HV Bancorp, Inc. - Quarter Report: 2017 March (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐ (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to to

Commission file number: 001-37981

HV BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania

46-4351868

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

3501 Masons Mill Road Suite 401 Huntingdon Valley, Pennsylvania 19006

(Address of Principal Executive Offices and Zip Code)

(267) 280-4000

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(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 ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 10, 2017, there were 2,182,125 outstanding shares of the issuer’s common stock.

INDEX


PART I – FINANCIAL INFORMATION			1

Item 1 – Consolidated Financial Statements - Unaudited			1

Notes to Unaudited Consolidated Financial Statements			6

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			41

Item 3 – Quantitative and Qualitative Disclosures about Market Risk			62

Item 4 – Controls and Procedures			62

Item 1 – Legal Proceedings			63

Item 1A – Risk Factors			63

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			63

Item 3 – Defaults upon Senior Securities			63

Item 4 – Mine Safety Disclosures			63

Item 5 – Other Information			63

Item 6 – Exhibits			63

SIGNATURES			64

PART I – FINANCIAL INFORMATION

Item 1 – Consolidated Financial Statements - Unaudited

Consolidated Statements of Financial Condition as of March 31, 2017 and June 30, 2016 (Unaudited) (in thousands, except share data)


	At March 31, 2017			At June 30, 2016
Assets
Cash and due from banks	$	37,609		$	9,949
Interest-earning deposits with banks		9,943			5,478

Cash and cash equivalents		47,552			15,427

Investment securities available- for- sale, at fair value		46,533			33,281
Investment securities held- to- maturity (fair value of $9,026 at March 31, 2017 and $5,941 at June 30, 2016)		9,053			5,825
Loans held for sale, at fair value		6,050			24,676
Loans receivable, net of allowance for loan losses of (March 31, 2017 $514; June 30, 2016 $487)		98,588			93,450
Bank-owned life insurance		3,978			3,895
Restricted investment in bank stock		650			1,108
Premises and equipment, net		1,788			1,652
Accrued interest receivable		554			527
Prepaid federal income taxes		196			147
Deferred income taxes, net		398			26
Prepaid expenses		333			231
Real estate owned, net		—			115
Mortgage banking derivatives		950			1,492
Other assets		299			171

Total Assets	$	216,922		$	182,023

Liabilities and Shareholders’ Equity

Liabilities
Deposits	$	171,802		$	141,771
Advances from the Federal Home Loan Bank		9,000			20,000
Securities sold under agreements to repurchase		2,408			3,929
Advances from borrowers for taxes and insurance		1,070			1,357
Deferred gain on sale – leaseback of building		314			326
Other liabilities		1,255			1,669

Total Liabilities		185,849			169,052

Shareholders’ Equity

Preferred stock, $0.01 par value, 2,000,000 shares authorized (at March 31, 2017)	$	—		$	—
Common stock, $0.01 par value, 20,000,000 shares authorized; issued and outstanding 2,182,125 shares (at March 31, 2017)		22			—
Additional paid in capital		20,374			—
Retained earnings		13,368			12,978
Accumulated other comprehensive loss		(282	)		(7	)
Unearned ESOP Shares		(2,409	)		—

Total Shareholders’ Equity		31,073			12,971

Total Liabilities and Shareholders’ Equity	$	216,922		$	182,023

See Notes to Unaudited Consolidated Financial Statements

Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2017 and 2016; (Unaudited) (in thousands except per share data)


	For the Three Months Ended March 31,					For the Nine Months Ended March 31,
	2017			2016		2017			2016
Interest Income
Interest and fee on loans	$	1,114		$	1,081	$	3,452		$	3,261
Interest and dividends on investment:
Taxable		101			44		232			141
Nontaxable		50			43		133			120
Interest on mortgage-backed securities and collateralized mortgage obligations		71			94		182			295
Interest on interest-earning deposits		155			38		238			83

Total Interest Income		1,491			1,300		4,237			3,900

Interest Expense

Interest on deposits		206			158		535			493
Interest on advances from the Federal Home Loan Bank		32			27		119			65
Interest on securities sold under agreements to repurchase		1			1		2			2

Total Interest Expense		239			186		656			560

Net Interest Income		1,252			1,114		3,581			3,340

(Credit) Provision for Loan Losses		(12	)		26		123			(18	)

Net Interest Income after (Credit) Provision for Loan Losses		1,264			1,088		3,458			3,358

Non-Interest Income
Fee for customer services		51			51		156			160
Increase in cash surrender value of bank owned life insurance		26			28		83			84
Gain on sale of loans		744			989		4,449			3,119
Gain on sale of available-for-sale securities		—			7		11			15
Gain(loss) from mortgage derivative instruments		469			174		(469	)		68
Change in fair value of loans held-for-sale		(2	)		16		(697	)		(33	)
Other		5			1		7			5

Total Non-Interest Income		1,293			1,266		3,540			3,418

Non-Interest Expense
Salaries and employee benefits		1,443			1,067		3,741			3,254
Occupancy		255			263		754			722
Federal deposit insurance premiums		42			39		113			119
Data processing related operations		145			135		430			377
Loss on sale of other real estate owned		—			23		12			19
Real estate owned expense		3			175		19			247
Professional fees		178			122		447			353
Other		352			321		972			933

Total Non-Interest Expense		2,418			2,145		6,488			6,024

Income before Income Taxes		139			209		510			752
Income Tax expense		41			40		120			222

Net Income	$	98		$	169	$	390		$	530

Net Income per share:
Basic	$	0.05			N/A	$	0.62			N/A

Diluted	$	0.05			N/A	$	0.62			N/A

See Notes to Unaudited Consolidated Financial Statements

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended March 31, 2017 and 2016 (Unaudited) (in thousands)


	For the Three Months Ended March 31,					For the Nine Months Ended March 31,
	2017		2016			2017			2016
Net Income	$	98	$	169		$	390		$	530

Other Comprehensive Income (Loss), net of tax:
Unrealized gains (losses) on investment securities available-for-sale (pre-tax $61 and $408;($476) and $583, respectively)		41		260			(268	)		366
Reclassification adjustment for gain included in income (pre-tax $0 and $7; $11 and $15, respectively) (1)		—		(5	)		(7	)		(10	)

Other comprehensive income (loss)		41		255			(275	)		356

Total Comprehensive Income	$	139	$	424		$	115		$	886

(1)	Amounts are included in gain on sale of available-for-sale securities on the Consolidated Statements of Income as a separate element within non-interest income. Income tax expense is included in the Consolidated Statements of Income.

See Notes to Unaudited Consolidated Financial Statements

Consolidated Statements of Equity for the Nine Months Ended March 31, 2017 and 2016 (Unaudited) (in thousands)


	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)			Unearned ESOP Shares			Total Equity
BALANCE - July 1, 2016	$	—	$	—	$	12,978	$	(7	)	$	—		$	12,971

Proceeds from issuance of common stock, net of $1,426 in offering costs		22		20,374		—		—						20,396

Purchase of ESOP Shares											(2,430	)		(2,430	)

ESOP Shares committed to be released											21			21

Net income		—		—		390		—			—			390

Other comprehensive loss		—		—		—		(275	)		—			(275	)

BALANCE – March 31, 2017	$	22	$	20,374	$	13,368	$	(282	)	$	(2,409	)	$	31,073


	Common Stock (1)		Additional Paid in Capital (1)		Retained Earnings		Accumulated Other Comprehensive (Loss)/Income			Unearned ESOP Shares(1)			Total Equity
BALANCE - July 1, 2015	$	—	$	—	$	11,952	$	(496	)	$	—		$	11,456

Net income		—		—		530		—			—			530

Other comprehensive income		—		—		—		356			—			356

BALANCE – March 31, 2016	$	—	$	—	$	12,482	$	(140	)	$	—		$	12,342

(1)	No common stock or ESOP shares were issued and outstanding during the nine months ended March 31, 2016.

See Notes to Unaudited Consolidated Financial Statements

Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2017 and 2016 (Unaudited) (in thousands)


	For the Nine Months Ended March 31,
	2017			2016
Cash Flows from Operating Activities
Net Income	$	390		$	530
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		149			139
Impairment of real estate owned, net		—			68
Amortization (accretion) of deferred loan fees		7			5
Net amortization of securities premiums and discounts		147			166
Loss on sale of real estate owned		12			19
Gain on sale of available-for-sale securities		(11	)		(15	)
Provision (credit) for loan losses		123			(18	)
(Benefit) Expense for deferred income taxes		(179	)		184
Amortization of deferred gain on sale-leaseback transaction		(12	)		(12	)
Increase in the cash surrender value of bank owned life insurance		(83	)		(84	)
ESOP Compensation Expense		21			—
Loans held for sale:
Originations, net of prepayments		(117,261	)		(71,435	)
Proceeds from sales		139,639			78,208
Gain on sale of loan		(4,449	)		(3,119	)
Change in fair value of loans held for sale		697			33
Decrease (increase) in:
Accrued interest receivable		(27	)		27
Prepaid federal income taxes		(49	)		25
Mortgage banking derivatives		447			(70	)
Prepaid and other assets		(230	)		39
Other liabilities		(321	)		(129	)

Net Cash provided by Operating Activities		19,010			4,561

Cash Flows from Investing Activities
Net increase in loans receivable		(5,333	)		(7,408	)
Activity in available-for-sale securities:
Proceeds from sales		2,554			5,891
Maturities and repayments		1,164			2,913
Purchases		(17,572	)		(4,298	)
Activity in held-to-maturity securities:
Maturities and repayments		1,887			688
Purchases		(5,115	)		(2,071	)
Redemption (purchase) of restricted investment in bank stock		458			(89	)
Proceeds from sale of real estate owned		168			296
Purchases of premises and equipment		(285	)		(106	)

Net Cash (used in) Investing Activities		(22,074	)		(4,184	)

Cash Flows from Financing Activities
Net increase in deposits		30,031			3,859
Net decrease in advances from borrowers for taxes and insurance		(287	)		(55	)
Net decrease in securities sold under agreements to repurchase		(1,521	)		(1,321	)
Proceeds from Federal Home Loan Bank		—			4,000
Repayment of Federal Home Loan Bank		(11,000	)		(1,000	)
Proceeds from issuance of common stock, net		20,396			—
Purchase of shares for ESOP		(2,430	)		—

Net Cash provided by Financing Activities		35,189			5,483

Net Increase in Cash and Cash Equivalents		32,125			5,860

Cash and Cash Equivalents – Beginning of Period	$	15,427		$	15,596

Cash and Cash Equivalents – End of Period	$	47,552		$	21,456

Supplementary Disclosure of Cash Flow Information
Cash payments for interest	$	659		$	566

Cash payments for income taxes	$	415		$	70

Supplementary Schedule of Noncash Investing Activities
Transfer from loans to real estate owned	$	65		$	—

See Notes to Unaudited Consolidated Financial Statements

Notes to Unaudited Consolidated Financial Statements

1. Organization, Basis of Presentation and Recent Accounting Pronouncements

Organization

HV Bancorp, Inc., a Pennsylvania Corporation (the “Company”) is the holding company of Huntingdon Valley Bank (the “Bank”) and was formed in connection with the conversion of the Bank from the mutual to the stock form of organization. On January 11, 2017, the mutual to stock conversion of the Bank was completed and the Company became the parent holding company for the Bank. A total of 2,182,125 shares of common stock were sold to depositors at $10.00 per share through which the Company received gross offering proceeds of approximately $21.8 million. Offering costs from the sale of the common stock totaled $1.4 million, resulting in net proceeds of $20.4 million. Shares of the Company began trading on the Nasdaq Capital Market on January 12, 2017.

The Bank is a Pennsylvania savings bank, organized in 1871, and currently provides residential and commercial loans to its general service area (Montgomery, Bucks and Philadelphia Counties of Pennsylvania) as well as offering a wide variety of savings, checking and certificate of deposit accounts to its retail and business customers.

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) for interim information and with the instructions to Form 10-Q, as applicable to a smaller reporting company. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements.

The financial statements are unaudited; but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation thereof. The balances as of June 30, 2016 have been derived from the audited financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Registration Statement on Form S-1 (File No. 333-213537) declared effective by the Securities and Exchange Commission on November 10, 2016. The results of operations for the three and nine months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending June 30, 2017 or any other period. All significant intercompany transactions have been eliminated in consolidation.

The Company has evaluated subsequent events through the date of issuance of the financial statements included herein.

