WVS FINANCIAL CORP - Quarter Report: 2019 March (Form 10-Q)

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]

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

For the quarterly period ended March 31, 2019

[ ]

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

For the transition period from to

Commission File Number: 0-22444


WVS Financial Corp.
(Exact name of registrant as specified in its charter)

Pennsylvania						25-1710500
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

9001 Perry Highway Pittsburgh, Pennsylvania						15237
(Address of principal executive offices)						(Zip Code)

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

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 requirement for the past 90 days. YES X NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES X NO

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


Large accelerated filer		Accelerated filer
Non-accelerated filer		Smaller reporting company X
		Emerging growth company

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 12 b-2 of the Exchange Act). YES NO X

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock

WVFC

NASDAQ

Shares outstanding as of May 10, 2019: 1,943,796 shares Common Stock, $.01 par value.

WVS FINANCIAL CORP. AND SUBSIDIARY

INDEX


PART I.	Financial Information	Page

Item 1.	Financial Statements

	Consolidated Balance Sheet as of March 31, 2019 and June 30, 2018 (Unaudited)	3

	Consolidated Statement of Income for the Three and Nine Months Ended March 31, 2019 and 2018 (Unaudited)	4

	Consolidated Statement of Comprehensive Income for the Three and Nine Months Ended March 31, 2019 and 2018 (Unaudited)	5

	Consolidated Statement of Changes in Stockholders’ Equity for the Three and Nine Months Ended March 31, 2019 and 2018 (Unaudited)	6

	Consolidated Statement of Cash Flows for the Nine Months Ended March 31, 2019 and 2018 (Unaudited)	8

	Notes to Unaudited Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Nine Months Ended March 31, 2019	40

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47

Item 4.	Controls and Procedures	51

PART II.	Other Information	Page

Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	53
	Signatures	54

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(In thousands, except share and per share data)


	March 31, 2019			June 30, 2018
Assets
Cash and due from banks		$ 2,387			$ 2,099
Interest-earning demand deposits		1,817			342

Total cash and cash equivalents		4,204			2,441
Certificates of deposit		1,346			350
Investment securities available-for-sale (amortized cost of $135,007 and $128,824)		134,605			128,811
Investment securities held-to-maturity (fair value of $4,031 and $6,125)		3,995			6,181
Mortgage-backed securities held-to-maturity (fair value of $109,919 and $116,844)		109,270			115,857
Net loans receivable (allowance for loan losses of $510 and $468)		88,846			84,675
Accrued interest receivable		1,279			1,225
Federal Home Loan Bank (FHLB) stock, at cost		7,060			7,161
Premises and equipment, net		355			392
Bank owned life insurance		4,759			4,668
Deferred tax assets, net		462			359
Other assets		177			168

TOTAL ASSETS		$ 356,358			$ 352,288


Liabilities and Stockholders’ Equity
Liabilities:
Deposits
Non-interest-bearing accounts		$ 20,563			$ 18,436
Interest-earning checking accounts		24,512			24,459
Savings accounts		44,113			44,727
Money market accounts		20,114			21,087
Certificates of deposit		34,924			34,376
Advance payments by borrowers for taxes and insurance		1,706			1,938

Total deposits		145,932			145,023
Federal Home Loan Bank advances: long-term – fixed rate		15,000			-
Federal Home Loan Bank advances: long-term – variable		85,000			-
Federal Home Loan Bank advances: short-term		71,922			171,403
Accrued interest payable		799			380
Other liabilities		2,409			1,465

TOTAL LIABILITIES		321,062			318,271


Stockholders’ equity:
Preferred stock:
5,000,000 shares, no par value per share, authorized; none issued		-			-
Common stock:
10,000,000 shares, $.01 par value per share, authorized; 3,805,636 shares issued		38			38
Additional paid-in capital		21,545			21,516
Treasury stock: 1,861,840 and 1,836,123 shares at cost, respectively		(28,258	)		(27,886	)
Retained earnings, substantially restricted		44,511			42,795
Accumulated other comprehensive loss		(390	)		(188	)
Unallocated Employee Stock Ownership Plan (“ESOP”) shares		(2,150	)		(2,258	)

TOTAL STOCKHOLDERS’ EQUITY		35,296			34,017

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$ 356,358			$ 352,288

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

(In thousands, except share and per share data)


	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2019			2018		2019			2018
INTEREST AND DIVIDEND INCOME:
Loans, including fees		$ 847			$ 748		$ 2,475			$ 2,222
Investment securities		1,188			766		3,276			2,085
Mortgage-backed securities		973			800		2,789			2,250
Certificates of deposit		7			16		12			70
Interest-earning demand deposits		1			3		10			7
FHLB Stock		142			149		370			322

Total interest and dividend income		3,158			2,482		8,932			6,956


INTEREST EXPENSE:
Deposits		253			102		505			268
Federal Home Loan Bank advances – long-term – fixed rate		114			-		348			32
Federal Home Loan Bank advances – long-term – variable rate		586			-		993			11
Federal Home Loan Bank advances – short-term		373			716		1,719			1,827

Total interest expense		1,326			818		3,565			2,138


NET INTEREST INCOME		1,832			1,664		5,367			4,818
PROVISION FOR LOAN LOSSES		10			10		42			22

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		1,822			1,654		5,325			4,796


NON-INTEREST INCOME:
Service charges on deposits		30			32		86			95
Earnings on Bank Owned Life Insurance		30			31		91			95
Investment securities gains/(losses)		-			2		(2	)		2
Other than temporary impairment losses		122			-		122			41
Portion of loss recognized in other comprehensive income		(148	)		-		(148	)		(49	)

Net impairment loss recognized in earnings		(26	)		-		(26	)		(8	)
ATM fee income		38			43		123			137
Other		15			12		36			39

Total non-interest income		87			120		307			360


NON-INTEREST EXPENSE:
Salaries and employee benefits		575			546		1,695			1,631
Occupancy and equipment		66			80		192			228
Data processing		56			60		171			163
Correspondent bank service charges		9			10		24			30
Federal deposit insurance premium		24			27		75			83
ATM network expense		21			25		83			74
Other		147			159		512			530

Total non-interest expense		897			907		2,752			2,739


INCOME BEFORE INCOME TAXES		1,012			867		2,880			2,417
INCOME TAX EXPENSE		265			233		701			884

NET INCOME		$ 747			$ 634		$ 2,179			$ 1,533


EARNINGS PER SHARE:
Basic		$ 0.42			$ 0.35		$ 1.22			$ 0.84
Diluted		$ 0.42			$ 0.35		$ 1.22			$ 0.84

AVERAGE SHARES OUTSTANDING:
Basic		1,772,165			1,828,283		1,782,512			1,826,568
Diluted		1,772,165			1,829,750		1,782,584			1,827,057

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

(In thousands)


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2019			2018			2019			2018

NET INCOME	$	747		$	634		$	2,179		$	1,533

OTHER COMPREHENSIVE INCOME (LOSS)

Investment securities available for sale not other-than-temporarily impaired:
Gains (losses) arising during the year		1,479			(222	)		(392	)		(100	)
Less: Income tax effect		(311	)		47			82			5

		1,168			(175	)		(310	)		(95	)

Unrealized holdings gains (losses) on securities available for sale not other-than-temporarily impaired, net of tax		1,168			(175	)		(310	)		(95	)


Investment securities (gains)/losses		-			(2	)		2			(2	)
Less: Income tax effect		-			1			-			1

		-			(1	)		2			(1	)

Investment securities held to maturity other-than-temporarily impaired:
Total losses		122			-			122			41
Losses recognized in earnings		26			-			26			8

Gains (losses) recognized in comprehensive income		148			-			148			49
Income tax effect		(31	)		-			(31	)		(17	)

		117			-			117			32

Accretion of other comprehensive loss on other-than-temporarily impaired securities held to maturity		12			16			(14	)		13
Less: Income tax effect		(2	)		(3	)		3			(2	)


Unrealized holding gains on other-than-temporarily impaired securities held to maturity, net of tax		10			13			(11	)		11


Unrealized holdings (losses) gains on securities, net		127			(163	)		106			43


Other comprehensive income (loss)		1,295			(163	)		(202	)		(53	)


COMPREHENSIVE INCOME	$	2,042		$	471		$	1,977		$	1,480

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)


	Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings – Substantially Restricted			Accumulated Other Comprehensive Loss			Unallocated ESOP Shares			Total
Balance December 31, 2018		$ 38		$ 21,530		$ (28,258	)		$ 43,941			$ (1,685	)		$ (2,179	)		$ 33,387

Net income									747									747

Other comprehensive income												1,295						1,295

Amortization of unallocated ESOP Shares				15											29			44

Cash dividends declared ($0.10 per share)									(177	)								(177	)


Balance March 31, 2019		$ 38		$ 21,545		$ (28,258	)		$ 44,511			$ (390	)		$ (2,150	)		$ 35,296


	Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings – Substantially Restricted			Accumulated Other Comprehensive Loss			Unallocated ESOP Shares			Total
Balance June 30, 2018		$ 38		$ 21,516		$ (27,886	)		$ 42,795			$ (188	)		$ (2,258	)		$ 34,017

Net income									2,179									2,179

Other comprehensive loss												(202	)					(202	)

Purchase of treasury stock (25,717 shares)						(372	)											(372	)

Amortization of unallocated ESOP shares				29											108			137

Cash dividends declared ($0.26 per share)									(463	)								(463	)


Balance March 31, 2019		$ 38		$ 21,545		$ (28,258	)		$ 44,511			$ (390	)		$ (2,150	)		$ 35,296

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)



	Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings – Substantially Restricted			Accumulated Other Comprehensive Loss			Unallocated ESOP Shares			Total
Balance December 31, 2017		$ 38		$ 21,500		$ (27,264	)		$ 42,000			$ (93	)		$ (2,316	)		$ 33,865

Net income									634									634

Other comprehensive loss												(163	)					(163	)

Amortization of unallocated ESOP shares				7											(4	)		3

Cash dividends declared ($0.08 per share)									(169	)								(169	)


Balance March 31, 2018		$ 38		$ 21,507		$ (27,264	)		$ 42,465			$ (256	)		$ (2,320	)		$ 34,170



	Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings – Substantially Restricted			Accumulated Other Comprehensive Loss			Unallocated ESOP Shares			Total
Balance June 30, 2017		$ 38		$ 21,485		$ (27,264	)		$ 41,344			$ (188	)		$ (2,372)			$ 33,043

Reclassification due to change in federal income tax rate									15			(15	)					-

Net income									1,533									1,533

Other comprehensive loss												(53	)					(53	)

Amortization of unallocated ESOP shares				22											52			74

Cash dividends declared ($0.20 per share)									(427	)								(427	)


Balance March 31, 2018		$ 38		$ 21,507		$ (27,264	)		$ 42,465			$ (256	)		$ (2,320	)		$ 34,170

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Nine Months Ended
	March 31,
	2019			2018
OPERATING ACTIVITIES

Net income	$	2,179		$	1,533
Adjustments to reconcile net income to cash provided by operating activities:
Provision for loan losses		42			22
Depreciation		38			59
Losses (gains) on sale of investment securities		2			(2	)
Net impairment loss recognized in earnings		26			8
Amortization of discounts, premiums and deferred loan costs, net		130			481
Amortization of unallocated ESOP shares		137			106
Deferred income taxes		(49	)		92
Increase in prepaid/accrued income taxes		271			228
Earnings on bank owned life insurance		(91	)		(95	)
(Increase) decrease in accrued interest receivable		(54	)		44
Increase in accrued interest payable		419			70
Increase in deferred director compensation payable		33			29
Increase in cash items in the process of collection		-			1,230
Other, net		112			42

Net cash provided by operating activities		3,195			3,847


INVESTING ACTIVITIES

Available-for-sale:
Purchases of investment securities		(40,658	)		(47,425	)
Proceeds from repayments of investments		33,450			25,271
Sale of investment securities		1,364			1,257
Held-to-maturity:
Proceeds from repayments of investments		2,180			2,483
Proceeds from repayments of mortgage-backed securities		6,706			9,646
Purchase of certificates of deposit		(1,096	)		(348	)
Maturities/redemptions of certificates of deposit		100			10,125
Purchase of loans		(7,208	)		(6,989	)
Net decrease in net loans receivable		3,037			4,271
Purchase of FHLB stock		(5,537	)		(5,113	)
Redemption of FHLB stock		5,638			4,805
Acquisition of premises and equipment		(1	)		(11	)

Net cash used for investing activities		(2,025	)		(2,028	)

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Nine Months Ended
	March 31,
	2019			2018
FINANCING ACTIVITIES

Net increase (decrease) in transaction and savings accounts	$	593		$	(2,814	)
Net increase (decrease) in certificates of deposit		548			(1,576	)
Net decrease in advance payments by borrowers for taxes and insurance		(232	)		(294	)
Proceeds (repayments) of FHLB long-term advances – fixed rate		15,000			(10,000	)
Proceeds (repayments) of FHLB long-term advances – variable rate		85,000			(6,109	)
Net (decrease) increase in FHLB short-term advances		(99,481	)		23,992
Purchase of treasury stock		(372	)		-
Cash dividends paid		(463	)		(427	)

Net cash provided by financing activities		593			2,772


Increase in cash and cash equivalents		1,763			4,591

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD		2,441			2,272


CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	$	4,204		$	6,863


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the period for:
Interest on deposits and borrowings	$	3,146		$	2,068
Income taxes	$	478		$	567

Non-cash items:
Educational Improvement Tax Credit	$	45		$	50
Unfunded securities commitments	$	519		$	-

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (GAAP). However, all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation have been included. The results of operations for the three and nine months ended March 31, 2019, are not necessarily indicative of the results which may be expected for the entire fiscal year.

