SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2019

OR

¨ 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     x 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     x 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 x
Non-accelerated filer ¨	Smaller reporting company x
	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   x

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   x    No ¨

As of November 5, 2019, the registrant had 4,686,940 shares of common stock, $0.01 par value per share, outstanding.

Standard AVB Financial Corp.

Table of Contents

	Part I – Financial Information
ITEM 1.	Financial Statements (Unaudited)	1-27
	Consolidated Statements of Financial Condition as of September 30, 2019 and December 31, 2018
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2019 and 2018
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018
	Consolidated Statement of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018
	Notes to Consolidated Statements
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28-36
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	36
ITEM 4.	Controls and Procedures	36
	PART II – Other Information
ITEM 1.	Legal Proceedings	37
ITEM 1A.	Risk Factors	37
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
ITEM 3.	Defaults Upon Senior Securities	37
ITEM 4.	Mine Safety Disclosures	37
ITEM 5.	Other Information	37
ITEM 6.	Exhibits	38
	Signatures	39

PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements

Standard AVB Financial Corp.

Consolidated Statements of Financial Condition

(Dollars in thousands, except per share data)

	September 30,
	2019			December 31,
	(Unaudited)			2018
ASSETS
Cash on hand and due from banks	$	3,275		$	3,371
Interest-earning deposits in other institutions		26,002			12,836
Cash and Cash Equivalents		29,277			16,207
Investment securities available for sale, at fair value		69,730			66,169
Equity securities, at fair value		2,880			2,725
Mortgage-backed securities available for sale, at fair value		92,883			81,794
Certificate of deposit		249			249
Federal Home Loan Bank and other restricted stock, at cost		7,665			7,900
Loans receivable, net of allowance for loan losses of $4,743 and $4,414		724,254			728,982
Loans held for sale		96			-
Foreclosed real estate		459			486
Office properties and equipment, net		7,715			7,794
Bank-owned life insurance		23,238			22,572
Goodwill		25,836			25,836
Core deposit intangible		2,026			2,508
Accrued interest receivable and other assets		5,180			8,574
TOTAL ASSETS	$	991,488		$	971,796
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand, savings and club accounts	$	491,758		$	471,177
Certificate accounts		245,205			246,697
Total Deposits		736,963			717,874
Federal Home Loan Bank short-term borrowings		-			4,524
Long-term borrowings		105,738			104,963
Securities sold under agreements to repurchase		2,925			2,137
Advance deposits by borrowers for taxes and insurance		33			45
Accrued interest payable and other liabilities		4,546			4,363
TOTAL LIABILITIES		850,205			833,906
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, 4,696,107 and 4,812,991 shares outstanding, respectively		47			48
Additional paid-in-capital		72,327			75,571
Retained earnings		68,963			65,301
Unearned Employee Stock Ownership Plan (ESOP) shares		(1,571	)		(1,686	)
Accumulated other comprehensive gain (loss)		1,517			(1,344	)
TOTAL STOCKHOLDERS' EQUITY		141,283			137,890
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	991,488		$	971,796

See accompanying notes to the consolidated financial statements.

1

Standard AVB Financial Corp.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Interest and Dividend Income
Loans, including fees	$	8,239		$	8,007		$	24,426		$	23,919
Mortgage-backed securities		572			504			1,690			1,477
Investments:
Taxable		112			101			345			308
Tax-exempt		402			343			1,170			1,057
Federal Home Loan Bank and other restricted stock		147			134			476			455
Interest-earning deposits and federal funds sold		90			112			268			218
Total Interest and Dividend Income		9,562			9,201			28,375			27,434
Interest Expense
Deposits		1,818			1,335			5,202			3,456
Federal Home Loan Bank short-term borrowings		7			-			44			226
Long-term borrowings		570			599			1,640			1,688
Securities sold under agreements to repurchase		3			2			13			6
Total Interest Expense		2,398			1,936			6,899			5,376
Net Interest Income		7,164			7,265			21,476			22,058
Provision for Loan Losses		254			223			544			398
Net Interest Income after Provision for Loan Losses		6,910			7,042			20,932			21,660
Noninterest Income
Service charges		794			736			2,197			2,208
Earnings on bank-owned life insurance		136			134			401			398
Net losses on sales of securities		-			-			(1	)		(17	)
Net gains on sales of equities		-			331			-			394
Net equity securities fair value adjustment gains (losses)		120			(218	)		155			(13	)
Net loan sale gains		78			20			160			47
Investment management fees		172			141			541			469
Other income		187			17			266			60
Total Noninterest Income		1,487			1,161			3,719			3,546
Noninterest Expenses
Compensation and employee benefits		3,161			2,956			9,595			9,351
Data processing		177			164			530			472
Premises and occupancy costs		565			645			1,834			1,983
Automatic teller machine expense		160			126			445			380
Federal deposit insurance		(32	)		72			104			220
Core deposit amortization		144			193			482			643
Other operating expenses		1,051			1,154			3,093			3,396
Total Noninterest Expenses		5,226			5,310			16,083			16,445
Income before Income Tax Expense		3,171			2,893			8,568			8,761
Income Tax Expense
Federal		509			357			1,351			1,370
State		198			156			486			357
Total Income Tax Expense		707			513			1,837			1,727
Net Income	$	2,464		$	2,380		$	6,731		$	7,034
Earnings Per Share:
Basic earnings per common share	$	0.54		$	0.51		$	1.45		$	1.52
Diluted earnings per common share	$	0.53		$	0.50		$	1.42		$	1.48
Cash dividends paid per common share	$	0.22		$	0.22		$	0.66		$	0.66
Basic weighted average shares outstanding		4,573,856			4,635,129			4,628,308			4,628,983
Diluted weighted average shares outstanding		4,665,801			4,759,026			4,725,186			4,752,487

See accompanying notes to the consolidated financial statements.  

2

Standard AVB Financial Corp.

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net Income	$	2,464		$	2,380		$	6,731		$	7,034
Other comprehensive income (loss):
Change in unrealized gain (loss) on securities available for sale		324			(918	)		3,613			(3,772	)
Tax effect		(68	)		193			(759	)		791
Reclassification adjustment for security losses realized in income		-			-			1			17
Tax effect		-			-			-			(4	)
Change in pension obligation for defined benefit plan		2			3			7			29
Tax effect		-			(1	)		(1	)		(6	)
Total other comprehensive income (loss)		258			(723	)		2,861			(2,945	)
Total Comprehensive Income	$	2,722		$	1,657		$	9,592		$	4,089

See accompanying notes to the consolidated financial statements.

3

Standard AVB Financial Corp.

Consolidated Statement 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 (Loss)			Equity
Three Months Ended:
Balance, June 30, 2019	$	48		$	74,340		$	67,508		$	(1,609	)	$	1,259		$	141,546
Net income		-			-			2,464			-			-			2,464
Other comprehensive income		-			-						-			258			258
Stock repurchases (76,039 shares)		(1	)		(2,096	)		-			-			-			(2,097	)
Cash dividends ($0.22 per share)		-			-			(1,009	)		-			-			(1,009	)
Compensation expense on stock awards		-			23			-			-			-			23
Compensation expense on ESOP		-			60			-			38			-			98
Balance, September 30, 2019	$	47		$	72,327		$	68,963		$	(1,571	)	$	1,517		$	141,283
Balance, June 30, 2018	$	48		$	75,275		$	63,124		$	(1,763	)	$	(2,110	)	$	134,574
Net income		-			-			2,380			-			-			2,380
Other comprehensive loss		-			-			-			-			(723	)		(723	)
Stock repurchases (6,064 shares)		-			(206	)		-			-			-			(206	)
Cash dividends ($0.22 per share)		-			-			(1,062	)		-			-			(1,062	)
Stock options exercised (13,910 shares)		-			238			-			-			-			238
Compensation expense on ESOP		-			74			-			39			-			113
Balance, September 30, 2018	$	48		$	75,381		$	64,442		$	(1,724	)	$	(2,833	)	$	135,314
Nine Months Ended:
Balance, December 31, 2018	$	48		$	75,571		$	65,301		$	(1,686	)	$	(1,344	)	$	137,890
Net income		-			-			6,731			-			-			6,731
Other comprehensive income		-			-						-			2,861			2,861
Stock repurchases (133,096 shares)		(1	)		(3,700	)		-			-			-			(3,701	)
Cash dividends ($0.66 per share)		-			-			(3,069	)		-			-			(3,069	)
Stock options exercised (11,665 shares)		-			206			-			-			-			206
Compensation expense on stock awards		-			58			-			-			-			58
Compensation expense on ESOP		-			192			-			115			-			307
Balance, September 30, 2019	$	47		$	72,327		$	68,963		$	(1,571	)	$	1,517		$	141,283
Balance, December 31, 2017	$	48		$	75,063		$	60,172		$	(1,839	)	$	528		$	133,972
Net income		-			-			7,034			-			-			7,034
Other comprehensive loss		-			-			-			-			(2,945	)		(2,945	)
Change in accounting principle for adoption of ASU 2016-01		-			-			416			-			(416	)		-
Stock repurchases (10,739 shares)		-			(346	)		-			-			-			(346	)
Cash dividends ($0.66 per share)		-			-			(3,180	)		-			-			(3,180	)
Stock options exercised (24,794 shares)		-			448			-			-			-			448
Compensation expense on ESOP		-			216			-			115			-			331
Balance, September 30, 2018	$	48		$	75,381		$	64,442		$	(1,724	)	$	(2,833	)	$	135,314

See accompanying notes to the consolidated financial statements.

