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EX-32.2 - EX-32.2 - LAKE SHORE BANCORP, INC.lsbk-20170630xex32_2.htm
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EX-31.2 - EX-31.2 - LAKE SHORE BANCORP, INC.lsbk-20170630xex31_2.htm
EX-31.1 - EX-31.1 - LAKE SHORE BANCORP, INC.lsbk-20170630xex31_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, 2017



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, a smaller reporting company or an emerging growth company.  See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.





 

Large accelerated filer

Accelerated filer

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

Smaller reporting company

Emerging growth company

 



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



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



Yes  [  ]        No  [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 6,102,322 shares of the registrant’s common stock, $0.01 par value per share, outstanding at August 4, 2017.

 


 









 

 

 



 

TABLE OF CONTENTS

 



 

 

 

ITEM

 

PART I

PAGE



 

 

 

1

FINANCIAL STATEMENTS

 



-

Consolidated Statements of Financial Condition as of June 30, 2017 and December 31, 2016 (Unaudited)

1



-

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2017 and 2016 (Unaudited)

2



-

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2017 and 2016 (Unaudited)

3



-

Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2017 and  2016 (Unaudited)

4



-

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and  2016 (Unaudited)

5



-

Notes to Unaudited Consolidated Financial Statements

6

2

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

32

3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

49

4

CONTROLS AND PROCEDURES

49



 

 

 



 

PART II

 



 

 

 

1A

RISK FACTORS

50

2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

50

6

EXHIBITS 

50

SIGNATURES

 

 

51



 

 





 

 


 

PART I

Item 1. Financial Statements

Lake Shore Bancorp, Inc. and Subsidiary











 

 

 

 

 

 

Consolidated Statements of Financial Condition

 

 

 

 

 

 



 

 

 

 

 

 



 

June 30,

 

December 31,



 

2017

 

2016



 

(Unaudited)



 

(Dollars in thousands, except share data)



 

 

 

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

7,506 

 

$

8,089 

Interest earning deposits

 

 

4,567 

 

 

6,889 

Federal funds sold

 

 

20,895 

 

 

30,501 

Cash and Cash Equivalents

 

 

32,968 

 

 

45,479 

Securities available for sale

 

 

75,819 

 

 

86,335 

Federal Home Loan Bank stock, at cost

 

 

1,715 

 

 

1,340 

Loans receivable, net of allowance for loan losses 2017 $3,223;  2016 $2,882

 

 

364,018 

 

 

326,365 

Premises and equipment, net

 

 

9,271 

 

 

8,747 

Accrued interest receivable

 

 

1,631 

 

 

1,600 

Bank owned life insurance

 

 

17,896 

 

 

17,719 

Other assets

 

 

1,604 

 

 

1,589 

Total Assets

 

$

504,922 

 

$

489,174 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

              Interest bearing

 

$

338,072 

 

$

330,004 

              Non-interest bearing

 

 

54,608 

 

 

55,889 

Total Deposits

 

 

392,680 

 

 

385,893 

Long-term debt

 

 

26,950 

 

 

18,950 

Advances from borrowers for taxes and insurance

 

 

3,045 

 

 

3,183 

Other liabilities

 

 

4,839 

 

 

5,118 

Total Liabilities

 

$

427,514 

 

$

413,144 

Commitments and Contingencies

 

 

 -

 

 

 -

Stockholders' Equity

 

 

 

 

 

 

Common stock, $0.01 par value per share, 25,000,000 shares authorized; 6,827,236 shares issued and 6,102,322 shares outstanding at June 30, 2017 and 6,827,236 shares issued and 6,088,674 shares outstanding at December 31, 2016

 

$

68 

 

$

68 

Additional paid-in capital

 

 

30,619 

 

 

30,532 

Treasury stock, at cost (724,914 shares at June 30, 2017 and 738,562 shares at December 31, 2016)

 

 

(7,244)

 

 

(7,300)

Unearned shares held by ESOP

 

 

(1,577)

 

 

(1,620)

Unearned shares held by compensation plans

 

 

(704)

 

 

(578)

Retained earnings

 

 

55,031 

 

 

53,546 

Accumulated other comprehensive income

 

 

1,215 

 

 

1,382 

Total Stockholders' Equity

 

 

77,408 

 

 

76,030 

Total Liabilities and Stockholders' Equity

 

$

504,922 

 

$

489,174 



 

 

 

 

 

 

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,



 

2017

 

 

2016

 

2017

 

2016



 

(Unaudited)



 

(Dollars in thousands, except per share data)

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

   Loans, including fees

 

$

4,105 

 

$

3,602 

 

$

8,167 

 

$

7,116 

   Investment securities, taxable

 

 

198 

 

 

259 

 

 

408 

 

 

642 

   Investment securities, tax-exempt

 

 

