HVBC 2016 Annual Report

HV Bancorp, Inc. and Subsidiary Notes to the Consolidated Financial Statements Years Ended June 30, 2017 and 2016 62 Premises and Equipment Property and equipment are recorded at cost less accumulated depreciation. Depreciation is charged to income on the straight-line method over the estimated useful lives of the assets or, in the case of leasehold improvements, the expected lease period, if shorter. When disposal of fixed assets occurs, the related cost and accumulated depreciation are removed from the asset accounts, and the gain or loss from these disposals is reflected in non- interest income. The estimated useful lives are as follows: Years Land improvements 40 Buildings 15 to 40 Leasehold improvements 5 to 15 Furniture and office equipment 3 to 10 Real Estate Owned Real estate owned is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure and loans classified as in-substance foreclosure. A loan is classified as in-substance foreclosure when the Company has taken possession of the collateral regardless of whether formal proceedings take place. Foreclosed assets initially are recorded at fair value, net of estimated selling costs, at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value minus estimated costs to sell. Real estate secured by residential 1-4 in the process of foreclosure totaled $946,000 and $886,000 as of June 30, 2017 and 2016, family properties respectively. Real estate secured by residential 1-4 family properties held in Other Real Estate Owned totaled $0 and $115,000 at June 30, 2017 and 2016, respectively. There was no real estate secured by commercial properties d at June 30, 2017 and 2016, respectively. Revenues and expenses from operations held in Other Real Estate Owne and changes in the valuation allowance are included in real estate owned expenses, as part of non-interest expenses. In addition, any gain or loss realized upon disposal is included in gains or losses on real estate sold, as part of non- interest expense. The following is a roll forward of activity in Other Real Estate Owned at June 30: (Dollars in thousands) 2017 2016 Balance at beginning of period $ 115 $ 574 Properties transferred in 65 313 Proceeds from properties sold (168) (496) Loss on sales of properties (12) (20) Impairment valuation reserves — (256) Balance at end of year $ — $ 115 Securities Sold Under Agreements to Repurchase The Company enters into sales of securities under agreements to repurchase. Reverse repurchase agreements are treated as financings, with the obligation to repurchase securities sold reflected as a liability in the consolidated statement of financial condition. The securities underlying the agreements remain in the asset accounts. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.