SEC Form 10-Q filed by WVS Financial Corp.

11/15/21 5:01:18 PM ET

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WVS Financial Corp

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 September 30, 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 Number: 0-22444

_________________________

WVS Financial Corp.
(Exact name of registrant as specified in its charter)
_________________________
Pennsylvania		25-1710500
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. YES ☒ NO ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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 ☒

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 $.01

WVFC

NASDAQ Global Market ^SM

Shares outstanding as of November 12, 2021: 1,884,114 shares of Common Stock, $.01 par value.

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WVS FINANCIAL CORP. AND SUBSIDIARY

INDEX

	Page
PART I.Financial Information
Item 1.Financial Statements
Consolidated Balance Sheet as of September 30, 2021 and June 30, 2021 (Unaudited)	3
Consolidated Statement of Income for the Three Months Ended September 30, 2021 and 2020 (Unaudited)	4
Consolidated Statement of Comprehensive Income for the Three Months Ended September 30, 2021 and 2020 (Unaudited)	5
Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended September 30, 2021 and 2020 (Unaudited)	6
Consolidated Statement of Cash Flows for the Three Months Ended September 30, 2021 and 2020 (Unaudited)	7
Notes to Unaudited Consolidated Financial Statements	9
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3Quantitative and Qualitative Disclosures about Market Risk	37
Item 4Controls and Procedures	41
	Page
PART II.Other Information
Item 1.Legal Proceedings	42
Item 1A.Risk Factors	42
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.Defaults Upon Senior Securities	43
Item 4.Mine Safety Disclosures	43
Item 5.Other Information	43
Item 6.Exhibits	43
Signature	44

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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(In thousands)

	September 30, 2021			June 30, 2021
Assets
Cash and due from banks	$	2,391		$	2,514
Interest-earning demand deposits		37			37
Total cash and cash equivalents		2,428			2,551
Certificates of deposit		350			350
Investment securities available-for-sale (amortized cost of $142,971 and $150,886)		143,526			151,577
Investment securities held-to-maturity (fair value of $10,582 and $15,592)		10,492			15,489
Mortgage-backed securities held-to-maturity (fair value of $100,143 and $82,659)		99,958			82,459
Net loans receivable (allowance for loan losses of $551 and $565)		81,300			80,684
Accrued interest receivable		980			749
Federal Home Loan Bank (FHLB) stock, at cost		6,144			6,044
Premises and equipment, net		643			657
Bank owned life insurance		5,049			5,021
Deferred tax assets (net)		284			245
Other assets		310			252
TOTAL ASSETS	$	351,464		$	346,078
Liabilities and Stockholders’ Equity
Liabilities:
Deposits
Non-interest-bearing accounts	$	23,948		$	25,452
Interest-earning checking		26,010			26,881
Savings accounts		48,967			50,058
Money market accounts		23,214			22,995
Certificates of deposit		32,314			29,731
Advance payments by borrowers for taxes and insurance		835			2,050
Total deposits		155,288			157,167
Federal Home Loan Bank advances: long-term – fixed rate		10,000			10,000
Federal Home Loan Bank advances: long-term – variable rate		25,000			25,000
Federal Home Loan Bank advances: short-term		115,594			113,093
Accrued interest payable		140			155
Other liabilities		7,021			2,274
TOTAL LIABILITIES		313,043			307,689
Stockholders’ equity:
Preferred stock:
5,000,000 shares, no par value per share, authorized; none issued		-			-
Common stock:
10,000,000 shares, $.01 par value per share, authorized; 3,805,636 shares issued;		38			38
Additional paid-in capital		21,604			21,596
Treasury stock: 1,921,522 and 1,921,522 shares at cost, respectively		(29,119	)		(29,119)	)
Retained earnings, substantially restricted		47,283			47,186
Accumulated other comprehensive income		395			502
Unallocated Employee Stock Ownership Plan (“ESOP”) shares		(1,780	)		(1,814)
TOTAL STOCKHOLDERS’ EQUITY		38,421			38,389
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	351,464		$	346,078

See accompanying notes to unaudited consolidated financial statements.

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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

(In thousands, except per share data)

	Three Months Ended September 30,
	2021		2020
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	697	$	864
Investment securities		358		437
Mortgage-backed securities		201		269
Certificates of deposit		2		6
FHLB Stock		61		89
Total interest and dividend income		1,319		1,665
INTEREST EXPENSE:
Deposits		37		104
Federal Home Loan Bank advances – long-term – fixed rate		57		115
Federal Home Loan Bank advances – long-term – variable rate		35		71
Federal Home Loan Bank advances – short-term		46		34
Other short-term borrowings		-		1
Total interest expense		175		325
NET INTEREST INCOME		1,144		1,340
PROVISION (CREDIT) FOR LOAN LOSSES		(14)		2
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES		1,158		1,338
NON-INTEREST INCOME:
Service charges on deposits		23		22
Earnings on Bank Owned Life Insurance		28		28
Investment securities gains		35		25

Other than temporary impairment (“OTTI”) losses		-		(13	)
Portion of loss (gain) recognized in other comprehensive income (before taxes)		-		-
Net impairment loss recognized in earnings		-		(13	)

ATM fee income		39		38
Other		13		11
Total non-interest income		138		111
NON-INTEREST EXPENSE:
Salaries and employee benefits		588		552
Occupancy and equipment		68		68
Data processing		62		59
Correspondent bank service charges		10		9
Federal deposit insurance premium		23		27
ATM Network expense		21		21
Other		160		144
Total non-interest expense		932		880
INCOME BEFORE INCOME TAXES		364		569
INCOME TAX EXPENSE		93		149
NET INCOME	$	271	$	420
EARNINGS PER SHARE:
Basic	$	0.16	$	0.24
Diluted	$	0.16	$	0.24
AVERAGE SHARES OUTSTANDING:
Basic		1,738,227		1,748,040
Diluted		1,738,227		1,748,040

See accompanying notes to unaudited consolidated financial statements.

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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

(In thousands)

	Three Months Ended September 30,
	2021			2020

NET INCOME	$	271		$	420
OTHER COMPREHENSIVE INCOME
Investment securities available for sale not other-than-temporarily impaired:
(Losses) gains arising during the year		(102)			1,030
Less: Income tax effect		21			(216	)
		(81	)		814
(Gains) recognized in earnings		(35	)		(25	)
Less: Income tax effect		(7	)		(5	)
		(28	)		(20	)
Unrealized holding (losses) gains on investment securities available for sale not other-than-temporarily impaired, net of tax		(109)			794
Investment securities held to maturity other-than-temporarily impaired:
Total losses		-			13
Losses recognized in earnings		-			13
Gains (losses) recognized in comprehensive income		-			-
Income tax effect		-			-
		-			-
Accretion of other comprehensive gain on other-than-temporarily impaired securities held to maturity		3			4
Less: Income tax effect		(1	)		(1	)

Unrealized holding gains on other-than-temporarily impaired securities held to maturity, net of tax		2			3
Other comprehensive (loss) income		(107)			797
COMPREHENSIVE INCOME	$	164		$	1,217

See accompanying notes to unaudited consolidated financial statements.

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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except per share data)

	Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings – Substantially Restricted			Accumulated Other Comprehensive (Loss) Income		Unallocated ESOP Shares			Total
Balance June 30, 2021	$	38	$	21,596	$	(29,119)		$	47,186		$	502	$	(1,814)		$	38,389
Net income									271								271
Other comprehensive loss												(107)					(107)
Amortization of unallocated ESOP shares				8										34			42
Cash dividends declared ($0.10 per share)									(174	)							(174	)
Balance September 30, 2021	$	38	$	21,604	$	(29,119	)	$	47,283		$	395	$	(1,780	)	$	38,421

	Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings – Substantially Restricted			Accumulated Other Comprehensive (Loss) Income			Unallocated ESOP Shares			Total
Balance June 30, 2020	$	38	$	21,577	$	(28,775	)	$	46,590		$	(556	)	$	(1,961	)	$	36,913
Net income									420									420
Other comprehensive income												797						797
Purchase of treasury stock (4,014 shares)						(52	)											(52	)
Amortization of unallocated ESOP shares				1											35			36
Cash dividends declared ($0.10 per share)									(175	)								(175	)
Balance September 30, 2020	$	38	$	21,578	$	(28,827	)	$	46,835		$	241		$	(1,926	)	$	37,939

See accompanying notes to unaudited consolidated financial statements.

