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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File No. 001-34893

Standard AVB Financial Corp.

(Exact Name of Registrant as Specified in Its Charter)

Maryland		27-3100949
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2640 Monroeville Blvd. Monroeville, Pennsylvania		15146
(Address of Principal Executive Offices)		(Zip Code)

(412) 856-0363

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		STND		The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

YES ⌧ NO ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ⌧ NO ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ⌧

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of May 11, 2021, the registrant had 4,773,716 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

Standard AVB Financial Corp.

Table of Contents


	Part I – Financial Information

ITEM 1.	Financial Statements (Unaudited)	3

	Consolidated Statements of Financial Condition as of March 31, 2021 and December 31, 2020	3

	Consolidated Statements of Income for the Three Months Ended March 31, 2021 and 2020	4

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020	5

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020	6

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	7

	Notes to Consolidated Statements	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	39

ITEM 4.	Controls and Procedures	39

	PART II – Other Information	40

ITEM 1.	Legal Proceedings	40

ITEM 1A.	Risk Factors	40

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

ITEM 3.	Defaults Upon Senior Securities	41

ITEM 4.	Mine Safety Disclosures	41

ITEM 5.	Other Information	41

ITEM 6.	Exhibits	42

	Signatures	43

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

Standard AVB Financial Corp.

Consolidated Statements of Financial Condition

(Dollars in thousands, except per share data)


		March 31,
		2021	December 31,
		(unaudited)	2020
ASSETS
Cash on hand and due from banks	$	3,575	$	3,543
Interest-earning deposits in other institutions		85,735		46,970
Cash and Cash Equivalents		89,310		50,513
Investment securities available for sale, at fair value		88,386		89,953
Equity securities, at fair value		2,609		2,552
Mortgage-backed securities available for sale, at fair value		94,970		95,525
Certificate of deposit		249		249
Federal Home Loan Bank and other restricted stock, at cost		8,503		9,008
Loans receivable, net of allowance for loan losses of $7,979 and $7,841		711,407		734,752
Loans held for sale		886		371
Foreclosed real estate		329		488
Office properties and equipment, net		9,132		9,357
Bank-owned life insurance		25,074		24,934
Goodwill		25,836		25,836
Core deposit intangible		1,302		1,411
Accrued interest receivable and other assets		6,622		6,639
TOTAL ASSETS	$	1,064,615	$	1,051,588

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits:
Demand and savings accounts	$	628,524	$	603,077
Time deposits		204,622		206,163
Total Deposits		833,146		809,240
Long-term borrowings		78,521		89,382
Securities sold under agreements to repurchase		3,629		3,597
Accrued interest payable and other liabilities		4,262		3,418
TOTAL LIABILITIES		919,558		905,637

Stockholders’ Equity
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized, none issued		—		—
Common stock, $0.01 par value per share, 40,000,000 shares authorized, 4,773,716 and 4,773,995 shares issued and outstanding, respectively		48		48
Additional paid-in-capital		72,142		72,137
Retained earnings		74,035		72,938
Unearned Employee Stock Ownership Plan (ESOP) shares		(1,379)		(1,379)
Accumulated other comprehensive income		211		2,207
TOTAL STOCKHOLDERS’ EQUITY		145,057		145,951
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,064,615	$	1,051,588

See accompanying notes to the consolidated financial statements.

Table of Contents

Standard AVB Financial Corp.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Interest and Dividend Income
Loans, including fees	$	7,575	$	7,813
Mortgage-backed securities		301		463
Investments:
Taxable		74		114
Tax-exempt		513		415
Federal Home Loan Bank and other restricted stock		106		143
Interest-earning deposits and federal funds sold		13		88
Total Interest and Dividend Income		8,582		9,036

Interest Expense
Deposits		950		1,672
Long-term borrowings		423		531
Securities sold under agreements to repurchase		2		4
Total Interest Expense		1,375		2,207

Net Interest Income		7,207		6,829

Provision for Loan Losses		150		550

Net Interest Income after Provision for Loan Losses		7,057		6,279

Noninterest Income
Service charges		661		732
Earnings on bank-owned life insurance		140		138
Net gains on sales of securities		4		—
Net equity securities fair value adjustment gains (losses)		57		(674)
Net loan sale gains and referral fees		140		99
Investment management fees		115		220
Other income		53		20
Total Noninterest Income		1,170		535

Noninterest Expenses
Compensation and employee benefits		3,213		3,365
Data processing		186		188
Premises and occupancy costs		628		610
Automatic teller machine expense		137		146
Federal deposit insurance		67		(44)
Core deposit amortization		109		145
Merger expenses		151		—
Other operating expenses		1,085		1,100
Total Noninterest Expenses		5,576		5,510

Income before Income Tax Expense		2,651		1,304

Income Tax Expense
Federal		414		110
State		114		84
Total Income Tax Expense		528		194
Net Income	$	2,123	$	1,110
Earnings Per Share:
Basic earnings per common share	$	0.46	$	0.24
Diluted earnings per common share	$	0.46	$	0.24

Cash dividends paid per common share	$	0.22	$	0.22
Basic weighted average shares outstanding		4,639,890		4,544,408
Diluted weighted average shares outstanding		4,653,625		4,627,073

See accompanying notes to the consolidated financial statements.

