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EX-32.1 - EXHIBIT 32.1 - SBT Bancorp, Inc.ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - SBT Bancorp, Inc.ex31-2.htm
EX-32.2 - EXHIBIT 32.2 - SBT Bancorp, Inc.ex32-2.htm
EX-31.1 - EXHIBIT 31.1 - SBT Bancorp, Inc.ex31-1.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2016

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 Number: 000-51832

 

SBT Bancorp, Inc.


(Exact Name of Registrant as Specified in Its Charter)

 

                Connecticut                                                    

                     20-4346972                                                      

 (State or Other Jurisdiction of         

 (I.R.S. Employer

 Incorporation or Organization)          

 Identification No.)

 

 

 

 86 Hopmeadow Street, Weatogue, CT

06089

 (Address of Principal Executive Offices) 

(Zip Code)

 

 

 

 

        

 

(860) 408-5493


(Registrant's Telephone Number, Including Area Code)

 

 


(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

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 filing requirements for the past 90 days.

Yes [X]     No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]     No [ ]

 

 

 
-1-

 

 

 

 

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

 

Large accelerated filer [ ]

Accelerated filer [ ]

 

 

Non-accelerated filer [ ]

Smaller reporting company [X]

(Do not check if a smaller reporting company)  

                     

 

                     

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 the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of May 6, 2016, the registrant had 1,360,689 shares of its Common Stock, no par value per share, outstanding.

 

 
-2-

 

 

table of contents

 

SBT Bancorp, Inc. and Subsidiary

 

 

     

Page No.

 
         

PART I - FINANCIAL INFORMATION

       
         

Item 1. Financial Statements

       
         

Condensed Consolidated Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015

    4  
         

Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2016 and 2015 (unaudited)

    5  
         

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015 (unaudited)

    6  
         

Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2016 and 2015 (unaudited)

    7  
         

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 (unaudited)

    8 - 9  
         

Notes to Condensed Consolidated Financial Statements – (unaudited)

    10 - 24  
         

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

    25- 34  
         

Item 3. Quantitative and Qualitative Disclosures About Market Risk

    34  
         

Item 4. Controls and Procedures

    34  
         

PART II - OTHER INFORMATION

       

Item 1. Legal Proceedings

    35  
         

Item 1A. Risk Factors

    35  
         

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

    35  
         

Item 3. Defaults Upon Senior Securities

    35  
         

Item 4. Mine Safety Disclosures

    35  
         

Item 5. Other Information

    35  
         

Item 6. Exhibits

    36  
         

SIGNATURES

    37  
         

EXHIBIT INDEX

    38  

 

 
-3-

 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

SBT BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for share and per share amounts)

 

   

3/31/16

   

12/31/15

 
   

(Unaudited)

         
ASSETS                

Cash and due from banks

  $ 6,111     $ 8,933  

Interest-bearing deposits with the Federal Reserve Bank and Federal Home Loan Bank

    5,867       19,795  

Money market mutual funds

    393       13  

Federal funds sold

    200       149  

Cash and cash equivalents

    12,571       28,890  
                 

Certificates of deposit

    1,500       1,250  
                 

Investments in available-for-sale securities

    72,874       71,517  

Federal Home Loan Bank stock, at cost

    2,009       2,047  
                 

Loans held-for-sale

    1,187       2,167  
                 

Loans outstanding

    346,863       326,723  

Less: allowance for loan losses

    3,160       3,028  

Loans, net

    343,703       323,695  
                 

Premises and equipment, net

    1,688       1,420  

Accrued interest receivable

    1,161       1,143  

Bank owned life insurance

    8,940       7,389  

Other assets

    4,831       5,262  

Total other assets

    16,620       15,214  
                 
                 

Total assets

  $ 450,464     $ 444,780  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Deposits:

               

