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EX-32.1 - EX-32.1 - LAKE SHORE BANCORP, INC.lsbk-20160630xex32_1.htm
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EX-31.2 - EX-31.2 - LAKE SHORE BANCORP, INC.lsbk-20160630xex31_2.htm
EX-31.1 - EX-31.1 - LAKE SHORE BANCORP, INC.lsbk-20160630xex31_1.htm







United States

Securities and Exchange Commission

Washington, D.C. 20549



FORM 10-Q



(Mark One)

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

For the quarterly period ended June 30, 2016



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

Commission File No.:  000-51821





 

 

LAKE SHORE BANCORP, INC.

(Exact name of registrant as specified in its charter)



 

 

United States

 

20-4729288

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)



 

 

31 East Fourth Street, Dunkirk, New York

 

14048

(Address of principal executive offices)

 

(Zip code)



 

 



(716) 366-4070

 

(Registrant’s telephone number, including area code)



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,  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  [ ]

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





 

Large accelerated filer

Accelerated filer

Non-accelerated filer (Do not check if a smaller reporting company)

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 practical date:



There were 6,070,421 shares of the registrant’s common stock, $0.01 par value per share, outstanding at August 9, 2016.









 

 

 

 


 



 

TABLE OF CONTENTS

 



 

 

 

ITEM

 

PART I

PAGE



 

 

 

1

FINANCIAL STATEMENTS

 



-

Consolidated Statements of Financial Condition as of June 30, 2016 and December 31, 2015 (Unaudited)

1



-

Consolidated Statements of Income for the Three and Six Months ended June 30, 2016 and 2015 (Unaudited)

2



-

Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months ended June 30, 2016 and 2015 (Unaudited)

3



-

Consolidated Statements of Stockholders’ Equity for the Six Months ended June 30, 2016 and  2015 (Unaudited)

4



-

Consolidated Statements of Cash Flows for the Six Months ended June 30, 2016 and  2015 (Unaudited)

5



-

Notes to Unaudited Consolidated Financial Statements

6

2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

30

3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

47

4

CONTROLS AND PROCEDURES

47



 

 

 



 

PART II

 



 

 

 

1A

RISK FACTORS

48

2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

48

6

EXHIBITS 

48

SIGNATURES

 

 

49



 

 





 

 


 

PART I

Item 1. Financial Statements

Lake Shore Bancorp, Inc. and Subsidiary











 

 

 

 

 

 

Consolidated Statements of Financial Condition

 

 

 

 

 

 



 

 

 

 

 

 



 

June 30,

 

December 31,



 

2016

 

2015



 

(Unaudited)



 

(Dollars in thousands, except share data)



 

 

 

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

8,663 

 

$

7,296 

Interest earning deposits

 

 

18,090 

 

 

12,714 

Federal funds sold

 

 

14,445 

 

 

14,217 

Cash and Cash Equivalents

 

 

41,198 

 

 

34,227 

Securities available for sale

 

 

95,021 

 

 

113,213 

Federal Home Loan Bank stock, at cost

 

 

1,340 

 

 

1,454 

Loans receivable, net of allowance for loan losses 2016 $2,060; 2015 $1,985

 

 

315,218 

 

 

297,101 

Premises and equipment, net

 

 

8,865 

 

 

9,144 

Accrued interest receivable

 

 

1,563 

 

 

1,648 

Bank owned life insurance

 

 

15,075 

 

 

14,938 

Other assets

 

 

1,700 

 

 

1,660 

Total Assets

 

$

479,980 

 

$

473,385 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

              Interest bearing

 

$

322,581 

 

$

323,931 

              Non-interest bearing

 

 

52,263 

 

 

45,224 

Total Deposits

 

 

374,844 

 

 

369,155 

Long-term debt

 

 

18,950 

 

 

21,150 

Advances from borrowers for taxes and insurance

 

 

3,162 

 

 

3,285 

Other liabilities

 

 

5,979 

 

 

5,919 

Total Liabilities

 

$

402,935 

 