Use of Estimates in the Preparation of Financial Statements

In preparing financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, other-than-temporary impairments of securities, interest rate lock commitments (“IRLCs”), mandatory sales commitments, the valuation of mortgage loans held-for-sale, other real estate owned, and the valuation of deferred tax assets.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU establishes a comprehensive revenue recognition standard for virtually all industries following U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate and construction industries. The revenue standard’s core principal is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this, the standard requires five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) identify the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies the performance obligation. Three basic transition methods are available - full retrospective, retrospective with certain practical expedients, and a cumulative effect approach. Under the cumulative effect alternative, an entity would apply the new revenue standard only to contracts that are incomplete under legacy U.S. GAAP at the date of initial application and recognize the cumulative effect of the new standard as an adjustment to the opening balance of retained earnings. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date. The guidance in this ASU is now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net). While the ASU does not change the core provisions of Topic 606, it clarifies the implementation guidance on principal versus agent considerations. Namely, the ASU clarifies and offers guidance to help determine when the reporting entity is providing goods or services to a customer itself (i.e., the entity is a principal), or merely arranging for that good or service to be provided by the other party (i.e., the reporting entity is an agent). If the entity is a principal, it recognizes revenue in the gross amount of consideration to which it expects to be entitled in exchange for the specified good or service transferred to the customer. When the reporting entity is an agent, it recognizes revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified good or service to be provided by the other party. An entity is a principal if it controls the specified good or service before that good or service is transferred to a customer. The guidance includes indicators to assist in determining whether the control criteria are met. If a contract with a customer includes more than one specified good or service, an entity could be a principal for some specified goods or services and an agent for others. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing. This ASU clarifies guidance related to identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. The ASU includes targeted improvements based on input the FASB received from the Transition Resource Group for Revenue Recognition and other stakeholders. The ASU seeks to proactively address areas in which diversity in practice potentially could arise, as well as to reduce the cost and complexity of applying certain aspects of the guidance both at implementation and on an ongoing basis. The amendments in this ASU affect the guidance in ASU 2014-09, Revenue from Contracts with Customers, which will be effective for fiscal years beginning after December 31, 2017 for public entities. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients. This ASU clarifies certain aspects of Topic 606 guidance as follows:

•

The objective of the collectibility assessment is to determine whether the contract is valid and represents a substantive transaction on the basis of whether a customer has the ability and intention to pay the promised consideration in exchange for the goods or services transferred.

•

An entity can recognize revenue in the amount of consideration received when it has transferred control of the goods or services, has no additional obligation to transfer goods or services, and the consideration received is nonrefundable.

•

A reporting entity is permitted to make the accounting policy election to exclude amounts collected from customers for all sales taxes from the transaction price.

•

The measurement date is specified as being the contract inception, and variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration.

•

As a practical expedient, a reporting entity is permitted to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented in accordance with Topic 606 when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

•

The ASU clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application. Accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments in this ASU permit an entity to apply the modified retrospective transition method either to all contracts or only to contracts that are not completed contracts.

The amendments in this ASU clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted.

The guidance in the revenue recognition ASUs listed above is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of the various revenue recognition ASUs. The guidance does not apply to revenue associated with financial instruments, including loans and securities. The Company is currently evaluating its non-interest revenue sources and does not anticipate the adoption of these ASUs to have a material impact on its financial condition or results of operations.

In March 2017, the FASB issued Accounting Standards Update (ASU) 2017-08, Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 shortens the amortization for premiums on purchased callable debt securities to the earliest call date (i.e. yield-to-earliest call amortization), rather than amortizing over the full contractual term. The ASU does not change the accounting for securities held at a discount.

The amendments apply to callable debt securities with explicit, noncontingent call features that are callable at fixed prices and on preset dates. If a security may be prepaid based on prepayments of the underlying loans, not because the issuer has exercised a date specific call option, it is excluded from the scope of the new standard. However, for instruments with contingent call features, once the contingency is resolved and the security is callable at a fixed price and preset date, the security is within the scope of the amendment. Further, the amendments apply to all premiums on callable debt securities, regardless of how they were generated.

The amendments require companies to reset the effective yield using the payment terms of the debt security if the call option is not exercised on the earliest call date. If the security has additional call dates, any excess of the amortized cost basis over the amount repayable by the issuer at the next call date should be amortized to the next call date.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those years. For all other entities, including emerging growth entities as further described below, the amendments are effective for fiscal periods beginning after December 15, 2019, and interim periods within fiscal periods beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the adoption of the new standard on the consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases. The new leases standard applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification.

The new leases standard requires a lessor to classify leases as either sales-type, direct financing or operating, similar to existing U.S. GAAP. Classification depends on the same five criteria used by lessees plus certain additional factors. The subsequent accounting treatment for all three lease types is substantially equivalent to existing U.S. GAAP for sales-type leases, direct financing leases, and operating leases. However, the new standard updates certain aspects of the lessor accounting model to align it with the new lessee accounting model, as well as with the new revenue standard under Topic 606.

Lessees and lessors are required to provide certain qualitative and quantitative disclosures to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The new leases standard addresses other considerations including identification of a lease, separating lease and non-lease components of a contract, sale and leaseback transactions, modifications, combining contracts, reassessment of the lease term, and re-measurement of lease payments. It also contains comprehensive implementation guidance with practical examples.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The amendments are effective for all other entities (including emerging growth entities as further described below) for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. Specific transition requirements apply. The Company is currently evaluating the impact of adoption of the new standard on the consolidated financial statements.

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.

The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above.

Further, the ASU made certain targeted amendments to the existing impairment model for available-for-sale (AFS) debt securities. For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis.

The Update is effective for public business entities for fiscal years after December 15, 2019, including interim periods within those fiscal years. The amendments are effective for all other entities (including emerging growth companies as further described below for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of adoption of the new standard on the consolidated financial statements.

The Company qualifies under the Jumpstart Our Business Startups Act (the “JOBS Act”) as an emerging growth company. As an emerging growth company, the Company has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements until such pronouncements are made applicable to private companies.

2. Investment Securities

Investment securities available-for-sale was comprised of the following:


	March 31, 2017
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Governmental securities	$	4,414	$	7	$	(51	)	$	4,370
Corporate notes		13,734		27		(117	)		13,644
Collateralized mortgage obligations – agency residential		13,792		33		(260	)		13,565
Mortgage-backed securities – agency residential		5,060		4		(108	)		4,956
Municipal securities		3,519		1		(14	)		3,506
Bank CDs		6,492		6		(6	)		6,492

	$	47,011	$	78	$	(556	)	$	46,533

Investment securities held-to-maturity was comprised of the following:


	March 31, 2017
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Municipal securities	$	9,053	$	38	$	(65	)	$	9,026

	$	9,053	$	38	$	(65	)	$	9,026

Investment securities available-for-sale was comprised of the following:


	June 30, 2016
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Governmental securities	$	1,493	$	28	$	—		$	1,521
Corporate notes		8,423		40		(136	)		8,327
Collateralized mortgage obligations – agency residential		9,879		45		(93	)		9,831
Mortgage-backed securities – agency residential		6,980		44		(15	)		7,009
Municipal securities		3,524		42		—			3,566
Bank CDs		2,994		41		(8	)		3,027

	$	33,293	$	240	$	(252	)	$	33,281

Investment securities held-to-maturity was comprised of the following:


	June 30, 2016
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Municipal securities	$	5,825	$	117	$	(1	)	$	5,941

	$	5,825	$	117	$	(1	)	$	5,941

The scheduled maturities of securities available-for-sale and held-to-maturity at March 31, 2017 were as follows:

March 31, 2017

Available-for-Sale

Held-to-Maturity

(Dollars in thousands)

Amortized
Cost

Fair Value

Amortized
Cost

Fair Value

Due in one year or less

750

140

Due from more than one to five years

15,507

15,503

2,644

2,647

Due from more than five to ten years

5,562

5,465

4,597

4,565

Due after ten years

25,192

24,815

1,672

1,674

47,011

46,533

9,053

9,026

Securities with a fair value of $6.9 million and $3.3 million at March 31, 2017 and June 30, 2016, respectively, were pledged to secure public deposits and for other purposes as required by law.

Proceeds from the sale of available-for-sale securities for the three months and nine months ended March 31, 2017 were $0.5 million and $2.6 million, respectively. There were no gains or losses for the three months ended March 31, 2017. Gross realized gains on such sales were approximately $11,000 and gross realized losses on such sales were $0 for the nine months ended March 31, 2017.

Proceeds from the sale of available-for-sale securities for the three months and nine months ended March 31, 2016 were $3.6 million and $5.9 million, respectively. Gross realized gains on such sales were $7,000 and there were no gross realized losses for the three months ended March 31, 2016. Gross realized gains on such sales were $16,000 and gross realized losses on such sales were $1,000 for the nine months ending March 31, 2016.

The following tables summarize the unrealized loss positions of securities available-for-sale and held-to-maturity as of March 31, 2017 and June 30, 2016:


	March 31, 2017
	Less than 12 Months					12 Months or Longer					Total
(Dollars in thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Available-for-sale:
U.S. Governmental securities	$	2,417	$	(25	)	$	667	$	(26	)	$	3,084	$	(51	)
Corporate notes		3,885		(31	)		4,564		(86	)		8,449		(117	)
Collateralized mortgage obligations		4,161		(60	)		5,732		(200	)		9,893		(260	)
Mortgage-backed securities		1,338		(23	)		3,206		(85	)		4,544		(108	)
Municipal securities		1,927		(7	)		739		(7	)		2,666		(14	)
Bank CDs		250		—			489		(6	)		739		(6	)

	$	13,978	$	(146	)	$	15,397	$	(410	)	$	29,375	$	(556	)

Held–to-maturity:
Municipal securities	$	3,958	$	(61	)	$	500	$	(4	)	$	4,458	$	(65	)

	$	3,958	$	(61	)	$	500	$	(4	)	$	4,458	$	(65	)


	June 30, 2016
	Less than 12 Months					12 Months or Longer					Total
(Dollars in thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Available-for-sale:
U.S. Governmental securities	$	—	$	—		$	—	$	—		$	—	$	—
Corporate notes		1,000		(13	)		3,677		(123	)		4,677		(136	)
Collateralized mortgage obligations		—		—			5,792		(93	)		5,792		(93	)
Mortgage-backed securities		—		—			1,885		(15	)		1,885		(15	)
Municipal securities		—		—			—		—			—		—
Bank CDs		249		(1	)		493		(7	)		742		(8	)

	$	1,249	$	(14	)	$	11,847	$	(238	)	$	13,096	$	(252	)

Held–to-maturity:
Municipal securities	$	506	$	(1	)	$	—	$	—		$	506	$	(1	)

	$	506	$	(1	)	$	—	$	—		$	506	$	(1	)

At March 31, 2017 and June 30, 2016, the investment portfolio included ten and five U.S. Government securities, respectively, with total market values of $4.4 million and $1.5 million, respectively. Of these securities, six and zero were in an unrealized loss position as of March 31, 2017 and June 30, 2016, respectively. These securities are zero risk weighted for capital purposes and are guaranteed for repayment of principal and interest. As of March 31, 2017 and June 30, 2016, management found no evidence of Other Than Temporary Impairment (“OTTI”) on any of the U.S. Governmental securities held in the investment securities portfolio and the Company has no intention to sell the securities before a recovery of the cost has occurred.

At March 31, 2017 and June 30, 2016, the investment portfolio included twenty-five and sixteen corporate notes with total market values of $13.6 million and $8.3 million, respectively. Of these securities, seventeen and nine were in an unrealized loss position as of March 31, 2017 and June 30, 2016, respectively. At the time of purchase and as of March 31, 2017 and June 30, 2016, these bonds continue to maintain investment grade ratings. As of March 31, 2017 and June 30, 2016, management found no evidence of OTTI on any of the corporate notes held in the investment securities portfolio and the Company has no intention to sell the securities before a recovery of the cost has occurred.

At March 31, 2017 and June 30, 2016, the investment portfolio included thirty-six and thirty-two collateralized mortgage obligations (“CMOs”) with total market values of $13.6 million and $9.8 million at March 31, 2017 and June 30, 2016, respectively. Of these securities, thirty-one and nineteen were in an unrealized loss position as of March 31, 2017 and June 30, 2016, respectively. The CMO portfolio is comprised of 100% agency (FHLMC, FNMA and GNMA) investment grade bonds. As of March 31, 2017 and June 30, 2016, management found no evidence of OTTI on any of the CMOs held in the investment securities portfolio and the Company has no intention to sell the securities before a recovery of the cost has occurred.

At March 31, 2017 and June 30, 2016, the investment portfolio included sixteen and nineteen mortgage backed securities (“MBS”) with a total market value of $5.0 million and $7.0 million, respectively. Of these securities, twelve and four were in an unrealized loss position as of March 31, 2017 and June 30, 2016, respectively. The MBS portfolio is comprised of 100% agency (FHLMC, FNMA and GNMA) investment grade bonds. As of March 31, 2017 and June 30, 2016, management found no evidence of OTTI on any of the MBS held in the investment securities portfolio and the Company has no intention to sell the securities before a recovery of the cost has occurred.

