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Lake Shore Bancorp 10-Q 2015

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
lsbk 20150930 10Q

 

 

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 September 30, 2015

 

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 5,978,754 shares of the registrant’s common stock, $0.01 par value per share, outstanding at November 9, 2015.

 

 

 

 

 

 

 

 


 

 

 

TABLE OF CONTENTS

 

 

 

 

 

ITEM

 

PART I

PAGE

 

 

 

 

1 

FINANCIAL STATEMENTS

 

 

-

Consolidated Statements of Financial Condition as of September 30, 2015 and December 31, 2014 (Unaudited)

1

 

-

Consolidated Statements of Income for the Three and Nine Months ended September 30, 2015 and 2014 (Unaudited)

2

 

-

Consolidated Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2015 and 2014 (Unaudited)

3

 

-

Consolidated Statements of Stockholders’ Equity for the Nine Months ended September 30, 2015 and  2014 (Unaudited)

4

 

-

Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2015 and  2014 (Unaudited)

5

 

-

Notes to Unaudited Consolidated Financial Statements

6

2 

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

33

3 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

52

4 

CONTROLS AND PROCEDURES

52

 

 

 

 

 

 

PART II

 

 

 

 

 

1A 

RISK FACTORS

52

2 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

53

6 

EXHIBITS 

53

SIGNATURES 

 

 

54

 

 

 

 

 

 

 


 

PART I

Item 1. Financial Statements

Lake Shore Bancorp, Inc. and Subsidiary

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Financial Condition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2015

 

2014

 

 

(Unaudited)

 

 

(Dollars in thousands, except share data)

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

7,313 

 

$

7,460 

Interest earning deposits

 

 

18,565 

 

 

19,575 

Federal funds sold

 

 

6,710 

 

 

8,776 

Cash and Cash Equivalents

 

 

32,588 

 

 

35,811 

Securities available for sale

 

 

116,806 

 

 

138,202 

Federal Home Loan Bank stock, at cost

 

 

1,355 

 

 

1,375 

Loans receivable, net of allowance for loan losses 2015 $2,097; 2014 $1,921

 

 

294,615 

 

 

284,853 

Premises and equipment, net

 

 

9,156 

 

 

9,519 

Accrued interest receivable

 

 

1,802 

 

 

1,716 

Bank owned life insurance

 

 

14,870 

 

 

14,666 

Other assets

 

 

1,105 

 

 

1,329 

Total Assets

 

$

472,297 

 

$

487,471 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

              Interest bearing

 

$

326,164 

 

$

349,777 

              Non-interest bearing

 

 

45,706 

 

 

37,162 

Total Deposits

 

 

371,870 

 

 

386,939 

Long-term debt

 

 

18,950 

 

 

18,950 

Advances from borrowers for taxes and insurance

 

 

1,894 

 

 

3,415 

Other liabilities

 

 

6,238 

 

 

6,537 

Total Liabilities

 

$

398,952 

 

$

415,841 

Commitments and Contingencies

 

 

 -

 

 

 -

Stockholders' Equity

 

 

 

 

 

 

Common stock, $0.01 par value per share, 25,000,000 shares authorized; 6,685,715 shares issued and 5,977,372 shares outstanding at September 30, 2015 and 6,673,940 shares issued and 5,990,042 shares outstanding at December 31, 2014

 

$

67 

 

$

67 

Additional paid-in capital

 

 

28,891 

 

 

28,684 

Treasury stock, at cost (708,343 shares at September 30, 2015 and 683,898 shares at December 31, 2014)

 

 

(6,816)

 

 

(6,420)

Unearned shares held by ESOP

 

 

(1,727)

 

 

(1,791)

Unearned shares held by compensation plans

 

 

(630)

 

 

(622)

Retained earnings

 

 

50,237 

 

 

48,192 

Accumulated other comprehensive income

 

 

3,323 

 

 

3,520 

Total Stockholders' Equity

 

 

73,345 

 

 

71,630 

Total Liabilities and Stockholders' Equity

 

$

472,297 

 

$

487,471 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

1


 

Lake Shore Bancorp, Inc. and Subsidiary

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2015

 

 

2014

 

2015

 

2014

 

 

(Unaudited)

 

 

(Dollars in thousands, except per share data)

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

   Loans, including fees

 

$

3,474 

 

$

3,307 

 

$

10,268 

 

$

9,977 

   Investment securities, taxable

 

 

435 

 

 

552 

 

 

1,377 

 

 

1,884 

   Investment securities, tax-exempt

 

 

513 

 

 

530 

 

 

1,573 

 

 

1,589 

   Other

 

 

 

 

 

 

16 

 

 

10 

         Total Interest Income

 

 

4,427 

 

 

4,395 

 