4

Standard AVB Financial Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2019			2018
Cash Flows From Operating Activities
Net income	$	6,731		$	7,034
Adjustments to reconcile net income to net cash  provided by operating activities:
Depreciation and amortization		1,401			990
Provision for loan losses		544			398
Amortization of core deposit intangible		482			643
Net loss on sale of securities available for sale		1			17
Net gain on sale of equity securities		-			(394	)
Net gain on sale of office properties and equipment		(29	)		-
Net equity securities fair value adjustment (gains) losses		(155	)		13
Origination of loans held for sale		(9,070	)		(4,193	)
Proceeds from sale of loans held for sale		9,230			4,240
Net loan sale gains		(160	)		(47	)
Compensation expense on ESOP		307			331
Compensation expense on stock awards		58			-
Deferred income taxes		(126	)		(258	)
Increase in accrued interest receivable		(78	)		(208	)
Earnings on bank-owned life insurance		(401	)		(398	)
(Decrease) increase in accrued interest payable		(134	)		56
Other, net		3,085			1,108
Net Cash Provided by Operating Activities		11,686			9,332
Cash Flows Used In Investing Activities
Net decrease in loans		4,122			18,585
Purchases of investment securities		(10,776	)		(4,937	)
Purchases of equity securities		-			(554	)
Purchases of mortgage-backed securities		(24,720	)		(25,946	)
Proceeds from maturities of certificates of deposits		-			250
Proceeds from maturities/principal repayments/calls of investment securities		2,535			115
Proceeds from maturities/principal repayments/calls of mortgage-backed securities		13,752			8,661
Proceeds from sales of investment securities		6,328			4,830
Proceeds from sales of equity securities		-			1,900
Proceeds from sales of mortgage-backed securities		1,286			-
Purchase of Federal Home Loan Bank stock		(2,969	)		(3,219	)
Redemption of Federal Home Loan Bank stock		3,204			4,703
Proceeds from sales of foreclosed real estate		45			-
Purchase of bank-owned life insurance		(265	)		-
Proceeds from sales of office properties and equipment		997			-
Net additions of office properties and equipment		(527	)		(274	)
Net Cash (Used) Provided by Investing Activities		(6,988	)		4,114
Cash Flows From Financing Activities
Net increase in demand, savings and club accounts		20,581			2,074
Net (decrease) increase in certificate accounts		(1,492	)		28,444
Net increase (decrease) in securities sold under agreements to repurchase		788			(134	)
Repayments of Federal Home Loan Bank short-term borrowings		(108,719	)		(165,490	)
Proceeds from Federal Home Loan Bank short-term borrowing		104,195			138,469
Repayments of Federal Home Loan Bank advances		(25,308	)		(24,600	)
Proceeds from Federal Home Loan Bank advances		25,208			30,000
Lease liabilities payments		(305	)		-
Net decrease in advance deposits by borrowers for taxes and insurance		(12	)		(775	)
Exercise of stock options		206			448
Dividends paid		(3,069	)		(3,180	)
Stock repurchases		(3,701	)		(346	)
Net Cash Provided by Financing Activities		8,372			4,910
Net Increase in Cash and Cash Equivalents		13,070			18,356
Cash and Cash Equivalents - Beginning		16,207			16,265
Cash and Cash Equivalents - Ending	$	29,277		$	34,621
Supplementary Cash Flows Information:
Interest paid	$	7,033		$	5,320
Income taxes paid	$	2,061		$	1,194
Investment securities purchased not settled	$	-		$	596
Right-of-use asset	$	(1,132	)	$	-
Lease liability	$	1,158		$	-
Prepaid lease payments	$	(26	)	$	-

  See accompanying notes to the consolidated financial statements.

5

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(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, 2018 contained in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission on March 18, 2019. The results for the three and nine month periods ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any future interim period. Certain amounts in the 2018 financial statements have been reclassified to conform to the 2019 presentation format. These reclassifications had no effect on stockholders’ equity or net income.

(3) 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 and nine months ended September 30, 2019 and September 30, 2018 (dollars in thousands, except per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net income available to common stockholders	$	2,464	$	2,380	$	6,731	$	7,034
Basic EPS:
Weighted average shares outstanding		4,573,856		4,635,129		4,628,308		4,628,983
Basic EPS	$	0.54	$	0.51	$	1.45	$	1.52
Diluted EPS:
Weighted average shares outstanding		4,573,856		4,635,129		4,628,308		4,628,983
Dilutive effect of common stock equivalents		91,945		123,897		96,878		123,504
Total diluted weighted average shares outstanding		4,665,801		4,759,026		4,725,186		4,752,487
Diluted EPS	$	0.53	$	0.50	$	1.42	$	1.48

(4) Recent Accounting Pronouncements

Accounting Standards Adopted in 2019

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet.  Additionally, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) – Targeted Improvements, which, among other things, provided an additional transition method that allows entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted ASU 2016-02 and its related amendments as of January 1, 2019, which resulted in the recognition of finance right-of-use assets and finance lease liabilities totaling $1.1 million and $1.2 million, respectively. The Company elected to adopt the transition relief provisions from ASU 2018-11 and recorded the impact of adoption as of January 1, 2019, without restating any prior-year amounts or disclosures. Additional lease disclosures can be found in Note 10 contained herein. There was no cumulative effect adjustment to the opening balance of retained earnings required.

6

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(4) Recent Accounting Pronouncements (Continued)

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. On October 16, 2019, the FASB voted to defer the effective date for ASC 326, Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The final ASU is expected to be issued in mid-November. 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 has been working with a third party to evaluate the various CECL methodologies and decided to utilize the vintage method. The Company is continuing to work through implementation of that method and 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. 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. On October 16, 2019, the FASB voted to defer 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 final ASU is expected to be issued in mid-November. 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 June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718), which simplified the accounting for nonemployee share-based payment transactions. The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this Update improve the following areas of nonemployee share-based payment accounting; (a) the overall measurement objective, (b) the measurement date, (c) awards with performance conditions, (d) classification reassessment of certain equity-classified awards, (e) calculated value (nonpublic entities only), and (f) intrinsic value (nonpublic entities only). The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective 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.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s financial statements.

7

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(4) Recent Accounting Pronouncements (Continued)

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. On October 16, 2019, the FASB voted to defer 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 final ASU is expected to be issued in mid-November. 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.

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. On October 16, 2019, the FASB voted to defer the effective date for ASC 326, Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The final ASU is expected to be issued in mid-November. 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. 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 asset 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. On October 16, 2019, the FASB voted to defer the effective date for ASC 326, Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The final ASU is expected to be issued in mid-November. This Update is not expected to have a significant impact on the Company’s financial statements.

8

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(5) Investment Securities

Investment securities available for sale at September 30, 2019 and December 31, 2018 are as follows (dollars in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2019:
U.S. government and agency obligations due:
Within 1 year	$	3,486	$	4	$	-		$	3,490
Beyond 1 year but within 5 years		3,963		26		-			3,989
Beyond 5 year but within 10 years		946		44		-			990
Corporate bonds due:
Beyond 1 year but within 5 years		2,475		106		-			2,581
Municipal obligations due:
Within 1 year		260		2		-			262
Beyond 1 year but within 5 years		6,076		266		-			6,342
Beyond 5 years but within 10 years		18,946		484		-			19,430
Beyond 10 years		31,905		743		(2	)		32,646
	$	68,057	$	1,675	$	(2	)	$	69,730
December 31, 2018:
U.S. government and agency obligations due:
Beyond 1 year but within 5 years	$	7,428	$	-	$	(81	)	$	7,347
Beyond 5 year but within 10 years		940		-		(17	)		923
Corporate bonds due:
Within 1 year		1,758		-		(15	)		1,743
Beyond 1 year but within 5 years		1,472		2		(10	)		1,464
Beyond 5 years but within 10 years		996		-		(2	)		994
Municipal obligations due:
Beyond 1 year but within 5 years		6,658		298		-			6,956
Beyond 5 years but within 10 years		22,384		132		(81	)		22,435
Beyond 10 years		24,504		82		(279	)		24,307
	$	66,140	$	514	$	(485	)	$	66,169

For the three months ended September 30, 2019, there were no sales of investment securities. For the nine months ended September 30, 2019, proceeds from the sales of investment securities were $6.3 million, with total gains of $7,000 offset by total losses of $7,000 during the period. There were no sales of investment securities for the three months ended September 30, 2018. For the nine months ended September 30, 2018, losses on sales of investment securities were $17,000 and proceeds from such sales were $4.8 million.

Investment securities with a carrying value of $11.7 million and $11.6 million were pledged to secure repurchase agreements and public funds accounts at September 30, 2019 and December 31, 2018, respectively.

9

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(5) Investment Securities (Continued)

The following table shows 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 September 30, 2019 and December 31, 2018 (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
September 30, 2019:
Municipal obligations		1,001		(2	)		-		-			1,001		(2	)
Total	$	1,001	$	(2	)	$	-	$	-		$	1,001	$	(2	)
December 31, 2018:
U.S. government and agency obligations	$	-	$	-		$	8,270	$	(98	)	$	8,270	$	(98	)
Corporate bonds		1,490		(12	)		1,743		(15	)		3,233		(27	)
Municipal obligations		10,049		(55	)		11,730		(305	)		21,779		(360	)
Total	$	11,539	$	(67	)	$	21,743	$	(418	)	$	33,282	$	(485	)

At September 30, 2019, the Company held 2 investment 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 losses to be temporary impairment losses.

(6) Equity Securities

The following table presents the net gains and losses on equity investments recognized in earnings during the three and nine months ended September 30, 2019 and September 30, 2018, and the portion of unrealized gains and losses for those periods that relate to equity investments held (dollars in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019		2018
Net equity securities fair value adjustment gains (losses)	$	120	$	(218	)	$	155	$	(13	)
Net gains realized on the sale of equity securities during the period		-		331			-		394
Gains recognized on equity securities during the period	$	120	$	113		$	155	$	381

There were no sales of equity securities during the three or nine months ended September 30, 2019. During the three months ended September 30, 2018, gains on sales of equity securities were $331,000 and proceeds from such sales were $1.6 million. For the nine months ended September 30, 2018, gains on sales of equity securities were $394,000 and proceeds from such sales were $1.9 million.

10

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(7) Mortgage-Backed Securities

Mortgage-backed securities available for sale at September 30, 2019 and December 31, 2018 are as follows (dollars in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2019:
Government pass-throughs:
Ginnie Mae	$	18,531	$	194	$	(52	)	$	18,673
Fannie Mae		22,502		549		-			23,051
Freddie Mac		13,346		105		(25	)		13,426
Private pass-throughs		23,111		-		(291	)		22,820
Collateralized mortgage obligations		14,848		119		(54	)		14,913
	$	92,338	$	967	$	(422	)	$	92,883
December 31, 2018:
Government pass-throughs:
Ginnie Mae	$	19,213	$	1	$	(324	)	$	18,890
Fannie Mae		13,952		7		(339	)		13,620
Freddie Mac		12,662		-		(252	)		12,410
Private pass-throughs		25,064		-		(349	)		24,715
Collateralized mortgage obligations		12,328		11		(180	)		12,159
	$	83,219	$	19	$	(1,444	)	$	81,794

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 September 30, 2019, there were no sales of mortgage-backed securities. For the nine months ended September 30, 2019, losses on sales of mortgage-backed securities were $1,000 and proceeds from such sales were $1.3 million. There were no sales of mortgage-backed securities during the three or nine months ended September 30, 2018.