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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)

	Three Months Ended September 30,
	2021			2020
OPERATING ACTIVITIES
Net income	$	271		$	420
Adjustments to reconcile net income to cash (used for) provided by operating activities:
Provision (credit) for loan losses		(14)			2
Depreciation		18			18
Investment securities gains		(35	)		(25	)
Net impairment loss recognized in earnings		0			13
Amortization of discounts, premiums and deferred loan fees, net		304			8
Amortization of unallocated ESOP shares		42			36
Deferred income taxes		(10	)		22
(Decrease) increase in accrued income taxes		89			(355	)
Earnings on bank owned life insurance		(28	)		(28	)
Increase in accrued employee benefits		50			46
(Increase) decrease in accrued interest receivable		(231	)		35
Decrease in accrued interest payable		(15	)		(173	)
Increase in deferred director compensation payable		13			14
Other, net		(394	)		(171	)
Net cash (used for) provided by operating activities		60			(138	)
INVESTING ACTIVITIES
Available-for-sale:
Purchases of investment securities		(11,308	)		(12,945	)
Proceeds from sale of investments		6,145			1,015
Proceeds from repayments of investment securities		12,814			19,507
Held-to-maturity:
Purchase of mortgage-backed securities		(20,767	)		-
Proceeds from repayments of investment securities		5,000			-
Proceeds from repayments of mortgage-backed securities		8,204			19,171
Purchases of certificates of deposit		(100	)		(100	)
Maturities/redemptions of certificates of deposit		100			597
Purchase of loans		(394	)		(5,248	)
Net (increase) decrease in net loans receivable		(221	)		4,558
Purchase of FHLB stock		(2,818	)		(3,044	)
Redemption of FHLB stock		2,718			3,685
Acquisition of premises and equipment		(4	)		(119	)
Net cash (used for) provided by investing activities		(631)			27,077

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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)

	Three Months Ended September 30,
	2021			2020
FINANCING ACTIVITIES
Net decrease in transaction and savings accounts	$	(3,247	)	$	(1,853	)
Net increase (decrease) in certificates of deposit		2,583			(5,198	)
Net decrease in advance payments by borrowers for taxes and insurance		(1,215	)		(1,347	)
Net increase (decrease) in FHLB short-term advances		2,501			(15,878	)
Repayments of other short-term borrowings		-			(1,125	)
Purchase of treasury stock		-			(52	)
Cash dividends paid		(174	)		(175	)
Net cash (used for) provided by financing activities		448			(25,628	)
(Decrease) increase in cash and cash equivalents		(123)			1,311
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD		2,551			2,500
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	$	2,428		$	3,811
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings	$	190		$	498
Income taxes		15			518
Unfunded security commitments		4,931			-

See accompanying notes to unaudited consolidated financial statements.

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WVS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (GAAP). However, all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation have been included. The results of operations for the three months ended September 30, 2021, are not necessarily indicative of the results which may be expected for the entire fiscal year.

The coronavirus (COVID-19) pandemic has negatively impacted the global economy, disrupted global supply chains and increased unemployment levels. The resulting temporary closure of many businesses and the implementation of social distancing and sheltering-in-place policies has and may continue to impact many of the Company’s customers. While the full effects of the pandemic remain unknown, the Company is committed to supporting its customers, employees and communities during this difficult time. The Company has given hardship relief assistance to customers, including the consideration of various loan payment deferral and fee waiver options, and encourages customers to reach out for assistance to support their individual circumstances. The pandemic could result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, the impact on the global economy worsens, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize impairments on the securities we hold. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed by the President of the United States. Certain provisions within the CARES Act encourage financial institutions to practice prudent efforts to work with borrowers impacted by COVID-19. Under these provisions, loan modifications deemed to be COVID-19 related would not be considered a troubled debt restructuring (TDR) if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of termination of the COVID-19 national emergency or December 31, 2020. The banking regulators issued similar guidance, which also clarified that a COVID-19-related modification should not be considered a TDR if the borrower was current on payments at the time the underlying loan modification program was implemented and if the modification is considered to be short-term. As of September 30, 2021, the Savings Bank had no loans in deferral.

2.RECENT ACCOUNTING PRONOUNCEMENTS

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

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In November, 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which amended the effective date of ASU 2016-13 for entities other than public business entities (PBEs), by requiring non-PBEs to adopt the standard for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Therefore, the revised effective dates of ASU 2016-13 for PBEs that are SEC filers will be fiscal years beginning after December 15, 2019, including interim periods within those years, PBEs other than SEC filers will be for fiscal years beginning after December 15, 2020, including interim periods within those years, and all other entities (non-PBEs) will be for fiscal years beginning after December 15, 2021, including interim periods within those years. The ASU also clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Rather, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The effective date and transition requirements for ASU 2018-19 are the same as those in ASU 2016-13, as amended by ASU 2018-19. On October 16, 2019, the FASB voted to defer the effective date for ASC 326, Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The final ASU is expected to be issued in mid-November. This Update is not expected to have a significant impact on the Company’s financial statements.

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. On October 16, 2019, the FASB voted to defer the effective date for ASC 326, Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The final ASU is expected to be issued in mid-November. 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. 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 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 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 asset 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. On October 16, 2019, the FASB voted to defer the effective date for ASC 326,Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The final ASU is expected to be issued in mid-November. 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 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 qualifies as a smaller reporting company and does not expect to early adopt these ASUs.

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In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. This ASU was issued to improve and clarify various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. The ASU includes seven issues that describe the areas of improvement and the related amendments to GAAP; they are intended to make the standards easier to understand and apply and to eliminate inconsistencies, and they are narrow in scope and are not expected to significantly change practice for most entities. Among its provisions, the ASU clarifies that all entities, other than public business entities that elected the fair value option, are required to provide certain fair value disclosures under ASC 825, Financial Instruments, in both interim and annual financial statements. It also clarifies that the contractual term of a net investment in a lease under Topic 842 should be the contractual term used to measure expected credit losses under Topic 326. Amendments related to ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is not permitted before an entity’s adoption of ASU 2016-01. Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU 2016-13. Early adoption is not permitted before an entity’s adoption of ASU 2016-13. Amendments related to ASU 2016-13 for entities that have adopted that guidance are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. Other amendments are effective upon issuance of this ASU. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. 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 May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which requires an entity to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. An entity should measure the effect of a modification as the difference between the fair value of the modified warrant and the fair value of that warrant immediately before modification. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. This Update is not expected to have a significant impact on the Company’s financial statements.

In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842), which amends ASC 842 so that lessors are no longer required to recognize a selling loss upon commencement of a lease with variable lease payments that, prior to the amendments, would have been classified as a sales-type or direct financing lease. Furthermore, a lessor must classify as an operating lease any lease that would otherwise be classified as a sales-type or direct financing lease and that would result in the recognition of a selling loss at lease commencement, provided that the lease includes variable lease payments that do not depend on an index or rate. For public business entities and certain not-for-profit entities and employee benefit plans that have adopted ASC 842, the amendments are effective for fiscal years beginning after December 15, 2021, and for interim periods within those fiscal years. For all other entities that have adopted ASC 842, the amendments are effective for fiscal years beginning after December 15, 2021, and for interim periods within fiscal years beginning after December 15, 2022. All entities that have adopted ASC 842 are permitted to early adopt the amendments in ASU 2021-05. The amendments in ASU 2021-05 are effective as of the same date as the guidance in ASC 842 for entities that have not adopted ASC 842. This Update is not expected to have a significant impact on the Company’s financial statements.

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3.REVENUE RECOGNITION

The Company recognizes revenue in accordance with ASC 606, Revenue from contracts with Customers – Topic 606. Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment security gains, and earnings on bank owned life insurances are not within the scope of ASC 606. The main types of noninterest income within the scope of the standard are as follows: Service Charges on deposit accounts - the Company has contracts with its deposit customers where fees are charged if certain parameters are not met. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific transactions or activities resulting from a customer request or activity that include overdraft fees, online banking fees, interchange fees, ATM fees and other transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time upon the completion of the requested service/transaction.

4.EARNINGS PER SHARE

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

	Three Months Ended
	September 30,
	2021			2020
Weighted average common shares issued		3,805,636			3,805,636
Average treasury stock shares		(1,921,522	)		(1,901,801	)
Average unallocated ESOP shares		(145,887	)		(155,795	)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share		1,738,227			1,748,040
Weighted average common shares and common stock equivalents used to calculate diluted earnings per share		1,738,227			1,748,040

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

The unallocated shares controlled by the ESOP are not considered in the weighted-average shares outstanding until the shares are committed for allocation to an employee’s individual account.