Demand deposits

  $ 123,904     $ 135,580  

Savings and NOW deposits

    204,187       179,775  

Time deposits

    55,121       57,287  

Total deposits

    383,212       372,642  
                 

Securities sold under agreements to repurchase

    1,988       1,915  

Federal Home Loan Bank advances

    26,000       31,500  

Long-term subordinated debt

    7,230       7,230  

Other liabilities

    1,621       1,751  

Total liabilities

    420,051       415,038  

Stockholders' equity:

               

Common stock, no par value; authorized 2,000,000 shares; issued and outstanding 1,361,103 shares and 1,360,689 shares, respectively, at March 31, 2016 and 1,360,591 shares and 1,360,177 shares, respectively, at December 31, 2015

    18,871       18,856  

Retained earnings

    11,305       11,288  

Treasury stock, 414 shares

    (7 )     (7 )

Unearned compensation-restricted stock awards

    (172 )     (206 )

Accumulated other comprehensive income (loss)

    416       (189 )

Total stockholders' equity

    30,413       29,742  

Total liabilities and stockholders' equity

  $ 450,464     $ 444,780  

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 
-4-

 

 

SBT BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except for share and per share amounts)

 

    For the three months ended  
   

3/31/2016

   

3/31/2015

 

Interest and dividend income:

               

Interest and fees on loans

  $ 3,075     $ 2,641  

Investment securities

    390       434  

Interest-bearing deposits

    23       7  

Total interest and dividend income

    3,488       3,082  

Interest expense:

               

Interest on deposits

    159       185  

Interest on securities sold under agreements to repurchase

    1       1  

Interest on long-term subordinated debt

    107       -  

Interest on Federal Home Loan Bank advances

    32       8  

Total interest expense

    299       194  

Net interest and dividend income

    3,189       2,888  
                 

Provision for loan losses

    131       50  
                 

Net interest and dividend income after provision for loan losses

    3,058       2,838  

Noninterest income (loss):

               

Service charges on deposit accounts

    90       104  

Gain on sales of available-for-sale securities, net of writedowns

    47       43  

Mortgage loan servicing activities

    (247 )     (92 )

Gain on sale of mortgages

    241       229  

Investment services fees and commissions

    27       34  

Other service charges and fees

    233       143  

Increase in cash surrender value of life insurance policies

    51       52  

Other income

    17       17  

Total noninterest income

    459       530  

Noninterest expense:

               

Salaries and employee benefits

    1,830       1,580  

Occupancy expense

    370       377  

Equipment expense

    93       102  

Advertising and promotions

    107       105  

Forms and supplies

    39       32  

Professional fees

    84       105  

Directors’ fees

    53       51  

Correspondent charges

    72       29  

FDIC assessment

    62       78  

Data processing

    213       144  

Internet banking costs

    53       53  

Other expenses

    342       313  

Total noninterest expense

    3,318       2,969  

Income before income taxes

    199       399  

Income tax (benefit) provision

    (7 )     56  

Net income

  $ 206     $ 343  

Net income available to common stockholders

  $ 206     $ 317  

Weighted average shares outstanding, basic

    1,348,572       887,891  

Earnings per common share, basic

  $ 0.15     $ 0.36  

Weighted average shares outstanding, assuming dilution

    1,350,507       888,988  

Earnings per common share, assuming dilution

  $ 0.15     $ 0.36  
                 

Dividends declared per common share

  $ 0.14     $ 0.14  

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 
-5-

 

 

SBT BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 (Unaudited)

(Dollars in thousands)

 

   

Three Months Ended

March 31,

 
   

2016

   

2015

 
                 

Net income

  $ 206     $ 343  

Other comprehensive income, net of tax:

               

Net change in unrealized holding gain/loss on securities available-for-sale

    966       568  

Reclassification adjustment for realized gains in net income

    (47 )     (43 )

Other comprehensive income, before tax

    919       525  

Income tax expense

    (314 )     (177 )

Other comprehensive income, net of tax

    605       348  

Comprehensive income

  $ 811     $ 691  

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 
-6-

 

 

 SBT BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY                                     

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015 

(Unaudited)

 (Dollars in thousands)

 