At March 31, 2017 and June 30, 2016, the investment portfolio included thirty and twenty-four municipal securities with a total market value of $12.5 million and $9.5 million, respectively. Of these securities, seventeen and one were in an unrealized loss position as of March 31, 2017 and June 30, 2016, respectively. The Company’s municipal portfolio issuers are located in Pennsylvania and were purchased and, as of March 31, 2017 and June 30, 2016, continue to maintain investment grade ratings. Each of the municipal securities is reviewed quarterly for impairment. This includes research on each issuer to ensure the financial stability of the municipal entity. As of March 31, 2017 and June 30, 2016, management found no evidence of OTTI on any of the municipal securities held in the investment securities portfolio and the Company has no intention to sell the securities before a recovery of the cost has occurred.

3. Loans Receivable

Loans receivable were comprised of the following:


(Dollars in thousands)	March 31, 2017			June 30, 2016
Residential:
One-to-four family	$	75,960		$	71,980
Home equity and HELOCs		5,254			6,448
Commercial:
Commercial real estate		12,326			11,620
Commercial business		2,087			558
Construction		3,204			3,179
Consumer		23			10

		98,854			93,795

Less:
Unearned discounts, origination and commitment fees and costs		248			142
Allowance for loan losses		(514	)		(487	)

	$	98,588		$	93,450

Overdraft deposits are reclassified as consumer loans and are included in the total loans on the statements of financial condition. Overdrafts were $23,000 and $10,000 at March 31, 2017 and June 30, 2016, respectively.

The following tables summarizes the activity in the allowance for loan losses by loan class for the three months ended March 31, 2017 and 2016.


	For the Three Months Ended March 31, 2017
Allowance for Loan Losses
(Dollars in thousands)	Beginning Balance		Charge- offs			Recoveries		Provision/ (Credit)			Ending Balance		Ending Balance: Individually Evaluated for Impairment		Ending Balance: Collectively Evaluated for Impairment
Residential:
One-to-four family	$	362	$	—		$	2	$	(20	)	$	344	$	—	$	344
Home equity and HELOCs		114		(125	)		—		25			14		—		14
Commercial:
Commercial real estate		118		—			25		(27	)		116		14		102
Commercial business		20		—			—		18			38		15		23
Construction		1		—			—		1			2		—		2
Consumer		—		(3	)		1		2			—		—		—
Unallocated reserve		11		—			—		(11	)		—		—		—

	$	626	$	(128	)	$	28	$	(12	)	$	514	$	29	$	485



	For the Three Months Ended March 31, 2016
Allowance for Loan Losses
(Dollars in thousands)	Beginning Balance		Charge- offs		Recoveries		Provision/ (Credit)			Ending Balance
Residential:
One-to-four family	$	219	$	—	$	—	$	(8	)	$	211
Home equity and HELOCs		19		—		—		—			19
Commercial:
Commercial real estate		203		—		—		34			237
Commercial business		26		—		—		—			26
Construction		—		—		—		—			—
Consumer		2		—		—		—			2
Unallocated reserve		—		—		—		—			—

	$	469	$	—	$	—	$	26		$	495

The following tables summarizes the activity in the allowance for loan losses by loan class for the nine months ended March 31, 2017 and 2016 and information in regards to the recorded investment in loans receivable as of March 31, 2017 and June 30, 2016:


	For the Nine Months Ended March 31, 2017
Allowance for Loan Losses
(Dollars in thousands)	Beginning Balance		Charge- offs			Recoveries		Provision/ (Credit)			Ending Balance		Ending Balance: Individually Evaluated for Impairment		Ending Balance: Collectively Evaluated for Impairment
Residential:
One-to-four family	$	314	$	—		$	7	$	23		$	344	$	—	$	344
Home equity and HELOCs		18		(125	)		—		121			14		—		14
Commercial:
Commercial real estate		131		—			25		(40	)		116		14		102
Commercial business		23		—			—		15			38		15		23
Construction		1		—			—		1			2		—		2
Consumer		—		(5	)		2		3			—		—		—
Unallocated reserve		—		—			—		—			—		—		—

	$	487	$	(130	)	$	34	$	123		$	514	$	29	$	485


	For the Nine Months Ended March 31, 2016
Allowance for Loan Losses
(Dollars in thousands)	Beginning Balance		Charge- offs			Recoveries		(Credit)/ Provisions			Ending Balance
Residential:
One-to-four family	$	219	$	—		$	—	$	(8	)	$	211
Home equity and HELOCs		19		—			—		—			19
Commercial:
Commercial real estate		230		—			—		7			237
Commercial business		45		—			—		(19	)		26
Construction		—		—			—		—			—
Consumer		—		(1	)		—		3			2
Unallocated reserve		1		—			—		(1	)		—

	$	514	$	(1	)	$	—	$	(18	)	$	495

March 31, 2017

Loans Receivable

(Dollars in thousands)

Ending
Balance

Ending
Balance:
Individually
Evaluated
for
Impairment

Ending
Balance:
Collectively
Evaluated
for
Impairment

Residential:

One-to-four family

75,960

890

75,070

Home equity and HELOCs

5,254

198

5,056

Commercial:

Commercial real estate

12,326

744

11,582

Commercial business

2,087

179

1,908

Construction

3,204

—

3,204

Consumer

—

98,854

2,011

96,843

June 30, 2016

Loans Receivable

(Dollars in thousands)

Ending
Balance

Ending
Balance:
Individually
Evaluated
for
Impairment

Ending
Balance:
Collectively
Evaluated
for
Impairment

Residential:

One-to-four family

71,980

818

71,162

Home equity and HELOCs

6,448

227

6,221

Commercial:

Commercial real estate

11,620

760

10,860

Commercial business

558

193

365

Construction

3,179

—

3,179

Consumer

—

93,795

1,998

91,797

The following table summarizes the Allowance for Loan Losses by loan portfolio class as of June 30, 2016:


	June 30, 2016
	Allowance for Loan Losses
(Dollars in thousands)	Ending Balance		Ending Balance: Individually Evaluated for Impairment		Ending Balance: Collectively Evaluated for Impairment
Residential:
One-to-four family	$	314	$	—	$	314
Home equity and HELOCs		18		—		18
Commercial:
Commercial real estate		131		39		92
Commercial business		23		19		4
Construction		1		—		1
Consumer		—		—		—

	$	487	$	58	$	429

The following tables summarize information in regard to impaired loans by loan portfolio class as of March 31, 2017 and June 30, 2016:


	March 31, 2017						June 30, 2016
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded
Residential:
One-to-four family	$	890	$	890	$	—	$	818	$	818	$	—
Home equity and HELOCs		198		198		—		227		227		—
Commercial:
Commercial real estate		546		546		—		557		600		—
Commercial business		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

	$	1,634	$	1,634	$	—	$	1,602	$	1,645	$	—

With an allowance recorded
Residential:
One-to-four family	$	—	$	—	$	—	$	—	$	—	$	—
Home equity and HELOCs		—		—		—		—		—		—
Commercial:
Commercial real estate		198		198		14		203		203		39
Commercial business		179		179		15		193		193		19
Construction		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

	$	377	$	377	$	29	$	396	$	396	$	58

Total:
Residential:
One-to-four family	$	890	$	890	$	—	$	818	$	818	$	—
Home equity and HELOCs		198		198		—		227		227		—
Commercial:
Commercial real estate		744		744		14		760		803		39
Commercial business		179		179		15		193		193		19
Construction		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

	$	2,011	$	2,011	$	29	$	1,998	$	2,041	$	58

The following table presents additional information regarding the Company’s impaired loans for the three months ended March 31, 2017 and 2016:


	Three Months Ended March 31,
	2017				2016
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Residential:
One-to-four family	$	1,082	$	2	$	1,491	$	1
Home equity and HELOCs		253		—		232		—
Commercial:
Commercial real estate		548		8		543		8
Commercial business		—		—		—		—
Construction		—		—		—		—
Consumer		—		—		—		—

Total	$	1,883	$	10	$	2,266	$	9

With an allowance recorded:
Residential:
One-to-four family	$	—	$	—	$	—	$	—
Home equity and HELOCs		—		—		—		—
Commercial:
Commercial real estate		199		4		223		2
Commercial business		181		2		200		3
Construction		—		—		—		—
Consumer		—		—		—		—

Total	$	380	$	6	$	423	$	5

Total:
Residential:
One-to-four family	$	1,082	$	2	$	1,491	$	1
Home equity and HELOCs		253		—		232		—
Commercial:
Commercial real estate		747		12		766		10
Commercial business		181		2		200		3
Construction		—		—		—		—
Consumer		—		—		—		—

Total	$	2,263	$	16	$	2,689	$	14

If these loans were performing under the original contractual rate, interest income on such loans would have increased approximately $20,000 and $26,000 for the three months ended March 31, 2017 and 2016, respectively.

The following table presents additional information regarding the Company’s impaired loans for the nine months ended March 31, 2017 and 2016:


	Nine Months Ended March 31,
	2017				2016
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Residential:
One-to-four family	$	946	$	5	$	1,616	$	2
Home equity and HELOCs		152		—		223		—
Commercial:
Commercial real estate		552		24		618		26
Commercial business		—		—		—		—
Construction		—		—		—		—
Consumer		—		—		—		—

Total	$	1,650	$	29	$	2,457	$	28

With an allowance recorded:
Residential:
One-to-four family	$	—	$	—	$	—	$	—
Home equity and HELOCs		—		—		—		—
Commercial:
Commercial real estate		200		12		191		4
Commercial business		186		8		203		9
Construction		—		—		—		—
Consumer		—		—		—		—

Total	$	386	$	20	$	394	$	13

Total:
Residential:
One-to-four family	$	946	$	5	$	1,616	$	2
Home equity and HELOCs		152		—		223		—
Commercial:
Commercial real estate		752		36		809		30
Commercial business		186		8		203		9
Construction		—		—		—		—
Consumer		—		—		—		—

Total	$	2,036	$	49	$	2,851	$	41

If these loans were performing under the original contractual rate, interest income on such loans would have increased approximately $65,000 and $81,000 for the nine months ended March 31, 2017 and 2016, respectively.

The following table presents nonaccrual loans by classes of the loan portfolio as of March 31, 2017 and June 30, 2016:


(Dollars in thousands)	March 31, 2017		June 30, 2016
Residential:
One-to-four family	$	745	$	818
Home equity and HELOCs		195		227
Commercial:
Commercial real estate		100		100
Commercial business		—		—
Construction		—		—
Consumer		—		—

	$	1,040	$	1,145

Credit quality risk ratings include regulatory classifications of Special Mention, Substandard, Doubtful and Loss. Loans classified as Special Mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of prospects for repayment. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

The following tables summarize the Aggregate Pass and criticized categories of Special Mention, Substandard and Doubtful within the Company’s internal risk rating system as of March 31, 2017 and June 30, 2016:


	March 31, 2017
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Residential:
One-to-four family	$	74,786	$	—	$	1,174	$	—	$	75,960
Home equity and HELOCs		5,056		—		198		—		5,254
Commercial:
Commercial real estate		11,583		385		358		—		12,326
Commercial business		1,729		179		179		—		2,087
Construction		3,204		—		—		—		3,204
Consumer		23		—		—		—		23

	$	96,381	$	564	$	1,909	$	—	$	98,854


	June 30, 2016
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Residential:
One-to-four family	$	70,874	$	—	$	1,106	$	—	$	71,980
Home equity and HELOCs		6,221		—		227		—		6,448
Commercial:
Commercial real estate		10,860		395		365		—		11,620
Commercial business		162		203		193		—		558
Construction		3,179		—		—		—		3,179
Consumer		10		—		—		—		10

	$	91,306	$	598	$	1,891	$	—	$	93,795

The following tables present the segments of the loan portfolio summarized by aging categories as of March 31, 2017 and June 30, 2016:


	March 31, 2017
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loan Receivables		Loans Receivable >90 Days and Accruing
Residential:
One-to-four family	$	722	$	158	$	587	$	1,467	$	74,493	$	75,960	$	—
Home equity and HELOCs		—		3		195		198		5,056		5,254		—
Commercial:
Commercial real estate		—		—		100		100		12,226		12,326		—
Commercial business		—		—		—		—		2,087		2,087		—
Construction		—		—		—		—		3,204		3,204		—
Consumer		—		—		—		—		23		23		—

	$	722	$	161	$	882	$	1,765	$	97,089	$	98,854	$	—


	June 30, 2016
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loan Receivables		Loans Receivable >90 Days and Accruing
Residential:
One-to-four family	$	470	$	317	$	659	$	1,446	$	70,534	$	71,980	$	—
Home equity and HELOCs		94		79		227		400		6,048		6,448		—
Commercial:
Commercial real estate		—		—		100		100		11,520		11,620		—
Commercial business		—		—		—		—		558		558		—
Construction		—		—		—		—		3,179		3,179		—
Consumer		—		—		—		—		10		10		—

	$	564	$	396	$	986	$	1,946	$	91,849	$	93,795	$	—

The Company may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan that is then identified as a troubled debt restructuring (“TDR”). The Company may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Company’s allowance for loan losses. TDRs are restored to accrual status when the obligation is brought current, has performed in accordance with the modified contractual terms for a reasonable period of time, generally six months, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

The Company may identify loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions and negative trends may result in a payment default in the near future.