423 

 

 

451 

 

 

871 

 

 

902 

   Other

 

 

48 

 

 

35 

 

 

86 

 

 

51 

         Total Interest Income

 

 

4,774 

 

 

4,347 

 

 

9,532 

 

 

8,711 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

   Deposits

 

 

499 

 

 

456 

 

 

976 

 

 

924 

   Long-term debt

 

 

97 

 

 

91 

 

 

189 

 

 

187 

   Other

 

 

21 

 

 

23 

 

 

42 

 

 

46 

         Total Interest Expense

 

 

617 

 

 

570 

 

 

1,207 

 

 

1,157 

         Net Interest Income

 

 

4,157 

 

 

3,777 

 

 

8,325 

 

 

7,554 

Provision for Loan Losses

 

 

25 

 

 

55 

 

 

375 

 

 

185 

         Net Interest Income after Provision for Loan Losses

 

 

4,132 

 

 

3,722 

 

 

7,950 

 

 

7,369 

Non-Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

   Service charges and fees

 

 

465 

 

 

431 

 

 

912 

 

 

865 

   Earnings on bank owned life insurance

 

 

90 

 

 

70 

 

 

177 

 

 

137 

   Recovery on previously impaired investment securities

 

 

32 

 

 

33 

 

 

71 

 

 

68 

   Gain on sale of securities available for sale

 

 

197 

 

 

 -

 

 

222 

 

 

1,636 

   Net gain on sale of loans

 

 

 

 

46 

 

 

 

 

61 

   Other

 

 

21 

 

 

23 

 

 

46 

 

 

46 

         Total Non-Interest Income

 

 

807 

 

 

603 

 

 

1,437 

 

 

2,813 

Non-Interest Expenses

 

 

 

 

 

 

 

 

 

 

 

 

   Salaries and employee benefits

 

 

1,822 

 

 

1,795 

 

 

3,712 

 

 

3,585 

   Occupancy and equipment

 

 

565 

 

 

577 

 

 

1,175 

 

 

1,158 

   Data processing

 

 

310 

 

 

261 

 

 

617 

 

 

526 

   Professional services

 

 

245 

 

 

257 

 

 

472 

 

 

527 

   Advertising

 

 

145 

 

 

189 

 

 

312 

 

 

302 

   Postage and supplies

 

 

81 

 

 

56 

 

 

144 

 

 

110 

   FDIC Insurance

 

 

37 

 

 

59 

 

 

73 

 

 

124 

   Other

 

 

297 

 

 

297 

 

 

574 

 

 

561 

         Total Non-Interest Expenses

 

 

3,502 

 

 

3,491 

 

 

7,079 

 

 

6,893 

         Income before Income Taxes

 

 

1,437 

 

 

834 

 

 

2,308 

 

 

3,289 

Income Tax Expense

 

 

295 

 

 

170 

 

 

450 

 

 

671 

         Net Income

 

$

1,142 

 

$

664 

 

$

1,858 

 

$

2,618 

Basic and diluted earnings per common share

 

$

0.19 

 

$

0.11 

 

$

0.30 

 

$

0.44 

Dividends declared per share

 

$

0.08 

 

$

0.07 

 

$

0.16 

 

$

0.14 



 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

















2


 

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income









 

 

 

 

 

 

 



 

 

Three Months Ended June 30,



 

 

2017

 

2016



 

 

(Unaudited)



 

 

(Dollars in thousands)



 

 

 

 

 

 

 

Net Income

 

 

$

1,142 

 

$

664 



 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Unrealized holding gains on securities available for sale, net of tax expense

 

 

 

66 

 

 

351 



 

 

 

 

 

 

 

Reclassification adjustments related to:

 

 

 

 

 

 

 

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

 

 

 

(21)

 

 

(22)

Net gain on sale of securities included in net income, net of tax expense

 

 

 

(130)

 

 

 -

Total Other Comprehensive (Loss) Income

 

 

 

(85)

 

 

329 



 

 

 

 

 

 

 

Total Comprehensive Income

 

 

$

1,057 

 

$

993 



 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

Six Months Ended June 30,



 

 

 



 

 

2017

 

2016



 

 

(Unaudited)



 

 

(Dollars in thousands)



 

 

 

 

 

 

 

Net Income

 

 

$

1,858 

 

$

2,618 



 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Unrealized holding gains on securities available for sale, net of tax expense

 

 

 

26 

 

 

1,326 



 

 

 

 

 

 

 

Reclassification adjustments related to:

 

 

 

 

 

 

 

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

 

 

 

(47)

 

 

(45)

Net gain on sale of securities included in net income, net of tax expense

 

 

 

(146)

 

 

(1,080)

Total Other Comprehensive (Loss) Income

 

 

 

(167)

 

 

201 



 

 

 

 

 

 