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5.INVESTMENT SECURITIES

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
September 30, 2021
AVAILABLE FOR SALE
U.S. government agency securities	$	3,209	$	-	$	(2	)	$	3,207
Corporate debt securities		108,075		438		(38	)		108,475
Foreign debt securities¹		30,960		168		(4	)		31,124
Obligations of states and political subdivisions		727		-		(7	)		720
Total	$	142,971	$	606	$	(51	)	$	143,526

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
September 30, 2021
HELD TO MATURITY
U.S. government agency securities	$	7,747	$	-	$	(14	)	$	7,733
Obligations of states and political subdivisions		2,745		104		-			2,849
Total	$	10,492	$	104	$	(14	)	$	10,582

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
June 30, 2021
AVAILABLE FOR SALE
U.S. government agency securities	$	3,215	$	-	$	(1)		$	3,214
Corporate debt securities		109,501		546	$	(7	)	$	110,040
Foreign debt securities¹		37,440		179		(21	)		37,598
Obligations of states and political subdivisions		730		-		(5)			725
Total	$	150,886	$	725	$	(34)		$	151,577

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in Thousands)
June 30, 2021
HELD TO MATURITY
U.S. government agency securities
Obligations of states and political subdivisions		2,745		98		-		2,843
Total	$	15,489	$	103	$	-	$	15,592

__________________________

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

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The Company recorded gross realized investment security gains of $34.8 thousand during the quarter ended September 30, 2021. Proceeds from the sales of investment securities totaled $6.1 million during this same period.

The Company recorded gross realized investment security gains of $25.3 thousand during the qurter ended September 30, 2020. Proceeds from the sales of investment securities totaled $1.0 million during the same period.

The amortized cost and fair values of debt securities at September 30, 2021, by contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because issuers may have the right to call securities prior to their final maturities.

	Due in one year or less		Due after one through five years		Due after five through ten years		Due after ten years		Total
	(Dollars in Thousands)
AVAILABLE FOR SALE
Amortized cost	$	55,452	$	87,050	$	469	$	-	$	142,971
Fair value		55,605		87,455		466		-		143,526
HELD TO MATURITY
Amortized cost	$	540	$	2,205	$	7,747	$	-	$	10,492
Fair value		543		2,306		7,733		-		10,582

At September 30, 2021 investment securities with amortized costs of $13.7 million and $40.4 million and fair values of $13.8 million and $40.7 million were pledged to secure borrowings with the Federal Home Loan Bank (“FHLB”) of Pittsburgh and the Federal Reserve Bank of Cleveland (“FRB”), respectively. Of the securities pledged to the FRB, $40.4 million of amortized cost, and $40.7 million of fair value, was excess collateral. Excess collateral is maintained to support future borrowings and may be withdrawn by the Company at any time.

6.MORTGAGE-BACKED SECURITIES

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

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

At September 30, 2021, the Company’s Agency CMOs totaled $99.6 million as compared to $82.1 million at June 30, 2021. The Company’s Private-Label CMOs totaled $373 thousand at September 30, 2021 as compared to $400 thousand at June 30, 2021. The $17.5 million increase in the Agency CMO segment of our MBS portfolio was due to purchases on our Agency CMOs which totaled $20.8 million, partially offset by repayments totaling $12.8 million. During the three months ended September 30, 2021, the Company received principal payments totaling $29 thousand on its Private-Label CMOs. At September 30, 2021 and June 30, 2021, all of the Company’s MBS portfolio was comprised of adjustable or floating rate investments. The Company has no investment in multi-family or commercial real estate based MBS.

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

The Company retains an independent third party to assist it in the determination of a fair value for its three private-label CMOs. This valuation is meant to be a “Level Three” valuation as defined by ASC Topic 820, Fair Value Measurements and Disclosures. The valuation does not represent the actual terms or prices at which any party could purchase the securities. There is currently no active secondary market for Private-Label CMOs and there can be no assurance that any secondary market for Private-Label CMOs will develop. The Private-Label CMO portfolio had six previously recorded other-than-temporary impairments at September 30, 2021. During the three months ended September 30, 2021, the Company recorded no additional credit impairment charge on its Private-Label CMO portfolio.

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

The following table sets forth information with respect to the Company’s Private-Label CMO portfolio as of September 30, 2021. At the time of purchase, all of our Private-Label CMOs were rated in the highest investment category by at least two ratings agencies.

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		At September 30, 2021
		Rating			Book Value		Fair Value²		Life to Date Impairment Recorded in Earnings
Cusip #	Security Description	S&P	Moody’s	Fitch	(in thousands)
126694CP1	CWHL SER 21 A11	NR	WR	D	$	233	$	256	$	271
126694KF4	CWHL SER 24 A15	NR	NR	D		104		133		180
126694MP0	CWHL SER 26 1A5	NR	NR	WD		36		43		48
					$	373	$	432	$	499

The amortized cost and fair values of the Company’s mortgage-backed securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)
September 30, 2021
HELD TO MATURITY
Collateralized mortgage obligations:
Agency	$	99,585	$	323	$	(197	)	$	99,711
Private-label		373		59		-			432
Total	$	99,958	$	382	$	(197	)	$	100,143

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)
June 30, 2021
HELD TO MATURITY
Collateralized mortgage obligations:
Agency	$	82,059	$	283	$	(140	)	$	82,202
Private-label		400		57		-			457
Total	$	82,459	$	340	$	(140	)	$	82,659

The amortized cost and fair value of the Company’s mortgage-backed securities at September 30, 2021, by contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Due in one year or less		Due after one through five years		Due after five through ten years		Due after ten years		Total
	(Dollars in Thousands)
HELD TO MATURITY
Amortized cost	$	-	$	42	$	-	$	99,916	$	99,958
Fair value		-		42		-		100,101		100,143

At September 30, 2021, mortgage-backed securities with amortized costs of $84.0 million and fair values of $84.0 million were pledged to secure public deposits and borrowings with the FHLB. Of the securities pledged, $12.7 million of fair value was excess collateral. At June 30, 2021, mortgage-backed securities with an amortized cost of $78.9 million and fair values of $79.0 million, were pledged to secure public deposits and borrowings with the FHLB. Of the securities pledged, $5.0 million of fair value was excess collateral. Excess collateral is maintained to support future borrowings and may be withdrawn by the Company at any time.

___________________

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

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7.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present the changes in accumulated other comprehensive income (loss) by component, for the three months ended September 30, 2021 and 2020.

	Three Months Ended September 30, 2021
	(Dollars in Thousands – net of tax)
	Unrealized Gains and Losses on Available-for-Sale Securities			Unrealized Gains and Losses on Held-to-Maturity Securities			Total
Beginning Balance – June 30, 2021	$	546		$	(44	)	$	502
Other comprehensive loss before reclassifications		(81	)		-			(81	)
Amounts reclassified from accumulated other comprehensive (loss) income		(28	)		2			(26	)
Net current-period other comprehensive (loss) income		(109	)		2			(107	)
Ending Balance – September 30, 2021	$	437		$	(42	)	$	395

	Three Months Ended September 30, 2020
	(Dollars in Thousands – net of tax)
	Unrealized Gains and Losses on Available-for-Sale Securities			Unrealized Gains and Losses on Held-to-Maturity Securities			Total
Beginning Balance – June 30, 2020	$	(499	)	$	(57	)	$	(556	)
Other comprehensive income before reclassifications		814			-			814
Amounts reclassified from accumulated other comprehensive (loss) income		(20	)		3			(17	)
Net current-period other comprehensive income		794			3			797
Ending Balance – September 30, 2020	$	295		$	(54	)	$	241

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8.UNREALIZED LOSSES ON SECURITIES

The following tables show the Company’s gross unrealized losses and fair value, aggregated by category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2021 and June 30, 2021.

