Form 10-Q
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 |
For the quarterly period ended June 30, 2009
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
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
271 Main Street, Harleysville, Pennsylvania 19438
(Address of principal executive offices)
(Zip Code)
(215) 256-8828
(Registrants telephone number, including area code)
(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 Regualtion
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 o 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). Yes o No þ
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, 3,614,903 shares outstanding as of August 14, 2009
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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2009 |
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2008 |
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Assets |
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Cash and amounts due from depository institutions |
|
$ |
2,645 |
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$ |
2,217 |
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Interest bearing deposits in other banks |
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20,481 |
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7,157 |
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Total cash and cash equivalents |
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23,126 |
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9,374 |
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Investment securities held to maturity (fair value
June 30, $77,672; September 30, $78,973) |
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77,337 |
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79,254 |
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Investment securities available-for-sale at fair value |
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19,827 |
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854 |
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Mortgage-backed securities held to maturity (fair value
June 30, $179,833; September 30, $211,814) |
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175,275 |
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213,933 |
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Mortgage-backed securities available-for-sale at fair value |
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816 |
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|
758 |
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Loans receivable (net of allowance for loan losses
June 30, $2,272; September 30, $1,988) |
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483,098 |
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476,858 |
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Accrued interest receivable |
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3,341 |
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3,799 |
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Federal Home Loan Bank stock at cost |
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16,096 |
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16,574 |
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Real estate owned |
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567 |
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Office properties and equipment, net |
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9,739 |
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9,769 |
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Prepaid expenses and other assets |
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15,928 |
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14,502 |
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TOTAL ASSETS |
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$ |
825,150 |
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$ |
825,675 |
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Liabilities and Stockholders Equity |
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Liabilities: |
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Deposits |
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$ |
450,997 |
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$ |
425,513 |
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Short-term borrowings |
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21,800 |
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Long-term debt |
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316,088 |
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326,046 |
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Accrued interest payable |
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1,615 |
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1,686 |
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Advances from borrowers for taxes and insurance |
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5,583 |
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1,483 |
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Accounts payable and accrued expenses |
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1,484 |
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1,938 |
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Total liabilities |
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775,767 |
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778,466 |
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Stockholders equity: |
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Preferred Stock: $.01 par value;
12,500,000 shares authorized; none issued |
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Common stock: $.01 par value; 25,000,000 shares authorized;
3,921,177 shares issued; outstanding June 30, 2009 3,614,903 shares
September 30, 2008 3,567,934 shares |
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39 |
|
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|
39 |
|
Additional Paid-in capital |
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8,022 |
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|
7,993 |
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Treasury stock, at cost (June 30, 2009, 306,274 shares; September 30, 2008, 353,243) |
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(4,373 |
) |
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(5,017 |
) |
Retained earnings partially restricted |
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45,734 |
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44,235 |
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Accumulated other comprehensive loss |
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(39 |
) |
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(41 |
) |
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Total stockholders equity |
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49,383 |
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47,209 |
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
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$ |
825,150 |
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$ |
825,675 |
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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) |
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2009 |
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2008 |
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2009 |
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2008 |
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INTEREST INCOME: |
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Interest on mortgage loans |
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$ |
4,961 |
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$ |
4,797 |
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$ |
15,066 |
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$ |
14,053 |
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Interest on commercial loans |
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774 |
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|
449 |
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2,223 |
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|
1,166 |
|
Interest on mortgage-backed securities |
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2,209 |
|
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2,724 |
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7,163 |
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|
7,442 |
|
Interest on consumer and other loans |
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1,144 |
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|
|
1,373 |
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3,639 |
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4,356 |
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Interest on taxable investments |
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|
572 |
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1,114 |
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|
2,134 |
|
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3,943 |
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Interest on tax-exempt investments |
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|
312 |
|
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|
345 |
|
|
|
968 |
|
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|
1,043 |
|
Dividends on investment securities |
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1 |
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|
10 |
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|
10 |
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32 |
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|
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Total interest income |
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|
9,973 |
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|
10,812 |
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|
31,203 |
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|
32,035 |
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Interest Expense: |
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Interest on deposits |
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2,642 |
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|
3,685 |
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8,356 |
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11,997 |
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Interest on borrowings |
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3,486 |
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3,371 |
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10,460 |
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10,209 |
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Total interest expense |
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6,128 |
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|
7,056 |
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18,816 |
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|
22,206 |
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|
|
|
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Net Interest Income |
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|
3,845 |
|
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|
3,756 |
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12,387 |
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|
9,829 |
|
Provision for loan losses |
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90 |
|
|
|
35 |
|
|
|
290 |
|
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|
40 |
|
|
|
|
|
|
|
|
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|
|
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|
Net Interest Income after Provision
for Loan Losses |
|
|
3,755 |
|
|
|
3,721 |
|
|
|
12,097 |
|
|
|
9,789 |
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|
|
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|
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|
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|
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Other Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Customer service fees |
|
|
161 |
|
|
|
156 |
|
|
|
497 |
|
|
|
460 |
|
Impairment of equity securities |
|
|
|
|
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|
(252 |
) |
|
|
(449 |
) |
|
|
(252 |
) |
Gain on sale of investments |
|
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|
|
|
|
|
|
|
|
(11 |
) |
|
|
|
|
Loss on sale of investments |
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
4 |
|
Income on bank-owned life insurance |
|
|
121 |
|
|
|
120 |
|
|
|
364 |
|
|
|
372 |
|
Other income |
|
|
178 |
|
|
|
177 |
|
|
|
534 |
|
|
|
583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income |
|
|
460 |
|
|
|
201 |
|
|
|
955 |
|
|
|
1,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
1,523 |
|
|
|
1,437 |
|
|
|
4,719 |
|
|
|
4,195 |
|
Occupancy and equipment |
|
|
299 |
|
|
|
289 |
|
|
|
900 |
|
|
|
817 |
|
Deposit insurance premiums |
|
|
604 |
|
|
|
12 |
|
|
|
861 |
|
|
|
37 |
|
Data processing |
|
|
146 |
|
|
|
186 |
|
|
|
409 |
|
|
|
434 |
|
Other |
|
|
541 |
|
|
|
630 |
|
|
|
1,798 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses |
|
|
3,113 |
|
|
|
2,554 |
|
|
|
8,687 |
|
|
|
7,365 |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before Income Taxes |
|
|
1,102 |
|
|
|
1,368 |
|
|
|
4,365 |
|
|
|
3,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
246 |
|
|
|
332 |
|
|
|
930 |
|
|
|
720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
856 |
|
|
$ |
1,036 |
|
|
$ |
3,435 |
|
|
$ |
2,871 |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Basic Earnings Per Share |
|
$ |
0.24 |
|
|
$ |
0.29 |
|
|
$ |
0.96 |
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|
$ |
0.78 |
|
|
|
|
|
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|
|
|
|
|
|
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|
Diluted Earnings Per Share |
|
$ |
0.24 |
|
|
$ |
0.29 |
|
|
$ |
0.95 |
|
|
$ |
0.77 |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Dividends Per Share |
|
$ |
0.18 |
|
|
$ |
0.17 |
|
|
$ |
0.54 |
|
|
$ |
0.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
2009 |
|
|
2008 |
|
Net Income |
|
$ |
856 |
|
|
$ |
1,036 |
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities available for sale, net of tax
benefit 2009, ($3); 2008, ($2) and reclassifications |
|
|
6 |
(1) |
|
|
4 |
(1) |
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
$ |
862 |
|
|
$ |
1,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
(1) Disclosure of reclassification amount, net of tax for the three months ended: |
|
|
|
|
|
|
|
|
Net unrealized gain (loss) arising during the three months ended |
|
$ |
9 |
|
|
$ |
(246 |
) |
Reclassification adjustment for net losses (gains) included in net income |
|
|
|
|
|
|
252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9 |
|
|
|
6 |
|
Tax (expense) benefit |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
Net unrealized gain on securities avalaible for sale |
|
$ |
6 |
|
|
$ |
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
June 30, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
Net Income |
|
$ |
3,435 |
|
|
$ |
2,871 |
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities available for sale, net of tax
benefit 2009, $1; 2008, $55 and reclassifications |
|
|
2 |
(1) |
|
|
(107 |
)(1) |
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
$ |
3,437 |
|
|
$ |
2,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
(1) Disclosure of reclassification amount, net of tax for the nine months ended: |
|
|
|
|
|
|
|
|
Net unrealized gain (loss) arising during the nine months ended |
|
$ |
(437 |
) |
|
$ |
(410 |
) |
Reclassification adjustment for net losses (gains) included in net income |
|
|
440 |
|
|
|
248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3 |
|
|
|
(162 |
) |
Tax (expense) benefit |
|
|
(1 |
) |
|
|
55 |
|
|
|
|
|
|
|
|
Net unrealized loss on securities available for sale |
|
$ |
2 |
|
|
$ |
(107 |
) |
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements.
