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| PVFC > SEC Filings for PVFC > Form 10-Q on 17-Feb-2009 | All Recent SEC Filings |
17-Feb-2009
Quarterly Report
December 31, June 30,
2008 2008
Real estate mortgages:
One-to-four family residential $ 163,063,396 $ 168,532,008
Home equity line of credit 90,295,243 87,876,182
Multi-family residential 60,077,201 52,420,774
Commercial 195,142,037 174,403,925
Commercial equity line of credit 40,993,539 36,913,491
Land 70,524,085 73,544,594
Construction - residential 53,063,858 55,442,114
Construction - multi-family 5,393,315 5,802,842
Construction - commercial 24,487,804 38,303,228
Total real estate mortgages 703,040,478 693,239,158
Non-real estate loans 32,491,517 33,592,529
Total loans receivable 735,531,995 726,831,687
Net deferred loan origination fees (2,475,897 ) (2,685,309 )
Allowance for loan losses (11,000,008 ) (9,653,972 )
Loans receivable, net $ 722,056,090 $ 714,492,406
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Park View Federal Savings Bank does not originate sub-prime loans and only
originates Alt A loans for sale, without recourse, in the secondary market. All
one-to-four family loans are underwritten according to agency underwriting
standards. Exceptions, if any, are submitted to the loan committee for approval.
Any exposure the Bank may have to these types of loans is immaterial and
insignificant.
The decrease of $3.5 million in loans receivable held for sale is the result of
timing differences between the origination and the sale of loans. Previously,
the Company's mortgage-backed securities were classified as held-to-maturity and
were carried at amortized cost. During the second quarter of the current fiscal
year, management transferred these to available-for-sale and these securities
are now carried at fair value. The Company sold $49.7 million of these
securities previously held-to-maturity, acquired $68 million of new securities,
and subsequently sold $14.7 million of the new securities. Market conditions
were extraordinary during the period due to the announcement of the Federal
Reserve's unprecedented actions to bolster the mortgage-backed security market.
RESULTS OF OPERATIONS Three months ended December 31, 2008,
compared to three months ended
December 31, 2007.
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PVF's net income is dependent primarily on its net interest income, which is the
difference between interest earned on its loans and investments and interest
paid on interest-bearing liabilities. Net interest income is determined by
(i) the difference between yields earned on interest-earning assets and rates
paid on interest-bearing liabilities ("interest-rate spread") and (ii) the
relative amounts of interest-earning assets and interest-bearing liabilities.
The Company's interest-rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand, the
collectibility of loans, and deposit flows. Net interest income also includes
amortization of loan origination fees, net of origination costs.
PVF's net income is also affected by the generation of non-interest income,
which primarily consists of loan servicing income, service fees on deposit
accounts, and gains on the sale of loans held for sale. In addition, net income
is affected by the level of operating expenses, loan loss provisions and costs
associated with the acquisition, maintenance and disposal of real estate.
During the three and six months ended December 31, 2008, the Company reported a
net loss due to elevated levels of loan loss provisions and other-than-temporary
impairment charges on its holdings of FNMA preferred stock.
The Company's net loss for the three months ended December 31, 2008 was
$2,721,500 as compared to net income of $731,800 for the prior year comparable
period. This represents a decrease of $3,453,300 when compared with the prior
year comparable period.
Net interest income for the three months ended December 31, 2008 decreased by
$812,000, or 15.4%, as compared to the prior year comparable period. This
resulted from a decrease of $2,503,300, or 17.3%, in interest income partially
offset by a
December 31, 2008 December 31, 2007
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-earning assets
Loans (1) $ 727,166 $ 10,929 6.01 % $ 726,626 $ 13,184 7.26 %
Mortgage-backed
securities 57,190 687 4.81 % 25,043 314 5.01 %
Investments and other 51,277 347 2.71 % 78,123 969 4.96 %
Total interest-earning
assets 835,633 11,963 5.73 % 829,792 14,467 6.97 %
Non-interest-earning
assets 68,513 60,723
Total Assets $ 904,146 $ 890,515
Interest-bearing
liabilities
Deposits $ 697,093 $ 6,249 3.59 % $ 655,425 $ 7,411 4.52 %
Borrowings 83,855 913 4.36 % 105,365 1,404 5.33 %
Subordinated debt 20,000 347 6.94 % 20,000 386 7.72 %
Total interest-bearing
liabilities 800,948 7,509 3.75 % 780,790 9,201 4.71 %
Non-interest-bearing
liabilities 36,199 37,851
Total liabilities $ 837,147 $ 818,641
Retained earnings 66,999 71,874
Total liabilities and
R.E. $ 904,146 $ 890,515
Net interest income $ 4,454 $ 5,266
Interest-rate spread 1.98 % 2.26 %
Yield on
interest-earning assets 2.13 % 2.54 %
Interest-earning assets
to interest-bearing
liabilities 104.33 % 106.28 %
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(1) Non-accruing loans are included in the average loan balances for the periods presented.
