SEC Form 10-Q filed by Standard AVB Financial Corp.

5/14/21 11:33:25 AM ET

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Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

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

For the transition period from _______________ to _______________

Commission File No. 001-34893

Standard AVB Financial Corp.

(Exact Name of Registrant as Specified in Its Charter)

Maryland		27-3100949
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2640 Monroeville Blvd. Monroeville, Pennsylvania		15146
(Address of Principal Executive Offices)		(Zip Code)

(412) 856-0363

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		STND		The NASDAQ Stock Market, LLC

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 requirements for the past 90 days.

YES ⌧ NO ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ⌧ NO ◻

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ⌧

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of May 11, 2021, the registrant had 4,773,716 shares of common stock, $0.01 par value per share, outstanding.

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Standard AVB Financial Corp.

Table of Contents


	Part I – Financial Information

ITEM 1.	Financial Statements (Unaudited)	3

	Consolidated Statements of Financial Condition as of March 31, 2021 and December 31, 2020	3

	Consolidated Statements of Income for the Three Months Ended March 31, 2021 and 2020	4

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020	5

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020	6

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	7

	Notes to Consolidated Statements	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	39

ITEM 4.	Controls and Procedures	39

	PART II – Other Information	40

ITEM 1.	Legal Proceedings	40

ITEM 1A.	Risk Factors	40

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

ITEM 3.	Defaults Upon Senior Securities	41

ITEM 4.	Mine Safety Disclosures	41

ITEM 5.	Other Information	41

ITEM 6.	Exhibits	42

	Signatures	43

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

Standard AVB Financial Corp.

Consolidated Statements of Financial Condition

(Dollars in thousands, except per share data)


		March 31,
		2021	December 31,
		(unaudited)	2020
ASSETS
Cash on hand and due from banks	$	3,575	$	3,543
Interest-earning deposits in other institutions		85,735		46,970
Cash and Cash Equivalents		89,310		50,513
Investment securities available for sale, at fair value		88,386		89,953
Equity securities, at fair value		2,609		2,552
Mortgage-backed securities available for sale, at fair value		94,970		95,525
Certificate of deposit		249		249
Federal Home Loan Bank and other restricted stock, at cost		8,503		9,008
Loans receivable, net of allowance for loan losses of $7,979 and $7,841		711,407		734,752
Loans held for sale		886		371
Foreclosed real estate		329		488
Office properties and equipment, net		9,132		9,357
Bank-owned life insurance		25,074		24,934
Goodwill		25,836		25,836
Core deposit intangible		1,302		1,411
Accrued interest receivable and other assets		6,622		6,639
TOTAL ASSETS	$	1,064,615	$	1,051,588

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits:
Demand and savings accounts	$	628,524	$	603,077
Time deposits		204,622		206,163
Total Deposits		833,146		809,240
Long-term borrowings		78,521		89,382
Securities sold under agreements to repurchase		3,629		3,597
Accrued interest payable and other liabilities		4,262		3,418
TOTAL LIABILITIES		919,558		905,637

Stockholders’ Equity
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized, none issued		—		—
Common stock, $0.01 par value per share, 40,000,000 shares authorized, 4,773,716 and 4,773,995 shares issued and outstanding, respectively		48		48
Additional paid-in-capital		72,142		72,137
Retained earnings		74,035		72,938
Unearned Employee Stock Ownership Plan (ESOP) shares		(1,379)		(1,379)
Accumulated other comprehensive income		211		2,207
TOTAL STOCKHOLDERS’ EQUITY		145,057		145,951
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,064,615	$	1,051,588

See accompanying notes to the consolidated financial statements.

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Standard AVB Financial Corp.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Interest and Dividend Income
Loans, including fees	$	7,575	$	7,813
Mortgage-backed securities		301		463
Investments:
Taxable		74		114
Tax-exempt		513		415
Federal Home Loan Bank and other restricted stock		106		143
Interest-earning deposits and federal funds sold		13		88
Total Interest and Dividend Income		8,582		9,036

Interest Expense
Deposits		950		1,672
Long-term borrowings		423		531
Securities sold under agreements to repurchase		2		4
Total Interest Expense		1,375		2,207

Net Interest Income		7,207		6,829

Provision for Loan Losses		150		550

Net Interest Income after Provision for Loan Losses		7,057		6,279

Noninterest Income
Service charges		661		732
Earnings on bank-owned life insurance		140		138
Net gains on sales of securities		4		—
Net equity securities fair value adjustment gains (losses)		57		(674)
Net loan sale gains and referral fees		140		99
Investment management fees		115		220
Other income		53		20
Total Noninterest Income		1,170		535

Noninterest Expenses
Compensation and employee benefits		3,213		3,365
Data processing		186		188
Premises and occupancy costs		628		610
Automatic teller machine expense		137		146
Federal deposit insurance		67		(44)
Core deposit amortization		109		145
Merger expenses		151		—
Other operating expenses		1,085		1,100
Total Noninterest Expenses		5,576		5,510

Income before Income Tax Expense		2,651		1,304

Income Tax Expense
Federal		414		110
State		114		84
Total Income Tax Expense		528		194
Net Income	$	2,123	$	1,110
Earnings Per Share:
Basic earnings per common share	$	0.46	$	0.24
Diluted earnings per common share	$	0.46	$	0.24

Cash dividends paid per common share	$	0.22	$	0.22
Basic weighted average shares outstanding		4,639,890		4,544,408
Diluted weighted average shares outstanding		4,653,625		4,627,073

See accompanying notes to the consolidated financial statements.

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Standard AVB Financial Corp.

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Net Income	$	2,123	$	1,110

Other comprehensive loss:
Change in unrealized gain on securities available for sale		(2,533)		(475)
Tax effect		532		100
Reclassification adjustment for security gains realized in income		(4)		—
Tax effect		1		—
Change in pension obligation for defined benefit plan		10		3
Tax effect		(2)		(1)
Total other comprehensive loss		(1,996)		(373)

Total Comprehensive Income	$	127	$	737

See accompanying notes to the consolidated financial statements.

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Standard AVB Financial Corp.

Consolidated Statements of Changes in Stockholders’ Equity

(Dollars in thousands, except per share data)

(Unaudited)


									Accumulated
			Additional				Unearned		Other		Total
	Common		Paid-In		Retained		ESOP		Comprehensive		Stockholders’
	Stock		Capital		Earnings		Shares		Income		Equity
Three Months Ended:
Balance, December 31, 2020	$	48	$	72,137	$	72,938	$	(1,379)	$	2,207	$	145,951
Net income		—		—		2,123		—		—		2,123
Other comprehensive loss		—		—		—		—		(1,996)		(1,996)
Cash dividends ($0.22 per share)		—		—		(1,026)		—		—		(1,026)
Stock repurchases (279 shares)		—		(9)		—		—		—		(9)
Compensation expense on stock awards		—		14		—		—		—		14
Balance, March 31, 2021	$	48	$	72,142	$	74,035	$	(1,379)	$	211	$	145,057

Balance, December 31, 2019	$	47	$	72,155	$	70,037	$	(1,533)	$	1,142	$	141,848
Net income		—		—		1,110		—		—		1,110
Other comprehensive loss		—		—		—		—		(373)		(373)
Stock repurchases (49,500 shares)		—		(1,197)		—		—		—		(1,197)
Cash dividends ($0.22 per share)		—		—		(1,007)		—		—		(1,007)
Stock options exercised (13,442 shares)		—		242		—		—		—		242
Compensation expense on stock awards		—		27		—		—		—		27
Compensation expense on ESOP		—		61		—		39		—		100
Balance, March 31, 2020	$	47	$	71,288	$	70,140	$	(1,494)	$	769	$	140,750

See accompanying notes to the consolidated financial statements.

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Standard AVB Financial Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Cash Flows From Operating Activities
Net income	$	2,123	$	1,110
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		989		520
Provision for loan losses		150		550
Amortization of core deposit intangible		109		145
Net gain on sale of securities available for sale		(4)		—
Net equity securities fair value adjustment (gains) losses		(57)		674
Net gain on sale of foreclosed real estate		(23)		—
Origination of loans held for sale		(5,776)		(5,571)
Proceeds from sale of loans held for sale		5,387		5,932
Net loan sale gains and referral fees		(140)		(99)
Compensation expense on ESOP		—		100
Compensation expense on stock awards		14		27
Deferred income taxes		71		(95)
Increase in accrued interest receivable		(29)		(42)
Earnings on bank-owned life insurance		(140)		(138)
Decrease in accrued interest payable		(16)		(56)
Other, net		770		(731)
Net Cash Provided by Operating Activities		3,428		2,326
Cash Flows Used In Investing Activities
Net decrease in loans		22,742		2,334
Purchases of investment securities		(6,807)		(4,146)
Purchases of mortgage-backed securities		(14,507)		(1,531)
Proceeds from maturities/principal repayments/calls of investment securities		7,455		9,145
Proceeds from maturities/principal repayments/calls of mortgage-backed securities		8,127		6,601
Proceeds from sales of mortgage-backed securities		5,678		—
Purchase of Federal Home Loan Bank stock		(206)		(1,120)
Redemption of Federal Home Loan Bank stock		711		456
Proceeds from sales of foreclosed real estate		203		—
Purchase of bank-owned life insurance		—		(1,000)
Net additions of office properties and equipment		(51)		(65)
Net Cash Provided by Investing Activities		23,345		10,674
Cash Flows From Financing Activities
Net increase in demand and savings accounts		25,447		4,509
Net decrease in time deposits		(1,541)		(9,399)
Net increase in securities sold under agreements to repurchase		32		270
Repayments of Federal Home Loan Bank advances		(10,774)		(11,530)
Proceeds from Federal Home Loan Bank advances		—		25,000
Lease liability payments		(105)		(89)
Exercise of stock options		—		242
Dividends paid		(1,026)		(1,007)
Stock repurchases		(9)		(1,197)
Net Cash Provided by Financing Activities		12,024		6,799
Net Increase in Cash and Cash Equivalents		38,797		19,799
Cash and Cash Equivalents - Beginning		50,513		32,427
Cash and Cash Equivalents - Ending	$	89,310	$	52,226
Supplementary Cash Flows Information:
Interest paid	$	1,391	$	2,263
Income taxes paid	$	45	$	163
Investment securities purchased not settled	$	641	$	477
Loans transferred to foreclosed real estate	$	22	$	85

See accompanying notes to the consolidated financial statements.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

(1) Consolidation

The accompanying consolidated financial statements include the accounts of Standard AVB Financial Corp. (the “Company”) and its direct and indirect wholly owned subsidiaries, Standard Bank, PaSB (the “Bank”), and Westmoreland Investment Company. All significant intercompany accounts and transactions have been eliminated in consolidation. Standard AVB Financial Corp. owns all of the outstanding shares of common stock of the Bank.