2.	RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard). This Update requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaces most existing revenue recognition guidance in GAAP. The new standard was effective for the Company on July 1, 2018. Adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements other than additional disclosures in Note 3 as the Company’s primary sources of revenues are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of ASU 2014-09.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This accounting standard (a) requires separate presentation of equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) on the balance sheet and measured at fair value with changes in fair value recognized in net income; (b) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (c) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (d) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (e) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (f) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (g) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

The Company adopted ASU 2016-01 during the reporting period. On a prospective basis, the Company implemented changes to the measurement of the fair value of financial instruments using an exit price notion for disclosure purposes in Note 13 to the financial statements. The June 30, 2018, fair value of each class of financial instruments disclosure did not utilize the exit price notion when measuring fair value and, therefore, would not be comparable to the December 31, 2018 disclosure. The Company estimated the fair value based on guidance from ASC 820-10, Fair Value Measurements, which defines fair value as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is no active observable market for sale information on community bank loans and, thus, Level 3 fair value procedures were utilized, primarily in the use of present value techniques incorporating assumptions that market participants would use in estimating fair values. The fair value of loans held for investment, excluding impaired loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit and nonperformance risk of the loans. Loans are considered a Level 3 classification.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently assessing the practical expedients it may elect at adoption, but does not anticipate the amendments will have a significant impact on the financial statements. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s balance sheet is estimated to result in less than a 1 percent increase in assets and liabilities. The Company also anticipates additional disclosures to be provided at adoption.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the ASU is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842), which provides an optional transition practical expedient to not evaluate under Topic 842 existing or expired land easements that were not previously accounted for as leases under the current lease guidance in Topic 840. An entity that elects this practical expedient should evaluate new or modified land easements under Topic 842 beginning at the date the entity adopts Topic 842; otherwise, an entity should evaluate all existing or expired land easements in connection with the adoption of the new lease requirements in Topic 842 to assess whether they meet the definition of a lease. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in ASU 2016-02. This Update is not expected to have a significant impact on the Company’s financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718), which simplified the accounting for nonemployee share-based payment transactions. The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this Update improve the following areas of nonemployee share-based payment accounting; (a) the overall measurement objective, (b) the measurement date, (c) awards with performance conditions, (d) classification reassessment of certain equity-classified awards, (e) calculated value (nonpublic entities only), and (f) intrinsic value (nonpublic

entities only). The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. This Update is not expected to have a significant impact on the Company’s financial statements.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements, represents changes to clarify, correct errors in, or make minor improvements to the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and will be effective upon issuance of this ASU. However, many of the amendments in this ASU do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities. This Update is not expected to have a significant impact on the Company’s financial statements.

In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, represents changes to clarify, correct errors in, or make minor improvements to the Codification. The amendments in this ASU affect the amendments in ASU 2016-02, which are not yet effective, but for which early adoption upon issuance is permitted. For entities that early adopted Topic 842, the amendments are effective upon issuance of this ASU, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. This Update is not expected to have a significant impact on the Company’s financial statements.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. This Update provides another transition method which allows entities to initially apply ASC 842 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Entities that elect this approach should report comparative periods in accordance with ASC 840, Leases. In addition, this Update provides a practical expedient under which lessors may elect, by class of underlying assets, to not separate nonlease components from the associated lease component, similar to the expedient provided for lessees. However, the lessor practical expedient is limited to circumstances in which the nonlease component or components otherwise would be accounted for under the new revenue guidance and both (a) the timing and pattern of transfer are the same for the nonlease component(s) and associated lease component and (b) the lease component, if accounted for separately, would be classified as an operating lease. If the nonlease component or components associated with the lease component are the predominant component of the combined component, an entity should account for the combined component in accordance with ASC 606, Revenue from Contracts with Customers. Otherwise, the entity should account for the combined component as an operating lease in accordance with ASC 842. If a lessor elects the practical expedient, certain disclosures are required. This Update is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits (Topic 715-20). This Update amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The Update eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The Update also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This Update is effective for public business entities for fiscal years ending after December 15, 2020, and must be applied on a retrospective basis. For all other entities, this Update is effective for fiscal years ending after December 15, 2021. This standard is not expected to have a significant impact on the Company’s financial position or results of operations.

In November, 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which amended the effective date of ASU 2016-13 for entities other than public business entities (PBEs), by requiring non-PBEs to adopt the standard for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Therefore, the revised effective dates of ASU 2016-13 for PBEs that are SEC filers will be fiscal years beginning after December 15, 2019, including interim periods within those years, PBEs other than SEC filers will be for fiscal years beginning after December 15, 2020, including interim periods within those years, and all other entities (non-PBEs) will be for fiscal years beginning after December 15, 2021, including interim periods within those years. The ASU also clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Rather, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The effective date and transition requirements for ASU 2018-19 are the same as those in ASU 2016-13, as amended by ASU 2018-19. This Update is not expected to have a significant impact on the Company’s financial statements.

In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842), which addressed implementation questions arising from stakeholders in regard to ASU 2016-02, Leases. Specifically addressed in this Update were issues related to 1) sales taxes and other similar taxes collected from lessees, 2) certain lessor costs, and 3) recognition of variable payments for contracts with lease and nonlease components. The amendments in this Update affect the amendments in Update 2016-02, which are not yet effective but can be early adopted. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements in Update 2016-02 (for example, January 1, 2019, for calendar-year-end public business entities). This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements, which addressed issues lessors sometimes encounter. Specifically addressed in this Update were issues related to 1) determining the fair value of the underlying asset by the lessor that are not manufacturers or dealers (generally financial institutions and captive finance companies), and 2) lessors that are depository and lending institutions should classify principal and payments received under sales-type and direct financing leases within investing activities in the cash flow statement. The ASU also exempts both lessees and lessors from having to provide the interim disclosures required by ASC 250-10-50-3 in the fiscal year in which a company adopts the new leases standard. The amendments addressing the two lessor accounting issues are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the effective date is for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. This Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

3.	REVENUE RECOGNITION

Effective July 1, 2018, the Company adopted Accounting Standards Update ASU 2014-09, Revenue from contracts with Customers – Topic 606, and all subsequent ASUs that modified ASC 606. The Company has elected to apply the standard to all prior periods presented utilizing the full retrospective approach. The implementation of the new standard had no material impact to the measurement or recognition of revenue of prior periods. Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment security gains, and earnings on bank owned life insurances are not within the scope of ASC 606. As a result, no changes were made during the period related to these sources of revenue. The main types of noninterest income within the scope of the standard are as follows: Service Charges on deposit accounts—the Company has contracts with its deposit customers where fees are charged if certain parameters are not met. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific transactions or activities resulting from a customer request or activity that include overdraft fees, online banking fees, interchange fees, ATM fees and other transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time upon the completion of the requested service/transaction.

4.	EARNINGS PER SHARE

The following table sets forth the computation of the weighted-average common shares used to calculate basic and diluted earnings per share.


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2019			2018			2019			2018
Weighted average common shares issued		3,805,636			3,805,636			3,805,636			3,805,636
Average treasury stock shares		(1,861,840	)		(1,797,492	)		(1,849,296	)		(1,797,492	)
Average unallocated ESOP shares		(171,631	)		(179,861	)		(173,828	)		(181,576	)


Weighted average common shares and common stock equivalents used to calculate basic earnings per share		1,772,165			1,828,283			1,782,512			1,826,568
Additional common stock equivalents (stock options) used to calculate diluted earnings per share		-			1,467			72			489


Weighted average common shares and common stock equivalents used to calculate diluted earnings per share		1,772,165			1,829,750			1,782,584			1,827,057

There are no convertible securities that would affect the numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statement of Income is used.

At March 31, 2018, there were 114,519 options outstanding with an exercise price of $16.20. All outstanding options were expired at March 31, 2019.

5.	STOCK BASED COMPENSATION DISCLOSURE

The Company’s 2008 Stock Incentive Plan (the “Plan”), which was approved by shareholders in October 2008, permitted the grant of stock options or restricted shares to its directors and employees for up to 152,000 shares (up to 38,000 restricted shares may be issued). Option awards were generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vested over five years of continuous service and had ten-year contractual terms.

During the three and nine month periods ended March 31, 2019 and 2018, the Company recorded no compensation expense related to our share-based compensation awards. As of March 31, 2019, there was no unrecognized compensation cost related to unvested share-based compensation awards granted in fiscal 2009.

All of the Company’s outstanding stock options were vested at March 31, 2018 and were expired as of March 31, 2019. There were no stock options exercised or issued during the nine months ended March 31, 2019 and 2018.

6.	INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair values of investments are as follows:


					Gross			Gross
		Amortized			Unrealized			Unrealized				Fair
		Cost			Gains			Losses				Value
		(Dollars in Thousands)
March 31, 2019

AVAILABLE FOR SALE
Corporate debt securities	$		106,785	$		212	$		(467	)	$		106,530
Foreign debt securities ¹			26,592			13			(157	)			26,448
Obligations of states and political subdivisions			1,630			-			(3	)			1,627


Total	$		135,007	$		225	$		(627	)	$		134,605


					Gross			Gross
		Amortized			Unrealized			Unrealized				Fair
		Cost			Gains			Losses				Value
		(Dollars in Thousands)
March 31, 2019

HELD TO MATURITY
Obligations of states and political subdivisions	$		3,995	$		36	$		-		$		4,031


Total	$		3,995	$		36	$		-		$		4,031

¹ U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.


					Gross			Gross
		Amortized			Unrealized			Unrealized				Fair
		Cost			Gains			Losses				Value
		(Dollars in Thousands)
June 30, 2018

AVAILABLE FOR SALE
Corporate debt securities	$		104,316	$		204	$		(181	)	$		104,339
Foreign debt securities ¹			22,878			11			(38	)			22,851
Obligations of states and political subdivisions			1,630			-			(9	)			1,621


Total	$		128,824	$		215	$		(228	)	$		128,811


					Gross			Gross
		Amortized			Unrealized			Unrealized				Fair
		Cost			Gains			Losses				Value
		(Dollars in Thousands)
June 30, 2018

HELD TO MATURITY
U.S. government agency securities	$		625	$		-	$		(1	)	$		624
Corporate debt securities			1,061			13			-				1,074
Obligations of states and political subdivisions			4,495			-			(68	)			4,427


Total	$		6,181	$		13	$		(69	)	$		6,125

Proceeds from sales of investments during the nine month period ending March 31, 2019 were $1.4 million and the Company recorded gross realized investment losses of $2 thousand during this same period. There were no sales of investment securities during the quarter ended March 31, 2019.

During the quarter and nine months ended March 31, 2018, the Company recorded gross realized investment securities gains of $2 thousand. Proceeds from sales of investment securities during the three and nine months ended March 31, 2018 were $1.3 million.

The amortized cost and fair values of debt securities at March 31, 2019, by contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because issuers may have the right to call securities prior to their final maturities.


		Due in one year or less			Due after one through five years			Due after five through ten years			Due after ten years			Total
		(Dollars in Thousands)
AVAILABLE FOR SALE
Amortized cost	$		6,264	$		127,238	$		1,505	$		-	$		135,007
Fair value			6,262			126,855			1,488			-			134,605

HELD TO MATURITY
Amortized cost	$		500	$		3,495	$		-	$		-	$		3,995
Fair value			500			3,531			-			-			4,031

¹U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.

