t62739_10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
|
EXCHANGE
ACT OF 1934
|
|
For
the quarterly period ended March 31, 2008
|
|
OR
|
o |
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: 000-51214
|
Prudential
Bancorp, Inc. of Pennsylvania
|
(Exact
Name of Registrant as Specified in Its
Charter)
|
Pennsylvania
|
68-0593604
|
(State
or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S.
Employer Identification No.)
|
1834
Oregon Avenue
Philadelphia,
Pennsylvania
|
19145
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(215)
755-1500
|
(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
requirements for the past 90
days. Yes x No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “large accelerated filer”, “accelerated
filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
accelerated filer
|
o
|
|
Accelerated
filer
|
o |
Non-accelerated
filer
|
o
|
(Do
not check is smaller reporting company)
|
Smaller
reporting company
|
x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock
as of the latest practical date: as of May 9, 2008, 11,085,076 shares
were issued and outstanding
PRUDENTIAL
BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES
TABLE
OF CONTENTS
|
|
PAGE
|
|
|
|
PART
I FINANCIAL INFORMATION:
|
|
|
|
Item
1.
|
Condensed
Financial Statements
|
|
|
|
|
|
Unaudited
Consolidated Statements of Financial Condition at March 31, 2008 and
September 30, 2007
|
2
|
|
|
|
|
Unaudited
Consolidated Statements of Income for the Three and Six Months Ended
March
31, 2008 and 2007
|
3
|
|
|
|
|
Unaudited
Consolidated Statement of Changes in Stockholders’ Equity and
Comprehensive Income for the Six Months Ended March 31, 2008 and
2007
|
4
|
|
|
|
|
Unaudited
Consolidated Statements of Cash Flows for the Six Months Ended March 31,
2008 and 2007
|
5
|
|
|
|
|
Notes
to Consolidated Unaudited Financial Statements
|
6
|
|
|
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
19
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
28
|
|
|
|
Item
4T.
|
Controls
and Procedures
|
31
|
|
|
|
PART
II OTHER INFORMATION
|
|
|
|
Item
1.
|
Legal
Proceedings
|
31
|
|
|
|
Item
1A.
|
Risk
Factors
|
31
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
31
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
32
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
33
|
|
|
|
Item
5.
|
Other
Information
|
33
|
|
|
|
Item
6.
|
Exhibits
|
34
|
|
|
|
SIGNATURES
|
35
|
PRUDENTIAL
BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
UNAUDITED
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
|
September
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars
in thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and amounts due from depository institutions
|
|
$ |
5,328 |
|
|
$ |
4,133 |
|
Interest-bearing
deposits
|
|
|
14,055 |
|
|
|
8,136 |
|
|
|
|
|
|
|
|
|
|
Total
cash and cash equivalents
|
|
|
19,383 |
|
|
|
12,269 |
|
|
|
|
|
|
|
|
|
|
Investment
securities held to maturity (estimated fair value—March 31, 2008,
$121,763;
|
|
|
|
|
|
|
|
|
September
30, 2007, $133,693)
|
|
|
120,827 |
|
|
|
134,782 |
|
Investment
securities available for sale (amortized cost—March 31, 2008,
$36,516;
|
|
|
|
|
|
|
|
|
September
30, 2007, $38,007)
|
|
|
37,139 |
|
|
|
38,343 |
|
Mortgage-backed
securities held to maturity (estimated fair value—
|
|
|
|
|
|
|
|
|
March
31, 2008, $43,393; September 30, 2007, $44,213)
|
|
|
42,936 |
|
|
|
45,534 |
|
Mortgage-backed
securities available for sale (amortized cost—
|
|
|
|
|
|
|
|
|
March
31, 2008, $15,600; September 30, 2007, $8,492)
|
|
|
15,931 |
|
|
|
8,549 |
|
Loans
receivable—net of allowance for loan losses (March 31, 2008,
$658;
|
|
|
|
|
|
|
|
|
September
30, 2007, $1,011)
|
|
|
223,785 |
|
|
|
219,149 |
|
Accrued
interest receivable:
|
|
|
|
|
|
|
|
|
Loans
receivable
|
|
|
1,241 |
|
|
|
1,264 |
|
Mortgage-backed
securities
|
|
|
253 |
|
|
|
234 |
|
Investment
securities
|
|
|
1,591 |
|
|
|
2,006 |
|
Real
Estate Owned
|
|
|
1,598 |
|
|
|
- |
|
Federal
Home Loan Bank stock—at cost
|
|
|
2,063 |
|
|
|
2,397 |
|
Office
properties and equipment—net
|
|
|
2,244 |
|
|
|
2,363 |
|
Prepaid
expenses and other assets
|
|
|
9,053 |
|
|
|
7,274 |
|
Deferred
tax asset-net
|
|
|
193 |
|
|
|
28 |
|
TOTAL
ASSETS
|
|
$ |
478,237 |
|
|
$ |
474,192 |
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$ |
4,735 |
|
|
$ |
4,480 |
|
Interest-bearing
|
|
|
369,664 |
|
|
|
349,558 |
|
Total
deposits
|
|
|
374,399 |
|
|
|
354,038 |
|
Advances
from Federal Home Loan Bank
|
|
|
22,722 |
|
|
|
33,743 |
|
Accrued
interest payable
|
|
|
1,791 |
|
|
|
2,868 |
|
Advances
from borrowers for taxes and insurance
|
|
|
1,249 |
|
|
|
1,117 |
|
Accounts
payable and accrued expenses
|
|
|
2,141 |
|
|
|
913 |
|
Accrued
dividend payable
|
|
|
509 |
|
|
|
552 |
|
Total
liabilities
|
|
|
402,811 |
|
|
|
393,231 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value, 10,000,000 shares authorized, none
issued
|
|
|
- |
|
|
|
- |
|
Common
stock, $.01 par value, 40,000,000 shares authorized, issued
12,563,750;
|
|
|
|
|
|
|
|
|
outstanding
- 11,087,766 at March 31, 2008; 11,478,366 at September 30,
2007
|
|
|
126 |
|
|
|
126 |
|
Additional
paid-in capital
|
|
|
54,911 |
|
|
|
54,880 |
|
Unearned
ESOP shares
|
|
|
(3,792 |
) |
|
|
(3,903 |
) |
Treasury
stock, at cost: 1,475,984 shares at March 31,
2008;
|
|
|
|
|
|
|
|
|
1,085,384
shares at September 30, 2007
|
|
|
(19,265 |
) |
|
|
(14,372 |
) |
Retained
earnings
|
|
|
42,817 |
|
|
|
43,971 |
|
Accumulated
other comprehensive income
|
|
|
629 |
|
|
|
259 |
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
75,426 |
|
|
|
80,961 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$ |
478,237 |
|
|
$ |
474,192 |
|
|
|
|
|
|
|
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
|
|
|
|
|
|
|
PRUDENTIAL
BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME
|
|
Three
Months Ended
March
31,
|
|
|
Six
Months Ended
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars
in Thousands Except Per Share Amounts)
|
|
|
(Dollars
in Thousands Except Per Share Amounts)
|
|
INTEREST
INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on loans
|
|
$ |
3,589 |
|
|
$ |
3,786 |
|
|
$ |
7,224 |
|
|
$ |
7,611 |
|
Interest
on mortgage-backed securities
|
|
|
757 |
|
|
|
702 |
|
|
|
1,480 |
|
|
|
1,413 |
|
Interest
and dividends on investments
|
|
|
2,219 |
|
|
|
2,204 |
|
|
|
4,522 |
|
|
|
4,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest income
|
|
|
6,565 |
|
|
|
6,692 |
|
|
|
13,226 |
|
|
|
13,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on deposits
|
|
|
3,478 |
|
|
|
3,250 |
|
|
|
6,973 |
|
|
|
6,453 |
|
Interest
on borrowings
|
|
|
289 |
|
|
|
324 |
|
|
|
689 |
|
|
|
715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest expense
|
|
|
3,767 |
|
|
|
3,574 |
|
|
|
7,662 |
|
|
|
7,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INTEREST INCOME
|
|
|
2,798 |
|
|
|
3,118 |
|
|
|
5,564 |
|
|
|
6,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR LOAN LOSSES
|
|
|
75 |
|
|
|
15 |
|
|
|
150 |
|
|
|
75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INTEREST INCOME AFTER PROVISION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
LOAN LOSSES
|
|
|
2,723 |
|
|
|
3,103 |
|
|
|
5,414 |
|
|
|
6,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-INTEREST
INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
and other service charges
|
|
|
133 |
|
|
|
153 |
|
|
|
275 |
|
|
|
298 |
|
Impairment
charge on investment securities
|
|
|
(1,492 |
) |
|
|
- |
|
|
|
(1,492 |
) |
|
|
- |
|
Other
|
|
|
80 |
|
|
|
68 |
|
|
|
160 |
|
|
|
233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest income (charges)
|
|
|
(1,279 |
) |
|
|
221 |
|
|
|
(1,057 |
) |
|
|
531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-INTEREST
EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
1,158 |
|
|
|
1,147 |
|
|
|
2,311 |
|
|
|
2,263 |
|
Data
processing
|
|
|
129 |
|
|
|
134 |
|
|
|
253 |
|
|
|
253 |
|
Professional
services
|
|
|
472 |
|
|
|
215 |
|
|
|
557 |
|
|
|
443 |
|
Office
occupancy
|
|
|
99 |
|
|
|
94 |
|
|
|
185 |
|
|
|
182 |
|
Depreciation
|
|
|
83 |
|
|
|
56 |
|
|
|
166 |
|
|
|
118 |
|
Payroll
taxes
|
|
|
79 |
|
|
|
81 |
|
|
|
146 |
|
|
|
148 |
|
Director
compensation
|
|
|
65 |
|
|
|
67 |
|
|
|
129 |
|
|
|
138 |
|
Other
|
|
|
424 |
|
|
|
328 |
|
|
|
778 |
|
|
|
599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest expense
|
|
|
2,509 |
|
|
|
2,122 |
|
|
|
4,525 |
|
|
|
4,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS)
INCOME BEFORE INCOME TAXES
|
|
|
(1,065 |
) |
|
|
1,202 |
|
|
|
(168 |
) |
|
|
2,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
(benefit) expense
|
|
|
(71 |
) |
|
|
261 |
|
|
|
259 |
|
|
|
563 |
|
Deferred
(benefit) expense
|
|
|
(312 |
) |
|
|
(24 |
) |
|
|
(355 |
) |
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
income tax (benefit) expense
|
|
|
(383 |
) |
|
|
237 |
|
|
|
(96 |
) |
|
|
658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
(LOSS) INCOME
|
|
$ |
(682 |
) |
|
$ |
965 |
|
|
$ |
(72 |
) |
|
$ |
1,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
(LOSS) EARNINGS PER SHARE
|
|
$ |
(0.06 |
) |
|
$ |
0.08 |
|
|
$ |
(0.01 |
) |
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
(LOSS) EARNINGS PER SHARE
|
|
$ |
(0.06 |
) |
|
$ |
0.08 |
|
|
$ |
(0.01 |
) |
|
$ |
0.16 |
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
PRUDENTIAL
BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
Common
|
|
|
Paid-In
|
|
|
ESOP
|
|
|
Treasury
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
Comprehensive
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Shares
|
|
|
Stock
|
|
|
Earnings
|
|
|
Income
|
|
|
Equity
|
|
|
Income
|
|
|
|
(Dollars
in Thousands)
|
|
BALANCE,
OCTOBER 1, 2007
|
|
$ |
126 |
|
|
$ |
54,880 |
|
|
$ |
(3,903 |
) |
|
$ |
(14,372 |
) |
|
$ |
43,971 |
|
|
$ |
259 |
|
|
$ |
80,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(72 |
) |
|
|
|
|
|
|
(72 |
) |
|
|
(72 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized holding loss on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available
for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
arising
during the period, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
income tax benefit of $317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(615 |
) |
|
|
(615 |
) |
|
|
(615 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
adjustment for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other-than-temporary
impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of tax of $507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
985 |
|
|
|
985 |
|
|
|
985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
stock purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,893 |
) |
|
|
|
|
|
|
|
|
|
|
(4,893 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividend declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($.10
per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,082 |
) |
|
|
|
|
|
|
(1,082 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESOP
shares committed to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
be
released
|
|
|
- |
|
|
|
31 |
|
|
|
111 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
March 31, 2008
|
|
$ |
126 |
|
|
$ |
54,911 |
|
|
$ |
(3,792 |
) |
|
$ |
(19,265 |
) |
|
$ |
42,817 |
|
|
$ |
629 |
|
|
$ |
75,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
Common
|
|
|
Paid-In
|
|
|
ESOP
|
|
|
Treasury
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
Comprehensive
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Shares
|
|
|
Stock
|
|
|
Earnings
|
|
|
Income
|
|
|
Equity
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
OCTOBER 1, 2006
|
|
$ |
126 |
|
|
$ |
54,798 |
|
|
$ |
(4,127 |
) |
|
$ |
(6,422 |
) |
|
$ |
42,539 |
|
|
$ |
534 |
|
|
$ |
87,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,861 |
|
|
|
|
|
|
|
1,861 |
|
|
|
1,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized holding loss on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available
for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
arising
during the period, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
income tax benefit of $72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(119 |
) |
|
|
(119 |
) |
|
|
(119 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
stock purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,415 |
) |
|
|
|
|
|
|
|
|
|
|
(3,415 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($.09
per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,029 |
) |
|
|
|
|
|
|
(1,029 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
adjustment related to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the
adoption of SAB 108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172 |
|
|
|
|
|
|
|
172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESOP
shares committed to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
be
released
|
|
|
- |
|
|
|
42 |
|
|
|
112 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
March 31, 2007
|
|
$ |
126 |
|
|
$ |
54,840 |
|
|
$ |
(4,015 |
) |
|
$ |
(9,837 |
) |
|
$ |
43,543 |
|
|
$ |
415 |
|
|
$ |
85,072 |
|
|
|
|
|
See notes
to unaudited consolidated financial statements.