 

Total Comprehensive Income

 

 

$

1,691 

 

$

2,819 



 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 





3


 

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2017 and 2016 (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, 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 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - January 1, 2017

 

$

68 

 

$

30,532 

 

$

(7,300)

 

$

(1,620)

 

$

(578)

 

$

53,546 

 

$

1,382 

 

$

76,030 

Net income

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

1,858 

 

 

 -

 

 

1,858 

Other comprehensive loss, net of tax benefit of $86

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(167)

 

 

(167)

ESOP shares earned (3,968 shares)

 

 

 -

 

 

20 

 

 

 -

 

 

43 

 

 

 -

 

 

 -

 

 

 -

 

 

63 

Stock based compensation

 

 

 -

 

 

22 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

22 

Compensation plan shares granted (27,348 shares)

 

 

 -

 

 

 -

 

 

270 

 

 

 -

 

 

(270)

 

 

 -

 

 

 -

 

 

 -

Compensation plan shares forfeited (200 shares)

 

 

 -

 

 

 -

 

 

(2)

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

Compensation plan shares earned (13,321 shares)

 

 

 -

 

 

45 

 

 

 -

 

 

 -

 

 

142 

 

 

 -

 

 

 -

 

 

187 

Purchase of treasury stock, at cost (13,500 shares)

 

 

 -

 

 

 -

 

 

(212)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(212)

Cash dividends declared ($0.16 per share)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(373)

 

 

 -

 

 

(373)

Balance - June 30, 2017

 

$

68 

 

$

30,619 

 

$

(7,244)

 

$

(1,577)

 

$

(704)

 

$

55,031 

 

$

1,215 

 

$

77,408 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



























4


 

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows



 

 

 

 

 

 



 

Six Months Ended June 30,



 

2017

 

2016



 

(Unaudited)



 

(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

1,858 

 

$

2,618 

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

 

 

 

 

 

 

Net amortization of investment securities

 

 

61 

 

 

94 

Net amortization of deferred loan costs

 

 

287 

 

 

259 

Provision for loan losses

 

 

375 

 

 

185 

Recovery on previously impaired investment securities

 

 

(71)

 

 

(68)

Gain on sale of investment securities

 

 

(222)

 

 

(1,636)

Originations of loans held for sale

 

 

(672)

 

 

(2,996)

Proceeds from sales of loans held for sale

 

 

681 

 

 

3,057 

Gain on sale of loans

 

 

(9)

 

 

(61)

Depreciation and amortization

 

 

441 

 

 

430 

Increase in bank owned life insurance, net

 

 

(177)

 

 

(137)

ESOP shares committed to be released

 

 

63 

 

 

53 

Stock based compensation expense

 

 

209 

 

 

144 

(Increase) decrease in accrued interest receivable

 

 

(31)

 

 

85 

Decrease in other assets

 

 

105 

 

 

53 

Decrease in other liabilities

 

 

(279)

 

 

(44)

Net Cash Provided by Operating Activities

 

 

2,619 

 

 

2,036 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Activity in available for sale securities:

 

 

 

 

 

 

Sales

 

 

5,445 

 

 

14,406 

Maturities, prepayments and calls

 

 

6,764 

 

 

5,701 

Purchases

 

 

(1,714)

 

 

 -

Purchases of Federal Home Loan Bank Stock

 

 

(375)

 

 

(3)

Redemptions of Federal Home Loan Bank Stock

 

 

 -

 

 

117 

Loan origination and principal collections, net

 

 

(38,347)

 

 

(18,654)

Additions to premises and equipment

 

 

(967)

 

 

(151)

Net Cash (Used in) Provided by Investing Activities

 

 

(29,194)

 

 

1,416 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Net increase in deposits

 

 

6,787 

 

 

5,689 

Net decrease in advances from borrowers for taxes and insurance

 

 

(138)

 

 

(123)

Proceeds from issuance of long-term debt

 

 

9,700 

 

 

 -

Repayment of long-term debt

 

 

(1,700)

 

 

(2,200)

Proceeds from stock options exercised

 

 

 -

 

 

737 

Purchase of treasury stock

 

 

(212)

 

 

(271)

Cash dividends paid

 

 

(373)

 

 

(313)

Net Cash Provided by Financing Activities

 

 

14,064 

 

 

3,519 

Net (Decrease) Increase in Cash and Cash Equivalents

 

 

(12,511)

 

 

6,971 

CASH AND CASH EQUIVALENTS - BEGINNING

 

 

45,479 

 

 

34,227 

CASH AND CASH EQUIVALENTS - ENDING

 

$

32,968 

 

$

41,198 

SUPPLEMENTARY CASH FLOWS INFORMATION

 

 

 

 

 

 

Interest paid

 

$

1,202 

 

$

1,164 

Income taxes paid

 

$

440 

 

$

580 



 

 

 

 

 

 

SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING ACTIVITIES

 

 

 

 

 

 

Foreclosed real estate acquired in settlement of loans

 

$

45 

 

$

97 



 

 

 

 

 

 

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, 2017 and for the three and six months ended June 30, 2017 and 2016 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, 2016 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, 2016.  The consolidated statements of income for the three and six months ended June 30, 2017 are not necessarily indicative of the results for any subsequent period or the entire year ending December 31, 2017.