page -3-
Harleysville Savings Financial Corporation
Unaudited Consolidated Statements of Stockholders Equity
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2008 |
|
|
3,567,934 |
|
|
$ |
39 |
|
|
$ |
7,993 |
|
|
$ |
44,235 |
|
|
$ |
(41 |
) |
|
$ |
(5,017 |
) |
|
$ |
47,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,435 |
|
|
|
|
|
|
|
|
|
|
|
3,435 |
|
Dividends $.54 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,936 |
) |
|
|
|
|
|
|
|
|
|
|
(1,936 |
) |
Stock option compensation |
|
|
|
|
|
|
|
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102 |
|
Treasury stock delivered under employee stock plan |
|
|
10,000 |
|
|
|
|
|
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
137 |
|
|
|
120 |
|
Treasury stock delivered under
reinvestment plan |
|
|
34,885 |
|
|
|
|
|
|
|
(47 |
) |
|
|
|
|
|
|
|
|
|
|
478 |
|
|
|
431 |
|
Employee options exercised |
|
|
2,084 |
|
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
29 |
|
|
|
20 |
|
Change in unrealized holding loss
on available-for-sale securities, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009 |
|
|
3,614,903 |
|
|
$ |
39 |
|
|
$ |
8,022 |
|
|
$ |
45,734 |
|
|
$ |
(39 |
) |
|
$ |
(4,373 |
) |
|
$ |
49,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2007 |
|
|
3,717,519 |
|
|
$ |
39 |
|
|
$ |
8,044 |
|
|
$ |
42,363 |
|
|
$ |
(89 |
) |
|
$ |
(3,316 |
) |
|
$ |
47,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,871 |
|
|
|
|
|
|
|
|
|
|
|
2,871 |
|
Dividends $.51 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,868 |
) |
|
|
|
|
|
|
|
|
|
|
(1,868 |
) |
Stock option compensation |
|
|
|
|
|
|
|
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88 |
|
Treasury stock purchased |
|
|
(205,358 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,557 |
) |
|
|
(2,557 |
) |
Treasury stock delivered under employee stock plan |
|
|
8,000 |
|
|
|
|
|
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
133 |
|
|
|
107 |
|
Treasury stock delivered under
reinvestment plan |
|
|
31,122 |
|
|
|
|
|
|
|
(78 |
) |
|
|
|
|
|
|
|
|
|
|
487 |
|
|
|
409 |
|
Employee options exercised |
|
|
2,250 |
|
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
38 |
|
|
|
19 |
|
Change in unrealized holding loss
on available-for-sale securities, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(107 |
) |
|
|
|
|
|
|
(107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008 |
|
|
3,553,533 |
|
|
$ |
39 |
|
|
$ |
8,009 |
|
|
$ |
43,366 |
|
|
$ |
(196 |
) |
|
$ |
(5,215 |
) |
|
$ |
46,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
2009 |
|
|
2008 |
|
Operating Activities: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
3,435 |
|
|
$ |
2,871 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
347 |
|
|
|
387 |
|
Provision for loan losses |
|
|
290 |
|
|
|
40 |
|
Gain on sales of investments |
|
|
(20 |
) |
|
|
(4 |
) |
Loss on sales of investments |
|
|
11 |
|
|
|
|
|
Loss on impairment of equity securities |
|
|
449 |
|
|
|
252 |
|
Amortization of deferred loan fees |
|
|
47 |
|
|
|
12 |
|
Net amortization of premiums and discounts |
|
|
107 |
|
|
|
122 |
|
Increase in cash surrender value |
|
|
(364 |
) |
|
|
(372 |
) |
Compensation charge on stock options |
|
|
102 |
|
|
|
88 |
|
Changes in assets and liabilities which provided (used) cash: |
|
|
|
|
|
|
|
|
(Decrease) increase in accounts payable and accrued expenses |
|
|
(453 |
) |
|
|
284 |
|
Increase in prepaid expenses and other assets |
|
|
(1,063 |
) |
|
|
(1,189 |
) |
Decrease in accrued interest receivable |
|
|
458 |
|
|
|
41 |
|
(Decrease) increase in accrued interest payable |
|
|
(71 |
) |
|
|
11 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
3,275 |
|
|
|
2,543 |
|
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
Purchase of mortgage-backed securities held to maturity |
|
|
|
|
|
|
(61,396 |
) |
Purchase of investment securities held to maturity |
|
|
(25,000 |
) |
|
|
(20,997 |
) |
Purchase of investment securities available-for-sale |
|
|
(19,478 |
) |
|
|
|
|
Net redemption of FHLB stock |
|
|
478 |
|
|
|
(1,012 |
) |
Proceeds from the sale of investment securities available-for-sale |
|
|
|
|
|
|
422 |
|
Proceeds from maturities of investment securities held to maturity |
|
|
1,365 |
|
|
|
31,818 |
|
Principal collected on mortgage-backed securities |
|
|
64,112 |
|
|
|
39,172 |
|
Principal collected on long-term loans |
|
|
101,726 |
|
|
|
66,039 |
|
Long-term loans originated or acquired |
|
|
(108,870 |
) |
|
|
(103,170 |
) |
Purchases of premises and equipment |
|
|
(317 |
) |
|
|
(212 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
14,016 |
|
|
|
(49,336 |
) |
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
Net increase in demand deposits, NOW accounts
and savings accounts |
|
|
17,606 |
|
|
|
5,302 |
|
Net increase in certificates of deposit |
|
|
7,878 |
|
|
|
11,584 |
|
Cash dividends |
|
|
(1,505 |
) |
|
|
(1,459 |
) |
Net decrease in short-term borrowings |
|
|
(21,800 |
) |
|
|
(19,000 |
) |
Proceeds from long-term debt |
|
|
24,500 |
|
|
|
93,000 |
|
Repayment of long-term debt |
|
|
(34,458 |
) |
|
|
(43,455 |
) |
Acquisition of treasury stock |
|
|
|
|
|
|
(2,557 |
) |
Treasury stock delivered under employee stock plans |
|
|
140 |
|
|
|
126 |
|
Net increase in advances from borrowers for taxes and insurance |
|
|
4,100 |
|
|
|
4,423 |
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(3,539 |
) |
|
|
47,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
13,752 |
|
|
|
1,171 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
|
|
9,374 |
|
|
|
8,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR |
|
$ |
23,126 |
|
|
$ |
9,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest (credited and paid) |
|
$ |
12,887 |
|
|
$ |
22,195 |
|
Income taxes |
|
|
1,203 |
|
|
|
683 |
|
Non cash transfer of loans to real estate owned |
|
|
567 |
|
|
|
|
|
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 condensed 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 that allows the Company to offer non deposit products
and HARL LLC 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 six months ended June 30, 2009 are not necessarily
indicative of the results which may be expected for the entire fiscal year ending September 30,
2009 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, 2008.