   

Preferred Stock

   

Common

   

Retained

   

Treasury

   

 

Unearned

Compensation-

Restricted

   

 

Accumulated

Other

Comprehensive

         
   

Series C

   

Stock

   

Earnings

   

Stock

   

Stock Awards

   

Income (Loss)

   

Total

 

Balance, December 31, 2014

  $ 8,988     $ 10,127     $ 10,549     $ (7 )   $ (207 )   $ 22     $ 29,472  

Net income

    -       -       343       -       -       -       343  

Other comprehensive income, net of tax

    -       -       -       -       -       348       348  

Preferred stock dividends

    -       -       (23 )     -       -       -       (23 )

Preferred stock amortization (accretion)

    3       -       (3 )     -       -       -       -  

Stock-based compensation

    -       -       -       -       9       -       9  

Restricted stock awards

    -       177       -       -       (177 )     -       -  

Common stock issued

    -       9       -       -       -       -       9  

Dividends declared on common stock ($.14 per share)

    -       -       (125 )     -       -       -       (125 )

Balance March 31, 2015

  $ 8,991     $ 10,313     $ 10,741     $ (7 )   $ (375 )   $ 370     $ 30,033  
                                                         

Balance, December 31, 2015

  $ -     $ 18,856     $ 11,288     $ (7 )   $ (206 )   $ (189 )   $ 29,742  

Net income

    -       -       206       -       -       -       206  

Other comprehensive income, net of tax

    -       -       -       -       -       605       605  

Stock-based compensation

    -       5       -       -       34       -       39  

Common stock issued

    -       10       -       -       -       -       10  

Dividends declared on common stock ($.14 per share)

    -       -       (189 )     -       -       -       (189 )

Balance, March 31, 2016

  $ -     $ 18,871     $ 11,305     $ (7 )   $ (172 )   $ 416     $ 30,413  

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 
-7-

 

 

SBT BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

 

    For the three months ended  
   

3/31/2016

   

3/31/2015

 

Cash flows from operating activities:

               

Net income

  $ 206     $ 343  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Amortization of securities, net

    88       99  

Amortization of mortgage servicing rights

    166       150  

Gain on sales of available-for-sale securities

    (47 )     (43 )

Change in deferred origination costs, net

    (254 )     25  

Provision for loan losses

    131       50  

Loans originated for sale

    (13,297 )     (15,004 )

Proceeds from sales of loans originated for sale

    14,518       16,076  

Gain on sales of loans

    (241 )     (229 )

Gain on sale of other real estate owned

    -       (9 )

Depreciation and amortization

    78       111  

Accretion on impairment of operating lease

    -       (11 )

Amortization of long-term subordinated debt issuance costs

    7       -  

Increase in other assets

    (75 )     (56 )

(Increase) decrease in interest receivable

    (18 )     91  

Decrease in taxes receivable

    26       54  

Increase in cash surrender value of bank owned life insurance

    (51 )     (52 )

Stock-based compensation

    39       9  

Decrease in other liabilities

    (71 )     (218 )

(Decrease) increase in interest payable

    (59 )     16  
                 

Net cash provided by operating activities

    1,146       1,402  
                 

Cash flows from investing activities:

               

Purchases of certificates of deposit

    (250 )     -  

Purchases of available-for-sale securities

    (3,827 )     -  

Proceeds from maturities of available-for-sale securities

    2,783       2,354  

Proceeds from sales of available-for-sale securities

    565       588  

Purchases of Federal Home Loan Bank stock

    (418 )     (80 )

Redemption of Federal Home Loan Bank stock

    456       -  

Loan originations and principal collections, net

    (11,892 )     (4,045 )

Loans purchased

    (7,994 )     (2,103 )

Recoveries of loans previously charged off

    1       1  

Proceeds from sale of other real estate owned

    -       114  

Purchase of bank owned life insurance

    (1,500 )     -  

Capital expenditures

    (346 )     (64 )
                 

Net cash used in investing activities

    (22,422 )     (3,235 )