At March 31, 2019, investment securities with amortized costs and fair values of $3.5 million were pledged to secure borrowings with the Federal Home Loan Bank (“FHLB”).

As of March 31, 2019, investment securities with amortized costs and fair values of $13.4 million were pledged to secure future borrowings with the Federal Reserve Bank of Cleveland (FRBC). Since the Company had no FRBC borrowings outstanding on March 31, 2019, all FRBC collateral pledges may be withdrawn by the Company at any time.

7.	MORTGAGE-BACKED SECURITIES

Mortgage-backed securities (“MBS”) include mortgage pass-through certificates (“PCs”) and collateralized mortgage obligations (“CMOs”). With a pass-through security, investors own an undivided interest in the pool of mortgages that collateralize the PCs. Principal and interest is passed through to the investor as it is generated by the mortgages underlying the pool. PCs and CMOs may be insured or guaranteed by Freddie Mac (“FHLMC”), Fannie Mae (“FNMA”) and the Government National Mortgage Association (“GNMA”). CMOs may also be privately issued with varying degrees of credit enhancements. A CMO reallocates mortgage pool cash flow to a series of bonds (called traunches) with varying stated maturities, estimated average lives, coupon rates and prepayment characteristics.

The Company’s CMO portfolio is comprised of two segments: CMOs backed by U.S. Government Agencies (“Agency CMOs”) and CMOs backed by single-family whole loans not guaranteed by a U.S. Government Agency (“private-label CMOs”).

At March 31, 2019, the Company’s Agency CMOs totaled $108.4 million as compared to $114.9 million at June 30, 2018. The Company’s private-label CMOs totaled $936 thousand at March 31, 2019 as compared to $958 thousand at June 30, 2018. The $6.5 million decrease in the CMO segment of our MBS portfolio was primarily due to repayments on our Agency and private-label CMOs which totaled $6.6 million and $130 thousand, respectively, which were partially offset by a $133 thousand decrease in the noncredit impairment component of other than temporary impairment (“OTTI”) associated with our private-label CMOs. At March 31, 2019 and June 30, 2018, the Company’s MBS portfolio, including CMOs, were comprised of adjustable or floating rate investments. Substantially all of the Company’s floating rate MBSs adjust monthly based upon changes in the one month LIBOR. The Company has no investment in multi-family or commercial real estate based MBS.

Due to prepayments of the underlying loans, and the prepayment characteristics of the CMO traunches, the actual maturities of the Company’s MBSs are expected to be substantially less than the scheduled maturities.

The Company retains an independent third party to assist it in the determination of a fair value for its three private-label CMOs. This valuation is meant to be a “Level Three” valuation as defined by ASC Topic 820, Fair Value Measurements and Disclosures. The valuation does not represent the actual terms or prices at which any party could purchase the securities. There is currently no active secondary market for private-label CMOs and there can be no assurance that any secondary market for private-label CMOs will develop. The private-label CMO portfolio had three previously recorded other-than-temporary impairments at March 31, 2019. During the nine months ending March 31, 2019, the Company reversed $14 thousand of non-credit unrealized holding losses on its three private-label CMOs with OTTI due to principal repayments. During the three months ended March 31, 2019, the Company recorded $26 thousand of additional credit impairment charges on its private-label CMO portfolio.

The Company believes that the data and assumptions used to determine the fair values are reasonable. The fair value calculations reflect relevant facts and market conditions. Events and conditions occurring after the valuation date could have a material effect on the private-label CMO segment’s fair value.

The following table sets forth information with respect to the Company’s private-label CMO portfolio as of March 31, 2019. At the time of purchase, all of our private-label CMOs were rated in the highest investment category by at least two ratings agencies.


			At March 31, 2019
			Rating						Amortized Cost		Fair Value²		Life to Date Impairment Recorded in Earnings
Cusip #	Security Description		S&P		Moody’s		Fitch		(in thousands)
126694CP1		CWHL SER 21 A11		N/A		Caa2		D	$	532	$	532	$	214
126694KF4		CWHL SER 24 A15		D		N/A		D		308		308		146
126694MP0		CWHL SER 26 1A5		D		N/A		D		96		101		36

									$	936	$	941	$	396

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s mortgage-backed securities are as follows:


		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses				Fair Value

		(Dollars in Thousands)
March 31, 2019
HELD TO MATURITY

Collateralized mortgage obligations:
Agency	$		108,334	$		1,123	$		(479	)	$		108,978
Private-label			936			128			-				941


Total	$		109,270	$		1,128	$		(479	)	$		109,919


		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses				Fair Value

		(Dollars in Thousands)
June 30, 2018
HELD TO MATURITY

Collateralized mortgage obligations:
Agency	$		114,899	$		1,260	$		(426	)	$		115,733
Private-label			958			153			-				1,111


Total	$		115,857	$		1,413	$		(426	)	$		116,844

The amortized cost and fair value of the Company’s mortgage-backed securities at March 31, 2019, by contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

² Fair value estimate provided by the Company’s independent third party valuation consultant.


		Due in one year or less			Due after one through five years			Due after five through ten years			Due after ten years			Total
		(Dollars in Thousands)

HELD TO MATURITY
Amortized cost	$		-	$		-	$		152	$		109,118	$		109,270
Fair value			-			-			154			109,765			109,919

At March 31, 2019, mortgage-backed securities with amortized costs of $108.3 million and fair values of $109.0 million were pledged to secure public deposits and borrowings with the FHLB. Of the securities pledged, $8.2 million of fair value was excess collateral. At June 30, 2018 mortgage-backed securities with an amortized cost of $114.9 million and fair values of $115.7 million, were pledged to secure public deposits and borrowings with the FHLB. Of the mortgage-backed securities pledged, $13.1 million of amortized cost was excess collateral at the FHLB. Excess collateral is maintained to support future borrowings and may be withdrawn by the Company at any time.

8.	ACCUMULATED OTHER COMPREHENSIVE GAIN (LOSS)

The following tables present the changes in accumulated other comprehensive gain (loss) by component, for the three and nine months ended March 31, 2019 and 2018.


	Three Months Ended March 31, 2019
	(Dollars in Thousands – net of tax)

	Unrealized Gains and Losses on Available-for-Sale Securities			Unrealized Gains and Losses on Held-to-Maturity Securities			Total

Beginning Balance – December 31, 2018	$	(1,486	)	$	(199	)	$	(1,685)

Other comprehensive income before reclassifications		1,168			127			1,295

Amounts reclassified from accumulated other comprehensive loss		-			-			-


Net current-period other comprehensive income		1,168			127			1,295


Ending Balance – March 31, 2019	$	(318	)	$	(72	)	$	(390	)


	Nine Months Ended March 31, 2019
	(Dollars in Thousands – net of tax)

	Unrealized Gains and Losses on Available-for-Sale Securities			Unrealized Gains and Losses on Held-to-Maturity Securities			Total

Beginning Balance – June 30, 2018	$	(10	)	$	(178	)	$	(188)

Other comprehensive income (loss) before reclassifications		(310	)		106			(204	)

Amounts reclassified from accumulated other comprehensive loss		2			-			2


Net current-period other comprehensive Income (loss)		(308	)		106			(202	)


Ending Balance – March 31, 2019	$	(318	)	$	(72	)	$	(390	)


	Three Months Ended March 31, 2018
	(Dollars in Thousands – net of tax)

	Unrealized Gains and Losses on Available-for-Sale Securities			Unrealized Gains and Losses on Held-to-Maturity Securities			Total

Beginning Balance – December 31, 2017	$	148		$	(241)		$	(93)

Other comprehensive income before reclassifications		(175	)		13			(162	)

Amounts reclassified from accumulated other comprehensive loss		(1	)		-			(1	)


Net current-period other comprehensive income		(176	)		13			(163	)


Ending Balance – March 31, 2018	$	(28	)	$	(228	)	$	(256	)


	Nine Months Ended March 31, 2018
	(Dollars in Thousands – net of tax)

	Unrealized Gains and Losses on Available-for-Sale Securities			Unrealized Gains and Losses on Held-to-Maturity Securities			Total

Beginning Balance – June 30, 2017	$	44		$	(232	)	$	(188	)

Other comprehensive income before reclassifications		(95	)		37			(58	)

Amounts reclassified from accumulated other comprehensive loss		(1	)		6			5


Net current-period other comprehensive income		(96	)		43			(53	)


Reclassification for the change in corporate tax rate		24			(39	)		(15	)

Ending Balance – March 31, 2018	$	(28	)	$	(228	)	$	(256	)

9.	UNREALIZED LOSSES ON SECURITIES

The following tables show the Company’s gross unrealized losses and fair value, aggregated by category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2019 and June 30, 2018.


		March 31, 2019

		Less Than Twelve Months						Twelve Months or Greater						Total

	Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses

			(Dollars in Thousands)

Corporate debt securities	$		39,252	$	(302	)	$		15,468	$	(165	)	$		54,720	$	(467	)
Foreign debt securities ¹			16,418		(145	)			1,225		(12	)			17,643		(157	)
Obligations of state and political subdivisions			1,327		(3	)			-		-				1,327		(3	)
Collateralized mortgage obligations:
Agency			19,228		(129	)			21,475		(350	)			40,703		(479	)


Total	$		76,225	$	(579	)	$		38,168	$	(527	)	$		114,393	$	(1,106	)

¹ U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.


			June 30, 2018

			Less Than Twelve Months						Twelve Months or Greater						Total

	Fair Value				Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses

				(Dollars in Thousands)
U.S. government agency securities		$		624	$	(1	)	$		-	$	-		$		624	$	(1	)
Corporate debt securities				56,714		(169	)			3,028		(12	)			59,742		(181	)
Foreign debt securities¹				13,761		(38	)			-		-				13,761		(38	)
Obligations of states and political subdivisions				5,048		(77	)			-		-				5,048		(77	)
Collateralized mortgage obligations:
Agency				7,600		(12	)			21,424		(414	)			29,024		(426	)


Total		$		83,747	$	(297	)	$		24,452	$	(426	)	$		108,199	$	(723	)

For debt securities, impairment is considered to be other than temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its amortized cost basis, or (3) does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell the security). In addition, impairment is considered to be other than temporary if the present value of cash flows expected to be collected from the debt security is less than the amortized cost basis of the security (any such shortfall is referred to as a credit loss).

The Company evaluates outstanding available-for-sale and held-to-maturity securities in an unrealized loss position (i.e., impaired securities) for other than temporary impairment (“OTTI”) on a quarterly basis. In doing so, the Company considers many factors including, but not limited to: the credit ratings assigned to the securities by the Nationally Recognized Statistical Rating Organizations (NRSROs); other indicators of the credit quality of the issuer; the strength of the provider of any guarantees; the length of time and extent that fair value has been less than amortized cost; and whether the Company has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. In the case of its private label residential MBS, the Company also considers prepayment speeds, the historical and projected performance of the underlying loans and the credit support provided by the subordinate securities. These evaluations are inherently subjective and consider a number of quantitative and qualitative factors.

The following table presents a roll-forward of the credit loss component of the amortized cost of mortgage-backed securities that we have written down for OTTI and the credit component of the loss that is recognized in earnings. OTTI recognized in earnings for credit impaired mortgage-backed securities is presented as additions in two components based upon whether the current period is the first time the mortgage-backed security was credit-impaired (initial credit impairment) or is not the first time the mortgage-backed security was credit impaired (subsequent credit impairments). The credit loss component is reduced if we sell, intend to sell or believe that we will be required to sell previously credit-impaired mortgage-backed securities. Additionally, the credit loss component is reduced if we receive cash flows in excess of what we expected to receive over the remaining life of the credit impaired mortgage-backed securities, the security matures or is fully written down.

¹U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2019			2018			2019			2018
	(Dollars in Thousands)
Beginning balance	$	229		$	248		$	239		$	259
Initial credit impairment		-			-			-			-
Subsequent credit impairment		26			-			26			8
Reductions for amounts recognized in earnings due to intent or requirement to sell		-			-			-			-
Reductions for securities sold		-			-			-			-
Reduction for actual realized losses		(5	)		(5	)		(15	)		(24	)
Reduction for increase in cash flows expected to be collected		-			-			-			-

Ending Balance	$	250		$	243		$	250		$	243

During the three months ended March 31, 2019, the Company recorded a $26 thousand credit impairment charge and no non-credit unrealized holding losses to accumulated other comprehensive income. During the three and nine months ended March 31, 2019, the Company accreted back into (out of) other comprehensive income $10 thousand and $(14) thousand, respectively, (net of income tax effect of $2 thousand and $(3) thousand, respectively), based on principal repayments on private-label CMOs previously identified with OTTI.