$

399,509 

Commitments and Contingencies

 

 

-  

 

 

-  

Stockholders' Equity

 

 

 

 

 

 

Common stock, $0.01 par value per share, 25,000,000 shares authorized; 6,794,079 shares issued and 6,070,421 shares outstanding at June 30, 2016 and 6,727,428 shares issued and 6,003,416 shares outstanding at December 31, 2015

 

$

68 

 

$

67 

Additional paid-in capital

 

 

30,131 

 

 

29,359 

Treasury stock, at cost (723,658 shares at June 30, 2016 and 724,012 shares at December 31, 2015)

 

 

(7,100)

 

 

(7,026)

Unearned shares held by ESOP

 

 

(1,663)

 

 

(1,706)

Unearned shares held by compensation plans

 

 

(659)

 

 

(580)

Retained earnings

 

 

53,224 

 

 

50,919 

Accumulated other comprehensive income

 

 

3,044 

 

 

2,843 

Total Stockholders' Equity

 

 

77,045 

 

 

73,876 

Total Liabilities and Stockholders' Equity

 

$

479,980 

 

$

473,385 



 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 



 









1


 

Lake Shore Bancorp, Inc. and Subsidiary



 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Income

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended June 30,

 

Six Months Ended June 30,



 

2016

 

 

2015

 

2016

 

2015



 

(Unaudited)



 

(Dollars in thousands, except per share data)

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

   Loans, including fees

 

$

3,602 

 

$

3,424 

 

$

7,116 

 

$

6,794 

   Investment securities, taxable

 

 

259 

 

 

449 

 

 

642 

 

 

942 

   Investment securities, tax-exempt

 

 

451 

 

 

530 

 

 

902 

 

 

1,060 

   Other

 

 

35 

 

 

 

 

51 

 

 

11 

         Total Interest Income

 

 

4,347 

 

 

4,408 

 

 

8,711 

 

 

8,807 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

   Deposits

 

 

456 

 

 

593 

 

 

924 

 

 

1,256 

   Long-term debt

 

 

91 

 

 

98 

 

 

187 

 

 

197 

   Other

 

 

23 

 

 

25 

 

 

46 

 

 

49 

         Total Interest Expense

 

 

570 

 

 

716 

 

 

1,157 

 

 

1,502 

         Net Interest Income

 

 

3,777 

 

 

3,692 

 

 

7,554 

 

 

7,305 

Provision for Loan Losses

 

 

55 

 

 

185 

 

 

185 

 

 

210 

         Net Interest Income after Provision for Loan Losses

 

 

3,722 

 

 

3,507 

 

 

7,369 

 

 

7,095 

Non-Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

   Service charges and fees

 

 

431 

 

 

399 

 

 

865 

 

 

778 

   Earnings on bank owned life insurance

 

 

70 

 

 

69 

 

 

137 

 

 

136 

   Recovery on previously impaired investment securities

 

 

33 

 

 

43 

 

 

68 

 

 

75 

   Gain on sale of securities available for sale

 

 

-  

 

 

-  

 

 

1,636 

 

 

-  

   Net gain on sale of loans

 

 

46 

 

 

21 

 

 

61 

 

 

45 

   Other

 

 

23 

 

 

15 

 

 

46 

 

 

47 

         Total Non-Interest Income

 

 

603 

 

 

547 

 

 

2,813 

 

 

1,081 

Non-Interest Expenses

 

 

 

 

 

 

 

 

 

 

 

 

   Salaries and employee benefits

 

 

1,795 

 

 

1,684 

 

 

3,585 

 

 

3,487 

   Occupancy and equipment

 

 

577 

 

 

565 

 

 

1,158 

 

 

1,136 

   Data processing

 

 

261 

 

 

252 

 

 

526 

 

 

502 

   Professional services

 

 

257 

 

 

258 

 

 

527 

 

 

503 

   Advertising

 

 

189 

 

 

103 

 

 

302 

 

 

209 

   FDIC Insurance

 

 

59 

 

 

73 

 

 

124 

 