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Standard AVB Financial Corp.

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Net Income	$	2,123	$	1,110

Other comprehensive loss:
Change in unrealized gain on securities available for sale		(2,533)		(475)
Tax effect		532		100
Reclassification adjustment for security gains realized in income		(4)		—
Tax effect		1		—
Change in pension obligation for defined benefit plan		10		3
Tax effect		(2)		(1)
Total other comprehensive loss		(1,996)		(373)

Total Comprehensive Income	$	127	$	737

See accompanying notes to the consolidated financial statements.

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Standard AVB Financial Corp.

Consolidated Statements of Changes in Stockholders’ Equity

(Dollars in thousands, except per share data)

(Unaudited)


									Accumulated
			Additional				Unearned		Other		Total
	Common		Paid-In		Retained		ESOP		Comprehensive		Stockholders’
	Stock		Capital		Earnings		Shares		Income		Equity
Three Months Ended:
Balance, December 31, 2020	$	48	$	72,137	$	72,938	$	(1,379)	$	2,207	$	145,951
Net income		—		—		2,123		—		—		2,123
Other comprehensive loss		—		—		—		—		(1,996)		(1,996)
Cash dividends ($0.22 per share)		—		—		(1,026)		—		—		(1,026)
Stock repurchases (279 shares)		—		(9)		—		—		—		(9)
Compensation expense on stock awards		—		14		—		—		—		14
Balance, March 31, 2021	$	48	$	72,142	$	74,035	$	(1,379)	$	211	$	145,057

Balance, December 31, 2019	$	47	$	72,155	$	70,037	$	(1,533)	$	1,142	$	141,848
Net income		—		—		1,110		—		—		1,110
Other comprehensive loss		—		—		—		—		(373)		(373)
Stock repurchases (49,500 shares)		—		(1,197)		—		—		—		(1,197)
Cash dividends ($0.22 per share)		—		—		(1,007)		—		—		(1,007)
Stock options exercised (13,442 shares)		—		242		—		—		—		242
Compensation expense on stock awards		—		27		—		—		—		27
Compensation expense on ESOP		—		61		—		39		—		100
Balance, March 31, 2020	$	47	$	71,288	$	70,140	$	(1,494)	$	769	$	140,750

See accompanying notes to the consolidated financial statements.

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Standard AVB Financial Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Cash Flows From Operating Activities
Net income	$	2,123	$	1,110
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		989		520
Provision for loan losses		150		550
Amortization of core deposit intangible		109		145
Net gain on sale of securities available for sale		(4)		—
Net equity securities fair value adjustment (gains) losses		(57)		674
Net gain on sale of foreclosed real estate		(23)		—
Origination of loans held for sale		(5,776)		(5,571)
Proceeds from sale of loans held for sale		5,387		5,932
Net loan sale gains and referral fees		(140)		(99)
Compensation expense on ESOP		—		100
Compensation expense on stock awards		14		27
Deferred income taxes		71		(95)
Increase in accrued interest receivable		(29)		(42)
Earnings on bank-owned life insurance		(140)		(138)
Decrease in accrued interest payable		(16)		(56)
Other, net		770		(731)
Net Cash Provided by Operating Activities		3,428		2,326
Cash Flows Used In Investing Activities
Net decrease in loans		22,742		2,334
Purchases of investment securities		(6,807)		(4,146)
Purchases of mortgage-backed securities		(14,507)		(1,531)
Proceeds from maturities/principal repayments/calls of investment securities		7,455		9,145
Proceeds from maturities/principal repayments/calls of mortgage-backed securities		8,127		6,601
Proceeds from sales of mortgage-backed securities		5,678		—
Purchase of Federal Home Loan Bank stock		(206)		(1,120)
Redemption of Federal Home Loan Bank stock		711		456
Proceeds from sales of foreclosed real estate		203		—
Purchase of bank-owned life insurance		—		(1,000)
Net additions of office properties and equipment		(51)		(65)
Net Cash Provided by Investing Activities		23,345		10,674
Cash Flows From Financing Activities
Net increase in demand and savings accounts		25,447		4,509
Net decrease in time deposits		(1,541)		(9,399)
Net increase in securities sold under agreements to repurchase		32		270
Repayments of Federal Home Loan Bank advances		(10,774)		(11,530)
Proceeds from Federal Home Loan Bank advances		—		25,000
Lease liability payments		(105)		(89)
Exercise of stock options		—		242
Dividends paid		(1,026)		(1,007)
Stock repurchases		(9)		(1,197)
Net Cash Provided by Financing Activities		12,024		6,799
Net Increase in Cash and Cash Equivalents		38,797		19,799
Cash and Cash Equivalents - Beginning		50,513		32,427
Cash and Cash Equivalents - Ending	$	89,310	$	52,226
Supplementary Cash Flows Information:
Interest paid	$	1,391	$	2,263
Income taxes paid	$	45	$	163
Investment securities purchased not settled	$	641	$	477
Loans transferred to foreclosed real estate	$	22	$	85

See accompanying notes to the consolidated financial statements.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

(1) Consolidation

The accompanying consolidated financial statements include the accounts of Standard AVB Financial Corp. (the “Company”) and its direct and indirect wholly owned subsidiaries, Standard Bank, PaSB (the “Bank”), and Westmoreland Investment Company. All significant intercompany accounts and transactions have been eliminated in consolidation. Standard AVB Financial Corp. owns all of the outstanding shares of common stock of the Bank.