(2) Basis of Presentation

The accompanying consolidated financial statements were prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles in the United States. All adjustments (consisting of normal recurring adjustments), which, in the opinion of management are necessary for a fair presentation of the financial statements and to make the financial statements not misleading have been included. The unaudited consolidated financial statements and other financial information contained in this quarterly report on Form 10-Q should be read in conjunction with the audited financial statements of Standard AVB Financial Corp. at and for the year ended December 31, 2020 contained in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission on March 31, 2021. The results for the three month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future interim period. Certain amounts in the 2020 financial statements have been reclassified to conform to the 2021 presentation format. These reclassifications had no effect on stockholders’ equity or net income.

(3) Proposed Merger with Dollar

On September 25, 2020 the Company, and Dollar Mutual Bancorp (“Dollar”) announced they had entered into a definitive agreement under which Dollar will acquire the Company in an all cash transaction valued at approximately $158 million. The Company’s stockholders will receive $33.00 for each share of Company common stock that they own. The transaction was approved by the Company’s stockholders on January 19, 2021 and all necessary regulatory approvals and waivers have been received. The parties expect that the proposed merger will be completed after market hours on May 28, 2021, pending the satisfaction or waiver of customary closing conditions. However, it is possible that factors outside the control of both companies could result in the merger being completed at a different time or not at all. In connection with the acquisition, the Company had incurred $151,000 ($121,000 after tax) of merger-related expenses for the three months ended March 31, 2021, primarily legal costs, which are included in the Consolidated Statements of Income.

(4) Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The following table sets forth the computation of basic and diluted EPS for the three months ended March 31, 2021 and March 31, 2020 (dollars in thousands, except per share data):

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021


	Three Months Ended March 31,
	2021		2020
Net income available to common stockholders	$	2,123	$	1,110

Basic EPS:
Weighted average shares outstanding		4,639,890		4,544,408
Basic EPS	$	0.46	$	0.24

Diluted EPS:
Weighted average shares outstanding		4,639,890		4,544,408
Dilutive effect of common stock equivalents		13,735		82,665
Total diluted weighted average shares outstanding		4,653,625		4,627,073
Diluted EPS	$	0.46	$	0.24

Options to purchase 29,790 and 234,339 shares of common stock were outstanding as of March 31, 2021 and March 31, 2020 respectively, with an average exercise price of $16.50 and $17.02, respectively. There were no anti-dilutive shares as of March 31, 2021 or March 31, 2020.

As of March 31, 2021 and March 31, 2020, there were 3,140 and 8,297 shares of outstanding restricted stock, respectively, that were not fully vested and were taken into consideration in the computation of both basic and diluted earnings per common share.

(5) Recent Accounting Pronouncements

Accounting Standards Pending Adoption

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. The Company had initially worked with a third party to evaluate the various CECL methodologies and decided to utilize the vintage method. Given the deferral of the effective date, the Company has delayed further efforts to determine what impact it will have on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (“SEC”) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profit entities that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 350, Intangibles — Goodwill and Other, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

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

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40). This Update addresses customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This Update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The amendments in this Update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 350, Intangibles — Goodwill and Other, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

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

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. Topic 326, Financial Instruments — Credit Losses amendments are effective for SEC registrants for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other public business entities, the effective date is for fiscal years beginning after December 15, 2020, and for all other entities, the effective date is for fiscal years beginning after December 15, 2021. Topic 815, Derivatives and Hedging amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. For entities that have adopted the amendments in Update 2017-12, the effective date is as of the beginning of the first annual period beginning after the issuance of this Update. Topic 825, Financial Instruments amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Furthermore, the ASU provides a one-year deferral of the effective dates of the ASUs on derivatives and hedging for companies that are not public business entities. This Update is not expected to have a significant impact on the Company’s financial statements.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments — Credit Losses, Topic 326, which allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of the new credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for the applying the fair value option in ASC 825-10.3. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. For entities that elect the fair value option, the difference between the carrying amount and the fair value of the financial assets would be recognized through a cumulative-effect adjustment to opening retained earnings as of the date an entity adopted ASU 2016-13. Changes in fair value of that financial asset would subsequently be reported in current earnings. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). The Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, to clarify its new credit impairment guidance in ASC 326, based on implementation issues raised by stakeholders. This Update clarified, among other things, that expected recoveries are to be included in the allowance for credit losses for these financial assets; an accounting policy election can be made to adjust the effective interest rate for existing troubled debt restructurings based on the prepayment assumptions instead of the prepayment assumptions applicable immediately prior to the restructuring event; and extends the practical expedient to exclude accrued interest receivable from all additional relevant disclosures involving amortized cost basis. The effective dates in this Update are the same as those applicable for ASU 2019-10. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs, which clarifies that, for each reporting period, an entity should reevaluate whether a callable debt security is within the scope of ASC 310-20-35-33. For public business entities, ASU 2020-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application is not permitted. For all other entities, ASU 2020-08 is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

In October 2020, the FASB issued ASU 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762, which codifies, as appropriate, the amended financial statement disclosure requirements in Regulation S-X Rules 13-01 and 13-02. The amendments are effective January 4, 2021. This Update did not have a significant impact on the Company’s financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which makes minor technical corrections and clarifications to the ASC. The amendments in Sections B and C of the ASU are effective for annual periods beginning after December 15, 2020, for public business entities. For all other entities, the amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

(6) Investment Securities

Investment securities available for sale at March 31, 2021 and December 31, 2020 were as follows (dollars in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
March 31, 2021:
U.S. government and agency obligations due:
Beyond 1 year but within 5 years	$	3,000	$	—	$	(33)	$	2,967
Beyond 5 year but within 10 years		3,000		—		(71)		2,929
Corporate bonds due:
Beyond 1 year but within 5 years		3,978		210		—		4,188
Beyond 5 years but within 10 years		1,125		—		(31)		1,094
Municipal obligations due:
Within 1 year		3,223		71		—		3,294
Beyond 1 year but within 5 years		1,665		47		—		1,712
Beyond 5 years but within 10 years		16,297		357		(44)		16,610
Beyond 10 years		55,543		597		(548)		55,592
	$	87,831	$	1,282	$	(727)	$	88,386


December 31, 2020:
U.S. government and agency obligations due:
Beyond 1 year but within 5 years	$	1,000	$	2	$	—	$	1,002
Beyond 5 year but within 10 years		3,000		5		—		3,005
Corporate bonds due:
Within 1 year		1,000		—		—		1,000
Beyond 1 year but within 5 years		3,975		255		—		4,230
Municipal obligations due:
Within 1 year		4,657		107		—		4,764
Beyond 1 year but within 5 years		1,640		53		—		1,693
Beyond 5 years but within 10 years		18,571		525		—		19,096
Beyond 10 years		54,009		1,177		(23)		55,163
	$	87,852	$	2,124	$	(23)	$	89,953

There were no sales of investment securities during the three months ended March 31, 2021 or March 31, 2020, respectively.

Investment securities with a carrying value of $11.4 million were pledged to secure repurchase agreements and public funds accounts at both March 31, 2021 and December 31, 2020, respectively.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table presents the fair value and gross unrealized losses on investment securities and the length of time that the securities have been in a continuous unrealized loss position at March 31, 2021 and December 31, 2020 (dollars in thousands):


	Less than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2021:
U.S. government and agency obligations	$	5,896	$	(104)	$	—	$	—	$	5,896	$	(104)
Corporate bonds		1,094		(31)		—		—		1,094		(31)
Municipal obligations		31,631		(592)		—		—	$	31,631	$	(592)
Total	$	38,621	$	(727)	$	—	$	—	$	38,621	$	(727)


December 31, 2020:
Municipal obligations	$	5,619	$	(23)	$	—	$	—	$	5,619	$	(23)
Total	$	5,619	$	(23)	$	—	$	—	$	5,619	$	(23)

At March 31, 2021, the Company held 66 investment securities in an unrealized loss position. The decline in the fair value of these securities resulted primarily from interest rate fluctuations. There were no potential credit concerns identified with regard to the municipal obligations as of March 31, 2021. The Company does not intend to sell these securities nor is it more likely than not that the Company would be required to sell these securities before their anticipated recovery. Additionally, the Company believes the collection of the investment principal and related interest is probable. Based on the above, the Company considers all of the unrealized losses to be temporary impairment losses.

