HVBC 2016 Annual Report

HV Bancorp, Inc. and Subsidiary Notes to the Consolidated Financial Statements Years Ended June 30, 2017 and 2016 76 meet the net worth requirements could adversely impact the ability to originate loans and access secondary markets. As of June 30, 2017 and 2016, the Bank maintained the minimum required net worth levels. The Bank must hold a capital conservation buffer, subject to a phase-in from January 1, 2016 through December 31, 2019, above its minimum risk-based capital requirements. As of June 30, 2017, the Bank is required to maintain a capital conservation buffer of 1.25%. At June 30, 2017, the Bank met the regulatory minimum capital requirements. Failure to maintain the full amount of the buffer will result in restrictions on the Bank’s ability to make capital distributions and to pay discretionary bonuses to executive officers. The phase-in requires the Bank to increase its capital conservation buffer from 0.625% as of June 30, 2016 to 2.50% as of June 30, 2019 and thereafter. 9. Derivatives and Risk Management Activities The Company did not have any derivative instruments designated as hedging instruments, or subject to master netting and collateral agreements as of and for the year ended June 30, 2017. The following table summarizes the amounts recorded in the Company’s consolidated statement of financial condition for derivatives not designated as hedging instruments as of June 30, 2017 and 2016 (dollars in thousands): June 30, 2017 Asset Derivatives Balance Sheet Notional Presentation Fair Value Amount IRLCs Mortgage banking derivatives $ 786 $ 21,389 Forward loan sales commitments Mortgage banking derivatives 179 10,864 TBA securities Mortgage banking derivatives 36 14,750 Liability Derivatives Balance Sheet Notional Presentation Fair Value Amount IRLCs Other liabilities $ 19 $ 4,089 Forward loan sales commitments Other liabilities 37 3,717 TBA securities Other liabilities 8 2,750 June 30, 2016 Asset Derivatives Balance Sheet Notional Presentation Fair Value Amount IRLCs Mortgage banking derivatives $ 1,084 $ 30,006 Forward loan sales commitments Mortgage banking derivatives 408 7,046 TBA securities Mortgage banking derivatives — — Liability Derivatives Balance Sheet Notional Presentation Fair Value Amount IRLCs Other liabilities $ 32 $ 4,572 Forward loan sales commitments Other liabilities 48 5,544 TBA securities Other liabilities 166 22,000