As of March 31, 2017 and June 30, 2016, the Company had two loans identified as TDRs totaling $339,000 and $357,000, respectively. At March 31, 2017 and June 30, 2016, all of the TDRs were performing in compliance with their restructured terms and on accrual status. There were no modifications to loans classified as TDRs during the nine month period ended March 31, 2017. No additional loan commitments were outstanding to these borrowers at March 31, 2017 and June 30, 2016.

The following table details the Company’s TDRs that are on accrual status and non-accrual status at March 31, 2017:


	As of March 31, 2017
(Dollars in thousands)	Number of Loans		Accrual Status		Non-Accrual Status		Total TDRs
Commercial real estate		2	$	339	$	—	$	339

Total		2	$	339	$	—	$	339

The following table details the Company’s TDRs that are on accrual status and non-accrual status at June 30, 2016:


	As of June 30, 2016
(Dollars in thousands)	Number of Loans		Accrual Status		Non-Accrual Status		Total TDRs
Commercial real estate		2	$	357	$	—	$	357

Total		2	$	357	$	—	$	357

The carrying amount of residential mortgage loans in the process of foreclosure was $488,000 and $886,000 at March 31, 2017 and June 30, 2016, respectively.

4. Derivatives and Risk Management Activities

The Company did not have any derivative instruments designated as hedging instruments or subject to master netting and collateral agreements as of and for the nine months ended March 31, 2017 and for the year ended June 30, 2016. The following table summarizes the amounts recorded in the Company’s Consolidated Statements of Financial Condition for derivatives not designated as hedging instruments as of March 31, 2017 and June 30, 2016 (in thousands):



	Statement of Financial
	Condition			Notional
	Presentation	Fair Value		Amount
Interest Rate Lock Commitments	Mortgage banking derivatives	$	839	$	29,485

Mandatory sale commitments:

Related to interest rate and price risk for Loans held for sale	Mortgage banking derivatives		111		2,990

To Be Announced securities	Mortgage banking derivatives		—		—



Liability Derivatives



	Statement of Financial
	Condition			Notional
	Presentation	Fair Value		Amount
Interest Rate Lock Commitments	Other liabilities	$	41	$	6,631

Mandatory sale commitments:

Related to interest rate and price risk for Loans held for sale	Other liabilities		4		580

To Be Announced securities	Other liabilities		106		14,750



	Statement of Financial
	Condition			Notional
	Presentation	Fair Value		Amount
Interest Rate Lock Commitments	Mortgage banking derivatives	$	1,084	$	30,006

Mandatory sale commitments:

Related to interest rate and price risk for Loans Held for Sale	Mortgage banking derivatives		408		7,046

To Be Announced securities	Mortgage banking derivatives		—		—



Liability Derivatives



	Statement of Financial
	Condition			Notional
	Presentation	Fair Value		Amount
Interest Rate Lock Commitments	Other liabilities	$	32	$	4,572

Mandatory sale commitments:

Related to interest rate and price risk for Loans Held for Sale	Other liabilities		48		5,544

To Be Announced securities	Other liabilities		166		22,000

The following tables summarize the amounts recorded in the Company’s statements of income for derivative instruments not designated as hedging instruments for the nine and three months ended March 31, 2017 and 2016 (in thousands):


		Gain/(Loss)
	Statement of Income	Nine Months Ended
	Presentation	March 31, 2017			March 31, 2016
Interest Rate Lock Commitments	(Loss) gain from derivative Instruments	$	(128	)	$	553
Mandatory sale commitments:

Related to interest rate and price risk for Loans Held for Sale	(Loss) from derivative instruments		(596	)		(64	)

To Be Announced securities	Gain (loss) from Instruments		255			(421	)

	Total (loss) gain from hedging instruments	$	(469	)	$	68


		Gain/(Loss)
	Statement of Income	Three Months Ended
	Presentation	March 31, 2017			March 31, 2016
Interest Rate Lock Commitments	Gain from hedging Instruments	$	140		$	277
Mandatory sale commitments:

Related to interest rate and price risk for Loans Held for Sale	Gain from hedging instruments		332			115

To Be Announced securities	(Loss) from hedging Instruments		(3	)		(218	)

	Total gain from hedging instruments	$	469		$	174

The fair value of the Company’s Interest Rate Lock Commitments (“IRLCs”) and mandatory sales commitments are based upon the estimated fair value of the underlying mortgage loan (determined consistent with “Loans Held for Sale”), adjusted for (1) estimated costs to complete and originate the loan, and (ii) the estimated percentage of IRLCs that will result in a closed mortgage loan. The valuation of the Company’s IRLCs approximates a whole-loan price, which includes the value of the related mortgage servicing.

5. Fair Value of Financial Instruments

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with FASB ASC Topic 820, “Fair Value Measurement”, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is determined at a reasonable point within the range that is most representative of fair value under current market conditions. Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially

all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends, and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuation is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.

The incorporation of counterparty credit risk did not have significant impact on the valuation of assets and liabilities recorded at fair value as of March 31, 2017 or June 30, 2016.

Assets measured at fair value on a recurring basis at March 31, 2017 and June 30, 2016 are summarized below:

March 31, 2017

(Dollars in thousands)

Level 1

Level 2

Level 3

Total

Investment securities available-for-sale:

U.S. governmental securities

—

4,370

—

4,370

Corporate notes

—

13,644

—

13,644

Collateralized mortgage obligations - agency residential

—

13,565

—

13,565

Mortgage-backed securities - agency residential

—

4,956

—

4,956

Municipal securities

—

3,506

—

3,506

Bank CDs

—

6,492

—

6,492

Loans Held for Sale

—

6,050

—

6,050

Price risk for Loans Held for Sale

—

111

—

111

Interest rate lock commitments

—

839

—

839

—

53,533

—

53,533

June 30, 2016

(Dollars in thousands)

Level 1

Level 2

Level 3

Total

Investment securities available- for- sale:

U.S. governmental securities

—

1,521

—

1,521

Corporate notes

—

8,327

—

8,327

Collateralized mortgage obligations - agency residential

—

9,831

—

9,831

Mortgage-backed securities - agency residential

—

7,009

—

7,009

Municipal securities

—

3,566

—

3,566

Bank CDs

—

3,027

—

3,027

Loans Held for Sale

—

24,676

—

24,676

Price risk for Loans Held for Sale

—

408

—

408

Interest rate lock commitments

—

1,084

—

1,084

—

59,449

—

59,449

Liabilities measured at fair value on a recurring basis at March 31, 2017 are summarized below.


	March 31, 2017
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Price risk for Loans Held for Sale	$	—	$	4	$	—	$	4
To Be Announced securities		—		106		—		106
Interest rate lock commitments		—		41		—		41

	$	—	$	151	$	—	$	151

Liabilities measured at fair value on a recurring basis at June 30, 2016 are summarized below.


	June 30, 2016
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Price risk for Loans Held for Sale	$	—	$	48	$	—	$	48
To Be Announced securities		—		166		—		166
Interest rate lock commitments		—		32		—		32

	$	—	$	246	$	—	$	246

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2017 and June 30, 2016 are as follows:

March 31, 2017

(Dollars in thousands)

Level 1

Level 2

Level 3

Total

Impaired loans

—

348

—

348

June 30, 2016

(Dollars in thousands)

Level 1

Level 2

Level 3

Total

Impaired loans

—

338

Real estate owned

—

115

—

453

The following tables presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

Balances as of March 31, 2017
Qualitative Information about Level 3 Fair Value Measurements

(Dollars in thousands)

Fair Value

Valuation

Techniques

Unobservable
Input

Range
(Weighted
Average)

Impaired loans

348

Appraisal of collateral ⁽¹⁾

Liquidation expenses/
borrower negotiations

5.0%-16.3%
(13.1%

)

Balances as of June 30, 2016
Qualitative Information about Level 3 Fair Value Measurements

(Dollars in thousands)

Fair Value

Valuation

Techniques

Unobservable
Input

Range
(Weighted
Average)

Impaired loans

338

Appraisal of collateral ⁽¹⁾

Liquidation expenses/
borrower negotiations

5.0%-16.3% (11.2%

)

Other real estate owned

115

Appraisal of collateral ⁽¹⁾

Liquidation expenses

7.0% to 8.0% (7.5%

)

⁽¹⁾	Appraisals may be discounted for qualitative factors such as age of appraisal, interior condition of the property, and liquidation expenses. Fair value may also be based on negotiated settlements with the borrowers.

The estimated fair values of the Company’s financial instruments, whether carried at cost or fair value, at March 31, 2017 and June 30, 2016 are as follows:


					Fair Value Measurements at March 31, 2017
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash and cash equivalents	$	47,552	$	47,552	$	47,552	$	—	$	—
Investment securities available-for-sale		46,533		46,533		—		46,533		—
Investment securities held-to-maturity		9,053		9,026		—		9,026		—
Loans held for sale at fair value		6,050		6,050		—		6,050		—
Loans receivable, net		98,588		98,090		—		—		98,090
Restricted investment in bank stock		650		650		—		—		650
Accrued interest receivable		554		554		—		554		—
Price risk for Loans Held for Sale		111		111		—		111		—
Interest rate lock commitments		839		839		—		839		—

Liabilities:
Deposits	$	171,802	$	162,554	$	—	$	162,445	$	—
Advances from the FHLB		9,000		8,969		—		8,969		—
Securities sold under agreements to repurchase		2,408		2,408		—		2,408		—
Price risk for Loans Held for Sale		4		4		—		4		—
To Be Announced securities		106		106		—		106		—
Interest rate lock commitments		41		41		—		41		—
Accrued Interest Payable		21		21		—		21		—

Off-balance sheet:
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—


					Fair Value Measurements at June 30, 2016
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash and cash equivalents	$	15,427	$	15,427	$	15,427	$	—	$	—
Investment securities available-for-sale		33,281		33,281		—		33,281		—
Investment securities held-to-maturity		5,825		5,941		—		5,941		—
Loans held for sale at fair value		24,676		24,676		—		24,676		—
Loans receivable, net		93,450		93,907		—		—		93,907
Restricted investment in bank stock		1,108		1,108		—		—		1,108
Accrued interest receivable		527		527		—		527		—
Price risk for Loans Held for Sale		408		408		—		408		—
Interest rate lock commitments		1,084		1,084		—		1,084		—

Liabilities:
Deposits	$	141,771	$	138,711	$	—	$	138,711	$	—
Advances from the FHLB		20,000		20,040		—		20,040		—
Securities sold under agreements to repurchase		3,929		3,929		—		3,929		—
Price risk for Loans Held for Sale		48		48		—		48		—
To Be Announced securities		167		167		—		167		—
Interest rate lock commitments		32		32		—		32		—
Accrued Interest Payable		19		19		—		19		—

Off-balance sheet:
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. There were no changes in methodologies or transfers between levels during the nine months ended March 31, 2017 and for the year ended June 30, 2016.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at March 31, 2017 and June 30, 2016:

Cash and Cash Equivalents

These short-term assets are valued at their face value, which approximate fair value.

Investments (Available- for- Sale and Held- to- Maturity)

Where quoted prices are available in an active market for identical instruments, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid U.S. Treasury securities and most equity securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include certain Mortgage Backed Securities (MBS). In cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. Investment securities classified within Level 3 include certain equity securities that do not have readily available market prices, certain municipal bonds, certain Asset Backed Securities (ABS), and other less liquid investment securities.

Loans Held for Sale at Fair Value

All mortgage loans held for sale are carried at fair value. Interest income on loans held for sale, which totaled $319,000 and $257,000 for the nine months ended March 31, 2017 and 2016, respectively, and $44,000 and $61,000 for the three months ended March 31, 2017 and 2016, respectively, are included in Interest and fees on loans in the Consolidated Statements of Income.