The amortized cost and fair value of mortgage-backed securities at September 30, 2019, 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	$	704	$	702
Due after five years through ten years		6,384		6,368
Due after ten years		85,250		85,813
Total Mortgage-Backed Securities	$	92,338	$	92,883

11

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(7) Mortgage-Backed Securities (Continued)

The following table shows 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 September 30, 2019 and December 31, 2018 (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
September 30, 2019:
Government pass-throughs:
Ginnie Mae	$	-	$	-		$	3,900	$	(52	)	$	3,900	$	(52	)
Freddie Mac		2,489		(25	)		-		-			2,489		(25	)
Private pass-throughs		2,115		(11	)		20,478		(280	)		22,593		(291	)
Collateralized mortgage obligations		2,021		(7	)		3,947		(47	)		5,968		(54	)
Total	$	6,625	$	(43	)	$	28,325	$	(379	)	$	34,950	$	(422	)
December 31, 2018:
Government pass-throughs:
Ginnie Mae	$	4,850	$	(26	)	$	13,794	$	(298	)	$	18,644	$	(324	)
Fannie Mae		403		(2	)		12,152		(337	)		12,555		(339	)
Freddie Mac		680		(24	)		11,699		(228	)		12,379		(252	)
Private pass-throughs		14,436		(134	)		9,359		(215	)		23,795		(349	)
Collateralized mortgage obligations		4,091		(40	)		6,048		(140	)		10,139		(180	)
Total	$	24,460	$	(226	)	$	53,052	$	(1,218	)	$	77,512	$	(1,444	)

At September 30, 2019, the Company held 34 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 $15.1 million and $10.4 million were pledged to secure repurchase agreements and public funds accounts at September 30, 2019 and December 31, 2018, respectively.

12

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(8) Loans Receivable and Related Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio, and the related allowance for loan losses, as of September 30, 2019 and December 31, 2018 (dollars in thousands):

	Real Estate Loans
	One-to-four-				Home
	family		Commercial		Equity Loans
	Residential and		Real		and Lines		Commercial		Other
	Construction		Estate		of Credit		Business		Loans		Total
September 30, 2019:
Collectively evaluated for impairment	$	242,000	$	321,956	$	114,517	$	49,952	$	572	$	728,997
Individually evaluated for impairment		-		-		-		-		-		-
Total loans before allowance for loan losses	$	242,000	$	321,956	$	114,517	$	49,952	$	572	$	728,997
December 31, 2018:
Collectively evaluated for impairment	$	253,913	$	308,775	$	123,373	$	46,196	$	1,139	$	733,396
Individually evaluated for impairment		-		-		-		-		-		-
Total loans before allowance for loan losses	$	253,913	$	308,775	$	123,373	$	46,196	$	1,139	$	733,396

Total loans at September 30, 2019 and December 31, 2018 were net of deferred loan fees of $251,000 and $226,000, respectively. The Company’s primary business activity is with customers located within its local trade 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 trade area.

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) includes loans to individuals secured by residential properties having maturities up to 30 years. Commercial real estate consists of loans to commercial borrowers secured by commercial or residential real estate. The repayment of commercial real estate loans is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. 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. 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 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.

13

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(8) Loans Receivable and Related Allowance for Loan Losses (Continued)

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, greater than 90 days 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 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. To be considered a TDR, the borrower must be experiencing financial difficulties and the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower that would not otherwise be considered. The Company did not modify any loans as TDRs during the three or nine month periods ended September 30, 2019 or 2018 nor did it have any TDRs within the preceding year where a concession had been made that then defaulted during the three or nine month periods ending September 30, 2019 or 2018.

There were no impaired loans at September 30, 2019 or December 31, 2018. For both the three and nine months ended September 30, 2019, there was no recorded investment in impaired loans compared to an average recorded investment of $295,000 for both the three and nine months ended September 30, 2018. For both the three and nine months ended September 30, 2019 and September 30, 2018, there was no interest income recognized on impaired loans.

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 greater than 90 days 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.

14

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(8) Loans Receivable and Related Allowance for Loan Losses (Continued)

The following table presents the classes of the loan portfolio summarized by the aggregate Pass rating and the criticized ratings of Special Mention, Substandard and Doubtful within the Company’s internal risk rating system as of September 30, 2019 and December 31, 2018 (dollars in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Total
September 30, 2019:
Real estate loans:
One-to-four-family residential and construction	$	240,316	$	-	$	1,684	$	-	$	242,000
Commercial real estate		318,923		2,699		334		-		321,956
Home equity loans and lines of credit		114,141		64		312		-		114,517
Commercial business loans		49,701		216		35		-		49,952
Other loans		563		-		9		-		572
Total	$	723,644	$	2,979	$	2,374	$	-	$	728,997
December 31, 2018:
Real estate loans:
One-to-four-family residential and construction	$	252,186	$	-	$	1,727	$	-	$	253,913
Commercial real estate		303,161		4,851		763		-		308,775
Home equity loans and lines of credit		123,053		62		258		-		123,373
Commercial business loans		45,902		232		62		-		46,196
Other loans		1,120		-		19		-		1,139
Total	$	725,422	$	5,145	$	2,829	$	-	$	733,396

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. At September 30 2019, there were 16 loans on non-accrual status that were less than 90 days past due totaling $694,000. The following table presents the segments of the loan portfolio summarized by the past due status of the loans still accruing and nonaccrual loans as of September 30, 2019 and December 31, 2018 (dollars in thousands):

15

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(8) Loans Receivable and Related Allowance for Loan Losses (Continued)

			30-59 Days		60-89 Days				90 Days Past		Total
	Current		Past Due		Past Due		Non-Accrual		Due & Accruing		Loans
September 30, 2019:
Real estate loans:
One-to-four-family residential and construction	$	239,962	$	25	$	329	$	1,684	$	-	$	242,000
Commercial real estate		321,517		105		-		334		-		321,956
Home equity loans and lines of credit		113,837		368		-		312		-		114,517
Commercial business loans		49,869		47		-		36		-		49,952
Other loans		562		1		-		9		-		572
Total	$	725,747	$	546	$	329	$	2,375	$	-	$	728,997
December 31, 2018:
Real estate loans:
One-to-four-family residential and construction	$	250,691	$	1,341	$	154	$	1,727	$	-	$	253,913
Commercial real estate		307,740		374		-		661		-		308,775
Home equity loans and lines of credit		122,929		163		23		258		-		123,373
Commercial business loans		45,434		690		10		62		-		46,196
Other loans		1,111		3		3		19		3		1,139
Total	$	727,905	$	2,571	$	190	$	2,727	$	3	$	733,396

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.

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 such as 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; 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 spreadsheet to track and apply the various components of the allowance. During the three and nine months ended September 30, 2019, there was an increase in the provision for the Commercial Real Estate loan class primarily due to charge-offs incurred during the nine month period as well as growth in the loan balances during the periods included in the allowance calculation for that loan class. During the three and nine months ended September 30, 2019, there was a decrease in the provision for the One-to-four family Residential and Construction loan class primarily due to a decline in the loan balances included in the allowance calculation for that loan class as well as a decrease in the qualitative factors. The Home Equity loans and Lines of Credit loan class increased primarily due to the charge-offs incurred during the nine month period.

16

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(8) Loans Receivable and Related Allowance for Loan Losses (Continued)

During the three months ended September 30, 2019 there was a decrease in the provision for the Commercial Business loan class due to a decline in the balances included in the allowance calculation for that loan class. During the nine months ended September 30, 2019 there was an increase in the provision for the Commercial Business loan class due to both an increase in the balance of loans included in the allowance calculation for that loan class as well as an increase in the qualitative factors for the periods.

The following tables summarize the activity in the primary segments of the ALL for the three and nine months ended September 30, 2019 and September 30, 2018 as well as the allowance required for loans individually and collectively evaluated for impairment as of September 30, 2019 and December 31, 2018 (dollars in thousands):

	Real Estate Loans
	One-to-four-						Home
	family			Commercial			Equity Loans
	Residential and			Real			and Lines			Commercial			Other
	Construction			Estate			of Credit			Business			Loans			Total
Three Months Ended:
Balance June 30, 2019	$	851		$	2,836		$	295		$	510		$	2		$	4,494
Charge-offs		(1	)		-			-			-			(8	)		(9	)
Recoveries		-			-			3			-			1			4
Provision		(56	)		330			3			(30	)		7			254
Balance September 30, 2019	$	794		$	3,166		$	301		$	480		$	2		$	4,743
Balance at June 30, 2018	$	1,183		$	2,430		$	385		$	359		$	3		$	4,360
Charge-offs		-			(41	)		-			-			(4	)		(45	)
Recoveries		-			1			-			-			-			1
Provision		(144	)		353			4			5			5			223
Balance at September 30, 2018	$	1,039		$	2,743		$	389		$	364		$	4		$	4,539
Nine Months Ended:
Balance December 31, 2018	$	1,051		$	2,761		$	312		$	286		$	4		$	4,414
Charge-offs		(1	)		(121	)		(59	)		-			(41	)		(222	)
Recoveries		-			-			6			-			1			7
Provision		(256	)		526			42			194			38			544
Balance September 30, 2019	$	794		$	3,166		$	301		$	480		$	2		$	4,743
Balance at December 31, 2017	$	1,384		$	2,003		$	400		$	333		$	7		$	4,127
Charge-offs		-			(50	)		-			(11	)		(6	)		(67	)
Recoveries		69			1			11			-			-			81
Provision		(414	)		789			(22	)		42			3			398
Balance at September 30, 2018	$	1,039		$	2,743		$	389		$	364		$	4		$	4,539

17

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(8) Loans Receivable and Related Allowance for Loan Losses (Continued)

	Real Estate Loans
	One-to-four-				Home
	family		Commercial		Equity Loans
	Residential and		Real		and Lines		Commercial		Other
	Construction		Estate		of Credit		Business		Loans		Total
Evaluated for Impairment:
Individually	$	-	$	-	$	-	$	-	$	-	$	-
Collectively		794		3,166		301		480		2		4,743
Balance at September 30, 2019	$	794	$	3,166	$	301	$	480	$	2	$	4,743
Evaluated for Impairment:
Individually	$	-	$	-	$	-	$	-	$	-	$	-
Collectively		1,051		2,761		312		286		4		4,414
Balance at December 31, 2018	$	1,051	$	2,761	$	312	$	286	$	4	$	4,414

The ALL is based on estimates and actual losses will vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the loan portfolio at any given date.