(7) Equity Securities

The following table presents the net gains and losses on equity investments recognized in earnings during the three months ended March 31, 2021 and March 31, 2020, and the portion of unrealized gains and losses for those periods that relate to equity investments held (dollars in thousands):


	Three Months Ended March 31,
	2021		2020
Net equity securities fair value adjustment gains (losses)	$	57	$	(674)
Net gains realized on the sale of equity securities during the period		—		—
Gains (losses) recognized on equity securities during the period	$	57	$	(674)

There were no sales of equity securities during the three months ended March 31, 2021 or March 31, 2020, respectively.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

(8) Mortgage-Backed Securities

Mortgage-backed securities available for sale at March 31, 2021 and December 31, 2020 were as follows (dollars in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
March 31, 2021:
Government pass-throughs:
Ginnie Mae	$	14,305	$	325	$	(5)	$	14,625
Fannie Mae		36,341		385		(382)		36,344
Freddie Mac		18,326		276		(156)		18,446
Private pass-throughs		16,501		9		(188)		16,322
Collateralized mortgage obligations		9,225		119		(111)		9,233
	$	94,698	$	1,114	$	(842)	$	94,970


December 31, 2020:
Government pass-throughs:
Ginnie Mae	$	20,079	$	432	$	(16)	$	20,495
Fannie Mae		24,051		601		(99)		24,553
Freddie Mac		21,317		357		(50)		21,624
Private pass-throughs		17,528		55		(212)		17,371
Collateralized mortgage obligations		11,287		209		(14)		11,482
	$	94,262	$	1,654	$	(391)	$	95,525

Private pass-throughs include Small Business Administration (“SBA”) securities that are each an aggregation of SBA guaranteed portions of loans made by SBA lenders under section 7(a) of the Small Business Act. The guaranty is backed by the full faith and credit of the United States.

For the three months ended March 31, 2021, gains on the sale of mortgage-backed securities were $43,000, losses were $39,000 and proceeds from such sales were $5.7 million. There were no sales of mortgage-backed securities during the three months ended March 31, 2020.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The amortized cost and fair value of mortgage-backed securities at March 31, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to repay obligations with or without prepayment penalties (dollars in thousands):


	Amortized Cost		Fair Value
Due after one year through five years	$	765		777
Due after five years through ten years		3,907		3,904
Due after ten years		90,026		90,289
Total Mortgage-Backed Securities	$	94,698	$	94,970

The following table presents the fair value and gross unrealized losses on mortgage-backed securities and the length of time that the securities have been in a continuous unrealized loss position at March 31, 2021 and December 31, 2020 (dollars in thousands):


	Less than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2021:
Government pass-throughs:
Ginnie Mae	$	—	$	—	$	807	$	(5)	$	807	$	(5)
Fannie Mae		25,332		(382)		—		—		25,332		(382)
Freddie Mac		11,974		(156)		—		—		11,974		(156)
Private pass-throughs		—		—		14,821		(188)		14,821		(188)
Collateralized mortgage obligations		5,122		(111)		—		—		5,122		(111)
Total	$	42,428	$	(649)	$	15,628	$	(193)	$	58,056	$	(842)


December 31, 2020:
Government pass-throughs:
Ginnie Mae	$	2,629	$	(15)	$	462	$	(1)	$	3,091	$	(16)
Fannie Mae		7,062		(99)		—		—		7,062		(99)
Freddie Mac		7,543		(50)		—		—		7,543		(50)
Private pass-throughs		—		—		15,539		(212)		15,539		(212)
Collateralized mortgage obligations		5,944		(14)		—		—		5,944		(14)
Total	$	23,178	$	(178)	$	16,001	$	(213)	$	39,179	$	(391)

At March 31, 2021, the Company held 21 mortgage-backed securities in an unrealized loss position. The decline in the fair value of these securities resulted primarily from interest rate fluctuations. The Company does not intend to sell these securities nor is it more likely than not that the Company would be required to sell these securities before their anticipated recovery. Additionally, the Company believes the collection of the investment principal and related interest is probable. Based on the above, the Company considers all of the unrealized loss to be temporary impairment loss.

Mortgage-backed securities with a carrying value of $15.3 million and $17.0 million were pledged to secure repurchase agreements and public funds accounts at March 31, 2021 and December 31, 2020, respectively.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

(9) Loans Receivable and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio by the amounts collectively evaluated for impairment and the amounts individually evaluated for impairment, and the related allowance for loan losses, as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	Real Estate Loans
	One-to-four-		Commercial		Home
	family		Real Estate		Equity Loans
	Residential and		and		and Lines		Commercial		Other
	Construction		Construction		of Credit		Business		Loans		Total
March 31, 2021:
Collectively evaluated for impairment	$	179,776	$	374,502	$	91,163	$	69,827	$	449	$	715,717
Individually evaluated for impairment		—		3,051		—		618		—		3,669
Total loans before allowance for loan losses	$	179,776	$	377,553	$	91,163	$	70,445	$	449	$	719,386

December 31, 2020:
Collectively evaluated for impairment	$	192,402	$	372,558	$	96,116	$	77,332	$	504	$	738,912
Individually evaluated for impairment		—		3,063		—		618		—		3,681
Total loans before allowance for loan losses	$	192,402	$	375,621	$	96,116	$	77,950	$	504	$	742,593

Total loans at March 31, 2021 and December 31, 2020 were net of deferred loan fees of $1.2 million and $1.3 million, respectively.

The segments of the Bank’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The three segments are: real estate, commercial business and other. The real estate loan segment is further disaggregated into three classes. One-to-four family residential mortgages (including residential construction loans) include loans to individuals secured by residential properties having maturities up to 30 years. Commercial real estate (including commercial construction loans) consists of loans to commercial borrowers secured by commercial or residential real estate. Home equity loans and lines of credit include loans having maturities up to 20 years. The commercial business loan segment consists of loans to finance the activities of commercial business customers and includes PPP loans. The other loan segment consists primarily of consumer loans and overdraft lines of credit. The portfolio segments utilized in the calculation of the allowance for loan losses are disaggregated at the same level that management uses to monitor risk in the portfolio. Therefore the portfolio segments and classes of loans are the same.

There are various risks associated with lending to each portfolio segment. One-to-four family residential mortgage loans are typically longer-term loans which generally entail greater interest rate risk than consumer and commercial loans. Under certain economic conditions, housing values may decline, which may increase the risk that the collateral values are insufficient. Commercial real estate loans generally present a higher level of risk than loans secured by residences. This greater risk is due to several factors including but not limited to concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the increased difficulty in monitoring these types of loans. Furthermore, the repayment of commercial real estate loans is typically dependent upon successful operation of the related real estate project. If the cash flow from the project is reduced by such occurrences as leases not being obtained, renewed or not entirely fulfilled, the borrower’s ability to repay the loan may be impaired. Commercial business loans are primarily secured by business assets, inventories and accounts receivable which present collateral risk. The repayment of the commercial business loan is dependent upon the ongoing cash flow of the operating entity and the ability of a guarantor to support the company. The other loan segment generally has higher interest rates and shorter terms than one-to-four family residential mortgage loans, however, they can have additional credit risk due to the type of collateral securing the loan.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table provides additional information with respect to the Company’s commercial real estate and construction and commercial business loans by industry sector at March 31, 2021 (dollars in thousands):


Type of Loan⁽¹⁾	Number of Loans	Balance
Real Estate Rental and Leasing	1,287	$	310,788
Construction	142		26,075
Accommodation and Food Services	71		22,408
Health Care and Social Assistance	104		14,224
Other Services (except Public Administration)	131		14,100
Retail Trade	78		13,137
Professional, Scientific, and Technical Services	132		8,270
Manufacturing	37		7,171
Public Administration	50		6,567
Wholesale Trade	54		6,096
Other	203		19,162
Total	2,289	$	447,998

_______________________________________

(1) Loan types are based on the North American Industry Classification System (NAICS).

As of March 31, 2021, the real estate rental and leasing sector included the following industry categories:


Detail of Real Estate Rental and Leasing	Number of Loans	Balance
Lessors of Residential Buildings and Dwellings	938	$	163,066
Lessors of Nonresidential Buildings	214		109,601
Other Activities Related to Real Estate	43		11,793
Other General Government Support	18		6,547
Lessors of Mini Warehouses and Self-Storage Units	17		6,155
Lessors of Other Real Estate Property	13		5,263
Real Estate Property Managers	12		2,786
All Other Real Estate Rental and Leasing	32		5,577
Total	1,287	$	310,788

The Company’s primary business activity is with customers located within its local market area. Although the Company has a diversified loan portfolio, loans outstanding to individuals and businesses are dependent upon the local economic conditions in its immediate market area. It is anticipated that certain industries will continue to suffer losses as a result of the COVID-19 pandemic. At March 31, 2021, the Company’s largest commercial loan concentrations are to the lessors of residential properties and the lessors of nonresidential properties representing 36.4% and 24.5% of the commercial loan portfolio, respectively. The construction portfolio is very well diversified with no exposure in any NAICS above $4.8 million. Additionally, the Bank had approximately $15.7 million in hotel and motel loans and $5.9 million in restaurant loans at March 31, 2021. Included in the hotel and motel and restaurant loans were $362,000 and $2.4 million of PPP loans, respectively.

The Company is a qualified SBA lender and was automatically authorized to originate PPP loans. The initial PPP loan program closed on August 8, 2020. The Company is continuing to work with customers to submit the required information to the SBA in order to receive the maximum amount of loan forgiveness on those loans. To date, the Company has received loan forgiveness on 165 loans totaling over $18.0 million out of the 428 loans totaling over $42.0 million approved under the first round of the PPP program. On December 27, 2020, an additional round of PPP funding was established. The Company is continuing to participate in the program, which opened mid-January for new loan applications and remains open through May 31, 2021. The Company has processed 93 applications totaling over $8.1 million under the second round of the PPP program.

Eligible businesses were able to apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly “payroll costs;” or (2) $10.0 million. PPP loans have: (a) an interest rate of 1.0%, (b) a five-year loan term to maturity for loans made on or after June 5, 2020 (loans made prior to June 5, 2020 have a two-year term, however borrowers and lenders may mutually

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

agree to extend the maturity for such loans to five years); and (c) principal and interest payments deferred for nine months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expenses, with the remaining 40% of the loan proceeds used for other qualifying expenses.

Management evaluates individual loans in all of the commercial segments for possible impairment if the relationship is greater than $200,000, and the loan is in nonaccrual status, risk-rated Substandard or Doubtful, 90 days or more past due or represents a troubled debt restructuring ("TDR"). Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectability, while not classifying the loan as impaired if the loan is not a commercial business or commercial real estate loan. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loan is part of a larger relationship that is impaired, has a classified risk rating, or is a TDR.