(2) Basis of Presentation

The accompanying consolidated financial statements were prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles in the United States. All adjustments (consisting of normal recurring adjustments), which, in the opinion of management are necessary for a fair presentation of the financial statements and to make the financial statements not misleading have been included. The unaudited consolidated financial statements and other financial information contained in this quarterly report on Form 10-Q should be read in conjunction with the audited financial statements of Standard AVB Financial Corp. at and for the year ended December 31, 2020 contained in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission on March 31, 2021. The results for the three month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future interim period. Certain amounts in the 2020 financial statements have been reclassified to conform to the 2021 presentation format. These reclassifications had no effect on stockholders’ equity or net income.

(3) Proposed Merger with Dollar

On September 25, 2020 the Company, and Dollar Mutual Bancorp (“Dollar”) announced they had entered into a definitive agreement under which Dollar will acquire the Company in an all cash transaction valued at approximately $158 million. The Company’s stockholders will receive $33.00 for each share of Company common stock that they own. The transaction was approved by the Company’s stockholders on January 19, 2021 and all necessary regulatory approvals and waivers have been received. The parties expect that the proposed merger will be completed after market hours on May 28, 2021, pending the satisfaction or waiver of customary closing conditions. However, it is possible that factors outside the control of both companies could result in the merger being completed at a different time or not at all. In connection with the acquisition, the Company had incurred $151,000 ($121,000 after tax) of merger-related expenses for the three months ended March 31, 2021, primarily legal costs, which are included in the Consolidated Statements of Income.

(4) Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The following table sets forth the computation of basic and diluted EPS for the three months ended March 31, 2021 and March 31, 2020 (dollars in thousands, except per share data):

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021


	Three Months Ended March 31,
	2021		2020
Net income available to common stockholders	$	2,123	$	1,110

Basic EPS:
Weighted average shares outstanding		4,639,890		4,544,408
Basic EPS	$	0.46	$	0.24

Diluted EPS:
Weighted average shares outstanding		4,639,890		4,544,408
Dilutive effect of common stock equivalents		13,735		82,665
Total diluted weighted average shares outstanding		4,653,625		4,627,073
Diluted EPS	$	0.46	$	0.24

Options to purchase 29,790 and 234,339 shares of common stock were outstanding as of March 31, 2021 and March 31, 2020 respectively, with an average exercise price of $16.50 and $17.02, respectively. There were no anti-dilutive shares as of March 31, 2021 or March 31, 2020.

As of March 31, 2021 and March 31, 2020, there were 3,140 and 8,297 shares of outstanding restricted stock, respectively, that were not fully vested and were taken into consideration in the computation of both basic and diluted earnings per common share.

(5) Recent Accounting Pronouncements

Accounting Standards Pending Adoption

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. The Company had initially worked with a third party to evaluate the various CECL methodologies and decided to utilize the vintage method. Given the deferral of the effective date, the Company has delayed further efforts to determine what impact it will have on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (“SEC”) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profit entities that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 350, Intangibles — Goodwill and Other, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In August 2018, the FASB issued ASU 2018-14, Compensation — Retirement Benefits (Topic 715-20). This Update amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The Update eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The Update also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This Update is effective for public business entities for fiscal years ending after December 15, 2020, and must be applied on a retrospective basis. For all other entities, this Update is effective for fiscal years ending after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40). This Update addresses customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This Update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The amendments in this Update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 350, Intangibles — Goodwill and Other, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements, which addressed issues lessors sometimes encounter. Specifically addressed in this Update were issues related to 1) determining the fair value of the underlying asset by the lessor that are not manufacturers or dealers (generally financial institutions and captive finance companies), and 2) lessors that are depository and lending institutions should classify principal and payments received under sales-type and direct financing leases within investing activities in the cash flow statement. The ASU also exempts both lessees and lessors from having to provide the interim disclosures required by ASC 250-10-50-3 in the fiscal year in which a company adopts the new leases standard. The amendments addressing the two lessor accounting issues are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the effective date is for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. This Update is not expected to have a significant impact on the Company’s financial statements.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. Topic 326, Financial Instruments — Credit Losses amendments are effective for SEC registrants for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other public business entities, the effective date is for fiscal years beginning after December 15, 2020, and for all other entities, the effective date is for fiscal years beginning after December 15, 2021. Topic 815, Derivatives and Hedging amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. For entities that have adopted the amendments in Update 2017-12, the effective date is as of the beginning of the first annual period beginning after the issuance of this Update. Topic 825, Financial Instruments amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Furthermore, the ASU provides a one-year deferral of the effective dates of the ASUs on derivatives and hedging for companies that are not public business entities. This Update is not expected to have a significant impact on the Company’s financial statements.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments — Credit Losses, Topic 326, which allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of the new credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for the applying the fair value option in ASC 825-10.3. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. For entities that elect the fair value option, the difference between the carrying amount and the fair value of the financial assets would be recognized through a cumulative-effect adjustment to opening retained earnings as of the date an entity adopted ASU 2016-13. Changes in fair value of that financial asset would subsequently be reported in current earnings. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). The Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, to clarify its new credit impairment guidance in ASC 326, based on implementation issues raised by stakeholders. This Update clarified, among other things, that expected recoveries are to be included in the allowance for credit losses for these financial assets; an accounting policy election can be made to adjust the effective interest rate for existing troubled debt restructurings based on the prepayment assumptions instead of the prepayment assumptions applicable immediately prior to the restructuring event; and extends the practical expedient to exclude accrued interest receivable from all additional relevant disclosures involving amortized cost basis. The effective dates in this Update are the same as those applicable for ASU 2019-10. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs, which clarifies that, for each reporting period, an entity should reevaluate whether a callable debt security is within the scope of ASC 310-20-35-33. For public business entities, ASU 2020-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application is not permitted. For all other entities, ASU 2020-08 is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