Changes in fair value of loans held for sale are reported in non-interest income in the Consolidated Statements of Income and amounted to $(697,000) and $(33,000) for the nine months ended March 31, 2017 and 2016, respectively, and $(2,000) and $16,000 for the three months ended March 31, 2017 and 2016, respectively.

The Company’s mortgage loans are generally classified within Level 2 of the valuation hierarchy.

The following table reflects the difference between the carrying amount of mortgage loans held for sale, measured at fair value and the aggregate unpaid principal amount that the Company is contractually entitled to receive at maturity as of March 31, 2017 and June 30, 2016 (in thousands):


					Excess Carrying Amount
	Carrying		Aggregate Unpaid		Over Aggregate Unpaid Principal
Loans held for sale	Amount		Principal Balance		Balance
March 31, 2017	$	6,050	$	5,919	$	131
June 30, 2016	$	24,676	$	23,848	$	828

The Company did not have any mortgage loans held for sale recorded at fair value that were 90 or more days past due and on non-accrual at March 31, 2017.

Interest Rate Lock Commitments (“IRLC”)

The fair value of the Company’s IRLC instruments are based upon the underlying loans measured at fair value on a recurring basis and the probability of such commitments being exercised. Due to observable market data inputs used by the Company, the Company’s IRLCs are classified within Level 2 of the valuation hierarchy.

Mandatory Sales Commitments for Loans Held for Sale

Fair values for mandatory sales commitments are based on fair values of the underlying mortgage loans and the probability of such commitments being exercised. Due to the observable inputs used by the Company, the Company’s mandatory sales commitments (LHS) are classified within Level 2 of the valuation hierarchy.

To Be Announced Securities (“TBAs”)

TBAs are valued based on forward dealer marks from the Company’s approved counterparties. The Company utilizes a third party market pricing service which compiles current prices for instruments from market sources, and those prices represent the current executable price. Due to the observable inputs used by the Company, the Company’s TBAs are classified within Level 2 of the valuation hierarchy.

Loan Receivable, Net

Fair values are estimated for portfolios of loans with similar financial characteristics. For loans that reprice frequently, the carrying value approximates fair value. The fair value of other type of loans is estimated by discounting expected cash flows using the current rates at which similar loans would be made to borrowers with comparable credit ratings and for similar remaining maturities.

Impaired Loans

Impaired loans include those collateral-dependent loans and leases for which the practical expedient under ASC 310-40 was applied, resulting in a fair value adjustment to the loans. Impaired loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or fair value. Fair value is measured based on the value of the collateral securing these loans less cost to sell and is classified at Level 3 in the fair value hierarchy. The fair value of collateral is based on appraisals performed by qualified licensed appraisers hired by the Company.

Restricted Investment in Bank Stock

The stock is carried at cost; which approximates fair value and considers the limited marketability of such securities.

Real Estate Owned (Cost or Fair Value)

Real estate properties acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. These assets are included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurements. At March 31, 2017, the Company held no real estate properties acquired through, or in lieu of, foreclosures.

Accrued Interest Receivable and Accrued Interest Payable

The carrying amount of accrued interest receivable and payable approximates their respective fair values.

Deposits

The fair value of demand deposits, savings accounts, and money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated discounting the contractual cash flows. The discount rate is estimated using the rates currently offered for deposits with comparable remaining maturities.

Advances from the FHLB

The fair value of advances is estimated based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for borrowings with comparable terms, credit, and remaining maturities.

Securities Sold Under Agreements to Repurchase

The fair value of securities sold under agreements to repurchase is estimated based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for borrowings with comparable terms, credit, and remaining maturities.

Commitments to Extend Credit

The majority of the Company’s commitments to extend credit carry current market interest rates if converted to loans. Because commitments to extend credit are generally unassignable by either the Company or the borrower, they only have value to the Company and the borrower. The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.

6. Earnings per Share

Earnings per share (“EPS”) consist of two separate components: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for each period presented. The diluted EPS calculation reflects the EPS if all outstanding instruments convertible to common stock were exercised. There were no common shares outstanding for the three and nine months ended March 31, 2016. For the three and nine months ended March 31, 2017 and 2016, there were no stock options or other convertible instruments outstanding for either period. Therefore, there is no effect of dilution on the Company’s earnings per share.

The calculation of EPS for the three and nine months ended March 31, 2017 and 2016 is as follows (in thousands, except per share data):

For the Three Months
Ended March 31,

For the Nine Months
Ended March 31,

2017(1)

2016

2017(1)

2016

Net income (basic and diluted)

169

390

530

Weighted average shares outstanding

1,915,421

N/A

629,153

N/A

Net income per share – basic

0.05

N/A

0.62

N/A

(1)	The weighted average shares outstanding are calculated for the full periods presented and factor zero shares outstanding for the days prior to the conversion on January 11, 2017.

7. Employee Stock Ownership Plan

The Company adopted the Huntingdon Valley Bank Employee Stock Ownership Plan (the “ESOP”) for eligible employees. Eligible employees who have attained age 21 may participation in the ESOP on the later of the effective date of the ESOP or upon the first entry date commencing on or after the eligible employee’s completion of 1,000 hours of service during a continuous 12-month period.

The ESOP trustee purchased, on behalf of the ESOP, 8% of the total number of shares of HV Bancorp common stock issued in the offering. The ESOP funded the stock purchase with a loan from HV Bancorp equal to the aggregate purchase price of the common stock. The loan will be repaid principally through Huntingdon Valley Bank’s contribution to the ESOP and dividends payable on common stock held by the ESOP over the anticipated 20-year term of the loan. The interest rate for the ESOP loan is an adjustable rate equal to the prime rate, as published in The Wall Street Journal, beginning on the closing date of the conversion. Thereafter the interest rate will adjust annually and will be the prime rate on the first business day of the calendar year, retroactive to January 1 of such year. The collateral for the loan is the common stock of the Company purchased by the ESOP.

The trustee will hold the shares purchased by the ESOP in an unallocated suspense account, and shares will be released from the suspense account on a pro-rata basis as the loan is repaid. As shares are released from collateral, the Company recognizes compensation expense equal to the average market price of the shares during the period and the shares will be outstanding for earnings-per-share purposes. The

trustee will allocate the shares released among participants on the basis of each participant’s proportional share of compensation relative to the total aggregate compensation paid to all participants. A participant will become vested in his or her account balance at a rate of 20% per year over a six-year period, beginning in the second year of credited service. Participants who were employed by Huntingdon Valley Bank immediately prior to the conversion will receive credit for vesting purposes for years of service prior to the adoption of the ESOP. Participants also will become fully vested automatically upon normal retirement, death or disability, a change in control, or termination of the ESOP. Generally, participants will receive distributions from the ESOP upon separation from service. The ESOP reallocates any unvested shares forfeited upon termination of employment among the remaining participants.

During the three months ended March 31, 2017, the ESOP purchased 8% of the total shares issued which equated to 174,570 shares of the Company’s common stock in the open market ranging from $12.50 per share to $14.21 per share for a weighted average price per share of $13.92, and a total purchase price of $2,430,000.

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to the Company within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the beliefs of management as well as assumptions made by and information currently available to management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “should,” “could,” or “may” and similar expressions or the negative thereof. Certain factors that could cause actual results to differ materially from expected results include, changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of the Company, and changes in the securities markets. 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. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to revise or update any forward-looking statements contained in this Form 10-Q to reflect future events or developments.

Overview

The Bank provides financial services to individuals and businesses from our main office in Huntingdon Valley, Pennsylvania, and from our three additional full-service banking offices located in Plumsteadville, Warrington and Huntingdon Valley, Pennsylvania. We also operate a limited service branch in Philadelphia, Pennsylvania. We have a loan production office located in Warminster, Pennsylvania and a loan origination office in Montgomeryville, Pennsylvania. Our primary market area includes Montgomery, Bucks and Philadelphia Counties in Pennsylvania. Our principal business consists of attracting retail deposits from the general public in our market area and investing those deposits, together with funds generated from operations and borrowings, primarily in one- to four-family residential mortgage loans, commercial real estate loans (including multi-family loans), home equity loans and lines of credit and, to a lesser extent, construction loans. We retain our loans in portfolio depending on market conditions, but we primarily sell our fixed-rate one- to four-family residential mortgage loans in the secondary market. We also invest in various investment securities. Our revenue is derived principally from interest on loans and investments and loan sales. Our primary sources of funds are deposits, Federal Home Loan Bank advances and principal and interest payments on loans and securities.

Our results of operations depend primarily on our net interest income which is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provision for loan losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of gains recognized from the sale of residential mortgage loans in the secondary market, fees and service charges on deposit accounts, gain from hedging instruments and sales of securities. Non-interest expense currently consists primarily of expenses related to salaries and employee benefits, occupancy, data processing related operations, professional fees, real estate owned and other expenses.

Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities. A complete set of Risk factors are described in the Registration Statement on Form S-1 (File No. 333-213537) declared effective by the Securities and Exchange Commission on November 10, 2016.

Critical Accounting Policies

The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. Critical accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.

Our critical accounting policies involving significant judgments and assumptions used in the preparation of the Financial Statements as of March 31, 2017 have remained unchanged from the disclosures presented in our Registration Statement on Form S-1 (file number 333-213537).

The Jumpstart Our Business Startups Act (“JOBS Act”) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. As of March 31, 2017 and June 30, 2016, there is not a significant difference in the presentation of our financial statements as compared to other public companies as a result of this transition guidance.

The complete list of Critical Accounting Policies are described in the Registration Statement on Form S-1 (File No. 333-213537) declared effective by the Securities and Exchange Commission on November 10, 2016.

Comparison of Statements of Financial Condition at March 31, 2017 and at June 30, 2016

Total Assets

Total assets increased $34.9 million, or 19.2%, to $216.9 million at March 31, 2017 from $182.0 million at June 30, 2016. The increase was primarily the result of increases of $32.1 million in cash and cash equivalents, $16.5 million in investment securities and $5.1 million in loans receivable, partially offset by a decrease of $18.6 million in loans held for sale.

Cash and cash equivalents

Cash and cash equivalents increased $32.1 million, or 208.2%, to $47.6 million at March 31, 2017 from $15.4 million at June 30, 2016, primarily as a result of the proceeds received by the Company relating to the initial public offering of the Company which has not been deployed into loans or securities. Additionally, an increase in deposits of $30.0 million, partially offset by a decrease in Federal Home Loan Bank Advances of $11.0 million also contributed to the increase in cash and cash equivalents.

Investment Securities

Investment securities increased by $16.5 million, or 42.1%, to $55.6 million at March 31, 2017 from $39.1 million at June 30, 2016. The increase was primarily due to purchases of $22.7 million in new securities, partially offset by sales and principal repayments of $5.6 million and an increase in unrealized losses on securities available-for-sale of $466,000. At March 31, 2017, our held-to-maturity portion of the securities portfolio, at amortized cost, was $9.1 million, and our available-for-sale portion of the securities portfolio, at fair value, was $46.5 million.

Net Loans

Net loans increased $5.1 million, or 5.5%, to $98.6 million at March 31, 2017 from $93.5 million at June 30, 2016. One- to four-family residential real estate loans increased $4.0 million, or 5.5%, to $76.0 million at March 31, 2017 from $72.0 million at June 30, 2016 as a result of our continued strategic emphasis on growing our adjustable-rate jumbo one- to four-family residential real estate loan portfolio. Commercial real estate loans increased by $706,000 from $11.6 million at June 30, 2016 to $12.3 million at March 31, 2017, as a result of increased loan demand for that product. Construction loans increased $25,000 to $3.2 million at March 31, 2017 compared to June 30, 2016. Home equity loans decreased $1.2 million to $5.3 million at March 31, 2017 from $6.4 million at June 30, 2016 primarily as a result of borrower refinancing.

Loans Held For Sale

Loans held for sale decreased $18.6 million, or 75.5%, to $6.1 million at March 31, 2017 from $24.7 million at June 30, 2016 as the pipeline of one- to four-family residential real estate loans decreased during the nine months ended March 31, 2017 due to increases in interest rates and lower demand for loans due to seasonality.

Deposits

Deposits increased $30.0 million, or 21.2%, to $171.8 million at March 31, 2017 from $141.8 million at June 30, 2016. Our core deposits (consisting of NOW, money market, pass book and statement and checking accounts) increased by $36.3 million, or 34.8%, to $140.6 million at March 31, 2017 from $104.3 million at June 30, 2016, primarily as a result of the introduction of a new money market product attracting clients of local CPA firms, totaling $24.9 million at March 31, 2017.