Once the decision has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is calculated by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The appropriate method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis. The Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

Consistent with accounting and regulatory guidance, the Company recognizes a TDR when a borrower is experiencing financial difficulties and the Bank, for economic or legal reasons related to a borrower's financial difficulties, grants a concession to the borrower that would not normally be considered. Regardless of the form of concession granted, the Company's objective in offering a TDR is to increase the probability of repayment of the borrower's loan. The Company did not modify any loans as TDRs during the three months ended March 31, 2021 or March 31, 2020. As of March 31, 2021, all TDRs were performing in accordance with their modified terms and are included in the impaired loan table below.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary at March 31, 2021 and December 31, 2020 (dollars in thousands):


					Impaired Loans
	Impaired Loans With				Without
	Allowance				Allowance		Total Impaired Loans
	Recorded		Related		Recorded		Recorded		Unpaid Principal
	Investment		Allowance		Investment		Investment		Balance
March 31, 2021:
Commercial real estate and construction	$	853	$	346	$	2,198	$	3,051	$	3,071
Commercial business		618		251		—		618		633
Total impaired loans	$	1,471	$	597	$	2,198	$	3,669	$	3,704

December 31, 2020:
Commercial real estate and construction	$	853	$	256	$	2,210	$	3,063	$	3,063
Commercial business		618		186		—		618		618
Total impaired loans	$	1,471	$	442	$	2,210	$	3,681	$	3,681

The following table presents the average recorded investment in impaired loans and related interest income recognized for the three months ended March 31, 2021 and March 31, 2020 (dollars in thousands):


	For the Three Months Ended March 31,
	2021		2020
Average investment in impaired loans:
Commercial real estate and construction	$	3,057	$	834
Commercial business		618		605
	$	3,675	$	1,439
Interest income recognized on impaired loans	$	22	$	18

The Company has elected to follow the loan modification guidance under Section 4013 of the CARES Act with regard to COVID-19 modifications made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Under that guidance, any loan modification that is done as a result of COVID-19 for a loan that was not more than 30 days past due as of December 31, 2019, will not be categorized as a TDR. The Company has developed loan payment deferral programs to provide assistance to both individuals and small business clients directly impacted by the COVID-19 pandemic. As of March 31, 2021, the Bank had existing payment deferrals for eight commercial loans totaling $9.2 million and five consumer loans totaling $1.0 million as a result of COVID-19. All of these loans were initially provided a deferral period of 90 days and, if necessary, additional deferral periods were provided upon request. The Company remains fully committed to serving its customers and communities through this uncertain time.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table provides additional information with respect to the loans modified under Section 4013 of the CARES Act in the Company’s loan portfolio at March 31, 2021 (dollars in thousands):


				Weighted Average
Type of Loan	Number of Loans	Balance		Interest Rate
One-to-four family and residential and construction	5	$	1,007	3.78	%
Commercial real estate and construction	7		8,229	4.31	%
Commercial business	1		954	4.62	%
Total	13	$	10,190	4.29	%

Included in the commercial real estate and construction modifications were two hotel and motel loans totaling $3.6 million.

Management uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first five categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently performing but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the collection of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans 90 days or more past due are considered Substandard. Any loan that has a specific allocation of the allowance for loan losses and is in the process of liquidation of the collateral is placed in the Doubtful category. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as delinquency, bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolio at origination. Commercial relationships are periodically reviewed internally for credit deterioration or improvement in order to confirm that the relationship is appropriately risk rated. The Audit Committee of the Company also engages an external consultant to conduct loan reviews. The scope of the annual external engagement, which is performed through semi-annual loan reviews, includes reviewing approximately the top 50 to 60 loan relationships, all watchlist loans greater than $100,000, all commercial Reg O loans, and a random sampling of new loan originations between $200,000 and $500,000 during the year. Status reports are provided to management for loans classified as Substandard on a quarterly basis, which results in a proactive approach to resolution. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table presents the classes of the loan portfolio summarized by the aggregate Pass rating and the criticized categories of Special Mention, Substandard and Doubtful within the Company’s internal risk rating system as of March 31, 2021 and December 31, 2020 (dollars in thousands):


			Special
	Pass		Mention		Substandard		Doubtful		Total
March 31, 2021:
Real estate loans:
One-to-four-family residential and construction	$	177,955	$	—		1,821	$	—	$	179,776
Commercial real estate and construction		362,921		11,129		3,503		—		377,553
Home equity loans and lines of credit		90,939		54		170		—		91,163
Commercial business loans		69,384		384		677		—		70,445
Other loans		449		—		—		—		449
Total	$	701,648	$	11,567	$	6,171	$	—	$	719,386

December 31, 2020:
Real estate loans:
One-to-four-family residential and construction	$	190,491	$	—		1,911	$	—	$	192,402
Commercial real estate and construction		361,961		10,020		3,640		—		375,621
Home equity loans and lines of credit		95,888		55		173		—		96,116
Commercial business loans		76,852		415		683		—		77,950
Other loans		502		—		2		—		504
Total	$	725,694	$	10,490	$	6,409	$	—	$	742,593

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due based on the loans’ contractual due dates. Management considers nonperforming loans to be those loans that are past due 90 days or more and are still accruing as well as all nonaccrual loans. The following table presents the segments of the loan portfolio summarized by the past due status of the loans as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	30‑59 Days		60‑89 Days		90 days		Total				Total		90 Days Past
	Past Due		Past Due		or Greater		Past Due		Current		Loans		Due & Accruing
March 31, 2021:
Real estate loans:
One-to-four-family residential and construction	$	618	$	—	$	878	$	1,496	$	178,280	$	179,776	$	—
Commercial real estate and construction		203		—		1,070		1,273		376,280		377,553		—
Home equity loans and lines of credit		120		34		54		208		90,955		91,163		—
Commercial business loans		44		9		—		53		70,392		70,445		—
Other loans		—		—		—		—		449		449		—
Total	$	985	$	43	$	2,002	$	3,030	$	716,356	$	719,386	$	—

December 31, 2020:
Real estate loans:
One-to-four-family residential and construction	$	698	$	454	$	1,046	$	2,198	$	190,204	$	192,402	$	—
Commercial real estate and construction		188		—		1,161		1,349		374,272		375,621		—
Home equity loans and lines of credit		73		56		49		178		95,938		96,116		—
Commercial business loans		326		—		—		326		77,624		77,950		—
Other loans		—		—		2		2		502		504		—
Total	$	1,285	$	510	$	2,258	$	4,053	$	738,540	$	742,593	$	—

The following table presents nonaccrual loans summarized by the loan portfolio segments as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	March 31,		December 31,
	2021		2020
Real estate loans:
One-to-four-family residential and construction	$	1,759	$	1,911
Commercial real estate and construction		2,031		2,196
Home equity loans and lines of credit		171		173
Commercial business loans		677		683
Other loans		—		2
Total	$	4,638	$	4,965

An allowance for loan losses (“ALL”) is maintained to absorb losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

The Bank’s methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the Bank’s ALL.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors. Management tracks the historical net charge-off activity for the loan segments which may be adjusted for qualitative factors. Pass rated credits are segregated from criticized credits for the application of qualitative factors. Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.

Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors are evaluated using information obtained from internal, regulatory, and governmental sources and include national and local economic trends and conditions; levels of and trends in delinquency rates and non-accrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, depth and ability of management; effects of the COVID-19 pandemic; and concentrations of credit from a loan type, industry and/or geographic standpoint.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL. Management utilizes an internally developed methodology to track and apply the various components of the allowance.

During the three months ended March 31, 2021, there was (1) an increase in the provision for the one-to-four family residential and construction loan class primarily due to increases in the qualitative factors related to the percentage change in both loan balances and the volume and severity of past due loans compared to the previous quarter; (2) a decrease in the provision for the commercial real estate and construction loan class primarily due to decreases in the qualitative factors related to the changes in loan balances, the volume and severity of past due loans and loan concentrations partially offset by additional reserves established for the hotel loan segment and impaired loans; (3) an increase in the provision for the commercial business loan class primarily due to an increase in the qualitative factor related to the percentage change in loan balances compared to the prior quarter partially offset by a decrease in the qualitative factor related to balance changes in loan concentrations; (4) an increase in the provision for the home equity loans and lines of credit loan class primarily due to an increase in the qualitative factor related to the percentage changes in loan balances during the period.

The following tables summarize the activity in the primary segments of the ALL for the three months ended March 31, 2021 and March 31, 2020 as well as the allowance required for loans individually and collectively evaluated for impairment as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	Real Estate Loans
	One-to-four-		Commercial		Home
	family		Real Estate		Equity Loans
	Residential and		and		and Lines		Commercial		Other
	Construction		Construction		of Credit		Business		Loans		Total
Three Months Ended :
Balance December 31, 2020	$	206	$	6,990	$	191	$	451	$	3	$	7,841
Charge-offs		(12)		—		—		—		(3)		(15)
Recoveries		—		—		—		—		3		3
Provision		298		(314)		66		100		—		150
Balance March 31, 2021	$	492	$	6,676	$	257	$	551	$	3	$	7,979

Balance at December 31, 2019	$	721	$	3,313	$	310	$	534	$	4	$	4,882
Charge-offs		—		—		(13)		(38)		(2)		(53)
Recoveries		2		1		—		1		—		4
Provision		646		(205)		57		50		2		550
Balance at March 31, 2020	$	1,369	$	3,109	$	354	$	547	$	4	$	5,383

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021


	Real Estate Loans
	One-to-four-		Commercial		Home
	family		Real Estate		Equity Loans
	Residential and		and		and Lines		Commercial		Other
	Construction		Construction		of Credit		Business		Loans		Total
Evaluated for Impairment:
Collectively	$	492	$	6,330	$	257	$	300	$	3	$	7,382
Individually		—		346		—		251		—		597
Balance at March 31, 2021	$	492	$	6,676	$	257	$	551	$	3	$	7,979

Evaluated for Impairment:
Collectively	$	206	$	6,734	$	191	$	265	$	3	$	7,399
Individually		—		256		—		186		—		442
Balance at December 31, 2020	$	206	$	6,990	$	191	$	451	$	3	$	7,841

The ALL is based on estimates and actual losses will vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the loan portfolio at any given date. In addition, federal regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses and may require the Bank to make changes to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to Management. Based on Management’s comprehensive analysis of the loan portfolio, they believe the current level of the allowance for loan losses is adequate.