In October 2020, the FASB issued ASU 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762, which codifies, as appropriate, the amended financial statement disclosure requirements in Regulation S-X Rules 13-01 and 13-02. The amendments are effective January 4, 2021. This Update did not have a significant impact on the Company’s financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which makes minor technical corrections and clarifications to the ASC. The amendments in Sections B and C of the ASU are effective for annual periods beginning after December 15, 2020, for public business entities. For all other entities, the amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

(6) Investment Securities

Investment securities available for sale at March 31, 2021 and December 31, 2020 were as follows (dollars in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
March 31, 2021:
U.S. government and agency obligations due:
Beyond 1 year but within 5 years	$	3,000	$	—	$	(33)	$	2,967
Beyond 5 year but within 10 years		3,000		—		(71)		2,929
Corporate bonds due:
Beyond 1 year but within 5 years		3,978		210		—		4,188
Beyond 5 years but within 10 years		1,125		—		(31)		1,094
Municipal obligations due:
Within 1 year		3,223		71		—		3,294
Beyond 1 year but within 5 years		1,665		47		—		1,712
Beyond 5 years but within 10 years		16,297		357		(44)		16,610
Beyond 10 years		55,543		597		(548)		55,592
	$	87,831	$	1,282	$	(727)	$	88,386


December 31, 2020:
U.S. government and agency obligations due:
Beyond 1 year but within 5 years	$	1,000	$	2	$	—	$	1,002
Beyond 5 year but within 10 years		3,000		5		—		3,005
Corporate bonds due:
Within 1 year		1,000		—		—		1,000
Beyond 1 year but within 5 years		3,975		255		—		4,230
Municipal obligations due:
Within 1 year		4,657		107		—		4,764
Beyond 1 year but within 5 years		1,640		53		—		1,693
Beyond 5 years but within 10 years		18,571		525		—		19,096
Beyond 10 years		54,009		1,177		(23)		55,163
	$	87,852	$	2,124	$	(23)	$	89,953

There were no sales of investment securities during the three months ended March 31, 2021 or March 31, 2020, respectively.

Investment securities with a carrying value of $11.4 million were pledged to secure repurchase agreements and public funds accounts at both March 31, 2021 and December 31, 2020, respectively.

Table of Contents

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table presents the fair value and gross unrealized losses on investment securities and the length of time that the securities have been in a continuous unrealized loss position at March 31, 2021 and December 31, 2020 (dollars in thousands):


	Less than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2021:
U.S. government and agency obligations	$	5,896	$	(104)	$	—	$	—	$	5,896	$	(104)
Corporate bonds		1,094		(31)		—		—		1,094		(31)
Municipal obligations		31,631		(592)		—		—	$	31,631	$	(592)
Total	$	38,621	$	(727)	$	—	$	—	$	38,621	$	(727)


December 31, 2020:
Municipal obligations	$	5,619	$	(23)	$	—	$	—	$	5,619	$	(23)
Total	$	5,619	$	(23)	$	—	$	—	$	5,619	$	(23)

At March 31, 2021, the Company held 66 investment securities in an unrealized loss position. The decline in the fair value of these securities resulted primarily from interest rate fluctuations. There were no potential credit concerns identified with regard to the municipal obligations as of March 31, 2021. The Company does not intend to sell these securities nor is it more likely than not that the Company would be required to sell these securities before their anticipated recovery. Additionally, the Company believes the collection of the investment principal and related interest is probable. Based on the above, the Company considers all of the unrealized losses to be temporary impairment losses.