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.
Recent Accounting Pronouncements In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No.
115. SFAS No. 159 permits entities to choose to measure many financial instruments and certain
other items at fair value. Unrealized gains and losses on items for which the fair value option
has been elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is
effective for our Company October 1, 2008.
The adoption of SFAS No. 159 did not have an impact on
our consolidated financial statements.
page -6-
In September 2006, the Emerging Issues Task Force (EITF) of FASB issued EITF Issue No. 06-4,
Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split
Dollar Life Insurance Arrangements (EITF 06-04). EITF 06-4 requires the recognition of a
liability related to the postretirement benefits covered by an
endorsement split-dollar life insurance arrangement. The consensus highlights that the employer
(who is also the policyholder) has a liability for the benefit it is providing to its employee. As
such, if the policyholder has agreed to maintain the insurance policy in force for the employees benefit
during his or her retirement, then the liability recognized during the employees active service
period should be based on the future cost of insurance to be incurred during the employees
retirement. Alternatively, if the policyholder has agreed to provide the employee with a death
benefit, then the liability for the future death benefit should be recognized by following the
guidance in SFAS No. 106 or Accounting Principles Board (APB) Opinion No. 12, as appropriate. For
transition, an entity can choose to apply the guidance using either of the
following approaches: (a) a change in accounting principle through retrospective application to all
periods presented or (b) a change in accounting principle through a cumulative-effect adjustment to
the balance in retained earnings at the beginning of the year of adoption. The disclosures are
required in fiscal years beginning after December 15, 2007, with early adoption permitted. The
adoption of this new accounting standard did not have an impact to our consolidated financial
statements.
In March 2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 Accounting for
Collateral Assignment Split-Dollar Life Insurance Agreements (EITF 06-10). EITF 06-10 provides
guidance for determining a liability for the postretirement benefit obligation as well as
recognition and measurement of the associated asset on the basis of the terms of the collateral
assignment agreement. EITF 06-10 is effective for fiscal years beginning after December 15, 2007.
The adoption of EITF 06-10 did not have an impact on the Companys consolidated financial position
and results of operations.
In December of 2007, FASB issued statement No. 141 (R) Business Combinations. This Statement
establishes principles and requirements for how the acquirer of a business recognizes and measures
in its financial statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. The Statement also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the nature and financial effects
of the business combination. The guidance will become effective as of the beginning of a companys
fiscal year beginning after December 15, 2008. The new pronouncement will impact the Companys
accounting for business combinations completed beginning October 1, 2009.
In December 2007, FASB issued statement No. 160 Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51. This Statement establishes accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. The guidance will become effective as of the beginning of a companys fiscal year
beginning after December 15, 2008. The Company believes that this new pronouncement will have an
immaterial impact on the Companys financial statements in future periods.
page -7-
In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133 (Statement 161). Statement 161 requires
entities that utilize derivative instruments to provide qualitative
disclosures about their objectives and strategies for using such instruments, as well as any
details of credit-risk-related contingent features contained within derivatives. Statement 161
also requires entities to disclose additional information about the amounts and location of
derivatives located within the financial statements, how the provisions of SFAS 133 have been
applied, and the impact that hedges have on an entitys financial position, financial performance,
and cash
flows. Statement 161 is effective for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company is currently evaluating the potential
impact the new pronouncement will have on its consolidated financial statements.
In September 2008, the FASB issued FSP 133-1 and FIN 45-4, Disclosures about Credit Derivatives
and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and
Clarification of the Effective Date of FASB Statement No. 161 (FSP 133-1 and FIN 45-4). FSP 133-1
and FIN 45-4 amends and enhances disclosure requirements for sellers of credit derivatives and
financial guarantees. It also clarifies that the disclosure requirements of SFAS No. 161 are
effective for quarterly periods beginning after November 15, 2008, and fiscal years that include
those periods. FSP 133-1 and FIN 45-4 is effective for reporting periods (annual or interim)
ending after November 15, 2008. The implementation of this standard did not have a material impact
on our consolidated financial position and results of operations.
In December 2008, the FASB issued FSP SFAS 140-4 and FASB Interpretation (FIN) 46(R)-8,
Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in
Variable Interest Entities (FSP SFAS 140-4 and FIN 46(R)-8). FSP SFAS 140-4 and FIN 46(R)-8 amends
FASB SFAS 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, to require public entities to provide additional disclosures about transfers of
financial assets. It also amends FIN 46(R), Consolidation of Variable Interest Entities, to
require public enterprises, including sponsors that have a variable interest in a variable interest
entity, to provide additional disclosures about their involvement with variable interest entities.
Additionally, this FSP requires certain disclosures to be provided by a public enterprise that is
(a) a sponsor of a qualifying special purpose entity (SPE) that holds a variable interest in the
qualifying SPE but was not the transferor of financial assets to the qualifying SPE and (b) a
servicer of a qualifying SPE that holds a significant variable interest in the qualifying SPE but
was not the transferor of financial assets to the qualifying SPE. The disclosures required by FSP
SFAS 140-4 and FIN 46(R)-8 are intended to provide greater transparency to financial statement
users about a transferors continuing involvement with transferred financial assets and an
enterprises involvement with variable interest entities and qualifying SPEs. FSP SFAS 140-4 and
FIN 46(R) is effective for reporting periods (annual or interim) ending after December 15, 2008.
This new pronouncement will not have an impact on the Companys consolidated financial statements.
page -8-
In January 2009, the FASB issued FSP EITF 99-20-1, Amendments to the Impairment of Guidance of
EITF Issue No. 99-20 (FSP EITF 99-20-1). FSP EITF 99-20-1 amends the impairment guidance in EITF
Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests
and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,
to achieve more consistent determination of whether an other-than-temporary impairment has
occurred. FSP EITF 99-20-1 also retains and emphasizes the objective of an other-than-temporary
impairment assessment and the related disclosure requirements in SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, and other related guidance. FSP EITF 99-20-1 is
effective for interim and annual reporting periods ending after December 15, 2008, and shall be
applied prospectively. Retrospective application to a prior interim or annual reporting period is
not permitted. This new pronouncement did not have an impact on the Companys consolidated
financial statements.
In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers
of financial statements prepared in accordance with International Financial Reporting Standards
(IFRS). IFRS is a comprehensive series of accounting standards published by the International
Accounting Standards Board (IASB). Under the proposed roadmap, the Company may be required to
prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a
determination in 2011 regarding the mandatory adoption of IFRS. The Company is currently assessing
the impact that this potential change would have on its consolidated financial statements, and it
will continue to monitor the development of the potential implementation of IFRS.
In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
(FSP) No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS
157-4). FASB Statement 157, Fair Value Measurements, defines fair value as the price that would be
received to sell the asset or transfer the liability in an orderly transaction (that is, not a
forced liquidation or distressed sale) between market participants at the measurement date under
current market conditions. FSP FAS 157-4 provides additional guidance on determining when the
volume and level of activity for the asset or liability has significantly decreased. The FSP also
includes guidance on identifying circumstances when a transaction may not be considered orderly.