Certificates of deposit decreased $6.3 million, or 16.8%, to $31.2 million at March 31, 2017 from $37.5 million at June 30, 2016. The decrease in certificates of deposit was primarily due to the Bank allowing higher costing certificates of deposit held by credit unions and banks (through deposit listing services) to mature without renewing.

Advances from the Federal Home Loan Bank

Advances from the Federal Home Loan Bank decreased by $11.0 million from $20.0 million at June 30, 2016 to $9.0 million at March 31, 2017. The reduction was primarily due to the $30.0 million or 21.2% increase in deposits from June 30, 2016, which totaled $141.8 million, to $171.8 million at March 31, 2017.

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase decreased $1.5 million, or 38.7%, to $2.4 million at March 31, 2017 from $3.9 million at June 30, 2016 as a result of a reduction in the underlying deposit balances, which are primarily held by title companies.

Total Shareholders’ Equity

Total shareholders’ equity increased $18.1 million to $31.1 million at March 31, 2017 compared to $13.0 million at June 30, 2016 as a result of the issuance of the Company’s common stock which increased equity by $20.4 million in January 2017, and net income for the nine months ended March 31, 2017 of $390,000. These increases in shareholders’ equity were partially offset by unearned ESOP shares of $2.4 million, established as part of the creation of the Huntingdon Valley Bank Employee Stock Ownership Plan and an increase in accumulated other comprehensive losses of $275,000 due to the fair value adjustments, net of deferred tax, on the investment securities available-for-sale portfolio.

Comparison of Statements of Income for the Three Months Ended March 31, 2017 and 2016

General

Net income decreased $71,000, or 42.1%, to $98,000 for the three months ended March 31, 2017 from $169,000 for the three months ended March 31, 2016. The decrease in net income was primarily due to an increase in salaries and employee benefits of $376,000 due to an increase in full time equivalent employees (FTEs). FTEs increased from sixty-one FTEs as of March 31, 2016 to seventy FTEs as of March 31, 2017. This increase in personnel expenses was partially offset by an increase of $138,000 in net interest income, and a reduction in provision for loan loss expense of $38,000 due to recoveries of $34,000 for the period.

Interest Income

Total interest income increased $191,000 or 14.7%, to $1.5 million for the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. The increase was primarily the result of increases in interest and fees on loans, interest on interest-earning deposits and interest and dividends on investments. The average balance of our interest-earning assets increased by $47.3 million to $208.1 million for the three months ended March 31, 2017 as compared $160.8 million for the three months ended March 31, 2016. This was partially offset by a decrease in the total average yield on interest earning assets as average balances on the lower yielding interest-earning cash and cash equivalents deposits increased substantially causing the overall yield on interest earning assets to decrease 36 basis points to 2.87% for the three months ended March 31, 2017 as compared to 3.23% for the three months ended March 31, 2016.

Interest on interest-earning deposits increased $117,000, 307.8% increase, from $38,000 for the three months ended March 31, 2016 to $155,000 for the three months ended March 31, 2017. As a result of recent rate increases by the Federal Reserve, yields on interest earning cash and cash equivalents increased by 28 basis points from 72 basis points for the quarter ended March 31, 2016 to 100 basis points for the quarter ended March 31, 2017. Interest earning cash and cash equivalents increased as a result of the subscription proceeds related to the Company’s initial public offering and the conversion of the Bank from the mutual to the stock form of organization. The average balance in cash and cash equivalents increased $40.8 million from $21.0 million for the quarter ending March 31, 2016 to $61.8 million for the quarter ending March 31, 2017. The initial funds received were $57.5 million which were held by the Bank before returning approximately $35.7 million received in excess proceeds of the approved maximum. Interest on investment securities increased by $36,000 which is the result of an increase in interest income on US Government securities, corporate and municipal bonds, bank certificate of deposit investments and mortgage backed securities of $64,000. The average yield on total investments securities increased 17 basis points from 1.78% for the quarter ended March 31, 2016 to 1.95% for the same period in 2017 as market rates increased slightly. A portion of the conversion proceeds were used to purchase investment securities, which caused the average balance of investment securities to increase by $4.1 million from $39.0 million for the quarter ended March 31, 2016 to $43.1 million for the quarter ended March 31, 2017. Interest income on restricted investments in bank stock increased $5,000 from $7,000 for the quarter ended March 31, 2016 to $12,000 for the quarter ended March 31, 2017. These increases were partially offset by a decrease in interest income from collateralized mortgage obligation securities, which decreased by $23,000 for the quarter ended March 31, 2017 compared to the same period in 2016. The decrease in collateralized mortgage obligation securities was due primarily to a decrease in average balances from $12.6 million for the quarter ended March 31, 2016 to $9.5 million for the quarter ended March 31, 2017.

Interest and fees on loans increased $33,000, or 3.1%, to $1.1 million for the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. This was due to the total average loans increasing by $2.6 million and the average yield on average loans increasing by two basis points for the three months ended March 31, 2017 as compared to the same quarter in 2016. This increase was the result of continued focus on originating adjustable-rate one- to four-family residential mortgages.

Interest Expense

Total interest expense increased $53,000, or 28.5%, to $239,000 for the three months ended March 31, 2017 from $186,000 for the three months ended March 31, 2016, due to a $48,000 increase in interest on deposits and a $5,000 increase in interest on advances from the Federal Home Loan Bank.

Interest on deposits increased $48,000, or 30.4%, to $206,000 for the three months ended March 31, 2017 from $158,000 for the three months ended March 31, 2016 primarily as a result of an increase in average interest bearing deposits of $36.3 million to $170.5 million during the three months ended March 31, 2017 as compared to $134.1 million for the prior year period, primarily as a result of a $40.5 million increase in the average balance of our core deposit accounts, which was partially offset by a $4.2 million decrease in the average balance of our certificates of deposit. The increase in average balances on core deposits was primarily the result of the introduction of a new money market product attracting clients of local CPA firms, totaling $24.9 million at March 31, 2017. The average cost of deposits increased by one basis point to 0.48% for the three months ended March 31, 2017 from 0.47% for the three months ended March 31, 2016, due primarily to an increase in cost of NOW accounts and money market deposits, which increased by 41 basis points and 11 basis points, respectively. Rates on NOW accounts increased due to the Bank creating a higher tier NOW account product for the purposes of attracting deposits from professionals who

maintain escrow or other fiduciary accounts on behalf of their clients. This product can pay up to 1.00% on interest per annum. The average cost of certificates of deposit decreased by seven basis points to 0.96% during the three months ended March 31, 2017 as compared to 1.03% for the three months ended March 31, 2016, reflecting runoff of higher priced certificates of deposit held by credit unions and banks.

Interest on advances from the Federal Home Loan Bank increased $5,000 to $32,000 for the three months ended March 31, 2017 from $27,000 for the three months ended March 31, 2016 as a result of an increase in the average rate paid on the Federal Home Loan Bank advances, which increased from 1.08% for the quarter ended March 31, 2016 to 1.42% for the quarter ended March 31, 2017. The increase in average cost was due to increased rates on advances. This was partially offset by the average balance of Federal Home Loan Bank advances decreasing by $1.0 million to $10.0 million for the three months ended March 31, 2017 from $9.0 million for the same period in 2016.

Net Interest Income

Net interest income increased $138,000, or 12.4%, to $1.3 million for the three months ended March 31, 2017 as compared to $1.1 million the three months ended March 31, 2016 as a result of an increase in our net interest-earning assets which increased to $26.9 million for the three months ended March 31, 2017 from $14.7 million for the three months ended March 31, 2016. This increase in net interest-earning assets was primarily the result of the subscription proceeds related to the Company’s initial public offering and the conversion of the Bank from the mutual to the stock form of organization during the three months ended March 31, 2017. Our net interest spread decreased 38 basis points from 2.72% for the three months ended March 31, 2016 to 2.34% for the three months ended March 31, 2017. Our net interest margin decreased by 36 basis points to 2.41% for the three months ended March 31, 2017 from 2.77% for the three months ended March 31, 2016 as the increase in average interest earning assets occurred primarily in the lower yielding interest earning cash and cash equivalents.

Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.


	For the Three Months Ended March 31,
	2017								2016
(Dollars in Thousands)	Average Balance			Interest Income Expense		Yield/ Costs(5)			Average Balance			Interest Income Expense		Yield/ Costs(5)
Interest earning assets
Loans (1)	$	102,548		$	1,114		4.35	%	$	99,953		$	1,081		4.33	%
Cash and cash equivalents		61,797			155		1.00	%		21,039			38		0.72	%
Investment securities		43,064			210		1.95	%		39,044			174		1.78	%
Restricted Investment in bank stock		654			12		7.34	%		716			7		3.91	%

Total interest earning assets		208,063			1,491		2.87	%		160,752			1,300		3.23	%

Noninterest-earning assets		9,244								7,367

Total assets	$	217,307							$	168,119

Interest bearing liabilities
Now accounts	$	47,276		$	68		0.58	%	$	33,641		$	14		0.17	%
Money market deposit accounts		27,586			27		0.39	%		24,724			17		0.28	%
Passbooks and statement savings accounts		35,222			26		0.30	%		35,048			26		0.30	%
Checking accounts		27,017			5		0.07	%		3,208			4		0.50	%
Certificate of deposit		33,359			80		0.96	%		37,528			97		1.03	%

Total deposits	$	170,460		$	206		0.48	%	$	134,149		$	158		0.47	%

Federal home loan bank advances		9,000			32		1.42	%		10,000			27		1.08	%
Securities sold under agreements to repurchase		1,720			1		0.23	%		1,918			1		0.21	%

Total interest-bearing liabilities	$	181,180		$	239		0.53	%	$	146,067		$	186		0.51	%

Noninterest-bearing liabilities
Checking		8,365								9,224
Other		719								1,067

Total liabilities	$	190,264							$	156,358

Equity		27,043								11,761

Total liabilities and Total shareholders’ equity	$	217,307							$	168,119

Net interest income				$	1,252							$	1,114

Interest rate spread (2)							2.34	%							2.72	%

Net interest-earning assets (3)	$	26,883							$	14,685

Net interest margin (4)							2.41	%							2.77	%

Average interest-earning assets to average interest-bearing liabilities		114.84	%							110.05	%

(1)	Includes loans held for sale.

(2)	Interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.

(3)	Net interest earning assets represent total average interest-earning assets less total interest–bearing liabilities.

(4)	Net interest margin represents net interest income divided by total average interest-earning assets.

(5)	Annualized

Rate/ Volume Analysis

The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.


For the Three Months Ended March 31, 2017 and 2016
Increase (Decrease) Due to
	Volume			Rate			Total Increase (Decrease)
	(in thousands)
Interest-Earning Assets:
Loans	$	28		$	5		$	33
Cash and cash equivalents		97			20			117
Investment securities		19			17			36
Restricted investment in bank stock		(1	)		6			5

Total interest-earning assets	$	143		$	48		$	191

Interest Bearing-Liabilities:

NOW accounts	$	8		$	46		$	54
Money market deposit accounts		2			8			10
Passbook and statement savings accounts		—			—			—
Checking accounts		1			—			1
Certificates of deposits		(10	)		(7	)		(17	)
Federal Home Loan Bank advances		(2	)		7			5
Securities sold under agreements to repurchase		—			—			—

Total interest-bearing liabilities	$	(1	)	$	54		$	53

Change in net interest income	$	144		$	(6	)	$	138

Provision for Loan Losses

We establish a provision for loan losses, which is charged to operations, in order to maintain the allowance for loan losses at a level we consider necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimated at the balance sheet date. In determining the level of the allowance for loan losses, we consider past and current loss experience, evaluations of real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of non-performing loans. The amount of the allowance is based on estimates, and actual losses may vary from such estimates as more information becomes available or economic conditions change.

This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as circumstances change as more information becomes available. The allowance for loan losses is assessed on a quarterly basis and provisions are made for loan losses as required in order to maintain the allowance.

Provision for loan losses decreased by $38,000 to a credit of $(12,000) for the three months ended March 31, 2017, from a provision of $26,000 for the three months ended March 31, 2016 as a result of recoveries received during the quarter ended March 31, 2017 of $34,000. During the quarter ended March 31, 2017, charge-offs of $128,000 were recorded and $28,000 of recoveries were received. We recorded no charge-offs and received no recoveries for the three months ended March 31, 2016.

