income
Net income for the three-month period ended June 30, 2011 was $2.0 million compared to $1.3
million for the comparable period in 2010. Basic and diluted earnings per share for the
three-month period ending June 30, 2011 was $0.53. There was a onetime Bank Owned Life Insurance
(BOLI), net death benefit claim, of $927,000 (net of $115,000 state income taxes), or $.24 per
diluted share due to the death of an officer in the current quarter. Net income for the nine-month
period ended June 30, 2011 was $4.3 million compared to $3.7 million for the comparable period in
2010. Basic and diluted earnings per share for the nine-month period ended June 30, 2011 was $1.16
and $1.15 compared to $1.01 for basic and diluted earnings per share for the comparable period in
2010.
Net Interest Income
Net
interest income was $4.8 million for the three-month period ended June 30, 2011 compared to $4.7
million for the comparable period in 2010. Net interest income increased to $13.7 million for the
nine-month period ended June 30, 2011 compared to $13.6 million for the comparable period in 2010.
The increase occurred for both the three- month and nine-month period ended June 30, 2011 due to a
reduction in interest expense that was partially offset by a decrease in interest income. Our
average interest rate spread for the three and nine-month periods ended June 30, 2010 and 2011 were
2.07%, 2.03%, 2.11% and 2.03%. Our increase in average balance on interest-bearing liabilities was
more than offset by our increase in average balance on interest-bearing assets.
Non-Interest Income
Non-interest income increased to $1.5 million for the three-month period ended June 30, 2011 from
$508,000 for the comparable period in 2010. Non-interest income increased to $2.5 million for the
nine-month period ended June 30, 2011 from $1.5 million for the comparable period in 2010. The
increases are primarily due to a onetime Bank Owned Life Insurance (BOLI) benefit of $1.0
million. This increase was offset by a decrease in income on non-deposit products.
Non-Interest Expenses
For the three-month period ended June 30, 2011, non-interest expenses increased by $181,000 or
5.65% to $3.4 million compared to $3.2 million for the same period in 2010. For the nine-month
period ended June 30, 2011, non-interest expenses increased by $383,000 or 4.04% to $9.9 million
compared to $9.5 million for the same period in 2010. Salary and employee benefits increased
$162,000 to $1.9 million and $355,000 to $5.5 million for the three and nine-month period ended
June 30, 2011. These increases are primarily due to salary increases and additional employee
benefits expense. Occupancy and equipment decreased $30,000 for three-months ended June
30th 2011 compared to the same period in 2010. This is due to additional furniture and
fixture expenses in the three-months ended in 2010 related to the opening of our Souderton Branch.
An increase of $54,000 for the nine-month period ended June 30th 2011 was due to
building maintenance, office depreciation, and taxes related to the opening of our Souderton
Branch. FDIC insurance expense increased to $234,000 and $724,000 for the three and nine-month
period ended June 30, 2011 compared to $229,000 and $682,000 for the same periods in 2010 due to an
increase in deposits. Other expenses increased by $12,000 and decreased by $108,000 for the three
and nine-month period ended June 30, 2011. The decrease was primarily due to prior years
advertising expense relating to the Souderton Branch opening. The annualized ratio of non-interest
expenses to average assets for the three and nine-month periods ended June 30, 2011 and 2010 were
1.54%, 1.58% and 1.50%, 1.50%, respectively.
page -31-
Income Taxes
The Company made provisions for income taxes of $739,000 and $1.5 million for the three-month and
nine-month period ended June 30, 2011, compared to $500,000 and $1.4 million for the comparable
periods in 2010. These provisions are based on the levels of pre-tax income, adjusted primarily
for tax-exempt interest income on investments.
Liquidity and Capital Recourses
For a financial institution, liquidity is a measure of the ability to fund customers needs for
loans and deposit withdrawals. The Bank regularly evaluates economic conditions in order to
maintain a strong liquidity position. One of the most significant factors considered by management
when evaluating liquidity requirements is the stability of the Banks core deposit base. In
addition to cash, the Bank maintains a portfolio of short-term investments to meet its liquidity
requirements.
The Company (or also relies upon cash flow from operations and other financing activities,
generally short-term and long-term debt. Liquidity is also provided by investing activities
including the repayment and maturity of loans and investment securities as well as the management
of asset sales when considered necessary. The Bank also has access to and sufficient assets to
secure lines of credit and other borrowings in amounts adequate to fund any unexpected cash
requirements.