 

 

 
-8-

 

 

SBT BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

(continued)

 

    For the three months ended  
   

3/31/2016

   

3/31/2015

 
                 

Cash flows from financing activities:

               

Net increase in demand deposits, NOW and savings accounts

    12,736       6,269  

Decrease in time deposits

    (2,166 )     (1,772 )

Net increase (decrease) in securities sold under agreements to repurchase

    73       (843 )

Net change in short-term Federal Home Loan Bank advances

    (5,500 )     (7,000 )

Proceeds from issuance of common stock

    10       9  

Increase in subordinated debt issuance fees

    (7 )     -  

Dividends paid - preferred stock

    -       (23 )

Dividends paid - common stock

    (189 )     (125 )
                 

Net cash provided by (used in) financing activities

    4,957       (3,485 )
                 

Net decrease in cash and cash equivalents

    (16,319 )     (5,318 )

Cash and cash equivalents at beginning of period

    28,890       19,820  

Cash and cash equivalents at end of period

  $ 12,571     $ 14,502  
                 

Supplemental disclosures:

               

Interest paid

  $ 358     $ 178  

Income taxes received

    33       -  

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 
-9-

 

 

 SBT BANCORP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

(Dollars in thousands)

 

NOTE 1 – BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and the instructions to Form 10-Q and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all necessary adjustments, consisting of only normal recurring accruals, to present fairly the financial position, results of operations, cash flows and changes in stockholders’ equity of SBT Bancorp, Inc. (the “Company”) for the periods presented. The Company’s only business is its investment in The Simsbury Bank & Trust Company, Inc. (the “Bank”), which is a community-oriented financial institution providing a variety of banking and investment services. In preparing the interim financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated balance sheets and revenues and expenses for the periods presented. Actual results could differ significantly from those estimates. The interim results of operations are not necessarily indicative of the results to be expected for the full year ending December 31, 2016. Material estimates that are particularly susceptible to significant change in the near-term include the determination of the allowance for loan losses, valuation and potential other-than-temporary impairment (“OTTI”) of available-for-sale securities and the valuation of deferred tax assets.

 

While management believes that the disclosures presented are adequate so as to not make the information misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes included in the Company’s Form 10-K for the year ended December 31, 2015.

 

NOTE 2 – STOCK-BASED COMPENSATION

 

At March 31, 2016, the Company maintained a stock-based employee compensation plan. The Company recognizes the cost resulting from all share-based payment transactions in the consolidated financial statements and establishes fair value as the measurement objective in accounting for share-based payment arrangements. During the three months ended March 31, 2016, the Company recognized $39 thousand in stock-based employee compensation expense. During the three months ended March 31, 2015, the Company recognized $9 thousand in stock-based employee compensation expense.

 

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

 

In April 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by the amendments in this ASU. The standard is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The guidance should be applied on a retrospective basis. The Company adopted this ASU for the year ended December 31, 2015 in relation to its debt issuance costs.

 

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU will require entities to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. It will also require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, thus eliminating eligibility for the current available-for-sale category. The ASU will take effect for public companies for fiscal years beginning after December 15, 2017. The Company is currently reviewing this ASU to determine if it will have an impact on its consolidated financial statements.

 

 
-10-

 

 

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842).” ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new guidance will be effective for public entities for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption of ASU 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently reviewing this ASU to determine the impact on its consolidated financial statements.

 

In March 2016, the FASB issued ASU 2016-09, “ Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting.” The ASU simplifies several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The new guidance will be effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently reviewing this ASU to determine if it will have an impact on its consolidated financial statements.

 

In April 2016, the FASB voted to proceed with the proposed standard on accounting for credit losses. The standard would replace multiple existing impairment models, including replacing an “incurred loss” model for loans with an “expected loss” model. The FASB has recently announced that the standard will be effective for public compies that are Securities and Exchange Commission (“SEC”) filers, such as the Company, for fiscal years beginning after December 15, 2019(and interim periods within those fiscal years), and final guidance is expected to be issued in the second quarter of 2016. The final standard may have a material impact on the Company’s retained earnings in the period of adoption.