(7) Equity Securities

The following table presents the net gains and losses on equity investments recognized in earnings during the three months ended March 31, 2021 and March 31, 2020, and the portion of unrealized gains and losses for those periods that relate to equity investments held (dollars in thousands):


	Three Months Ended March 31,
	2021		2020
Net equity securities fair value adjustment gains (losses)	$	57	$	(674)
Net gains realized on the sale of equity securities during the period		—		—
Gains (losses) recognized on equity securities during the period	$	57	$	(674)

There were no sales of equity securities during the three months ended March 31, 2021 or March 31, 2020, respectively.

Table of Contents

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

(8) Mortgage-Backed Securities

Mortgage-backed securities available for sale at March 31, 2021 and December 31, 2020 were as follows (dollars in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
March 31, 2021:
Government pass-throughs:
Ginnie Mae	$	14,305	$	325	$	(5)	$	14,625
Fannie Mae		36,341		385		(382)		36,344
Freddie Mac		18,326		276		(156)		18,446
Private pass-throughs		16,501		9		(188)		16,322
Collateralized mortgage obligations		9,225		119		(111)		9,233
	$	94,698	$	1,114	$	(842)	$	94,970


December 31, 2020:
Government pass-throughs:
Ginnie Mae	$	20,079	$	432	$	(16)	$	20,495
Fannie Mae		24,051		601		(99)		24,553
Freddie Mac		21,317		357		(50)		21,624
Private pass-throughs		17,528		55		(212)		17,371
Collateralized mortgage obligations		11,287		209		(14)		11,482
	$	94,262	$	1,654	$	(391)	$	95,525

Private pass-throughs include Small Business Administration (“SBA”) securities that are each an aggregation of SBA guaranteed portions of loans made by SBA lenders under section 7(a) of the Small Business Act. The guaranty is backed by the full faith and credit of the United States.

For the three months ended March 31, 2021, gains on the sale of mortgage-backed securities were $43,000, losses were $39,000 and proceeds from such sales were $5.7 million. There were no sales of mortgage-backed securities during the three months ended March 31, 2020.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The amortized cost and fair value of mortgage-backed securities at March 31, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to repay obligations with or without prepayment penalties (dollars in thousands):


	Amortized Cost		Fair Value
Due after one year through five years	$	765		777
Due after five years through ten years		3,907		3,904
Due after ten years		90,026		90,289
Total Mortgage-Backed Securities	$	94,698	$	94,970

The following table presents the fair value and gross unrealized losses on mortgage-backed securities and the length of time that the securities have been in a continuous unrealized loss position at March 31, 2021 and December 31, 2020 (dollars in thousands):


	Less than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2021:
Government pass-throughs:
Ginnie Mae	$	—	$	—	$	807	$	(5)	$	807	$	(5)
Fannie Mae		25,332		(382)		—		—		25,332		(382)
Freddie Mac		11,974		(156)		—		—		11,974		(156)
Private pass-throughs		—		—		14,821		(188)		14,821		(188)
Collateralized mortgage obligations		5,122		(111)		—		—		5,122		(111)
Total	$	42,428	$	(649)	$	15,628	$	(193)	$	58,056	$	(842)


December 31, 2020:
Government pass-throughs:
Ginnie Mae	$	2,629	$	(15)	$	462	$	(1)	$	3,091	$	(16)
Fannie Mae		7,062		(99)		—		—		7,062		(99)
Freddie Mac		7,543		(50)		—		—		7,543		(50)
Private pass-throughs		—		—		15,539		(212)		15,539		(212)
Collateralized mortgage obligations		5,944		(14)		—		—		5,944		(14)
Total	$	23,178	$	(178)	$	16,001	$	(213)	$	39,179	$	(391)

At March 31, 2021, the Company held 21 mortgage-backed securities in an unrealized loss position. The decline in the fair value of these securities resulted primarily from interest rate fluctuations. The Company does not intend to sell these securities nor is it more likely than not that the Company would be required to sell these securities before their anticipated recovery. Additionally, the Company believes the collection of the investment principal and related interest is probable. Based on the above, the Company considers all of the unrealized loss to be temporary impairment loss.

Mortgage-backed securities with a carrying value of $15.3 million and $17.0 million were pledged to secure repurchase agreements and public funds accounts at March 31, 2021 and December 31, 2020, respectively.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

(9) Loans Receivable and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio by the amounts collectively evaluated for impairment and the amounts individually evaluated for impairment, and the related allowance for loan losses, as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	Real Estate Loans
	One-to-four-		Commercial		Home
	family		Real Estate		Equity Loans
	Residential and		and		and Lines		Commercial		Other
	Construction		Construction		of Credit		Business		Loans		Total
March 31, 2021:
Collectively evaluated for impairment	$	179,776	$	374,502	$	91,163	$	69,827	$	449	$	715,717
Individually evaluated for impairment		—		3,051		—		618		—		3,669
Total loans before allowance for loan losses	$	179,776	$	377,553	$	91,163	$	70,445	$	449	$	719,386

December 31, 2020:
Collectively evaluated for impairment	$	192,402	$	372,558	$	96,116	$	77,332	$	504	$	738,912
Individually evaluated for impairment		—		3,063		—		618		—		3,681
Total loans before allowance for loan losses	$	192,402	$	375,621	$	96,116	$	77,950	$	504	$	742,593

Total loans at March 31, 2021 and December 31, 2020 were net of deferred loan fees of $1.2 million and $1.3 million, respectively.