 

144 

   Postage and supplies

 

 

56 

 

 

68 

 

 

110 

 

 

127 

   Other

 

 

297 

 

 

259 

 

 

561 

 

 

461 

         Total Non-Interest Expenses

 

 

3,491 

 

 

3,262 

 

 

6,893 

 

 

6,569 

         Income before Income Taxes

 

 

834 

 

 

792 

 

 

3,289 

 

 

1,607 

Income Tax Expense

 

 

170 

 

 

93 

 

 

671 

 

 

339 

         Net Income

 

$

664 

 

$

699 

 

$

2,618 

 

$

1,268 

Basic earnings per common share

 

$

0.11 

 

$

0.12 

 

$

0.44 

 

$

0.22 

Diluted earnings per common share

 

$

0.11 

 

$

0.12 

 

$

0.44 

 

$

0.21 

Dividends declared per share

 

$

0.07 

 

$

0.07 

 

$

0.14 

 

$

0.14 



 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 











2


 

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income/(Loss)









 

 

 

 

 

 

 



 

 

Three Months Ended June 30,



 

 

2016

 

2015



 

 

(Unaudited)



 

 

(Dollars in thousands)



 

 

 

 

 

 

 

Net Income

 

 

$

664 

 

$

699 



 

 

 

 

 

 

 

Other Comprehensive Income (Loss), net of tax (expense) benefit

 

 

 

 

 

 

 

Unrealized holding gains (losses) on securities available for sale, net of tax (expense) benefit

 

 

 

351 

 

 

(1,025)



 

 

 

 

 

 

 

Reclassification adjustments related to:

 

 

 

 

 

 

 

Recovery on  previously impaired investment securities included in net income, net of tax expense

 

 

 

(22)

 

 

(29)

Total Other Comprehensive Income (Loss)

 

 

 

329 

 

 

(1,054)



 

 

 

 

 

 

 

Total Comprehensive Income (Loss)

 

 

$

993 

 

$

(355)



 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

Six Months Ended June 30,



 

 

2016

 

2015



 

 

(Unaudited)



 

 

(Dollars in thousands)



 

 

 

 

 

 

 

Net Income

 

 

$

2,618 

 

$

1,268 



 

 

 

 

 

 

 

Other Comprehensive Income (Loss), net of tax (expense) benefit:

 

 

 

 

 

 

 

Unrealized holding gains (losses) on securities available for sale, net of tax (expense) benefit

 

 

 

1,326 

 

 

(452)



 

 

 

 

 

 

 

Reclassification adjustments related to:

 

 

 

 

 

 

 

Recovery on  previously impaired investment securities included in net income, net of tax expense

 

 

 

(45)

 

 

(50)

Gains on sale of securities included in net income, net of tax expense

 

 

 

(1,080)

 

 

-  

Total Other Comprehensive Income (Loss)

 

 

 

201 

 

 

(502)



 

 

 

 

 

 

 

Total Comprehensive Income

 

 

$

2,819 

 

$

766 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 





3


 

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2016 and 2015 (Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Unearned

 

Unearned Shares

 

 

 

 

Accumulated

 

 

 



 

 

 

 

Additional

 

 

 

 

Shares

 

Held by

 

 

 

 

Other

 

 

 



 

Common

 

Paid-In

 

Treasury

 

Held by

 

Compensation

 

Retained

 

Comprehensive

 

 

 



 

Stock

 

Capital

 

Stock

 

ESOP

 

Plans

 

Earnings

 

Income

 

Total



 

(Dollars in thousands, except share and per share data)

Balance - January 1, 2015

 

$

67 

 

$

28,684 

 

$

(6,420)

 

$

(1,791)

 

$

(622)

 

$

48,192 

 

$

3,520 

 

$

71,630 

Net income

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

1,268 

 

 

-  

 

 

1,268 

Other comprehensive loss, net of tax benefit of $666

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

(502)

 

 

(502)

Stock options exercised (11,775 shares)

 

 

-  

 

 