In addition, federal regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses and may require the Bank to make changes to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to Management. Based on Management’s comprehensive analysis of the loan portfolio, they believe the current level of the allowance for loan losses is adequate.

(9) Foreclosed Assets Held For Sale

Foreclosed assets acquired in the settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate on the Consolidated Statement of Financial Condition. As of September 30, 2019 and December 31, 2018, foreclosed real estate totaled $459,000 and $486,000, respectively. As of September 30, 2019, the $459,000 included three residential properties and one commercial real estate property. As of September 30, 2019, the Company had initiated formal foreclosure procedures on $1.3 million of loans, including $1.0 million in one-to-four family residential loans, $168,000 in commercial real estate loans, and $151,000 in home equity loans.

(10) Leases

The Company currently has four financing lease agreements for branch offices. In conjunction with the implementation of ASU 2016-02, the Company recognized right-of-use assets totaling $1.1 million and lease liabilities totaling $1.2 million related to those financing leases. One of the leases includes an option to extend which was recognized as part of the Company’s right-of-use asset and corresponding lease liability for that property because the Company believes that it is more likely than not to exercise the extension option.

The right-of-use assets are included with office properties and equipment while lease liabilities are included in long-term borrowings on the September 30, 2019 Consolidated Statements of Financial Condition. Amortization of right-of-use assets is included in premises and occupancy costs while interest expense on the lease liabilities is included in the interest expense on long-term borrowings on the Consolidated Statements of Income. The following table presents the financing lease costs during the three and nine months ended September 30, 2019 (dollars in thousands):

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Financing lease costs
Amortization of right-of-use asset	$	94	$	283
Interest expense		7		22
Total financing lease costs	$	101	$	305

18

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(10) Leases (continued)

The discount rates utilized to determine the interest expense portion of the lease liability were obtained by utilizing FHLB advance rates for a similar term borrowings as of January 1, 2019. The following table presents the weighted-average remaining term and discount rates for financing leases outstanding as of September 30, 2019:

	Financing
Weighted-average term (years)		4.7
Weighted-average discount rate		2.80	%

The following table presents the undiscounted cash flows due related to financing leases as of September 30, 2019, along with a reconciliation to the discounted amount recorded on the September 30, 2019 Consolidated Statements of Financial Condition (dollars in thousands):

	Financing
Undiscounted cash flows due within:
2019	$	102
2020		292
2021		124
2022		102
2023		102
2024 and thereafter		212
Total undiscounted cash flows		934
Impact of present value discount		(59	)
Amount reported on balance sheet	$	875

(11) Stock Based Compensation

The Company currently has two stock plans that allow for the issuance of stock based compensation, the Allegheny Valley Bancorp, Inc. 2011 Stock Incentive Plan (the “2011 Plan”) and the Standard Financial Corp. 2012 Equity Incentive Plan (the “2012 Plan”). On February 26, 2019, 1,820 shares of restricted stock were awarded to directors out of the 2011 Plan. The awards vest quarterly through December 31, 2019 and the related compensation expense is being recognized straight line over the 11 month vesting period. On March 12, 2019, 2,727 shares of restricted stock were awarded to employees out of the 2011 Plan. The awards vest over 34 months and the related compensation expense is being recognized straight line over the vesting period. At September 30, 2019, there were 72,588 and 101,144 shares available to be issued under the 2011 Plan and the 2012 Plan, respectively.

For both the three months and nine months ended September 30, 2019 and September 30, 2018, there was no recorded compensation expense related to stock options. As of September 30, 2019, all outstanding stock options were fully vested and there was no unrecognized compensation cost.

The following table summarizes transactions regarding the options under the Plans:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Outstanding at December 31, 2018		266,695		$	17.12		3.32
Granted		-			-
Exercised		(11,665	)		17.64
Forfeited		-			-
Outstanding at September 30, 2019		255,030		$	17.09		2.67
Exercisable at September 30, 2019		255,030		$	17.09

For the three months ended September 30, 2019, there was $23,000 of compensation expense recorded on restricted stock grants. For the nine months ended September 30, 2019, there was $58,000 of compensation expense recorded on restricted stock grants. For the three and nine months ended September 30, 2018, there was no recorded compensation expense on restricted stock. As of September 30, 2019, there was $81,000 of unrecognized compensation expense that will be recognized over the remaining vesting periods.

19

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(11) Stock Based Compensation (continued)

The following table summarizes transactions regarding the restricted stock under the Plans:

	Number of Restricted Shares		Weighted Average Grant Date Price Per Share
Non-vested shares at December 31, 2018		250	$	31.10
Granted		4,547		29.13
Vested		1,490		29.83
Forfeited		-		-
Non-vested shares at September 30, 2019		3,307	$	28.97

(12) Employee Stock Ownership Plan

The Company established a tax qualified Employee Stock Ownership Plan (“ESOP”) for the benefit of its employees in conjunction with the stock conversion on October 6, 2010. Eligible employees begin to participate in the plan after one year of service and become 20% vested in their accounts after two years of service, 40% after three years of service, 60% after four years of service, 80% after five years of service and 100% after six years of service, or earlier, upon death, disability or attainment of normal retirement age.

In connection with the stock conversion, the purchase of the 278,254 shares of the Company stock by the ESOP was funded by a loan from the Company through the Bank. Unreleased ESOP shares collateralize the loan payable, and the cost of the shares is recorded as a contra-equity account in the stockholders’ equity of the Company. Shares are released as debt payments are made by the ESOP to the loan. The ESOP’s sources of repayment of the loan can include dividends, if any, on the unallocated stock held by the ESOP and discretionary contributions from the Company to the ESOP and earnings thereon.

Compensation expense is equal to the fair value of the shares committed to be released and unallocated ESOP shares are excluded from outstanding shares for purposes of computing earnings per share. Compensation expense related to the ESOP of $98,000 and $113,000 was recognized during the three months ended September 30, 2019 and 2018, respectively. Compensation expense related to the ESOP of $307,000 and $331,000 was recognized during the nine months ended September 30, 2019 and 2018, respectively. Dividends on unallocated shares are not treated as ordinary dividends and are instead used to repay the ESOP loan and recorded as compensation expense.

As of September 30, 2019, the ESOP held a total of 253,590 shares of the Company’s stock. Of the 253,590 shares, there were 159,003 unallocated as of September 30, 2019 with a fair market value of $4.3 million.

(13) Pension Information

The Company sponsors a pension plan which is a noncontributory defined benefit retirement plan. Effective August 1, 2005, the annual benefit provided to employees under this defined benefit pension plan was frozen by the Bank. Freezing the plan eliminated all future benefit accruals; however, the accrued benefit as of August 1, 2005 remained.

The net periodic pension cost for the three and nine months ended September 30, 2019 and September 30, 2018 are as follows (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Interest Cost	$	31		$	33		$	93		$	99
Expected return on plan assets		(32	)		(41	)		(96	)		(123	)
Amortization of net loss		2			3			6			9
Settlement obligation		-			-			-			30
Net periodic pension cost	$	1		$	(5	)	$	3		$	15

20

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(14) Fair Value of Assets and Liabilities

Fair Value Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date.  GAAP established a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.  A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.  A contractually binding sales price also provides reliable evidence of fair value.

Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that utilize model-based techniques for which all significant assumptions are observable in the market.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement; inputs to the valuation methodology that utilize model-based techniques for which significant assumptions are not observable in the market; or inputs to the valuation methodology that requires significant management judgment or estimation, some of which may be internally developed.

Management maximizes the use of observable inputs and minimizes the use of unobservable inputs when determining fair value measurements.  Management reviews and updates the fair value hierarchy classifications of the Company’s assets and liabilities on a quarterly basis.

Assets Measured at Fair Value on a Recurring Basis

Investment, Mortgage-Backed and Equity Securities

Fair values of investment and mortgage-backed securities were primarily measured using information from a third-party pricing service.  This service provides pricing information by utilizing evaluated pricing models supported with market data information.  Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data from market research publications.  Level 1 securities are comprised of equity securities.  As quoted prices were available, unadjusted, for identical securities in active markets, these securities were classified as Level 1 measurements.  Level 2 securities were primarily comprised of debt securities issued by government agencies, states and municipalities, corporations, as well as mortgage-backed securities issued by government agencies.  Fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models.  In cases where there may be limited or less transparent information provided by the Company’s third-party pricing service, fair value may be estimated by the use of secondary pricing services or through the use of non-binding third-party broker quotes.

On a quarterly basis, management reviews the pricing information received from the Company’s third-party pricing service.  This review process includes a comparison to non-binding third-party broker quotes, as well as a review of market-related conditions impacting the information provided by the Company’s third-party pricing service.  Management primarily identifies investment securities which may have traded in illiquid or inactive markets by identifying instances of a significant decrease in the volume or frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs.  As of September 30, 2019 and December 31, 2018, management did not make adjustments to prices provided by the third-party pricing service as a result of illiquid or inactive markets.  On a quarterly basis, management also reviews a sample of securities priced by the Company’s third-party pricing service to review significant assumptions and valuation methodologies used.  Based on this review, management determines whether the current placement of the security in the fair value hierarchy is appropriate or whether transfers may be warranted.