The segments of the Bank’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The three segments are: real estate, commercial business and other. The real estate loan segment is further disaggregated into three classes. One-to-four family residential mortgages (including residential construction loans) include loans to individuals secured by residential properties having maturities up to 30 years. Commercial real estate (including commercial construction loans) consists of loans to commercial borrowers secured by commercial or residential real estate. Home equity loans and lines of credit include loans having maturities up to 20 years. The commercial business loan segment consists of loans to finance the activities of commercial business customers and includes PPP loans. The other loan segment consists primarily of consumer loans and overdraft lines of credit. The portfolio segments utilized in the calculation of the allowance for loan losses are disaggregated at the same level that management uses to monitor risk in the portfolio. Therefore the portfolio segments and classes of loans are the same.

There are various risks associated with lending to each portfolio segment. One-to-four family residential mortgage loans are typically longer-term loans which generally entail greater interest rate risk than consumer and commercial loans. Under certain economic conditions, housing values may decline, which may increase the risk that the collateral values are insufficient. Commercial real estate loans generally present a higher level of risk than loans secured by residences. This greater risk is due to several factors including but not limited to concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the increased difficulty in monitoring these types of loans. Furthermore, the repayment of commercial real estate loans is typically dependent upon successful operation of the related real estate project. If the cash flow from the project is reduced by such occurrences as leases not being obtained, renewed or not entirely fulfilled, the borrower’s ability to repay the loan may be impaired. Commercial business loans are primarily secured by business assets, inventories and accounts receivable which present collateral risk. The repayment of the commercial business loan is dependent upon the ongoing cash flow of the operating entity and the ability of a guarantor to support the company. The other loan segment generally has higher interest rates and shorter terms than one-to-four family residential mortgage loans, however, they can have additional credit risk due to the type of collateral securing the loan.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table provides additional information with respect to the Company’s commercial real estate and construction and commercial business loans by industry sector at March 31, 2021 (dollars in thousands):


Type of Loan⁽¹⁾	Number of Loans	Balance
Real Estate Rental and Leasing	1,287	$	310,788
Construction	142		26,075
Accommodation and Food Services	71		22,408
Health Care and Social Assistance	104		14,224
Other Services (except Public Administration)	131		14,100
Retail Trade	78		13,137
Professional, Scientific, and Technical Services	132		8,270
Manufacturing	37		7,171
Public Administration	50		6,567
Wholesale Trade	54		6,096
Other	203		19,162
Total	2,289	$	447,998

_______________________________________

(1) Loan types are based on the North American Industry Classification System (NAICS).

As of March 31, 2021, the real estate rental and leasing sector included the following industry categories:


Detail of Real Estate Rental and Leasing	Number of Loans	Balance
Lessors of Residential Buildings and Dwellings	938	$	163,066
Lessors of Nonresidential Buildings	214		109,601
Other Activities Related to Real Estate	43		11,793
Other General Government Support	18		6,547
Lessors of Mini Warehouses and Self-Storage Units	17		6,155
Lessors of Other Real Estate Property	13		5,263
Real Estate Property Managers	12		2,786
All Other Real Estate Rental and Leasing	32		5,577
Total	1,287	$	310,788

The Company’s primary business activity is with customers located within its local market area. Although the Company has a diversified loan portfolio, loans outstanding to individuals and businesses are dependent upon the local economic conditions in its immediate market area. It is anticipated that certain industries will continue to suffer losses as a result of the COVID-19 pandemic. At March 31, 2021, the Company’s largest commercial loan concentrations are to the lessors of residential properties and the lessors of nonresidential properties representing 36.4% and 24.5% of the commercial loan portfolio, respectively. The construction portfolio is very well diversified with no exposure in any NAICS above $4.8 million. Additionally, the Bank had approximately $15.7 million in hotel and motel loans and $5.9 million in restaurant loans at March 31, 2021. Included in the hotel and motel and restaurant loans were $362,000 and $2.4 million of PPP loans, respectively.

The Company is a qualified SBA lender and was automatically authorized to originate PPP loans. The initial PPP loan program closed on August 8, 2020. The Company is continuing to work with customers to submit the required information to the SBA in order to receive the maximum amount of loan forgiveness on those loans. To date, the Company has received loan forgiveness on 165 loans totaling over $18.0 million out of the 428 loans totaling over $42.0 million approved under the first round of the PPP program. On December 27, 2020, an additional round of PPP funding was established. The Company is continuing to participate in the program, which opened mid-January for new loan applications and remains open through May 31, 2021. The Company has processed 93 applications totaling over $8.1 million under the second round of the PPP program.

Eligible businesses were able to apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly “payroll costs;” or (2) $10.0 million. PPP loans have: (a) an interest rate of 1.0%, (b) a five-year loan term to maturity for loans made on or after June 5, 2020 (loans made prior to June 5, 2020 have a two-year term, however borrowers and lenders may mutually

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

agree to extend the maturity for such loans to five years); and (c) principal and interest payments deferred for nine months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expenses, with the remaining 40% of the loan proceeds used for other qualifying expenses.