PRUDENTIAL
BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Six Months
Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES:
|
|
(Dollars
in Thousands)
|
|
Net
(loss) income
|
|
$ |
(72 |
) |
|
$ |
1,861 |
|
Adjustments
to reconcile net income to net cash used in
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
150 |
|
|
|
75 |
|
Depreciation
|
|
|
166 |
|
|
|
118 |
|
Net
accretion of premiums/discounts
|
|
|
(40 |
) |
|
|
(40 |
) |
Net
accretion of deferred loan fees and costs
|
|
|
(134 |
) |
|
|
(201 |
) |
Impairment
charge on investment securities
|
|
|
1,492 |
|
|
|
- |
|
Amortization
of ESOP
|
|
|
142 |
|
|
|
153 |
|
Income
from bank owned life insurance
|
|
|
(98 |
) |
|
|
(106 |
) |
Deferred
income tax (benefit) expense
|
|
|
(355 |
) |
|
|
95 |
|
Changes
in assets and liabilities which used cash:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
1,228 |
|
|
|
(603 |
) |
Accrued
interest payable
|
|
|
(1,077 |
) |
|
|
(1,345 |
) |
Prepaid
expenses and other assets
|
|
|
(1,680 |
) |
|
|
(345 |
) |
Accrued
interest receivable
|
|
|
419 |
|
|
|
(127 |
) |
Net
cash provided by (used in) operating activities
|
|
|
141 |
|
|
|
(465 |
) |
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase
of investment securities held to maturity
|
|
|
(57,943 |
) |
|
|
(14,994 |
) |
Purchase
of investment available for sale
|
|
|
(2,000 |
) |
|
|
- |
|
Purchase
of mortgage-backed securities held to maturity
|
|
|
- |
|
|
|
(1,992 |
) |
Purchase
of mortgage-backed securities available for sale
|
|
|
(7,842 |
) |
|
|
- |
|
Loans
originated or acquired
|
|
|
(29,964 |
) |
|
|
(31,872 |
) |
Principal
collected on loans
|
|
|
23,714 |
|
|
|
30,861 |
|
Principal
payments received on mortgage-backed securities:
|
|
|
|
|
|
|
|
|
held-to-maturity
|
|
|
2,621 |
|
|
|
3,769 |
|
available-for-sale
|
|
|
745 |
|
|
|
336 |
|
Proceeds
from calls and maturities of investment securities held to
maturity
|
|
|
71,903 |
|
|
|
15,787 |
|
Proceeds
from calls and maturities of investment available for sale
|
|
|
1,999 |
|
|
|
- |
|
Net
proceeds from redemption of Federal Home Loan Bank stock
|
|
|
334 |
|
|
|
99 |
|
Purchases
of equipment
|
|
|
(48 |
) |
|
|
(28 |
) |
Net
cash provided by investing activities
|
|
|
3,519 |
|
|
|
1,966 |
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in demand deposits, NOW accounts,
|
|
|
|
|
|
|
|
|
and
savings accounts
|
|
|
2,412 |
|
|
|
(1,286 |
) |
Net
increase in certificates of deposit
|
|
|
17,949 |
|
|
|
9,644 |
|
Net
repayment of advances from Federal Home Loan Bank
|
|
|
(11,021 |
) |
|
|
(9,020 |
) |
Increase
in advances from borrowers for taxes and insurance
|
|
|
132 |
|
|
|
38 |
|
Cash
dividend paid
|
|
|
(1,125 |
) |
|
|
(927 |
) |
Purchase
of treasury stock
|
|
|
(4,893 |
) |
|
|
(3,415 |
) |
Net
cash provided by (used in) financing activities
|
|
|
3,454 |
|
|
|
(4,966 |
) |
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
7,114 |
|
|
|
(3,465 |
) |
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS—Beginning of period
|
|
|
12,269 |
|
|
|
13,428 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS—End of period
|
|
$ |
19,383 |
|
|
$ |
9,963 |
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW
|
|
|
|
|
|
|
|
|
INFORMATION:
|
|
|
|
|
|
|
|
|
Interest
paid on deposits and advances from Federal
|
|
|
|
|
|
|
|
|
Home
Loan Bank
|
|
$ |
8,738 |
|
|
$ |
8,513 |
|
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$ |
667 |
|
|
$ |
653 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF NONCASH ITEMS:
|
|
|
|
|
|
|
|
|
Real
estate acquired in settlement of loans
|
|
$ |
1,598 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to unaudited consolidated financial statements.
|
|
|
|
|
|
|
|
|
PRUDENTIAL
BANCORP, INC. OF PENNSYLVANIA AND SUBSIDIARIES
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
|
BASIS
OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES
|
Prudential
Bancorp, Inc. of Pennsylvania (the “Company”) is a Pennsylvania corporation,
which was organized to be the mid-tier holding company for Prudential Savings
Bank (the “Bank”), which is a Pennsylvania-chartered, FDIC-insured savings bank
with seven full-service branches in the Philadelphia area. The
Company was organized in conjunction with the Bank’s reorganization from a
mutual savings bank to the mutual holding company structure in March
2005. The Bank is principally in the business of attracting deposits
from its community through its branch offices and investing those deposits,
together with funds from borrowings and operations, primarily in single-family
residential loans and construction loans.
Prudential
Mutual Holding Company, a Pennsylvania-chartered mutual entity, is the mutual
holding company parent of the Company. Prudential Mutual Holding
Company owns 62.3% (6,910,062 shares) of the Company’s outstanding common stock
as of March 31, 2008 and must always own at least a majority of the voting stock
of the Company. In addition to the shares of the Company, Prudential
Mutual Holding Company was capitalized with $100,000 in cash from the Bank in
connection with the completion of the reorganization. The
consolidated financial statements of the Company include the accounts of the
Company and the Bank. In addition, Prudential Mutual Holding Company
receives dividends on the common stock of the Company that it
holds. All intercompany balances and transactions have been
eliminated.
Prior to
the reorganization described above, the Board of Directors approved a plan of
charter conversion in May 2004 pursuant to which the Bank would convert its
charter from a Pennsylvania-chartered mutual savings and loan association to a
Pennsylvania-chartered mutual savings bank. The conversion to a
Pennsylvania-chartered mutual savings bank was completed on August 20,
2004. As a result of the charter conversion, the Bank’s primary
federal banking regulator changed from the Office of Thrift Supervision to the
Federal Deposit Insurance Corporation. The Pennsylvania Department of
Banking remains as the Bank’s state banking regulator.
In
November 2005, the Bank formed PSB Delaware, Inc., a Delaware Corporation, as a
subsidiary of the Bank. In March 2006, all mortgage-backed securities
owned by the Company were transferred to PSB Delaware, Inc. The
activity of PSB Delaware, Inc. is included as part of the consolidated financial
statements.
The
accompanying unaudited consolidated financial statements were prepared in
accordance with the instructions to Form 10-Q, and therefore do not include all
the information or footnotes necessary for complete financial statements in
conformity with accounting principles generally accepted in the United States of
America. However, all normal recurring adjustments that, in the opinion of
management, are necessary for a fair presentation of the financial statements
have been included. The results for the three and six months ended
March 31, 2008 are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 2008, or any other period.
These financial statements should be read in conjunction with the audited
consolidated financial statements of the Company and the accompanying notes
thereto for the year ended September 30, 2007 included in the Company’s Annual
Report on Form 10-K for the fiscal year ended September 30, 2007.
Use of Estimates
in the Preparation of Financial Statements—The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. The
most significant estimates and assumptions in the Company’s consolidated
financial statements are recorded in the allowance for loan losses and deferred
income taxes. Actual results could differ from those estimates.
Dividend
Payable – On March 19, 2008, the Company’s Board of Directors declared a
quarterly cash dividend of $.05 on the common stock of the Company payable on
April 28, 2008 to the shareholders of record at the close of business on April
14, 2008 which resulted in a payable of $509,000 at March 31, 2008. A
portion of the cash dividend was payable to Prudential Mutual Holding Company on
its shares of the Company’s common stock and totaled $346,000.
Employee Stock
Ownership Plan – In fiscal 2005, the Company established an employee
stock ownership plan (“ESOP”) for substantially all of its full-time employees.
The ESOP purchased 452,295 shares of the Company’s common stock for an
aggregate cost of approximately $4.5 million. Shares of the Company’s
common stock purchased by the ESOP are held in a suspense account until released
for allocation to participants. Shares are allocated to each eligible
participant based on the ratio of each such participant’s compensation, as
defined in the ESOP, to the total compensation of all eligible plan
participants. As the unearned shares are released from the suspense account, the
Company recognizes compensation expense equal to the fair value of the ESOP
shares during the periods in which they become committed to be
released. To the extent that the fair value of the ESOP shares
released differs from the cost of such shares, the difference is charged or
credited to equity as additional paid-in capital. As of March 31,
2008, the Company had allocated a total of 62,205 shares from the suspense
account to participants and committed to release an additional 5,655
shares. In addition, at such date the amount of the shares of Company
common stock held by the ESOP totaled 450,885. For the six months
ended March 31, 2008, the Company recognized $137,000 in compensation expense
with respect to the ESOP.
Treasury Stock –
Stock held in treasury by the Company is accounted for using the cost
method, which treats stock held in treasury as a reduction to total
stockholders’ equity.
Comprehensive
Income—The Company presents in the unaudited consolidated statement of
changes in stockholders’ equity and comprehensive income those amounts arising
from transactions and other events which currently are excluded from the
statement of income and are recorded directly to stockholders’
equity. For the six months March 31, 2008 and 2007, the only
components of comprehensive income were net (loss) income and unrealized holding
gains and losses, net of income tax expense and benefit, on available for sale
securities. Comprehensive income totaled $298,000 and $1.7 million
for the six months ended March 31, 2008 and 2007, respectively.
Recent Accounting
Pronouncements – On July 13, 2006, the Financial Accounting
Standards Board (“FASB”) issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" ("FIN 48"), which is effective for fiscal years
beginning after December 15, 2006. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in the financial statements in accordance
with FASB Statement No. 109, "Accounting for Income Taxes." This Interpretation
prescribes a comprehensive model for how a company should recognize, measure,
present and disclose in its financial statements uncertain tax positions that
the company has taken or expects to take on a tax return. The Company
adopted FIN 48 on October 1, 2007, and the adoption did not have an impact on
the Company’s financial statements. The Company recognizes interest
and/or penalties related to income tax matters in income tax
expense. The Company did not have any amounts accrued for interest
and penalties at March 31, 2008. As of October 1, 2007, the Company
had no unrecognized tax benefits. The Company’s federal and state
income tax returns for taxable years through September 30, 2003 have been closed
for purposes of examination by the Internal Revenue Service (the “IRS”) or the
Pennsylvania Department of Revenue. As of March 31, 2008, the Company
is not currently being audited by and has no pending disputes with the IRS or
the State of Pennsylvania on any tax matters.
In
September 2006, the Emerging Issues Task Force (“EITF”) of FASB issued EITF
Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split Dollar Life Insurance Arrangements” (EITF
06-04). EITF 06-4 requires the recognition of a liability related to the
postretirement benefits covered by an endorsement split-dollar life insurance
arrangement. EITF 06-4 is effective for fiscal years beginning after
December 15, 2007, with earlier application permitted. The Company is
currently assessing the impact of the adoption of EITF 06-04 on its financial
statements.