In the case of its private-label residential CMOs that exhibit adverse risk characteristics, the Company employs models to determine the cash flows that it is likely to collect from the securities. These models consider borrower characteristics and the particular attributes of the loans underlying the securities, in conjunction with assumptions about future changes in home prices and interest rates, to predict the likelihood a loan will default and the impact on default frequency, loss severity and remaining credit enhancement. A significant input to these models is the forecast of future housing price changes for the relevant states and metropolitan statistical areas, which are based upon an assessment of the various housing markets. In general, since the ultimate receipt of contractual payments on these securities will depend upon the credit and prepayment performance of the underlying loans and, if needed, the credit enhancements for the senior securities owned by the Company, the Company uses these models to assess whether the credit enhancement associated with each security is sufficient to protect against likely losses of principal and interest on the underlying mortgage loans. The development of the modeling assumptions requires significant judgment.

In conjunction with our adoption of ASC Topic 820 effective June 30, 2009, the Company retained an independent third party to assist it with assessing its investments within the private-label CMO portfolio. The independent third party utilized certain assumptions for producing the cash flow analysis used in the OTTI assessment. Key assumptions would include interest rates, expected market participant spreads and discount rates, housing prices, projected future delinquency levels and assumed loss rates on any liquidated collateral.

The Company reviewed the independent third party’s assumptions used in the March 31, 2019 OTTI process. Based on the results of this review, the Company deemed the independent third party’s assumptions to be reasonable and adopted them. However, different assumptions could produce materially different results, which could impact the Company’s conclusions as to whether an impairment is considered other-than-temporary and the magnitude of the credit loss.

If the Company intends to sell an impaired debt security, or more likely than not will be required to sell the security before recovery of its amortized cost basis, the impairment is other-than-temporary and is recognized currently in earnings in an amount equal to the entire difference between fair value and amortized cost. The Company does not anticipate selling its private-label CMO portfolio, nor does Management believe that the Company will be required to sell these securities before recovery of this amortized cost basis.

In instances in which the Company determines that a credit loss exists but the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before the anticipated recovery of its remaining amortized cost basis, the OTTI is separated into (1) the amount of the total impairment related to the credit loss and (2) the amount of the total impairment related to all other factors (i.e., the noncredit portion). The amount of the total OTTI related to the credit loss is recognized in earnings and the amount of the total OTTI related to all other factors is recognized in accumulated other comprehensive loss. The total OTTI is presented in the Consolidated Statement of Income with an offset for the amount of the total OTTI that is recognized in accumulated other comprehensive loss. Absent the intent or requirement to sell a security, if a credit loss does not exist, any impairment is considered to be temporary.

Regardless of whether an OTTI is recognized in its entirety in earnings or if the credit portion is recognized in earnings and the noncredit portion is recognized in other comprehensive income (loss), the estimation of fair values has a significant impact on the amount(s) of any impairment that is recorded.

The noncredit portion of any OTTI losses on securities classified as available-for-sale is adjusted to fair value with an offsetting adjustment to the carrying value of the security. The fair value adjustment could increase or decrease the carrying value of the security. All of the Company’s private-label CMOs were originally, and continue to be classified, as held to maturity.

In periods subsequent to the recognition of an OTTI loss, the other-than-temporarily impaired debt security is accounted for as if it had been purchased on the measurement date of the OTTI at an amount equal to the previous amortized cost basis less the credit-related OTTI recognized in earnings. For debt securities for which credit-related OTTI is recognized in earnings, the difference between the new cost basis and the cash flows expected to be collected is accreted into interest income over the remaining life of the security in a prospective manner based on the amount and timing of future estimated cash flows.

The Company had investments in 67 positions that were impaired at March 31, 2019. Based on its analysis, management has concluded that three private-label CMOs are other-than-temporarily impaired, while the remaining securities portfolio has experienced unrealized losses and a decrease in fair value due to interest rate volatility, illiquidity in the marketplace, or credit deterioration in the U.S. mortgage markets.

10.

LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES

The following table summarizes the primary segments of the loan portfolio as of March 31, 2019 and June 30, 2018.


		March 31, 2019							June 30, 2018
		Total Loans			Individually evaluated for impairment		Collectively evaluated for impairment		Total Loans			Individually evaluated for impairment		Collectively evaluated for impairment

		(Dollars in Thousands)
First mortgage loans:
1 – 4 family dwellings	$		75,918		$	-	$	75,918	$	72,237		$	-	$	72,237
Construction			2,108			-		2,108		1,769			-		1,769
Land acquisition & development			384			-		384		-			-		-
Multi-family dwellings			3,191			-		3191		3,390			-		3,390
Commercial			3,800			-		3,800		3,482			-		3,482

Consumer loans
Home equity			911			-		911		861			-		861
Home equity lines of credit			1,956			-		1,956		2,177			-		2,177
Other			133			-		133		125			-		125

Commercial loans			475			-		475		633			-		633

	$		88,876		$	-	$	88,876	$	84,674		$	-	$	84,674

Plus: Deferred loan costs			480							469
Allowance for loan losses			(510	)						(468	)

Total	$		88,846						$	84,675

Impaired loans are loans for which it is probable the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. The following loan categories are collectively evaluated for impairment. First mortgage loans: 1 – 4 family dwellings and all consumer loan categories (home equity, home equity lines of credit, and other). The following loan categories are individually evaluated for impairment. First mortgage loans: construction, land acquisition and development, multi-family dwellings, and commercial. The Company evaluates commercial loans not secured by real property individually for impairment.

The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectability, while not classifying the loan as impaired if the loan is not a commercial or commercial real estate loan. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of impaired loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral.

Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case basis taking into consideration all circumstances surrounding the loan and the borrower, including the length of the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed.

At March 31, 2019 and June 30, 2018 there were no loans considered to be impaired.

Total nonaccrual loans as of March 31, 2019 and June 30, 2018 and the related interest income recognized for the three and nine months ended March 31, 2019 and March 31, 2018 are as follows:


		March 31, 2019			June 30, 2018
		(Dollars in Thousands)
Principal outstanding
1 – 4 family dwellings	$		229	$		235
Construction			-			-
Land acquisition & development			-			-
Commercial real estate			-			-
Home equity lines of credit			-			-


Total	$		229	$		235


		Three Months Ended						Nine Months Ended
		March 31,			March 31,			March 31,			March 31,
		2019			2018			2019			2018
		(Dollars in Thousands)
Average nonaccrual loans
1 – 4 family dwellings	$		230	$		241	$		232	$		243
Construction			-			-			-			-
Land acquisition & development			-			-			-			-
Commercial real estate			-			-			-			-
Home equity lines of credit			-			-			-			-

Total	$		230	$		241	$		232	$		243


Income that would have been recognized	$		5	$		4	$		11	$		13

Interest income recognized	$		5	$		7	$		11	$		17

The Company’s loan portfolio may also include troubled debt restructurings (“TDRs”), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

During the three and nine months ended March 31, 2019 and March 31, 2018, there were no troubled debt restructurings, and no troubled debt restructurings that subsequently defaulted.

When the Company modifies a loan, management evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or a charge-off to the allowance. Segment and class status is determined by the loan’s classification at origination.

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance account. Subsequent recoveries, if any, are credited to the allowance. The allowance is maintained at a level believed adequate by management to absorb estimated potential loan losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio considering past experience, current economic conditions, composition of the loan portfolio and other relevant factors. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant change.

Effective December 13, 2006, the FDIC, in conjunction with the other federal banking agencies adopted a Revised Interagency Policy Statement on the Allowance for Loan and Lease Losses (“ALLL”). The revised policy statement revised and replaced the banking agencies’ 1993 policy statement on the ALLL. The revised policy statement provides that an institution must maintain an ALLL at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio. The banking agencies also revised the policy to ensure consistency with generally accepted accounting principles (“GAAP”). The revised policy statement updates the previous guidance that describes the responsibilities of the board of directors, management, and bank examiners regarding the ALLL, factors to be considered in the estimation of the ALLL, and the objectives and elements of an effective loan review system.

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

The Company’s general policy is to internally classify its assets on a regular basis and establish prudent general valuation allowances that are adequate to absorb losses that have not been identified but that are inherent in the loan portfolio. The Company maintains general valuation allowances that it believes are adequate to absorb losses in its loan portfolio that are not clearly attributable to specific loans. The Company’s general valuation allowances are within the following general ranges: (1) 0% to 5% of assets subject to special mention; (2) 1.00% to 100% of assets classified substandard; and (3) 50% to 100% of assets classified doubtful. Any loan classified as loss is charged-off. To further monitor and assess the risk characteristics of the loan portfolio, loan delinquencies are reviewed to consider any developing problem loans. Based upon the procedures in place, considering the Company’s past charge-offs and recoveries and assessing the current risk elements in the portfolio, management believes the allowance for loan losses at March 31, 2019, is adequate.

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2019 and June 30, 2018:


		Current			30 – 59 Days Past Due			60 – 89 Days Past Due			90 Days + Past Due Accruing			90 Days + Past Due Non-accrual			Total Past Due			Total Loans

		(Dollars in Thousands)
March 31, 2019
First mortgage loans:
1 – 4 family dwellings	$		75,689	$		-	$		-	$		-	$		229	$		229	$		75,918
Construction			2,108			-			-			-			-			-			2,108
Land acquisition & development			384			-			-			-			-			-			384
Multi-family dwellings			3,191			-			-			-			-			-			3,191
Commercial			3,800			-			-			-			-			-			3,800

Consumer Loans:
Home equity			911			-			-			-			-			-			911
Home equity lines of credit			1,956			-			-			-			-			-			1,956
Other			133			-			-			-			-			-			133

Commercial Loans			475			-			-			-			-			-			475

	$		88,647	$		-	$		-	$		-	$		229	$		229			88,876

Plus: Deferred loan fees																					480
Allowance for loan losses																					(510	)

Net Loans Receivable																			$		88,846


		Current			30 – 59 Days Past Due			60 – 89 Days Past Due			90 Days + Past Due Accruing			90 Days + Past Due Non-accrual			Total Past Due			Total Loans

		(Dollars in Thousands)
June 30, 2018
First mortgage loans:
1 – 4 family dwellings	$		72,002	$		-	$		-	$		-	$		235	$		235	$		72,237
Construction			1,769			-			-			-			-			-			1,769
Land acquisition & development			-			-			-			-			-			-			-
Multi-family dwellings			3,390			-			-			-			-			-			3,390
Commercial			3,482			-			-			-			-			-			3,482

Consumer Loans:
Home equity			861			-			-			-			-			-			861
Home equity lines of credit			2,177			-			-			-			-			-			2,177
Other			125			-			-			-			-			-			125

Commercial Loans			633			-			-			-			-			-			633

	$		84,439	$		-	$		-	$		-	$		235	$		235			84,674

Plus: Deferred loan fees																					469
Allowance for loan losses																					(468	)

Net Loans Receivable																			$		84,675

Credit quality information

The following tables represent credit exposure by internally assigned grades for the period ended March 31, 2019. The grading system analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or not at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

Substandard – loans that have a well-defined weakness based on objective evidence and can be characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard loan. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loss – loans classified as loss are considered uncollectible, or of such value that continuance as a loan is not warranted.

The primary credit quality indicator used by management in the 1 – 4 family and consumer loan portfolios is the performance status of the loans. Payment activity is reviewed by Management on a monthly basis to determine how loans are performing. Loans are considered to be non-performing when they become 90 days delinquent, have a history of delinquency, or have other inherent characteristics which Management deems to be weaknesses.

The following tables present the Company’s internally classified construction, land acquisition and development, multi-family dwellings, commercial real estate and commercial (not secured by real estate) loans at March 31, 2019 and June 30, 2018.