21

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(14) Fair Value of Assets and Liabilities (continued)

The following table presents the assets measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018 by level within the fair value hierarchy (dollars in thousands):

	Level 1		Level 2		Level 3		Total
September 30, 2019:
Investment securities available for sale:
U.S. government and agency obligations	$	-	$	8,469	$	-	$	8,469
Corporate bonds		-		2,581		-		2,581
Municipal obligations		-		58,680		-		58,680
Total investment securities available for sale		-		69,730		-		69,730
Equity securities		2,880		-		-		2,880
Mortgage-backed securities available for sale		-		92,883		-		92,883
Total recurring fair value measurements	$	2,880	$	162,613	$	-	$	165,493
December 31, 2018:
Investment securities available for sale:
U.S. government and agency obligations	$	-	$	8,270	$	-	$	8,270
Corporate bonds		-		4,201		-		4,201
Municipal obligations		-		53,698		-		53,698
Total investment securities available for sale		-		66,169		-		66,169
Equity securities		2,725		-		-		2,725
Mortgage-backed securities available for sale		-		81,794		-		81,794
Total recurring fair value measurements	$	2,725	$	147,963	$	-	$	150,688

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the assets measured at fair value on a nonrecurring basis as of September 30, 2019 and December 31, 2018 by level within the fair value hierarchy (dollars in thousands):

	Level 1		Level 2		Level 3		Total
September 30, 2019:
Foreclosed real estate	$	-	$	-	$	459	$	459
Total nonrecurring fair value measurements	$	-	$	-	$	459	$	459
December 31, 2018:
Foreclosed real estate	$	-	$	-	$	486	$	486
Total nonrecurring fair value measurements	$	-	$	-	$	486	$	486

22

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(14) Fair Value of Assets and Liabilities (continued)

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Company uses level 3 inputs to determine fair value (dollars in thousands):

					Quantitative Information about Level 3 Fair Value Measurements
	September 30,		December 31,		Valuation	Unobservable
	2019		2018		Techniques	Input	Range
Foreclosed real estate	$	459	$	486	Appraisal of collateral (1)	Appraisal adjustments (2)		0% to 30%
					Liquidation expenses (2)

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

23

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(14) Fair Value of Assets and Liabilities (Continued)

The following table presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2019 and December 31, 2018 (dollars in thousands): 

	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
September 30, 2019:
Financial Instruments - Assets:
Cash on hand and due from banks (1)	$	3,275	$	3,275	$	3,275	$	-	$	-
Interest-earning deposits in other institutions (1)		26,002		26,002		26,002		-		-
Investment securities (2)		69,730		69,730		-		69,730		-
Equity Securities (3)		2,880		2,880		2,880		-		-
Mortgage-backed securities (2)		92,883		92,883		-		92,883		-
Certificate of deposit (1)		249		249		249		-		-
Federal Home Loan Bank and other restricted stocks (1)		7,665		7,665		7,665		-		-
Loans receivable (1)		724,254		733,965		-		-		733,965
Bank-owned life insurance (1)		23,238		23,238		23,238		-		-
Accrued interest receivable (1)		2,901		2,901		2,901		-		-
Financial Instruments - Liabilities:
Demand, savings and club accounts (1)	$	491,758	$	491,758	$	491,758	$	-	$	-
Certificate deposit accounts (1)		245,205		248,324		-		-		248,324
Long-term borrowings (1)		105,738		106,850		-		-		106,850
Securities sold under agreements to repurchase (1)		2,925		2,925		2,925		-		-
Accrued interest payable (1)		1,020		1,020		1,020		-		-
December 31, 2018:
Financial Instruments - Assets:
Cash on hand and due from banks (1)	$	3,371	$	3,371	$	3,371	$	-	$	-
Interest-earning deposits in other institutions (1)		12,836		12,836		12,836		-		-
Investment securities (2)		66,169		66,169		-		66,169		-
Equity Securities (3)		2,725		2,725		2,725		-
Mortgage-backed securities (2)		81,794		81,794		-		81,794		-
Certificate of deposit (1)		249		249		249		-		-
Federal Home Loan Bank and other restricted stocks (1)		7,900		7,900		7,900		-		-
Loans receivable (1)		728,982		717,491		-		-		717,491
Bank-owned life insurance (1)		22,572		22,572		22,572		-		-
Accrued interest receivable (1)		2,823		2,823		2,823		-		-
Financial Instruments - Liabilities:										-
Demand, savings and club accounts (1)	$	471,177	$	471,177	$	471,177	$	-	$	-
Certificate deposit accounts (1)		246,697		245,740		-		-		245,740
Federal Home Loan Bank short-term borrowings (1)		4,524		4,524		4,524		-		-
Federal Home Loan Bank advances (1)		104,963		104,345		-		-		104,345
Securities sold under agreements to repurchase (1)		2,137		2,137		2,137		-		-
Accrued interest payable (1)		1,154		1,154		1,154		-		-

(1) The financial instrument is carried at amortized cost.

(2) The financial instrument is carried at fair value through other comprehensive income.

(3) The financial instrument is carried at fair value through net income.

24

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(15) Accumulated Other Comprehensive (Loss) Income

The following tables present the significant amounts reclassified out of accumulated other comprehensive income (loss) and the changes in accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2019 and September 30, 2018 (dollars in thousands):

	Unrealized Gains (Losses) on			Unrecognized
	Available for Sale			Pension
	Securities			Costs			Total
Balance as of June 30, 2019	$	1,496		$	(237	)	$	1,259
Other comprehensive income before reclassification		256			-			256
Amount reclassified from accumulated other comprehensive income		-			2			2
Total other comprehensive income		256			2			258
Balance as of September 30, 2019	$	1,752		$	(235	)	$	1,517
Balance as of December 31, 2018	$	(1,103	)	$	(241	)	$	(1,344	)
Other comprehensive income before reclassification		2,854			-			2,854
Amount reclassified from accumulated other comprehensive income		1			6			7
Total other comprehensive income		2,855			6			2,861
Balance as of September 30, 2019	$	1,752		$	(235	)	$	1,517

	Amount Reclassified
	from Accumulated			Affected Line on
	Other			the Consolidated
	Comprehensive Income (Loss)			Statements of Income
Three months ended September 30, 2019:
Amortization of defined benefit items:   Actuarial loss	$	2		Other operating expenses
		-		Income tax expense
	$	2		Net of tax
Total reclassification for the period	$	2		Net income
Nine months ended September 30, 2019:
Unrealized losses on available for sale securities	$	1		Net losses on sales of securities
		-		Income tax expense
	$	1		Net of tax
Amortization of defined benefit items:Actuarial loss	$	7		Other operating expenses
		(1	)	Income tax expense
	$	6		Net of tax
Total reclassification for the period	$	7		Net income

25

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(15) Accumulated Other Comprehensive (Loss) Income (continued)

	Unrealized Gains (Losses) on			Unrecognized
	Available for Sale			Pension
	Securities			Costs			Total
Balance as of June 30, 2018	$	(1,819	)	$	(291	)	$	(2,110	)
Other comprehensive loss before reclassification		(725	)		-			(725	)
Amount reclassified from accumulated other comprehensive loss		-			2			2
Total other comprehensive (loss) income		(725	)		2			(723	)
Balance as of September 30, 2018	$	(2,544	)	$	(289	)	$	(2,833	)
Balance as of December 31, 2017	$	840		$	(312	)	$	528
Other comprehensive loss before reclassification		(2,981	)		-			(2,981	)
Amount reclassified from accumulated other comprehensive loss		13			23			36
Total other comprehensive (loss) income		(2,968	)		23			(2,945	)
Change in accounting principle for adoption of ASU 2016-01		(416	)		-			(416	)
Balance as of September 30, 2018	$	(2,544	)	$	(289	)	$	(2,833	)

	Amount Reclassified
	from Accumulated Other			Affected Line on
	Comprehensive			the Consolidated
	Income (Loss)			Statements of Income
Three months ended September 30, 2018:
Amortization of defined benefit items:  Actuarial loss	$	3		Other operating expenses
		(1	)	Income tax expense
	$	2		Net of tax
Total reclassification for the period	$	2		Net income
Nine months ended September 30, 2018:
Unrealized losses on available for sale securities	$	17		Net loss on sales of securities
		(4	)	Income tax expense
	$	13		Net of tax
Amortization of defined benefit items:   Actuarial loss	$	9		Other operating expenses
Distribution settlement		20		Other operating expenses
		(6	)	Income tax expense
	$	23		Net of tax
Total reclassification for the period	$	36		Net income

26

STANDARD AVB FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

September 30, 2019

(16) Revenue Recognition

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine months ended September 30, 2019 and September 30, 2018 (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Noninterest income
In scope of Topic 606:
Service charges on deposit accounts	$	777	$	718	$	2,146	$	2,155
Investment management fees		172		141		541		469
Noninterest income (in-scope of Topic 606)		949		859		2,687		2,624
Noninterest income (out-of-scope of Topic 606)		538		302		1,032		922
Total noninterest income	$	1,487	$	1,161	$	3,719	$	3,546

(17) Goodwill and Other Intangibles

The Company has recorded goodwill associated with mergers totaling $25.8 million. Goodwill is not amortized, but is periodically evaluated for impairment. The Company did not recognize any impairment during the three or nine months ended September 30, 2019 or September 30, 2018.

Identifiable intangibles are amortized to their estimated residual values over the expected useful lives of such assets. The balance of the core deposit intangible at September 30, 2019 was $2.0 million net of $2.1 million of accumulated amortization as of that date.

As of September 30, 2019, the remaining current year and estimated future amortization expense for the core deposit intangible was (dollars in thousands):

2019		146
2020		472
2021		352
2022		325
2023		325
2024		325
2025		81
	$	2,026

27

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

The following discussion and analysis provides further detail to the financial condition and results of operations of the Company. This section should be read in conjunction with the Notes to Consolidated Financial Statements (Unaudited) presented elsewhere in this report.

The Company’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2019 have remained unchanged from the disclosures presented in the Company’s audited financial statements for the year ended December 31, 2018 contained in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission on March 18, 2019.

Standard AVB Financial Corp. is a Maryland corporation that provides a wide array of retail and commercial financial products and services to individuals, families and businesses through 17 banking offices located in the Pennsylvania counties of Allegheny, Westmoreland and Bedford and Allegany County, Maryland through its wholly-owned subsidiary Standard Bank.

Comparison of Financial Condition at September 30, 2019 and December 31, 2018

General. The Company’s total assets as of September 30, 2019 increased $19.7 million, or 2.0%, to $991.5 million, from $971.8 million at December 31, 2018. The increase in total assets included an increase in investment and mortgage-backed securities of $14.7 million, or 10.0%, an increase in cash and cash equivalents of $13.1 million, or 80.6%, partially offset by a decrease in loans receivable of $4.7 million, or 0.6%, for the nine month period.

Cash and Cash Equivalents. Cash and cash equivalents increased $13.1 million, or 80.6%, to $29.3 million at September 30, 2019 from $16.2 million at December 31, 2018. The increase primarily resulted from customer deposits and loan repayments, partially offset by purchases of mortgage-backed securities and repayments of short-term borrowings during the period.