In
September 2006, the FASB issued Statement No. 157, “Fair Value Measurements”
(“SFAS No. 157”). SFAS No. 157 (i) defines fair value, (ii) establishes a
framework for measuring fair value in GAAP and (iii) expands disclosure
requirements about fair value measurements. SFAS No. 157 is effective for all
financial statements issued for fiscal years beginning after November 15,
2007. SFAS No. 157 emphasizes that fair value is a market-based
measurement, not an entity-specific measurement. FASB Staff Position
(“FSP”) No 157-2, Effective
Date of FASB Statement No. 157, issued in February 2008, delays the
effective date of SFAS No. 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in
an entity’s financial statements on a recurring basis (at least annually), to
fiscal years beginning after November 15, 2008. The Company is currently
assessing the impact of SFAS No. 157 on its financial statements.
In
September 2006, the Securities and Exchange Commission (“SEC”) issued SAB No.
108 expressing the SEC staff’s views regarding the process of quantifying
financial statement misstatements and the build up of improper amounts on the
balance sheet. SAB No. 108 requires that registrants quantify errors
using both a balance sheet and income statement approach and evaluate whether
either approach results in a misstated amount that, when all relevant
quantitative and qualitative factors are considered, is material. The
built up misstatements, while not considered material in the individual years in
which the misstatements were built up, may be considered material in a
subsequent year if a company were to correct those misstatements through current
period earnings. Initial application of SAB No. 108 allows
registrants to elect not to restate prior periods but to reflect the initial
application in their annual financial statements covering the first fiscal year
ending after November 15, 2006. The cumulative effect of the initial
application should be reported in the carrying amounts of assets and liabilities
as of the beginning of that fiscal year and the offsetting adjustment, net of
tax, should be made to the opening balance of retained earnings for that
year.
The
Company implemented SAB No. 108 on October 1, 2006 which resulted in an increase
in mortgage-backed securities held to maturity of approximately $321,000, an
increase in income tax liabilities of approximately $149,000 and a cumulative
adjustment to increase retained earnings as of that date by approximately
$172,000. The adjustment relates to two separate accounting
entries. The first entry pertains to the method of accounting that
was utilized in past years for the recognition of investment income on
mortgage-backed securities. Prior to fiscal 2006, the Company used
the straight line method over the contractual life of the securities rather than
using the effective yield method prescribed by SFAS No. 91, “Accounting for
Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and
Initial Direct Costs of Leases”. The impact of this entry was the
correction of an understatement of mortgage-backed securities by approximately
$321,000 and a corresponding understatement of income tax payable of $109,000
during the quarter ended December 31, 2006. The second entry relates to a write
off during the quarter ended December 31, 2006 of a deferred tax asset of
approximately $40,000 that was incorrectly accounted for in prior
periods.
In prior
periods, management performed a quantitative and qualitative analysis of the
differences between these two methods of accounting and concluded that there was
not a material impact on any past individual quarter or annual reporting
periods.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. The Statement provides
companies with an option to report selected financial assets and liabilities at
fair value. This Statement is effective as of the beginning of an
entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted under certain circumstances. The Company is
currently assessing the impact of SFAS No. 159 on its financial
statements.
In March
2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 “Accounting
for Collateral Assignment Split-Dollar Life Insurance Agreements” (EITF
06-10). EITF 06-10 provides guidance for determining a liability for the
postretirement benefit obligation as well as recognition and measurement of the
associated asset on the basis of the terms of the collateral assignment
agreement. EITF 06-10 is effective for fiscal years beginning after
December 15, 2007. The Company is currently assessing the impact of the
adoption of EITF 06-10 on its financial statements.
Basic
earnings per common share is computed based on the weighted average number of
shares outstanding. Diluted earnings per share is computed based on the weighted
average number of shares outstanding and common share equivalents ("CSEs") that
would arise from the exercise of dilutive securities. As of March 31,
2008, the Company did not issue and does not have any outstanding
CSEs.
The
calculated basic and diluted earnings per share are as follows:
|
|
For
the Quarter Ended
March
31, 2008
|
|
|
For
the Quarter Ended
March
31, 2007
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
(Dollars
in thousands except per share data)
|
|
Net
(loss) income
|
|
$ |
(682 |
) |
|
$ |
(682 |
) |
|
$ |
965 |
|
|
$ |
965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding used in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
earnings per share computation
|
|
|
10,886,071 |
|
|
|
10,886,071 |
|
|
|
11,542,235 |
|
|
|
11,542,235 |
|
Effect
of CSEs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Adjusted
weighted average shares used in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
earnings per share computation
|
|
|
10,886,071 |
|
|
|
10,886,071 |
|
|
|
11,542,235 |
|
|
|
11,542,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
earnings per share - basic and diluted
|
|
$ |
(0.06 |
) |
|
$ |
(0.06 |
) |
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
|
For
the Six Months Ended
March
31, 2008
|
|
|
For
the Six Months Ended
March
31, 2007
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
(Dollars
in thousands except per share data)
|
|
Net
(loss) income
|
|
$ |
(72 |
) |
|
$ |
(72 |
) |
|
$ |
1,861 |
|
|
$ |
1,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding used in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
earnings per share computation
|
|
|
10,972,074 |
|
|
|
10,972,074 |
|
|
|
11,585,158 |
|
|
|
11,585,158 |
|
Effect
of CSEs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Adjusted
weighted average shares used in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
earnings per share computation
|
|
|
10,972,074 |
|
|
|
10,972,074 |
|
|
|
11,585,158 |
|
|
|
11,585,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
earnings per share - basic and diluted
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
0.16 |
|
|
$ |
0.16 |
|
The
amortized cost and fair value of securities, with gross unrealized gains and
losses, are as follows:
|
|
March
31, 2008
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars
in Thousands)
|
|
Securities
held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
securities - U.S. Treasury securities
|
|
|
|
|
|
|
|
|
|
|
|
|
and
securities of U.S. Government agencies
|
|
$ |
118,377 |
|
|
$ |
948 |
|
|
$ |
(17 |
) |
|
$ |
119,308 |
|
Debt
securities - Municipal bonds
|
|
|
2,450 |
|
|
|
6 |
|
|
|
(1 |
) |
|
|
2,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities held to maturity
|
|
$ |
120,827 |
|
|
$ |
954 |
|
|
$ |
(18 |
) |
|
$ |
121,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
securities - U.S. Treasury securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
securities of U.S. Government agencies
|
|
$ |
3,000 |
|
|
$ |
1 |
|
|
$ |
(24 |
) |
|
$ |
2,977 |
|
FNMA
stock
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
|
|
3 |
|
Mutual
fund
|
|
|
33,490 |
|
|
|
- |
|
|
|
- |
|
|
|
33,490 |
|
FHLMC
preferred stock
|
|
|
26 |
|
|
|
643 |
|
|
|
- |
|
|
|
669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities available for sale
|
|
$ |
36,516 |
|
|
$ |
647 |
|
|
$ |
(24 |
) |
|
$ |
37,139 |
|
|
|
September
30, 2007
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Securities
held to maturity:
|
|
(Dollars
in Thousands)
|
|
Debt
securities - U.S. Treasury securities
|
|
|
|
|
|
|
|
|
|
|
and
securities of U.S. Government agencies
|
|
$ |
132,332 |
|
|
$ |
109 |
|
|
$ |
(1,159 |
) |
|
$ |
131,282 |
|
Debt
securities - Municipal bonds
|
|
|
2,450 |
|
|
|
1 |
|
|
|
(40 |
) |
|
|
2,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities held to maturity
|
|
$ |
134,782 |
|
|
$ |
110 |
|
|
$ |
(1,199 |
) |
|
$ |
133,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
securities - U.S. Treasury securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
securities of U.S. Government agencies
|
|
$ |
2,999 |
|
|
$ |
- |
|
|
$ |
(30 |
) |
|
$ |
2,969 |
|
FNMA
stock
|
|
|
- |
|
|
|
7 |
|
|
|
- |
|
|
|
7 |
|
Mutual
fund
|
|
|
34,982 |
|
|
|
- |
|
|
|
(1,175 |
) |
|
|
33,807 |
|
FHLMC
preferred stock
|
|
|
26 |
|
|
|
1,534 |
|
|
|
- |
|
|
|
1,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities available for sale
|
|
$ |
38,007 |
|
|
$ |
1,541 |
|
|
$ |
(1,205 |
) |
|
$ |
38,343 |
|
The
following table shows the gross unrealized losses and related estimated fair
values of the Company’s investment securities, aggregated by investment category
and length of time that individual securities have been in a continuous loss
position at March 31, 2008:
|
|
Less
than 12 months
|
|
|
More
than 12 months
|
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars
in Thousands)
|
|
Securities
held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury and Government agencies
|
|
$ |
17 |
|
|
$ |
6,976 |
|
|
$ |
- |
|
|
$ |
- |
|
Municipal
bonds
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities held to maturity
|
|
|
17 |
|
|
|
6,976 |
|
|
|
1 |
|
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury and Government agencies
|
|
|
24 |
|
|
|
1,977 |
|
|
|
- |
|
|
|
- |
|
Mutual
fund
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities available for sale
|
|
|
24 |
|
|
|
1,977 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
41 |
|
|
$ |
8,953 |
|
|
$ |
1 |
|
|
$ |
349 |
|
The
following table shows the gross unrealized losses and related estimated fair
values of the Company’s investment securities, aggregated by investment category
and length of time that individual securities have been in a continuous loss
position at September 30, 2007:
|
|
Less
than 12 months
|
|
|
More
than 12 months
|
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars
in thousands)
|
|
Securities
held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury and Government agencies
|
|
|
92 |
|
|
|
14,899 |
|
|
|
1,067 |
|
|
|
82,715 |
|
Municipal
bonds
|
|
|
- |
|
|
|
- |
|
|
|
40 |
|
|
|
1,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities held to maturity
|
|
|
92 |
|
|
|
14,899 |
|
|
|
1,107 |
|
|
|
84,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury and Government agencies
|
|
|
- |
|
|
|
- |
|
|
|
30 |
|
|
|
2,969 |
|
Mutual
fund
|
|
|
- |
|
|
|
- |
|
|
|
1,175 |
|
|
|
33,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities available for sale
|
|
|
- |
|
|
|
- |
|
|
|
1,205 |
|
|
|
36,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
92 |
|
|
$ |
14,899 |
|
|
$ |
2,312 |
|
|
$ |
121,090 |
|
Management
evaluates securities for other-than-temporary impairment at least on a quarterly
basis, and more frequently when economic or market concerns warrant such
evaluation. For all securities that are in an unrealized loss position for
an extended period of time and for all securities whose fair value is
significantly below amortized cost, the Company performs an evaluation of the
specific events attributable to the market decline of the security. The Company
considers the length of time and extent to which the security’s market value has
been below cost as well as the general market conditions, industry
characteristics, and the fundamental operating results of the issuer to
determine if the decline is other-than-temporary. The Company also considers as
part of the evaluation its intent and ability to hold the security until its
market value has recovered to a level at least equal to the amortized cost. When
the Company determines that a security’s unrealized loss is
other-than-temporary, a realized loss is recognized in the period in which the
decline in value is determined to be other-than-temporary. The write-downs are
measured based on public market prices of the security at the time the Company
determines the decline in value was other-than temporary.
At March
31, 2008, securities in a gross unrealized loss position for twelve months or
longer consisted of 1 security having an aggregate depreciation of 0.4% from the
Company’s amortized cost basis. Securities in a gross unrealized loss
position for less than twelve months consist of 6 securities having an aggregate
depreciation of 0.5% from the Company’s amortized cost basis. The
unrealized losses disclosed above are primarily related to movement in market
interest rates. Although the fair value will fluctuate as the market interest
rates move, the majority of the Company’s investment portfolio consists of low
risk securities from U.S. government agencies or government sponsored
enterprises. If held to maturity, the contractual principal and
interest payments of such securities are expected to be received in full. As
such, no loss in value is expected over the lives of the securities with stated
maturities.
During
the three month period ended March 31, 2008, due to continued decline in the
market value of the mutual fund investment for a sustained period of time, the
loss was deemed “other than temporary” and $1.5 million was recorded as a
reduction of non-interest income. The impairment charge was related
to declines in fair value due to interest rate movements and the on-going
turmoil being experienced in the mortgage markets leading to significantly
reduced investor interest in mortgage-related
securities.
On May 7,
2008, the asset manager of the mutual fund investment advised the Company that
it has determined to activate the mutual fund’s redemption-in-kind (RIK)
provision to protect holders against the possibility that the mutual fund might
be forced to liquidate securities at distressed price levels to satisfy
redemption requests. The mutual fund has also advised the Company
that it was temporarily discontinuing acceptance of new purchase orders for the
fund, except for the reinvestment of dividends. This action was taken
because certain mortgage-related securities held by the mutual fund have been
downgraded below the funds investment guidelines applicable to purchases of
securities designed for permissible investments by financial
institutions.