FSP FAS 157-4 provides a list of factors that a reporting entity should evaluate to determine
whether there has been a significant decrease in the volume and level of activity for the asset or
liability in relation to normal market activity for the asset or liability. When the reporting
entity concludes there has been a significant decrease in the volume and level of activity for the
asset or liability, further analysis of the information from that market is needed and significant
adjustments to the related prices may be necessary to estimate fair value in accordance with
Statement 157.
This FSP clarifies that when there has been a significant decrease in the volume and level of
activity for the asset or liability, some transactions may not be orderly. In those situations, the
entity must evaluate the weight of the evidence to determine whether the transaction is orderly.
The FSP provides a list of circumstances that may indicate that a transaction is not orderly. A
transaction price that is not associated with an orderly transaction is given little, if any,
weight when estimating fair value.
page -9-
This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009. The adoption of this FSP
effective June 30, 2009, did not have a material impact on the Companys consolidated financial
statements, although additional disclosures were required.
In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2). FSP FAS 115-2 and FAS 124-2
clarifies the interaction of the factors that should be considered when determining whether a debt
security is other-than-temporarily impaired. For debt securities,
management must assess whether (a) it has the intent to sell the security and (b) it is more likely
than not that it will be required to sell the security prior to its anticipated recovery. These
steps are done before assessing whether the entity will recover the cost basis of the investment.
Previously, this assessment required management to assert it has both the intent and the ability to
hold a security for a period of time sufficient to allow for an anticipated recovery in fair value
to avoid recognizing an other-than-temporary impairment. This change does not affect the need to
forecast recovery of the value of the security through either cash flows or market price.
In instances when a determination is made that an other-than-temporary impairment exists but the
investor does not intend to sell the debt security and it is not more likely than not that it will
be required to sell the debt security prior to its anticipated recovery, FSP FAS 115-2 and FAS
124-2 changes the presentation and amount of the other-than-temporary impairment recognized in the
income statement. The other-than-temporary impairment is separated into (a) the amount of the total
other-than-temporary impairment related to a decrease in cash flows expected to be collected from
the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment
related to all other factors. The amount of the total other-than-temporary impairment related to
the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment
related to all other factors is recognized in other comprehensive income.
This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009. The adoption of this FSP
effective June 30, 2009, did not have a material impact on the Companys consolidated financial
statements, although additional disclosures were required.
In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments (FSP FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 amends FASB
Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures
about fair value of financial instruments for interim reporting periods of publicly traded
companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28,
Interim Financial Reporting, to require those disclosures in summarized financial information at
interim reporting periods.
This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009. The adoption of these new
provisions resulted in additional disclosure about the fair value of financial instruments in
connection with the Companys June 30, 2009 quarterly report, but did not have a material impact to
our consolidated financial statements.
page -10-
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an
amendment of FASB Statement No. 140. This statement prescribes the information that a reporting
entity must provide in its financial reports about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance and cash flows; and a transferors
continuing involvement in transferred financial assets. Specifically, among other aspects,
SFAS 166 amends Statement of Financial Standard No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, or SFAS 140, by removing the concept of a
qualifying special-purpose entity from SFAS 140 and removes the exception from
applying FIN 46(R) to variable interest entities that are qualifying special-purpose entities. It
also modifies the financial-components approach used in SFAS 140. SFAS 166 is effective for fiscal
years beginning after November 15, 2009. The Company is currently reviewing the effect this new
pronouncement will have on its consolidated financial statements.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). This
statement amends FASB Interpretation No. 46, Consolidation of Variable Interest Entities (revised
December 2003) an interpretation of ARB No. 51, or FIN 46(R), to require an enterprise to
determine whether its variable interest or interests give it a controlling financial interest in a
variable interest entity. The primary beneficiary of a variable interest entity is the enterprise
that has both (1) the power to direct the activities of a variable interest entity that most
significantly impact the entitys economic performance and (2) the obligation to absorb losses of
the entity that could potentially be significant to the variable interest entity or the right to
receive benefits from the entity that could potentially be significant to the variable interest
entity. SFAS 167 also amends FIN 46(R) to require ongoing reassessments of whether an enterprise
is the primary beneficiary of a variable interest entity. SFAS 167 is effective for fiscal years
beginning after November 15, 2009. The Company is currently reviewing the effect this new
pronouncement will have on its consolidated financial statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162.
SFAS 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, to
establish the FASB Accounting Standards Codification as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in preparation of
financial statements in conformity with generally accepted accounting principles in the United
States. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The
Company is currently reviewing the effect this new pronouncement will have on its consolidated
financial statements.
page -11-
2. INVESTMENT SECURITIES HELD TO MATURITY
A comparison of amortized cost and approximate fair value of investment securities with gross
unrealized gains and losses, by maturities, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
U.S. Government Agencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after 1 year through 5 years |
|
$ |
13,000 |
|
|
$ |
149 |
|
|
$ |
(53 |
) |
|
$ |
13,096 |
|
Due after 5 years through 10 years |
|
|
6,000 |
|
|
|
|
|
|
|
(85 |
) |
|
|
5,915 |
|
Due after 10 years through 15
years |
|
|
32,000 |
|
|
|
252 |
|
|
|
(172 |
) |
|
|
32,080 |
|
Due after 15 years |
|
|
2,430 |
|
|
|
181 |
|
|
|
|
|
|
|
2,611 |
|
Tax Exempt Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after 5 years through 10 years |
|
|
2,668 |
|
|
|
85 |
|
|
|
|
|
|
|
2,753 |
|
Due after 10 years through 15
years |
|
|
18,848 |
|
|
|
509 |
|
|
|
(208 |
) |
|
|
19,149 |
|
Due after 15 years |
|
|
2,391 |
|
|
|
|
|
|
|
(323 |
) |
|
|
2,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities |
|
$ |
77,337 |
|
|
$ |
1,176 |
|
|
$ |
(841 |
) |
|
$ |
77,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
U.S. Government Agencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after 1 year through 5 years |
|
$ |
5,000 |
|
|
$ |
67 |
|
|
$ |
|
|
|
$ |
5,067 |
|
Due after 5 years through 10 years |
|
|
2,000 |
|
|
|
5 |
|
|
|
|
|
|
|
2,005 |
|
Due after 10 years through 15
years |
|
|
38,497 |
|
|
|
11 |
|
|
|
(341 |
) |
|
|
38,167 |
|
Due after 15 years |
|
|
8,818 |
|
|
|
64 |
|
|
|
(44 |
) |
|
|
8,838 |
|
Tax Exempt Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after 10 years through 15
years |
|
|
21,544 |
|
|
|
592 |
|
|
|
(109 |
) |
|
|
22,027 |
|
Due after 15 years |
|
|
3,395 |
|
|
|
|
|
|
|
(526 |
) |
|
|
2,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities |
|
$ |
79,254 |
|
|
$ |
739 |
|
|
$ |
(1,020 |
) |
|
$ |
78,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of investments with unrealized losses, aggregated by category, at June 30, 2009 is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
12 Months or Longer |
|
|
Total |
|
|
Total |
|
(In Thousands) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
US Government agencies |
|
$ |
24,690 |
|
|
$ |
(310 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
24,690 |
|
|
$ |
(310 |
) |
Tax exempt obligations |
|
|
4,453 |
|
|
|
(208 |
) |
|
|
2,068 |
|
|
|
(323 |
) |
|
|
6,521 |
|
|
|
(531 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
29,143 |
|
|
$ |
(518 |
) |
|
$ |
2,068 |
|
|
$ |
(323 |
) |
|
$ |
31,211 |
|
|
$ |
(841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2009, investment securities in a gross unrealized loss position for twelve months
or longer consisted of 4 Tax Exempt Obligations that at such date had an aggregate depreciation of
13.5% 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 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. The Company does not have the intention to sell
and does not believe it will be required to sell any of the securities in an unrealized loss
position prior to a recovery at amortized cost. Management does not believe any individual
unrealized loss as of June 30, 2009 represents an other-than-temporary impairment.