(10) Foreclosed Assets Held For Sale

Foreclosed assets acquired in the settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate on the Consolidated Statements of Financial Condition. As of March 31, 2021, included within the foreclosed assets were two residential properties. As of December 31, 2020, included within the foreclosed assets were three residential properties. Additionally, the Company had initiated formal foreclosure procedures totaling $718,000 in one-to-four family residential loans and $869,000 in commercial real estate loans as of March 31, 2021.

(11) Stock Based Compensation

The Company currently has two stock plans that allow for the issuance of stock based compensation, the Allegheny Valley Bancorp, Inc. 2011 Stock Incentive Plan (the “2011 Plan”) and the Standard Financial Corp. 2012 Equity Incentive Plan (the “2012 Plan”). On February 5, 2020, 3,058 shares of restricted stock were awarded to directors out of the 2011 Plan. The awards vested on December 31, 2020 and the related compensation expense was recognized straight line over the 11 month vesting period. On March 10, 2020, 3,295 shares of restricted stock were awarded to employees out of the 2011 Plan. The awards become 1/3 vested annually on the grant date for each of the next 3 years and the related compensation expense is being recognized using the straight line method over the vesting period. On March 12, 2019, 2,727 shares of restricted stock were awarded to employees out of the 2011 Plan. The awards vest over 34 months and the related compensation expense is being recognized using the straight line method over the vesting period. At March 31, 2021, there were 66,235 and 101,144 shares available to be issued under the 2011 Plan and the 2012 Plan, respectively.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table summarizes transactions regarding restricted stock under the Plans:


			Weighted
			Average
	Number of		Grant Date
	Restricted		Price Per
	Shares		Share
Non-vested shares at December 31, 2020		4,202	$	26.73
Granted		—		—
Vested		(1,062)		26.17
Forfeited		—		—
Non-vested shares at March 31, 2021		3,140	$	26.92

Compensation expense recorded on restricted stock grants of $14,000 and $27,000 was recorded during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was $76,000 of unrecognized compensation expense that will be recognized over the remaining vesting periods.

The following table summarizes transactions regarding the stock options under the Plans:


		Weighted		Weighted
		Average		Average
		Exercise		Remaining
	Options	Price		Contractual Term
Outstanding at December 31, 2020	31,871	$	16.73	1.47
Granted	—		—
Exercised	—		—
Expired	(2,081)	$	20.02
Forfeited	—		—
Outstanding at March 31, 2021	29,790	$	16.50	1.32
Exercisable at March 31, 2021	29,790	$	16.50

For both the three months ended March 31, 2021 and March 31, 2020, there was no compensation expense related to stock options. As of March 31, 2021, all outstanding stock options were fully vested and there was no unrecognized compensation expense.

(12) Employee Stock Ownership Plan

The Company established a tax qualified Employee Stock Ownership Plan (“ESOP”) for the benefit of its employees in conjunction with the stock conversion on October 6, 2010. Eligible employees begin to participate in the plan after one year of service and become 20% vested in their accounts after two years of service, 40% after three years of service, 60% after four years of service, 80% after five years of service and 100% after six years of service, or earlier, upon death, disability or attainment of normal retirement age.

In connection with the stock conversion, the purchase of the 278,254 shares of the Company stock by the ESOP was funded by a loan from the Company through the Bank. Unreleased ESOP shares collateralize the loan payable, and the cost of the shares is recorded as a contra-equity account in the stockholders’ equity of the Company. Shares are released as debt payments are made by the ESOP to the loan. The ESOP’s sources of repayment of the loan can include dividends, if any, on the unallocated stock held by the ESOP and discretionary contributions from the Company to the ESOP and earnings thereon.

Compensation expense is equal to the fair value of the shares committed to be released and unallocated ESOP shares are excluded from outstanding shares for purposes of computing earnings per share. There is no 2021 share release anticipated due to the pending merger and termination of the ESOP plan. As such, there was no compensation expense related to the ESOP recognized during the three months ended March 31, 2021. During the three months ended March 31, 2020, compensation expense related to the ESOP was $100,000. Dividends on unallocated shares are not treated as ordinary dividends but are instead used to repay the ESOP loan and recorded as compensation expense.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

As of March 31, 2021, the ESOP held a total of 238,554 shares of the Company’s stock. Of the 238,554 shares, there were 130,093 unallocated as of March 31, 2021 with a fair market value of $4.2 million.

(13) Pension Information

The Company sponsors a pension plan which is a noncontributory defined benefit retirement plan. Effective August 1, 2005, the annual benefit provided to employees under this defined benefit pension plan was frozen by the Bank. Freezing the plan eliminated all future benefit accruals; however, the accrued benefit as of August 1, 2005 remained.

The net periodic pension benefit for the three months ended March 31, 2021 and March 31, 2020 was as follows (dollars in thousands):


	Three Months Ended March 31,
	2021		2020
Interest Cost	$	21	$	25
Expected return on plan assets		(32)		(32)
Amortization of net loss		10		3
Net periodic pension benefit	$	(1)	$	(4)

(14) Fair Value of Assets and Liabilities

Fair Value Hierarchy

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

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available. A contractually binding sales price also provides reliable evidence of fair value.

Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that utilize model-based techniques for which all significant assumptions are observable in the market.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement; inputs to the valuation methodology that utilize model-based techniques for which significant assumptions are not observable in the market; or inputs to the valuation methodology that requires significant management judgment or estimation, some of which may be internally developed.

Management maximizes the use of observable inputs and minimizes the use of unobservable inputs when determining fair value measurements. Management reviews and updates the fair value hierarchy classifications of the Company’s assets and liabilities on a quarterly basis.

Assets Measured at Fair Value on a Recurring Basis

Investment, Mortgage-Backed and Equity Securities

Fair values of investment and mortgage-backed securities were primarily measured using information from a third-party pricing service. This service provides pricing information by utilizing evaluated pricing models supported with market

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data from market research publications. Level 1 securities are comprised of equity securities. As quoted prices were available, unadjusted, for identical securities in active markets, these securities were classified as Level 1 measurements. Level 2 securities were primarily comprised of debt securities issued by government agencies, states and municipalities, corporations, as well as mortgage-backed securities issued by government agencies. Fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models. In cases where there may be limited or less transparent information provided by the Company’s third-party pricing service, fair value may be estimated by the use of secondary pricing services or through the use of non-binding third-party broker quotes.

On a quarterly basis, management reviews the pricing information received from the Company’s third-party pricing service. This review process includes a comparison to non-binding third-party broker quotes, as well as a review of market-related conditions impacting the information provided by the Company’s third-party pricing service. Management primarily identifies investment securities which may have traded in illiquid or inactive markets by identifying instances of a significant decrease in the volume or frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs. As of March 31, 2021 and December 31, 2020, management did not make adjustments to prices provided by the third-party pricing service as a result of illiquid or inactive markets. On a quarterly basis, management also reviews a sample of securities priced by the Company’s third-party pricing service to review significant assumptions and valuation methodologies used. Based on this review, management determines whether the current placement of the security in the fair value hierarchy is appropriate or whether transfers may be warranted.

The following table presents the assets measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 by level within the fair value hierarchy (dollars in thousands):


	Level 1		Level 2		Level 3		Total
March 31, 2021:
Investment securities available for sale:
U.S. government and agency obligations	$	—	$	5,896	$	—	$	5,896
Corporate bonds		—		5,282		—		5,282
Municipal obligations		—		77,208		—		77,208
Total investment securities available for sale		—		88,386		—		88,386
Equity securities		2,609		—		—		2,609
Mortgage-backed securities available for sale		—		94,970		—		94,970
Total recurring fair value measurements	$	2,609	$	183,356	$	—	$	185,965


December 31, 2020:
Investment securities available for sale:
U.S. government and agency obligations	$	—	$	4,007	$	—	$	4,007
Corporate bonds		—		5,230		—		5,230
Municipal obligations		—		80,716		—		80,716
Total investment securities available for sale		—		89,953		—		89,953
Equity securities		2,552		—		—		2,552
Mortgage-backed securities available for sale		—		95,525		—		95,525
Total recurring fair value measurements	$	2,552	$	185,478	$	—	$	188,030

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the assets measured at fair value on a nonrecurring basis as of March 31, 2021 and December 31, 2020 by level within the fair value hierarchy (dollars in thousands):


	Level 1		Level 2		Level 3		Total
March 31, 2021:
Impaired loans		—		—		874		874
Mortgage servicing rights		—		—		646		646
Total nonrecurring fair value measurements	$	—	$	—	$	1,520	$	1,520

December 31, 2020:
Foreclosed real estate	$	—	$	—	$	158	$	158
Impaired loans		—		—		1,029		1,029
Mortgage servicing rights		—		—		698		698
Total nonrecurring fair value measurements	$	—	$	—	$	1,885	$	1,885

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Company uses Level 3 inputs to determine fair value (dollars in thousands):

Quantitative Information about Level 3 Fair Value Measurements

March 31,

December 31,

Valuation

Unobservable

2021

2020

Techniques

Input

Range

Foreclosed real estate

—

158

Appraisal of collateral⁽¹⁾

Appraisal adjustments⁽²⁾

0% to 30%

Liquidation expenses⁽²⁾

Impaired loans

874

1,029

Fair value of collateral^{(1), (3)}

Appraisal adjustments⁽²⁾

0% to 30%

Liquidation expenses⁽²⁾

Mortgage servicing rights

646

698

Discounted cash flow method

Discount rate

Constant prepayment rates

(1)	Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

(2)	Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

(3) Includes qualitative adjustments by management and estimated liquidation expenses.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table presents the carrying value, estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments not required to be carried at fair value as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	Carrying		Estimated
	Value ⁽¹⁾		Fair Value		Level 1		Level 2		Level 3
March 31, 2021:
Financial Instruments - Assets:
Loans receivable	$	711,407	$	718,891	$	—	$	—	$	718,891

Financial Instruments - Liabilities:
Demand and savings accounts	$	628,524	$	628,524	$	628,524	$	—	$	—
Time deposits		204,622		207,937		—		—		207,937
Long-term borrowings		78,521		80,360		—		—		80,360

December 31, 2020:
Financial Instruments - Assets:
Loans receivable	$	734,752	$	737,782	$	—	$	—	$	737,782

Financial Instruments - Liabilities:
Demand and savings accounts	$	603,077	$	603,077	$	603,077	$	—	$	—
Time deposits		206,163		210,892		—		—		210,892
Long-term borrowings		89,382		92,259		—		—		92,259

(1)	The financial instrument is carried at amortized cost.