	September 30, 2021
	Less Than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(Dollars in Thousands)
U.S. government securities	$	10,940	$	(16	)	$	-	$	-		$	10,940	$	(16	)
Corporate debt securities		19,090		(38	)		-		-			19,090		(38	)
Foreign debt securities³		4,493		(4	)		-		-			4,493		(4	)
Obligations of states and political subdivisions		466		(3	)		254		(4	)		720		(7	)
Collateralized mortgage obligations		39,353		(122	)		8,457		(75	)		47,810		(197	)
Total	$	74,342	$	(183	)	$	8,711	$	(79	)	$	83,053	$	(262	)

	June 30, 2021
	Less Than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(Dollars in Thousands)
U.S. government agency securities	$	3,214	$	(1	)	$	-	$	-		$	3,214	$	(1	)
Corporate debt securities		17,111		(7	)		-		-			17,111		(7	)
Foreign debt securities³		10,929		(21	)		-		-			10,929		(21	)
Obligations of states and political subdivisions		725		(5	)		-		-			725		(5	)
Collateralized mortgage obligations		22,810		(42	)		10,407		(98	)		33,217		(140	)
Total	$	54,789	$	(76	)	$	10,407	$	(98	)	$	65,196	$	(174	)

For debt securities, impairment is considered to be other than temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its amortized cost basis, or (3) does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell the security). In addition, impairment is considered to be other than temporary if the present value of cash flows expected to be collected from the debt security is less than the amortized cost basis of the security (any such shortfall is referred to as a credit loss). The Company evaluates outstanding available-for-sale and held-to-maturity securities in an unrealized loss position (i.e., impaired securities) for other-than-temporary impairment (“OTTI”) on a quarterly basis. In doing so, the Company considers many factors including, but not limited to: the credit ratings assigned to the securities by the Nationally Recognized Statistical Rating Organizations (“NRSRO”); other indicators of the credit quality of the issuer; the strength of the provider of any guarantees; the length of time and extent that fair value has been less than amortized cost; and whether the Company has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. In the case of its Private-Label residential MBS, the Company also considers prepayment speeds, the historical and projected performance of the underlying loans and the credit support provided by the subordinate securities. These evaluations are inherently subjective and consider a number of quantitative and qualitative factors.

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

	Three Months Ended
	September 30,
	2021		2020
	(Dollars in Thousands)
Beginning balance	$	322	$	311
Initial credit impairment		-		-
Subsequent credit impairment		-		13
Reductions for amounts recognized in earnings due to intent or requirement to sell		-		-
Reductions for securities sold		-		-
Reduction for actual realized losses		-		-
Reduction for increase in cash flows expected to be collected		-		-
Ending balance	$	322	$	324

___________________

³ U.S. dollar denominated investment-grade corporate bonds of large foreign corporate issuers.

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During the three months ended September 30, 2021, the Company did not record any subsequent credit impairment charge and non-credit unrealized holding losses to accumulated other comprehensive income. During the three months ended September 30, 2021, the Company accreted back out of other comprehensive income $2 thousand (net of income tax effect of $0 thousand), based on principal repayments on Private-Label CMOs previously identified with OTTI.

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

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

The Company reviewed the independent third party’s assumptions used in the September 30, 2021 OTTI process. Based on the results of this review, the Company deemed the independent third party’s assumptions to be reasonable and adopted them. However, different assumptions could produce materially different results, which could impact the Company’s conclusions as to whether an impairment is considered other-than-temporary and the magnitude of the credit loss.

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

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

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

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

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

The Company had investments in 14 positions that were temporarily impaired at September 30, 2021. Based on its analysis, management has concluded that three Private-Label CMOs are OTTI, while the remaining securities portfolio has experienced unrealized losses and a decrease in fair value due to interest rate volatility, illiquidity in the marketplace, or credit deterioration in the U.S. mortgage markets.

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9.LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES

The following table summarizes the primary segments of the loan portfolio as of September 30, 2021 and June 30, 2021.

	September 30, 2021							June 30, 2021
	Total Loans			Individually evaluated for impairment		Collectively evaluated for impairment		Total Loans			Individually evaluated for impairment		Collectively evaluated for impairment
	(Dollars in Thousands)
First mortgage loans:
1 – 4 family dwellings	$	66,656		$	-	$	66,656	$	67,410		$	-	$	67,410
Construction		2,787			-		2,787		2,612			-		2,612
Land acquisition & development		670			-		670		666			-		666
Multi-family dwellings		3,402			-		3,402		3,469			-		3,469
Commercial		4,747			-		4,747		3,939			-		3,939
Consumer Loans
Home equity		1,811			-		1,811		1,340			-		1,340
Home equity lines of credit		1,500			-		1,500		1,508			-		1,508
Other		37			-		37		27			-		27
Commercial Loans		-			-		-		-			-		-
	$	81,610		$	-	$	81,610	$	80,971		$	-	$	80,971
Plus: Deferred loan costs		241							278
Allowance for loan losses		(551	)						(565	)
Total	$	81,300						$	80,684

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

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

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

As of September 30, 2021 and June 30, 2021, there were no loans considered to be impaired and no nonaccrual loans.

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	Three Months Ended
	September 30,		September 30,
	2021		2020
	(Dollars in Thousands)
Average nonaccrual loans
1 – 4 family dwellings	$	-	$	-
Construction		-		-
Land acquisition & development		-		-
Commercial real estate		-		-
Home equity lines of credit		-		-
Total	$	-	$	-
Income that would have been recognized	$	-	$	-
Interest income recognized	$	-	$	-
Interest income foregone	$	-	$	-

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

During the three months ended September 30, 2021 and 2020, there were no troubled debt restructurings, and no troubled debt restructurings that subsequently defaulted.

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

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

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

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

The Company’s general policy is to internally classify its assets on a regular basis and establish prudent general valuation allowances that are adequate to absorb losses that have not been identified but that are inherent in the loan portfolio. The Company maintains general valuation allowances that it believes are adequate to absorb losses in its loan portfolio that are not clearly attributable to specific loans. The Company’s general valuation allowances are within the following general ranges: (1) 0% to 5% of assets subject to special mention; (2) 1.00% to 100% of assets classified substandard; and (3) 50% to 100% of assets classified doubtful. Any loan classified as loss is charged-off. To further monitor and assess the risk characteristics of the loan portfolio, loan delinquencies are reviewed to consider any developing problem loans. Based upon the procedures in place, considering the Company’s past charge-offs and recoveries and assessing the current risk elements in the portfolio, management believes the allowance for loan losses at September 30, 2021, is adequate.

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The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of September 30, 2021 and June 30, 2021:

	Current		30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days + Past Due Accruing		90 Days + Past Due Non-accrual		Total Past Due		Total Loans
	(Dollars in Thousands)
September 30, 2021
First mortgage loans:
1 – 4 family dwellings	$	66,656	$	-	$	-	$	-	$	-	$	-	$	66,656
Construction		2,787		-		-		-		-		-		2,787
Land acquisition & development		670		-		-		-		-		-		670
Multi-family dwellings		3,402		-		-		-		-		-		3,402
Commercial		4,747		-		-		-		-		-		4,747
Consumer Loans:
Home equity		1,811		-		-		-		-		-		1,811
Home equity lines of credit		1,500		-		-		-		-		-		1,500
Other		37		-		-		-		-		-		37
Commercial Loans		-		-		-		-		-		-		-
	$	81,610	$	-	$	-	$	-	$	-	$	-	$	81,610
Deferred loan costs														241
Allowance for loan losses														(551	)
Net Loans Receivable													$	81,300

	Current		30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days + Past Due Accruing		90 Days + Past Due Non-accrual		Total Past Due		Total Loans
	(Dollars in Thousands)
June 30, 2021
First mortgage loans:
1 – 4 family dwellings	$	67,410	$	-	$	-	$	-	$	-	$	-	$	67,410
Construction		2,612		-		-		-		-		-		2,612
Land acquisition & development		666		-		-		-		-		-		666
Multi-family dwellings		3,469		-		-		-		-		-		3,469
Commercial		3,939		-		-		-		-		-		3,939
Consumer Loans
Home equity		1,340		-		-		-		-		-		1,340
Home equity lines of credit		1,508		-		-		-		-		-		1,508
Other		27		-		-		-		-		-		27
Commercial Loans		-		-		-		-		-		-		-
	$	80,971	$	-	$	-	$	-	$	-	$	-	$	80,971
Deferred loan costs														278
Allowance for loan losses														(565	)
Net Loans Receivable													$	80,684

Credit quality information

The following tables represent credit exposure by internally assigned grades for the periods ended September 30, 2021 and June 30, 2021. The grading system analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or not at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

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The Company’s internally assigned grades are as follows:

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

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

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

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

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

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

The following tables present the Company’s internally classified construction, land acquisition and development, multi-family residential, commercial real estate and commercial (not secured by real estate) loans at September 30, 2021 and June 30, 2021.

	September 30, 2021
	Construction		Land Acquisition & Development Loans		Multi-family Residential		Commercial Real Estate		Commercial
	(Dollars in Thousands)
Pass	$	2,787	$	670	$	3,402	$	4,747	$	-
Special Mention		-		-		-		-		-
Substandard		-		-		-		-		-
Doubtful		-		-		-		-		-
Ending Balance	$	2,787	$	670	$	3,402	$	4,747	$	-

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	June 30, 2021
	Construction		Land Acquisition & Development Loans		Multi-family Residential		Commercial Real Estate		Commercial
	(Dollars in Thousands)
Pass	$	2,612	$	666	$	3,469	$	3,939	$	-
Special Mention		-		-		-		-		-
Substandard		-		-		-		-		-
Doubtful		-		-		-		-		-
Ending Balance	$	2,612	$	666	$	3,469	$	3,939	$	-

The following table presents performing and non-performing 1 – 4 family residential and consumer loans based on payment activity for the periods ended September 30, 2021 and June 30, 2021.