 

13,234 

 

 

13,460 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

   Deposits

 

 

538 

 

 

724 

 

 

1,794 

 

 

2,229 

   Short-term borrowings

 

 

 -

 

 

 -

 

 

 -

 

 

20 

   Long-term debt

 

 

99 

 

 

102 

 

 

296 

 

 

182 

   Other

 

 

25 

 

 

25 

 

 

74 

 

 

76 

         Total Interest Expense

 

 

662 

 

 

851 

 

 

2,164 

 

 

2,507 

         Net Interest Income

 

 

3,765 

 

 

3,544 

 

 

11,070 

 

 

10,953 

Provision for Loan Losses

 

 

30 

 

 

70 

 

 

240 

 

 

70 

         Net Interest Income after Provision for Loan Losses

 

 

3,735 

 

 

3,474 

 

 

10,830 

 

 

10,883 

Non-Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

   Service charges and fees

 

 

406 

 

 

396 

 

 

1,184 

 

 

1,202 

   Earnings on bank owned life insurance

 

 

68 

 

 

65 

 

 

204 

 

 

190 

   Recovery on previously impaired investment securities

 

 

48 

 

 

35 

 

 

123 

 

 

136 

   Net gain on sale of securities available for sale

 

 

440 

 

 

 -

 

 

440 

 

 

59 

   Net gain on sale of loans

 

 

28 

 

 

 

 

73 

 

 

   Other

 

 

38 

 

 

30 

 

 

85 

 

 

89 

         Total Non-Interest Income

 

 

1,028 

 

 

531 

 

 

2,109 

 

 

1,681 

Non-Interest Expenses

 

 

 

 

 

 

 

 

 

 

 

 

   Salaries and employee benefits

 

 

1,663 

 

 

1,682 

 

 

5,150 

 

 

4,936 

   Occupancy and equipment

 

 

561 

 

 

531 

 

 

1,697 

 

 

1,648 

   Data processing

 

 

264 

 

 

202 

 

 

766 

 

 

579 

   Professional services

 

 

235 

 

 

298 

 

 

738 

 

 

956 

   Advertising

 

 

92 

 

 

85 

 

 

301 

 

 

353 

   FDIC Insurance

 

 

75 

 

 

70 

 

 

219 

 

 

211 

   Postage and supplies

 

 

74 

 

 

61 

 

 

201 

 

 

194 

   Other

 

 

300 

 

 

279 

 

 

761 

 

 

838 

         Total Non-Interest Expenses

 

 

3,264 

 

 

3,208 

 

 

9,833 

 

 

9,715 

         Income before Income Taxes

 

 

1,499 

 

 

797 

 

 

3,106 

 

 

2,849 

Income Tax Expense

 

 

263 

 

 

109 

 

 

602 

 

 

487 

         Net Income

 

$

1,236 

 

$

688 

 

$

2,504 

 

$

2,362 

Basic and diluted earnings per common share

 

$

0.21 

 

$

0.12 

 

$

0.42 

 

$

0.41 

Dividends declared per share

 

$

0.07 

 

$

0.07 

 

$

0.21 

 

$

0.21 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

2


 

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2015

 

2014

 

 

 

(Unaudited)

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

Net Income

 

 

$

1,236 

 

$

688 

 

 

 

 

 

 

 

 

Other Comprehensive Income, net of tax expense

 

 

 

 

 

 

 

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

 

 

 

626 

 

 

62 

 

 

 

 

 

 

 

 

Reclassification adjustments related to:

 

 

 

 

 

 

 

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

 

 

 

(32)

 

 

(21)

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

 

 

 

(290)

 

 

 -

Total Other Comprehensive Income

 

 

 

304 

 

 

41 

 

 

 

 

 

 

 

 

Total Comprehensive Income

 

 

$

1,540 

 

$

729 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

2014

 

 

 

(Unaudited)

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

Net Income

 

 

$

2,504 

 

$

2,362 

 

 

 

 

 

 

 

 

Other Comprehensive Income, net of tax expense

 

 

 

 

 

 

 

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

 

 

 

174 

 

 

2,528 

 

 

 

 

 

 

 

 

Reclassification adjustments related to:

 

 

 

 

 

 

 

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

 

 

 

(81)

 

 

(83)

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

 

 

 

(290)

 

 

(36)

Total Other Comprehensive (Loss) Income

 

 

 

(197)

 

 

2,409 

 

 

 

 

 

 

 

 

Total Comprehensive Income

 

 

$

2,307 

 

$

4,771 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

3


 

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Stockholders’ Equity

Nine months Ended September 30, 2015 and 2014 (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, 2014

 

$

66 

 

$

28,039 

 

$

(6,588)

 

$

(1,876)

 