(15) Accumulated Other Comprehensive Income

The following tables present the significant amounts reclassified out of accumulated other comprehensive income and the changes in accumulated other comprehensive income by component for the three months ended March 31, 2021 and March 31, 2020 (dollars in thousands):


	Unrealized Gains		Unrecognized
	on Available for Sale		Pension
	Securities		Costs		Total
Balance as of December 31, 2020	$	2,657	$	(450)	$	2,207
Other comprehensive loss before reclassification		(2,001)		—		(2,001)
Amount reclassified from accumulated other comprehensive loss		(3)		8		5
Total other comprehensive loss		(2,004)		8		(1,996)
Balance as of March 31, 2021	$	653	$	(442)	$	211

Balance as of December 31, 2019	$	1,386	$	(244)	$	1,142
Other comprehensive loss before reclassification		(375)		—		(375)
Amount reclassified from accumulated other comprehensive loss		—		2		2
Total other comprehensive loss		(375)		2		(373)
Balance as of March 31, 2020	$	1,011	$	(242)	$	769

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021


	Amount Reclassified
	from Accumulated		Affected Line on
	Other Comprehensive		the Consolidated
	Income (Loss) (a)		Statements of Income
Three Months Ended March 31, 2021:
Unrealized gains on available for sale securities	$	4	Net gains on sales of securities
		(1)	Income tax expense
	$	3	Net of tax
Amortization of defined benefit items:
Actuarial loss	$	(10)	Other operating expenses
		2	Income tax expense
	$	(8)	Net of tax
Total reclassification for the period	$	(5)	Net income

Three Months Ended March 31, 2020:
Amortization of defined benefit items:
Actuarial loss	$	(3)	Other operating expenses
		1	Income tax expense
	$	(2)	Net of tax
Total reclassification for the period	$	(2)	Net income

(a) Amounts in parentheses indicate debits to net income

(16) Revenue Recognition

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three months ended March 31, 2021 and March 31, 2020 (dollars in thousands):


	Three Months Ended March 31,
	2021		2020
Noninterest income
In scope of Topic 606:
Service charges	$	632	$	714
Investment management fees		115		220
Noninterest income (in-scope of Topic 606)		747		934
Noninterest income (out-of-scope of Topic 606)		423		(399)
Total noninterest income	$	1,170	$	535

(17) Goodwill and Other Intangibles

The Company has recorded goodwill associated with mergers totaling $25.8 million. Goodwill is not amortized, but is periodically evaluated for impairment. The Company did not recognize any impairment during either of the three months ended March 31, 2021 or March 31, 2020.

Identifiable intangibles are amortized to their estimated residual values over the expected useful lives of such assets. The balance of the core deposit intangible at March 31, 2021 was $1.3 million net of $2.8 million of accumulated amortization as of that date.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

As of March 31, 2021, the estimated future amortization expense for the core deposit intangible was (dollars in thousands):



2021	$	244
2022		326
2023		326
2024		325
2025		81
	$	1,302

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides further detail on the financial condition and results of operations of the Company. This section should be read in conjunction with the Notes to Consolidated Financial Statements (Unaudited) presented elsewhere in this Quarterly Report on Form 10-Q.

The Company’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of March 31, 2021 have remained unchanged from the disclosures presented in the Company’s audited financial statements for the year ended December 31, 2020 contained in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 31, 2021.

Standard AVB Financial Corp. is a Maryland corporation that provides a wide array of retail and commercial financial products and services to individuals, families and businesses through 17 banking offices located in the Pennsylvania counties of Allegheny, Westmoreland and Bedford and Allegany County, Maryland through its wholly-owned subsidiary Standard Bank.

Proposed Merger with Dollar

On September 25, 2020 the Company, and Dollar announced they had entered into a definitive agreement under which Dollar will acquire the Company in an all cash transaction valued at approximately $158 million. The Company’s stockholders will receive $33.00 for each share of Company common stock that they own. The transaction was approved by the Company’s stockholders on January 19, 2021 and all necessary regulatory approvals and waivers have been received. The parties expect that the propsed merger will be completed after market hours on May 28, 2021, pending the satisfaction or waiver of customary closing conditions. However, it is possible that factors outside the control of both companies could result in the merger being completed at a different time or not at all.

Non-GAAP Financial Measures

In addition to the results of operations presented in accordance with generally accepted accounting principles (GAAP), Management uses, and this exhibit contains, certain non-GAAP financial measures. Management believes these non-GAAP financial measures provide information useful to investors in understanding the Company’s underlying operational performance, business and performance trends, and facilitate comparisons with the performance of others in the financial service industry. Although Management believes these non-GAAP financial measures enhance investors’ understanding of the Company’s business and performance, they should not be considered an alternative to GAAP.

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Net income, basic earnings per share, diluted earnings per share, return on average assets and return on average equity excluding merger-related expenses are all non-GAAP measures. The following table reconciles net income to net income excluding merger-related expenses and presents basic earnings per share, diluted earnings per share, return on average assets and return on average equity utilizing both net income and net income excluding merger-related expenses for the periods presented (dollars in thousands, except per share data):


	Three Months Ended March 31,
	2021			2020

Noninterest Expense (GAAP)	$	5,576		$	5,510
Merger-related expenses (GAAP)		(151)			-
Noninterest expense, excluding merger-related expenses	$	5,425		$	5,510

Net Income (GAAP)	$	2,123		$	1,110
After tax merger-related expenses (GAAP)		121			-
Net income, excluding merger-related expenses	$	2,244		$	1,110

Earnings Per Share - Basic
GAAP	$	0.46		$	0.24
Excluding merger-related expenses	$	0.46			n/a

Earnings Per Share - Diluted
GAAP	$	0.46		$	0.24
Excluding merger-related expenses	$	0.46			n/a

Average Assets (GAAP)	$	1,048,584		$	975,543

Return on Average Assets
GAAP		0.82	%		0.46	%
Excluding merger-related expenses		0.87	%		n/a

Average Equity (GAAP)	$	145,423		$	141,938

Return on Average Equity
GAAP		5.92	%		3.15	%
Excluding merger-related expenses		6.26	%		n/a

Comparison of Financial Condition at March 31, 2021 and December 31, 2020

General. The Company’s total assets was $1.1 billion at both March 31, 2021 and December 31, 2020, respectively. Cash and cash equivalents increased $38.8 million, or 76.8%, net loans receivable decreased $23.3 million, or 3.2%, and investment and mortgage-backed securities decreased $2.1 million, or 1.1%, for the three months ended March 31, 2021.

Cash and Cash Equivalents. Cash and cash equivalents increased $38.8 million, or 76.8%, to $89.3 million at March 31, 2021 from $50.5 million at December 31, 2020. The increase in cash and cash equivalents was primarily the result of a $23.9 million increase in deposits and a $22.7 decrease in loans partially offset by a $10.8 decrease in FHLB advances.

Investment Securities. Investment securities available for sale decreased $1.6 million, or 1.7%, to $88.4 million at March 31, 2021 from $90.0 million at December 31, 2020. Purchases of investment securities totaled $7.4 million during the three months ended March 31, 2021 which included $641,000 in securities purchased but not settled as of quarter end. The purchases during the period were offset by calls and maturities of $7.5 million and a $1.5 million decrease in the unrealized gain on investment securities during the three months ended March 31, 2021.

Equity Securities. Equity securities available for sale were $2.6 million at both March 31, 2021 and December 31, 2020, respectively. There were no purchases or sales of equity securities during the three months ended March 31, 2021.

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Mortgage-Backed Securities. The Company’s mortgage-backed securities available for sale decreased $555,000, or 0.6%, to $95.0 million at March 31, 2021 from $95.5 million at December 31, 2020. Purchases of mortgage-backed securities totaling $14.5 million during the three months ended March 31, 2021 were offset by repayments of $8.1 million, sales of $5.7 million, and a $1.0 million decrease in the unrealized gain on mortgage-backed securities during the period.

Loans. At March 31, 2021, net loans were $711.4 million, or 66.8% of total assets, compared to $734.8 million, or 69.9% of total assets at December 31, 2020. One-to-four family residential and construction loans, commercial business loans, home equity loans and lines of credit, and other loans decreased $12.6 million or 6.6%, $7.5 million or 9.6%, $5.0 million or 5.2%, and $55,000 or 10.9%, respectively. The decreases were a result of loan payoffs and amortization exceeding loan production during the period. Commercial real estate and construction loans increased $1.9 million, or 0.5%.

Deposits. The Company accepts deposits primarily from the areas in which the Bank’s offices are located. The Company has consistently focused on building broader customer relationships and targeting small business customers to increase core deposits. The Company also relies on customer service to attract and retain deposits. The Company offers a variety of deposit accounts with a range of interest rates and terms. Deposit accounts consist of savings accounts, time deposits, money market accounts, commercial and consumer checking accounts and individual retirement accounts. Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market interest rates, liquidity requirements and deposit growth goals.