	September 30, 2021
	1 – 4 Family		Consumer
	(Dollars in Thousands)
Performing	$	66,656	$	3,348
Non-performing		-		-
Total	$	66,656	$	3,348

	June 30, 2021
	1 – 4 Family		Consumer
	(Dollars in Thousands)
Performing	$	67,410	$	2,875
Non-performing		-		-
Total	$	67,410	$	2,875

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

Our methodology used to determine the allocated portion of the allowance is as follows. For groups of homogenous loans, we apply a loss rate to the groups’ aggregate balance. Our group loss rate reflects our historical loss experience. We may adjust these group rates to compensate for changes in environmental factors; but our adjustments have not been frequent due to a relatively stable charge-off experience. The Company also monitors industry loss experience on similar loan portfolio segments. We then identify loans for individual evaluation under ASC Topic 310. If the individually identified loans are performing, we apply a segment specific loss rate adjusted for relevant environmental factors, if necessary, for those loans reviewed individually and considered individually impaired, we use one of the three methods for measuring impairment mandated by ASC Topic 310. Generally, the fair value of collateral is used since our impaired loans are generally real estate based. In connection with the fair value of collateral measurement, the Company generally uses an independent appraisal and determines costs to sell. The Company’s appraisals for commercial income based loans, such as multi-family and commercial real estate loans, assess value based upon the operating cash flows of the business as opposed to merely “as built” values. The Company then validates the reasonableness of our calculated allowances by: (1) reviewing trends in loan volume, delinquencies, restructurings and concentrations; (2) reviewing prior period (historical) charge-offs and recoveries; and 93) presenting the results of this process, quarterly, to the Asset Classification Committee and the Savings Bank’s Board of Directors. We then tabulate, format and summarize the current loan loss allowance balance for financial and regulatory reporting purposes.

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The Company had no unallocated loss allowance balance at September 30, 2021.

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

The following tables summarize the primary segments of the allowance for loan losses (“ALLL”), segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of September 30, 2021 and 2020. Activity in the allowance is presented for the three months ended September 30, 2021 and 2020.

	As of September 30, 2021
	First Mortgage Loans
	1 – 4 Family		Construction			Land Acquisition & Development		Multi- family		Commercial		Consumer Loans		Commercial Loans		Total
	(Dollars in Thousands)
Beginning ALLL Balance at June 30, 2021	$	389	$	50		$	11	$	24	$	59	$	32	$	-	$	565
Charge-offs		-		-			-		-		-		-		-		-
Recoveries		-		-			-		-		-		-		-		-
Provisions		(17)		(16	)		10		(1)		6		4		-		(14)
Ending ALLL Balance at September 30, 2021	$	372	$	34		$	21	$	23	$	65	$	36	$	-	$	551
Individually evaluated for impairment	$	-	$	-		$	-	$	-	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		372		34			21		23		65		36		-		551
	$	372	$	34		$	21	$	23	$	65	$	36	$	-	$	551

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	As of September 30, 2020
	First Mortgage Loans
	1 – 4 Family		Construction			Land Acquisition & Development		Multi- family		Commercial			Consumer Loans			Commercial Loans		Total
	(Dollars in Thousands)
Beginning ALLL Balance at June 30, 2020	$	449	$	38		$	6	$	26	$	66		$	32		$	1	$	618
Charge-offs		-		-			-		-		-			-			-		-
Recoveries		-		-			-		-		-			-			-		-
Provisions		6		(2	)		1		-		(2	)		(2	)		1		2
Ending ALLL Balance at September 30, 2020	$	455	$	36		$	7	$	26	$	64		$	30		$	2	$	620
Individually evaluated for impairment	$	-	$	-		$	-	$	-	$	-		$	-		$	-	$	-
Collectively evaluated for impairment		455		36			7		26		64			30			2		620
	$	455	$	36		$	7	$	26	$	64		$	30		$	2	$	620

During the three months ended September 30, 2021, the Company’s ALLL decreased by $14 thousand. Approximately, $22 thousand of the decrease was attributable to the reversal of about one quarter of the Company’s previously recorded COVID-19 provision which more than offset the recurring provisions due to changes in loan volumes. The Company anticipates reversing the remaining COVID-19 provision quarterly over the remainder of fiscal 2022.

During the quarter ended September 30, 2020, the ALLL increased $2 thousand primarily attributable to an increase in the ALLL associated with the 1-4 family segment, partially offset by decreases in the ALLL associated with the construction, commercial real estate and consumer and development loans

10.FEDERAL HOME LOAN BANK (FHLB) ADVANCES

The following table presents contractual maturities of FHLB long-term advances as of September 30, 2021.

	Maturity range		Weighted- average		Stated interest rate range				September 30,		June 30,
Description	from	to	interest rate⁴		from		to		2021		2021
										(Dollars in Thousands)
Fixed	10/01/20	10/03/22	3.03	%	2.95	%	3.09	%	$	10,000	$	10,000
Adjustable	10/01/20	10/01/21	0.32	%	0.29	%	0.36	%		25,000		25,000
Total									$	35,000	$	35,000

__________________________

⁴ As of September 30, 2021

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Maturities of FHLB long-term advances at September 30, 2021, are summarized as follows:

Maturing During			Weighted-
Fiscal Year Ended			Average
June 30:	Amount		Interest Rate⁴
	(Dollars in Thousands)
2022	$	30,000	$	0.72	%
2023		5,000		3.09	%
2024		-		-
2025		-		-
2026		-		-
2026 and thereafter		-		-
Total	$	35,000		1.06	%

The Company also utilized revolving and short-term FHLB advances. Short-term FHLB advances generally mature within 90 days, while revolving FHLB advances may be repaid by the Company without penalty. The following table presents information regarding such advances as of September 30, 2021 and June 30, 2021:

	September 30, 2021			June 30, 2021
		(Dollars in Thousands)
FHLB revolving and short-term advances:
Ending balance	$	115,594		$	113,093
Average balance		70,306			34,715
Maximum month-end balance		115,594			113,093
Average interest rate		.26	%		0.34	%
Weighted-average rate at period end		.25	%		0.28	%

At September 30, 2021, the Company had remaining borrowing capacity with the FHLB of approximately $12.7 million.

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

11.OTHER SHORT-TERM BORROWINGS

The Company periodically utilizes other short-term borrowings comprised of Federal Reserve Bank of Cleveland (“FRBC”) discount window borrowings. FRBC discount window borrowings mature within 90 days and may be repaid prior to maturity without penalty, in whole or in part, plus accrued interest. The following table presents information regarding the FRBC borrowings as of September 30, 2021 and June 30, 2021:

FRBC Discount Window Borrowings:

	September 30,			June 30,
	2021			2021
		(Dollars in Thousands)
Ending balance	$	-		$	-
Average balance		-			456
Maximum month-end balance		-			5,875
Average interest rate		-	%		0.25	%
Weighted-average rate at period end		-	%		-	%
_______________________
⁴ As of September 30, 2021.

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12.FAIR VALUE MEASUREMENTS

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

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

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

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

Assets Measured at Fair Value on a Recurring Basis

Investment Securities Available-for-Sale

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

The following tables present the assets reported on a recurring basis on the Consolidated Balance Sheet at their fair value as of September 30, 2021 and June 30, 2021, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

		September 30, 2021
		Level I		Level II		Level III		Total
		(Dollars in Thousands)
Assets measured on a recurring basis:
Investment securities – available for sale:
U.S. government agency securities	$	-	$	3,207	$	-	$	3,207
Corporate debt securities		-		108,475		-		108,475
Foreign debt securities⁵		-		31,124		-		31,124
Obligations of states and political subdivisions		-		720		-		720
	$	-	$	143,526	$	-	$	143,526
_______________________
⁵ U.S. dollar-denominated investment-grade corporate bonds of large foreign corporate issuers.