A summary of investments with unrealized losses, aggregated by category, at September 30, 2008 is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
12 Months or Longer |
|
|
Total |
|
|
Total |
|
(In Thousands) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
US Government agencies |
|
$ |
34,501 |
|
|
$ |
(385 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
34,501 |
|
|
$ |
(385 |
) |
Tax exempt obligations |
|
|
4,502 |
|
|
|
(298 |
) |
|
|
1,675 |
|
|
|
(337 |
) |
|
|
6,177 |
|
|
|
(635 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
39,003 |
|
|
$ |
(683 |
) |
|
$ |
1,675 |
|
|
$ |
(337 |
) |
|
$ |
40,678 |
|
|
$ |
(1,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -12-
3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
A comparison of amortized cost and approximate fair value of investment securities with gross
unrealized gains and losses, by maturities, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
(In Thousands) |
|
Cost |
|
|
Gain |
|
|
Losses |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities |
|
$ |
452 |
|
|
$ |
21 |
|
|
$ |
(111 |
) |
|
$ |
362 |
|
Money Market Mutual Funds |
|
|
19,465 |
|
|
|
|
|
|
|
|
|
|
|
19,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities |
|
$ |
19,917 |
|
|
$ |
21 |
|
|
$ |
(111 |
) |
|
$ |
19,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
(In Thousands) |
|
Cost |
|
|
Gain |
|
|
Losses |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities |
|
$ |
877 |
|
|
$ |
46 |
|
|
$ |
(81 |
) |
|
$ |
842 |
|
Money Market Mutual Funds |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities |
|
$ |
889 |
|
|
$ |
46 |
|
|
$ |
(81 |
) |
|
$ |
854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of investments with unrealized losses, aggregated by category, at June 30, 2009 is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
12 Months or Longer |
|
|
Total |
|
|
Total |
|
(In Thousands) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
Equity Securities |
|
$ |
131 |
|
|
$ |
(32 |
) |
|
$ |
211 |
|
|
$ |
(79 |
) |
|
$ |
342 |
|
|
$ |
(111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the nine month period ended June 30,2009, the Company recognized an impairment charge
of $449,000 on the equity securities of four financial institutions. In addition for the nine
month period ended June 30, 2008, the Company recognized an impairment charge of $252,000 on the
equity securities of two financial institutions. In total the Company has recognized an
impairment charge of $701,000 on equity securities.
As of June 30, 2009 there were four equity securities in an unrealized loss position. 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 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 for a
reasonable period of time until the anticipated recovery of fair value occurs. Management does not
believe any individual unrealized loss as of June 30, 2009 represents an other-than-temporary
impairment.
A summary of investments with unrealized losses, aggregated by category, at September 30, 2008
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
12 Months or Longer |
|
|
Total |
|
|
Total |
|
(In Thousands) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
Equity Securities |
|
$ |
258 |
|
|
$ |
(14 |
) |
|
$ |
339 |
|
|
$ |
(67 |
) |
|
$ |
597 |
|
|
$ |
(81 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -13-
4. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
A comparison of amortized cost and approximate fair value of mortgage-backed securities with gross
unrealized gains and losses, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Approximate |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
|
Collateralized mortgage obligations |
|
$ |
12,419 |
|
|
$ |
120 |
|
|
$ |
(486 |
) |
|
$ |
12,053 |
|
FHLMC pass-through certificates |
|
|
70,452 |
|
|
|
2,200 |
|
|
|
|
|
|
|
72,652 |
|
FNMA pass-through certificates |
|
|
92,404 |
|
|
|
2,724 |
|
|
|
|
|
|
|
95,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
175,275 |
|
|
$ |
5,044 |
|
|
$ |
(486 |
) |
|
$ |
179,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Approximate |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
$ |
14,708 |
|
|
$ |
8 |
|
|
$ |
(624 |
) |
|
$ |
14,092 |
|
FHLMC pass-through certificates |
|
|
88,594 |
|
|
|
283 |
|
|
|
(826 |
) |
|
|
88,051 |
|
FNMA pass-through certificates |
|
|
110,431 |
|
|
|
99 |
|
|
|
(1,061 |
) |
|
|
109,469 |
|
GNMA pass-through certificates |
|
|
200 |
|
|
|
2 |
|
|
|
|
|
|
|
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
213,933 |
|
|
$ |
392 |
|
|
$ |
(2,511 |
) |
|
$ |
211,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of securities with unrealized losses, aggregated by category, at June 30, 2009 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
12 Months or Longer |
|
|
Total |
|
|
Total |
|
(In Thousands) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
Mortgage-backed securities
held to maturity |
|
$ |
|
|
|
$ |
|
|
|
$ |
7,999 |
|
|
$ |
(486 |
) |
|
$ |
7,999 |
|
|
$ |
(486 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2009, mortgage-related securities in a gross unrealized loss position for twelve
months or longer consisted of 6 securities that at such date had an aggregate depreciation of 5.7%
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. All of the debt securities are
highly rated as investment grade and Management believes that it will not incur any losses. The
Company does not have the intention to sell and does not believe it will be required to sell any of
the securities in an unrealized loss position prior to a recovery of amortized cost. Management
does not believe any individual unrealized loss as of June 30, 2009 represents an
other-than-temporary impairment.
A summary of securities with unrealized losses, aggregated by category, at September 30, 2008
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
12 Months or Longer |
|
|
Total |
|
|
Total |
|
(In Thousands) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
Mortgage-backed securities
held to maturity |
|
$ |
159,415 |
|
|
$ |
(2,412 |
) |
|
$ |
4,615 |
|
|
$ |
(99 |
) |
|
$ |
164,030 |
|
|
$ |
(2,511 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -14-
5. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE
A comparison of amortized cost and approximate fair value of mortgage-backed securities with
gross unrealized gains and losses,
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
(In thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA pass-through certificates |
|
$ |
785 |
|
|
$ |
31 |
|
|
$ |
|
|
|
$ |
816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mortgage-Backed Securities |
|
$ |
785 |
|
|
$ |
31 |
|
|
$ |
|
|
|
$ |
816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
(In thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA pass-through certificates |
|
$ |
785 |
|
|
$ |
|
|
|
$ |
(27 |
) |
|
$ |
758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mortgage-Backed Securities |
|
$ |
785 |
|
|
$ |
|
|
|
$ |
(27 |
) |
|
$ |
758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. LOANS RECEIVABLE
Loans receivable consist of the following:
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
June 30, 2009 |
|
|
September 30, 2008 |
|
Residential Mortgages |
|
$ |
336,923 |
|
|
$ |
337,316 |
|
Commercial Mortgages |
|
|
54,201 |
|
|
|
44,407 |
|
Construction |
|
|
3,042 |
|
|
|
8,346 |
|
Savings Account |
|
|
1,075 |
|
|
|
955 |
|
Home Equity |
|
|
52,635 |
|
|
|
66,280 |
|
Automobile and other |
|
|
1,066 |
|
|
|
1,000 |
|
Home Equity Line of Credit |
|
|
38,264 |
|
|
|
26,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
487,206 |
|
|
|
484,407 |
|
Undisbursed portion of loans in process |
|
|
(1,164 |
) |
|
|
(5,109 |
) |
Deferred loan fees |
|
|
(672 |
) |
|
|
(452 |
) |
Allowance for loan losses |
|
|
(2,272 |
) |
|
|
(1,988 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Receivable net |
|
$ |
483,098 |
|
|
$ |
476,858 |
|
|
|
|
|
|
|
|
The total amount of loans being serviced for the benefit of others was approximately
$2,568,000 and $2,918,000 at June 30, 2009 and September 30, 2008, respectively.