The
amortized cost and estimated fair value of debt securities, by contractual
maturity, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
|
|
March
31, 2008
|
|
|
|
Held
to Maturity
|
|
|
Available
for Sale
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
|
(Dollars
in thousands)
|
|
Due
within one year
|
|
$ |
2,000 |
|
|
$ |
2,003 |
|
|
$ |
- |
|
|
$ |
- |
|
Due
after one through five years
|
|
|
4,000 |
|
|
|
4,096 |
|
|
|
- |
|
|
|
- |
|
Due
after five through ten years
|
|
|
30,423 |
|
|
|
30,746 |
|
|
|
- |
|
|
|
- |
|
Due
after ten years
|
|
|
84,404 |
|
|
|
84,918 |
|
|
|
3,000 |
|
|
|
2,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
120,827 |
|
|
$ |
121,763 |
|
|
$ |
3,000 |
|
|
$ |
2,977 |
|
Mutual
funds had a cost and fair value of $33.5 million as of March 31,
2008.
|
|
September
30, 2007
|
|
|
|
Held
to Maturity
|
|
|
Available
for Sale
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
|
(Dollars
in thousands)
|
|
Due
within one year
|
|
$ |
6,000 |
|
|
$ |
5,981 |
|
|
$ |
- |
|
|
$ |
- |
|
Due
after one through five years
|
|
|
25,002 |
|
|
|
24,950 |
|
|
|
- |
|
|
|
- |
|
Due
after five through ten years
|
|
|
39,592 |
|
|
|
39,427 |
|
|
|
1,000 |
|
|
|
999 |
|
Due
after ten years
|
|
|
64,188 |
|
|
|
63,335 |
|
|
|
1,999 |
|
|
|
1,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
134,782 |
|
|
$ |
133,693 |
|
|
$ |
2,999 |
|
|
$ |
2,969 |
|
Mutual
funds had a cost of $35.0 million and a fair value of $33.8 million as of
September 30, 2007.
4.
|
MORTGAGE-BACKED
SECURITIES
|
Mortgage-backed
securities are summarized as follows:
|
|
March
31, 2008
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars
in Thousands)
|
|
Securities
held to maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
GNMA
pass-through certificates
|
|
$ |
39,989 |
|
|
$ |
592 |
|
|
$ |
(157 |
) |
|
$ |
40,424 |
|
FNMA
pass-through certificates
|
|
|
1,356 |
|
|
|
4 |
|
|
|
- |
|
|
|
1,360 |
|
FHLMC
pass-through certificates
|
|
|
1,591 |
|
|
|
18 |
|
|
|
- |
|
|
|
1,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities held to maturity
|
|
$ |
42,936 |
|
|
$ |
614 |
|
|
$ |
(157 |
) |
|
$ |
43,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GNMA
pass-through certificates
|
|
$ |
6,842 |
|
|
$ |
91 |
|
|
$ |
- |
|
|
$ |
6,933 |
|
FNMA
pass-through certificates
|
|
|
8,758 |
|
|
|
240 |
|
|
|
- |
|
|
|
8,998 |
|
Total
securities available for sale
|
|
$ |
15,600 |
|
|
$ |
331 |
|
|
$ |
- |
|
|
$ |
15,931 |
|
|
|
September
30, 2007
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars
in thousands)
|
|
Securities
held to maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
GNMA
pass-through certificates
|
|
$ |
42,471 |
|
|
$ |
22 |
|
|
$ |
(1,261 |
) |
|
$ |
41,232 |
|
FNMA
pass-through certificates
|
|
|
1,370 |
|
|
|
- |
|
|
|
(60 |
) |
|
|
1,310 |
|
FHLMC
pass-through certificates
|
|
|
1,693 |
|
|
|
- |
|
|
|
(22 |
) |
|
|
1,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities held to maturity
|
|
$ |
45,534 |
|
|
$ |
22 |
|
|
$ |
(1,343 |
) |
|
$ |
44,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
pass-through certificates
|
|
$ |
8,492 |
|
|
$ |
66 |
|
|
$ |
(9 |
) |
|
$ |
8,549 |
|
Total
securities available for sale
|
|
$ |
8,492 |
|
|
$ |
66 |
|
|
$ |
(9 |
) |
|
$ |
8,549 |
|
The
following table shows the gross unrealized losses and related estimated fair
values of the Company’s mortgage-backed securities and length of time that
individual securities have been in a continuous loss position at March 31,
2008:
|
|
Less
than 12 months
|
|
|
More
than 12 months
|
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars
in thousands)
|
|
Securities
held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
GNMA
pass-through certificates
|
|
$ |
7 |
|
|
$ |
527 |
|
|
$ |
150 |
|
|
$ |
6,251 |
|
FNMA
pass-through certificates
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
FHLMC
pass-through certificates
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
7 |
|
|
$ |
527 |
|
|
$ |
150 |
|
|
$ |
6,251 |
|
At March
31, 2008, all mortgage-backed-securities available-for-sale were in an
unrealized gain position.
The
following table shows the gross unrealized losses and related estimated fair
values of the Company’s mortgage-backed securities and length of time that
individual securities have been in a continuous loss position at September 30,
2007:
|
|
Less
than 12 months
|
|
|
More
than 12 months
|
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars
in thousands)
|
|
Securities
held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
GNMA
pass-through certificates
|
|
$ |
129 |
|
|
$ |
7,968 |
|
|
$ |
1,132 |
|
|
$ |
31,050 |
|
FNMA
pass-through certificates
|
|
|
- |
|
|
|
- |
|
|
|
60 |
|
|
|
1,310 |
|
FHLMC
pass-through certificates
|
|
|
- |
|
|
|
- |
|
|
|
22 |
|
|
|
1,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities held to maturity
|
|
$ |
129 |
|
|
$ |
7,968 |
|
|
$ |
1,214 |
|
|
$ |
34,031 |
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
pass-through certificates
|
|
|
9 |
|
|
|
844 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities available for sale
|
|
$ |
9 |
|
|
$ |
844 |
|
|
$ |
- |
|
|
$ |
- |
|
Management
evaluates securities for other-than-temporary impairment at least on a quarterly
basis, and more frequently when economic or market concerns warrant such
evaluation. For all securities that are in an unrealized loss
position for an extended period of time and for all securities whose fair value
is significantly below amortized cost, the Company performs an evaluation of the
specific events attributable to the market decline of the security. The Company
considers the length of time and extent to which the security’s market value has
been below cost as well as the general market conditions, industry
characteristics, and the fundamental operating results of the issuer to
determine if the decline is other-than-temporary. The Company also considers as
part of the evaluation its intent and ability to hold the security until its
market value has recovered to a level at least equal to the amortized cost. When
the Company determines that a security’s unrealized loss is
other-than-temporary, a realized loss is recognized in the period in which the
decline in value is determined to be other-than-temporary. The write-downs are
measured based on public market prices of the security at the time the Company
determines the decline in value was other-than-temporary.
At March
31, 2008, mortgage-backed securities in a gross unrealized loss position for
twelve months or longer consist of 11 securities having an aggregate
depreciation of 2.3% from the Company’s amortized cost basis. Mortgage-backed
securities in a gross unrealized loss position for less than twelve months at
March 31, 2008 consists of 1 security with an aggregate depreciation of 1.3%
from the Company’s amortized cost basis. The unrealized losses
disclosed above are primarily related to movement in market interest rates.
Although the fair value will fluctuate as the market interest rates move, all of
the Company’s mortgage-backed securities portfolio consists of low-risk
securities issued by U.S. government sponsored
enterprises. If held to maturity, the contractual principal and
interest payments of such securities are expected to be received in full. As
such, no loss in value is expected over the lives of the
securities. The Company has the ability to hold these securities
until they mature and does not intend to sell the securities at a loss. Based on
the above, management believes that the unrealized losses are temporary. The
determination of whether a decline in market value is temporary is necessarily a
matter of subjective judgment. The timing and amount of any realized losses
reported in the Company’s financial statements could vary if conclusions other
than those made by management were to determine whether an other-than-temporary
impairment exists.
5. LOANS
RECEIVABLE
Loans
receivable consist of the following:
|
|
March
31,
|
|
|
September
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars
in Thousands)
|
|
One-to-four
family residential
|
|
$ |
166,227 |
|
|
$ |
159,945 |
|
Multi-family
residential
|
|
|
2,932 |
|
|
|
4,362 |
|
Commercial
real estate
|
|
|
19,921 |
|
|
|
18,019 |
|
Construction
and land development
|
|
|
51,028 |
|
|
|
52,429 |
|
Commercial
business
|
|
|
357 |
|
|
|
155 |
|
Consumer
|
|
|
808 |
|
|
|
832 |
|
|
|
|
|
|
|
|
|
|
Total
loans
|
|
|
241,273 |
|
|
|
235,742 |
|
|
|
|
|
|
|
|
|
|
Undisbursed
portion of loans-in-process
|
|
|
(17,141 |
) |
|
|
(15,897 |
) |
Deferred
loan fees
|
|
|
311 |
|
|
|
315 |
|
Allowance
for loan losses
|
|
|
(658 |
) |
|
|
(1,011 |
) |
|
|
|
|
|
|
|
|
|
Net
|
|
$ |
223,785 |
|
|
$ |
219,149 |
|
The
following schedule summarizes the changes in the allowance for loan
losses:
|
|
Six
Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars
in Thousands)
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$ |
1,011 |
|
|
$ |
618 |
|
Provision
for loan losses
|
|
|
150 |
|
|
|
75 |
|
Charge-offs
|
|
|
(503 |
) |
|
|
- |
|
Recoveries
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Balance,
end of period
|
|
$ |
658 |
|
|
$ |
693 |
|
Nonperforming
loans (which consist of nonaccrual loans and loans in excess of 90 days
delinquent and still accruing interest) at March 31, 2008 and September 30, 2007
amounted to approximately $297,000 and $2.6 million, respectively.
6. DEPOSITS
Deposits
consist of the following major classifications:
|
|
March
31,
|
|
|
September
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(Dollars
in Thousands)
|
|
Money
market deposit accounts
|
|
$ |
68,487 |
|
|
|
18.3 |
% |
|
$ |
63,675 |
|
|
|
18.0 |
% |
NOW
accounts
|
|
|
27,932 |
|
|
|
7.5 |
|
|
|
28,895 |
|
|
|
8.2 |
|
Passbook,
club and statement savings
|
|
|
69,465 |
|
|
|
18.6 |
|
|
|
70,903 |
|
|
|
20.0 |
|
Certificates
maturing in six months or less
|
|
|
100,925 |
|
|
|
27.0 |
|
|
|
101,615 |
|
|
|
28.7 |
|
Certificates
maturing in more than six months
|
|
|
107,590 |
|
|
|
28.6 |
|
|
|
88,950 |
|
|
|
25.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
374,399 |
|
|
|
100.0 |
% |
|
$ |
354,038 |
|
|
|
100.0 |
% |
At March
31, 2008 and September 30, 2007, the weighted average cost of deposits was 3.6%
and 3.9%, respectively.
Items
that gave rise to significant portions of deferred income taxes are as
follows:
|
|
March
31,
2008
|
|
|
September
30,
2007
|
|
Deferred
tax assets:
|
|
(Dollars
in thousands)
|
|
Securities
impairment
|
|
$ |
507 |
|
|
$ |
- |
|
Deposit
premium
|
|
|
241 |
|
|
|
265 |
|
Allowance
for loan losses
|
|
|
259 |
|
|
|
378 |
|
Employee
stock ownership plan
|
|
|
94 |
|
|
|
79 |
|
Total
|
|
|
1,101 |
|
|
|
722 |
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Unrealized
gain on available for sale securities
|
|
|
324 |
|
|
|
134 |
|
Property
|
|
|
472 |
|
|
|
446 |
|
Mortgage
servicing rights
|
|
|
7 |
|
|
|
8 |
|
Deferred
loan fees
|
|
|
105 |
|
|
|
106 |
|
Total
|
|
|
908 |
|
|
|
694 |
|
Net
deferred tax asset
|
|
$ |
193 |
|
|
$ |
28 |
|
8.
|
COMMITMENTS
AND CONTINGENT LIABILITIES
|
At March
31, 2008, the Company had $11.7 million in outstanding commitments to originate
fixed and variable-rate loans with market interest rates ranging from 5.5% to
8.5%. At September 30, 2007, the Company had $10.4 million in
outstanding commitments to originate fixed and variable-rate loans with market
interest rates ranging from 6.625% to 9.25%.
The
Company also had commitments under unused lines of credit of $6.7 million and
$7.2 million at March 31, 2007 and September 30, 2007, respectively, and letters
of credit outstanding of $95,000 at both March 31, 2008 and September 30,
2007.
Among the
Company’s contingent liabilities are exposures to limited recourse arrangements
with respect to the Company’s sales of whole loans and participation interests.