Investment Securities. Investment securities available for sale increased $3.5 million, or 5.4%, to $69.7 million at September 30, 2019 from $66.2 million at December 31, 2018. Purchases of investment securities totaled $10.8 million, partially offset by calls and maturities of $2.5 million and sales of $6.3 million during the nine months ended September 30, 2019. Additionally, there was a $1.6 million increase in the unrealized gain on investment securities during the period.

Equity Securities. Equity securities available for sale were $2.9 million and $2.7 million at September 30, 2019 and December 31, 2018, respectively. There were no purchases or sales of equity securities during the nine months ended September 30, 2019.

Mortgage-Backed Securities. The Company’s mortgage-backed securities available for sale increased $11.1 million, or 13.6%, to $92.9 million at September 30, 2019 from $81.8 million at December 31, 2018. Purchases of mortgage-backed securities totaled $24.7 million, partially offset by repayments of $13.8 million and sales of $1.3 million during the nine month period ended September 30, 2019. Additionally, there was a $2.0 million increase in the unrealized gain on mortgage-backed securities during the period.

Loans. At September 30, 2019, net loans were $724.3 million, or 73.0% of total assets, compared to $729.0 million, or 75.0% of total assets at December 31, 2018. The $4.7 million, or 0.6%, decrease in loans receivable was the result of loan payoffs and amortization exceeding loan production during the period. Commercial real estate loans and commercial business loans increased $13.2 million or 4.3%, and $3.8 million or 8.1%, respectively. These increases were offset by a decrease in 1-4 family residential and construction, home equity loans and lines of credit, and other loans of $11.9 million or 4.7%, $8.9 million or 7.2%, and $567,000 or 49.8%, respectively.

Office Properties and Equipment. Office properties and equipment decreased $79,000, or 1.0%, to $7.7 million at September 30, 2019 from $7.8 million at December 31, 2018. The decrease was primarily the result of the sale of one office building during the period which more than offset an increase due to the implementation of ASU 2016-02, Leases (Topic 842) as of January 1, 2019. See Footnote 10 in the Notes to Consolidated Financial Statements (Unaudited) for additional information on leases.

Deposits. The Company accepts deposits primarily from the areas in which the Bank’s offices are located. The Company has consistently focused on building broader customer relationships and targeting small business customers to increase core deposits. The Company also relies on customer service to attract and retain deposits. The Company offers a variety of deposit accounts with a range of interest rates and terms. Deposit accounts consist of savings accounts, certificates of deposit, money market accounts, commercial and consumer checking accounts and individual retirement accounts. Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market interest rates, liquidity requirements and deposit growth goals.

28

Deposits increased $19.1 million, or 2.7%, to $737.0 million at September 30, 2019 from $717.9 million at December 31, 2018. The increase resulted from increases in money market and interest-bearing checking accounts of $26.1 million or 29.8%, and $5.1 million or 5.1%, respectively. These increases were partially offset by decreases in savings, non-interest-bearing checking accounts, and time deposits of $3.4 million or 2.3%, $2.1 million or 1.6%, and $1.5 million or 0.6%, respectively.

Borrowings. Borrowed funds decreased by $3.0 million, or 2.7%, to $108.7 million at September 30, 2019 from $111.6 million at December 31, 2018. The decrease was primarily due to the repayment of maturing long term advances as well as pay downs on both amortizing long term advances and the overnight borrowing line. These decreases were partially offset by new advances entered into during the period. Federal Home Loan Bank advances decreased $99,000, or 0.1%, to $104.9 million from $105.0 million at December 31, 2018. The decrease in advances was due to $25.3 million in principal repayments made on existing advances partially offset by $25.2 million in additional advances entered into during the period. Included in the long-term borrowings on the September 30, 2019 Consolidated Statements of Financial Condition were $875,000 in financing lease liabilities booked in the accordance with the implementation of ASU 2016-02, Leases (Topic 842). There were no short-term borrowings at September 30, 2019 compared to $4.5 million at December 31, 2018. During the nine months ended September 30, 2019, proceeds from short-term borrowings were $104.2 million, offset by repayments of $108.7 million.

Stockholders’ Equity. Stockholders’ equity increased $3.4 million, or 2.5%, to $141.3 million at September 30, 2019 from $137.9 million at December 31, 2018. The increase was the result of net income of $6.7 million earned during the nine months ended September 30, 2019 as well as a $2.9 million increase in accumulated other comprehensive income resulting from fair value adjustments on available for sale debt securities during the period. These increases were partially offset by $3.1 million in dividends paid during the nine month period. Additionally, in accordance with the stock repurchase program, 127,539 shares of the Company’s outstanding stock were repurchased for $3.5 million during the nine months ended September 30, 2019.

29

Average Balance and Yields

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense (dollars in thousands).

	For the Three Months Ended September 30,
	2019								2018
	Average Outstanding Balance			Interest		Yield/ Rate			Average Outstanding Balance			Interest		Yield/ Rate
Interest-earning assets:
Loans	$	734,111		$	8,239		4.42	%	$	734,415		$	8,007		4.27	%
Investment and mortgage-backed securities		164,848			1,086		2.63	%		146,267			948		2.59	%
FHLB and other restricted stock		7,727			147		7.55	%		8,238			134		6.51	%
Interest-earning deposits		15,874			90		2.27	%		26,359			112		1.70	%
Total interest-earning assets		922,560			9,562		4.09	%		915,279			9,201		3.95	%
Noninterest-earning assets		65,755								62,200
Total assets	$	988,315							$	977,479
Interest-bearing liabilities:
Savings accounts	$	144,167			55		0.15	%	$	150,084			51		0.13	%
Certificates of deposit		246,542			1,340		2.16	%		232,964			1,092		1.86	%
Money market accounts		105,728			349		1.31	%		96,951			142		0.58	%
Demand and NOW accounts		105,085			74		0.28	%		101,653			50		0.20	%
Total interest-bearing deposits		601,522			1,818		1.20	%		581,652			1,335		0.91	%
Borrowings		106,328			577		2.14	%		116,873			599		2.05	%
Securities sold under agreements to repurchase		3,192			3		0.37	%		4,219			2		0.19	%
Total interest-bearing liabilities		711,042			2,398		1.34	%		702,744			1,936		1.10	%
Noninterest-bearing deposits		132,278								136,811
Noninterest-bearing liabilities		4,002								2,928
Total liabilities		847,322								842,483
Stockholders' equity		140,993								134,996
Total liabilities and stockholders' equity	$	988,315							$	977,479
Net interest income				$	7,164							$	7,265
Net interest rate spread (1)							2.75	%							2.85	%
Net interest-earning assets (2)	$	211,518							$	212,535
Net interest margin (3)							3.08	%							3.15	%
Average interest-earning assets to interest-bearing liabilities		129.75	%							130.24	%

(1) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

30

	For the Nine Months Ended September 30,
	2019								2018
	Average Outstanding Balance			Interest		Yield/ Rate			Average Outstanding Balance			Interest		Yield/ Rate
Interest-earning assets:
Loans	$	733,082		$	24,426		4.42	%	$	742,935		$	23,919		4.27	%
Investment and mortgage-backed securities		159,163			3,205		2.69	%		145,153			2,842		2.61	%
FHLB and other restricted stock		7,703			476		8.25	%		8,854			455		6.88	%
Interest-earning deposits		15,021			268		2.39	%		20,097			218		1.45	%
Total interest-earning assets		914,969			28,375		4.11	%		917,039			27,434		3.97	%
Noninterest-earning assets		65,651								62,227
Total assets	$	980,620							$	979,266
Interest-bearing liabilities:
Savings accounts	$	141,106			165		0.16	%	$	151,660			154		0.14	%
Certificates of deposit		246,920			3,895		2.11	%		222,343			2,805		2.26	%
Money market accounts		104,634			921		1.18	%		96,778			351		0.48	%
Demand and NOW accounts		104,432			221		0.28	%		99,115			146		0.20	%
Total interest-bearing deposits		597,092			5,202		1.16	%		569,896			3,456		0.81	%
Borrowings		104,197			1,684		2.15	%		132,097			1,914		1.93	%
Securities sold under agreements to repurchase		3,573			13		0.50	%		5,124			6		0.14	%
Total interest-bearing liabilities		704,862			6,899		1.30	%		707,117			5,376		1.02	%
Noninterest-bearing deposits		132,397								134,742
Noninterest-bearing liabilities		3,409								3,395
Total liabilities		840,668								845,254
Stockholders' equity		139,952								134,012
Total liabilities and stockholders' equity	$	980,620							$	979,266
Net interest income				$	21,476							$	22,058
Net interest rate spread (1)							2.81	%							2.95	%
Net interest-earning assets (2)	$	210,107							$	209,922
Net interest margin (3)							3.14	%							3.22	%
Average interest-earning assets to interest-bearing liabilities		129.81	%							129.69	%

(1) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

31

Comparison of Operating Results for the Three Months Ended September 30, 2019 and 2018

General. Net income for the quarter ended September 30, 2019 was $2.5 million compared to $2.4 million for the quarter ended September 30, 2018, an increase of $84,000, or 3.5%. Earnings per share for the current period was $0.54 for basic and $0.53 for fully diluted compared to $0.51 for basic and $0.50 for fully diluted for the same period in 2018.

The Company’s annualized return on average assets (ROA) and return on average equity (ROE) for the quarter ended September 30, 2019 were 0.99% and 6.93%, respectively, compared to 0.97% and 6.99%, respectively, for the quarter ended September 30, 2018.

Net Interest Income. Net interest income for the quarter ended September 30, 2019 was $7.2 million, a decrease of 1.4%, compared to $7.3 million for the quarter ended September 30, 2018. The decrease was primarily the result of an increase in the cost of interest-bearing deposits partially offset by an increase in the yield on interest-earning assets. The net interest rate spread and net interest margin were 2.75% and 3.08%, respectively, for the three months ended September 30, 2019, compared to 2.85% and 3.15%, respectively, for the three months ended September 30, 2018.

Interest and Dividend Income. Total interest and dividend income increased $361,000, or 3.9%, to $9.6 million for the three months ended September 30, 2019 compared to $9.2 million for the three months ended September 30, 2018. The increase was primarily the result of a 14 basis point increase in the average yield on interest-earning assets to 4.09% for the three months ended September 30, 2019 from 3.95% for the same period in the prior year.