		March 31, 2019
		Construction			Land Acquisition & Development			Multi- family dwellings			Commercial Real Estate			Commercial

		(Dollars in Thousands)
Pass	$		2,108	$		384	$		3,191	$		3,800	$		475
Special Mention		-			-			-			-			-
Substandard			-			-			-			-			-
Doubtful			-			-			-			-			-

Ending Balance	$		2,108	$		384	$		3,191	$		3,800	$		475


		June 30, 2018
	Construction				Land Acquisition & Development Loans			Multi-family Residential			Commercial Real Estate			Commercial

		(Dollars in Thousands)

Pass	$		1,769	$		-	$		3,390	$		3,482	$		633
Special Mention			-			-			-			-			-
Substandard			-			-			-			-			-
Doubtful			-			-			-			-			-

Ending Balance	$		1,769	$		-	$		3,390	$		3,482	$		633

The following table presents performing and non-performing 1 – 4 family residential and consumer loans based on payment activity for the periods ended March 31, 2019 and June 30, 2018.


		March 31, 2019

		1 – 4 Family			Consumer

		(Dollars in Thousands)

Performing	$		75,689	$		3,000
Non-performing			229			-

Total	$		75,918	$		3,000


		June 30, 2018

		1 – 4 Family			Consumer

		(Dollars in Thousands)

Performing	$		72,002	$		3,163
Non-performing			235			-

Total	$		72,237	$		3,163

The Company determines its allowance for loan losses in accordance with generally accepted accounting principles. The Company uses a systematic methodology as required by Financial Reporting Release No. 28 and the various Federal Financial Institutions Examination Council guidelines. The Company also endeavors to adhere to SEC Staff Accounting Bulletin No. 102 in connection with loan loss allowance methodology and documentation issues.

Our methodology used to determine the allocated portion of the allowance is as follows. For groups of homogenous loans, we apply a loss rate to the groups’ aggregate balance. Our group loss rate reflects our historical loss experience. We may adjust these group rates to compensate for changes in environmental factors; but our adjustments have not been frequent due to a relatively stable charge-off experience. The Company also monitors industry loss experience on similar loan portfolio segments. We then identify loans for individual evaluation under ASC Topic 310. If the individually identified loans are performing, we apply a segment specific loss rate adjusted for relevant environmental factors, if necessary, for those loans reviewed individually and considered individually impaired, we use one of the three methods for measuring impairment mandated by ASC Topic 310. Generally the fair value of collateral is used since our impaired loans are generally real estate based. In connection with the fair value of collateral measurement, the Company generally uses an independent appraisal and determines costs to sell. The Company’s appraisals for commercial income based loans, such as multi-family and commercial real estate loans, assess value based

upon the operating cash flows of the business as opposed to merely “as built” values. The Company then validates the reasonableness of our calculated allowances by: (1) reviewing trends in loan volume, delinquencies, restructurings and concentrations; (2) reviewing prior period (historical) charge-offs and recoveries; and (3) presenting the results of this process, quarterly, to the Asset Classification Committee and the Savings Bank’s Board of Directors. We then tabulate, format and summarize the current loan loss allowance balance for financial and regulatory reporting purposes.

The Company had no unallocated loss allowance balances at March 31, 2019 and June 30, 2018.

The allowance for loan losses represents the amount which management estimates is adequate to provide for probable losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan losses charged to operations. The provision for loan losses is based on management’s periodic evaluation of individual loans, economic factors, past loan loss experience, changes in the composition and volume of the portfolio, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to changes in the near term.

The following tables summarize the primary segments of the allowance for loan losses (“ALLL”), segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of March 31, 2019 and 2018. Activity in the allowance is presented for the three and nine months ended March 31, 2019 and 2018.


		For the three months ended March 31, 2019
		First Mortgage Loans
		1 – 4 Family			Construction			Land Acquisition & Development			Multi- family				Commercial				Consumer Loans				Commercial Loans			Total

		(Dollars in Thousands)
Beginning ALLL Balance at December 31, 2018	$		373	$		25	$		10	$		18		$		39		$		33		$		3	$		501
Charge-offs			-			-			-			-				-				-				-			-
Recoveries			-			-			-			-				-				-				-			-
Provisions			6			8			-			(1	)			(1	)			(3	)			-			9

Ending ALLL Balance at March 31, 2019	$		379	$		33	$		10	$		17		$		38		$		30		$		3	$		510

Individually evaluated for impairment	$		-	$		-	$		-	$		-		$		-		$		-		$		-	$		-
Collectively evaluated for impairment			379			33			10			17				38				30				3			510

	$		379	$		33	$		10	$		17		$		38		$		30		$		3	$		510


		For the nine months ended March 31, 2019
		First Mortgage Loans
		1 – 4 Family			Construction				Land Acquisition & Development			Multi- family				Commercial			Consumer Loans				Commercial Loans				Total

					(Dollars in Thousands)
Beginning ALLL Balance at June 30, 2018	$		356	$		24		$		-	$		18		$		35	$		31		$		4		$		468
Charge-offs			-			-				-			-				-			-				-				-
Recoveries			-			-				-			-				-			-				-				-
Provisions			23			9				10			(1	)			3			(1	)			(1	)			42

Ending ALLL Balance at March 31, 2019	$		379	$		33		$		10	$		17		$		38	$		30		$		3		$		510

Individually evaluated for impairment	$		-	$		-		$		-	$		-		$		-	$		-		$		-		$		-
Collectively evaluated for impairment			379			33				10			17				38			30				3				510

	$		379	$		33		$		10	$		17		$		38	$		30		$		3		$		510


		For the three months ended March 31, 2018
		First Mortgage Loans
		1 – 4 Family			Construction				Land Acquisition & Development			Multi- family				Commercial			Consumer Loans				Commercial Loans				Total

					(Dollars in Thousands)
Beginning ALLL Balance at December 31, 2017	$		327	$		26		$		-	$		19		$		20	$		34		$		4		$		430
Charge-offs			-			-				-			-				-			-				-				-
Recoveries			-			-				-			-				-			-				-				-
Provisions			13			(1	)			-			-				-			(2	)			-				10

Ending ALLL Balance at March 31, 2018	$		340	$		25		$		-	$		19		$		20	$		32		$		4		$		440

Individually evaluated for impairment	$		-	$		-		$		-	$		-		$		-	$		-		$		-		$		-
Collectively evaluated for impairment			340			25				-			19				20			32				4				440

	$		340	$		25		$		-	$		19		$		20	$		32		$		4		$		440


		For the nine months ended March 31, 2018
		First Mortgage Loans
		1 – 4 Family			Construction				Land Acquisition & Development				Multi- family				Commercial			Consumer Loans				Commercial Loans			Total

		(Dollars in Thousands)
Beginning ALLL Balance at June 30, 2017	$		305	$		30		$		5		$		20		$		20	$		34		$		4	$		418
Charge-offs			-			-				-				-				-			-				-			-
Recoveries			-			-				-				-				-			-				-			-
Provisions			35			(5	)			(5	)			(1	)			-			(2	)			-			22

Ending ALLL Balance at March 31, 2018	$		340	$		25		$		-		$		19		$		20	$		32		$		4	$		440

Individually evaluated for impairment	$		-	$		-		$		-		$		-		$		-	$		-		$		-	$		-
Collectively evaluated for impairment			340			25				-				19				20			32				4			440

	$		340	$		25		$		-		$		19		$		20	$		32		$		4	$		440

During the three months ended March 31, 2019, the primary changes to the ALLL were comprised of a $6 thousand increase attributable to 1-4 family loans and an $8 thousand increase attributable to construction loans which were partially offset by a $3 thousand decrease attributable to consumer loans.

During the nine months ended March 31, 2019, the ALLL associated with 1-4 family, construction and land acquisition and development loans increased $23 thousand, $9 thousand and $10 thousand, respectively. The primary reason for the changes in the ALLL balance for both periods of 2019, in total, and within the identified segments are volume related changes in applicable loan balances.

For the three and nine month periods ended March 31, 2018, the ALLL associated with the 1-4 family loan portfolio increased by $13 thousand and $35 thousand, respectively, primarily due to an increase in the Company’s reserve factor on the 1-4 family permanent loan segment. Additionally, the 1-4 family loan balances increased during these periods. For both periods of 2018, the changes in the ALLL balances associated with the other loan segments were driven by changes in the applicable loan balances.


Loan Segment	03/31/2019 Factor	06/30/2018 Factor
1 – 4 family-permanent	0.47%	0.46%

11.

FEDERAL HOME LOAN BANK (FHLB) ADVANCES

The following table presents contractual maturities of FHLB long-term advances as of March 31, 2019 and June 30, 2018.


					Weighted-		Stated interest
	Maturity range				average		rate range					March 31,			June 30,
Description	from		to		interest rate³		from		to			2019			2018
												(Dollars in Thousands)
Fixed		10/01/20		10/03/22		3.03%		2.95%		3.09%	$		15,000	$		-
Adjustable		10/01/20		10/01/21		2.47%		2.62%		2.86%			85,000			-


Total											$		100,000	$		-

Maturities of FHLB long-term advances at March 31, 2019, are summarized as follows:


Maturing During Fiscal Year Ended June 30:			Amount		Weighted- Average Interest Rate
		(Dollars in Thousands)
2019	$			-		-
2020				-		-
2021				65,000		2.73%
2022				30,000		2.89%
2023				5,000		3.09%
2024 and thereafter				-		-


Total	$			100,000		2.80%

The advances are not convertible or callable. The FHLB advances are secured by the Company’s FHLB stock, mortgage-backed and investment securities, and loans, and are subject to substantial prepayment penalties.

The Company also utilized revolving and short-term FHLB advances. Short-term FHLB advances generally mature within 90 days, while revolving FHLB advances may be repaid by the Company without penalty. The following table presents information regarding such advances as of March 31, 2019 and June 30, 2018:


		March 31, 2019				June 30, 2018

		(Dollars in Thousands)
FHLB revolving and short-term advances:
Ending balance	$		71,922		$		171,403
Average balance			94,806				167,306
Maximum month-end balance			161,289				179,791
Average interest rate			2.42	%			1.60	%
Weighted-average rate			2.70	%			2.12	%

³	As of March 31, 2019

At March 31, 2019, the Company had remaining borrowing capacity with the FHLB of approximately $2.5 million.

The FHLB advances are secured by the Company’s FHLB stock, loans, and mortgage-backed and investment securities held in safekeeping at the FHLB. FHLB advances are subject to substantial prepayment penalties.

12.

FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. GAAP established a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:


Level I:		Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II:		Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.

Level III:		Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Assets Measured at Fair Value on a Recurring Basis

Investment Securities Available-for-Sale

Fair values for securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. The Company has no Level I or Level III investment securities. Level II investment securities were primarily comprised of investment-grade corporate bonds and U.S. dollar-denominated investment-grade corporate bonds of large foreign issuers.

The following tables present the assets reported on a recurring basis on the Consolidated Balance Sheet at their fair value as of March 31, 2019 and June 30, 2018, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


		March 31, 2019
		Level I			Level II			Level III			Total
		(Dollars in Thousands)
Assets measured on a recurring basis:
Investment securities – available for sale:
Corporate securities	$		-	$		106,530	$		-	$		106,530
Foreign debt securities ⁽¹⁾			-			26,448			-			26,448
Obligations of states and political subdivisions			-			1,627			-			1,627

	$		-	$		134,605	$		-	$		134,605


		June 30, 2018
		Level I			Level II			Level III			Total
		(Dollars in Thousands)
Assets measured on a recurring basis:
Investment securities – available for sale:
Corporate securities	$		-	$		104,339	$		-	$		104,339
Foreign debt securities ⁽¹⁾			-			22,851			-			22,851
Obligations of states and political subdivisions			-			1,621			-			1,621

	$		-	$		128,811	$		-	$		128,811

Assets Measured at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. The Company had no assets measured at fair value on a nonrecurring basis.

Impaired Loans

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC Topic 310. The fair value of impaired loans is estimated using one of several methods, including collateral value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. For a majority of impaired real estate related loans, the Company obtains a current external appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information. The Company had no Level I, Level II or Level III impaired loans at March 31, 2019 and June 30, 2018.

¹	U.S. dollar-denominated investment-grade corporate bonds of large foreign corporate issuers.