At March 31, 2008, the exposure, which represents a portion of credit risk
associated with the interests sold, amounted to $64,000. This exposure is for
the life of the related loans and payables, on our proportionate share, as
actual losses are incurred.
The
Company is involved in various legal proceedings occurring in the ordinary
course of business. Management of the Company, based on discussions with
litigation counsel, believes that such proceedings will not have a material
adverse effect on the financial condition or operations of the Company. There
can be no assurance that any of the outstanding legal proceedings to which the
Company is a party will not be decided adversely to the Company's interests and
have a material adverse effect on the financial condition and operations of the
Company. For additional information, see Part II, Item I Legal
Proceedings in this Form 10-Q.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview. Prudential
Bancorp, Inc. of Pennsylvania (the “Company”) was formed by Prudential Savings
Bank (the “Bank”) in connection with the Bank’s reorganization into the mutual
holding company form in March 2005. The Company’s results of
operations are primarily dependent on the results of the Bank, which is a wholly
owned subsidiary of the Company. The Company’s results of operations depend to a
large extent on net interest income, which is the difference between the income
earned on its loan and securities portfolios and the cost of funds, which is the
interest paid on deposits and borrowings. Results of operations are also
affected by our provisions for loan losses, non-interest income and non-interest
expense. Non-interest expense principally consists of salaries and employee
benefits, office occupancy, depreciation, data processing expense, payroll taxes
and other expense. Our results of operations are also significantly affected by
general economic and competitive conditions, particularly changes in interest
rates, government policies and actions of regulatory authorities. Future changes
in applicable laws, regulations or government policies may materially impact our
financial condition and results of operations. The Bank is subject to regulation
by the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania
Department of Banking (the “Department”). The Bank’s main office is in
Philadelphia, Pennsylvania, with six additional banking offices located in
Philadelphia and Delaware Counties in Pennsylvania. The Bank’s primary business
consists of attracting deposits from the general public and using those funds
together with borrowings to originate loans and to invest primarily in U.S.
Government and agency securities and mortgage-backed securities. In
November 2005, the Bank formed PSB Delaware, Inc., a Delaware Corporation, as a
subsidiary of the Bank. In March 2006, all mortgage-backed securities
owned by the Company were transferred to PSB Delaware, Inc. PSB
Delaware, Inc.’s. activities are included as part of the consolidated financial
statements.
Critical Accounting
Policies. In
reviewing and understanding financial information for the Company, you are
encouraged to read and understand the significant accounting policies used in
preparing our financial statements. These policies are described in Note 2 of
the Notes to Consolidated Financial Statements included in the Annual
Report on Form 10-K for the year ended September 30, 2007 filed with
the SEC. The accounting and financial reporting policies of the
Company conform to accounting principles generally accepted in the United States
of America and to general practices within the banking industry. The preparation
of the Company’s consolidated financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses during
the reporting period. Management evaluates these estimates and assumptions on an
ongoing basis. The following accounting policies comprise those that
management believes are the most critical to aid in fully understanding and
evaluating our reported financial results. These policies require numerous
estimates or economic assumptions that may prove inaccurate or may be subject to
variations which may significantly affect our reported results and financial
condition for the period or in future periods.
Allowance
for Loan Losses. The allowance for loan losses is established
through a provision for loan losses charged to expense. Loans are charged
against the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. Subsequent recoveries are added to
the allowance. The allowance is an amount that management believes will cover
known and inherent losses in the loan portfolio, based on evaluations of the
collectibility of loans. The evaluations take into consideration such factors as
changes in the types and amount of loans in the loan portfolio, historical loss
experience, adverse situations that may affect the borrower’s ability to repay,
estimated value of any underlying collateral, estimated losses relating to
specifically identified loans, and current economic conditions. This evaluation
is inherently subjective as it requires material estimates including, among
others, exposure at default, the amount and timing of expected future cash flows
on affected loans, value of collateral, estimated losses on our commercial,
construction and residential loan portfolios and general amounts for historical
loss experience. All of these estimates may be susceptible to
significant change.
While
management uses the best information available to make loan loss allowance
evaluations, adjustments to the allowance may be necessary based on changes in
economic and other conditions or changes in accounting guidance. Historically,
our estimates of the allowance for loan loss have not required significant
adjustments from management’s initial estimates. In addition, the Department and
the FDIC, as an integral part of their examination processes, periodically
review our allowance for loan losses. The Department and the FDIC may require
the recognition of adjustments to the allowance for loan losses based on their
judgment of information available to them at the time of their examinations. To
the extent that actual outcomes differ from management’s estimates, additional
provisions to the allowance for loan losses may be required that would adversely
impact earnings in future periods.
Income
Taxes. We make estimates and judgments to calculate some of
our tax liabilities and determine the recoverability of some of our deferred tax
assets, which arise from temporary differences between the tax and financial
statement recognition of revenues and expenses. We also estimate a
reserve for deferred tax assets if, based on the available evidence, it is more
likely than not that some portion or all of the recorded deferred tax assets
will not be realized in future periods. These estimates and judgments are
inherently subjective. In the past, our estimates and judgments to
calculate our deferred tax accounts have not required significant revision to
our initial estimates.
The
Company accounts for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes, and FASB Interpretation (“FIN”) No. 48. SFAS No. 109
requires the recording of deferred income taxes that reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. On October 1, 2007, the Company incorporated FIN No. 48
with its existing accounting policy. FIN No. 48 prescribes a minimum
probability threshold that a tax position must meet before a financial statement
benefit is recognized. The Company recognizes, when applicable, interest and
penalties related to unrecognized tax benefits in the provision for income taxes
in the consolidated income statement.
Forward-looking
Statements. In addition to historical information, this
Quarterly Report on Form 10-Q includes certain "forward-looking statements"
based on management's current expectations. The Company's actual results could
differ materially, as such term is defined in the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, from management's
expectations. Such forward-looking statements include statements regarding
management's current intentions, beliefs or expectations as well as the
assumptions on which such statements are based. These forward-looking statements
are subject to significant business, economic and competitive uncertainties and
contingencies, many of which are not subject to the Company's control. You are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Factors that could cause future results to vary from current management
expectations include, but are not limited to, general economic conditions,
legislative and regulatory changes, monetary and fiscal policies of the federal
government, changes in tax policies, rates and regulations of federal, state and
local tax authorities, changes in interest rates, deposit flows, the cost of
funds, demand for loan products, demand for financial services, competition,
changes in the quality or composition of the Company's loan and investment
portfolios, changes in accounting principles, policies or guidelines and other
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and fees.
The
Company undertakes no obligation to update or revise any forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes to future operating results that occur subsequent to the date
such forward-looking statements are made.
COMPARISON
OF FINANCIAL CONDITION AT MARCH 31, 2008 AND SEPTEMBER 30, 2007
At March
31, 2008, the Company’s total assets were $478.2 million, an increase of $4.0
million from $474.2 million at September 30, 2007. The increase was
primarily attributable to an increase in interest-bearing deposits,
mortgage-backed securities available for sale and net loans receivable offset in
part by net repayments in the investment and mortgage-backed security
portfolios. Management chose to use the proceeds from these
repayments to repay higher cost short-term advances from the Federal Home Loan
Bank (FHLB).
Total
liabilities increased $9.6 million to $402.8 million at March 31, 2008 from
$393.2 million at September 30, 2007. The increase was primarily due
to a $20.4 million increase in deposits, mainly in certificates of
deposit. The increase was offset by the repayment of FHLB advances
which decreased by $11.0 million, from $33.7 million at September 30, 2007 to
$22.7 million at March 31, 2008.
Stockholders’
equity decreased by $5.5 million to $75.4 million at March 31, 2008 as compared
to $81.0 million at September 30, 2007 primarily as a result of the $4.9 million
cost of repurchasing 390,600 shares of common stock during the six month period
and the declaration of quarterly cash dividends totaling $1.1
million.
COMPARISON
OF RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2008 AND
2007
Net income. The
Company reported a net loss of $682,000 for the quarter ended March 31, 2008 as
compared to net income of $965,000 for the same period in 2007. For
the six months ended March 31, 2008, the Company recognized a net loss of
$72,000 compared to net income of $1.9 million for the comparable period in
2007. The net loss reported for both the three and six months ended
March 31, 2008 was due to the recognition of a $1.5 million (pre-tax) impairment
charge taken with respect to the Company’s $35.0 million investment in a mutual
fund. The impairment charge reflected the determination that the decline in fair
value in such investment was other than temporary and reflected the continued
decline in the value of the underlying mortgage-related securities held by such
mutual fund during the first quarter of calendar 2008. The impairment charge was
related to declines in fair value due to interest rate movements and the
on-going turbulence being experienced in the mortgage markets leading to
significantly reduced investor interest in mortgage-related
securities. The impairment charge reduced earnings and earnings per
share by $985,000, or $0.09 per share for the three and six month periods ended
March 31, 2008. On May 7, 2008, the asset manager of the mutual fund
investment advised the Company that it has determined to activate the mutual
fund’s redemption-in-kind (RIK) provision to protect holders against the
possibility that the mutual fund might be forced to liquidate securities at
distressed price levels to satisfy redemption requests. The mutual
fund has also advised the Company that it was temporarily discontinuing
acceptance of new purchase orders for the fund, except for the reinvestment of
dividends. This action was taken because certain mortgage-related
securities held by the mutual fund have been downgraded below the funds
investment guidelines applicable to purchases of securities designed for
permissible investments by financial institutions.
Net interest
income. Net interest income decreased $320,000 or 10.3% to
$2.8 million for the three months ended March 31, 2008 as compared to $3.1
million for the same period in 2007. The decrease reflected the effects of a
$193,000 or 5.4% increase in interest expense combined with a $127,000 or 1.9%
decrease in interest income. The increase in interest
expense resulted primarily from a $15.7 million or 4.2% increase in the average
balance of interest-bearing liabilities for the three months ended March 31,
2008, as compared to the same period in 2007. Also contributing to
the increase in interest expense was a 5 basis point increase to 3.88% in the
weighted average rate paid on interest-bearing liabilities, due primarily to the
continued increase in the average balance of certificates of deposit, which
generally pay a higher rate of interest than other deposit
products. The decrease in interest income resulted primarily from a
17 basis point decrease in the weighted average yield earned on such assets to
5.77% for the quarter ended March 31, 2008 from the comparable period in 2007,
partially offset by a $4.5 million or 1.0% increase in the average balance of
interest-earning assets for the three months ended March 31, 2008, as compared
to the same period in 2007.
For the
six months ended March 31, 2008, net interest income decreased $643,000 or 10.4%
to $5.6 million as compared to $6.2 million for the same period in 2007. The
decrease was due to the combined effects of a $494,000 or 6.9% increase in
interest expense and a $149,000 or 1.1% decrease in interest
income. The increase in interest expense resulted primarily from a
$13.8 million or 3.7% increase in the average balance of interest-bearing
liabilities for the six months ended March 31, 2008, as compared to the same
period in 2007. Also contributing to the increase in interest expense
was a 12 basis point increase to 3.97% in the weighted average rate paid on
interest-bearing liabilities, due primarily to the continued increase in the
average balance of certificates of deposit, which generally pay a higher rate of
interest than other deposit products. The decrease in
interest income resulted primarily from an 11 basis point decrease in the
weighted average yield earned on such assets to 5.80% for the six months ended
March 31, 2008 from the comparable period in 2007 partially offset by a $3.4
million or 0.8% increase in the average balance of interest-earning assets for
the six months ended March 31, 2008, as compared to the same period in
2007.
For the
quarter ended March 31, 2008, the net interest margin was 2.46%, as compared to
2.77% for the comparable period in 2007. For the six months ended
March 31, 2008, the net interest margin was 2.44%, as compared to 2.74% for the
comparable period in 2007. The compression in the net interest margin
primarily reflected an increase in the rate paid on the interest-bearing
liabilities combined with a decrease in the yield earned on interest-earning
assets. The decline in the yield earned on interest-earning assets
reflected in large part the effects of the decline in market rates of interest
in recent periods.