$

(499)

 

$

45,624 

 

$

505 

 

$

65,271 

Net income

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

2,362 

 

 

 -

 

 

2,362 

Other comprehensive income, net of tax expense of $1,521

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

2,409 

 

 

2,409 

Stock options exercised (3,646 shares)

 

 

 -

 

 

54 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

54 

ESOP shares earned (5,951 shares)

 

 

 -

 

 

 

 

 -

 

 

64 

 

 

 -

 

 

 -

 

 

 -

 

 

73 

Stock based compensation

 

 

 -

 

 

(3)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(3)

Compensation plan shares granted (24,570 shares)

 

 

 -

 

 

 -

 

 

230 

 

 

 -

 

 

(230)

 

 

 -

 

 

 -

 

 

 -

Compensation plan shares earned (5,322 shares)

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

60 

 

 

 -

 

 

 -

 

 

65 

Purchase of treasury stock, at cost (5,100 shares)

 

 

 -

 

 

 -

 

 

(62)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(62)

Cash dividends declared ($0.21 per share)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(442)

 

 

 -

 

 

(442)

Balance - September 30, 2014

 

$

66 

 

$

28,104 

 

$

(6,420)

 

$

(1,812)

 

$

(669)

 

$

47,544 

 

$

2,914 

 

$

69,727 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - January 1, 2015

 

$

67 

 

$

28,684 

 

$

(6,420)

 

$

(1,791)

 

$

(622)

 

$

48,192 

 

$

3,520 

 

$

71,630 

Net income

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

2,504 

 

 

 -

 

 

2,504 

Other comprehensive loss, net of tax benefit of $510

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(197)

 

 

(197)

Stock options exercised (11,775 shares)

 

 

 -

 

 

136 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

136 

ESOP shares earned (5,951 shares)

 

 

 -

 

 

17 

 

 

 -

 

 

64 

 

 

 -

 

 

 -

 

 

 -

 

 

81 

Stock based compensation

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

Compensation plan shares granted (15,455 shares)

 

 

 -

 

 

 -

 

 

145 

 

 

 -

 

 

(145)

 

 

 -

 

 

 -

 

 

 -

Compensation plan shares earned (12,909 shares)

 

 

 -

 

 

53 

 

 

 -

 

 

 -

 

 

137 

 

 

 -

 

 

 -

 

 

190 

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

 

 

 -

 

 

 -

 

 

(541)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(541)

Cash dividends declared ($0.21 per share)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(459)

 

 

 -

 

 

(459)

Balance - September 30, 2015

 

$

67 

 

$

28,891 

 

$

(6,816)

 

$

(1,727)

 

$

(630)

 

$

50,237 

 

$

3,323 

 

$

73,345 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4


 

Lake Shore Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2015

 

2014

 

 

 

 

(Unaudited)

 

 

 

 

(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

2,504 

 

$

2,362 

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

 

 

 

 

 

 

Net amortization of investment securities

 

 

228 

 

 

223 

Net amortization of deferred loan costs

 

 

416 

 

 

341 

Provision for loan losses

 

 

240 

 

 

70 

Recovery on previously impaired investment securities

 

 

(123)

 

 

(136)

Net gain on sale of investment securities

 

 

(440)

 

 

(59)

Originations of loans held for sale

 

 

(6,811)

 

 

(386)

Proceeds from sales of loans held for sale

 

 

6,884 

 

 

391 

Net gain on sale of loans

 

 

(73)

 

 

(5)

Depreciation and amortization

 

 

625 

 

 

559 

Increase in bank owned life insurance, net

 

 

(204)

 

 

(190)

ESOP shares committed to be released

 

 

81 

 

 

73 

Stock based compensation expense

 

 

191 

 

 

62 

Increase in accrued interest receivable

 

 

(86)

 

 

(77)

Decrease in other assets

 

 

452 

 

 

268 

Increase in other liabilities

 

 

211 

 

 

52 

Net Cash Provided by Operating Activities

 

 

4,095 

 

 

3,548 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Activity in available for sale securities:

 

 

 

 

 

 

Sales

 

 

9,846 

 

 

10,337 

Maturities, prepayments and calls

 

 

11,178 

 

 

10,577 

Purchases of Federal Home Loan Bank Stock

 

 

(254)

 

 

(351)

Redemptions of Federal Home Loan Bank Stock

 

 

274 

 

 

536 

Loan origination and principal collections, net

 

 

(10,646)

 

 

1,634 

Additions to premises and equipment

 

 

(262)

 

 

(446)

Net Cash Provided by Investing Activities

 

 

10,136 

 

 

22,287 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Net (decrease) increase in deposits

 

 

(15,069)

 

 

1,270 

Net decrease in advances from borrowers for taxes and insurance

 