The following schedule summarizes the changes in the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
June 30, 2009 |
|
|
June 30, 2008 |
|
|
June 30, 2009 |
|
|
June 30, 2008 |
|
|
|
(In thousands) |
|
|
(In thousands) |
|
Balance, beginning of period |
|
$ |
2,193 |
|
|
$ |
1,924 |
|
|
$ |
1,988 |
|
|
$ |
1,933 |
|
Provision for loan losses |
|
|
90 |
|
|
|
35 |
|
|
|
290 |
|
|
|
40 |
|
Recoveries |
|
|
9 |
|
|
|
3 |
|
|
|
26 |
|
|
|
9 |
|
Charge offs |
|
|
(20 |
) |
|
|
(2 |
) |
|
|
(32 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
2,272 |
|
|
$ |
1,960 |
|
|
$ |
2,272 |
|
|
$ |
1,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -15-
7. 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.
Management evaluates the restricted stock for impairment in accordance with Statement of Position
(SOP) 01-6, Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to
or Finance the Activities of Others. 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 or restricted stock as of
June 30, 2009.
8. DEPOSITS
Deposits are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
June 30, 2009 |
|
|
September 30, 2008 |
|
Non-interest bearing checking accounts |
|
$ |
11,820 |
|
|
$ |
10,963 |
|
NOW accounts |
|
|
17,863 |
|
|
|
14,315 |
|
Interest bearing checking accounts |
|
|
30,422 |
|
|
|
27,888 |
|
Money market demand accounts |
|
|
62,455 |
|
|
|
52,005 |
|
Passbook and club accounts |
|
|
2,858 |
|
|
|
2,641 |
|
Certificate of deposit accounts |
|
|
325,579 |
|
|
|
317,701 |
|
|
|
|
|
|
|
|
Total deposits |
|
$ |
450,997 |
|
|
$ |
425,513 |
|
|
|
|
|
|
|
|
The aggregate amount of certificate accounts in denominations of more than $100,000 at June 30,
2009 and September 30, 2008
amounted to approximately $59.1 million and $53.4 million, respectively.
9. COMMITMENTS
At June 30, 2009, the following commitments were outstanding:
|
|
|
|
|
|
|
(In thousands) |
|
Letters of credit |
|
$ |
534 |
|
Commitments to originate loans |
|
|
21,383 |
|
Unused portion of home equity lines of credits |
|
|
46,476 |
|
Unused portion of commercial lines of credits |
|
|
4,347 |
|
Undisbursed portion of construction loans in process |
|
|
842 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
73,582 |
|
|
|
|
|
page -16-
10. 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, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Basic |
|
|
3,608,620 |
|
|
|
3,555,039 |
|
|
|
3,591,380 |
|
|
|
3,669,262 |
|
Diluted |
|
|
3,622,751 |
|
|
|
3,598,927 |
|
|
|
3,602,169 |
|
|
|
3,713,388 |
|
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.
11. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Advances consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
Interest |
|
Maturing Period |
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 to 12 months |
|
$ |
25,778 |
|
|
|
4.39 |
% |
|
$ |
35,855 |
|
|
|
3.18 |
% |
13 to 24 months |
|
|
15,000 |
|
|
|
4.71 |
% |
|
|
31,405 |
|
|
|
4.36 |
% |
25 to 36 months |
|
|
54,855 |
|
|
|
4.56 |
% |
|
|
17,739 |
|
|
|
4.33 |
% |
37 to 48 months |
|
|
36,062 |
|
|
|
3.79 |
% |
|
|
57,090 |
|
|
|
4.48 |
% |
49 to 60 months |
|
|
45,131 |
|
|
|
4.23 |
% |
|
|
39,282 |
|
|
|
3.97 |
% |
61 to 72 months |
|
|
4,196 |
|
|
|
3.58 |
% |
|
|
26,444 |
|
|
|
4.05 |
% |
73 to 84 months |
|
|
20,000 |
|
|
|
4.13 |
% |
|
|
19,683 |
|
|
|
3.81 |
% |
85 to 120 months |
|
|
115,066 |
|
|
|
4.37 |
% |
|
|
120,348 |
|
|
|
4.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
316,088 |
|
|
|
4.31 |
% |
|
$ |
347,846 |
|
|
|
4.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank (FHLB) advances are collateralized by Federal Home Loan Bank (FHLB)
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, 2009 and $21.8 million was used as of
September 30, 2008, for general purposes. Included in the table above at June 30, 2009 and
September 30, 2008 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 $501.1 million of which $266.1 million was used as
of June 30, 2009. In addition, there are three long-term advances from other financial
institutions totaling $50 million that are secured by investment and mortgage-backed securities.
12. 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 Companies consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company
and the Bank must meet specific capital guidelines that involve quantitative measures of assets,
liabilities and certain off-balance-sheet items as calculated under regulatory accounting
practices. The 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 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, 2009, that the Bank meets all capital adequacy requirements to which it is
subject.
As of June 30, 2009, the most recent notification from the Federal Deposit Insurance Corporation
categorized the 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 are also presented in the table. The Companys capital
ratios are not significantly different than the Banks ratios disclosed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Be Considered Well |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized Under |
|
|
|
|
|
|
|
|
|
|
|
For Capital |
|
|
Prompt Corrective |
|
|
|
Actual |
|
|
Adequacy Purposes |
|
|
Action Provisions |
|
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
|
(In thousands) |
|
As of June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to assets) |
|
$ |
49,372 |
|
|
|
6.04 |
% |
|
$ |
32,691 |
|
|
|
4.00 |
% |
|
$ |
40,864 |
|
|
|
5.00 |
% |
Tier 1 Capital (to risk weighted assets) |
|
|
49,372 |
|
|
|
11.31 |
% |
|
|
17,466 |
|
|
|
4.00 |
% |
|
|
26,199 |
|
|
|
6.00 |
% |
Total Capital (to risk weighted assets) |
|
|
51,644 |
|
|
|
11.83 |
% |
|
|
34,932 |
|
|
|
8.00 |
% |
|
|
43,665 |
|
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to assets) |
|
$ |
47,191 |
|
|
|
5.69 |
% |
|
$ |
33,167 |
|
|
|
4.00 |
% |
|
$ |
41,459 |
|
|
|
5.00 |
% |
Tier 1 Capital (to risk weighted assets) |
|
|
47,191 |
|
|
|
10.97 |
% |
|
|
17,203 |
|
|
|
4.00 |
% |
|
|
25,804 |
|
|
|
6.00 |
% |
Total Capital (to risk weighted assets) |
|
|
49,179 |
|
|
|
11.44 |
% |
|
|
34,406 |
|
|
|
8.00 |
% |
|
|
43,007 |
|
|
|
10.00 |
% |
page -17-
13. FAIR VALUES OF FINANCIAL INSTRUMENTS
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157,
Fair Value Measurements (SFAS 157), which defines fair value, establishes a framework for
measuring fair value under GAAP, and expands disclosures about fair value measurements. SFAS 157
applies to other accounting pronouncements that require or permit fair value measurements. The new
standard is effective for financial statements issued for fiscal years beginning after November 15,
2007, and for interim periods within those fiscal years. The Company adopted SFAS 157 effective
for its fiscal year beginning October 1, 2008.
In December 2007, the FASB issued FASB Staff Position 157-2, Effective Date of FASB Statement No.