Non-Interest Income

Non-interest income increased $27,000 to $1.3 million for the three months ended March 31, 2017 compared to the three months ended March 31, 2016. The increase was primarily related to an increase of $295,000 in gain from hedging instruments, partially offset by a decrease on the sale of loans held for sale of $245,000. The gain from hedging instruments increased $295,000 to $469,000 for the three months ended March 31, 2017 from a gain of $174,000 for the three months ended March 31, 2016 due to a more favorable interest rate environment and increased volume of locked loans associated with hedging. The offset to the gains incurred from the hedging instruments is realized in the decreased value of the loan when it is committed to the investor in the secondary market. Net gain on sales of loans decreased $245,000, or 24.8%, to $744,000 for the three months ended March 31, 2017 from $989,000 for the three months ended March 31, 2016 primarily as a result of a decrease in premiums earned based on the decrease in the amount of loans sold from $36.4 million for the three months ended March 31, 2016 to $27.3 million for the three months ended March 31, 2017.

Non-Interest Expense

Non-interest expense increased $273,000, or 12.7%, to $2.4 million for the three months ended March 31, 2017 from $2.1 million for the three months ended March 31, 2016. The increase primarily reflected a $376,000 increase in salaries and employee benefits, partially offset by a decrease of $172,000 in real estate owned expense. Salaries increased as the full time equivalent employees increased from sixty-one at March 31, 2016 to seventy at March 31, 2017, primarily as a result of the expansion in our mortgage loan department. Real estate owned expense decreased $172,000, or 98.3%, to $3,000 for the three months ended March 31, 2017 from $175,000 for the three months ended March 31, 2016 due to reductions in write-downs of real estate owned. Other real estate owned was $0 at March 31, 2017 and $115,000 at March 31, 2016.

Income Tax Expense

Income tax expense was $41,000 comprised of federal taxes of $19,000 and Pennsylvania state taxes of $22,000 with an effective federal tax rate of 13.7% for the three months ended March 31, 2017. Income tax expense of $40,000, comprised only of federal tax, was recorded for the three months ended March 31, 2016 with an effective tax rate of 19.1%. There was no Pennsylvania state tax recorded for the three months ended March 31, 2016 primarily due to the application of certain state tax deductions during that period. Due to the increase in municipal tax free bonds during the three months ended March 31, 2017, income tax expense was reduced which caused a lower effective federal tax rate for the quarter when compared to the same period in 2016.

Comparison of Statements of Income for the Nine Months Ended March 31, 2017 and 2016

General

Net income decreased $140,000, or 26.4%, to $390,000 for the nine months ended March 31, 2017 from $530,000 for the nine months ended March 31, 2016. The decrease in net income was due primarily to an increase in non-interest expense of $464,000 primarily from increases in salaries and employee benefits of $487,000. The increase in non-interest expense was partially offset by increases in net interest income of $241,000 and in non-interest income of $122,000 for the nine months ended March 31, 2017 compared to the same period in 2016.

Interest Income

Total interest income increased $337,000 or 8.6%, to $4.2 million for the nine months ended March 31, 2017 from $3.9 million for the nine months ended March 31, 2016. The increase was primarily the result of a $191,000 increase in interest and fees on loans to $3.5 million for the nine months ended March 31, 2017 as the average loan balance increased by $11.7 million as a result of average loans held for sale increasing by $6.7 million and loans held in the Bank’s portfolio increasing $5.0 million. The increase in average loan balance during the nine months ended March 31, 2017 versus the same period in 2016 was partially offset by a decrease in the average yield earned on loans of 4 basis points, which decreased from 4.40% for the nine months ended March 31, 2016 to 4.16% for the nine months ended March 31, 2017.

Interest on interest-earning deposits increased by $155,000 to $238,000 for the nine months ended March 31, 2017 as the average balance increased by $20.6 million primarily as a result of the subscription proceeds related to the Company’s initial public offering and the conversion of the Bank from the mutual to the stock form of organization. The initial funds received were $57.5 million which were held by the Bank before returning approximately $35.7 million of proceeds received in excess of the approved maximum to the subscribers. The average yield on cash and cash equivalents increased from 0.66% for the nine months ended March 31, 2016 to 0.85% for the nine months ended March 31, 2017.

Interest earned on investment securities decreased by $22,000 to $514,000 for the nine months ended March 31, 2017 as the average balance of investment securities decreased by $1.3 million, from $40.5 million for the nine months ended March 31, 2016 to $39.2 million for the nine months ended March 31, 2017. Interest on collateralized mortgage obligation securities decreased by $93,000 for the nine months ended March 31, 2017 compared to the same period in 2016 due to the average balance decreasing by $4.7 million from $14.2 million for the nine months ended March 31, 2016 compared to $9.5 million for the nine months ended March 31, 2017. This was partially offset by increases in interest income on US Government securities, corporate and municipal bonds, bank certificate of deposit investments and mortgage backed securities of $71,000.

Interest Expense

Total interest expense increased $96,000, or 17.1%, to $656,000 for the nine months ended March 31, 2017 from $560,000 for the nine months ended March 31, 2016, due to a $54,000 increase in interest on advances from the Federal Home Loan Bank and a $42,000 increase in interest on deposits.

Interest on deposits increased $42,000, or 8.5%, to $535,000 for the nine months ended March 31, 2017 from $493,000 for the nine months ended March 31, 2016 due to an increase in the average balance of deposits outstanding during the nine months ended March 31, 2107. The average

balance of interest-bearing deposits increased by $18.2 million to $151.5 million during the nine months ended March 31, 2017 as compared to $133.3 million for the prior year period. The increases occurred primarily within the NOW accounts, checking accounts and money market deposits. NOW accounts had increases in average balance of $9.2 million from $31.4 million for the nine months ended March 31, 2016 to $40.6 million for the nine months ended March 31, 2017 and an increase in the average cost of such accounts of 21 basis points from 0.15% for the nine months ended March 31, 2016 to 0.36% for the nine months ended March 31, 2017. The increases in average balance and cost of NOW account deposits were due to the Bank creating a higher tier NOW account product for the purposes of attracting deposits from professionals who maintain escrow or other fiduciary accounts on behalf of their clients. The top rate on this new product can be as high as 1.00%. Interest expense on money market deposits increased by $14,000 for the nine months ended March 31, 2017 compared to the same period in 2016 as the average cost increased by seven basis points, from 0.27% for the nine months ended March 31, 2016 to 0.34% for the nine months ended March 31, 2017. The increase was the result of an increase in balances in higher tiered cost money market accounts. Interest expense on certificates of deposit decreased by $52,000, from $320,000 for the nine months ended March 31, 2016 compared to $268,000 for the same period in 2017. The average cost of certificates of deposit decreased by seven basis points to 1.01% during the nine months ended March 31, 2017 as compared to 1.08% for the nine months ended March 31, 2016, reflecting downward repricing in the current low interest rate environment. The decrease reflects runoff of higher price certificates of deposit and a decrease in average certificates of deposit which decreased by $4.0 million for the nine months ended March 31, 2017 compared to March 31, 2016.

The average cost of deposits decreased by two basis points to 0.47% for the nine months ended March 31, 2017 from 0.49% for the nine months ended March 31, 2016, due primarily to the decrease in the average cost of certificates of deposit and an increase in the lower costing interest bearing checking accounts. Average balances on interest bearing checking accounts increased by $11.3 million primarily due to the inflows from the conversion subscriptions received in January 2017. The change in the mix of deposits was due to the current low interest rate environment and our decision not to compete with other banks that offer higher rates on term deposits.

Interest on advances from the Federal Home Loan Bank increased $54,000 to $119,000 for the nine months ended March 31, 2017 from $65,000 for the nine months ended March 31, 2016 as a result of an increase in the average balance of Federal Home Loan Bank advances, partially offset by a decrease in the average cost of Federal Home Loan Bank advances. The average balance of Federal Home Loan Bank advances increased by $7.8 million to $16.1 million during the nine months ended March 31, 2017 from $8.3 million for the nine months ended March 31, 2016 due to an increase in loan funding requirements. This increase was partially offset by a decrease in the average cost of Federal Home Loan Bank advances which decreased by 5 basis points to 0.99% for the nine months ended March 31, 2017 from 1.04% for the nine months ended March 31, 2016, due primarily to decreases in advance rates from shorter borrowing terms.

Net Interest Income

Net interest income increased $241,000, or 7.2%, to $3.6 million for the nine months ended March 31, 2017 from $3.3 million for the nine months ended March 31, 2016 as we increased our interest income at a greater rate than our interest expense. Our net interest-earning assets increased to $18.8 million for the nine months ended March 31, 2017 from $13.3 million for the nine months ended March 31, 2016. Our interest rate spread decreased by 31 basis points to 2.48% for the nine months ended March 31, 2017 from 2.79% for the nine months ended March 31, 2016. Our net interest margin decreased by 30 basis points to 2.54% for the nine months ended March 31, 2017 from 2.84% for the nine months ended March 31, 2016. Both the interest rate spread and the net

interest margin decreased as the mix of interest earning assets shifted towards lower earning cash and cash equivalents products as a result of deposit inflows from the mutual to stock conversion causing a lower overall net interest margin and interest rate spread.

Average Balances, Net Interest Income, Yields Earned and Rates Paid


	For the Nine Months Ended March 31,
	2017								2016
(Dollars in Thousands)	Average Balance			Interest Income Expense		Yield/ Cost(5)			Average Balance			Interest Income Expense		Yield/ Cost(5)
Interest earning assets
Loans (1)	$	110,571		$	3,452		4.16	%	$	98,893		$	3,261		4.40	%
Cash and cash equivalents		37,464			238		0.85	%		16,868			83		0.66	%
Investment securities		39,237			514		1.75	%		40,498			536		1.76	%
Restricted Investment in bank stock		948			33		4.64	%		658			20		4.05	%

Total interest earning assets		188,220			4,237		3.00	%		156,917			3,900		3.31	%

Noninterest-earning assets		8,723								7,399

Total assets	$	196,943							$	164,316

Interest bearing liabilities
Now accounts	$	40,579		$	109		0.36	%	$	31,435		$	36		0.15	%
Money market deposit accounts		25,831			65		0.34	%		24,960			51		0.27	%
Passbooks and statement savings accounts		34,982			78		0.30	%		34,246			78		0.30	%
Checking accounts		14,548			15		0.14	%		3,207			8		0.33	%
Certificate of deposit		35,512			268		1.01	%		39,469			320		1.08	%

Total deposits	$	151,452		$	535		0.47	%	$	133,317		$	493		0.49	%

Federal home loan bank advances		16,088			119		0.99	%		8,342			65		1.04	%
Securities sold under agreements to repurchase		1,878			2		0.14	%		1,994			2		0.13	%

Total interest-bearing liabilities	$	169,418		$	656		0.52	%	$	143,653		$	560		0.52	%

Noninterest-bearing liabilities
Checking		8,181								8,085
Other		1,757								864

Total liabilities	$	179,356							$	152,602

Equity		17,587								11,714

Total liabilities and Total stockholders’ equity	$	196,943							$	164,316

Net interest income				$	3,581							$	3,340

Interest rate spread (2)							2.48	%							2.79	%

Net interest-earning assets (3)	$	18,802							$	13,264

Net interest margin (4)							2.54	%							2.84	%

Average interest-earning assets to average interest-bearing liabilities		111.10	%							109.23	%

(1)	Includes loans held for sale.

(2)	Interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.

(3)	Net interest earning assets represent total average interest-earning assets less total interest–bearing liabilities.

(4)	Net interest margin represents net interest income divided by total average interest-earning assets.

(5)	Annualized

Rate/ Volume Analysis


For the Nine Months Ended March 31, 2017 and 2016
Increase (Decrease) Due to
	Volume			Rate			Total Increase (Decrease)
	(In Thousands)
Interest-Earning Assets:

Loans	$	616		$	(425	)	$	191
Cash and cash equivalents		95			23			118
Investment securities		20			(5	)		15
Restricted investment in bank stock		10			3			13

Total interest-earning assets	$	741		$	(404	)	$	337

Interest Bearing-Liabilities:

NOW accounts	$	23		$	50		$	73
Money market deposit accounts		3			11			14
Passbook and statement savings accounts		—			—			—
Checking accounts		16			(9	)		7
Certificates of deposits		(32	)		(20	)		(52	)
Federal Home Loan Bank advances		63			(9	)		54
Securities sold under agreements to repurchase		—			—			—

Total interest-bearing liabilities	$	73		$	23		$	96

Change in net interest income	$	668		$	(427	)	$	241

Provision for Loan Losses

Provision for loan losses increased by $141,000 to $123,000 for the nine months ended March 31, 2017, from a credit of $(18,000) for the nine months ended March 31, 2016. The primary factor that contributed to the increase in the provision for loan losses was a specific loan loss reserve of $125,000 on one HELOC loan. Non-performing loans decreased from $1.1 million at June 30, 2016 to $1.0 million as of March 31, 2017, a decrease of $105,000, or 9.2%. We recorded charge-offs of $130,000 related primarily to the $125,000 HELOC and recoveries of $34,000 for the nine months ended March 31, 2017. We recorded charge-offs of $1,000 and no recoveries for the nine months ended March 31, 2016.