Average Balances, Net Interest
Income, and Yields Earned and Rates Paid. The following table shows for
the periods indicated the total dollar amount of interest from average
interest-earning assets and the resulting yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
rates, and the net interest margin. Tax-exempt income and yields have
not been adjusted to a tax-equivalent basis. All average balances are
based on monthly balances. Management does not believe that the monthly averages
differ significantly from what the daily averages would be.
|
|
Three
Months
|
|
|
|
Ended
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/Rate
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Thousands)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
$ |
167,103 |
|
|
$ |
2,174 |
|
|
|
5.20 |
% |
|
$ |
171,141 |
|
|
$ |
2,153 |
|
|
|
5.03 |
% |
Mortgage-backed
securities
|
|
|
57,086 |
|
|
|
757 |
|
|
|
5.30 |
|
|
|
53,732 |
|
|
|
702 |
|
|
|
5.23 |
|
Loans
receivable(1)
|
|
|
223,496 |
|
|
|
3,589 |
|
|
|
6.42 |
|
|
|
220,080 |
|
|
|
3,786 |
|
|
|
6.88 |
|
Other
interest-earning assets
|
|
|
7,667 |
|
|
|
45 |
|
|
|
2.35 |
|
|
|
5,868 |
|
|
|
51 |
|
|
|
3.48 |
|
Total
interest-earning assets
|
|
|
455,352 |
|
|
|
6,565 |
|
|
|
5.77 |
|
|
|
450,821 |
|
|
|
6,692 |
|
|
|
5.94 |
|
Cash
and non-interest-bearing balances
|
|
|
4,723 |
|
|
|
|
|
|
|
|
|
|
|
4,883 |
|
|
|
|
|
|
|
|
|
Other
non-interest-earning assets
|
|
|
12,254 |
|
|
|
|
|
|
|
|
|
|
|
11,300 |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
472,329 |
|
|
|
|
|
|
|
|
|
|
$ |
467,004 |
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
$ |
66,526 |
|
|
|
399 |
|
|
|
2.40 |
|
|
$ |
72,223 |
|
|
|
526 |
|
|
|
2.91 |
|
Money
market deposit and NOW accounts
|
|
|
91,741 |
|
|
|
748 |
|
|
|
3.26 |
|
|
|
95,909 |
|
|
|
837 |
|
|
|
3.49 |
|
Certificates
of deposit
|
|
|
204,218 |
|
|
|
2,329 |
|
|
|
4.56 |
|
|
|
179,347 |
|
|
|
1,884 |
|
|
|
4.20 |
|
Total
deposits
|
|
|
362,485 |
|
|
|
3,476 |
|
|
|
3.84 |
|
|
|
347,479 |
|
|
|
3,247 |
|
|
|
3.74 |
|
Advances
from Federal Home Loan Bank
|
|
|
24,254 |
|
|
|
289 |
|
|
|
4.77 |
|
|
|
23,611 |
|
|
|
324 |
|
|
|
5.49 |
|
Advances
from borrowers for taxes and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
insurance
|
|
|
1,820 |
|
|
|
2 |
|
|
|
0.44 |
|
|
|
1,782 |
|
|
|
3 |
|
|
|
0.67 |
|
Total
interest-bearing liabilities
|
|
|
388,559 |
|
|
|
3,767 |
|
|
|
3.88 |
|
|
|
372,872 |
|
|
|
3,574 |
|
|
|
3.83 |
|
Non-interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing
demand accounts
|
|
|
4,807 |
|
|
|
|
|
|
|
|
|
|
|
4,850 |
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
723 |
|
|
|
|
|
|
|
|
|
|
|
2,181 |
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
394,089 |
|
|
|
|
|
|
|
|
|
|
|
379,903 |
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
78,240 |
|
|
|
|
|
|
|
|
|
|
|
87,101 |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$ |
472,329 |
|
|
|
|
|
|
|
|
|
|
$ |
467,004 |
|
|
|
|
|
|
|
|
|
Net
interest-earning assets
|
|
$ |
66,793 |
|
|
|
|
|
|
|
|
|
|
$ |
77,949 |
|
|
|
|
|
|
|
|
|
Net
interest income; interest rate spread
|
|
|
|
|
|
$ |
2,798 |
|
|
|
1.89 |
% |
|
|
|
|
|
$ |
3,118 |
|
|
|
2.11 |
% |
Net
interest margin(2)
|
|
|
|
|
|
|
|
|
|
|
2.46 |
% |
|
|
|
|
|
|
|
|
|
|
2.77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
interest-earning assets to average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest-bearing
liabilities
|
|
|
|
|
|
|
117.19 |
% |
|
|
|
|
|
|
|
|
|
|
120.91 |
% |
|
|
|
|
_____________________________________
(1)
|
Includes
non-accrual loans. Calculated net of unamortized deferred fees,
undisbursed portion of loans-in-process and allowance for loan
losses.
|
|
|
(2)
|
Equals
net interest income divided by average interest-earning
assets.
|
|
|
Six
Months
|
|
|
|
Ended
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/Rate
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Thousands)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
$ |
169,794 |
|
|
$ |
4,411 |
|
|
|
5.20 |
% |
|
$ |
172,196 |
|
|
$ |
4,258 |
|
|
|
4.95 |
% |
Mortgage-backed
securities
|
|
|
55,830 |
|
|
|
1,480 |
|
|
|
5.30 |
% |
|
|
54,035 |
|
|
|
1,413 |
|
|
|
5.23 |
% |
Loans
receivable(1)
|
|
|
222,195 |
|
|
|
7,224 |
|
|
|
6.50 |
% |
|
|
220,652 |
|
|
|
7,611 |
|
|
|
6.90 |
% |
Other
interest-earning assets
|
|
|
8,037 |
|
|
|
111 |
|
|
|
2.76 |
% |
|
|
5,530 |
|
|
|
93 |
|
|
|
3.36 |
% |
Total
interest-earning assets
|
|
|
455,856 |
|
|
|
13,226 |
|
|
|
5.80 |
% |
|
|
452,413 |
|
|
|
13,375 |
|
|
|
5.91 |
% |
Cash
and non-interest-bearing balances
|
|
|
4,379 |
|
|
|
|
|
|
|
|
|
|
|
4,636 |
|
|
|
|
|
|
|
|
|
Other
non-interest-earning assets
|
|
|
12,333 |
|
|
|
|
|
|
|
|
|
|
|
11,368 |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
472,568 |
|
|
|
|
|
|
|
|
|
|
$ |
468,417 |
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
$ |
67,006 |
|
|
|
776 |
|
|
|
2.32 |
% |
|
$ |
73,667 |
|
|
|
1,114 |
|
|
|
3.02 |
% |
Money
market deposit and NOW accounts
|
|
|
91,310 |
|
|
|
1,548 |
|
|
|
3.39 |
% |
|
|
95,060 |
|
|
|
1,673 |
|
|
|
3.52 |
% |
Certificates
of deposit
|
|
|
199,059 |
|
|
|
4,645 |
|
|
|
4.67 |
% |
|
|
176,495 |
|
|
|
3,662 |
|
|
|
4.15 |
% |
Total
deposits
|
|
|
357,375 |
|
|
|
6,969 |
|
|
|
3.90 |
% |
|
|
345,222 |
|
|
|
6,449 |
|
|
|
3.74 |
% |
Advances
from Federal Home Loan Bank
|
|
|
27,456 |
|
|
|
689 |
|
|
|
5.02 |
% |
|
|
25,792 |
|
|
|
715 |
|
|
|
5.54 |
% |
Advances
from borrowers for taxes and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
insurance
|
|
|
1,641 |
|
|
|
4 |
|
|
|
0.49 |
% |
|
|
1,614 |
|
|
|
4 |
|
|
|
0.50 |
% |
Total
interest-bearing liabilities
|
|
|
386,472 |
|
|
|
7,662 |
|
|
|
3.97 |
% |
|
|
372,628 |
|
|
|
7,168 |
|
|
|
3.85 |
% |
Non-interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing
demand accounts
|
|
|
4,845 |
|
|
|
|
|
|
|
|
|
|
|
5,201 |
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
1,619 |
|
|
|
|
|
|
|
|
|
|
|
3,138 |
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
392,936 |
|
|
|
|
|
|
|
|
|
|
|
380,967 |
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
79,630 |
|
|
|
|
|
|
|
|
|
|
|
87,450 |
|
|
|
|
|
|
|
|
|
Total
liabilities and Stockholders' equity
|
|
$ |
472,566 |
|
|
|
|
|
|
|
|
|
|
$ |
468,417 |
|
|
|
|
|
|
|
|
|
Net
interest-earning assets
|
|
$ |
69,384 |
|
|
|
|
|
|
|
|
|
|
$ |
79,785 |
|
|
|
|
|
|
|
|
|
Net
interest income; interest rate spread
|
|
|
|
|
|
$ |
5,564 |
|
|
|
1.84 |
% |
|
|
|
|
|
$ |
6,207 |
|
|
|
2.06 |
% |
Net
interest margin(2)
|
|
|
|
|
|
|
|
|
|
|
2.44 |
% |
|
|
|
|
|
|
|
|
|
|
2.74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
interest-earning assets to average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest-bearing
liabilities
|
|
|
|
|
|
|
117.95 |
% |
|
|
|
|
|
|
|
|
|
|
121.41 |
% |
|
|
|
|
(1)
|
Includes
non-accrual loans. Calculated net of unamortized deferred fees,
undisbursed portion of loans-in-process and allowance for loan
losses.
|
|
|
(2)
|
Equals
net interest income divided by average interest-earning
assets.
|
Provisions for loan
losses. Provisions for loan losses are charged to earnings to
maintain the total allowance for loan losses at a level believed by management
to cover all known and inherent losses in the loan portfolio which are both
probable and reasonably estimable. Management's analysis includes consideration
of the Company's historical experience, the volume and type of lending conducted
by the Company, the amount of the Company's classified and criticized assets,
the status of past due principal and interest payments, general economic
conditions, particularly as they relate to the Company's primary market area,
and other factors related to the collectibility of the Company’s loan portfolio.
The Company established a provision for loan losses of $75,000 for the quarter
ended March 31, 2008 and $150,000 for the six month period ended March 31, 2008
as compared to $15,000 and $75,000 for the comparable periods in
2007. The provisions in the 2008 periods were primarily increased due
to a $2.1 million single family construction loan which became real estate owned
during the quarter ended March 31, 2008 through execution of a deed in lieu of
foreclosure. At the time the loan was re-classified as
real estate owned, the allowance was charged $68,000 to record the asset at its
fair value.
At March
31, 2008, the Company’s non-performing assets totaled $1.9 million, or 0.4%
of total assets and consisted of the one real estate owned property noted above
recorded at $1.6 million and four single-family residential real estate loans
totaling $297,000. The allowance for loan losses totaled
$658,000, or 0.3% of total loans and 221.55% of non-performing loans at March
31, 2008.
Management
continues to review its loan portfolio to determine the extent, if any, to which
further additional loss provisions may be deemed necessary. There can be no
assurance that the allowance for losses will be adequate to cover losses which
may in fact be realized in the future and that additional provisions for losses
will not be required.
The
secondary mortgage market has been adversely impacted in recent periods and
through the filing date of this Form 10-Q by deteriorating investor
demand for mortgage loan products, particularly with regard to subprime
products, as investors are tightening credit standards and offering less
favorable pricing. At both March 31, 2008 and September 30, 2007, the
Company had no real estate loans that would be considered subprime loans, which
are defined as mortgage loans advanced to borrowers who do not qualify for loans
bearing market interest rates because of problems with their credit
history. The Bank does not originate subprime loans. The Bank's
lending standards are discussed in Item 1 of the Annual Report on Form 10-K for
the fiscal year ended September 30, 2007.
Non-interest income
(charges). Non-interest income decreased by $1.5 million and
$1.6 million, respectively, for the three and six month periods of 2008 compared
with the same periods in 2007. The decrease was due to the previously
mentioned $1.5 million non-cash impairment charge related to the determination
that the decline in value of the Company’s $35.0 million mutual fund portfolio
was other than temporary. The Company attributes the decrease in the
Net Asset Value of the investment to a widening of the spreads in the bond
market for mortgage related securities due to instability in the mortgage
markets. The impairment charge was related to declines in fair value
due to interest rate movements and the significant reduction in investor
interest in mortgage-related securities in recent periods. As of May
12, 2008, the fair value of the fund shares held by the Company decreased by
approximately an additional $843,000 (pre-tax). The Company
investment in the mutual fund earned an annualized return of 4.9% for the six
months ended March 31, 2008 before giving effect to the impairment
charge.
Non-interest
expenses. For the quarter and six months ended March 31, 2008,
non-interest expense increased $387,000 and $381,000, respectively, compared to
the same periods in the prior year. The increases were primarily due
to increases in professional fees and other non-interest
expenses. The majority of the increase in professional fees and other
non-interest expense was related to expenses associated with the defense of a
previously disclosed lawsuit commenced in October 2006 by a shareholder,
Stilwell Value Partners I, L.P., and increased costs incurred in connection with
being a public company. As of March 31, 2008, claims for $348,000
which have not yet been evaluated by the insurance carrier have been submitted
for reimbursement which related to expenses incurred by the Company in defense
of this lawsuit. In prior quarters, a substantial portion of the
legal expenses were reimbursed by the insurance carrier. Any
reimbursement from the insurance carrier with respect to such claims would be
recorded as a reduction in non-interest expense in the period
received.