157 (FSP 157-2). FSP 157-2 delays the effective date of SFAS 157 for all non-financial assets
and liabilities, except those that are recognized or disclosed at fair value on a recurring basis
(at least annually) to fiscal years beginning after November 15, 2008 and interim periods within
those fiscal years. In October 2008, the FASB issued FASB Staff Position 157-3, Determining the
Fair Value of a Financial Asset When the Market for that Asset is Not Active (FSP 157-3), to
clarify the application of the provisions of SFAS 157 in an inactive market and how an entity would
determine fair value in an inactive market. FSP 157-3 is effective immediately and applies to our
December 31, 2008 financial statements. The adoption of SFAS 157 and FSP 157-3 had no impact on the
amounts reported in the consolidated financial statements.
The primary effect of SFAS 157 on the Company was to expand the required disclosures pertaining to
the methods used to determine fair values.
SFAS 157 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
SFAS 157 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, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant |
|
|
(Level 3) |
|
|
|
|
|
|
|
Active Markets |
|
|
Other |
|
|
Significant |
|
|
|
June 30, |
|
|
for Identical |
|
|
Observable |
|
|
Unobservable |
|
Description |
|
2009 |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
Investment securities available for sale |
|
$ |
19,827 |
|
|
$ |
19,827 |
|
|
$ |
|
|
|
$ |
|
|
Mortgage-backed securities available for sale |
|
|
816 |
|
|
|
|
|
|
|
816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,643 |
|
|
$ |
19,827 |
|
|
$ |
816 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For financial assets measured at fair value on a nonrecurring basis, the fair value
measurements by level within the fair value hierarchy used at June 30, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|
|
|
Quoted Prices |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
June 30, |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
Description |
|
2009 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Impaired Loans |
|
$ |
998 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On April 9, 2009 the Financial Accounting Standards Board (FASB) provided additional guidance
on FASB Statement 107, Disclosures about Fair Value of Financial Instruments, in staff position FAS
107-1. FAS 107-1 requires publicly traded companies (to include companies registered with the
Securities and Exchange Commission) to disclose in the notes of interim financial statements the
fair value and carrying value of assets and liabilities as of the statement date. An entity also
shall disclose the method(s) and significant assumptions used to estimate the fair value of
financial instruments and any changes in the method(s) and significant assumptions during the
period. FAS 107-1 is effective for interim reporting periods ending after June 15, 2009. FAS 107-1
does not require disclosure for earlier periods presented for comparative purposes at initial
adoption. In periods after initial adoption, FAS 107-1 requires comparative disclosures only for
periods ending after initial adoption
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 reported in the balance sheet for cash and short-term instruments 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. For certain securities which are not traded in active markets or are
subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or
non-transferability, and such adjustments are generally based on available market evidence (Level
3). In the absence of such evidence, managements best estimate is used. Managements best estimate
consists of both internal and external support on certain Level 3 investments. Internal cash flow
models using a present value formula that includes assumptions market participants would use along
with indicative exit pricing obtained from broker/dealers (where available) were used to support
fair values of certain Level 3 investments.
page -18-
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 that are accounted for under FASB Statement No. 114, Accounting by
Creditors for Impairment of a Loan (SFAS 114), in 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. The fair value consists
of the loan balances of $1,256 million less their specific valuation allowances of $258,000 as
determined under SFAS 114.
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.
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 noninterest 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, 2009.
The estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required
to interpret the market data to develop the estimates.
The carrying amounts and estimated fair values of financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
|
Carrying |
|
|
Estimated Fair |
|
(In Thousands) |
|
Amount |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
23,126 |
|
|
$ |
23,126 |
|
Investment securities held to maturity |
|
|
77,337 |
|
|
|
77,672 |
|
Investment securities available-for-sale |
|
|
19,827 |
|
|
|
19,827 |
|
Mortgage-backed securities held to maturity |
|
|
175,275 |
|
|
|
179,833 |
|
Mortgage-backed securities
available-for-sale |
|
|
816 |
|
|
|
816 |
|
Loans receivable net |
|
|
483,098 |
|
|
|
493,793 |
|
Federal Home Loan Bank Stock |
|
|
16,096 |
|
|
|
16,096 |
|
Accrued interest receivable |
|
|
3,341 |
|
|
|
3,341 |
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Checking, Passbook, Club and NOW accounts |
|
|
63,055 |
|
|
|
63,055 |
|
Money Market Demand accounts |
|
|
62,463 |
|
|
|
62,463 |
|
Certificate accounts |
|
|
325,579 |
|
|
|
330,538 |
|
Borrowings |
|
|
316,088 |
|
|
|
336,676 |
|
Accrued interest payable |
|
|
1,615 |
|
|
|
1,615 |
|
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 considered in the
estimates.
14. EVENTS OR TRANSACTIONS SUBSEQUENT TO THE BALANCE SHEET DATE
In May 2009, the Financial Accounting Standards Board (FASB) issued statement of Financial
Accounting Standards No. 165, Subsequent Events. This new standard applies to interim and annual
financial periods ending after June 15, 2009. The statement establishes principles setting forth
the period after the balance sheet date during which management shall evaluate events and
transactions that may occur for potential recognition or disclosure in the financial statements.
For the purposes of this accounting standard, the Company has evaluated subsequent events through
August 14, 2009; the date financial statements were issued.
page -19-
|
|
|
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 valuation of deferred tax assets.
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.
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 monthly to ensure their relevance in the current economic environment.
page -20-
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.
Changes in Financial Position for the Nine-Month Period Ended June 30, 2009
Total assets at June 30, 2009 were $825.1 million, a decrease of $525,000 for the nine-month period
then ended. The decrease was primarily due to mortgage-backed securities pay-downs totaling $38.6
million. The decrease in assets was offset by the retail growth in mortgage and commercial loans,
resulting in an overall increase in loans receivable of approximately $6.2 million.
In addition, the decrease was offset by an increase in investment securities and cash in
combination, totaling approximately $30.8 million.
During the nine-month period ended June 30, 2009, the total deposits increased by $25.5 million to
$451 million. The increase was offset by a decrease in borrowings of $31.8 million. Advances from
borrowers for taxes and insurance also increased by $4.1 million due to the timing of property tax
payments.
Comparisons of Results of Operations for the Three Month and Nine Month Period Ended June 30,
2009 with the Three Month and Nine Month Period Ended June 30, 2008
Net Interest Income
Net interest income was $3.8 million for the three-month periods ended June 30, 2009 and June 30,
2008. Net interest income for the three-month period ended June 30, 2009 remained the same when
compared to the same period in 2008. The interest rate spread decreased from 1.84% in 2008 to
1.72% in 2009, this was offset by an increase in the difference between the average interest
earning assets in relation to the average interest bearing liabilities in comparable periods. The
increase in the net interest income for the nine-month period ended June 30, 2009 when compared to
the same period in 2008 can be attributed to the increase in interest rate spread from 1.32% in
2008 to 1.85% in 2009. Net interest income was $12.4 million for the nine-month period ended June
30, 2009 compared to $9.8 million for the comparable period in 2008.
Non-Interest Income
Non-interest income increased to $460,000 for the three-month period ended June 30, 2009 from
$201,000 for the comparable period in 2008. The increase is primarily due to an impairment write
down of equity securities resulting in a loss of $252,000 in the June 30, 2008 period.
Non-interest income decreased to $955,000 for the nine-month period ended June 30, 2009 from $1.17
million for the comparable period in 2008. The decrease is primarily due to a difference in
impairment write downs of equity securities resulting in losses of $449,000 and $252,000 in the
June 30, 2009 and June 30, 2008 periods, respectively.