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		June 30, 2021
		Level I		Level II		Level III		Total
		(Dollars in Thousands)
Assets measured on a recurring basis:
Investment securities – available for sale:
U.S. government agency securities	$	-	$	3,214	$	-	$	3,214
Corporate securities		-		110,040		-		110,040
Foreign debt securities⁵		-		37,598		-		37,598
Obligations of states and political subdivisions		-		725		-		725
	$	-	$	151,577	$	-	$	151,577

13.FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of financial instruments are as follows:

		September 30, 2021
		Carrying Amount		Fair Value		Level I		Level II		Level III
		(Dollars in Thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	2,428	$	2,428	$	2,428	$	-	$	-
Certificates of deposit		350		350		350		-		-
Investment securities – held to maturity		10,492		10,582		-		10,582		-
Mortgage-backed securities – held to maturity:
Agency		99,585		99,711		-		99,711		-
Private-label		373		432		-		-		432
Net loans receivable		81,300		83,044		-		-		83,044
Accrued interest receivable		980		980		980		-		-
FHLB stock		6,144		6,144		6,144		-		-
Bank owned life insurance		5,049		5,049		5,049		-		-
FINANCIAL LIABILITIES
Deposits:
Non-interest bearing deposits	$	23,948	$	23,948	$	23,948	$	-	$	-
Interest-earning checking		26,010		26,010		26,010		-		-
Savings accounts		48,967		48,967		48,967		-		-
Money market accounts		23,214		23,214		23,214		-		-
Certificates of deposit		32,314		32,335		-		-		32,335
Advance payments by borrowers for taxes and insurance		835		835		835		-		-
FHLB advances – fixed rate		10,000		9,742		-		-		9,742
FHLB advances – variable rate		25,000		25,000		25,000		-		-
FHLB short-term advances		115,594		115,594		115,594		-		-
Accrued interest payable		140		140		140		-		-

__________________________

⁵ U.S. dollar-denominated investment-grade corporate bonds of large foreign corporate issuers.

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		June 30, 2021
		Carrying Amount		Fair Value		Level I		Level II		Level III
		(Dollars in Thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	2,551	$	2,551	$	2,551	$	-	$	-
Certificates of deposit		350		350		350		-		-
Investment securities – held to maturity		15,489		15,592		-		15,592		-
Mortgage-backed securities – held to maturity:
Agency		82,059		82,202		-		82,202		-
Private-label		400		457		-		-		457
Net loans receivable		80,684		82,930		-		-		82,930
Accrued interest receivable		749		749		749		-		-
FHLB stock		6,044		6,044		6,044		-		-
Bank owned life insurance		5,021		5,021		5,021		-		-
FINANCIAL LIABILITIES
Deposits:
Non-interest bearing deposits	$	25,452	$	25,452	$	25,452	$	-	$	-
Interest-earning checking		26,881		26,881		26,881		-		-
Savings accounts		50,058		50,058		50,058		-		-
Money market accounts		22,995		22,995		22,995		-		-
Certificates of deposit		29,731		29,763		-		-		29,763
Advance payments by borrowers for taxes and insurance		2,050		2,050		2,050		-		-
FHLB advances – fixed rate		10,000		9,763		-		-		9,763
FHLB advances – variable rate		25,000		25,000		25,000		-		-
FHLB short-term advances		113,093		113,093		113093		-		-
Accrued interest payable		155		155		155		-		-

All financial instruments included in the above tables, with the exception of net loans receivable, certificates of deposit liabilities, and FHLB advances – fixed rate, are carried at cost, which approximates the fair value of the instruments.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021

FORWARD LOOKING STATEMENTS

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

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

•

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

•

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

•

the effects and extent of the coronavirus (COVID-19) pandemic on the global economy, and its impact on the Company’s operations and financial condition, including the granting of various loan payment deferral and fee waivers, the possibility of credit losses in our loan portfolios and increases in our allowance for credit losses as well as possible impairments on the securities we hold;

•

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

•

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

•

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

•

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

•

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

•

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

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

GENERAL

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

West View Savings Bank is a Pennsylvania-chartered, FDIC-insured stock savings bank conducting business from six offices in the North Hills suburbs of Pittsburgh. The Savings Bank converted from the mutual to the stock form of ownership in November 1993. The Savings Bank had no subsidiaries at September 30, 2021.

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

Effects of COVID-19 Pandemic

The Company’s business is dependent upon the willingness and ability of our employees and clients to conduct banking and other financial transactions. The persistance of the novel coronavirus (COVID-19) pandemic has negatively impacted the global economy, disrupted global supply chains and increased unemployment levels. While the full effects of the pandemic remain unknown, the Company is committed to supporting its customers, employees and communities during this difficult time. The Company has given hardship relief assistance to customers, including the consideration of various loan payment deferral and fee waiver options, and encourages customers to reach out for assistance to support their individual circumstances. The pandemic could result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses were to close once again, the impact on the global economy worsens, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize impairments on the securities we hold. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

The Company has responded to the circumstances surrounding the pandemic to support the safety and well-being of the employees, customers and shareholders by enacting the following measures:

•

Modified branch business hours Monday through Thursday to close at 4:00 pm (no change), Friday close at 4:00 pm (as opposed to 6:00 pm and Saturday close at 12:00 pm (no change).

•

Monitor federal, state and local COVID-19 websites and adopt guidance as appropriate and feasible.

•

Encourage customers to use our various on-line portals (e.g. internet banking, online bill pay service), automated teller machines and night depositories to redirect routine transactions away from our branch staff as much as possible.

•

Non-branch banking services (e.g. lending, accounting, check and electronic processing) continue to be offered consistent with COVID-19 guidelines.

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FINANCIAL CONDITION

The Company’s assets totaled $351.5 million at September 30, 2021, as compared to $346.1 million at June 30, 2021. The $5.4 million, or 1.6%, increase in total assets was primarily due to a $17.5 million increase in mortgage-backed securities and a $616 thousand increase in net loans receivable, which were partially offset by a $8.1 million decrease in available-for-sale investment securities and $5.0 million decrease in held-to-maturity investment securities. The decrease in investment securities available-for-sale was primarily the result of maturities and early issuer redemptions of $12.8 million and $6.1 million, respectively, partially offset by purchases of investment securities totaling $11.3 million. The increase in mortgage-backed securities was due primarily from purchases of $20.8 million, partially offset by repayments of $8.2 million.

The Company’s total liabilities increased $5.4 million, or 1.7%, to $313.0 million as of September 30, 2021 from $307.7 million as of June 30, 2021. The increase in total liabilities was primarily comprised of a $2.5 million, or 2.2%, increase in FHLB short-term advances and a $4.9 million increase in other liabilities, partially offset by a $1.9 million decrease in total deposits. Additionally, other liabilities increased $4.7 million to $7.0 million at September 30, 2021 from $2.3 million at June 30, 2021, primarily due to a $4.9 million increase in unfunded security commitments. The decrease in total deposits was primarily attributable to decreases in non-interest bearing accounts, NOW accounts, savings accounts and advance payments by borrowers for taxes and insurance of $1.5 million, $871 thousand, $1.1 million and $1.2 million, respectively, partially offset by an increase in money market accounts of $219 thousand and certificates of deposit of $2.6 million. Management believes that the increase in certificates of deposit was primarily the result of a $3.3 million increase in brokered deposits which more than offset a $682 thousand decrease in retail time deposits. A significant portion of retail time deposits were transferred into savings accounts. The increase FHLB short-term borrowings and brokered deposits primarily funded purchases of mortgage-backed securities and available-for-sale investment securities. See also Quantitative and Qualitative Disclosures About Market Risk “Asset and Liability Management”.

Total stockholders’ equity increased $32 thousand, or 0.1%, to $38.4 million as of September 30, 2021, from $38.4 million as of June 30, 2021. The increase in stockholders’ equity was primarily attributable to net income of $271 thousand and $34 thousand attributable to amortization of unallocated ESOP shares, which were partially offset by a decrease in accumulated other comprehensive income of $107 thousand and cash dividends paid totaling $174 thousand. The decrease in accumulated other comprehensive income was primarily the result of an increase in the unrealized loss on the Company’s available-for-sale investment portfolio.

RESULTS OF OPERATIONS

General. WVS reported net income of $271 thousand or $0.16 earnings per share (basic and diluted) for the three months ended September 30, 2021 as compared to $420 thousand or $0.24 per share (basic and diluted) for the same period in 2020. The $149 thousand decrease in net income for the for the three months ended September 30, 2021 was primarily attributable to a $196 thousand decrease in net interest income and a $52 thousand increase in non-interest expense, which were partially offset by a $56 thousand decrease in income tax expense, a $27 thousand increase in non-interest income and a $16 thousand decrease in the provision for loan losses.