13.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values are as follows:


		March 31, 2019
		Carrying Amount			Fair Value			Level I			Level II			Level III
		(Dollars in Thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$		4,204	$		4,204	$		4,204	$		-	$		-
Certificates of deposit			1,346			1,346			1,346			-			-
Investment securities – available for sale			134,605			134,605			134,605			134,605			-
Investment securities – held to maturity			3,995			4,031			-			4,031			-
Mortgage-backed securities – held to maturity:
Agency			108,334			108,978			-			108,978			-
Private-label			936			941			-			-			941
Net loans receivable			88,846			88,395			-			-			88,395
Accrued interest receivable			1,279			1,279			1,279			-			-
FHLB stock			7,060			7,060			7,060			-			-
Bank owned life insurance			4,759			4,759			4,759			-			-

FINANCIAL LIABILITIES
Deposits:
Non-interest bearing deposits	$		20,563	$		20,563	$		20,563	$		-	$		-
Interest-earning checking accounts			24,512			24,512			24,512			-			-
Savings accounts			44,113			44,113			44,113			-			-
Money market accounts			20,114			20,114			20,114			-			-
Certificates of deposit			34,924			34,824			-			-			34,824
Advance payments by borrowers for taxes and insurance			1,706			1,706			1,706			-			-
FHLB advances – fixed rate			15,000			14,168			-			-			14,168
FHLB advances – variable rate			85,000			85,000			85,000			-			-
FHLB short-term advances			71,922			71,922			71,922			-			-
Accrued interest payable			799			799			799			-			-


		June 30, 2018
		Carrying Amount			Fair Value			Level I			Level II			Level III
		(Dollars in Thousands)

FINANCIAL ASSETS
Cash and cash equivalents	$		2,441	$		2,441	$		2,441	$		-	$		-
Certificates of deposit			350			350			350			-			-
Investment securities – available for sale			128,811			128,811			-			128,811			-
Investment securities – held to maturity			6,181			6,125			-			6,125			-
Mortgage-backed securities – held to maturity:
Agency			114,899			115,733			-			115,733			-
Private-label			958			1,111			-			-			1,111
Net loans receivable			84,675			84,319			-			-			84,319
Accrued interest receivable			1,225			1,225			1,225			-			-
FHLB stock			7,161			7,161			7,161			-			-
Bank owned life insurance			4,668			4,668			4,668			-			-

FINANCIAL LIABILITIES
Deposits:
Non-interest earning checking	$		18,436	$		18,436	$		18,436	$		-	$		-
Interest-earning checking			24,459			24,459			24,459			-			-
Savings accounts			44,727			44,727			44,727			-			-
Money market accounts			21,087			21,087			21,087			-			-
Certificates of deposit			34,376			34,053			-			-			34,053
Advance payments by borrowers for taxes and insurance			1,938			1,938			1,938			-			-
FHLB short-term advances			171,403			171,403			171,403			-			-
Accrued interest payable			380			380			380			-			-

Financial instruments are defined as cash, evidence of an ownership interest in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from or to a second entity on potentially favorable or unfavorable terms.

Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. If a quoted market price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument.

If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses, and other factors, as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by management based upon estimates, which are inherently uncertain, the resulting estimated values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the estimated values are based may have a significant impact on the resulting estimated values.

As certain assets and liabilities, such as deferred tax assets, premises and equipment, and many other operational elements of the Company, are not considered financial instruments, but have value, this estimated fair value of financial instruments would not represent the full market value of the Company.

Estimated fair values have been determined by the Company using the best available data, as generally provided in internal Savings Bank regulatory, or third party valuation reports, using an estimation methodology suitable for each category of financial instruments. The estimation methodologies used are as follows:

Cash and Cash Equivalents, Certificates of Deposit, Accrued Interest Receivable and Payable, and FHLB Short-term Advances

The fair value approximates the current carrying value.

Investment Securities, Mortgage-Backed Securities, and FHLB Stock

The fair value of investment and mortgage-backed securities is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities. For discussion of valuation of private-label CMOs, see Note 8 “Unrealized Losses on Securities”. Since the FHLB stock is not actively traded on a secondary market and held exclusively by member financial institutions, the estimated fair market value approximates the carrying amount.

Net Loans Receivable, Deposits, and Advance Payments by Borrowers for Taxes and Insurance

Fair value for consumer mortgage loans is estimated using market quotes or discounting contractual cash flows for prepayment estimates. Discount rates were obtained from secondary market sources, adjusted to reflect differences in servicing, credit, and other characteristics.

The estimated fair values for consumer, fixed-rate commercial, and multi-family real estate loans are estimated by discounting contractual cash flows for prepayment estimates. Discount rates are based upon rates generally charged for such loans with similar credit characteristics.

The estimated fair value for nonperforming loans is the appraised value of the underlying collateral adjusted for estimated credit risk.

Demand, savings, money market deposit accounts, and advance payments by borrowers for taxes and insurance are reported at book value. The fair value of certificates of deposit is based upon the discounted value of the contractual cash flows. The discount rate is estimated using average market rates for deposits with similar average terms.

Bank Owned Life Insurance (“BOLI”)

The fair value of BOLI approximates the cash surrender value of the policies at these dates.

FHLB Advances – Fixed and Variable Rate

The fair values of fixed-rate advances are estimated using discounted cash flows, based on current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount on variable rate advances approximates their fair value.

Commitments to Extend Credit

These financial instruments are generally not subject to sale, and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, is not considered material for disclosure.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2019

FORWARD LOOKING STATEMENTS

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

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

•

our investments in our businesses and in related technology could require additional incremental spending, and might not produce expected deposit and loan growth and anticipated contributions to our earnings;

•

general economic or industry conditions could be less favorable than expected, resulting in a deterioration in credit quality, a change in the allowance for loan losses or a reduced demand for credit or fee-based products and services;

•

changes in the interest rate environment could reduce net interest income and could increase credit losses;

•

the conditions of the securities markets could change, which could adversely affect, among other things, the value or credit quality of our assets, the availability and terms of funding necessary to meet our liquidity needs and our ability to originate loans and leases;

•

changes in the extensive laws, regulations and policies governing financial holding companies and their subsidiaries could alter our business environment or affect our operations;

•

the potential need to adapt to industry changes in information technology systems, on which we are highly dependent, could present operational issues or require significant capital spending;

•

competitive pressures could intensify and affect our profitability, including as a result of continued industry consolidation, the increased availability of financial services from non-banks, technological developments such as the internet or bank regulatory reform; and

•

acts or threats of terrorism and actions taken by the United States or other governments as a result of such acts or threats, including possible military action, could further adversely affect business and economic conditions in the United States generally and in our principal markets, which could have an adverse effect on our financial performance and that of our borrowers and on the financial markets and the price of our common stock.

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

GENERAL

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

West View Savings Bank is a Pennsylvania-chartered, FDIC-insured stock savings bank conducting business from six offices in the North Hills suburbs of Pittsburgh. The Savings Bank converted from the mutual to the stock form of ownership in November 1993. The Savings Bank had no subsidiaries at March 31, 2019.

The operating results of the Company depend primarily upon its net interest income, which is determined by the difference between income on interest-earning assets, principally loans, mortgage-backed securities and investment securities, and interest expense on interest-bearing liabilities, which consist primarily of deposits and borrowings. The Company’s net income is also affected by its provision for loan losses, as well as the level of its non-interest income, including loan fees and service charges, and its non-interest expenses, such as compensation and employee benefits, income taxes, deposit insurance and occupancy costs.

FINANCIAL CONDITION

The Company’s assets totaled $356.4 million at March 31, 2019, as compared to $352.3 million at June 30, 2018. The $4.1 million or 1.2% increase in total assets was primarily comprised of a $5.8 million increase in investment securities available for sale, a $4.1 million increase in net loans receivable, a $1.8 million increase in cash and cash equivalents and a $996 thousand increase in certificates of deposit, which were partially offset by a $6.6 million decrease in mortgage-backed securities and a $2.2 million decrease in investment securities held-to-maturity. The increase in investment securities available for sale was the result of purchases of corporate and foreign bonds which more than offset the maturities and calls of this category of securities. The decrease in mortgage-backed securities was principally due to repayments of principal totaling $6.7 million and the decrease in investment securities held-to-maturity was the result of maturities and calls. The increase in net loans receivable was primarily attributable to an increase in the purchase of single-family owner occupied homes segment of the loan portfolio.

The Company’s total liabilities increased $2.8 million or 0.9% to $321.1 million as of March 31, 2019 from $318.3 million as of June 30, 2018. The $2.8 million increase in total liabilities was primarily comprised of a $909 thousand increase in total deposits, a $519 thousand net increase in FHLB advances, a $519 thousand increase in unfunded securities commitments, a $419 thousand increase in accrued interest payable and a $338 thousand increase in accrued income taxes. Non-interest bearing transaction accounts and certificates of deposit increased $5.5 million and $548 thousand, respectively, as of March 31, 2019 from June 30, 2018. Partially offsetting the increases in non-interest bearing transaction accounts and certificates of deposit was a $3.3 million or 13.5% decrease in interest bearing transaction accounts, a $614 thousand decrease in savings accounts and a $973 thousand decrease in money market transaction accounts. The overall increase in FHLB advances was the result of $15 million in long-term fixed rate and $85 million long-term variable rate FHLB advances partially offsetting a $99.5 million decrease in FHLB short-term advances. See also Quantitative and Qualitative Disclosures About Market Risk “Asset and Liability Management”.

Total stockholders’ equity increased $1.3 million or 3.76% to $35.3 million as of March 31, 2019, from $34.0 million as of June 30, 2018. The change to stockholders’ equity was primarily attributable to net income of $2.2 million, which was partially offset by cash dividends paid totaling $463 thousand and Treasury share purchases of $372 thousand.

RESULTS OF OPERATIONS

General. WVS reported net income of $747 million or $0.42 per share (diluted and basic) for the three months ended March 31, 2019 as compared to $634 thousand or $0.35 per share for the same period in 2018. The $113 thousand or 17.8% increase in net income during the three months ended March 31, 2019 was primarily attributable to a $168 thousand increase in net interest income and a $10 thousand decrease in non-interest expense, which were partially offset by a $33 thousand decrease in other non-interest income, and a $32 thousand increase in income tax expense. The increase in net interest income during the three months ended March 31, 2019 was attributable to a $676 thousand increase in interest income, which was partially offset by a $508 thousand increase in interest expense. The decrease in non-interest income for the three months ended March 31, 2019 was primarily attributable to a $26 thousand increase in impairment charges related to the Company’s private label mortgage-backed securities portfolio when compared to the same period in 2018. The increase in income tax expense for the quarter ended March 31, 2019 was primarily attributable to higher levels of taxable income when compared to the same period in 2018.

Net income for the nine months ended March 31, 2019 totaled $2.2 million or $1.22 per diluted share, as compared to $1.5 million or $0.84 per diluted share for the same period in 2018. The $646 thousand or 42.1% increase in net income during the nine months ended March 31, 2019 was primarily attributable to a $549 thousand increase in net interest income and a $183 thousand decrease in income tax expense, which were partially offset by a $20 thousand increase in the provision for loan losses and a $13 thousand increase in non-interest expense, when compared to the same period of 2018. The increase in net interest income during the nine month period was attributable to a $2.0 million increase in interest income, which was partially offset by a $1.4 million increase in interest expense. The decrease in non-interest income for the quarter ended March 31, 2019 was primarily attributable to higher impairment charges on the Company’s private label mortgage-backed securities portfolio, and lower revenues from ATM fee income, service charges on deposit accounts, and bank-owned life insurance, when compared to the same period in 2018. The increase in the provision for loan losses was primarily attributable to higher levels of loans for land acquisition and development, and commercial real estate, during the nine months ended March 31, 2019 compared to the same period of 2018. The decrease in income tax expense for the nine months ended March 31, 2019 was primarily the result of the absence of an additional $133 thousand federal income tax expense during the nine months ended March 31, 2018 due to the write down of the Company’s net deferred tax assets associated with the Tax Cuts and Jobs Act of 2017, which was partially offset by higher taxable income and the reduced corporate federal tax rate effective January 1, 2018.

Net Interest Income. The Company’s net interest income increased by $168 thousand or 10.1% for the three months ended March 31, 2019, when compared to the same period in 2018. The increase in net interest income was primarily attributable to a $676 thousand increase in interest income which was partially offset by a $508 thousand increase in interest expense. The $676 thousand increase in interest income during the three months ended March 31, 2019 was primarily attributable to higher average yields on the Company’s mortgage-backed securities, and higher average balances and yields on the Company’s investment and loan portfolios when compared to the same period in 2018. The $508 thousand increase in interest expense for the three months ended March 31, 2019 was primarily attributable to higher average market rates paid on FHLB borrowings, and time deposits, when compared to the same period in 2018.

