HVBC 2016 Annual Report

HV Bancorp, Inc. and Subsidiary Notes to the Consolidated Financial Statements Years Ended June 30, 2017 and 2016 63 Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of the evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company accounts for uncertain tax positions if it is more likely than not, based on the technical merits, the tax position will be realized or sustained upon examination. The term “more likely than not” means that a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. As of June 30, 2017 and 2016, the Company had no material unrecognized tax benefits or accrued interest and penalties. The Company's policy is to account for interest as a component of interest expense and penalties as a component of other expense. Federal and state tax years 2014 through 2016 were open for examination as of June 30, 2017. Transfer of Financial Assets Transfers of financials assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Fair Value Measurements Fair value of financial instruments is estimated using relevant market information and other assumptions. As more fully disclosed in Note 13, fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates. 2. Investment Securities Investment securities available-for-sale at June 30, 2017 were comprised of the following: 2017 Gross Gross Amortized Unrealized Unrealized (Dollars in thousands) Cost Gains Losses Fair Value U.S. Governmental securities $ 4,330 $ 26 $ (16) $ 4,340 Corporate notes 11,231 59 (64) 11,226 Collateralized mortgage obligations - agency residential 12,668 59 (160) 12,567 Mortgage-backed securities - agency residential 4,520 — (85) 4,435 Municipal securities 3,517 1 (11) 3,507 Bank CDs 6,742 23 (20) 6,745 $ 43,008 $ 168 $ (356) $ 42,820