136 

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

136 

ESOP shares earned (3,968 shares)

 

 

-  

 

 

11 

 

 

-  

 

 

43 

 

 

-  

 

 

-  

 

 

-  

 

 

54 

Stock based compensation

 

 

-  

 

 

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

Compensation plan shares granted (15,455 shares)

 

 

-  

 

 

-  

 

 

145 

 

 

-  

 

 

(145)

 

 

-  

 

 

-  

 

 

-  

Compensation plan shares earned (8,443 shares)

 

 

-  

 

 

16 

 

 

-  

 

 

-  

 

 

91 

 

 

-  

 

 

-  

 

 

107 

Purchase of treasury stock, at cost (39,900 shares)

 

 

-  

 

 

-  

 

 

(541)

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

(541)

Cash dividends declared ($0.14 per share)

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

(307)

 

 

-  

 

 

(307)

Balance - June 30, 2015

 

$

67 

 

$

28,848 

 

$

(6,816)

 

$

(1,748)

 

$

(676)

 

$

49,153 

 

$

3,018 

 

$

71,846 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - January 1, 2016

 

$

67 

 

$

29,359 

 

$

(7,026)

 

$

(1,706)

 

$

(580)

 

$

50,919 

 

$

2,843 

 

$

73,876 

Net income

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

2,618 

 

 

-  

 

 

2,618 

Other comprehensive income, net of tax expense of $104

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

201 

 

 

201 

Stock options exercised (66,651 shares)

 

 

 

 

736 

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

737 

ESOP shares earned (3,968 shares)

 

 

-  

 

 

10 

 

 

-  

 

 

43 

 

 

-  

 

 

-  

 

 

-  

 

 

53 

Compensation plan shares granted (20,354 shares)

 

 

-  

 

 

-  

 

 

197 

 

 

-  

 

 

(197)

 

 

-  

 

 

-  

 

 

-  

Compensation plan shares earned (11,320 shares)

 

 

-  

 

 

26 

 

 

-  

 

 

-  

 

 

118 

 

 

-  

 

 

-  

 

 

144 

Purchase of treasury stock, at cost (20,000 shares)

 

 

-  

 

 

-  

 

 

(271)

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

(271)

Cash dividends declared ($0.14 per share)

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

(313)

 

 

-  

 

 

(313)

Balance - June 30, 2016

 

$

68 

 

$

30,131 

 

$

(7,100)

 

$

(1,663)

 

$

(659)

 

$

53,224 

 

$

3,044 

 

$

77,045 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 















4


 

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows



 

 

 

 

 

 



 

Six Months Ended June 30,



 

2016

 

2015



 

(Unaudited)



 

(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

2,618 

 

$

1,268 

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

 

 

 

 

 

 

Net amortization of investment securities

 

 

94 

 

 

162 

Net amortization of deferred loan costs

 

 

259 

 

 

244 

Provision for loan losses

 

 

185 

 

 

210 

Recovery on previously impaired investment securities

 

 

(68)

 

 

(75)

Gain on sale of investment securities

 

 

(1,636)

 

 

-  

Originations of loans held for sale

 

 

(2,996)

 

 

(3,277)

Proceeds from sales of loans held for sale

 

 

3,057 

 

 

3,322 

Gain on sale of loans

 

 

(61)

 

 

(45)

Depreciation and amortization

 

 

430 

 

 

415 

Increase in bank owned life insurance, net

 

 

(137)

 

 

(136)

ESOP shares committed to be released

 

 

53 

 

 

54 

Stock based compensation expense

 

 

144 

 

 

108 

Decrease in accrued interest receivable

 

 

85 

 

 

15 

Decrease in other assets

 

 

53 

 

 

473 

Decrease in other liabilities

 

 

(44)

 

 

(204)

Net Cash Provided by Operating Activities

 

 

2,036 

 

 

2,534 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Activity in available for sale securities:

 

 

 

 

 

 

Sales

 

 

14,406 

 

 

-  

Maturities, prepayments and calls

 

 

5,701 

 

 