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, 2017 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 May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718)” (“ASU 2017-09”). ASU 2017-09 was issued in order to provide clarity and reduce both the (1) diversity in practice and (2) the cost and complexity when applying the guidance in FASB Topic 718 to a change to the terms or conditions of a share-based payment award. ASU 2017-09 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2017 for all public business entities. Early application is permitted for any interim period. The amendments in ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. Management is currently evaluating the impact the adoption of ASU 2017-09 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, 2017



 

 

 

 

Gross

 

Gross

 

 

 



 

Amortized

 

Unrealized

 

Unrealized

 

Fair



 

Cost

 

Gains

 

Losses

 

Value



 

 

(Dollars in thousands)

SECURITIES AVAILABLE FOR SALE:

 

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds

 

$

42,858 

 

$

1,657 

 

$

(5)

 

$

44,510 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

Collateralized mortgage obligations-private label

 

 

35 

 

 

 -

 

 

 -

 

 

35 

Collateralized mortgage obligations-government sponsored entities

 

 

25,748 

 

 

44 

 

 

(384)

 

 

25,408 

Government National Mortgage Association

 

 

265 

 

 

19 

 

 

 -

 

 

284 

Federal National Mortgage Association

 

 

3,119 

 

 

114 

 

 

 -

 

 

3,233 

Federal Home Loan Mortgage Corporation

 

 

1,671 

 

 

50 

 

 

 -

 

 

1,721 

Asset-backed securities-private label

 

 

197 

 

 

318 

 

 

(5)

 

 

510 

Asset-backed securities-government sponsored entities

 

 

63 

 

 

 

 

 -

 

 

68 

Equity securities

 

 

22 

 

 

28 

 

 

 -

 

 

50 



 

$

73,978 

 

$

2,235 

 

$

(394)

 

$

75,819 







 

 

 

 

 

 

 

 

 

 

 

 



 

December 31, 2016



 

 

 

 

Gross

 

Gross

 

 

 



 

Amortized

 

Unrealized

 

Unrealized

 

Fair



 

Cost

 

Gains

 

Losses

 

Value



 

 

(Dollars in thousands)

SECURITIES AVAILABLE FOR SALE:

 

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds

 

$

48,869 

 

$

1,847 

 

$

(18)

 

$

50,698 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

Collateralized mortgage obligations-private label

 

 

37 

 

 

 -

 

 

 -

 

 

37 

Collateralized mortgage obligations-government sponsored entities

 

 

29,170 

 

 

83 

 

 

(423)

 

 

28,830 

Government National Mortgage Association

 

 

306 

 

 

23 

 

 

 -

 

 

329 

Federal National Mortgage Association

 

 

3,457 

 

 

128 

 

 

(3)

 

 

3,582 

Federal Home Loan Mortgage Corporation

 

 

1,825 

 

 

42 

 

 

 -

 

 

1,867 

Asset-backed securities-private label

 

 

484 

 

 

362 

 

 

(14)

 

 

832 

Asset-backed securities-government sponsored entities

 

 

71 

 

 

 

 

 -

 

 

76 

Equity securities

 

 

22 

 

 

62 

 

 

 -

 

 

84 



 

$

84,241 

 

$

2,552 

 

$

(458)

 

$

86,335 



All of our collateralized mortgage obligations are backed by one- to four-family residential mortgages.

At June 30, 2017 and at December 31, 2016, equity securities consisted of 22,368 shares of Federal Home Loan Mortgage Corporation (“FHLMC”) common stock.

7


 

At June 30, 2017 and December 31, 2016, thirty-three municipal bonds and thirty-four municipal bonds, respectively, with a cost of $11.1 million and fair value of $11.6 million and $11.5 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, 2017 and December 31, 2016 fourteen municipal bonds with a cost and fair value of $3.6 million and $3.7 million, respectively, were pledged as collateral for customer deposits in excess of the Federal Deposit Insurance Corporation (“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, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds

 

$

1,202 

 

$

(5)

 

$

 -

 

$

 -

 

$

1,202 

 

$

(5)

Mortgage-backed securities

 

 

12,695 

 

 

(166)

 

 

9,364 

 

 

(218)

 

 

22,059 

 

 

(384)

Asset-backed securities -private label

 

 

192 

 

 

(5)

 

 

 -