NOTE 4 – FAIR VALUE MEASUREMENTS

 

Accounting Standards Codification (ASC) 820-10, “Fair Value Measurement - Overall,” provides a framework for measuring fair value under generally accepted accounting principles.

 

In accordance with ASC 820-10, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

 

Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury, other U.S. Government and agency mortgage-backed securities that are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

 

Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.

 

Level 3 - Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, are not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.

 

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company did not have any significant transfers of assets between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2016.

 

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value for March 31, 2016 and December 31, 2015.

 

The Company’s investments in obligations of states and municipalities, mortgage-backed securities and other debt securities available-for-sale are generally classified within Level 2 of the fair value hierarchy. For these securities, we obtain fair value measurements from independent pricing services. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information, and the instrument’s terms and conditions.

 

 
-11-

 

 

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalization and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows.

 

The Company’s impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 2 inputs based upon appraisals of similar properties obtained from a third party. For Level 3 inputs, fair values are based on management estimates.

 

Other real estate owned values are estimated using Level 2 inputs based upon appraisals of similar properties obtained from a third party. For Level 3 inputs, fair values are based on management estimates.

 

The following summarizes assets measured at fair value at March 31, 2016 and December 31, 2015.

 

 

Assets Measured at Fair Value on a Recurring Basis

 

           

Fair Value Measurements at Reporting Date Using:

 
           

Quoted Prices in

   

Significant

   

Significant

 
           

Active Markets for

   

Other Observable

   

Unobservable

 
           

Identical Assets

   

Inputs

   

Inputs

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 
   

(In Thousands)

 

March 31, 2016:

                               

Debt securities issued by U.S. government corporations and agencies

  $ 10,553     $ -     $ 10,553     $ -  

Obligations of states and municipalities

    15,339       -       15,339       -  

Mortgage-backed securities

    45,884       -       45,884       -  

SBA loan pools

    1,098       -       1,098       -  
    $ 72,874     $ -     $ 72,874     $ -  
                                 

December 31, 2015:

                               

Debt securities issued by U.S. government corporations and agencies

  $ 10,463     $ -     $ 10,463     $ -  

Obligations of states and municipalities

    14,669       -       14,669       -  

Mortgage-backed securities

    45,281       -       45,281       -  

SBA loan pools

    1,104       -       1,104       -  

Totals

  $ 71,517     $ -     $ 71,517     $ -  

 

 
-12-

 

 

Assets Measured at Fair Value on a Nonrecurring Basis

 

            Fair Value Measurements at Reporting Date Using:  
           

Quoted Prices in

   

Significant

   

Significant

 
           

Active Markets for

   

Other Observable

   

Unobservable

 
           

Identical Assets

   

Inputs

   

Inputs

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 
   

(In Thousands)

 

March 31, 2016:

                               

Impaired loans

  $ 240     $ -     $ -     $ 240  
    $ 240     $ -     $ -     $ 240  

 

 

            Fair Value Measurements at Reporting Date Using:  
           

Quoted Prices in

   

Significant

   

Significant

 
           

Active Markets for

   

Other Observable

   

Unobservable

 
           

Identical Assets

   

Inputs

   

Inputs

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 
   

(In Thousands)

 

December 31, 2015:

                               

Impaired loans

  $ 240     $ -     $ -     $ 240  
    $ 240     $ -     $ -     $ 240  

 

 

 

The estimated fair values of the Company’s financial instruments, all of which are held or issued for purposes other than trading, were as follows as of March 31, 2016 and December 31, 2015:

 

   

March 31, 2016

 
   

Carrying

   

Fair Value

 
   

Amount

   

Level 1

   

Level 2

   

Level 3

   

Total

 
   

(In Thousands)

 

Financial assets:

                                       