Non-Interest Income

Non-interest income increased $122,000 to $3.5 million for the nine months ended March 31, 2017 as compared to the prior year period. The increase was primarily related to an increase of $1.3 million for the net gain on sale of loans, partially offset by a decrease of $664,000 in the change in fair value of loans held for sale, and an increase in losses from hedging instruments of $537,000. Gain on sale of loans, net increased $1.3 million to $4.4 million for the nine months ended March 31, 2017 from $3.1 million for the nine months ended March 31, 2016 primarily as a result of an increase in premiums earned based on the higher interest rate environment, and an increase in the amount of loans sold from $114.6 million for the nine months ended March 31, 2016 to $139.6 million for the nine months ended March 31, 2017. Loss from hedging instruments increased by $537,000 for the nine months ended March 31, 2017 due to a higher interest rate environment and increased volume of locked loans associated with hedging. The offset to the losses incurred from the hedging instruments was realized in the increased value of the loan when it is committed to the investor in the secondary market. The decrease in the change in fair value of loans held for sale was due to the decrease in principal balances in loans held for sale. The aggregate unpaid balance of loans held for sale decreased from $23.8 million at June 30, 2016 to $5.9 million at March 31, 2017.

Non-Interest Expense

Non-interest expense increased $464,000, or 7.7%, to $6.5 million for the nine months ended March 31, 2017 from $6.0 million for the nine months ended March 31, 2016. The increase primarily reflected $487,000 increase in salaries and employee benefits, partially offset by a reduction in real estate owned expenses. Salaries and employee benefits increased $487,000, or 15.0%, to $3.7 million for the nine months ended March 31, 2017 from $3.3 million for the nine months ended March 31, 2016 primarily due to an increase in the full time equivalent employees from sixty-one at March 31, 2016 to seventy at March 31, 2017 as a result of additional personnel added to our loan production department during the nine months ended March 31, 2017. Real estate owned expense decreased $228,000, or 92.3%, to $19,000 for the nine months ended March 31, 2017 from $247,000 for the nine months ended March 31, 2016 due to reductions in write-downs of real estate owned. Other real estate owned was $0 at March 31, 2017 and $115,000 at March 31, 2016.

Income Tax Expense

Income tax expense was $120,000 for the nine months ended March 31, 2017 as compared to income tax expense of $222,000 for the nine months ended March 31, 2016. The reduction in income tax expense was primarily due to the reduction in Pennsylvania state taxable income due to the application of certain state tax deductions during the nine months ended March 31, 2017, resulting in a decrease in state tax expense to $20,000 for the nine months ended March 31, 2017 compared to the nine months ended March 31, 2016. The effective federal tax rate was 18.5% for the nine months ended March 31, 2017 as compared to 33.5% for the nine months ended March 31, 2016. Due to the increase in municipal tax free bonds during the nine months ended March 31, 2017, federal income tax expense was reduced which caused a lower effective tax rate by approximately 8.9%.

Non-Performing Assets

We define non-performing loans as loans that are either non-accruing or accruing whose payments are 90 days or more past due and non-accruing troubled debt restructurings. Non-performing assets, including non-performing loans and other real estate owned, totaled $1.0 million, or 0.48% of total assets, at March 31, 2017 and $1.3 million, or 0.63% of total assets, at June 30, 2016. The following table sets forth the amounts and categories of our non-performing assets at the dates indicated. We had no accruing loans past due 90 days or more or non-accruing TDRs at March 31, 2017 or June 30, 2016.


	At March 31, 2017			At June 30, 2016
	(dollars in thousands)
Non-accrual loans:

Residential:
One- to four-family	$	745		$	818
Home equity and HELOCs		195			227
Commercial real estate		100			100
Commercial business		—			—
Construction		—			—
Consumer		—			—

Total non-accrual loans	$	1,040		$	1,145

Real estate owned		—			115

Total non-performing assets	$	1,040		$	1,260

Ratios:

Total non-performing loans to total loans		1.05	%		1.22	%

Total non-performing loans to total assets		0.48	%		0.63	%

Total non-performing assets to total assets		0.48	%		0.69	%

Allowance for Loan Losses

The following table sets forth activity in our allowance for loan losses for the periods indicated. (Dollars in Thousands)


	At or For the Three Months Ended March 31,						At or For the Nine Months Ended March 31,
	2017			2016			2017			2016
Balance at beginning of period	$	626		$	469		$	487		$	514

Charge-offs:
Residential:
One- to four-family		—			—			—			—
Home equity and HELOCs		(125	)		—			(125	)		—
Commercial real estate		—			—			—			—
Commercial business		—			—			—			—
Construction		—			—			—			—
Consumer		(3	)		—			(5	)		(1	)

Total charge-offs		(128	)		—			(130	)		(1	)

Recoveries:
Residential:
One- to four-family		2			—			7			—
Home equity and HELOCs		—			—			—			—
Commercial real estate		25			—			25			—
Commercial business		—			—			—			—
Construction		—			—			—			—
Consumer		1			—			2			—

Total recoveries		28			—			34			—

Net recoveries (charge-offs)		(100	)		—			(96	)		(1	)
Provision (credit) for loan losses		(12	)		26			123			(18	)

Balance at end of period	$	514		$	495		$	514		$	495

Ratios:

Net charge-offs to average loans outstanding		(0.09	%)		—	%		(0.09	%)		—	%
Allowance for loan losses to non-performing loans at end of period		49.42	%		32.18	%		49.42	%		32.18	%
Allowance for loan losses to total loans at end of period		0.52	%		0.55	%		0.52	%		0.55	%

Liquidity and Capital Resources

Liquidity Management. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from sales, and matured loans and securities. We also have the ability to borrow from the Federal Home Loan Bank of Pittsburgh. Huntingdon Valley Bank had Federal Home Loan Bank of Pittsburgh advances of $9.0 million outstanding with unused borrowing capacity of $57.7 million as of March 31, 2017. Additionally, at March 31, 2017, we had the ability to borrow $3.0 million from the Atlantic Community Bankers Bank and we maintained a line of credit equal to 95% of the fair value of collateral held by the Federal Reserve Bank, which was $2.5 million at March 31, 2017. We have not borrowed against the credit lines with the Atlantic Community Bankers Bank and the Federal Reserve Bank as of March 31, 2017.

The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we have enough sources of liquidity to satisfy our short and long-term liquidity needs as of March 31, 2017.

We monitor and adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand; (2) expected deposit flows; (3) yields available on interest-earning deposits and securities; and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short-and intermediate-term securities.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents, which include federal funds sold and interest-earning deposits in other banks. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At March 31, 2017, cash and cash equivalents totaled $47.6 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $46.5 million at March 31, 2017.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $18.9 million and $4.6 million for the nine months ended March 31, 2017 and March 31, 2016, respectively. Net cash used in investing activities, which consists primarily of disbursements for loans originations and the purchase of securities, offset by principal collections on loans and proceeds from maturing securities, was $22.1 million and $4.2 million for the nine months ended March 31, 2017 and March 31, 2016, respectively. During the nine months ended March 31, 2017 and March 31, 2016, we sold $2.6 million and $5.9 million, respectively, in securities available-for-sale. Net cash provided by financing activities, consisting primarily of proceeds from the issuance of common stock, increases in deposits and decreases in advances from borrowers for taxes and insurance, was $35.2 million for the nine months ended March 31, 2017 and $5.5 million for the nine months ended March 31, 2016.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of March 31, 2017, totaled $15.5 million, or 9.0%, of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Capital Management. Huntingdon Valley Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2017, Huntingdon Valley Bank exceeded all regulatory capital requirements and was considered “well capitalized” under regulatory guidelines.

Regulatory Capital

Information presented for March 31, 2017 and June 30, 2016, reflects the Basel III capital requirements that became effective January 1, 2015 for the Bank. Under these capital requirements and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk- weightings and other factors.

Federal bank regulators require the Bank maintain minimum ratios of core capital to adjusted average assets of 4.0%, common equity Tier 1 capital to risk-weighted assets of 4.5%, Tier 1 capital to risk-weighted assets of 6.0% and total risk-based capital to risk-weighted assets of 8.0%. At March 31, 2017, the Bank met all the capital adequacy requirements to which it was subject. At March 31, 2017, the Bank was “well capitalized” under the regulatory framework for prompt corrective action. To be “well capitalized,” the Bank must maintain minimum leverage, common equity Tier 1 risk-based, Tier 1 risk-based and total risk-based capital ratios of at least 5.0%, 6.5%, 8.0% and 10.0%, respectively. Management believes that no conditions or events have occurred since March 31, 2017 that would materially adversely change the Bank’s capital classifications.

The Bank’s actual capital amounts and ratios are presented in the table (dollars in thousands):

Actual

Capital Adequacy
Purposes

To Be Well
Capitalized Under
the Prompt
Corrective Action
Provision

(Dollars in

thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of March 31, 2017:

Total risk-based capital (to risk-weighted assets)

23,694

23.2

³$8,158

8.0

³$10,197

10.0

Tier I capital (to risk-weighted assets)

23,180

22.7

6,118

6.0

8,158

8.0

Tier I capital (to average assets)

23,180

10.9

8,541

4.0

10,677

5.0

Tier I common equity (to risk-weighted assets)

23,180

22.7

4,589

4.5

6,628

6.5

As of June 30, 2016:

Total risk-based capital (to risk-weighted assets)

13,438

12.5

³8,607

8.0

³10,759

10.0

Tier I capital (to risk-weighted assets)

12,951

12.0

6,455

6.0

8,607

8.0

Tier I capital (to average assets)

12,951

7.6

6,787

4.0

8,483

5.0

Tier I common equity (to risk-weighted assets)

12,951

12.0

4,842

4.5

6,993

6.5

As a licensed mortgagee, the Bank is subject to the rules and regulations of the Department of Housing and Urban Development (“HUD”), Federal Housing Authority (“FHA”) and state regulatory authorities with respect to originating, processing and selling loans. Those rules and regulations, among other things, require the maintenance of minimum net worth levels (which vary based on the portfolio of FHA loans originated by the Bank). Failure to meet the net worth requirements could adversely impact the ability to originate loans and access secondary markets. As of March 31, 2017 and June 30, 2016, the Bank maintained the minimum required net worth levels.

The Bank must hold a capital conservation buffer, subject to a phase-in from January 1, 2016 through December 31, 2019, above its minimum risk-based capital requirements. As of March 31, 2017, the Bank is required to maintain a capital conservation buffer of 1.25%. The Bank’s conservation buffer was 15.2% as of March 31, 2017. Failure to maintain the full amount of the buffer will result in restrictions on the Bank’s ability to make capital distributions and to pay discretionary bonuses to executive officers. The phase-in requires the Bank to increase its capital conservation buffer from 1.25% as of March 31, 2017 to 2.50% as of December 31, 2019 and thereafter.

Off-Balance Sheet Arrangements and Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At March 31, 2017, we had outstanding commitments to originate loans of $26.0 million, unused lines of credit totaling $8.8 million and no stand-by letters of credit outstanding. We anticipate that we will have sufficient funds available to meet our current lending commitments. Certificates of deposit that are scheduled to mature in less than one year from March 31, 2017 totaled $15.5 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for equipment, agreements with respect to borrowed funds and deposit liabilities.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies

Item 4 – Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated 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 (the “Exchange Act”)) as of March 31, 2017. Based on their evaluation of the Company’s disclosure controls and procedures, the Company’s 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 the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations 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 Exchange Act) occurred during the third fiscal quarter of 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

At March 31, 2017, the Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition and operating results of the Company.

Item 1A – Risk Factors

Not required for smaller reporting companies

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

(a)

Not applicable

(b)

Not applicable

(c)

Not Applicable

Item 3 – Defaults upon Senior Securities

Not Applicable

Item 4 – Mine Safety Disclosures

Not Applicable

Item 5 – Other Information

None

Item 6 – Exhibits



31.1		Rule 13a-14(a) Certification of the Chief Executive Officer

31.2		Rule 13a-14(a) Certification of the Chief Financial Officer

32.0		Section 1350 Certification

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Label Linkbase Document

101.PRE		XBRL Taxonomy Presentation Linkbase Document

SIGNATURES

HV BANCORP, INC.

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.


		HV BANCORP, INC.

Date: May 12, 2017	By:	/s/ Travis J. Thompson
		Travis J. Thompson
		President and Chief Executive Officer
		(Duly Authorized Officer)

Date: May 12, 2017	By:	/s/ Joseph C. O’Neill, Jr.
		Joseph C. O’Neill, Jr.
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)