For the nine months ended March 31, 2019, net interest income increased $549 thousand or 11.4% when compared to the same period in 2018. The increase in net interest income was primarily attributable to a $2.0 million increase in interest income, which was partially offset by a $1.4 million increase in interest expense. The increase in interest income was primarily the result of higher average yields on the Company’s investment and mortgage-backed securities, FHLB stock and loans and higher average balances of loans and investment securities outstanding, which were partially offset by lower average balances of mortgage-backed securities, certificates of deposit and FHLB stock, when compared to the same period in 2018. The increase in interest expense was primarily attributable to higher average market rates paid on FHLB borrowings and time deposits.

Interest Income. Interest income on net loans receivable increased $99 thousand or 13.2% and $253 thousand or 11.4% for the three and nine months ended March 31, 2019, respectively, when compared to the same periods in 2018. The increase for the quarter ended March 31, 2019 was primarily attributable to a $7.1 million increase in the average balance of net loans receivable and an increase of 15 basis points in the weighted average yield earned on net loans receivable compared to the same period in 2018. The increase for the nine months ended March 31, 2019 was primarily attributable to a $6.4 million increase in the average balance of net loans receivable and an increase of 11 basis points in the weighted average yield earned on net loans receivable when compared to the same period in 2018. For the three and nine months ended March 31, 2019, the increase in the average balance of loans outstanding was primarily attributable to loan originations in excess of repayments, while the increase in the average yield earned on net loans receivable was primarily attributable to higher market rates on new loans originated. During fiscal 2017, 2018 and into fiscal 2019, the Company enjoyed higher demand for single-family home purchase loans. Substantially all of our loan originations and purchases were fixed-rate loans with a mix of 15, 20, and 30 year terms.

Interest income on investment securities increased $422 thousand or 55.1% and $1.2 million or 57.1% for the three and nine months ended March 31, 2019, respectively, when compared to the same periods in 2018. The increase for the three months ended March 31, 2019 was primarily attributable to a $5.5 million increase in the average balance of investment securities outstanding and a 115 basis point increase in the weighted average yield on investment securities, when compared to the same period in 2018. The increase for the nine months ended March 31, 2019 was primarily attributable to an $8.5 million increase in the average balance of investment securities outstanding and an increase in the weighted average yield on investment securities of 104 basis points, when compared to the same period in 2018. The increase in the average balance of investments outstanding during both periods is attributable to the redeployment of mortgage-backed securities cash flows into floating rate corporate bonds. The increase in weighted average yields in 2019 was principally attributable to higher one-month dollar London Interbank Offered Rates (“LIBOR”) when compared to the same periods in 2018.

Interest income on mortgage-backed securities increased $173 thousand or 21.6% and $539 thousand or 24.0% for the three and nine months ended March 31, 2019, respectively, when compared to the same periods in 2018. The increase for the three months ended March 31, 2019 was primarily attributable to a 90 basis point increase in the weighted average yield earned on U.S. Government agency mortgage-backed securities, which more than offset a $10.9 million decrease in the average balance of U.S. Government agency mortgage-backed securities, when compared to the same period in 2018. The increase for the nine months ended March 31, 2019 was also primarily attributable to a 94 basis point increase in the weighted average yield earned on U.S. Government agency mortgage-backed securities, which more than offset a $13.2 million decline in the average balance of U.S. Government agency mortgage-backed securities, when compared to the same period in 2018. The decrease in the average balances of U.S. Government and agency private-label mortgage-backed securities during the three and nine months ended March 31, 2019 was attributable to principal paydowns during the periods. The mortgage-backed securities proceeds during both periods were primarily used to fund loan originations and purchases of floating rate corporate bonds in the investment portfolio. The increase in weighted average yields in 2019 was primarily attributable to higher three-month LIBOR when compared to the same periods in 2018.

Dividend income on FHLB stock decreased $7 thousand or 4.7% and increased $48 thousand or 14.9% for the three and nine months ended March 31, 2019, respectively, when compared to the same periods in 2018. The decrease for the three months ended March 31, 2019 was primarily attributable to a $552 decrease in the average balance of FHLB stock which was partially offset by a 28 basis point increase in the weighted average yield earned. The increase for the nine months ended March 31, 2019 was primarily attributable to a 122 basis point increase in the weighted average yield earned which was partially offset by a $302 decrease in the average balance of FHLB stock.

Interest income on certificates of deposit decreased $9 thousand or 56.3% for the three months ended March 31, 2019 when compared to the same period in 2018. The decrease for the quarter ended March 31, 2019 was primarily the result of a decrease in the average portfolio balance of certificates of deposit of $1.7 million. For the nine months ended March 31, 2019, interest income on certificates of deposits decreased by $58 thousand or 82.9% primarily as a result of a decrease in the average portfolio balance of certificates of deposit of $4.3 million, which was partially offset by a 60 basis point increase in the weighted average yield earned compared to the same period in 2018. During the three and nine months ended March 31, 2018, the Company redeployed maturing large dollar floating rate certificates of deposit to fund loan originations and purchases of floating rate corporate bonds in the investment portfolio.

Interest Expense. Interest paid on FHLB fixed-rate and variable-rate long term advances increased by $700 thousand and $1.3 million, respectively, for the three and nine months ended March 31, 2019 when compared to the same periods in 2018. The increases were primarily due to increases in the average balances of FHLB long-term advances during the three and nine months ended March 31, 2019 of $100 million and $64.0 million, respectively, when compared to the same periods in 2018. The decrease in interest expense on short-term FHLB advances for the three months ended March 31, 2019 was primarily attributable to a $116.2 million decrease in the average balance of FHLB short-term advances outstanding when compared to the same period in 2018. Interest expense on short-term borrowings during the nine months ended March 31, 2019 decreased by $108 thousand or 5.9% due to a decrease of $116.2 million in the average balance of these obligations, partially offset by a 96 basis point increase in rates paid compared to the same period of 2018. The Company reduced this funding source during the nine months ended March 31, 2019 periods by increasing FHLB long-term fixed and variable advances to better match expected cash flows from the Company’s investment, MBS and loan portfolios.

Interest expense on deposits increased $151 thousand and $237 thousand for the three and nine months ended March 31, 2019, respectively, when compared to the same periods in 2018. The increase in interest expense on deposits for the three months ended March 31, 2019 was primarily attributable to a 93 basis point increase in the weighted average rate paid on time deposits and a $14.4 million increase in the average balances of time deposits outstanding for the quarter ended March 31, 2019, when compared to the same period in 2018. For the nine months ended March 31, 2019, the $237 thousand increase in interest expense was primarily due to a $2.8 million increase in the average balance of time deposits outstanding and an 82 basis point increase in the weighted average rate paid on these time deposits when compared to the same period in 2018. The increase in the average balances of time deposits during both the three and nine months ended March 31, 2019 was primarily attributable to higher levels of short-term brokered deposits when compared to the same periods of 2018. From time to time the Company uses brokered deposits to fund investment purchases, or as an alternative to FHLB borrowings, if the cost of such deposits is less than other wholesale funding options.

Provision for Loan Losses. A provision for loan losses is charged or accreted to earnings to bring the total allowance to a level considered adequate by management to absorb potential losses in the portfolio. Management’s determination of the adequacy of the allowance is based on an evaluation of the portfolio considering past experience, current economic conditions, volume, growth and composition of the loan portfolio, and other relevant factors.

During the three and nine months ending March 31, 2019, the ALLL increased $10 thousand and $42 thousand, respectively. For the three months ended March 31, 2019, the ALLL associated with 1 - 4 family real estate loans increased $6 thousand and the ALLL associated with construction loans increased $8 thousand, which were partially offset by a decrease of $2 thousand in the ALLL associated with the consumer loan segment. During the nine months ended March 31, 2019, the ALLL associated with 1 - 4 family real estate loans, construction and land acquisition and development loans increased by $23 thousand, $9 thousand and $10 thousand, respectively. The primary reason for the changes in the ALLL balances, both in total and within the identified segments, are changes in applicable loan balances.

At March 31, 2019, the Company’s total allowance for loan losses amounted to $510 thousand or 0.57% of the Company’s total loan portfolio, as compared to $468 thousand or 0.55% at June 30, 2018. At March 31, 2019, the Company’s non-performing loans totaled $229 thousand as compared to $235 thousand at June 30, 2018.

Non-Interest Income. The decreases in the non-interest income for the three and nine months ended March 31, 2019 were primarily attributable to a $26 thousand impairment charge related to the Company’s private label mortgage-backed securities portfolio recorded during the quarter ended March 31, 2019. In addition, non-interest income for the nine month period ended March 31, 2019 was impacted by lower revenues from ATM fee income and lower service charges on deposits, when compared to the same period of 2018.

Non-Interest Expense. Non-interest expense decreased $10 thousand or 1.1% for the three months ended March 31, 2019, when compared to the same period in 2018. This decrease was principally attributable to lower occupancy and equipment charges and lower other operating costs, which were partially offset by higher employee related costs when compared to the same period in 2018. Non-interest expense increased $13 thousand or 0.5% for the nine months ended March 31, 2019 when compared to the same period in 2018. This increase was due to higher employee related costs, data processing costs and ATM network expenses, which were partially offset by lower occupancy and equipment, federal deposit insurance premiums, correspondent bank service charges, and other operating expenses when compared to the same period in 2018.

Income Tax Expense. Income tax expense increased $32 thousand for the three months ended March 31, 2019, when compared to the same period in 2018 primarily as a result of the higher levels of taxable income. The decrease in income tax expense for the nine months ended March 31, 2019 was primarily the result of the absence of an additional $133 thousand federal income tax expense during the nine months ended March 31, 2018 due to the write down of the Company’s net deferred tax assets associated with the Tax Cuts and Jobs Act of 2017, which was partially offset by higher taxable income and the reduced corporate federal tax rate effective January 1, 2018.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities totaled $3.2 million during the nine months ended March 31, 2019. Net cash provided by operating activities was primarily comprised of net income of $2.2 million, a $419 thousand increase in accrued interest payable and a $271 thousand increase in accrued income taxes.

Funds used for investing activities totaled $2.0 million during the nine months ended March 31, 2019. Primary uses of funds during the nine months ended March 31, 2019 were purchases of investment securities available for sale totaling $40.7 million, purchases of loans totaling $7.2 million and purchases of certificates of deposit totaling $1.1 million. Primary sources of funds included proceeds from repayments of investment securities and mortgage-backed securities in the held-to-maturity portfolio totaling $2.2 million and $6.7 million, respectively, proceeds from repayments of investment securities in the available-for-sale portfolio totaling $33.5 million, and $1.4 million of proceeds on sales of investment securities available for sale and repayments of loans in excess of originations of $3.0 million.

Funds provided by financing activities totaled $593 thousand for the nine months ended March 31, 2019. The primary sources were a $100.0 million increase in FHLB long-term advances, a $593 thousand increase in savings and transaction accounts and a $548 thousand increase in certificates of deposits. These sources were partially offset by decreases of FHLB short-term advances totaling $99.5 million, cash dividends paid of $463 thousand, treasury stock purchases totaling $372 thousand and a $232 thousand decrease in advance payments by borrowers for taxes and insurance. Management believes that a significant portion of our local maturing deposits will remain with the Company. Management has determined that it currently is maintaining adequate liquidity and continues to match funding sources with lending and investment opportunities.

The Company’s primary sources of funds are deposits, amortization, repayments and maturities of existing loans, mortgage-backed securities and investment securities, funds from operations, and funds obtained through FHLB advances and other borrowings. Certificates of deposit scheduled to mature in one year or less at March 31, 2019 totaled $23.1 million.

Historically, the Company used its sources of funds primarily to meet its ongoing commitments to pay maturing savings certificates and savings withdrawals, fund loan commitments and maintain a substantial portfolio of investment securities. At March 31, 2019, total approved loan commitments outstanding were $2.5 million. At the same date, commitments under unused lines of credit amounted to $6.0 million and the unadvanced portion of construction loans approximated $3.0 million. The Company has been able to generate sufficient cash through the retail deposit market, its traditional funding source, and through FHLB advances, and other borrowings, to provide the cash utilized in investing activities. The Company’s available for sale segment of the investment portfolio totaled $134.6 million at March 31, 2019. In addition the Company had $1.3 million of certificates of deposit at March 31, 2019. Management believes that the Company currently has adequate liquidity available to respond to liquidity demands.

On April 29, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share and a special cash dividend of $0.08 per share, both payable on May 23, 2019, to shareholders of record at the close of business on May 13, 2019. Dividends are subject to determination and declaration by the Board of Directors, which take into account the Company’s financial condition, statutory and regulatory restrictions, general economic conditions and other factors. There can be no assurance that dividends will in fact be paid on the Common Stock in future periods or that, if paid, such dividends will not be reduced or eliminated.