Income tax
expense. The Company recognized income tax benefits for the
quarter and six months ended March 31, 2008 of $383,000 and $96,000,
respectively, compared to income tax expense of $237,000 and $658,000,
respectively, for the quarter and six months ended March 31,
2007. The recognition of income tax benefits in the 2008
periods was primarily due to the net loss before taxes incurred as a result of
the write-down of the value of the Company’s mutual fund portfolio
LIQUIDITY
AND CAPITAL RESOURCES
The
Company’s liquidity, represented by cash and cash equivalents, is a product of
its operating, investing and financing activities. Our primary sources of funds
are from deposits, scheduled principal and interest payments on loans, loan
prepayments and the maturity of loans, mortgage-backed securities and other
investments, and other funds provided from operations. While scheduled payments
from the amortization of loans and mortgage-backed securities and maturing
investment securities are relatively predictable sources of funds, deposit flows
and loan and securities prepayments can be greatly influenced by market rates of
interest, economic conditions and competition. We also maintain
excess funds in short-term, interest-bearing assets that provide additional
liquidity. At March 31, 2008, our cash and cash equivalents amounted
to $19.4 million. In addition, our available for sale investment and
mortgage-backed securities amounted to an aggregate of $53.1 million at such
date.
We use
our liquidity to fund existing and future loan commitments, to fund maturing
certificates of deposit and demand deposit withdrawals, to invest in other
interest-earning assets, and to meet operating expenses. At March 31,
2008, the Company had $11.7 million in outstanding commitments to originate
fixed and variable-rate loans, not including loans in process. The
Company also had commitments under unused lines of credit of $6.7 million and
letters of credit outstanding of $95,000 at March 31,
2008. Certificates of deposit at March 31, 2008 maturing in one
year or less totaled $153.0 million. Based upon historical experience, we
anticipate that a significant portion of the maturing certificates of deposit
will be redeposited with us.
In
addition to cash flow from loan and securities payments and prepayments as well
as from sales of available for sale securities, we have significant borrowing
capacity available to fund liquidity needs should the need arise. Our
borrowings consist solely of advances from the Federal Home Loan Bank of
Pittsburgh, of which we are a member. Under terms of the collateral
agreement with the Federal Home Loan Bank, we pledge residential mortgage loans
and mortgage-backed securities as well as our stock in the Federal Home Loan
Bank as collateral for such advances. However, use of FHLB advances
has been modest. At March 31, 2008, we had $22.7 million in
outstanding FHLB advances and we had $258.0 million in additional FHLB advances
available to us.
We
anticipate that we will continue to have sufficient funds and alternative
funding sources to meet our current commitments.
At March
31, 2008, the Company had no collateral underlying mortgage-backed securities
that would be considered to be subprime loans. All mortgage-backed
securities owned by the Company as of March 31, 2008 possessed the highest
possible investment credit rating excluding certain mortgage-related securities
held by the mutual fund which have been downgraded below the funds investment
guidelines applicable to purchases of securities designed for permissible
investments by financial institutions.
The
following table summarizes the Company and Bank’s regulatory capital ratios as
of March 31, 2008 and September 30, 2007 and compares them to current regulatory
guidelines.
|
|
|
|
|
|
|
|
To
Be
|
|
|
|
|
|
|
|
|
|
Well
Capitalized
|
|
|
|
|
|
|
Required
for
|
|
|
Under
Prompt
|
|
|
|
|
|
|
Capital
Adequacy
|
|
|
Corrective
Action
|
|
|
|
Actual
Ratio
|
|
|
Purposes
|
|
|
Provisions
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2008:
|
|
|
|
|
|
|
|
|
|
Tier
1 capital (to average assets)
|
|
|
|
|
|
|
|
|
|
The
Company
|
|
15.84%
|
|
|
4.0%
|
|
|
N/A
|
|
The
Bank
|
|
14.65%
|
|
|
4.0%
|
|
|
5.0%
|
|
|
|
|
|
|
|
|
|
|
|
Tier
1 capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
The
Company
|
|
35.90%
|
|
|
4.0%
|
|
|
N/A
|
|
The
Bank
|
|
32.46%
|
|
|
4.0%
|
|
|
6.0%
|
|
|
|
|
|
|
|
|
|
|
|
Total
capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
The
Company
|
|
36.36%
|
|
|
8.0%
|
|
|
N/A
|
|
The
Bank
|
|
32.91%
|
|
|
8.0%
|
|
|
10.0%
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2007:
|
|
|
|
|
|
|
|
|
|
Tier
1 capital (to average assets)
|
|
|
|
|
|
|
|
|
|
The
Company
|
|
17.08%
|
|
|
4.0%
|
|
|
N/A
|
|
The
Bank
|
|
15.52%
|
|
|
4.0%
|
|
|
5.0%
|
|
|
|
|
|
|
|
|
|
|
|
Tier
1 capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
The
Company
|
|
37.88%
|
|
|
4.0%
|
|
|
N/A
|
|
The
Bank
|
|
34.22%
|
|
|
4.0%
|
|
|
6.0%
|
|
|
|
|
|
|
|
|
|
|
|
Total
capital (to risk weighted assets)
|
|
|
|
|
|
|
|
|
|
The
Company
|
|
38.43%
|
|
|
8.0%
|
|
|
N/A
|
|
The
Bank
|
|
34.77%
|
|
|
8.0%
|
|
|
10.0%
|
|
IMPACT
OF INFLATION AND CHANGING PRICES
The
financial statements, accompanying notes, and related financial data of the
Company presented herein have been prepared in accordance with generally
accepted accounting principles which requires the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation.
Unlike
most industrial companies, substantially all of the assets and liabilities of a
financial institution are monetary in nature. As a result, interest rates have a
more significant impact on a financial institution's performance than the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or in the same magnitude as the price of goods and
services, since such prices are affected by inflation to a larger extent than
interest rates. In the current interest rate environment, liquidity and the
maturity structure of the Company's assets and liabilities are critical to the
maintenance of acceptable performance levels.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
How We Manage Market
Risk. Market risk is the risk of loss from adverse changes in
market prices and rates. Our market risk arises primarily from the
interest rate risk which is inherent in our lending, investment and deposit
gathering activities. To that end, management actively monitors and
manages interest rate risk exposure. In addition to market risk, our
primary risk is credit risk on our loan portfolio. We attempt to
manage credit risk through our loan underwriting and oversight
policies.
The
principal objective of our interest rate risk management function is to evaluate
the interest rate risk embedded in certain balance sheet accounts, determine the
level of risk appropriate given our business strategy, operating environment,
capital and liquidity requirements and performance objectives, and manage the
risk consistent with approved guidelines. We seek to manage our exposure to
risks from changes in interest rates while at the same time trying to improve
our net interest spread. We monitor interest rate risk as such risk
relates to our operating strategies. We have established an
Asset/Liability Committee which is comprised of our President and Chief
Executive Officer, Chief Financial Officer, Chief Lending Officer, Treasurer and
Controller. The Asset/Liability Committee meets on a regular basis
and is responsible for reviewing our asset/liability policies and interest rate
risk position. Both the extent and direction of shifts in interest rates are
uncertainties that could have a negative impact on future earnings.
In recent
years, we primarily have utilized the following strategies in our efforts to
manage interest rate risk:
|
●
|
we
have increased our originations of shorter term loans and/or loans with
adjustable rates of interest, particularly construction and land
development loans;
|
|
|
|
|
●
|
we
have invested in securities with “step-up” rate features providing for
increased interest rates prior to maturity according to a pre-determined
schedule and formula; and
|
|
|
|
|
●
|
we
have maintained moderate levels of short-term liquid
assets.
|
However,
notwithstanding the foregoing steps, we remain subject to a significant level of
interest rate risk in a rising rate environment due to the high proportion of
our loan portfolio that consists of fixed-rate loans as well as our decision to
invest a significant amount of our assets in long-term, fixed-rate investment
and mortgage-backed securities designated as held to maturity. In
addition, our interest rate spread and margin have been adversely affected due
to the flat yield curve. Likewise, our unwillingness to originate
long-term, fixed-rate residential mortgage loans at low rates has resulted in
borrowers in many cases refinancing loans elsewhere, requiring us to reinvest
the resulting proceeds from the loan payoffs at low current market rates of
interest. Thus, both of these strategies have increased our
interest rate risk.
Gap Analysis. The
matching of assets and liabilities may be analyzed by examining the extent to
which such assets and liabilities are “interest rate sensitive” and by
monitoring a Company’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 that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest-earning assets maturing or repricing within a specific time period and
the amount of interest-bearing liabilities maturing or repricing within that
same time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest
rate sensitive liabilities exceeds the amount of interest rate sensitive
assets. During a period of rising interest rates, a negative gap
would tend to affect adversely net interest income while a positive gap would
tend to result in an increase in net interest income. Conversely,
during a period of falling interest rates, a negative gap would tend to result
in an increase in net interest income while a positive gap would tend to affect
adversely net interest income.
The
following table sets forth the amounts of our interest-earning assets and
interest-bearing liabilities outstanding at March 31, 2008, which we expect,
based upon certain assumptions, to reprice or mature in each of the future time
periods shown (the “GAP Table”). Except as stated below, the amounts
of assets and liabilities shown which reprice or mature during a particular
period were determined in accordance with the earlier of term to repricing or
the contractual maturity of the asset or liability. The table sets
forth an approximation of the projected repricing of assets and liabilities at
March 31, 2008, on the basis of contractual maturities, anticipated prepayments,
and scheduled rate adjustments within a three-month period and subsequent
selected time intervals. The loan amounts in the table reflect
principal balances expected to be redeployed and/or repriced as a result of
contractual amortization and anticipated prepayments of adjustable-rate loans
and fixed-rate loans, and as a result of contractual rate adjustments on
adjustable-rate loans. Annual prepayment rates for adjustable-rate
and fixed-rate single-family and multi-family residential and commercial
mortgage loans are assumed to range from 8.8% to 20.0%. The annual
prepayment rate for mortgage-backed securities is assumed to range from 0.9% to
62.5%. Money market deposit accounts, savings accounts and
interest-bearing checking accounts are assumed to have annual rates of
withdrawal, or “decay rates,” based on information from the FDIC. For
savings accounts and checking accounts, the decay rates are 60% in one to three
years, 20% in three to five years and 20% in five to 10 years. For
money market accounts, the decay rates are 50% in three to 12 months and 50% in
13 to 36 months.
|
|
|
|
|
More
than
|
|
|
More
than
|
|
|
More
than
|
|
|
|
|
|
|
|
|
|
3
Months
|
|
|
3
Months
|
|
|
1
Year
|
|
|
3
Years
|
|
|
More
than
|
|
|
Total
|
|
|
|
or
Less
|
|
|
to
1 Year
|
|
|
to
3 Years
|
|
|
to
5 Years
|
|
|
5
Years
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Thousands)
|
|
Interest-earning
assets(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities(2)
|
|
$ |
29,646 |
|
|
$ |
19,723 |
|
|
$ |
11,073 |
|
|
$ |
0 |
|
|
$ |
96,901 |
|
|
$ |
157,343 |
|
Mortgage-backed
securities
|
|
|
2,760 |
|
|
|
7,490 |
|
|
|
15,028 |
|
|
|
10,411 |
|
|
|
22,847 |
|
|
|
58,536 |
|
Loans
receivable(3)
|
|
|
40,660 |
|
|
|
39,982 |
|
|
|
60,238 |
|
|
|
35,275 |
|
|
|
47,977 |
|
|
|
224,132 |
|
Other
interest earning assets
|
|
|
16,118 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,118 |
|
Total
interest-earning assets
|
|
$ |
89,184 |
|
|
$ |
67,195 |
|
|
$ |
86,339 |
|
|
$ |
45,686 |
|
|
$ |
167,725 |
|
|
$ |
456,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
accounts
|
|
$ |
333 |
|
|
$ |
228 |
|
|
$ |
40,124 |
|
|
$ |
13,375 |
|
|
$ |
13,375 |
|
|
$ |
67,435 |
|
Money
market deposit and NOW accounts
|
|
|
- |
|
|
|
34,243 |
|
|
|
49,385 |
|
|
|
5,048 |
|
|
|
5,048 |
|
|
|
93,724 |
|
Certificates
of deposits
|
|
|
52,180 |
|
|
|
100,760 |
|
|
|
30,058 |
|
|
|
25,506 |
|
|
|
- |
|
|
|
208,504 |
|
Advances
from Federal Home Loan Bank
|
|
|
9,020 |
|
|
|
62 |
|
|
|
13,170 |
|
|
|
130 |
|
|
|
340 |
|
|
|
22,722 |
|
Advances
from borrowers for taxes and insurance
|
|
|
1,249 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,249 |
|
Total
interest-bearing liabilities
|
|
$ |
62,782 |
|
|
$ |
135,293 |
|
|
$ |
132,737 |
|
|
$ |
44,059 |
|
|
$ |
18,763 |
|
|
$ |
393,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less
interest-bearing liabilities
|
|
$ |
26,402 |
|
|
$ |
(68,098 |
) |
|
$ |
(46,398 |
) |
|
$ |
1,627 |
|
|
$ |
148,962 |
|
|
$ |
62,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
interest-rate sensitivity gap (4)
|
|
$ |
26,402 |
|
|
$ |
(41,696 |
) |
|
$ |
(88,094 |
) |
|
$ |
(86,467 |
) |
|
$ |
62,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
interest-rate gap as a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
percentage
of total assets at March 31, 2008
|
|
|
5.52 |
% |
|
|
-8.72 |
% |
|
|
-18.42 |
% |
|
|
-18.08 |
% |
|
|
13.07 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
as
a percentage of cumulative interest-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
bearing
liabilities at March 31, 2008
|
|
|
142.05 |
% |
|
|
78.95 |
% |
|
|
73.37 |
% |
|
|
76.93 |
% |
|
|
115.88 |
% |
|
|
|
|
(1)
|
Interest-earning
assets are included in the period in which the balances are expected to be
redeployed and/or repriced as a result of anticipated prepayments,
scheduled rate adjustments and contractual maturities.