Management evaluates individual loans in all of the commercial segments for possible impairment if the relationship is greater than $200,000, and the loan is in nonaccrual status, risk-rated Substandard or Doubtful, 90 days or more past due or represents a troubled debt restructuring ("TDR"). Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectability, while not classifying the loan as impaired if the loan is not a commercial business or commercial real estate loan. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loan is part of a larger relationship that is impaired, has a classified risk rating, or is a TDR.

Once the decision has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is calculated by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The appropriate method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis. The Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

Consistent with accounting and regulatory guidance, the Company recognizes a TDR when a borrower is experiencing financial difficulties and the Bank, for economic or legal reasons related to a borrower's financial difficulties, grants a concession to the borrower that would not normally be considered. Regardless of the form of concession granted, the Company's objective in offering a TDR is to increase the probability of repayment of the borrower's loan. The Company did not modify any loans as TDRs during the three months ended March 31, 2021 or March 31, 2020. As of March 31, 2021, all TDRs were performing in accordance with their modified terms and are included in the impaired loan table below.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary at March 31, 2021 and December 31, 2020 (dollars in thousands):


					Impaired Loans
	Impaired Loans With				Without
	Allowance				Allowance		Total Impaired Loans
	Recorded		Related		Recorded		Recorded		Unpaid Principal
	Investment		Allowance		Investment		Investment		Balance
March 31, 2021:
Commercial real estate and construction	$	853	$	346	$	2,198	$	3,051	$	3,071
Commercial business		618		251		—		618		633
Total impaired loans	$	1,471	$	597	$	2,198	$	3,669	$	3,704

December 31, 2020:
Commercial real estate and construction	$	853	$	256	$	2,210	$	3,063	$	3,063
Commercial business		618		186		—		618		618
Total impaired loans	$	1,471	$	442	$	2,210	$	3,681	$	3,681

The following table presents the average recorded investment in impaired loans and related interest income recognized for the three months ended March 31, 2021 and March 31, 2020 (dollars in thousands):


	For the Three Months Ended March 31,
	2021		2020
Average investment in impaired loans:
Commercial real estate and construction	$	3,057	$	834
Commercial business		618		605
	$	3,675	$	1,439
Interest income recognized on impaired loans	$	22	$	18

The Company has elected to follow the loan modification guidance under Section 4013 of the CARES Act with regard to COVID-19 modifications made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Under that guidance, any loan modification that is done as a result of COVID-19 for a loan that was not more than 30 days past due as of December 31, 2019, will not be categorized as a TDR. The Company has developed loan payment deferral programs to provide assistance to both individuals and small business clients directly impacted by the COVID-19 pandemic. As of March 31, 2021, the Bank had existing payment deferrals for eight commercial loans totaling $9.2 million and five consumer loans totaling $1.0 million as a result of COVID-19. All of these loans were initially provided a deferral period of 90 days and, if necessary, additional deferral periods were provided upon request. The Company remains fully committed to serving its customers and communities through this uncertain time.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table provides additional information with respect to the loans modified under Section 4013 of the CARES Act in the Company’s loan portfolio at March 31, 2021 (dollars in thousands):


				Weighted Average
Type of Loan	Number of Loans	Balance		Interest Rate
One-to-four family and residential and construction	5	$	1,007	3.78	%
Commercial real estate and construction	7		8,229	4.31	%
Commercial business	1		954	4.62	%
Total	13	$	10,190	4.29	%

Included in the commercial real estate and construction modifications were two hotel and motel loans totaling $3.6 million.

Management uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first five categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently performing but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the collection of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans 90 days or more past due are considered Substandard. Any loan that has a specific allocation of the allowance for loan losses and is in the process of liquidation of the collateral is placed in the Doubtful category. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as delinquency, bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolio at origination. Commercial relationships are periodically reviewed internally for credit deterioration or improvement in order to confirm that the relationship is appropriately risk rated. The Audit Committee of the Company also engages an external consultant to conduct loan reviews. The scope of the annual external engagement, which is performed through semi-annual loan reviews, includes reviewing approximately the top 50 to 60 loan relationships, all watchlist loans greater than $100,000, all commercial Reg O loans, and a random sampling of new loan originations between $200,000 and $500,000 during the year. Status reports are provided to management for loans classified as Substandard on a quarterly basis, which results in a proactive approach to resolution. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

The following table presents the classes of the loan portfolio summarized by the aggregate Pass rating and the criticized categories of Special Mention, Substandard and Doubtful within the Company’s internal risk rating system as of March 31, 2021 and December 31, 2020 (dollars in thousands):


			Special
	Pass		Mention		Substandard		Doubtful		Total
March 31, 2021:
Real estate loans:
One-to-four-family residential and construction	$	177,955	$	—		1,821	$	—	$	179,776
Commercial real estate and construction		362,921		11,129		3,503		—		377,553
Home equity loans and lines of credit		90,939		54		170		—		91,163
Commercial business loans		69,384		384		677		—		70,445
Other loans		449		—		—		—		449
Total	$	701,648	$	11,567	$	6,171	$	—	$	719,386