As of March 31, 2019, WVS Financial Corp. maintained Common Equity Tier I Capital, Tier I, and total risk-based capital equal to $35.7 million or 18.71%, $35.7 million or 18.71%, and $36.2 million or 19.00%, respectively, of total risk-weighted assets, and Tier I leverage capital of $35.7 million or 10.15% of average quarterly assets.

Nonperforming assets consist of nonaccrual loans and real estate owned. A loan is placed on nonaccrual status when, in the judgment of management, the probability of collection of interest is deemed insufficient to warrant further accrual. When a loan is placed on nonaccrual status, previously accrued but uncollected interest is deducted from interest income. The Company normally does not accrue interest on loans past due 90 days or more, however, interest may be accrued if management believes that it will collect on the loan.

The Company’s nonperforming assets at March 31, 2019 totaled $229 thousand or 0.06% of total assets as compared to $235 thousand or 0.07% of total assets at June 30, 2018. Nonperforming assets at March 31, 2019 consisted of one single-family real estate loan. The loan is currently under a bankruptcy order and making payments as agreed.

The $6 thousand decrease in nonperforming assets during the nine months ended March 31, 2019 was primarily attributable to principal repayments.

During the three and nine months ended March 31, 2019, the Company collected $5 thousand and $11 thousand, respectively, of interest income on non-accrual loans. Approximately $5 thousand and $11 thousand, respectively, of interest income would have been recorded during the three and nine months ended March 31, 2019, on non-accrual loans if such loans had been current according to the original loan agreements for the entire periods. The Company continues to work with the borrowers in an attempt to cure the default and is also pursuing various legal avenues in order to collect on this loan.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET AND LIABILITY MANAGEMENT

The Company’s primary market risk exposure is interest rate risk and, to a lesser extent, liquidity risk. All of the Company’s transactions are denominated in US dollars with no specific foreign exchange exposure. The Savings Bank has no agricultural loan assets and therefore would not have a specific exposure to changes in commodity prices. Any impacts that changes in foreign exchange rates and commodity prices would have on interest rates are assumed to be exogenous and will be analyzed on an ex post basis.

Interest rate risk (“IRR”) is the exposure of a banking organization’s financial condition to adverse movements in interest rates. Accepting this risk can be an important source of profitability and shareholder value, however excessive levels of IRR can pose a significant threat to the Company’s earnings and capital base. Accordingly, effective risk management that maintains IRR at prudent levels is essential to the Company’s safety and soundness.

Evaluating a financial institution’s exposure to changes in interest rates includes assessing both the adequacy of the management process used to control IRR and the organization’s quantitative level of exposure. When assessing the IRR management process, the Company seeks to ensure that appropriate policies, procedures, management information systems and internal controls are in place to maintain IRR at prudent levels with consistency and continuity. Evaluating the quantitative level of IRR exposure requires the Company to assess the existing and potential future effects of changes in interest rates on its consolidated financial condition, including capital adequacy, earnings, liquidity, and, where appropriate, asset quality.

Financial institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time. Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot adapt to interest-rate changes. For example, assume that an institution’s assets carry intermediate- or long-term fixed rates and that those assets were funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institution’s interest expense on its liabilities may not be sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institution’s profits could decrease on existing assets because the institution will either have lower net interest income or, possibly, net interest expense. Similar risks exist when assets are subject to contractual interest-rate ceilings, or rate sensitive assets are funded by longer-term, fixed-rate liabilities in a decreasing-rate environment.

During the fiscal years 2013-2018 and into fiscal year 2019, intermediate and long-term market interest rates fluctuated considerably. Many central banks, including the Federal Reserve, continued above normal levels of monetary accommodation including quantitative easing and targeted asset purchase programs. The desired outcomes of these programs are to stimulate aggregate demand, reduce high levels of unemployment and to further lower market interest rates.

The effect of interest rate changes on a financial institution’s assets and liabilities may be analyzed by examining the “interest rate sensitivity” of the assets and liabilities and by monitoring an institution’s interest rate sensitivity “gap”. An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within a given time period. A gap is considered positive (negative) when the amount of rate sensitive assets (liabilities) exceeds the amount of rate sensitive liabilities (assets). During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income. During a period of rising interest rates, a positive gap would tend to result in an increase in net interest income.

As part of its asset/liability management strategy, the Company maintained an asset sensitive financial position due to unusually low market interest rates. An asset sensitive financial position may benefit earnings during a period of rising interest rates and reduce earnings during a period of declining interest rates.

The following table sets forth certain information at the dates indicated relating to the Company’s interest-earning assets and interest-bearing liabilities which are estimated to mature or are scheduled to reprice within one year.


	March 31,			June 30,
	2019			2018			2017
	(Dollars in Thousands)
Interest-earning assets maturing or repricing within one year		$277,303			$270,356			$257,808
Interest-bearing liabilities maturing or repricing within one year		212,612			229,231			228,616

Interest sensitivity gap		$ 64,691			$ 41,125			$ 29,192

Interest sensitivity gap as a percentage of total assets		18.15	%		11.67	%		8.30	%
Ratio of assets to liabilities maturing or repricing within one year		130.43	%		117.94	%		112.77	%

The following table illustrates the Company’s estimated stressed cumulative repricing gap – the difference between the amount of interest-earning assets and interest-bearing liabilities expected to reprice at a given point in time – at March 31, 2019. The table estimates the impact of an upward or downward change in market interest rates of 100 and 200 basis points.

Cumulative Stressed Repricing Gap


	Month 3			Month 6			Month 12			Month 24			Month 36			Month 60			Long Term
	(Dollars in Thousands)
Base Case Up 200 bp
Cumulative Gap ($’s)	$	59,199		$	59,201		$	59,276		$	51,445		$	46,057		$	42,828		$	32,075
% of Total Assets		16.6	%		16.6	%		16.6	%		14.4	%		12.9	%		12.0	%		9.0	%
Base Case Up 100 bp
Cumulative Gap ($’s)	$	59,456		$	59,692		$	60,196		$	53,060		$	48,191		$	45,369		$	32,075
% of Total Assets		16.7	%		16.8	%		16.9	%		14.9	%		13.5	%		12.7	%		9.0	%
Base Case No Change
Cumulative Gap ($’s)	$	60,731		$	62,139		$	64,691		$	60,535		$	57,636		$	54,718		$	32,075
% of Total Assets		17.0	%		17.4	%		18.2	%		17.0	%		16.2	%		15.4	%		9.0	%
Base Case Down 100 bp
Cumulative Gap ($’s)	$	62,252		$	65,009		$	69,784		$	68,419		$	66,718		$	64,698		$	32,075
% of Total Assets		17.5	%		18.2	%		19.6	%		19.2	%		18.7	%		18.2	%		9.0	%
Base Case Down 200 bp
Cumulative Gap ($’s)	$	64,213		$	68,627		$	75,916		$	76,974		$	75,765		$	72,225		$	32,075
% of Total Assets		18.0	%		19.3	%		21.3	%		21.6	%		21.3	%		20.3	%		9.0	%

The Company utilizes an income simulation model to measure interest rate risk and to manage interest rate sensitivity. The Company believes that income simulation modeling may enable the Company to better estimate the possible effects on net interest income due to changing market interest rates. Other key model parameters include: estimated prepayment rates on the Company’s loan, mortgage-backed securities and investment portfolios; savings decay rate assumptions; and the repayment terms and embedded options of the Company’s borrowings.

The following table presents the simulated impact of a 100 and 200 basis point upward or downward (parallel) shift in market interest rates on net interest income, return on average equity, return on average assets and the market value of portfolio equity at March 31, 2019. This analysis was done assuming that the interest-earning assets will average approximately $349 million and $351 million over a projected twelve and twenty-four month period, respectively, for the estimated impact on change in net interest income, return on average equity and return on average assets. The estimated changes in market value of equity were calculated using balance sheet levels at March 31, 2019. Actual future results could differ materially from our estimates primarily due to unknown future interest rate changes and the level of prepayments on our investment and loan portfolios and future FDIC regular and special assessments.

Analysis of Sensitivity to Changes in Market Interest Rates


	Twelve Month Forward Modeled Change in Market Interest Rates
	March 31, 2020															March 31, 2021
Estimated impact on:	-200			-100			0			+100			+200			-200			-100			0			+100			+200
Change in net interest income		-22.7	%		-10.8	%		-			6.5	%		13.8	%		-30.7	%		-14.4	%		-			9.1	%		19.0	%
Return on average equity		4.50	%		6.26	%		7.84	%		8.79	%		9.84	%		3.32	%		5.63	%		7.55	%		8.72	%		9.95	%
Return on average assets		0.45	%		0.63	%		0.80	%		0.90	%		1.01	%		0.34	%		0.59	%		0.81	%		0.95	%		1.10	%
Market value of equity (in thousands)	$	39,026		$	43,255		$	46,360		$	46,991		$	47,436

The table below provides information about the Company’s anticipated transactions comprised of firm loan commitments and other commitments, including undisbursed lines of credit, at March 31, 2019. The Company used no derivative financial instruments to hedge such anticipated transactions as of March 31, 2019.


Anticipated Transactions

	(Dollars in Thousands)
Undisbursed construction and land development loans	$	2,923
Undisbursed lines of credit	$	6,013
Loan origination commitments	$	2,478

	$	11,414

In the ordinary course of its construction lending business, the Savings Bank may enter into performance standby letters of credit. Typically, the standby letters of credit are issued on behalf of a builder to a third party to ensure the timely completion of a certain aspect of a construction project or land development. At March 31, 2019, the Savings Bank had no performance standby letters of credit outstanding. In the event that an obligor is unable to perform its obligations as specified in the applicable letter of credit agreement, the Savings Bank would be obligated to disburse funds up to the amount specified in the letter of credit agreement. The Savings Bank maintains adequate collateral that could be liquidated to fund these contingent obligations.

ITEM 4. CONTROLS AND PROCEDURES

As of March 31, 2019, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Accounting Officer, on the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Accounting Officer, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2019.

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that the information required to be disclosed by the Company in its reports filed and submitted under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in its reports filed under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer and principal accounting officer, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended March 31, 2019, no change in the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) has occurred that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings

(a)The Company is involved with various legal actions arising in the ordinary course of business. Management believes the outcome of these matters will have no material effect on the consolidated operations or consolidated financial condition of WVS Financial Corp.

(b)Not applicable.

ITEM 1A. Risk Factors

There are no material changes to the risk factors included in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

(c) The following table sets forth information with respect to purchases of common stock of the Company made by WVS Financial Corp. during the three months ended March 31, 2019.


COMPANY PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share ($)		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs ⁽¹⁾	Maximum Number of Shares that May Yet Be Repurchased Under the Plans or Programs ⁽²⁾
01/01/19 – 01/31/19	-	$	-	-		28,411
02/01/19 – 02/28/19	-	$	-	-		28,411
03/01/19 – 03/31/19	-	$	-	-		28,411
Total	-	$	-	-		28,411

(1)	All shares indicated were purchased under the Company’s reopened Eleventh Stock Repurchase Program.

(2)	Eleventh Stock Repurchase Program

(a)

Announced October 27, 2015.

(b)

100,800 common shares approved for repurchase.

(c)

No fixed date of expiration.

(d)

This Program has not expired and has 28,411 common shares remaining to be purchased at March 31, 2019.

(e)

Not applicable.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

(a) Not applicable.

(b) Not applicable.

ITEM 6. Exhibits

The following exhibits are filed as part of this Form 10-Q, and this list includes the Exhibit Index.


Number	Description	Page
31.1	Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive Officer	E-1
31.2	Rule 13a-14(a) / 15d-14(a) Certification of the Chief Accounting Officer	E-2
32.1	Section 1350 Certification of the Chief Executive Officer	E-3
32.2	Section 1350 Certification of the Chief Accounting Officer	E-4
99	Report of Independent Registered Public Accounting Firm	E-5
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document

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.


	WVS FINANCIAL CORP.

	BY:	/s/ David J. Bursic
Date: May 14, 2019		David J. Bursic
		President and Chief Executive Officer (Principal Executive Officer)

	BY:	/s/ Linda K. Butia
Date: May 14, 2019		Linda K. Butia
		Vice-President, Treasurer and Chief Accounting Officer (Principal Accounting Officer)