As of June 30, 2011, the Company had $94.0 million in commitments to fund loan originations,
disburse loans in process and meet other obligations. Management anticipates that the majority of
these commitments will be funded within the next six months by means of normal cash flows and new
deposits.
The Company invests excess funds in overnight deposits and other short-term interest-earning
assets, which provide liquidity to meet lending requirements. The Company also has available
borrowings with the Federal Home Loan Bank of Pittsburgh up to the Companys maximum borrowing
capacity, which was $332.9 million at June 30, 2011 of which $211.9 was outstanding at June 30,
2011.
The Banks net income for the nine-months ended June 30, 2011 was $4.3 million compared to $3.7
million for the comparable period 2010. This increased the Banks stockholders equity to $56.5
million or 6.59% of total assets. This amount is well in excess of the Banks minimum regulatory
capital requirement.
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures About Market Risk |
The Company has instituted programs designed to decrease the sensitivity of its earnings to
material and prolonged increases in interest rates. The principal determinant of the exposure of
the Companys earnings to interest rate risk is the timing difference between the repricing or
maturity of the Companys interest-earning assets and the repricing or maturity of its
interest-bearing liabilities. If the maturities of such assets and liabilities were perfectly
matched, and if the interest rates borne by its assets and liabilities were equally flexible and
moved concurrently, neither of which is the case, the impact on net interest income of rapid
increases or decreases in interest rates would be minimized. The Companys asset and liability
management policies seek to decrease the interest rate sensitivity by shortening the repricing
intervals and the maturities of the Companys interest-earning assets. Although management of the
Company believes that the steps taken have reduced the Companys overall vulnerability to increases
in interest rates, the Company remains vulnerable to material and prolonged increases in interest
rates during periods in which its interest rate sensitive liabilities exceed its interest rate
sensitive assets. The authority and responsibility for interest rate management is vested in the
Companys Board of Directors. The Chief Executive Officer implements the Board of Directors
policies during the day-to-day operations of the Company.
Each month, the Chief Financial Officer (CFO) presents the Board of Directors with a report,
which outlines the Companys asset and liability gap position in various time periods. The gap
is the difference between interest- earning assets and interest-bearing liabilities which mature or
reprice over a given time period.
page -32-
The CFO also meets weekly with the Companys other senior officers to review and establish policies
and strategies designed to regulate the Companys flow of funds and coordinate the sources, uses
and pricing of such funds. The first priority in structuring and pricing the Companys assets and
liabilities is to maintain an acceptable interest rate spread while reducing the effects of changes
in interest rates and maintaining the quality of the Companys assets.
The following table summarizes the amount of interest-earning assets and interest-bearing
liabilities outstanding as of June 30, 2011, which are expected to mature, prepay or reprice in
each of the future time periods shown. Except as stated below, the amounts of assets or
liabilities shown which mature or reprice during a particular period were determined in accordance
with the contractual terms of the asset or liability. Adjustable and floating-rate assets are
included in the period in which interest rates are next scheduled to adjust rather than in the
period in which they are due and fixed-rate loans and mortgage-backed securities are included in
the periods in which they are anticipated to be repaid.
The passbook accounts, negotiable order of withdrawal (NOW) accounts, interest bearing accounts,
and money market deposit accounts, are included in the Over 5 Years categories based on
managements beliefs that these funds are core deposits having significantly longer effective
maturities based on the Companys retention of such deposits in changing interest rate
environments.
Generally, during a period of rising interest rates, a positive gap would result in an increase in
net interest income while a negative gap would adversely affect net interest income. Conversely,
during a period of falling interest rates, a positive gap would result in a decrease in net
interest income while a negative gap would positively affect net interest income. However, the
following table does not necessarily indicate the impact of general interest rate movements on the
Companys net interest income because the repricing of certain categories of assets and
liabilities is discretionary and is subject to competitive and other pressures. As a result,
certain assets and liabilities indicated as repricing within a stated period may in fact reprice at
different rate levels.