Interest income on loans increased $232,000, or 2.9%, to $8.2 million for the three months ended September 30, 2019 compared to $8.0 million for the three months ended September 30, 2018. The increase was primarily the result of a 15 basis point increase in the average yield on loans receivable to 4.42% for the three months ended September 30, 2019 from 4.27% for the same period in the prior year. The increase in the average yield was primarily attributable to the repositioning of the loan portfolio to emphasize commercial real estate and business lending.

Interest income on investment and mortgage-backed securities increased $138,000, or 14.6%, to $1.1 million for the three months ended September 30, 2019 compared to $948,000 for the three months ended September 30, 2018. The increase was primarily the result of an increase in the average balance of investment and mortgage-backed securities of $18.6 million, or 12.7%, to $164.8 million for the three months ended September 30, 2019 compared to the prior period. In addition, the average yield earned on investment and mortgage-backed securities increased four basis points to 2.63% for the quarter ended September 30, 2019 from 2.59% for the same period in the prior year. The increase in the average yield was due to new security purchases made at higher interest rates during the period as well as variable rate securities resetting higher as a result of increases in general market rates.

Interest income on FHLB stock and other restricted stock increased $13,000, or 9.7%, to $147,000 for the three months ended September 30, 2019 compared to $134,000 for the three months ended September 30, 2018. The increase primarily resulted from an increase in the average yield to 7.55% for the three months ended September 30, 2019 from 6.51% for the same period in the prior year. The increase in interest income resulting from the increase in the average yield was partially offset by a decrease in the average balance of FHLB stock and other restricted stock of $511,000, or 6.2%, to $7.7 million for the three months ended September 30, 2019 compared to the prior period.

Interest income on interest-earning deposits decreased $22,000, or 19.6%, to $90,000 for the three months ended September 30, 2019 compared to $112,000 for the three months ended September 30, 2018. The decrease was primarily the result of a decrease in the average balance of interest-earning deposits of $10.5 million, or 39.8%, to $15.9 million for the three months ended September 30, 2019 compared to the prior period. The decrease in interest income resulting from the decrease in the average balance was partially offset by an increase in the average yield on interest-earning deposits to 2.27% for the three months ended September 30, 2019 from 1.70% for the same period in the prior year.

Interest Expense. Total interest expense increased $462,000, or 23.9%, to $2.4 million for the three months ended September 30, 2019 from $1.9 million for the three months ended September 30, 2018. The increase was primarily the result of a 24 basis point increase in the average cost of interest-bearing liabilities to 1.34% for the three months ended September 30, 2019 from 1.10% for the same period in the prior year. Additionally, the average balance of interest-bearing deposits increased $19.9 million which was partially offset by a decrease of $10.5 million in the average balance of borrowings for the three months ended September 30, 2019 compared to the same period in the prior year.

Interest expense on deposits increased $483,000, or 36.2%, to $1.8 million for the three months ended September 30, 2019 from $1.3 million for the three months ended September 30, 2018. The increase was primarily the result of a 29 basis point increase in the average cost of interest-bearing deposits to 1.20% for the three months ended September 30, 2019 from 0.91% for the same prior year period due to a rising interest rate market. Additionally, the average balance of interest-bearing deposits increased $19.9 million, or 3.42%, for the three months ended September 30, 2019 compared to the same period in the prior year.

32

Interest expense on borrowed funds decreased $22,000, or 3.7%, to $577,000 for the three months ended September 30, 2019 from $599,000 for the three months ended September 30, 2018. The decrease was primarily the result of decrease in the average balance of borrowings of $10.5 million, or 9.0%, to $106.3 million for the three months ended September 30, 2019 compared to the same period in the prior year. The decrease in interest expense resulting from the decrease in the average balance was partially offset by a nine basis point increase in the cost of borrowings to 2.14% for the quarter ended September 30, 2019 from 2.05% for the quarter ended September 30, 2018 due to the repayment of lower cost borrowings and new advances entered into at higher rates during the period as a result of increases in general market rates.

Provision for Loan Losses. Provision for loan losses increased $31,000, or 13.9%, to $254,000 for the three months ended September 30, 2019 compared to $223,000 for the three months ended September 30, 2018. In management’s judgment, the allowance for loan losses is at a sufficient level that reflects the losses inherent in the loan portfolio relative to loan mix, economic conditions and historical loss experience. See Footnote 8 in the Notes to Consolidated Financial Statements (Unaudited) for additional information.

Noninterest Income. Noninterest income increased $326,000, or 28.1%, to $1.5 million for the three months ended September 30, 2019 compared to $1.2 million for the three months ended September 30, 2018. The increase was primarily the result of increases in net equity securities fair value adjustment gains of $338,000, or 155.0%, as well as increases in other income of $170,000, or 1,000.0%, and loan sale gains of $58,000, or 290.0%, for the quarter ended September 30, 2019 compared to the same period in the prior year. The increase in other income was primarily due to income received from the assignment of a note that was charged off against the specific credit mark established at the merger date. Those increases were partially offset by having no gains on the sales of equity securities during the quarter ended September 30, 2019 compared to $331,000 in the quarter ended September 30, 2018.

Noninterest Expenses. Noninterest expenses decreased $84,000, or 1.6%, to $5.2 million for the quarter ended September 30, 2019 from $5.3 million for the quarter ended September 30, 2018. The decrease was primarily the result of decreases in other operating expenses, core deposit amortization, premises and occupancy expenses and federal deposit insurance of $103,000 or 8.9%, $49,000 or 25.4%, $80,000 or 12.4%, and $104,000 or 144.4%, respectively, compared to the same period in the prior year. The lower federal deposit insurance was due to the application of small bank credits to the payment due September 30, 2019. These decreases were partially offset by an increase in compensation and benefits of $205,000, or 6.9%, compared to the quarter ended September 30, 2018.

Income Tax Expense. The Company recorded a provision for income tax of $707,000 for the three months ended September 30, 2019 compared to $513,000 for the three months ended September 30, 2018. The effective tax rate was 22.3% for the three months ended September 30, 2019 and 17.7% for the three months ended September 30, 2018.

Comparison of Operating Results for the Nine Months Ended September 30, 2019 and 2018

General. Net income for the nine months ended September 30, 2019 was $6.7 million compared to $7.0 million for the nine months ended September 30, 2018, a decrease of $303,000, or 4.3%. Earnings per share for the current period was $1.45 for basic and $1.42 for fully diluted compared to $1.52 for basic and $1.48 for fully diluted for the same period in 2018.

The Company’s annualized return on average assets (ROA) and return on average equity (ROE) for the nine months ended September 30, 2019 were 0.92% and 6.43%, respectively, compared to 0.96% and 7.02%, respectively, for the same period in 2018.

Net Interest Income. Net interest income for the nine months ended September 30, 2019 was $21.5 million, a decrease of 2.6%, compared to $22.1 million for the nine months ended September 30, 2018. The decrease was primarily the result of an increase in the cost of interest-bearing deposits partially offset by an increase in the yield on interest-earning assets. The net interest rate spread and net interest margin were 2.81% and 3.14%, respectively, for the nine months ended September 30, 2019, compared to 2.95% and 3.22%, respectively, for the nine months ended September 30, 2018.

Interest and Dividend Income. Total interest and dividend income increased by $941,000, or 3.4%, to $28.4 million for the nine months ended September 30, 2019 compared to $27.4 million for the nine months ended September 30, 2018. The increase was primarily the result of a 14 basis point increase in the average yield on interest-earning assets to 4.11% for the nine months ended September 30, 2019 from 3.97% for the same period in the prior year.

Interest income on loans increased $507,000, or 2.1%, to $24.4 million for the nine months ended September 30, 2019 compared to $23.9 million for the nine months ended September 30, 2018. The increase was primarily the result of a 15 basis point increase in the average yield on loans receivable to 4.42% for the nine months ended September 30, 2019 from 4.27% for the same period in the prior year. The increase in the average yield was attributable to some adjustable rate loans resetting higher as a result of increases in general market rates and the repositioning of the loan portfolio to emphasize commercial real estate and business lending compared to the same period in the prior year. The increase in interest income resulting from the increase in the average yield was partially offset by a decrease in the average balance of loans receivable of $9.9 million, or 1.3%, to $733.0 million for the nine months ended September 30, 2019 compared to the same period in the prior year.

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Interest income on investment and mortgage-backed securities increased by $363,000, or 12.8%, to $3.2 million for the nine months ended September 30, 2019 compared to $2.8 million for the nine months ended September 30, 2018. The increase was primarily the result of an increase in the average balance of investment and mortgage-backed securities of $14.0 million, or 9.7%, to $159.2 million for the nine months ended September 30, 2019 compared to the prior period. In addition, the average yield earned on investment and mortgage-backed securities increased eight basis points to 2.69% for the nine months ended September 30, 2019 from 2.61% for the same period in the prior year. The increase in the average yield was due to new security purchases made at higher interest rates during the period as well as variable rate securities resetting higher as a result of increases in general market rates.

Interest income on FHLB stock and other restricted stock increased $21,000, or 4.6%, to $476,000 for the nine months ended September 30, 2019 compared to $455,000 for the nine months ended September 30, 2018. The increase was primarily the result of an increase in the average yield to 8.25% for the nine months ended September 30, 2019 from 6.88% for the same period in the prior year. The FHLB increased the dividend yield on both activity and membership stock as of the fourth quarter of 2018. The additional dividend income to true up the 2018 quarter was received in 2019. The increase in interest income resulting from the increase in the average yield was partially offset by a decrease in the average balance of FHLB stock and other restricted stock of $1.2 million, or 13.0%, to $7.7 million for the nine months ended September 30, 2019 compared to the prior period.

Interest income on interest-earning deposits increased $50,000, or 22.9%, to $268,000 for the nine months ended September 30, 2019 compared to $218,000 for the nine months ended September 30, 2018. The increase was primarily the result of a 94 basis point increase in the average yield on interest-earning deposits to 2.39% for the nine months ended September 30, 2019 from 1.45% for the same period in the prior year as a result of rising short-term interest rates. The increase in interest income resulting from the increase in the average yield was partially offset by a decrease in the average balance of interest-earning deposits of $5.1 million, or 25.3%, to $15.0 million for the nine months ended September 30, 2019 compared to the prior period.

Interest Expense. Total interest expense increased $1.5 million, or 28.3%, to $6.9 million for the nine months ended September 30, 2019 from $5.4 million for the nine months ended September 30, 2018. The increase was primarily the result of a 28 basis point increase in the average cost of interest-bearing liabilities to 1.30% for the nine months ended September 30, 2019 from 1.02% for the same period in the prior year. Additionally, an increase in the average balance of interest-bearing deposits was partially offset by a decrease in the average balance of borrowings for the nine months ended September 30, 2019 compared to the same period in the prior year.