Part I Financial Information
Item 2
RESULTS OF OPERATIONS continued
For the three months ended December 31, 2008, a provision for loan losses of
$3,641,000 was recorded, while a provision for loan losses of $82,000 was
recorded in the prior year comparable period. The provision for loan losses for
the current period reflects management's judgments about the credit quality of
the Bank's loan portfolio. The allowance for loan losses consists of a specific
component and a general component.
Following is a breakdown of our valuation allowances:
December 31, 2008 June 30, 2008
General valuation allowance $ 7,763,433 $ 6,315,252
Specific valuation allowance 3,236,575 3,338,720
Total valuation allowance $ 11,000,008 $ 9,653,972
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Management's approach includes establishing a specific valuation allowance by evaluating individual non-performing loans for probable losses based on a systematic approach involving estimating the realizable value of the underlying collateral. Additionally, management established a general valuation allowance for pools of performing loans segregated by collateral type. For the general valuation allowance, management is applying a prudent loss factor based on our historical loss experience, trends based on changes to non-performing loans and foreclosure activity, and our subjective evaluation of the local population and economic environment. The loan portfolio is segregated into categories based on collateral type and a loss factor is applied to each category. The initial basis for each loss factor is the Company's loss experience for each category. Historical loss percentages are calculated and adjusted by taking charge-offs in each risk category during the past 12 months and dividing the total by the average balance of each category. The Bank's historical charge-offs, prior to fiscal 2008, are limited and the application of historical charge-offs per our formula resulted in extremely small historical loss factors at June 30, 2008 and September 30, 2008. In the quarter ended December 31, 2008, since charge-off activity has increased, the historical loss factors were revised to reflect the most current twelve month rolling average. Presently, we are updating our historical loss percentages on a monthly basis using a 12 month rolling average. A provision for loan losses is recorded when necessary to bring the allowance to a level consistent with this analysis. Management believes it uses the best information available to make a determination as to the adequacy of the allowance for loan losses. The current period provision for loan losses reflects the impact on the loss factors applied to pools of performing loans due to the recent increase in the Company's historical loss experience.
December 31, June 30,
2008 2008
Total loans on non-accrual status: $ 32,820 $ 22,489
Ratio of non-performing loans to total loans 4.52 % 3.09 %
Other non-performing assets (2) $ 9,502 $ 4,065
Total non-performing assets $ 42,322 $ 26,554
Total non-performing assets to total assets 4.69 % 3.06 %
(1) Non-accrual status denotes loans on which, in the opinion of management, the collection of additional interest is unlikely, or loans that meet the non-accrual criteria established by regulatory authorities. Payments received on a non-accrual loan are either applied to the outstanding principal balance or recorded as interest income, depending on an assessment of the collectibility of the principal balance of the loan.
(2) Other non-performing assets represent property acquired by the Bank through foreclosure or repossession.
The levels of non-accruing loans at June 30, 2008 and December 31, 2008 are
attributable to poor current local and economic conditions. Residential markets
nationally and locally have been adversely impacted by a significant increase in
foreclosures as a result of the problems faced by sub-prime borrowers and the
resulting contraction of residential credit available to all but the most credit
worthy borrowers. Land development projects nationally and locally have seen
slow sales and price decreases. The Company has significant exposure to the
residential market in the Greater Cleveland, Ohio area. As a result, the Company
has seen a significant increase in non-performing loans. Due to an increase in
foreclosure activity in the area, the foreclosure process in Cuyahoga County,
our primary market, has become elongated. As such, loans have remained past due
for considerable periods prior to being collected, transferred to real estate
owned, or charged off.
Of the $32.8 million and $22.5 million in non-accruing loans at December 31,
2008 and June 30, 2008, $23.1 million and $16.0 million, respectively, were
individually identified as impaired. All of these loans are collateralized by
various forms of non-residential real estate or residential construction. These
loans were reviewed for the likelihood of full collection based primarily on the
value of the underlying collateral, and, to the extent we believed collection of
loan principal was in doubt, we established specific loss reserves. Our
evaluation of the underlying collateral included a consideration of the
potential impact of erosion in real estate values due to poor local economic
conditions and a potentially long foreclosure process. This consideration
involves obtaining an updated valuation of the underlying real estate collateral
and estimating carrying and disposition costs to arrive at an estimate of the
net realizable value of the collateral. Through our
The Company's net loss for the six months ended December 31, 2008 was $3,622,800
as compared to net income of $1,342,800 for the prior year comparable period.
This represents a decrease of $4,965,600 when compared with the prior year
comparable period.
Net interest income for the six months ended December 31, 2008 decreased by
$1,365,900, or 12.3%, as compared to the prior year comparable period. This
resulted from a decrease of $5,304,300, or 17.8%, in interest income partially
offset by a decrease of $3,938,400, or 21.1%, in interest expense. The decrease
in net interest income was attributable to a decline of 22 basis points in the
interest-rate spread for the six month period ended December 31, 2008 as
compared to the prior year comparable period. The decrease in interest-rate
spread resulted from margin compression attributable to declining rates on
adjustable-rate loans, resulting from a decrease in short-term market rates not
reflected in local market deposit pricing, along with an increase in
non-performing loans.
The following table presents comparative information for the six months ended
December 31, 2008 and 2007 about average balances and average yields and costs
for
. . .
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