HVBC 2016 Annual Report

37 • Increase Commercial Real Estate Lending . In order to increase the yield on our loan portfolio and reduce the term to repricing, we plan to increase our commercial real estate lending while maintaining what we believe are conservative underwriting standards. We will focus our commercial real estate lending on small businesses located in our market area, targeting owner-occupied businesses such as professional service providers. • Maintain High Asset Quality. Strong asset quality is critical to the long-term financial success of a community bank. We attribute our high asset quality to maintaining conservative underwriting standards, the diligence of our loan collection personnel and the stability of the local economy. At June 30, 2017, our non-performing assets to total assets ratio was 0.65%. Because substantially all of our loans are secured by real estate, and the level of our non-performing loans has been low in recent years, we believe that our allowance for loan losses is adequate to absorb the probable losses inherent in our loan portfolio. • Increase our Lower-Cost Core Deposits . NOW, passbook, checking and money market accounts are a lower cost source of funds than time deposits, and we have made a concerted effort to increase lower-cost transaction deposit accounts and reduce time deposits. Our ratio of core (non-time) deposits to total deposits has increased from 73.5% at June 30, 2016 to 83.6% at June 30, 2017 primarily as a result of the introduction of a new demand product attracting clients of local professional firms such as CPA firms, totaling $23.3 million at June 30, 2017. We plan to continue to aggressively market our core transaction accounts, emphasizing our high-quality service and competitive pricing of these products. We also offer the convenience of technology-based products, such as remote deposit capture, internet banking, mobile banking and mobile capture. • Expand our banking franchise as opportunities arise through acquisitions of other financial institutions. We currently operate from four full service and one limited service banking offices. In order to grow our assets to mitigate the increasing costs of regulatory compliance, we intend to evaluate expansion opportunities, primarily through potential acquisitions of local financial institutions. We would seek to expand our presence in Montgomery, Bucks or Philadelphia Counties, Pennsylvania. However, we currently have no understandings or agreements with respect to acquiring any financial institution. Critical Accounting Policies The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations. On April 5, 2015, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.