Net Interest Income. The Company’s net interest income decreased by $196 thousand or 14.6% for the three months ended September 30, 2021, when compared to the same period in 2020. The decrease in net interest income is attributable to a $346 thousand decrease in interest and dividend income, which was partially offset by a $150 thousand decrease in interest expense. The decrease in interest and dividend income during the three months ended September 30, 2021 was primarily attributable to lower yields earned on the Company’s investment and mortgage-backed securities, FHLB stock and net loans, when compared to the same period in 2020. The decrease in interest expense during the three months ended September 30, 2021 was primarily attributable to lower market interest rates paid on FHLB advances and time deposits as well as a slightly higher level of average time deposits and FHLB short term borrowings, when compared to the same period in 2020.

Interest Income. Interest income on net loans receivable decreased $167 thousand or 19.3% for the three months ended September 30, 2021, when compared to the same period in 2020. The decrease for the quarter ended September 30, 2021 was primarily attributable to a 24 basis point decrease in the average portfolio yield and a $12.8 million decrease in the average balance of net loans receivable, when compared to the same period in 2020. The decrease in the average balance of loans outstanding was primarily attributable to decreased loan originations and purchases.

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Interest income on investment securities decreased $79 thousand or 18.1% for the three months ended September 30, 2021, when compared to the same period in 2020. The decrease for the three months ended September 30, 2021 was primarily attributable to a 29 basis point decrease in the weighted-average yield on the available-for-sale portfolio, partially offset by a $12.8 million increase in the average balance of these investment securities when compared to the same period in 2020.

Interest income on mortgage-backed securities decreased $68 thousand or 25.3% for the three months ended September 30, 2021, when compared to the same period in 2020. The decrease for the three months ended September 30, 2021 was primarily attributable to a 28 basis point decrease in the weighted-average yield earned on U.S. Government agency mortgage-backed securities and a $1.5 million decrease in the average balance of these U.S. Government agency mortgage-backed securities, when compared to the same period in 2020. The decrease in the average balances of U.S. Government agency and Private-Label mortgage-backed securities during the three months ended September 30, 2021 was attributable to principal pay-downs of $8.2 million on U.S. Government agency and Private-Label mortgage-backed securities, when compared to the same period in 2020. The $8.2 million in principal paydowns was used in part to reduce the level of FHLB short-term advances.

Interest income on bank certificates of deposit decreased $4 thousand for the three months ended September 30, 2021 when compared to the same period in 2020. The decrease for the three months ended September 30, 2021 was attributable to a decrease of $1.2 million in the average balance of certificates of deposit, partially offset by an increase of 77 basis points in the average yield earned.

Dividend income on FHLB stock decreased $28 thousand or 31.5% for the three months ended September 30, 2021 when compared to the same period in 2020. The decrease for the three months ended September 30, 2021 was primarily attributable to a 77 basis point decrease in the weighted-average yield earned as well as a $1.3 million decrease in the average balance of FHLB stock held.

Interest Expense. Interest paid on FHLB short-term advances increased $12 thousand or 35.3% for the three months ended September 30, 2021, when compared to the same period in 2020. The increase for the three months ended September 30, 2021 was primarily attributable to a $35.7 million increase in the average balance of FHLB short-term advances outstanding, partially offset by a 12 basis point decrease in the weighted-average rate paid on FHLB short-term balances outstanding. The decrease in rates paid on FHLB short-term borrowings were consistent with decreases in short-term market interest rates.

Interest paid on FHLB long-term variable rate advances decreased $36 thousand for the three months ended September 30, 2021, when compared to the same period in 2020. The decrease for the three months ended September 30, 2021 was primarily attributable to a $60.0 million decrease in the average balance of FHLB long-term variable rate advances and an 18 basis point decrease in the weighted-average rate paid in FHLB long-term variable rate advances.

Interest expense on deposits decreased $67 thousand or 64.4% for the three months ended September 30, 2021, when compared to the same period in 2020. The decrease in interest expense on deposits for the three months ended September 30, 2021 was primarily attributable to a 61 basis point decrease in the weighted-average rate paid on time deposits and was partially offset by an increase of $17.9 million in the average balance of time deposits when compared the same period in the prior year.

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

Provision for loan losses decreased $14 thousand for the three months ended September 30, 2021, when compared to the same period in 2020. The decrease in the provision for loan losses for the three months ended September 30, 2021 was primarily due to decreased reserve factors related to the economic uncertainty as a result of the COVID-19 pandemic totaling $22 thousand which were partially offset by increases related to increased net loans outstanding, when compared to the same period in 2020. At September 30, 2021, the Company’s total allowance for loan losses amounted to $551 thousand or 0.68% of the Company’s total loan portfolio, as compared to $565 thousand and 0.70% at June 30, 2021. At September 30, 2021 and June 30, 2021, the Company had no non-performing loans.

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Non-Interest Income. For the three months ended September 30, 2021, non-interest income increased $27 thousand compared to the same period in 2020. For the quarter ended September 30, 2021, the increase was attributable to a $10 thousand increase in gains on investments, a $13 thousand decrease in other than temporary security impairment losses, a $2 thousand increase in miscellaneous operating income, a $1 thousand increase in service charges on deposits, and a $1 thousand increase in automated teller machine and debit card fee income.

Non-Interest Expense. Non-interest expense increased $52 thousand or 5.9% for the three months ended September 30, 2021, when compared to the same period in 2020. This increase was primarily due to a $36 thousand increase in employee compensation and benefits expenses, a $24 thousand increase in the provision for off-balance sheet commitments (primarily unfunded loan commitments), and $3 thousand in data processing expenses, which were partially offset by a $5 thousand decrease in stationary, printing and office supplies, $4 thousand decrease in the federal deposit insurance premium and a $2 thousand decrease in postage expense, when compared to the same period of 2020.

Income Tax Expense. Income tax expense decreased $56 thousand for the three months ended September 30, 2021, when compared to the same period in 2020. The decrease for the three months ended September 30, 2021 was primarily due to lower levels of taxable income, when compared to the same period in 2020.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities totaled $59 thousand during the three months ended September 30, 2021. Net cash provided by operating activities was primarily attributable to $271 thousand of Company net income, $304 thousand of amortization of discounts, premiums and deferred loan fees, which were partially offset by $231 thousand decrease in accrued interest receivable and a $394 decrease in other, net.

Net cash used for investing activities totaled $630 thousand for the three months ended September 30, 2021. Primary sources of funds from investing activities during the three months ended September 30, 2021 included proceeds from repayments of investment securities of $12.8 million, proceeds from early issuer redemptions of investment securities of $6.1 million, $8.2 million of repayments of mortgage-backed securities, $5.0 million of proceeds from repayments of held-to-maturity investment securities and a decrease in loans receivable of $614 thousand. Primary uses of funds for investing activities during the three months ended September 30, 2021 included purchases of investment securities available-for-sale totaling $11.3 million and purchases of mortgage-backed securities totaling $20.8 million.

Funds provided by financing activities totaled $448 thousand for the three months ended September 30, 2021. Primary uses of funds by financing activities were decreases in transaction accounts of $3.2 million, decreases in advance payments by borrowers for taxes and insurance of $1.2 million and $174 thousand of cash dividends paid. Primary sources of funds from financing activities were increases in certificates of deposits and FHLB short-term advances of $2.6 million and $2.5 million, respectively.

The decreases in transaction accounts and advance payments by borrowers for taxes and insurance were primarily attributable to seasonal withdrawals for the payment of local real estate taxes. The increase in certificates of deposit at September 30, 2021 was due principally to a $3.3 million increase in brokered deposits. Management has determined that it currently is maintaining adequate liquidity and continues to match funding sources with lending and investment opportunities.

The Company’s primary sources of funds are deposits, amortization, repayments and maturities of existing loans, mortgage-backed securities and investment securities, funds from operations, and funds obtained through FHLB advances and other borrowings. Certificates of deposit scheduled to mature in one year or less at September 30, 2021 totaled $28.4 million.

Historically, the Company used its sources of funds primarily to meet its ongoing commitments to pay maturing savings certificates and savings withdrawals, fund loan commitments and maintain a substantial portfolio of investment securities. At September 30, 2021, total approved loan commitments outstanding were $722 thousand. At the same date, commitments under unused lines of credit amounted to $5.3 million and the unadvanced portion of construction loans approximated $2.6 million. The Company has been able to generate sufficient cash through the retail deposit market, its traditional funding source, and through FHLB advances, and other borrowings, to provide the cash utilized in investing activities. The Company’s available-for-sale segment of the investment portfolio totaled $143.5 million at September 30, 2021. In addition, the Company had $350 thousand of certificates of deposit at September 30, 2021. Management believes that the Company currently has adequate liquidity available to respond to liquidity demands.