 

(1,521)

 

 

(1,415)

Net decrease in short term borrowings

 

 

 -

 

 

(11,650)

Proceeds from issuance of long-term debt

 

 

8,250 

 

 

15,200 

Repayment of long-term debt

 

 

(8,250)

 

 

(4,100)

Proceeds from stock options exercised

 

 

136 

 

 

54 

Purchase of treasury stock

 

 

(541)

 

 

(62)

Cash dividends paid

 

 

(459)

 

 

(442)

Net Cash Used in Financing Activities

 

 

(17,454)

 

 

(1,145)

Net (Decrease) Increase in Cash and Cash Equivalents

 

 

(3,223)

 

 

24,690 

CASH AND CASH EQUIVALENTS - BEGINNING

 

 

35,811 

 

 

17,202 

CASH AND CASH EQUIVALENTS - ENDING

 

$

32,588 

 

$

41,892 

SUPPLEMENTARY CASH FLOWS INFORMATION

 

 

 

 

 

 

Interest paid

 

$

2,169 

 

$

2,492 

Income taxes paid

 

$

370 

 

$

648 

 

 

 

 

 

 

 

SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Foreclosed real estate acquired in settlement of loans

 

$

265 

 

$

171 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

5


 

 

Lake Shore Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1 – Nature of Operations and Basis of Presentation

 

Lake Shore Bancorp, Inc. (the “Company,” “us,” “our,” or “we”) was formed on April 3, 2006 to serve as the stock holding company for Lake Shore Savings Bank (“the Bank”) as part of the Bank’s conversion and reorganization from a New York-chartered mutual savings and loan association to the federal mutual holding company form of organization.

 

The interim consolidated financial statements include the accounts of the Company and the Bank, its wholly owned subsidiary.  All intercompany accounts and transactions of the consolidated subsidiary have been eliminated in consolidation.

 

The interim financial statements included herein as of September 30, 2015 and for the three and nine months ended September 30, 2015 and 2014 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, 2014 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, 2014.  The consolidated statements of income for the three and nine months ended September 30, 2015 are not necessarily indicative of the results for any subsequent period or the entire year ending December 31, 2015.

 

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 September 30, 2015 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 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 is intended to clarify and simplify revenue recognition principles, develop a common revenue standard across industries and accounting frameworks, and improve the usefulness and consistency of revenue reporting. In response to stakeholders’ requests to defer the effective date of the guidance in ASU 2014-09 and in consideration of feedback received through extensive outreach with preparers, practitioners, and users of financial statements, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date” (“ASU 2015-14”) in August 2015. ASU 2015-14 defers the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 is now 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 as of annual reporting periods after December 15, 2016. The Company has not yet determined the impact the adoption of ASU 2014-09 will have on its financial condition and results of operations.

 

6


 

In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718):  Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”). ASU 2014-12 applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The update requires that a performance target be treated as a performance condition. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. ASU 2014-12 is effective for the reporting periods beginning after December 15, 2015. Management does not expect the adoption of this update to have a material impact on the Company’s consolidated financial statements or results of operations.

 

Note 3 – Investment Securities

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

 

Cost

 

Gains

 

Losses

 

Value

 

 

 

(Dollars in thousands)

SECURITIES AVAILABLE FOR SALE:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury bonds

 

$

12,788 

 

$

1,621 

 

$

 -

 

$

14,409 

Municipal bonds

 

 

49,074 

 

 

2,630 

 

 

(18)

 

 

51,686 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

Collateralized mortgage obligations-private label

 

 

52 

 

 

 -

 

 

 -

 

 

52 

Collateralized mortgage obligations-government sponsored entities

 

 

41,198 

 

 

228 

 

 

(286)

 

 

41,140 

Government National Mortgage Association

 

 

424 

 

 

36 

 

 

 -

 

 

460 

Federal National Mortgage Association

 

 

4,592 

 

 

251 

 

 

 -

 

 

4,843 

Federal Home Loan Mortgage Corporation

 

 

2,313 

 

 

114 

 

 

 -

 

 

2,427 

Asset-backed securities-private label

 

 

1,214 

 

 

493 

 

 

(72)

 

 

1,635 

Asset-backed securities-government sponsored entities

 

 

95 

 

 

10 

 

 

 -

 

 

105 

Equity securities

 

 

22 

 

 

27 

 

 

 -

 

 

49 

 

 

$

111,772 

 

$

5,410 

 

$

(376)

 

$

116,806 

 

 

7


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

 

Cost

 

Gains

 

Losses

 

Value

 

 

 

(Dollars in thousands)

SECURITIES AVAILABLE FOR SALE:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury bonds

 

$

12,817 

 

$

1,544 

 

$

 -