Cash and cash equivalents

  $ 12,571     $ 12,571     $ -     $ -     $ 12,571  

Certificates of deposit

    1,500       1,500       -       -       1,500  

Available-for-sale securities

    72,874       -       72,874       -       72,874  

Federal Home Loan Bank stock

    2,009       2,009       -       -       2,009  

Loans held-for-sale

    1,187        -        -       1,205       1,205  

Loans, net

    343,703       -       -       345,387       345,387  

Accrued interest receivable

    1,161       1,161       -       -       1,161  

Bank owned life insurance

    8,940       -       8,940       -       8,940  
                                         

Financial liabilities:

                                       

Deposits

    383,212       -       379,453       -       379,453  

Securities sold under agreements to repurchase

    1,988       -       1,988       -       1,988  

Federal Home Loan Bank advances

    26,000       -       26,000       -       26,000  

Long-term subordinated debt

    7,230       -       7,557       -       7,557  

 

 
-13-

 

 

   

December 31, 2015

 
   

Carrying

   

Fair Value

 
   

Amount

   

Level 1

   

Level 2

   

Level 3

   

Total

 
   

(In Thousands)

 

Financial assets:

                                       

Cash and cash equivalents

  $ 28,890     $ 28,890     $ -     $ -     $ 28,890  

Certificates of deposit

    1,250       1,250       -       -       1,250  

Available-for-sale securities

    71,517       -       71,517       -       71,517  

Federal Home Loan Bank stock

    2,047       2,047       -       -       2,047  

Loans held-for-sale

    2,167       -       -       2,187       2,187  

Loans, net

    323,695       -       -       322,596       322,596  

Accrued interest receivable

    1,143       1,143       -       -       1,143  

Bank owned life insurance

    7,389       -       7,389       -       7,389  
                                         

Financial liabilities:

                                       

Deposits

    372,642       -       363,752       -       363,752  

Securities sold under agreements to repurchase

    1,915       -       1,915       -       1,915  

Federal Home Loan Bank advances

    31,500       -       31,500       -       31,500  

Long-term subordinated debt

    7,230       -       7,339       -       7,339  

 

 

NOTE 5 – EARNINGS PER COMMON SHARE

 

Basic earnings per common share (“EPS”) excludes dilution and 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 entity.

 

The following information was used in the computation of EPS on both a basic and diluted basis for the three months ended March 31, 2016 and 2015:

 

    For the three months ended  
   

3/31/16

   

3/31/15

 
   

(In Thousands, Except Share and Per Share Data)

 

Basic earnings per share computation:

               

Net income

  $ 206     $ 343  

Preferred stock net accretion

    -       (3 )

Cumulative preferred stock dividends

    -       (23 )

Net income available to common stockholders

  $ 206     $ 317  
                 

Weighted average shares outstanding, basic

    1,348,572       887,891  
                 

Basic earnings per share

  $ 0.15     $ 0.36  
                 

Diluted earnings per share computation:

               

Net income

  $ 206     $ 343  

Preferred stock net accretion

    -       (3 )

Cumulative preferred stock dividends

    -       (23 )

Net income available to common stockholders

  $ 206     $ 317  
                 

Weighted average shares outstanding, before dilution

    1,348,572       887,891  

Dilutive potential shares

    1,935       1,097  

Weighted average shares outstanding, assuming dilution

    1,350,507       888,988  
                 

Diluted earnings per share

  $ 0.15     $ 0.36  

 

 
-14-

 

 

NOTE 6 – INVESTMENT SECURITIES

 

The following tables summarize the amounts and distribution of the Company’s investment securities held as of March 31, 2016 and December 31, 2015:

 

   

INVESTMENT PORTFOLIO

 
   

(In Thousands)

 
                                         
   

March 31, 2016

 
   

Amortized

Cost

   

Unrealized

Gains

   

Unrealized

Losses

   

Fair

Value

   

Yield

 
                                         

AVAILABLE-FOR-SALE SECURITIES

                                       

Debt securities issued by U.S. government corporations and agencies

                                       