December 31, 2020:
Real estate loans:
One-to-four-family residential and construction	$	190,491	$	—		1,911	$	—	$	192,402
Commercial real estate and construction		361,961		10,020		3,640		—		375,621
Home equity loans and lines of credit		95,888		55		173		—		96,116
Commercial business loans		76,852		415		683		—		77,950
Other loans		502		—		2		—		504
Total	$	725,694	$	10,490	$	6,409	$	—	$	742,593

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due based on the loans’ contractual due dates. Management considers nonperforming loans to be those loans that are past due 90 days or more and are still accruing as well as all nonaccrual loans. The following table presents the segments of the loan portfolio summarized by the past due status of the loans as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	30‑59 Days		60‑89 Days		90 days		Total				Total		90 Days Past
	Past Due		Past Due		or Greater		Past Due		Current		Loans		Due & Accruing
March 31, 2021:
Real estate loans:
One-to-four-family residential and construction	$	618	$	—	$	878	$	1,496	$	178,280	$	179,776	$	—
Commercial real estate and construction		203		—		1,070		1,273		376,280		377,553		—
Home equity loans and lines of credit		120		34		54		208		90,955		91,163		—
Commercial business loans		44		9		—		53		70,392		70,445		—
Other loans		—		—		—		—		449		449		—
Total	$	985	$	43	$	2,002	$	3,030	$	716,356	$	719,386	$	—

December 31, 2020:
Real estate loans:
One-to-four-family residential and construction	$	698	$	454	$	1,046	$	2,198	$	190,204	$	192,402	$	—
Commercial real estate and construction		188		—		1,161		1,349		374,272		375,621		—
Home equity loans and lines of credit		73		56		49		178		95,938		96,116		—
Commercial business loans		326		—		—		326		77,624		77,950		—
Other loans		—		—		2		2		502		504		—
Total	$	1,285	$	510	$	2,258	$	4,053	$	738,540	$	742,593	$	—

The following table presents nonaccrual loans summarized by the loan portfolio segments as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	March 31,		December 31,
	2021		2020
Real estate loans:
One-to-four-family residential and construction	$	1,759	$	1,911
Commercial real estate and construction		2,031		2,196
Home equity loans and lines of credit		171		173
Commercial business loans		677		683
Other loans		—		2
Total	$	4,638	$	4,965

An allowance for loan losses (“ALL”) is maintained to absorb losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

The Bank’s methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the Bank’s ALL.

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STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)
March 31, 2021

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors. Management tracks the historical net charge-off activity for the loan segments which may be adjusted for qualitative factors. Pass rated credits are segregated from criticized credits for the application of qualitative factors. Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.

Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors are evaluated using information obtained from internal, regulatory, and governmental sources and include national and local economic trends and conditions; levels of and trends in delinquency rates and non-accrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, depth and ability of management; effects of the COVID-19 pandemic; and concentrations of credit from a loan type, industry and/or geographic standpoint.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL. Management utilizes an internally developed methodology to track and apply the various components of the allowance.

During the three months ended March 31, 2021, there was (1) an increase in the provision for the one-to-four family residential and construction loan class primarily due to increases in the qualitative factors related to the percentage change in both loan balances and the volume and severity of past due loans compared to the previous quarter; (2) a decrease in the provision for the commercial real estate and construction loan class primarily due to decreases in the qualitative factors related to the changes in loan balances, the volume and severity of past due loans and loan concentrations partially offset by additional reserves established for the hotel loan segment and impaired loans; (3) an increase in the provision for the commercial business loan class primarily due to an increase in the qualitative factor related to the percentage change in loan balances compared to the prior quarter partially offset by a decrease in the qualitative factor related to balance changes in loan concentrations; (4) an increase in the provision for the home equity loans and lines of credit loan class primarily due to an increase in the qualitative factor related to the percentage changes in loan balances during the period.

The following tables summarize the activity in the primary segments of the ALL for the three months ended March 31, 2021 and March 31, 2020 as well as the allowance required for loans individually and collectively evaluated for impairment as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	Real Estate Loans
	One-to-four-		Commercial		Home
	family		Real Estate		Equity Loans
	Residential and		and		and Lines		Commercial		Other
	Construction		Construction		of Credit		Business		Loans		Total
Three Months Ended :
Balance December 31, 2020	$	206	$	6,990	$	191	$	451	$	3	$	7,841
Charge-offs		(12)		—		—		—		(3)		(15)
Recoveries		—		—		—		—		3		3
Provision		298		(314)		66		100		—		150
Balance March 31, 2021	$	492	$	6,676	$	257	$	551	$	3	$	7,979

Balance at December 31, 2019	$	721	$	3,313	$	310	$	534	$	4	$	4,882
Charge-offs		—		—		(13)		(38)		(2)		(53)
Recoveries		2		1		—

Standard AVB Financial Corp. 10-Q