Deposits increased $23.9 million, or 3.0%, to $833.1 million at March 31, 2021 from $809.2 million at December 31, 2020. The increase resulted from a $25.4 million, or 4.2%, increase in demand and savings accounts partially offset by a $1.5 million, or 0.8%, decrease in time deposits during the three months ended March 31, 2021. The increase in demand and savings accounts resulted from increases in both business and consumer products. The increases were primarily the result of inflows from several sources including additional government stimulus, second round PPP loan proceeds, and maturing time deposits. Non-interest-bearing checking accounts, savings accounts, and interest-bearing checking accounts increased $16.7 million or 9.5%, $9.9 million or 5.8%, and $1.5 million or 1.2%, respectively. Money market accounts decreased $2.7 million, or 2.2% during the period.

Borrowings. Borrowed funds, which includes short and long-term borrowings and securities sold under agreements to repurchase, decreased by $10.8 million, or 11.7%, to $82.2 million at March 31, 2021 from $93.0 million at December 31, 2020. The decrease was primarily due to a decrease in long-term borrowings resulting from $8.5 million in maturities and an additional $2.3 million in principal repayments. Financing lease liabilities, which are also included in long-term borrowings, were $2.9 million at March 31, 2021 and $3.0 million at December 31, 2020. There were no short-term borrowings at March 31, 2021 or December 31, 2020.

Stockholders’ Equity. Stockholders’ equity decreased $894,000, or 0.6%, to $145.1 million at March 31, 2021 from $146.0 million at December 31, 2020. The decrease was a result of a $2.0 million decrease in accumulated other comprehensive income related to changes in the fair value of available for sale debt securities and $1.0 million in dividends paid during the period partially offset by net income of $2.1 million.

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Average Balance and Yields

The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated (dollars in thousands). No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.


	For the Three Months Ended March 31,
	2021							2020
	Average							Average
	Outstanding							Outstanding
	Balance			Interest		Yield/ Rate		Balance			Interest		Yield/ Rate
Interest-earning assets:
Loans	$	734,044		$	7,575	4.13	%	$	712,469		$	7,813	4.36	%
Investment and mortgage-backed securities		186,585			888	1.90	%		159,493			992	2.49	%
FHLB and other restricted stock		8,718			106	4.97	%		7,579			143	7.57	%
Interest-earning deposits		56,528			13	0.09	%		27,800			88	1.28	%
Total interest-earning assets		985,875			8,582	3.49	%		907,341			9,036	3.96	%
Noninterest-earning assets		62,709							68,202
Total assets	$	1,048,584						$	975,543
Interest-bearing liabilities:
Savings accounts	$	178,208			40	0.09	%		144,801			53	0.15	%
Time Deposits		205,895			797	1.57	%		239,852			1,283	2.15	%
Money market accounts		120,982			60	0.20	%		103,871			265	1.03	%
Demand and NOW accounts		124,821			53	0.17	%		109,592			71	0.26	%
Total interest-bearing deposits		629,906			950	0.61	%		598,116			1,672	1.12	%
Borrowings		83,343			423	2.03	%		99,195			531	2.14	%
Securities sold under agreements to repurchase		3,439			2	0.20	%		3,980			4	0.44	%
Total interest-bearing liabilities		716,688			1,375	0.78	%		701,291			2,207	1.26	%
Noninterest-bearing deposits		184,418							129,217
Noninterest-bearing liabilities		2,055							3,097
Total liabilities		903,161							833,605
Stockholders' equity		145,423							141,938
Total liabilities and stockholders' equity	$	1,048,584						$	975,543

Net interest income				$	7,207						$	6,829
Net interest rate spread ⁽¹⁾						2.71	%						2.70	%
Net interest-earning assets ⁽²⁾	$	269,187						$	206,050
Net interest margin ⁽³⁾						2.96	%						3.02	%
Average interest-earning assets to interest-bearing liabilities		137.56	%						129.47	%

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

(2)	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

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

Comparison of Operating Results for the Three Months Ended March 31, 2021 and 2020

General. Net income for the quarter ended March 31, 2021 was $2.1 million compared to $1.1 million for the quarter ended March 31, 2020, an increase of $1.0 million, or 91.3%. Net income for the quarter ended March 31, 2021 was impacted by merger expenses of $151,000 ($121,000 after tax) related to the pending merger with Dollar. Excluding the after tax impact of the merger-related expenses, net income would have been $2.2 million. Earnings per share for the current period was $0.46 for basic and $0.46 for fully diluted ($0.46 and $0.46, respectively, excluding the merger-related expenses) compared to $0.24 for basic and $0.24 for fully diluted for the same period in 2020.

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The Company’s annualized return on average assets (ROA) and annualized return on average equity (ROE) for the quarter ended March 31, 2021 were 0.82% and 5.92%, respectively, (0.87% and 6.26%, respectively, excluding the merger-related expenses) compared to 0.46% and 3.15%, respectively, for the quarter ended March 31, 2020.

Net Interest Income. Net interest income for the quarter ended March 31, 2021 was $7.2 million, an increase of 5.5%, compared to $6.8 million for the quarter ended March 31, 2020. The increase was primarily the result of a decrease in both the balance and cost of interest-bearing liabilities as well as an increase in the balance of interest-earning assets partially offset by a decrease in the yield on interest-earning assets. The net interest rate spread and net interest margin were 2.71% and 2.96%, respectively, for the three months ended March 31, 2021, compared to 2.70% and 3.02%, respectively, for the three months ended March 31, 2020.

Interest and Dividend Income. Total interest and dividend income decreased $454,000, or 5.0%, to $8.6 million for the three months ended March 31, 2021 compared to $9.0 million for the three months ended March 31, 2020. The decrease was primarily the result of a 47 basis point decrease in the average yield on interest-earning assets to 3.49% for the three months ended March 31, 2021 from 3.96% for the same period in the prior year as a result of lower short-term interest rates. The decrease in total interest and dividend income resulting from the decrease in the average yield was partially offset by an increase in the average balance of interest-earning assets of $78.5 million, or 8.7%, to $985.9 million for the three months ended March 31, 2021 compared to the same period in the prior year.

Interest income on loans decreased $238,000, or 3.1%, to $7.6 million for the three months ended March 31, 2021 compared to $7.8 million for the three months ended March 31, 2020. The decrease was primarily the result of a 23 basis point decrease in the average yield on loans receivable to 4.13% for the three months ended March 31, 2021 from 4.36% for the same period in the prior year. The decrease in interest income resulting from the decrease in the average yield was partially offset by an increase in the average balance of loans receivable of $21.6 million, or 3.0%, to $734.0 million for the three months ended March 31, 2021 compared to the same period in the prior year.

Interest income on investment and mortgage-backed securities decreased $104,000, or 10.5%, to $888,000 for the three months ended March 31, 2021 compared to $992,000 for the three months ended March 31, 2020. The decrease was primarily the result of a 59 basis point decrease in the average yield earned on investment and mortgage-backed securities to 1.90% for the quarter ended March 31, 2021 from 2.49% for the same period in the prior year. The decrease in interest income resulting from the decrease in the average yield was partially offset by an increase in the average balance of investment and mortgage-backed securities of $27.1 million, or 17.0%, to $186.6 million for the three months ended March 31, 2021 compared to the same period in the prior year.

Dividend income on FHLB and other restricted stock decreased $37,000, or 25.9%, to $106,000 for the three months ended March 31, 2021 compared to $143,000 for the three months ended March 31, 2020. The decrease primarily resulted from a 260 basis point decrease in the average yield to 4.97% for the three months ended March 31, 2021 from 7.57% for the same period in the prior year. The FHLB decreased the dividend yield on both activity and membership stock as of the first quarter of 2021. The decrease in interest income resulting from the decrease in the average yield was partially offset by an increase in the average balance of FHLB stock and other restricted stock of $1.1 million, or 15.0%, to $8.7 million for the three months ended March 31, 2021 compared to the same period in the prior year.

Interest income on interest-earning deposits decreased $75,000, or 85.2%, to $13,000 for the three months ended March 31, 2021 compared to $88,000 for the three months ended March 31, 2020. The decrease was primarily the result of a 119 basis point decrease in the average yield on interest-earning deposits to 0.09% for the three months ended March 31, 2021 from 1.28% for the same period in the prior year as a result of lower short-term interest rates. The decrease in interest income resulting from the decrease in the average yield was partially offset by an increase in the average balance of interest-earning deposits of $28.7 million, or 103.3%, to $56.5 million for the three months ended March 31, 2021 compared to the same period in the prior year.

Interest Expense. Total interest expense decreased $832,000, or 37.7%, to $1.4 million for the three months ended March 31, 2021 compared to $2.2 million for the three months ended March 31, 2020. The decrease was primarily the result of a 48 basis point decrease in the average cost of interest-bearing liabilities to 0.78% for the three months ended March 31, 2021 from 1.26% for the three months ended March 31, 2020 as a result of lower short-term interest rates. The decrease in total interest expense resulting from the decrease in the average cost was partially offset by an increase in the average balance of interest-bearing liabilities of $15.4 million, or 2.2%, to $716.7 million for the three months ended March 31, 2021 compared to the same period in the prior year.

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Interest expense on deposits decreased $722,000, or 43.2%, to $1.0 million for the three months ended March 31, 2021 from $1.7 million for the three months ended March 31, 2020. The decrease was primarily the result of a 51 basis point decrease in the average cost of interest-bearing deposits to 0.61% for the three months ended March 31, 2021 from 1.12% for the same period in the prior year due to lower short-term interest rates. Additionally, the average balance of time deposits decreased $34.0 million, or 14.2%, for the three months ended March 31, 2021 compared to the same period in the prior year. Partially offsetting those decreases was an increase in the average balance of savings, money market, and demand and NOW deposit accounts of $33.4 million or 23.1%, $17.1 million or 16.5%, and $15.2 million or 13.9%, respectively, for the three months ended March 31, 2021 compared to the same period in the prior year.