|
|
|
(2)
|
For
purposes of the gap analysis, investment securities are stated at
amortized cost.
|
|
|
(3)
|
For
purposes of the gap analysis, loans receivable includes non-performing
loans and is gross of the allowance for loan losses and unamortized
deferred loan fees, but net of undisbursed portion of
loans-in-process.
|
|
|
(4)
|
Interest-rate
sensitivity gap represents the difference between net interest-earning
assets and interest-bearing
liabilities.
|
Certain
shortcomings are inherent in the method of analysis presented in the foregoing
table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in
market interest rates, while interest rates on other types may lag behind
changes in market rates. Additionally, certain assets, such as
adjustable-rate loans, have features which restrict changes in interest rates
both on a short-term basis and over the life of the asset. Further,
in the event of a change in interest rates, prepayment and early withdrawal
levels would likely deviate significantly from those assumed in calculating the
table. Finally, the ability of many borrowers to service their
adjustable-rate loans may be adversely affected in the event of an
interest rate increase.
Net Portfolio Value
Analysis. Our interest rate sensitivity also is monitored by
management through the use of a model which generates estimates of the changes
in our net portfolio value (“NPV”) over a range of interest rate
scenarios. NPV is the present value of expected cash flows from
assets, liabilities and off-balance sheet contracts. The NPV ratio,
under any interest rate scenario, is defined as the NPV in that scenario divided
by the market value of assets in the same scenario. The following
table sets forth our NPV as of March 31, 2008 and reflects the changes to NPV as
a result of immediate and sustained changes in interest rates as
indicated.
Change
in
|
|
|
|
|
|
|
|
|
|
|
|
NPV
as % of Portfolio
|
|
Interest
Rates
|
|
|
Net
Portfolio Value
|
|
|
Value
of Assets
|
|
In
Basis Points
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Rate
Shock)
|
|
|
Amount
|
|
|
$
Change
|
|
|
%
Change
|
|
|
NPV
Ratio
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300
|
|
|
$ |
41,222 |
|
|
$ |
(38,789 |
) |
|
|
(48.48 |
)% |
|
|
9.68 |
% |
|
|
(6.97 |
)% |
200
|
|
|
|
53,327 |
|
|
|
(26,684 |
) |
|
|
(33.35 |
)% |
|
|
12.03 |
% |
|
|
(4.62 |
)% |
100
|
|
|
|
66,874 |
|
|
|
(13,137 |
) |
|
|
(16.42 |
)% |
|
|
14.47 |
% |
|
|
(2.18 |
)% |
Static
|
|
|
|
80,011 |
|
|
|
- |
|
|
|
- |
|
|
|
16.65 |
% |
|
|
- |
|
(100)
|
|
|
|
82,292 |
|
|
|
2,281 |
|
|
|
2.85 |
% |
|
|
16.85 |
% |
|
|
0.20 |
% |
(200)
|
|
|
|
79,071 |
|
|
|
(940 |
) |
|
|
(1.17 |
)% |
|
|
16.10 |
% |
|
|
(0.55 |
)% |
(300)
|
|
|
|
77,365 |
|
|
|
(2,646 |
) |
|
|
(3.31 |
)% |
|
|
15.65 |
% |
|
|
(1.00 |
)% |
As is the
case with the GAP Table, certain shortcomings are inherent in the methodology
used in the above interest rate risk measurements. Modeling changes
in NPV requires the making of certain assumptions which may or may not reflect
the manner in which actual yields and costs respond to changes in market
interest rates. In this regard, the models presented assume that the
composition of our interest sensitive assets and liabilities existing at the
beginning of a period remains constant over the period being measured and also
assumes that a particular change in interest rates is reflected uniformly across
the yield curve regardless of the duration to maturity or repricing of specific
assets and liabilities. Accordingly, although the NPV model provides
an indication of interest rate risk exposure at a particular point in time, such
model is not intended to and does not provide a precise forecast of the effect
of changes in market interest rates on net interest income and will differ from
actual results.
Our
management evaluated, with the participation of our Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based
on such evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures are designed to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
regulations and are operating in an effective manner.
No change
in our internal control over financial reporting (as defined in Rule 13a-15(e)
or 15d-15(f) under the Securities Exchange Act of 1934) occurred during the most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
On
October 4, 2006, Stilwell Value Partners I, L.P. (“Stilwell”) filed suit in the
United States District Court for the Eastern District of Pennsylvania against
Prudential Mutual Holding Company (the “MHC”), Prudential Bancorp, Inc. of
Pennsylvania (the “Company”) and each of the directors of the MHC and the
Company individually seeking equitable relief including (i) enjoining the
Company and the directors from allowing the MHC to participate in any
shareholder vote to consider the adoption of proposed stock option and stock
recognition and retention plans (collectively, the “Stock Plans”) and (ii)
enjoining MHC from participating in any shareholder vote to approve the Stock
Plans. In the event that the MHC and the Company are not enjoined,
Stilwell is seeking damages, the amount to be determined at trial.
Stilwell
alleged that the Company’s prospectus used to solicit offers to purchase shares
of the Company’s common stock in connection with the mutual holding
reorganization of Prudential Savings Bank “promised” that the Stock Plans would
be submitted for consideration only by the Company’s public shareholders and not
by the MHC which controls a majority of the Company’s issued and outstanding
shares of common stock and that Stilwell relied on such promise in determining
to invest in the common stock of the Company (a “promissory estoppel”
claim). Stilwell also alleged that the individual directors violated
their fiduciary duties to Stilwell by delaying the consideration of the Stock
Plans until such time that MHC could vote its shares on the Stock Plans assuring
their approval by shareholders. In addition, Stilwell asserted claims
for “unjust enrichment” and for “disenfranchisement.” On November 20,
2006, the Company, the MHC and the director defendants filed a motion to dismiss
the complaint, asserting, among other things, that the prospectus contained no
“promise,” implied or otherwise, that the MHC would never vote on the adoption
of the Stock Plans and that the breach of fiduciary duty claim, with respect to
the timing of any such vote, is legally insufficient. On August 15,
2007, the Court ruled that there was no express promise of the sort that would
support a promissory estoppel claim, no "unconscionability" of the sort that
would support an unjust enrichment claim, and no "fundamental unfairness" of the
sort that would support a claim for "disenfranchisement." The Court
also ruled that Stilwell does not have standing to assert claims for breach of
fiduciary duty against the directors individually. Accordingly, the
Court dismissed all of the claims against the Company and the individual
directors and all but one of the claims against the MHC. The Court
dismissed the claims with prejudice which prevents Stilwell from reasserting
such claims in amended form.
The only
claim remaining is a breach of fiduciary duty claim asserted against the MHC as
majority shareholder. Discovery has been substantially completed.
Trial on the remaining claim has been scheduled to commence in June
2008.
The
Company believes Stilwell's remaining claim is without merit and the remaining
defendant, the MHC, intends to vigorously defend the case. However,
no prediction can be made as to the outcome of the one remaining
claim.
Other
than the above referenced litigation, the Company is involved in various legal
proceedings occurring in the ordinary course of business. Management of the
Company, based on discussions with litigation counsel, believes that such
proceedings will not have a material adverse effect on the financial condition
or operations of the Company. There can be no assurance that any of the
outstanding legal proceedings to which the Company is a party will not be
decided adversely to the Company's interests and have a material adverse effect
on the financial condition and operations of the Company.
Item
1A. Risk Factors
There
were no material changes from the risk factors described in the Company’s annual
report on Form 10-K for the year ended September 30, 2007.
|
(b)
|
Not
applicable
|
|
|
|
|
(c)
|
Purchases
of Equity Securities
|
The
Company’s repurchases of its common stock made during the quarter are set forth
in the following table:
|
|
Total
Number
of
Shares
Purchased
|
|
|
Average
Price
Paid
per
Share
|
|
|
Total
Number
of
Shares
Purchased
as
Part
of
Publicly
Announced
Plans
or
Programs
|
|
|
Maximum
Number
of
Shares that May
Yet
be Purchased Under the Plan or Programs(1)(2)
|
|
January
1 – January 31, 2008
|
|
|
34,000 |
|
|
$ |
12.34 |
|
|
|
34,000 |
|
|
|
266,840 |
|
February
1 – February 29, 2008
|
|
|
25,100 |
|
|
|
12.54 |
|
|
|
25,100 |
|
|
|
241,740 |
|
March
1 - March 31, 2008
|
|
|
223,840 |
|
|
|
12.55 |
|
|
|
223,840 |
|
|
|
17,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
282,940 |
|
|
$ |
12.52 |
|
|
|
282,940 |
|
|
|
17,900 |
|
______________________
|
(1)
|
On
August 15, 2007, the Company announced its fifth stock repurchase program
to repurchase 230,500 shares or approximately 5% of the Company’s
outstanding common stock held by shareholders other than Prudential Mutual
Holding Company. Such program commenced in August 2007 and was
completed during March 2008.
|
|
(2)
|
On
January 22, 2008, the Company announced its sixth stock repurchase program
to repurchase up to 220,000 shares or approximately 5% of the Company’s
outstanding common stock held by shareholders other than Prudential Mutual
Holding Company. The program commenced upon completion of the
fifth stock repurchase program. In addition, the Prudential
Mutual Holding Company announced that its Board of Directors also approved
the purchase of 220,000 shares or approximately 5% of the Company’s common
stock held by shareholders other than Prudential Mutual Holding
Company.
|
Not
applicable
Item
4. Submission of Matters to a Vote of Security Holders
On
February 4, 2008, the Company held its annual meeting of shareholders and
submitted two proposals to shareholders on behalf of the Company’s Board of
Directors (the election of directors and the ratification of the
appointment of the Company’s independent registered public accounting firm for
fiscal 2008). Shareholders of record as of December 19, 2007,
received proxy materials and were considered eligible to on
these proposals at the annual meeting. At the annual
meeting, 11,393,306 shares of common stock of the Company were outstanding on
the record date and eligible to be voted at the meeting. The Stilwell Group
conducted a solicitation in opposition to the nominees for re-election as
directors nominated by the Company’s Board of Directors and in connection
therewith solicited proxies withholding votes in favor of management’s
nominees. The Stilwell Group did not oppose the ratification of the
appointment of Deloitte & Touche LLP as the Company’s independent registered
public accounting firm. Members of the Company’s Board of Directors not up for
election and continuing in office after the annual meeting were John P. Judge,
Thomas A. Vento, Jerome R. Balka, Esq. and A.J. Fanelli.
A total
of 10,564,723 shares of common were present in person or by proxy at the annual
meeting. The following is a brief summary of each proposal and the
result of the vote at the annual meeting:
|
1.
|
The
following directors were elected by the requisite plurality of the votes
cast to serve on the Company’s Board of
Directors:
|
|
|
|
|
|
Francis
V. Mulcahy
|
|
7,849,602
|
|
2,715,121
|
Joseph
W. Packer, Jr.
|
|
7,646,365
|
|
2,918,358
|
|
2.
|
To
ratify the appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for the fiscal year ended
September 30, 2008.
|
There
were no broker non-votes at the annual meeting
Item
5. Other Information
Not
applicable
Exhibit
No.
|
Description
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
|
32.0
|
Section
1350 Certifications
|
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.
PRUDENTIAL
BANCORP, INC. OF PENNSYLVANIA
Date:
May 15,2008
|
By:
|
/s/
Thomas
A. Vento
|
|
|
Thomas
A. Vento |
|
|
President
and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
Date:
May 15, 2008
|
By:
|
/s/
Joseph
R. Corrato
|
|
|
Joseph
R. Corrato |
|
|
Executive
Vice President and Chief Financial
Officer |
35