page -33-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
|
1 to 3 |
|
|
3 to 5 |
|
|
Over 5 |
|
|
|
|
(In thousands) |
|
or less |
|
|
Years |
|
|
Years |
|
|
Years |
|
|
Total |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans |
|
$ |
56,907 |
|
|
$ |
58,490 |
|
|
$ |
46,155 |
|
|
$ |
174,874 |
|
|
$ |
336,426 |
|
Commercial loans |
|
|
41,745 |
|
|
|
9,343 |
|
|
|
25,705 |
|
|
|
13,390 |
|
|
|
90,183 |
|
Mortgage-backed securities |
|
|
59,405 |
|
|
|
46,547 |
|
|
|
22,806 |
|
|
|
21,911 |
|
|
|
150,669 |
|
Consumer and other loans |
|
|
66,925 |
|
|
|
10,193 |
|
|
|
4,783 |
|
|
|
11,476 |
|
|
|
93,377 |
|
Investment securities and other investments |
|
|
71,263 |
|
|
|
19,022 |
|
|
|
47,842 |
|
|
|
22,486 |
|
|
|
160,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
296,245 |
|
|
|
143,595 |
|
|
|
147,291 |
|
|
|
244,137 |
|
|
|
831,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passbook and Club accounts |
|
|
399 |
|
|
|
|
|
|
|
|
|
|
|
3,807 |
|
|
|
4,206 |
|
NOW and checking accounts |
|
|
6,955 |
|
|
|
|
|
|
|
|
|
|
|
62,594 |
|
|
|
69,549 |
|
Consumer Money Market Deposit accounts |
|
|
51,252 |
|
|
|
|
|
|
|
|
|
|
|
57,900 |
|
|
|
109,152 |
|
Business Money Market Deposit accounts |
|
|
18,087 |
|
|
|
|
|
|
|
|
|
|
|
6,029 |
|
|
|
24,116 |
|
Certificate accounts |
|
|
160,424 |
|
|
|
104,133 |
|
|
|
39,442 |
|
|
|
|
|
|
|
303,999 |
|
Borrowed money |
|
|
58,135 |
|
|
|
70,219 |
|
|
|
21,575 |
|
|
|
111,971 |
|
|
|
261,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
295,252 |
|
|
|
174,352 |
|
|
|
61,017 |
|
|
|
242,301 |
|
|
|
772,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repricing GAP during the period |
|
$ |
993 |
|
|
$ |
(30,757 |
) |
|
$ |
86,274 |
|
|
$ |
1,836 |
|
|
$ |
58,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative GAP |
|
$ |
993 |
|
|
$ |
(29,764 |
) |
|
$ |
56,510 |
|
|
$ |
58,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of GAP during the period to
total assets |
|
|
0.12 |
% |
|
|
-3.59 |
% |
|
|
10.06 |
% |
|
|
0.21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of cumulative GAP to total assets |
|
|
0.12 |
% |
|
|
-3.47 |
% |
|
|
6.59 |
% |
|
|
6.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -34-
|
|
|
Item 4. |
|
Controls and Procedures |
Our management evaluated, with the participation of our Chief Executive Officer and Chief
Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period
covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures are designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and regulations and are operating in an effective manner.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
Part II OTHER INFORMATION
|
|
|
Item 1. |
|
Legal Proceedings |
The Company is involved in various legal proceedings occurring in the ordinary
course of business. It is the opinion of management that these matters will not materially affect the
Companys consolidated financial position or results of operations.
Not applicable.
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
Not applicable.
|
|
|
Item 3. |
|
Defaults upon Senior Securities |
Not applicable.
|
|
|
Item 4. |
|
(Removed and Reserved) |
|
|
|
Item 5. |
|
Other information. |
Not applicable.
page -35-
|
|
|
Item 6. |
|
Exhibits and Reports on Form 8-K |
|
|
|
|
|
No. |
|
Descriptions |
|
31.1 |
|
|
Certification of Chief Executive Officer |
|
31.2 |
|
|
Certification of Chief Operating and Financial Officer |
|
32.0 |
|
|
Section 1350 Certification of Chief Executive Officer and Chief Operating and Financial Officer |
The following Exhibits are being furnished* as part of this report:
|
|
|
No. |
|
Description |
101.INS
|
|
XBRL Instance Document.* |
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.* |
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.* |
101.LAB
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XBRL Taxonomy Extension Label Linkbase Document.* |
101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document.* |
101.DEF
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XBRL Taxonomy Extension Definitions Linkbase Document.* |
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* |
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These interactive data files are being furnished as part of this Quarterly Report, and, in
accordance with Rule 402 of Regulation S-T, shall not be deemed file for purposes of Section 11 or
12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934,
as amended, or otherwise subject to liability under those sections. |
page -36-
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.
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HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
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Date: August 12, 2011 |
By: |
/s/ Ronald B. Geib
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Ronald B. Geib |
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Chief Executive Officer |
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Date: August 12, 2011 |
By: |
/s/ Brendan J. McGill
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Brendan J. McGill |
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Executive Vice President
Chief Operating and Financial Officer |
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page -37-