Interest expense on borrowed funds decreased $108,000, or 20.3%, to $423,000 for the three months ended March 31, 2021 from $531,000 for the three months ended March 31, 2020. The decrease was primarily the result of a decrease in the average balance of borrowings of $15.9 million, or 16.0%, to $83.3 million for the three months ended March 31, 2021 compared to the same period in the prior year. Additionally, there was an 11 basis point decrease in the average cost of borrowings to 2.03% for the three months ended March 31, 2021 from 2.14% for the same period in the prior year. The decrease in the average cost of borrowed funds was primarily the result of maturities during the quarter ended March 31, 2021.

Provision for Loan Losses. Provision for loan losses decreased $400,000, or 72.7%, to $150,000 for the three months ended March 31, 2021 compared to $550,000 for the three months ended March 31, 2020. In management’s judgment, the allowance for loan losses is sufficient to cover losses inherent in the loan portfolio relative to loan mix, economic conditions and historical loss experience. The provision for the prior year quarter was impacted by a number of things including increases in several qualitative factors, some of which were directly impacted by the COVID-19 pandemic, an increase in loan balances included in the allowance calculation and increased reserves required on a few loans which had experienced a deterioration in quality. See Footnote 9 in the Notes to Consolidated Financial Statements (Unaudited) for additional information.

Noninterest Income. Noninterest income increased $635,000, or 118.7%, to $1.2 million for the three months ended March 31, 2021 compared to $535,000 for the three months ended March 31, 2020. The increase was primarily the result of a $731,000 change in the net equity securities fair value adjustment partially offset by decreases in investment management fees and service charges of $105,000 or 47.7%, and $71,000 or 9.7%, respectively, for the quarter ended March 31, 2021 compared to the same period in the prior year

Noninterest Expenses. Noninterest expenses totaled $5.6 million for the quarter ended March 31, 2021, compared to $5.5 million for the quarter ended March 31, 2020. Excluding the merger-related expenses of $151,000, noninterest expenses totaled $5.4 million for the quarter ended March 31, 2021. The decrease in noninterest expenses, excluding merger-related expenses, was primarily the result of a $152,000, or 4.5%, decrease in compensation and employee benefits expenses partially offset by a $111,000, or 252.3%, increase in federal deposit insurance for the three months ended March 31, 2021 compared to the same period in the prior year. The higher federal deposit insurance during the period was the result of the elimination of the small bank credits which had been applied in the prior period and have since been fully utilized.

Income Tax Expense. The Company recorded a provision for income tax of $528,000 for the three months ended March 31, 2021 compared to $194,000 for the three months ended March 31, 2020. The increase in income tax was primarily the result of an increase in taxable income as well as a higher effective tax rate for the period. The effective tax rate was 19.9% for the three months ended March 31, 2021 compared to 14.9% for the three months ended March 31, 2020.

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Non-Performing and Problem Assets

The table below sets forth the amounts and categories of non-performing assets at the dates indicated (dollars in thousands).


	March 31,			December 31,
	2021			2020
Non-accrual loans:
One-to-four family residential and construction	$	1,759		$	1,911
Commercial real estate and construction		2,031			2,196
Home equity loans and lines of credit		171			173
Commercial business		677			683
Other		—			2
Total nonaccrual loans		4,638			4,965
Loans past due 90 days and still accruing		—			—
Total non-performing loans		4,638			4,965
Foreclosed real estate		329			488
Total non-performing assets	$	4,967		$	5,453

Ratios:
Non-accrual loans to total loans		0.64	%		0.67	%
Non-performing loans to total loans		0.64	%		0.67	%
Non-performing assets to total assets		0.47	%		0.52	%
Allowance for loan losses to non-performing loans		172.04	%		157.93	%

As of March 31, 2021 and December 31, 2020, there were two loans modified as TDRs. Loans in the process of foreclosure totaled $1.6 million at March 31, 2021.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations. The Company’s primary sources of funds consist of deposit inflows, loan repayments and sales, advances and short-term borrowings from the FHLB, repurchase agreements and maturities, principal repayments and sales of available-for-sale securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general market interest rates, economic conditions and competition. The Company’s Asset/Liability Management Committee, under the direction of the Chief Financial Officer, is responsible for establishing and monitoring liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the funding needs of the Company including borrowing needs and deposit withdrawals of the Bank’s customers as well as unanticipated contingencies. At March 31, 2021, the Company’s cash and cash equivalents amounted to $89.3 million. Management believes there are sufficient sources of liquidity to satisfy short- and long-term liquidity needs as of March 31, 2021.

Time deposits due within one year of March 31, 2021 totaled $105.1 million, or 12.6% of total deposits. If these deposits do not remain with the Bank, it may be required to seek other sources of funds, including loan and securities sales, repurchase agreements and FHLB advances and short-term borrowings. The Company believes, however, based on historical experience and current market interest rates, it will retain upon maturity a large portion of time deposits with maturities of one year or less. The Company’s maximum borrowing capacity at the FHLB at March 31, 2021 was $386.6 million.

The Company is committed to serving both its individual and commercial customers through these difficult and unprecedented times. In light of the COVID-19 pandemic, the Company has increased the monitoring of its current liquidity and anticipated funding needs. Additionally, the Company has been proactive in positioning itself with additional liquidity in anticipation of the need to assist customers. Finally, the Company has successfully tested all of its contingency funding sources.

Stockholders’ equity decreased $894,000, or 0.6%, to $145.1 million at March 31, 2021 from $146.0 million at December 31, 2020. The decrease was a result of a $2.0 million decrease in accumulated other comprehensive income related to changes in the fair value of available for sale debt securities and $1.0 million in dividends paid during the period partially offset by net income of $2.1 million.

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Current regulatory requirements specify that the Bank and similar institutions must maintain regulatory capital sufficient to meet tier 1 leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios of at least 4.00%, 4.50%, 6.00% and 8.00%, respectively. At March 31, 2021, the Bank was in compliance with all regulatory capital requirements with ratios of 11.35%, 17.37%, 17.37% and 18.57%, respectively, and was considered “well capitalized” under regulatory guidelines.

As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have adopted a rule to establish for institutions with assets of less than $10 billion that meet other specified criteria a “community bank leverage ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) that such institutions may elect to utilize in lieu of the generally applicable leverage and risk-based capital requirements noted above. The federal banking agencies adopted 9% as the applicable ratio, however, in response to COVID-19, they temporarily reduced the ratio to 8% effective March 31, 2020. Institutions with capital meeting the specified requirements and electing to follow the alternative framework will be considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized.” The Bank did not utilize the community bank leverage ratio framework in its March 31, 2021 Call Report and maintains the right to opt-in or opt-out of the framework in any subsequent quarter.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, the Company routinely is a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans the Bank makes. At March 31, 2021, there were $117.6 million in loan commitments outstanding of which $55.4 million were for commercial loans and lines, $35.6 million were for one- to four-family and construction loans, and $26.6 million were for standby letters of credit and other commitments including consumer overdraft lines.

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

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of March 31, 2021, an evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Company’s management, including the President and Chief Executive Officer, and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2021.

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

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Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2021, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15-d15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

At March 31, 2021, the Company was not involved in any pending legal proceedings as a defendant other than routine legal proceedings occurring in the ordinary course of business. At March 31, 2021, the Company was not involved in any legal proceedings, the outcome of which management believes would be material to the Company’s financial condition or results of operations.

Item 1A. Risk Factors

There have been no material changes in risk factors applicable to the Company from those disclosed under the heading “Risk Factors” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 31, 2021.

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

The following table sets forth information with respect to purchases made by or on behalf of the Company of shares of common stock of the Company during the first quarter of 2021:


					Maximum
				Total Number of	Number of
				Shares Purchased	Shares That May
				as Part of	Yet Be
				Publically	Purchased Under
	Total Number of	Average Price		Announced Plans	the Plans or
Period	Shares Purchased	Paid Per Share		or Programs	Programs (1)
January 1-31, 2021	—	$	—	—	230,000
February 1-28, 2021	—		—	—	230,000
March 1-31, 2021	—		—	—	230,000
Totals	—	$	—	—

(1)

On January 29, 2020, the Company announced that its Board of Directors approved a new stock repurchase program. Pursuant to the new stock repurchase program, the Company may repurchase up to 230,000 shares of its common stock, or approximately 5% of its current outstanding shares. The stock repurchase program may be carried out through open market purchases, block trades, negotiated private transactions or pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission rules. The stock may be repurchased on an ongoing basis and will be subject to the availability of stock, general market conditions, the trading prices of the stock, alternative uses for capital and the Company’s financial performance. On March 19, 2020, the Company temporarily suspended its stock repurchase plan. To date, no shares have been repurchased under this program.

Table of Contents

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits


Exhibit
Number		Description

2.1		Agreement and Plan of Merger dated September 24, 2020 by and among Standard AVB Financial Corp., Dollar Mutual Bancorp, and Dollar Acquisition Sub, Inc. (1)

3.1		Articles of Incorporation of Standard AVB Financial Corp., as amended (2)

3.2		Amended and Restated Bylaws of Standard AVB Financial Corp. (3)

4.1		Form of common stock certificate of Standard AVB Financial Corp. (4)

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Written Statement of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials for the three and nine months ended September 30, 2020, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Statements of Financial Condition, (ii) Statements of Income, (iii) Statements of Comprehensive Income, (iv) Statements of Changes in Stockholder’s Equity, (v) Statements of Cash Flows, and (vi) Notes to Financial Statements.
104		Cover Page Interactive Data File (formatted as Inline XBRL and continued in Exhibit 101)

(1)	Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K as filed with the Securities and Exchange Commission on September 25, 2020.

(2)	Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K as filed with the Securities and Exchange Commission on August 24, 2017.

(3)	Incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K as filed with the Securities and Exchange Commission on February 26, 2020.

(4)	Incorporated by reference to Exhibit 4 to the Company’s Annual Report on Form 10-K, as filed on April 2, 2018.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	STANDARD AVB FINANCIAL CORP.


Date: May 14, 2021	/s/ Andrew W. Hasley
	Andrew W. Hasley
	President and Chief Executive Officer


Date: May 14, 2021	/s/ Susan A. Parente
	Susan A. Parente
	Executive Vice President and Chief Financial Officer

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