7,753 

Purchases of Federal Home Loan Bank Stock

 

 

(3)

 

 

(29)

Redemptions of Federal Home Loan Bank Stock

 

 

117 

 

 

49 

Loan origination and principal collections, net

 

 

(18,654)

 

 

(12,188)

Additions to premises and equipment

 

 

(151)

 

 

(147)

Net Cash Provided by (Used in) Investing Activities

 

 

1,416 

 

 

(4,562)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Net increase (decrease) in deposits

 

 

5,689 

 

 

(5,094)

Net decrease in advances from borrowers for taxes and insurance

 

 

(123)

 

 

(131)

Proceeds from issuance of long-term debt

 

 

-  

 

 

3,250 

Repayment of long-term debt

 

 

(2,200)

 

 

(3,250)

Proceeds from stock options exercised

 

 

737 

 

 

136 

Purchase of treasury stock

 

 

(271)

 

 

(541)

Cash dividends paid

 

 

(313)

 

 

(307)

Net Cash Provided by (Used in) Financing Activities

 

 

3,519 

 

 

(5,937)

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

6,971 

 

 

(7,965)

CASH AND CASH EQUIVALENTS - BEGINNING

 

 

34,227 

 

 

35,811 

CASH AND CASH EQUIVALENTS - ENDING

 

$

41,198 

 

$

27,846 

SUPPLEMENTARY CASH FLOWS INFORMATION

 

 

 

 

 

 

Interest paid

 

$

1,164 

 

$

1,501 

Income taxes paid

 

$

580 

 

$

370 



 

 

 

 

 

 

SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING ACTIVITIES

 

 

 

 

 

 

Foreclosed real estate acquired in settlement of loans

 

$

97 

 

$

45 



 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

5


 



Lake Shore Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)



Note 1 – Basis of Presentation



The interim consolidated financial statements include the accounts of Lake Shore Bancorp, Inc. (the “Company”, “us”, “our”, or “we”) and Lake Shore Savings Bank (the “Bank”), its wholly owned subsidiary.  All intercompany accounts and transactions of the consolidated subsidiary have been eliminated in consolidation.



The interim consolidated financial statements included herein as of June 30, 2016 and for the three and six months ended June 30, 2016 and 2015 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and therefore, do not include all information or footnotes necessary for a complete presentation of the consolidated statements of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”).  The consolidated statement of financial condition at December 31, 2015 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements.  The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information and to make the financial statements not misleading.  These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.  The consolidated statements of income for the three and six months ended June 30, 2016 are not necessarily indicative of the results for any subsequent period or the entire year ending December 31, 2016.



To prepare these consolidated financial statements in conformity with GAAP, management of the Company made a number of estimates and assumptions relating to the reporting of assets and liabilities and the reporting of revenue and expenses.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, securities valuation estimates, evaluation of impairment of securities and income taxes.



The Company has evaluated events and transactions occurring subsequent to the statement of financial condition as of June 30, 2016 for items that should potentially be recognized or disclosed in these consolidated financial statements.  The evaluation was conducted through the date these consolidated financial statements were issued.



Note 2 – New Accounting Standards



In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2019 for all public business entities that are U.S. Securities and Exchange Commission (“SEC”) filers. Early application is permitted as of the annual reporting periods beginning after December 15, 2018, including interim periods within those periods. Management is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and results of operations.



6


 

Note 3 – Investment Securities

The amortized cost and fair value of securities are as follows:



 

 

 

 

 

 

 

 

 

 

 

 



 

June 30, 2016



 

 

 

 

Gross

 

Gross

 

 

 



 

Amortized

 

Unrealized

 

Unrealized

 

Fair



 

Cost

 

Gains

 

Losses

 

Value



 

 

(Dollars in thousands)

SECURITIES AVAILABLE FOR SALE:

 

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds

 

$

49,047 

 

$

3,537 

 

$

 -

 

$

52,584 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

Collateralized mortgage obligations-private label

 

 

46 

 

 

 -

 

 

 -

 

 