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On October 26, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share, on the Common Stock payable on November 18, 2021, to shareholders of record at the close of business on November 8, 2021. Dividends are subject to determination and declaration by the Board of Directors, which take into account the Company’s financial condition, statutory and regulatory restrictions, general economic conditions and other factors. There can be no assurance that dividends will in fact be paid on the Common Stock in future periods or that, if paid, such dividends will not be reduced or eliminated.

As of September 30, 2021, WVS Financial Corp. exceeded all regulatory capital requirements and maintained Common Equity Tier I Capital, Tier I, and total risk-based capital equal to $38.0 million or 19.41%, $38.0 million or 19.41%, and $38.6 million or 19.70%, respectively, of total risk-weighted assets, and Tier I leverage capital of $38.0 million or 10.95% of average quarterly assets.

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

The Company had no non-performing assets at September 30, 2021 and on September 30, 2020.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET AND LIABILITY MANAGEMENT

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

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

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

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

During the fiscal years 2013-2021 and into fiscal year 2022, short intermediate and long-term market interest rates fluctuated considerably. Many central banks, including the Federal Reserve, continued above normal levels of monetary accommodation including quantitative easing and targeted asset purchase programs. The desired outcomes of these programs are to stimulate aggregate demand, reduce high levels of unemployment and to further lower market interest rates.

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

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

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

	September 30,			June 30,
	2021			2021			2020
	(Dollars in Thousands)
Interest-earning assets maturing or repricing within one year	$	235,057		$	222,105		$	289,076
Interest-bearing liabilities maturing or repricing within one year		206,422			201,614			218,272
Interest sensitivity gap	$	28,635		$	20,491		$	70,804
Interest sensitivity gap as a percentage of total assets		8.14	%		5.92	%		19.83	%
Ratio of assets to liabilities maturing or repricing within one year		113.87	%		110.16	%		132.44	%

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The following table illustrates the Company’s estimated stressed cumulative repricing gap – the difference between the amount of interest-earning assets and interest-bearing liabilities expected to reprice at a given point in time – at September 30, 2021. The table estimates the impact of an upward or downward change in market interest rates of 100 and 200 basis points.

Cumulative Stressed Repricing Gap


	Month 3			Month 6			Month 12			Month 24			Month 36			Month 60			Long Term
	(Dollars in Thousands)
Base Case Up 200 bp
Cumulative Gap ($’s)	$	20,658		$	16,459		$	23,071		$	52,201		$	64,736		$	67,139		$	37,818
% of Total Assets		5.9	%		4.7	%		6.6	%		14.8	%		18.4	%		19.1	%		10.8	%
Base Case Up 100 bp
Cumulative Gap ($’s)	$	21,388		$	17,854		$	25,615		$	55,760		$	68,511		$	70,837		$	37,818
% of Total Assets		6.1	%		5.1	%		7.3	%		15.9	%		19.5	%		20.1	%		10.8	%
Base Case No Change
Cumulative Gap ($’s)	$	22,292		$	19,554		$	28,634		$	60,754		$	74,121		$	76,349		$	37,818
% of Total Assets		6.3	%		5.6	%		8.1	%		17.3	%		21.1	%		21.7	%		10.8	%
Base Case Down 100 bp
Cumulative Gap ($’s)	$	22,638		$	20,207		$	29,711		$	62,199		$	75,588		$	77,596		$	37,818
% of Total Assets		6.4	%		5.7	%		8.4	%		17.7	%		21.5	%		22.1	%		10.8	%
Base Case Down 200 bp
Cumulative Gap ($’s)	$	22,766		$	20,445		$	30,200		$	63,190		$	76,752		$	78,642		$	37,818
% of Total Assets		6.5	%		5.8	%		8.6	%		18.0	%		21.8	%		22.4	%		10.8	%

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

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The following table presents the simulated impact of a 100 and 200 basis point upward or downward (parallel) shift in market interest rates on net interest income, return on average equity, return on average assets and the market value of portfolio equity at September 30, 2021. This analysis was done assuming that the interest-earning assets will average approximately $344 million and $345 million over a projected twelve and twenty-four month period, respectively, for the estimated impact on change in net interest income, return on average equity and return on average assets. The estimated changes in market value of equity were calculated using balance sheet levels at September 30, 2021. Actual future results could differ materially from our estimates primarily due to unknown future interest rate changes and the level of prepayments on our investment and loan portfolios and future FDIC regular and special assessments.

Analysis of Sensitivity to Changes in Market Interest Rates

	Twelve Month Forward Modeled Change in Market Interest Rates
	September 30, 2021										September 30, 2022
Estimated impact on:	-200		-100		0		+100		+200		-200		-100		0		+100		+200
Change in net interest income	-13.7	%	-11.1	%	-		2.6	%	5.7	%	-32.0	%	-25.4	%	-		9.8	%	19.7	%
Return on average equity	2.25	%	2.51	%	3.58	%	3.83	%	4.13	%	-0.45	%	1.10	%	3.50	%	4.42	%	5.31	%
Return on average assets	0.25	%	0.28	%	0.39	%	0.42	%	0.46	%	-0.05	%	0.12	%	0.39	%	0.50	%	0.60	%
Market value of equity (in thousands)	42,852		43,077		44,650		45,733		46,446

The table below provides information about the Company’s anticipated transactions comprised of firm loan commitments and other commitments, including undisbursed letters and lines of credit, at September 30, 2021. The Company used no derivative financial instruments to hedge such anticipated transactions as of September 30, 2021.

Anticipated Transactions
	(Dollars in Thousands)
Undisbursed construction and development loans	$	2,554
Undisbursed lines of credit		5,254
Loan origination commitments		722
	$	8,530

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In the ordinary course of its construction lending business, the Savings Bank enters into performance standby letters of credit. Typically, the standby letters of credit are issued on behalf of a builder to a third party to ensure the timely completion of a certain aspect of a construction project or land development. At September 30, 2021, the Savings Bank had no performance standby letters of credit outstanding. In the event that an obligor is unable to perform its obligations as specified in the applicable letter of credit agreement, the Savings Bank would be obligated to disburse funds up to the amount specified in the letter of credit agreement. The Savings Bank’s policy is to maintain adequate collateral that could be liquidated to fund such contingent obligations.

ITEM 4. CONTROLS AND PROCEDURES

As of September 30, 2021, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Accounting Officer, on the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Accounting Officer, concluded that the Company’s disclosure controls and procedures were effective as of September 30, 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 its reports filed and submitted under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in its reports filed under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer and principal accounting officer, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended September 30, 2021, no change in the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) has occurred that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Table of Contents

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

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

(b) Not applicable.

ITEM 1A. Risk Factors

There are no material changes to the risk factors included in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

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

(a) Not applicable.

(b) Not applicable.

(c) The following table sets forth information with respect to purchases of common stock of the Company made by WVS Financial Corp. during the three months ended September 30, 2021.

COMPANY PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased	Average Price Paid per Share ($)	Total Number of Shares Purchased as part of Publicly Announced Plans or Programs⁽¹⁾	Maximum Number of Shares that May Yet Be Repurchased Under the Plans or Programs⁽²⁾
07/01/21-07/31/21	-	-	-	68,729
08/01/21-08/31/21	-	-	-	68,729
09/01/21-09/30/21	-	-	-	68,729
Total	-	-	-	68,729

_______________________
(1)		All shares indicated were purchased under the Company’s Twelfth Stock Repurchase Program.
(2)		Twelfth Stock Repurchase Program
	(a)	Announced March 24, 2020.
	(b)	100,000 common shares approved for repurchase.
	(c)	No fixed date of expiration.
	(d)	This Program has not expired and has 68,729 common shares remaining to be purchased at September 30, 2021.
	(e)	Not applicable.

Table of Contents

ITEM 3.Defaults Upon Senior Securities

Not applicable.

ITEM 4.Mine Safety Disclosures

Not applicable.

ITEM 5.Other Information

(a) Not applicable.

(b) Not applicable.

ITEM 6.Exhibits

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

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

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.

		WVS FINANCIAL CORP.

Date:	November 15, 2021	BY:	/s/ David J. Bursic
			David J. Bursic President and Chief Executive Officer (Principal Executive Officer)

Date:	November 15, 2021	BY:	/s/ Mary C. Magestro-Johnston
			Mary C. Magestro-Johnston Vice-President, Treasurer and Chief Accounting Officer (Principal Accounting Officer)

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SEC Form 10-Q filed by WVS Financial Corp.

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