Interest expense on deposits increased $1.7 million, or 50.5%, to $5.2 million for the nine months ended September 30, 2019 from $3.5 million for the nine months ended September 30, 2018. The increase was primarily the result of a 35 basis point increase in the average cost of interest-bearing deposits to 1.16% for the nine months ended September 30, 2019 compared to 0.81% for the same period in the prior year due to a rising interest rate market. In addition, the average balance of interest-bearing deposits increased $27.2 million, or 4.8%, for the nine months ended September 30, 2019 compared to the same period in the prior year.

Interest expense on borrowed funds decreased $230,000, or 12.0%, to $1.7 million for the nine months ended September 30, 2019 from $1.9 million for the nine months ended September 30, 2018. The decrease was primarily the result of a decrease in the average balance of borrowings of $27.9 million, or 21.1%, to $104.2 million for the nine months ended September 30, 2019 compared to the same period in the prior year. Included in the decrease in the average balance of borrowings was a $14.6 million decrease in the average balance of FHLB short term borrowings for the nine months ended September 30, 2019 compared to the same period in the prior year. The decrease in interest expense resulting from the decrease in the average balance was partially offset by a 22 basis point increase in the cost of borrowings to 2.15% for the nine months ended September 30, 2019 from 1.93% for the nine months ended September 30, 2018 due to the repayment of lower cost borrowings and new advances entered into at higher rates during the period as a result of increases in general market rates.

Provision for Loan Losses. Provision for loan losses increased $146,000, or 36.7%, to $544,000 for the nine months ended September 30, 2019 compared to $398,000 for the nine months ended September 30, 2018. In management’s judgment, the allowance for loan losses is at a sufficient level that reflects the losses inherent in the loan portfolio relative to loan mix, economic conditions and historical loss experience. See Footnote 8 in the Notes to Consolidated Financial Statements (Unaudited) for additional information.

Noninterest Income. Noninterest income increased $173,000, or 4.9%, to $3.7 million for the nine months ended September 30, 2019 compared to $3.5 million for the nine months ended September 30, 2018. The increase was primarily the result of increases in net equity securities fair value adjustment gains of $168,000, or 1,292.3%, as well as increases in other income of $206,000, or 343.3%, and loan sale gains of $113,000, or 240.4%, for the nine months ended September 30, 2019 compared to the same period in the prior year. The increase in other income was primarily due to income received from the assignment of a note that was charged off against the specific credit mark established at the merger date. Those increases were partially offset by having no gains on the sales of equity securities during the nine months ended September 30, 2019 compared to $394,000 in the nine months ended September 30, 2018.

Noninterest Expenses. Noninterest expenses decreased $362,000, or 2.2%, to $16.1 million for the nine months ended September 30, 2019 from $16.4 million for the nine months ended September 30, 2018. The decrease was primarily the result of decreases in other operating expenses, core deposit amortization, premises and occupancy expenses and federal deposit insurance of $303,000 or 8.9%, $161,000 or 25.0%, $149,000 or 7.5%, and $116,000 or 52.7%, respectively, compared to the same period in the prior year. The lower federal deposit insurance was due to the application of small bank credits to the payment due September 30, 2019. These increases were partially offset by an increase in compensation and benefits of $244,000, or 2.6%, compared to the nine months ended September 30, 2018.

Income Tax Expense. The Company recorded a provision for income tax of $1.8 million for the nine months ended September 30, 2019 compared to $1.7 million for the nine months ended September 30, 2018. The effective tax rate was 21.4% for the nine months ended September 30, 2019 and 19.7% for the nine months ended September 30, 2018.

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Non-Performing and Problem Assets

The table below sets forth the amounts and categories of non-performing assets at the dates indicated. At September 30, 2019 and December 31, 2018, there were no TDRs (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates).

	September 30,			December 31,
	2019			2018
Non-accrual loans:
One-to-four family residential and construction	$	1,684		$	1,727
Commercial real estate		334			661
Home equity loans and lines of credit		312			258
Commercial business		36			62
Other		9			19
Total nonaccrual loans		2,375			2,727
Loans past due 90 days and still accruing		-			3
Total non-performing loans		2,375			2,730
Foreclosed real estate		459			486
Total non-performing assets	$	2,834		$	3,216
Ratios:
Non-accrual loans to total loans		0.33	%		0.37	%
Non-performing loans to total loans		0.33	%		0.37	%
Non-performing assets to total assets		0.29	%		0.33	%
Allowance for loan losses to non-performing loans		199.71	%		161.68	%

At September 30, 2019, loans in process of foreclosure totaled $1.4 million.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations. The Company’s primary sources of funds consist of deposit inflows, loan repayments and sales, borrowings from the Federal Home Loan Bank of Pittsburgh, repurchase agreements and maturities, principal repayments and the sale of available-for-sale securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company’s Asset/Liability Management Committee, under the direction of the Chief Financial Officer, is responsible for establishing and monitoring liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of the Bank’s customers as well as unanticipated contingencies. At September 30, 2019, the Company’s cash and cash equivalents amounted to $29.3 million. Management believes there is enough sources of liquidity to satisfy short- and long-term liquidity needs as of September 30, 2019.

Certificates of deposit due within one year of September 30, 2019 totaled $97.0 million, or 13.2% of total deposits. If these deposits do not remain with the Bank, it may be required to seek other sources of funds, including loan and securities sales, repurchase agreements and Federal Home Loan Bank advances. Management believes, however, based on historical experience and current market interest rates, the Bank will retain upon maturity a large portion of the certificates of deposit with maturities of one year or less. The Company’s maximum borrowing capacity at the FHLB at September 30, 2019 was $435.0 million.

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Stockholders’ equity was $141.3 million at September 30, 2019, an increase of $3.4 million or 2.5% from $137.9 million at December 31, 2018. The increase was a result of net income of $6.7 million earned during the nine months ended September 30, 2019 as well as a $2.8 million increase in accumulated other comprehensive gains resulting from fair value adjustments on available for sale securities during the period. These increases were partially offset by $3.1 million dividends paid during the nine month period. Additionally, in accordance with the stock repurchase program, 127,539 shares of the Company’s outstanding stock were repurchased for $3.5 million during the nine months ended September 30, 2019.

Current regulatory requirements specify that the Bank and similar institutions must maintain regulatory capital sufficient to meet tier 1 leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios of at least 4.00%, 4.50%, 6.00% and 8.00%, respectively. At September 30, 2019, the Bank was in compliance with all regulatory capital requirements with ratios of 11.4%, 16.6%, 16.6% and 17.4%, respectively, and was considered “well capitalized” under regulatory guidelines.

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies proposed a rule to establish for institutions with assets of less than $10 billion that meet other specified criteria a “community bank leverage ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) of 9% that such institutions may elect to utilize in lieu of the generally applicable leverage and risk-based capital requirements noted above. A “qualifying community bank” with capital exceeding 9% will be considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized.” The rule has been adopted in final form and the framework will first be available for use in the Bank’s March 31, 2020 Call Report.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, the Company routinely is a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans the Bank makes. At September 30, 2019, the Company had $127.5 million in loan commitments outstanding, $62.9 million of which were for commercial loan originations and $7.9 million which were for one- to four-family and construction loan originations. In addition to those commitments to originate loans, loan commitments outstanding included $31.7 million in unused home equity lines of credit to borrowers and $25.0 million in other commitments.

Contractual Obligations. In the ordinary course of operations, the Company enters into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, 2019, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer, the President and the Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934). Based on that evaluation, the Company’s management, including the Chief Executive Officer, the President and the Executive Vice President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2019.

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that the information required to be disclosed by the Company in reports filed and submitted under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in reports filed under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2019, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15-d15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

As of September 30, 2019, the Company was not involved in any pending legal proceedings as a defendant other than routine legal proceedings occurring in the ordinary course of business. As of September 30, 2019, the Company was not involved in any legal proceedings the outcome of which would be material to its financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this quarterly report, you should carefully consider the factors discussed under the heading “Risk Factors” contained in the Company’s annual report on Form 10-K filed with the SEC on March 18, 2019. The Company’s evaluation of the risk factors applicable to it has not changed materially from those disclosed in the Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to purchases made by or on behalf of the Company of shares of

common stock of the Company during the indicated periods.

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publically Announced Plans or Programs		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (1)
July 1-31, 2019		42,460		27.71		42,460		146,040
August 1-31, 2019		23,679		27.18		23,679		122,361
September 1-30, 2019		9,900		27.31		9,900		112,461
Totals		76,039	$	27.40		76,039

(1) On December 19, 2018, the Company announced that the Board of Directors authorized the repurchase of up to 240,000 shares, or approximately 5%, of the Company’s outstanding common stock. The stock repurchase program may be carried out through open market purchases, block trades, negotiated private transactions or pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission rules. The stock will be repurchased on an ongoing basis and will be subject to the availability of stock, general market conditions, the trading prices of the stock, alternative uses for capital and the Company’s financial performance. The stock repurchase program has an expiration date of December 9, 2019.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit
Number	Description
3.1	Articles of Incorporation of Standard AVB Financial Corp., as amended (1)
3.2	Bylaws of Standard AVB Financial Corp., as amended (2)
4.1	Form of common stock certificate of Standard AVB Financial Corp. (3)
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Written Statement of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0	The following materials for the three and six months ended September 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Financial Condition, (ii) Statements of Income, (iii) Statements of Comprehensive Income, (iv) Statements of Changes in Stockholder’s Equity, (v) Statements of Cash Flows, and (vi) Notes to Financial Statements.

_____________

(1) Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K as filed with the Securities and Exchange Commission on August 24, 2017.

(2) Incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K as filed with the Securities and Exchange Commission on April 12, 2017.

(3) Incorporated by reference to Exhibit 4 to the Company’s Annual Report on Form 10-K, as filed on April 2, 2018.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	STANDARD AVB FINANCIAL CORP.
Date:  November 12, 2019	/s/ Timothy K. Zimmerman
	Timothy K. Zimmerman
	Chief Executive Officer
Date:  November 12, 2019	/s/ Susan A. Parente
	Susan A. Parente
	Executive Vice President and Chief Financial Officer

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