46 

Collateralized mortgage obligations-government sponsored entities

 

 

34,137 

 

 

311 

 

 

(52)

 

 

34,396 

Government National Mortgage Association

 

 

352 

 

 

35 

 

 

 -

 

 

387 

Federal National Mortgage Association

 

 

3,952 

 

 

244 

 

 

 -

 

 

4,196 

Federal Home Loan Mortgage Corporation

 

 

2,025 

 

 

110 

 

 

 -

 

 

2,135 

Asset-backed securities-private label

 

 

749 

 

 

426 

 

 

(26)

 

 

1,149 

Asset-backed securities-government sponsored entities

 

 

79 

 

 

 

 

 -

 

 

87 

Equity securities

 

 

22 

 

 

19 

 

 

 -

 

 

41 



 

$

90,409 

 

$

4,690 

 

$

(78)

 

$

95,021 







 

 

 

 

 

 

 

 

 

 

 

 



 

December 31, 2015



 

 

 

 

Gross

 

Gross

 

 

 



 

Amortized

 

Unrealized

 

Unrealized

 

Fair



 

Cost

 

Gains

 

Losses

 

Value



 

 

(Dollars in thousands)

SECURITIES AVAILABLE FOR SALE:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury bonds

 

$

12,778 

 

$

1,333 

 

$

 -

 

$

14,111 

Municipal bonds

 

 

49,064 

 

 

2,746 

 

 

(2)

 

 

51,808 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

Collateralized mortgage obligations-private label

 

 

48 

 

 

 -

 

 

 -

 

 

48 

Collateralized mortgage obligations-government sponsored entities

 

 

38,838 

 

 

124 

 

 

(620)

 

 

38,342 

Government National Mortgage Association

 

 

396 

 

 

31 

 

 

 -

 

 

427 

Federal National Mortgage Association

 

 

4,355 

 

 

187 

 

 

 -

 

 

4,542 

Federal Home Loan Mortgage Corporation

 

 

2,217 

 

 

84 

 

 

 -

 

 

2,301 

Asset-backed securities-private label

 

 

1,099 

 

 

464 

 

 

(62)

 

 

1,501 

Asset-backed securities-government sponsored entities

 

 

89 

 

 

 

 

 -

 

 

97 

Equity securities

 

 

22 

 

 

14 

 

 

 -

 

 

36 



 

$

108,906 

 

$

4,991 

 

$

(684)

 

$

113,213 



All of our collateralized mortgage obligations are backed by residential mortgages.

7


 

At June 30, 2016 and at December 31, 2015, equity securities consisted of 22,368 shares of Federal Home Loan Mortgage Corporation (“FHLMC”) common stock.

At June 30, 2016 and December 31, 2015, thirty-four municipal bonds with a cost of $11.1 million and fair value of $11.9 million and $11.7 million, respectively, were pledged under a collateral agreement with the Federal Reserve Bank (“FRB”) of New York for liquidity borrowing. In addition, at June 30, 2016, fourteen municipal bonds with a cost and fair value of $3.6 million and $3.9 million, respectively, were pledged as collateral for customer deposits in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. At December 31, 2015, nine municipal bonds with a cost and fair value of $2.0 million and $2.1 million, respectively, were pledged as collateral for customer deposits in excess of the FDIC insurance limits.       

The following table sets forth the Company’s investment in securities available for sale with gross unrealized losses of less than twelve months and gross unrealized losses of twelve months or more and associated fair values as of the dates indicated:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Less than 12 months

 

12 months or more

 

Total



 

 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross



 

 

 

 

Unrealized

 

 

 

 

Unrealized

 

 

 

 

Unrealized



 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses



 

(Dollars In thousands)

June 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

$

 -

 

$

 -

 

$

8,959 

 

$

(52)

 

$

8,959 

 

$

(52)

Asset-backed securities -private label

 

 

267 

 

 

(5)

 

 

456 

 

 

(21)

 

 

723 

 

 

(26)



 

$

267 

 

$

(5)

 

$

9,415