Due after one to five years

  $ 10,495     $ 58     $ -     $ 10,553       1.30

%

Total U.S. government corporations and agencies

    10,495       58       -       10,553       1.30

%

Obligations of states and municipalities

                                       

Due after one to five years

    1,657       8       -       1,665       3.50

%

Due after five to ten years

    4,846       204       9       5,041       2.91

%

Due after ten to fifteen years

    6,227       217       -       6,444       2.70

%

Due beyond fifteen years

    2,116       73       -       2,189       3.13

%

Total obligations of states and municipalities

    14,846       502       9       15,339       2.92

%

Mortgage-backed securities

                                       

Due after one to five years

    657       13       -       670       2.52

%

Due after five to ten years

    2,460       36       2       2,494       2.04

%

Due after ten to fifteen years

    25,208       90       38       25,260       1.81

%

Due beyond fifteen years

    17,504       64       108       17,460       2.28

%

Total mortgage-backed securities

    45,829       203       148       45,884       2.01

%

SBA loan pool

                                       

Due after five to ten years

    1,072       26       -       1,098       3.17

%

Total SBA loan pool

    1,072       26       -       1,098       3.17

%

                                         

Total available-for-sale securities

  $ 72,242     $ 789     $ 157     $ 72,874       2.33

%

 

 

 

   

INVESTMENT PORTFOLIO

 
   

(In Thousands)

 
                                         
   

December 31,2015

 
   

Amortized

Cost

   

Unrealized

Gains

   

Unrealized

Losses

   

Fair

Value

   

Yield

 
                                         

AVAILABLE-FOR-SALE SECURITIES

                                     

Debt securities issued by U.S. government corporations and agencies

                                       

Due after one to five years

  $ 10,499     $ 6     $ 42     $ 10,463       1.33

%

Total U.S. government corporations and agencies

    10,499       6       42       10,463       1.33

%

Obligations of states and municipalities

                                       

Due within one year

    375       4       -       379       3.95

%

Due after one to five years

    7,780       305       20       8,065       2.70

%

Due after five to ten years

    4,580       121       8       4,693       3.08

%

Due after ten to fifteen years

    1,025       9       8       1,026       2.51

%

Due beyond fifteen years

    498       8       -       506       3.25

%

Total obligations of states and municipalities

    14,258       447       36       14,669       2.86

%

Mortgage-backed securities

                                       

Due after one to five years

    733       12       -       745       2.43

%

Due after five to ten years

    1,997       19       7       2,009       2.13

%

Due after ten to fifteen years

    25,144       16       393       24,767       1.80

%

Due beyond fifteen years

    18,084       18       342       17,760       2.20

%

Total mortgage-backed securities

    45,958       65       742       45,281       1.98

%

SBA loan pools

                                       

Due after five to ten years

    1,089       23       8       1,104       3.19

%

Total SBA loan pools

    1,089       23       8       1,104       3.19

%

                                         

Total available-for-sale securities

  $ 71,804     $ 541     $ 828     $ 71,517       2.36

%

 

 
-15-

 

 

The aggregate fair value and unrealized losses of securities that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more, and are not other than temporarily impaired, were as follows:

 

 

   

Less than 12 Months

   

12 Months or Longer

   

Total

 
   

Fair

   

Unrealized

   

Fair

   

Unrealized

   

Fair

   

Unrealized

 
   

Value

   

Losses

   

Value

   

Losses

   

Value

   

Losses

 
   

(In Thousands)

 

March 31, 2016:

                                               

Debt securities issued by U.S. government corporations and agencies

  $ 500     $ -     $ 500     $ -     $ 1,000     $ -  

Obligations of states and municipalities

    491       9       -       -       491       9  

Mortgage-backed securities

    7,113       9       11,908       111       19,021       120  

Total temporarily impaired securities

    8,104       18       12,408       111       20,512       129  
                                                 
                                                 

Other-than-temporarily impaired securities:

                                               

Mortgage-backed securities

    12       -