Non-Interest Expenses
For the three-month period ended June 30, 2009, non-interest expenses increased by $559,000 or
21.9% to $3.1 million compared to $2.6 million for the same period in 2008. For the nine month
period ended June 30, 2009, non-interest expenses increased by $1.3 million or 18.0% to $8.7
million compared to $7.4 million for the same period in 2008. These increased costs are primarily
due to the increase in FDIC insurance, normal salary increases and increases in healthcare costs.
Management believes that these are reasonable increases in the cost of operations after considering
the impact of additional expenses related to the Companys new commercial loan department business
banking and additional FDIC premiums. The annualized ratio of non-interest expenses to average
assets for the three and nine month periods ended June 30, 2009 and 2008 were 1.52%,1.41% and
1.25%, 1.22%, respectively.
On October 16, 2008, the Federal Deposit Insurance Corporation published a restoration plan
designed to replenish the Deposit Insurance Fund over a period of five years and to increase the
deposit insurance reserve ratio to the statutory minimum of 1.15% of insured deposits by December
31, 2013. In order to implement the restoration plan, the Federal Deposit Insurance Corporation
proposes to change both its risk-based assessment system and its base assessment rates. Assessment
rates would increase by seven basis points across the range of risk weightings of depository
institutions. Changes to the risk-based assessment system would include increasing premiums for
institutions that rely on excessive amounts of brokered deposits, including CDARS, increasing
premiums for excessive use of secured liabilities, including Federal Home Loan Bank advances,
lowering premiums for smaller institutions with very high capital levels, and adding financial
ratios and debt issuer ratings to the premium calculations for banks with over $10 billion in
assets, while providing a reduction for their unsecured debt.
page -21-
FDIC insurance expense increased to $604,000 for the three-month period ended June 30, 2009 from
$12,000 for the comparable period in 2008. The $592,000 increase was due to a $382,000 special
assessment, in addition to an increase in assessment rates, which was effective January 1, 2009.
FDIC insurance premiums were reduced by $54,000 for one-time credits in the three-month period
ended June 30, 2008.
For the nine month period ended June 30, 2009, FDIC insurance expense increased $824,000 to
$861,000 compared to $37,000 for the same period in 2008. The increase is due to the $382,000
special assessment, in addition to an increase in assessment rates, which was effective January 1,
2009. FDIC insurance premiums were reduced by $88,000 and $166,000 for one-time credits in the
nine-month period ended June 30, 2009 and 2008, respectively.
Income Taxes
The Company made provisions for income taxes of $246,000 and $930,000 for the three-month period
and nine-month period ended June 30, 2009, respectively, compared to $332,000 and $720,000 for the
comparable periods in 2008. These provisions are based on the levels of pre-tax income, adjusted
primarily for tax-exempt interest income on investments.
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.
Liquidity
and Capital Resources
For a financial institution, liquidity is a measure of the ability to fund customers needs for
loans and deposit withdrawals. Harleysville Savings 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. Harleysville Savings 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, 2009, the Company had $73.6 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 $501.1 million at June 30, 2009 of which $266.1 million was outstanding at June
30, 2009.
The Banks net income for the nine months ended June 30, 2009 is $3.4 million compared to $2.9
million for the comparable period in 2008. This increased the Banks stockholders equity to $49.3
million or 5.98% 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 -22-
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, 2009, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
|
1 to 3 |
|
|
3 to 5 |
|
|
Over 5 |
|
|
|
|
|
|
or less |
|
|
Years |
|
|
Years |
|
|
Years |
|
|
Total |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans |
|
$ |
56,495 |
|
|
$ |
56,325 |
|
|
$ |
44,842 |
|
|
$ |
179,261 |
|
|
$ |
336,923 |
|
Commercial loans |
|
|
23,962 |
|
|
|
5,746 |
|
|
|
12,225 |
|
|
|
12,268 |
|
|
|
54,201 |
|
Mortgage-backed securities |
|
|
58,028 |
|
|
|
60,213 |
|
|
|
29,503 |
|
|
|
28,347 |
|
|
|
176,091 |
|
Consumer and other loans |
|
|
55,236 |
|
|
|
19,752 |
|
|
|
9,206 |
|
|
|
11,888 |
|
|
|
96,082 |
|
Investment securities and other investments |
|
|
90,843 |
|
|
|
18,759 |
|
|
|
18,020 |
|
|
|
6,119 |
|
|
|
133,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
284,564 |
|
|
|
160,795 |
|
|
|
113,796 |
|
|
|
237,883 |
|
|
|
797,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passbook and Club accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,858 |
|
|
|
2,858 |
|
NOW and checking accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,285 |
|
|
|
48,285 |
|
Consumer Money Market Deposit accounts |
|
|
14,057 |
|
|
|
|
|
|
|
|
|
|
|
35,772 |
|
|
|
49,829 |
|
Business Money Market Deposit accounts |
|
|
9,470 |
|
|
|
|
|
|
|
|
|
|
|
3,156 |
|
|
|
12,626 |
|
Certificate accounts |
|
|
209,842 |
|
|
|
76,078 |
|
|
|
39,659 |
|
|
|
|
|
|
|
325,579 |
|
Borrowed money |
|
|
32,358 |
|
|
|
79,965 |
|
|
|
70,219 |
|
|
|
133,546 |
|
|
|
316,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
265,727 |
|
|
|
156,043 |
|
|
|
109,878 |
|
|
|
223,617 |
|
|
|
755,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repricing GAP during the period |
|
$ |
18,837 |
|
|
$ |
4,752 |
|
|
$ |
3,918 |
|
|
$ |
14,266 |
|
|
$ |
41,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative GAP |
|
$ |
18,837 |
|
|
$ |
23,589 |
|
|
$ |
27,507 |
|
|
$ |
41,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of GAP during the period to total assets |
|
|
2.28 |
% |
|
|
0.58 |
% |
|
|
0.47 |
% |
|
|
1.73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of cumulative GAP to total assets |
|
|
2.28 |
% |
|
|
2.86 |
% |
|
|
3.33 |
% |
|
|
5.06 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
page -23-
|
|
|
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.
page -24-
Part II OTHER INFORMATION
|
|
|
Item 1. |
|
Legal Proceedings |
Not applicable.
There are no material changes to the risk factors set forth in Part 1, Item
1A, Risk Factors of the Companys Form 10-K for the year ended September 30,
2008. Please refer to that section for disclosures regarding the risk and
uncertainties related to the Companys business.
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
Not applicable.
|
|
|
Item 3. |
|
Defaults upon Senior Securities |
Not applicable.
|
|
|
Item 4. |
|
Submission of Matters to a Vote of Security Holders |
Not applicable.
|
|
|
Item 5. |
|
Other information |
Not applicable.
|
|
|
Item 6. |
|
Exhibits and Reports on Form 8-K |
|
|
|
|
|
No. |
|
31.1 |
|
|
Certification of Chief
Executive Officer |
|
31.2 |
|
|
Certification of Chief
Financial Officer |
|
32.0 |
|
|
Section 1350
Certification of Chief
Executive Officer and
Chief Financial Officer |
page -25-
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.
|
|
|
|
|
|
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
|
|
Date: August 14, 2009 |
By: |
/s/ Ronald B. Geib
|
|
|
|
Ronald B. Geib |
|
|
|
Chief Executive Officer |
|
|
|
|
Date: August 14, 2009 |
By: |
/s/ Brendan J. McGill
|
|
|
|
Brendan J. McGill |
|
|
|
Senior Vice President
Treasurer and Chief Financial Officer |
|
page -26-
Exhibit Index
|
|
|
|
|
Exhibit No. |
|
Description |
|
31.1 |
|
|
Certification of Chief Executive Officer |
|
31.2 |
|
|
Certification of Chief Financial Officer |
|
32.0 |
|
|
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer |