10-Q

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 June 30, 2017

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: 001-35352

WELLESLEY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland	45-3219901
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)

40 Central Street, Wellesley, Massachusetts	02482
(Address of principal executive offices)	(Zip Code)

(781) 235-2550

(Registrant’s telephone number, including area code)

Not Applicable

(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 ¨

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. (Check one):

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer    ¨	Smaller reporting company x
(Do not check if a 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 standards provided pursuant to Section 7(a)(2)(B) of the Securities 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

As of August 1, 2017, there were 2,489,852 shares of the registrant’s common stock outstanding.

WELLESLEY BANCORP, INC.

Table of Contents

		Page No.
Part I.   Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016	1
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2017 and 2016	2
	Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2017 and 2016	3
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
Part II.   Other Information
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Defaults Upon Senior Securities	36
Item 3.	Mine Safety Disclosures	36
Item 4.	Other Information	36
Item 5.	Exhibits	36
Signatures		37

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

CONSOLIDATED BALANCE SHEETS

	June 30, 2017			December 31, 2016
	(Dollars in thousands)
Assets
Cash and due from banks	$	3,455		$	3,607
Short-term investments		18,818			24,818
Total cash and cash equivalents		22,273			28,425
Certificates of deposit		100			100
Securities available for sale, at fair value		66,471			64,648
Federal Home Loan Bank of Boston stock, at cost		6,436			5,758
Loans held for sale		1,057			1,454
Loans		623,133			581,563
Less allowance for loan losses		(5,543	)		(5,432	)
Loans, net		617,590			576,131
Bank-owned life insurance		7,417			7,303
Premises and equipment, net		3,665			3,876
Accrued interest receivable		1,626			1,647
Net deferred tax asset		2,674			2,742
Other assets		3,032			3,199
Total assets	$	732,341		$	695,283
Liabilities and Stockholders’ Equity
Deposits:
Non-interest-bearing	$	96,017		$	94,946
Interest-bearing		439,217			427,864
		535,234			522,810
Short-term borrowings		24,250			21,250
Long-term debt		100,848			83,020
Subordinated debt		9,786			9,769
Accrued expenses and other liabilities		4,557			3,220
Total liabilities		674,675			640,069
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none issued		—			—
Common stock, $0.01 par value; 14,000,000 shares authorized, 2,489,852 and 2,484,852 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively		25			25
Additional paid-in capital		25,134			24,703
Retained earnings		33,593			31,999
Accumulated other comprehensive income (loss)		134			(229	)
Unearned compensation – ESOP		(1,220	)		(1,284	)
Total stockholders' equity		57,666			55,214
Total liabilities and stockholders' equity	$	732,341		$	695,283

See accompanying notes to consolidated financial statements.

1

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(Dollars in thousands, except per share data)
Interest and dividend income:
Interest and fees on loans and loans held for sale	$	6,355		$	5,614		$	12,332		$	11,171
Debt securities:
Taxable		333			340			672			670
Tax-exempt		78			54			147			107
Short-term investments and certificates of deposit		42			17			85			40
FHLB stock		59			49			116			95
Total interest and dividend income		6,867			6,074			13,352			12,083
Interest expense:
Deposits		828			758			1,621			1,539
Short-term borrowings		48			24			80			40
Long-term debt		299			261			585			506
Subordinated debt		158			159			316			318
Total interest expense		1,333			1,202			2,602			2,403
Net interest income		5,534			4,872			10,750			9,680
Provision for loan losses		122			125			122			187
Net interest income, after provision for loan losses		5,412			4,747			10,628			9,493
Non-interest income:
Customer service fees		36			32			70			58
Mortgage banking activities		21			108			64			140
Gain on sale of securities, net		—			16			—			16
Income on bank-owned life insurance		57			57			114			115
Wealth management fees		308			238			603			449
Miscellaneous		27			59			119			77
Total non-interest income		449			510			970			855
Non-interest expense:
Salaries and employee benefits		2,501			2,378			5,110			4,680
Occupancy and equipment		707			687			1,403			1,350
Data processing		220			177			421			373
FDIC insurance		150			82			297			159
Professional fees		182			278			355			469
Other general and administrative		565			465			1,032			942
Total non-interest expense		4,325			4,067			8,618			7,973
Income before income taxes		1,536			1,190			2,980			2,375
Provision for income taxes		599			463			1,162			916
Net income		937			727			1,818			1,459
Other comprehensive income :
Net unrealized holding gains on available-for-sale securities		340			526			577			1,316
Reclassification adjustment for net gain on sale of securities recognized in non-interest income		—			(16	)		—			(16	)
Income tax expense		(127	)		(65	)		(214	)		(488	)
Total other comprehensive income		213			445			363			812
Comprehensive income	$	1,150		$	1,172		$	2,181		$	2,271
Earnings per common share:
Basic	$	0.40		$	0.31		$	0.77		$	0.63
Diluted	$	0.38		$	0.31		$	0.74		$	0.62
Weighted average shares outstanding:
Basic		2,364,581			2,322,147			2,361,336			2,320,542
Diluted		2,449,413			2,352,092			2,445,712			2,345,946

See accompanying notes to consolidated financial statements.

2

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Six Months Ended June 30, 2017 and 2016

	Common Stock				Additional Paid-in		Retained			Accumulated Other Comprehensive			Unearned Compensation-			Total Stockholders’
	Shares		Amount		Capital		Earnings			Income (Loss)			ESOP			Equity
	(Dollars in thousands)
Balance at December 31, 2015		2,458,553	$	25	$	23,992	$	29,411		$	162		$	(1,412	)	$	52,178
Comprehensive income		—		—		—		1,459			812			—			2,271
Dividends paid to common stockholders ($0.07 per share)		—		—		—		(172	)		—			—			(172	)
Share-based compensation-equity incentive plan		—		—		254		—			—			—			254
Tax benefit from stock based compensation		—		—		1		—			—			—			1
ESOP shares committed to be allocated  (6,419)		—		—		60		—			—			64			124
Balance at June 30, 2016		2,458,553	$	25	$	24,307	$	30,698		$	974		$	(1,348	)	$	54,656
Balance at December 31, 2016		2,484,852	$	25	$	24,703	$	31,999		$	(229	)	$	(1,284	)	$	55,214
Comprehensive income		—		—		—		1,818			363			—			2,181
Dividends paid to common stockholders ($0.09 per share)		—		—		—		(224	)		—			—			(224	)
Issuance of restricted stock		5,000		—		—		—			—			—			—
Share-based compensation-equity incentive plan		—		—		321		—			—			—			321
ESOP shares committed to be allocated (6,419)		—		—		110		—			—			64			174
Balance at June 30, 2017		2,489,852	$	25	$	25,134	$	33,593		$	134		$	(1,220	)	$	57,666

See accompanying notes to consolidated financial statements.

3

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2017			2016
	(In thousands)
Cash flows from operating activities:
Net income	$	1,818		$	1,459
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		122			187
Depreciation and amortization		380			354
Net amortization of securities		115			179
Gain on sale of securities, net		—			(16	)
Principal amount of loans sold		5,063			11,697
Loans originated for sale		(4,666	)		(13,380	)
Accretion of net deferred loan fees		(286	)		(300	)
Amortization  of subordinated debt issuance costs		17			18
Income on bank-owned life insurance		(114	)		(115	)
Deferred income tax provision (benefit)		(146	)		7
ESOP expense		174			124
Share-based compensation		321			254
Net change in other assets and liabilities		1,525			784
Net cash provided by operating activities		4,323			1,252
Cash flows from investing activities:
Activity in securities available for sale:
Maturities, prepayments and calls		1,652			11,381
Purchases		(3,013	)		(14,726	)
Proceeds from sales of securities, net		—			93
Redemption (purchase) of Federal Home Loan Bank stock		(678	)		64
Loan originations, net of principal payments		(41,295	)		(22,907	)
Additions to premises and equipment		(169	)		(839	)
Net cash used by investing activities		(43,503	)		(26,934	)
Cash flows from financing activities:
Net increase in deposits		12,424			20,799
Proceeds from long-term debt		36,000			9,500
Repayments of long-term debt		(18,172	)		(8,169	)
Increase (decrease) in short-term borrowings		3,000			(750	)
Excess tax benefits from share-based compensation		—			1
Cash dividends paid on common stock		(224	)		(172	)
Net cash provided by financing activities		33,028			21,209
Net change in cash and cash equivalents		(6,152	)		(4,473	)
Cash and cash equivalents at beginning period		28,425			28,178
Cash and cash equivalents at end of period	$	22,273		$	23,705
Supplementary information:
Interest paid	$	2,550		$	2,398
Income taxes paid		1,483			825

See accompanying notes to consolidated financial statements.

4

WELLESLEY BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND CONSOLIDATION

The accompanying unaudited interim consolidated financial statements include the accounts of Wellesley Bancorp, Inc. (the “Company”) and its wholly-owned subsidiary, Wellesley Bank (the “Bank”), the principal operating entity, and its wholly-owned subsidiaries: Wellesley Securities Corporation, which engages in the business of buying, selling and dealing in securities exclusively on its own behalf; Wellesley Investment Partners, LLC, formed to provide investment management services for individuals, not-for-profit entities and businesses; and Central Linden, LLC, to hold, manage and sell foreclosed real estate. All significant intercompany balances and transactions have been eliminated in consolidation. Assets under management at Wellesley Investment Partners, LLC are not included in these consolidated financial statements because they are not assets of the Company. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information, and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2016 Annual Report on Form 10-K. The results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or for any other period.

NOTE 2 – LOAN POLICIES

The loan portfolio consists of real estate, commercial and other loans to the Company’s customers in our primary market areas in eastern Massachusetts. The ability of the Company’s debtors to honor their contracts is dependent upon the economy in general and the real estate and construction sectors within our markets.

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred loan origination fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

Interest is generally not accrued on loans which are identified as impaired or loans which are ninety days or more past due. Past due status is based on the contractual terms of the loan. Interest income previously accrued on such loans is reversed against current period interest income. Interest income on non-accrual loans is recognized only to the extent of interest payments received and is first applied to the outstanding principal balance when collectibility of principal is in doubt. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured through sustained payment performance for at least six months.

Allowance for loan losses

The allowance for loan losses is established through a provision for loan losses charged to earnings as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes the uncollectibility of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components.

5

General component

The general component is based on the following loan segments: residential real estate, commercial real estate, construction, commercial, home equity lines of credit and other consumer. Management considers a rolling average of historical losses for each segment based on a time frame appropriate to capture relevant loss data for each loan segment, generally three and 10 years. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume, concentrations and terms of loans; level of collateral protection; effects of changes in risk selection and underwriting standards; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no significant changes to the Company’s policies or methodology pertaining to the general component of the allowance during 2017 or 2016.

The qualitative factor adjustments are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate – The Company generally does not originate loans with a loan-to-value ratio greater than 80 percent and does not originate subprime loans. Most loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Commercial real estate – Loans in this segment are primarily income-producing properties in the Company’s primary market areas in eastern Massachusetts. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management typically obtains rent rolls annually and continually monitors the cash flows of these loans.

Construction – Loans in this segment include speculative construction loans primarily on residential properties for which payment is derived from the sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.    Residential construction loans in this segment also include loans to build one-to-four family owner-occupied properties which are subject to the same credit quality factors as residential real estate.

Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Home equity lines of credit – Loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Other consumer – Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

Allocated component

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the fair value of the loan or, if the loan is collateral dependent, by the fair value of the collateral, less estimated costs to sell. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan are lower than the carrying value of that loan. Large groups of smaller-balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify performing individual residential and consumer loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement.

6

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring ("TDR"). All TDRs are initially classified as impaired.

Unallocated component

An unallocated component is maintained to cover additional uncertainties in management’s estimation of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

NOTE 3 – COMPREHENSIVE INCOME

Accounting principles generally require that recognized revenue, expenses, and gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the stockholders’ equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income/loss.

The components of accumulated other comprehensive income (loss) and related tax effects are as follows:

	June 30,			December 31,
	2017			2016
	(In thousands)
Unrealized holding gains (losses) on securities available for sale	$	203		$	(374	)
Tax effect		(69	)		145
Net-of tax amount	$	134		$	(229	)

NOTE 4 – RECENT ACCOUNTING AND REGULATORY PRONOUNCEMENTS

Effective January 1, 2017, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718). This update is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The adoption of this update did not have a significant impact on the consolidated financial statements.

During the quarter ended March 31, 2017, the FASB issued ASU 2017-08, Receivables - Non-refundable Fees and Other Costs (Subtopic 310-20), which shortens the period of amortization of the premium on certain callable debt securities to the earliest call date. For the Company, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. Management elected to early adopt this ASU effective January 1, 2017 and the adoption did not have a material impact on the Company’s financial statements.

7

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this update supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public companies, this ASU is effective for annual reporting periods, including interim periods, beginning after December 15, 2017. The Company's primary source of revenue is interest income on financial assets, which is explicitly excluded from the scope of the new guidance. In addition, management has determined that the timing of the Company’s recognition of wealth management fees will not change materially. Certain implementation issues relevant to the financial institutions industry are still pending resolution. Management will continue to evaluate any impact as additional guidance is issued.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10), to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The key provision included in the ASU is that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) will be measured at fair value with changes in fair value recognized in net income and the elimination of the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost.  For public entities such as the Company, this ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this update will not have a significant impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires a lessee to record a right-to-use asset and liability representing the obligation to make lease payments for long-term leases. This ASU will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption date; however, based on the current level of long-term leases in place, this is not expected to be material to the Company's results of operations or financial position. Management continues to evaluate the extent of potential impact the new guidance will have on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Credit losses on available-for-sale debt securities should be measured in a manner similar to current GAAP; however, recognized credit losses will be presented as an allowance rather than as a write-down. This ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods. Management is evaluating the provisions of the Update, and will closely monitor developments and additional guidance to determine the potential impact on the Company's consolidated financial statements. Management is currently working with a third party software service provider to ensure proper mapping and alignment of critical instrument-specific data.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU provide cash flow statement classification guidance for certain areas where diversification existed in practice. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted, including adoption in an interim period. The adoption of this update will not have a significant impact on the consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this update require that in the statement of cash flows, amounts generally described as restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this update will not have a significant impact on the consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change in terms or conditions of a share-based payment award. For public business entities, the amendments are effective for fiscal periods beginning December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The adoption of this update will not have a significant impact on the consolidated financial statements.

8

NOTE 5 – SECURITIES AVAILABLE FOR SALE

The amortized cost and fair value of securities available for sale, with gross unrealized gains and losses, follows:

	June 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Residential mortgage-backed securities:
Government National Mortgage Association	$	3,619	$	47	$	(35	)	$	3,631
Government-sponsored enterprises		12,507		110		(77	)		12,540
SBA and other asset-backed securities		11,882		122		(75	)		11,929
State and municipal bonds		12,380		226		(46	)		12,560
Government-sponsored enterprise obligations		8,000		—		(131	)		7,869
Corporate bonds		17,880		102		(40	)		17,942
	$	66,268	$	607	$	(404	)	$	66,471

	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Residential mortgage-backed securities:
Government National Mortgage Association	$	3,876	$	55	$	(33	)	$	3,898
Government-sponsored enterprises		13,134		73		(97	)		13,110
SBA and other asset-backed securities		12,571		70		(140	)		12,501
State and municipal bonds		9,533		93		(156	)		9,470
Government-sponsored enterprise obligations		8,000		—		(197	)		7,803
Corporate bonds		17,908		55		(97	)		17,866
	$	65,022	$	346	$	(720	)	$	64,648

There were no proceeds from sales of available-for-sale securities for the three and six months ended June 30, 2017.

For the three and six months ended June 30, 2016, proceeds from sales of available-for-sale securities amounted to $93 thousand with gross realized gains of $16 thousand and no gross realized losses.

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2017 are as follows. Expected maturities may differ from contractual maturities because the issuer, in certain instances, has the right to call or prepay obligations with or without call or prepayment penalties.

9

	Amortized Cost		Fair Value
	(In thousands)
Within 1 year	$	3,019	$	3,020
After 1 year to 5 years		12,627		12,642
After 5 years to 10 years		15,044		15,066
After 10 years		7,570		7,643
		38,260		38,371
Mortgage- and asset-backed securities		28,008		28,100
	$	66,268	$	66,471

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than Twelve Months					Over Twelve Months
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
	(In thousands)
June 30, 2017
Residential mortgage-backed securities:
Government National Mortgage Association	$	(15	)	$	941	$	(20	)	$	851
Government-sponsored enterprises		(56	)		3,756		(21	)		488
SBA and other asset-backed securities		(75	)		3,379		—			—
State and municipal bonds		(45	)		3,644		(1	)		100
Government-sponsored enterprise obligations		(131	)		7,869		—			—
Corporate bonds		(37	)		2,718		(3	)		994
	$	(359	)	$	22,307	$	(45	)	$	2,433
December 31, 2016
Residential mortgage-backed securities:
Government National Mortgage Association	$	(11	)	$	1,214	$	(22	)	$	849
Government-sponsored enterprises		(85	)		6,771		(12	)		540
SBA and other asset-backed securities		(115	)		6,109		(25	)		1,608
State and municipal bonds		(154	)		5,257		(2	)		396
Government-sponsored enterprise obligations		(197	)		7,803		—			—
Corporate bonds		(93	)		7,360		(4	)		992
	$	(655	)	$	34,514	$	(65	)	$	4,385

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluations. At June 30, 2017, various debt securities have unrealized losses with aggregate depreciation of 1.6% from their aggregate amortized cost basis. These unrealized losses relate principally to the effect of interest rate changes on the fair value of debt securities and not an increase in credit risk of the issuers. As the Company does not intend to sell the securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost, which may be maturity, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2017.

10

NOTE 6 – LOANS AND ALLOWANCE FOR LOAN LOSSES

A summary of the ending balances of loans is as follows:

	June 30,			December 31,
	2017			2016
	(In thousands)
Real estate loans:
Residential – fixed	$	26,086		$	18,573
Residential – variable		271,018			249,486
Commercial		123,882			121,134
Construction		118,320			110,390
		539,306			499,583
Commercial loans:
Secured		50,274			49,126
Unsecured		222			221
		50,496			49,347
Consumer loans:
Home equity lines of credit		33,015			32,437
Other		223			216
		33,238			32,653
Total loans		623,040			581,583
Less:
Allowance for loan losses		(5,543	)		(5,432	)
Net deferred origination costs (fees)		93			(20	)
Loans, net	$	617,590		$	576,131

11

The following table summarizes the changes in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2017 and 2016:

	Residential Real Estate			Commercial Real Estate			Construction			Commercial		Home Equity			Other Consumer			Unallocated			Total
	(In thousands)
Three Months Ended June 30, 2017
Allowance at March 31, 2017	$	1,487		$	1,134		$	1,695		$	710	$	211		$	3		$	181		$	5,421
Provision (credit) for loan losses		76			37			65			4		4			(1	)		(63	)		122
Allowance at June 30, 2017	$	1,563		$	1,171		$	1,760		$	714	$	215		$	2		$	118		$	5,543
Three Months Ended June 30, 2016
Allowance at March 31, 2016	$	1,520		$	1,043		$	1,587		$	589	$	221		$	2		$	212		$	5,174
Provision (credit) for loan losses		(45	)		(7	)		117			54		39			1			(34	)		125
Loans charged off		(102	)		—			—			—		(11	)		—			—			(113	)
Allowance at June 30, 2016	$	1,373		$	1,036		$	1,704		$	643	$	249		$	3		$	178		$	5,186
Six Months Ended June 30, 2017
Allowance at December 31, 2016	$	1,422		$	1,145		$	1,827		$	703	$	211		$	3		$	121		$	5,432
Provision (credit) for loan losses		141			26			(67	)		11		4			10			(3	)		122
Loans charged off		—			—			—			—		—			(11	)		—			(11	)
Allowance at June 30, 2017	$	1,563		$	1,171		$	1,760		$	714	$	215		$	2		$	118		$	5,543
Six Months Ended June 30, 2016
Allowance at December 31, 2014	$	1,490		$	1,025		$	1,684		$	509	$	238		$	2		$	164		$	5,112
Provision (credit) for loan losses		(15	)		11			20			134		22			1			14			187
Loans charged off		(102	)		—			—			—		(11	)		—			—			(113	)
Allowance at June 30, 2016	$	1,373		$	1,036		$	1,704		$	643	$	249		$	3		$	178		$	5,186

12

Additional information pertaining to the allowance for loan losses is as follows:

	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity		Other Consumer		Unallocated		Total
	(In thousands)
June 30, 2017
Allowance related to impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Allowance related to non-impaired loans		1,563		1,171		1,760		714		215		2		118		5,543
Total allowance	$	1,563	$	1,171	$	1,760	$	714	$	215	$	2	$	118	$	5,543
Impaired loan balances	$	175	$	582	$	—	$	—	$	—	$	—	$	—	$	757
Non-impaired loan balances		296,929		123,300		118,320		50,496		33,015		223		—		622,283
Total loans	$	297,104	$	123,882	$	118,320	$	50,496	$	33,015	$	223	$	—	$	623,040
December 31, 2016
Allowance related to impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Allowance related to non-impaired loans		1,422		1,145		1,827		703		211		3		121		5,432
Total allowance	$	1,422	$	1,145	$	1,827	$	703	$	211	$	3	$	121	$	5,432
Impaired loan balances	$	179		591	$	—	$	—	$	—	$	—	$	—	$	770
Non-impaired loan balances		267,880		120,543		110,390		49,347		32,437		216		—		580,813
Total loans	$	268,059	$	121,134	$	110,390	$	49,347	$	32,437	$	216	$	—	$	581,583

The following is a summary of past due and non-accrual loans:

	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due		Past Due 90 Days or More and Still Accruing		Non-accrual Loans
	(In thousands)
June 30, 2017
Commercial real estate	$	964	$	—	$	—	$	964	$	—	$	582
December 31, 2016
Commercial real estate	$	—	$	979	$	591	$	1,570	$	—	$	591
Home equity lines of credit		—		208		—		208		—		—
Total	$	—	$	1,187	$	591	$	1,778	$	—	$	591

13

The following is a summary of impaired loans:

	June 30, 2017				December 31, 2016
	Recorded Investment		Unpaid Principal Balance		Recorded Investment		Unpaid Principal Balance
	(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	175	$	193	$	179	$	196
Commercial real estate		582		714		591		646
Total impaired loans	$	757	$	907	$	770	$	842

Additional information pertaining to impaired loans follows:

	Three Months Ended June 30, 2017						Six Months Ended June 30, 2017
	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis
	(In thousands)
Residential real estate	$	176	$	2	$	—	$	177	$	3	$	—
Commercial real estate		581		43		43		583		43		43
Total	$	757	$	45	$	43	$	760	$	46	$	43

	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis
	(In thousands)
Residential real estate	$	468	$	5	$	3	$	516	$	11	$	8
Commercial real estate		626		—		—		633		—		—
Commercial		8		—		—		9		—		—
Home equity lines of credit		32		—		—		33		1		1
Total	$	1,134	$	5	$	3	$	1,191	$	12	$	9

No additional funds are committed to be advanced in connection with impaired loans.

The following is a summary of troubled debt restructurings recorded for the three and six months ended June 30, 2017.

	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(In thousands)
Commercial real estate	$	1	$	572	$	582

The Company recorded a TDR for one commercial borrower which capitalized past-due interest over the remaining term of the loan in accordance with their bankruptcy filing during the three and six months ended June 30, 2017.

14

There were no TDRs recorded during the three and six months ended June 30, 2016.

There were no TDRs that defaulted during the three and six months ended June 30, 2017 and 2016, and for which default was within one year of the restructure date.

Credit Quality Information

The Company utilizes an eleven-grade internal loan rating system for commercial real estate, construction and commercial loans.

Loans rated 1-4: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 5: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 6: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 7: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 8: Loans in this category are considered “loss” or uncollectible and of such little value that their continuance as loans is not warranted.

Loans rated 9: Loans in this category only include commercial loans under $25 thousand with no other outstandings or relationships with the Company that are not rated for credit quality on an annual basis.

Loans rated 10: Loans in this category include loans which otherwise require rating but which have not been rated, or loans for which the Company’s loan policy does not require rating.

Loans rated 11: Loans in this category include credit commitments/relationships that cannot be rated due to a lack of financial information or inaccurate financial information. If, within 60 days of the assignment of an 11 rating, information is still not available to allow a standard rating, the credit will be rated 6.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial loans. During each calendar year, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. On a monthly basis, the Company reviews the residential real estate and consumer loan portfolio for credit quality primarily through the use of delinquency reports.

The following table presents the Company’s loans by risk rating:

	June 30, 2017								December 31, 2016
	Commercial Real Estate		Construction		Commercial		Total		Commercial Real Estate		Construction		Commercial		Total
	(In thousands)
Loans rated 1 -4	$	119,111	$	118,320	$	49,473	$	286,904	$	115,110	$	110,390	$	46,820	$	272,320
Loans rated 5		4,189		—		325		4,514		5,433		—		1,569		7,002
Loans rated 6		—		—		698		698		—		—		958		958
Loans rated 7		582		—		—		582		591		—		—		591
Total	$	123,882	$	118,320	$	50,496	$	292,698	$	121,134	$	110,390	$	49,347	$	280,871

15

NOTE 7 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value hierarchy

The Company groups its assets generally 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 – Valuation is based on quoted market prices in active exchange markets for identical assets and liabilities. Valuations are obtained from readily available pricing sources.

Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. Valuations are obtained from readily available pricing sources.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as those for which the determination of fair value requires significant management judgment or estimation.

Transfers between levels are recognized at the end of a reporting period, if applicable.

Determination of fair value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The following methods and assumptions were used by the Company in estimating fair value disclosures:

Cash, cash equivalents and certificates of deposit: The carrying amounts approximate fair values based on the short-term nature of the assets.

Securities available for sale: Fair value measurements are obtained from a third-party pricing service and are not adjusted by management. All securities are measured at fair value in Level 2 based on valuation models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

Federal Home Loan Bank (“FHLB”) stock: The carrying value of FHLB stock is deemed to approximate fair value based on the redemption provisions of the FHLB of Boston.

Loans held for sale: Fair values are based on commitments in effect from investors or prevailing market prices.

Loans, net: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposits: The fair values disclosed for non-certificate deposit accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

16

Short-term borrowings: The carrying amount of short-term borrowings approximates fair value, based on the short-term nature of the liabilities.

Long-term debt: The fair values of long-term debt are estimated using discounted cash flow analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.

Subordinated debt: The fair values reported for subordinated debentures are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on instruments with similar terms and maturities.

Accrued interest: The carrying amounts of accrued interest approximate fair value.

Forward loan sale commitments and derivative loan commitments: The fair value of forward loan sale commitments and derivative loan commitments are based on fair values of the underlying mortgage loans, including servicing values as applicable. The fair value of derivative loan commitments also considers the probability of such commitments being exercised.

Off-balance sheet instruments: Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair values of these instruments are considered immaterial.

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis at June 30, 2017 and December 31, 2016 are summarized below.

	Level 1		Level 2		Level 3		Total Fair Value
	(In thousands)
June 30, 2017
Assets
Securities available for sale	$	—	$	66,471	$	—	$	66,471
Forward loan sale commitments		—		24		—		24
Total assets	$	—	$	66,495	$	—	$	66,495
Liabilities
Derivative loan commitments	$	—	$	9	$	—	$	9
December 31, 2016
Assets
Securities available for sale	$	—	$	64,648	$	—	$	64,648
Forward loan sale commitments		—		72		—		72
Total assets	$	—	$	64,720	$	—	$	64,720
Liabilities
Derivative loan commitments	$	—	$	17	$	—	$	17

17

Assets measured at fair value on a non-recurring basis

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market (“LOCOM”) accounting or write-downs of individual assets. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets.

There are no liabilities measured at fair value on a non-recurring basis at June 30, 2017 and December 31, 2016.

	June 30, 2017						December 31, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	(In thousands)
Loans held for sale	$	—	$	—	$	1,057	$	—	$	—	$	1,454

The following table presents the total losses on loans held for sale and impaired loans for the three and six month periods ended June 30, 2017 and 2016.

	Three Months Ended June 30,						Six Months Ended  June 30,
	2017			2016			2017			2016
	(In thousands)
Loans held for sale	$	(5	)	$	(8	)	$	(5	)	$	(8	)
Impaired loans		—			(113	)		—			(113	)
	$	(5	)	$	(121	)	$	(5	)	$	(121	)

Loans held for sale (“LHFS”) are evaluated for losses associated with the application of LOCOM accounting. At June 30, 2017, a rise in market interest rates above contractual loan rates from the time LHFS were recorded is reflected as a reduction in the carrying value of the asset and a loss is recognized in current period earnings. Losses applicable to certain impaired loans are estimated using the appraised value of the underlying collateral considering discounting factors and adjusted for selling costs. The loss is not recorded directly as an adjustment to current earnings, but rather as a component in determining the overall adequacy of the allowance for loan losses. Adjustments to the estimated fair value of impaired loans may result in increases or decreases to the provision for loan losses.

18

Summary of fair values of financial instruments

The estimated fair values and related carrying amounts of the Company’s financial instruments are outlined in the table below. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.

	Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(In thousands)
June 30, 2017
Financial assets:
Cash and cash equivalents	$	22,273	$	22,273	$	—	$	—	$	22,273
Certificates of deposit		100		100		—		—		100
Securities available for sale		66,471		—		66,471		—		66,471
FHLB stock		6,436		—		—		6,436		6,436
Loans held for sale		1,057		—		—		1,057		1,057
Loans, net		617,590		—		—		630,440		630,440
Accrued interest receivable		1,626		—		—		1,626		1,626
Forward loan sale commitments		24		—		—		24		24
Financial liabilities:
Deposits	$	535,234	$	—	$	—	$	536,311	$	536,311
Short-term borrowings		24,250		—		24,250		—		24,250
Long-term debt		100,848		—		101,109		—		101,109
Subordinated debt		9,786		—		—		9,552		9,552
Accrued interest payable		193		—		—		193		193
Derivative loan commitments		9		—		9		—		9
December 31, 2016
Financial assets:
Cash and cash equivalents	$	28,425	$	28,425	$	—	$	—	$	28,425
Certificate of deposit		100		100		—		—		100
Securities available for sale		64,648		—		64,648		—		64,648
FHLB stock		5,758		—		—		5,758		5,758
Loans held for sale		1,454		—		—		1,454—		1,454
Loans, net		576,131		—		—		591,450		591,450
Accrued interest receivable		1,647		—		—		1,647		1,647
Forward loan sale commitments		72		—		72		—		72
Financial liabilities:
Deposits	$	522,810	$	—	$	—	$	523,479	$	523,479
Short-term borrowings		21,250		—		21,250		—		21,250
Long-term debt		83,020		—		83,254		—		83,254
Subordinated debt		9,769		—		—		9,506		9,506
Accrued interest payable		140		—		—		140		140
Derivative loan commitments		17		—		17		—		17

19

NOTE 8 – EMPLOYEE STOCK OWNERSHIP PLAN

The Bank maintains an Employee Stock Ownership Plan (the “ESOP”) to provide eligible employees the opportunity to own Company stock. This plan is a tax-qualified retirement plan for the benefit of all Company employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits.

The Company granted a loan to the ESOP for the purchase shares of the Company’s common stock on the closing date of the Company’s mutual to stock conversion in 2012. As of June 30, 2017, the ESOP held 182,526 shares or 7.30% of the common stock outstanding on that date. The loan obtained by the ESOP from the Company to purchase common stock is payable annually over 15 years at the rate of 3.25% per annum. The loan can be prepaid without penalty. Loan payments are expected to be funded by cash contributions from the Bank. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. Cash dividends paid on allocated shares will be distributed to participants and cash dividends paid on unallocated shares will be used to repay the outstanding debt of the ESOP. Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid.

Shares held by the ESOP at June 30, 2017 include the following:

Allocated	54,144
Committed to be allocated	6,419
Unallocated	121,963
	182,526

The fair value of unallocated shares was $3.4 million at June 30, 2017.

Total compensation expense recognized in connection with the ESOP for the three and six month periods ended June 30, 2017 was $87 thousand and $174 thousand, respectively.

NOTE 9 – EQUITY INCENTIVE PLANS

Under the Company’s 2016 Equity Incentive Plan (the “2016 Equity Incentive Plan”), effective July 27, 2016, the Company may grant restricted stock awards to its employees and directors for up to 75,000 shares of its common stock. A restricted stock award (the “award”) is a grant of shares of Company common stock for no consideration, subject to a vesting schedule or the satisfaction of market conditions or performance criteria. Awarded shares are held in reserve for each grantee by the Company’s transfer agent, and will be issued from previously authorized but unissued shares upon vesting. The fair value of the stock awards, based on the market price at the grant date, will be recognized over the five-year vesting period.

Under the Company’s 2012 Equity Incentive Plan (the “2012 Equity Incentive Plan”), the Company granted stock options to its employees and directors in the form of incentive stock options and non-qualified stock options totaling 231,894 shares of its common stock. The exercise price of each stock option was not less than the fair market value of the Company’s common stock on the date of grant, and the maximum term of each option is 10 years from the date of each award. The vesting period is five years from the date of grant, with vesting at 20% per year.

Under the 2012 Equity Incentive Plan, the Company also granted stock awards to management, employees and directors. Awarded shares are held in reserve for each grantee by the Company’s transfer agent, and will be issued from previously authorized but unissued shares upon vesting. The fair value of the stock awards, based on the market price at the grant date, is recognized over the five-year vesting period.

The Company’s 2012 Equity Incentive Plan was terminated upon approval of the 2016 Equity Incentive Plan.

20

Stock Options

A summary of option activity under the 2012 Equity Incentive Plan for the six months ended June 30, 2017 is presented below:

Options	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)				(In years)		(In thousands)
Outstanding at beginning of period		222	$	16.02		5.92
Granted		—		—		—
Exercised		—		—		—
Forfeited		—		—		—
Outstanding at end of period		222	$	16.02		5.67	$	2,597
Options exercisable at end of period		158	$	15.40		5.32	$	1,879

For the three months ended June 30, 2017 and 2016, compensation expense applicable to the stock options was $53 thousand, and the recognized tax benefit related to this expense was $9 thousand, in both periods.

For the six months ended June 30, 2017 and 2016, compensation expense applicable to the stock options was $106 thousand, and the recognized tax benefit related to this expense was $19 thousand in both years.

Unrecognized compensation expense for non-vested stock options totaled $133 thousand as of June 30, 2017, which will be recognized over the remaining weighted average vesting period of 0.67 years.

Stock Awards

The following table presents the activity in non-vested stock awards under the Equity Incentive Plans for the six months ended June 30, 2017:

	Number of Shares		Grant-date Fair Value
	(In thousands)
Non-vested stock awards at beginning of year		51	$	19.38
Restricted shares granted		5		27.65
Non-vested stock awards at end of period		56	$	20.11

For the three months ended June 30, 2017 and 2016, compensation expense applicable to the stock awards was $113 thousand and $74 thousand, respectively, and the recognized tax benefit related to this expense was $45 thousand and $28 thousand, respectively.

For the six months ended June 30, 2017 and 2016, compensation expense applicable to the stock awards was $214 thousand and $148 thousand, respectively, and the recognized tax benefit related to this expense was $86 thousand and $59 thousand, respectively.

Unrecognized compensation expense for non-vested restricted stock totaled $813 thousand as of June 30, 2017, which will be recognized over the remaining weighted average vesting period of 2.88 years.

21

NOTE 10 – EARNINGS PER COMMON SHARE

Basic earnings per share represents net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. Under the Company’s 2012 and 2016 Equity Incentive Plans, stock awards contain non-forfeitable dividend rights. Accordingly, these shares are considered outstanding for computation of basic earnings per share. Potential common shares that may be issued by the Company relate to outstanding stock options and are determined using the treasury stock method.

Earnings per common share have been computed as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(In thousands, except per share data)
Net income applicable to common stock	$	937		$	727		$	1,818		$	1,459
Average number of common shares issued		2,488			2,458			2,486			2,458
Less: Average unallocated ESOP shares		(123	)		(136	)		(125	)		(138	)
Average number of common shares outstanding used to calculate basic earnings per common share		2,365			2,322			2,361			2,320
Effect of dilutive stock options		85			30			85			26
Average number of common shares outstanding used to calculate diluted earnings per share		2,450			2,352			2,446			2,346
Earnings per common share:
Basic	$	0.40		$	0.31		$	0.77		$	0.63
Diluted	$	0.38		$	0.31		$	0.74		$	0.62

All options were included in the computations of diluted earnings per share for the three and six months ended at June 30, 2017.

For the three and six months ended June 30, 2016, options for 43,400 shares were not included in the computations of diluted earnings per share because to do so would have been anti-dilutive. Anti-dilutive shares are common stock equivalents with exercise prices in excess of the average market value of the Company’s stock for the periods presented.

22

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

Safe Harbor Statement for Forward-Looking Statements

This report may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts; rather they are statements based on the Company’s current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Company’s actual results, performance and achievements being materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; the changing quality and composition of the loan and investment securities portfolio; loan demand; deposit flows; competition; and, changes in accounting principles and guidelines. Additional factors that may affect our results are discussed in the Company’s 2016 Annual Report on Form 10-K under the section titled “Item 1A.–Risk Factors.” These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company assumes no obligation and disclaims any obligation to update any forward-looking statements.

Critical Accounting Policies

We consider critical accounting policies to be accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income.

Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are the following: the likelihood of loan default; the loss exposure at default; the amount and timing of future cash flows on impaired loans; the value of collateral; and, the determination of loss factors to be applied to the various qualitative elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance at least quarterly and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectibility of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic or other conditions differ substantially from the assumptions used in making the evaluation. In addition, the Federal Deposit Insurance Corporation and Massachusetts Commissioner of Banks, as an integral part of their examination process, periodically review our allowance for loan losses and may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Deferred Tax Assets. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. Management reviews deferred tax assets on a quarterly basis to identify any uncertainties pertaining to realization of such assets. In determining whether a valuation allowance is required against deferred tax assets, management assesses historical and forecasted operating results, including a review of eligible carry-forward periods, tax planning opportunities and other relevant considerations. We believe the accounting estimate related to the valuation allowance is a critical estimate because the underlying assumptions can change from period to period. For example, tax law changes or variances in future projected operating performance could result in a change in the valuation allowance. Should actual factors and conditions differ materially from those used by management, the actual realization of net deferred tax assets could differ materially from the amounts recorded in the financial statements. If we were not able to realize all or part of our deferred tax assets in the future, an adjustment to the related valuation allowance would be charged to income tax expense in the period such determination was made and could have a negative impact on earnings. In addition, if actual factors and conditions differ materially from those used by management, we could incur penalties and interest imposed by taxing authorities.

23

Comparison of Financial Condition at June 30, 2017 and December 31, 2016

General. Total assets increased $37.1 million, or 5.3%, from $695.3 million at December 31, 2016 to $732.3 million at June 30, 2017. Total asset growth was due to an increase in gross loans of $41.6million or 7.1%, and an increase of $1.8 million, or 2.8%, in securities available for sale, partially offset by a reduction of $6.2million, or 21.6%, in cash and cash equivalents.

Loans. Growth in the loan portfolio of $41.6 million, or 7.1%, reflects our expansion efforts as well as a strategic focus to diversify our loan portfolio. Residential real estate loans increased $29.1 million to $297.1 million, compared to $268.1 million at December 31, 2016. The majority of growth in residential real estate was in adjustable-rate mortgages, but also included some fixed-rate loans, reflecting customer preferences. Commercial loans increased $1.1 million, or 2.3%, due largely to our presence in the Boston market. Commercial real estate loans increased $2.7 million, or 2.3%, as we have had recent success in expanding our business development efforts. Construction loans increased $7.9 million, or 7.2%, primarily due to strong housing demands within our lending area.

At June 30, 2017, total past due loans decreased $814 thousand as compared to December 31, 2016, as fewer customers are experiencing payment difficulties. Substantially all delinquent loans are secured by real estate collateral with values exceeding outstanding loan principal. Any losses expected on delinquent loans have been charged-off and amounted to $11 thousand and $113 thousand for the six months ended June 30, 2017 and June 30, 2016, respectively.

Securities. Total securities increased from $64.6 million at December 31, 2016 to $66.5 million at June 30, 2017, as excess liquidity was invested in tax-exempt municipal bonds.

Deposits. Total deposits increased $12.4 million, or 2.4%, from $522.8 million at December 31, 2016 to $535.2 million at June 30, 2017. Money market accounts increased $13.6 million. Certificates of deposit increased $2.1 million, which included $10.0 million of new brokered deposits used to diversify our funding for liquidity and cash needs. Demand deposits and NOW accounts increased $1.3 million, or 1.0%, to $131.9 million as growth was realized in both retail and commercial accounts. Savings accounts decreased $4.6 million.

Borrowings. We use borrowings, primarily from the FHLB, to supplement our supply of funds for loans and securities, and to support short-term liquidity needs of the institution. Long-term debt, consisting entirely of FHLB advances, increased $17.8 million, or 21.5%, for the six months ended June 30, 2017. Short-term borrowings consist entirely of advances from the FHLB with initial maturities less than one year. Balances of short-term borrowings increased $3.0 million, or 14.1%, since December 31, 2016. The balance of the subordinated debt was $9.8 million at June 30, 2017.

Stockholders’ Equity. Stockholders’ equity increased $2.5 million, or 4.4%, from $55.2 million at December 31, 2016 to $57.7 million at June 30, 2017, primarily as a result of net income for the six month period of $1.8 million, an increase in the value of share-based compensation related to the equity incentive plans of $320 thousand, an increase in the after-tax effect of increases in the fair value of available for sale securities of $363 thousand, offset by dividends paid.

Results of Operations for the Three Months Ended June 30, 2017 and 2016

Overview. Net income for the three months ended June 30, 2017 was $937 thousand, compared to net income of $727 thousand for the three months ended June 30, 2016. The $210 thousand increase was primarily due to an increase in net interest income, partially offset by a decrease in non-interest income and an increase in non-interest expenses. Net interest income increased $662 thousand to $5.5 million; non-interest income decreased $61 thousand to $449 thousand in the 2017 quarter, while non-interest expense increased $258 thousand to $4.3 million in the same period.

Net Interest Income. Net interest income for the three months ended June 30, 2017 increased $662 thousand, or 13.6%, as compared to the three months ended June 30, 2016. The increase in net interest income was primarily due to increases in the average balances of loans. Interest expense increased, driven by overall deposit growth, higher rates offered on money market accounts, and increases in long-term borrowings.

24

Interest and dividend income increased $793 thousand, or 13.1%, from $6.1 million for the three months ended June 30, 2016 to $6.9 million for the three months ended June 30, 2017. The average balance of interest-earning assets increased 12.7%, while the average rate earned on these assets increased by one basis point (“bp”). Interest and fees on loans increased $741 thousand, or 13.2%, due to a 14.2% increase in the average balance of loans partially offset by a five bp decrease in the average rate earned on loans. Contributing to the increase in loan income was the increase in residential real estate, construction loans, commercial real estate and commercial loan balances during the period. Interest income from investments increased $42 thousand, or 10.5%, due to an increase in the average balances for the three months ended June 30, 2017 as compared to the prior year period, as well as an increase in the average rate earned on these securities due, in part, to recent Federal Reserve interest rate increases.

The increase in interest expense was primarily due to an increase in average balances of interest-bearing deposits and long-term debt. The average balance of interest-bearing deposits increased $39.0 million, or 9.8%, in the three months ended June 30, 2017, compared to the same period in 2016 and the average rate paid on interest bearing deposits decreased one bp. The rate paid on savings accounts increased two bps primarily due to a higher rate structure for these accounts than in the prior year while the average balance of savings accounts decreased $714 thousand to $97.9 million, as compared to the prior year period. The cost of term certificates of deposit increased $32 thousand to $568 thousand as balances in our retail products, deposits generated through a national certificate of deposit clearinghouse and brokered CDs have increased, and rates paid to acquire these balances have decreased four bps, compared to the same period last year. The average balance of long-term FHLB advances increased from $75.2 million to $94.9 million, while rates paid on long-term FHLB advances decreased from 1.37% to 1.26%. Interest expense on short-term borrowings totaled $48 thousand in the three month period ended June 30, 2017, compared to $24 thousand in the three months ended June 30, 2016 due to rates increasing by 52 bps.

Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Loan fees are included in interest income on loans and are insignificant. Yields are not presented on a tax-equivalent basis. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant.

25

	For the Three Months Ended June,
	2017								2016
(Dollars in thousands)	Average Outstanding Balance			Interest Earned/ Paid		Average Yield/ Rate (1)			Average Outstanding Balance			Interest Earned/ Paid		Average Yield/ Rate (1)
Interest-earning assets:
Short-term investments	$	19,194		$	42		0.88	%	$	17,295		$	17		0.41	%
Debt securities:
Taxable		54,323			333		2.46			57,948			340		2.36
Tax-exempt		12,613			78		2.47			8,784			54		2.48
Total loans and loans held for sale		599,983			6,355		4.25			525,326			5,614		4.30
FHLB stock		6,336			59		3.71			5,325			49		3.68
Total interest-earning assets		692,449			6,867		3.98			614,678			6,074		3.97
Allowance for loan losses		(5,452	)							(5,195	)
Total interest-earning assets less allowance for loan losses		686,997								600,483
Non-interest-earning assets		22,275								21,250
Total assets	$	709,272							$	630,733
Interest-bearing liabilities:
Regular savings accounts	$	97,904			110		0.45		$	98,618			106		0.43
NOW checking accounts		34,186			23		0.27			30,726			19		0.25
Money market accounts		104,914			127		0.48			85,398			97		0.46
Certificates of deposit		199,887			568		1.14			183,197			536		1.18
Total interest-bearing deposits		436,891			828		0.76			397,939			758		0.77
Short-term borrowings		17,964			48		1.06			17,285			24		0.54
Long-term debt		94,910			299		1.26			75,192			261		1.37
Subordinated debt		9,781			158		6.56			9,746			159		6.52
Total interest-bearing liabilities		559,546			1,333		0.96			500,162			1,202		0.97
Non-interest-bearing demand deposits		89,025								73,861
Other non-interest-bearing liabilities		3,147								2,381
Total liabilities		651,718								576,404
Stockholders’ equity		57,554								54,329
Total liabilities and stockholders’ equity	$	709,272							$	630,733
Net interest income				$	5,534							$	4,872
Net interest rate spread (2)							3.02	%							3.00	%
Net interest-earning assets (3)	$	132,903							$	114,516
Net interest margin (4)							3.21	%							3.19	%
Average total interest-earning assets to average total interest-bearing liabilities		123.75	%							122.90	%

(1) Ratios for the three month periods have been annualized.

(2) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3) Represents total average interest-earning assets less total average interest-bearing liabilities.

(4) Represents net interest income as a percent of average interest-earning assets.

26

Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total increase (decrease) column represents the sum of the prior columns. For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

	Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016
	Increase (Decrease) Due to						Total Increase
(In thousands)	Volume			Rate			(Decrease)
Interest-earning assets:
Short-term investments	$	2		$	23		$	25
Debt securities:
Taxable		(16	)		9			(7	)
Tax-exempt		24			—			24
Total loans and loans held for sale		841			(100	)		741
FHLB stock		10			—			10
Total interest-earning assets		861			(68	)		793
Interest-bearing liabilities:
Regular savings		(1	)		5			4
NOW checking		2			2			4
Money market		24			6			30
Certificates of deposit		54			(22	)		32
Total interest-bearing deposits		79			(9	)		70
Short-term borrowings		1			23			24
Long-term debt		61			(23	)		38
Subordinated debt		—			(1	)		(1	)
Total interest-bearing liabilities		141			(10	)		131
Increase (decrease) in net interest income	$	720		$	(58	)	$	662

27

Provision for Loan Losses. The provision for loan losses was $122 thousand for the three months ended June 30, 2017, compared to $125 thousand for the three month period ended June 30, 2016. In the 2017 period, the provision reflects management’s estimate of loan losses based upon historical loan portfolio performance as well as environmental considerations such as the strength of the regional economy and organizational knowledge and expertise.

Analysis of Loan Loss Experience. The following table sets forth an analysis of the allowance for loan losses for the periods indicated.

	Three Months Ended
	June 30,
(Dollars in thousands)	2017			2016
Allowance at beginning of period	$	5,421		$	5,174
Provision for loan losses		122			125
Charge-offs		—			(113	)
Recoveries		—			—
Net charge-offs		—			(113	)
Allowance at end of period	$	5,543		$	5,186
Allowance for loan losses to nonperforming loans at end of period		953.17	%		605.04	%
Allowance for loan losses to total loans at end of period		0.89	%		0.97	%
Net charge-offs to average loans outstanding during the period		N/A			0.02	%

Non-interest Income. Non-interest income totaled $449 thousand, a decrease of $61 thousand or 12.0%. Wealth management fees increased $70 thousand, or 29.4%, as compared to the prior year as assets under management increased to $339.5 million as of June 30, 2017. Income from mortgage banking activities in 2017 decreased $87 thousand as sales of longer-term, fixed rate mortgage loans were lower as compared to the prior year. Miscellaneous income decreased $32 thousand due to a decrease in fees on customer swaps.

Non-interest Expense. Non-interest expense increased $258 thousand to $4.3 million for the three months ended June 30, 2017, from $4.1 million for the three months ended June 30, 2016. Factors that contributed to the increase in non-interest expense during the 2017 period were increased salaries and employee benefits of $123 thousand, or 5.2%, primarily attributable to several strategic hires in late 2016. FDIC insurance costs increased $68 thousand, or 82.9%, due to growth and new quarterly assessment rates. Data processing increased $43 thousand and other general administrative costs, such as advertising and insurance, increased $100 thousand due to expanding business volumes and operations. Professional fees decreased $96 thousand, as one-time charges were incurred during 2016 for certain staffing searches.

Income Taxes. An income tax provision of $599 thousand was recorded during the quarter ended June 30, 2017, compared to a provision of $463 thousand in the comparable 2016 quarter. The effective tax rate for the 2017 three month period was 39.0%, compared with 38.9% for the 2016 three month period.

Results of Operations for the Six Months Ended June 30, 2017 and 2016

Overview. Net income for the six months ended June 30, 2017 was $1.8 million, compared to net income of $1.5 million for the six months ended June 30, 2016, an increase of 24.6%. The $359 thousand increase was primarily due to increased net interest income of $1.1 million and increased non-interest income of $115 thousand, partially offset by increased non-interest expense of $645 thousand and provision of income taxes of $246 thousand.

Net Interest Income. Net interest income for the six months ended June 30, 2017 increased $1.1 million, or 11.1%, as compared to the six months ended June 30, 2016. The increase in net interest income was primarily due to an increase in interest income of $1.3 million, or 10.5% partially offset by interest expenses that increased $199 thousand, or 8.3%, during the period.

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Interest and dividend income increased $1.3 million, or 10.5%, from $12.1 million for the six months ended June 30, 2016 to $13.4 million for the six months ended June 30, 2017. The average balance of interest-earning assets increased 12.1%, while the average rate earned on these assets decreased by four bps. Interest and fees on loans increased $1.2 million, or 10.4%, due to a 13.4% increase in the average balance of loans partially offset by a 10 bps decrease in the average rate earned on loans. Contributing to the increase in loan income was the increase in residential real estate, construction loan, commercial real estate and commercial loan balances during the period. Interest income from investments increased $87 thousand, or 10.6%, due to an increase in the average balances for the six months ended June 30, 2017 as compared to the prior year period, as well as an increase in the average rate earned on these securities, due, in part, to recent Federal Reserve interest rate increases.

The increase in interest expense was primarily due to an increase in average balances of interest-bearing deposits and long-term debt. The average balance of interest-bearing deposits increased $34.6 million, or 8.7%, in the six months ended June 30, 2017, as compared to the same period in 2016, while the average rate paid on interest-bearing deposits decreased two bps. The rate paid on money market accounts remained at 48 bps while the average balance of these accounts increased $19.3 million to $105.5 million, as compared to the prior year period. The cost of term certificates of deposit increased $36 thousand to $1.1 million as balances in both our retail products, deposits generated through a national certificate of deposit clearinghouse, and brokered CDs have increased, partially offset by a four bp decrease in the rates paid to acquire these balances, as compared to the same period last year. The average balance of long-term FHLB advances increased from $74.0 million to $90.2 million, while rates paid on long-term FHLB advances decreased from 1.35% to 1.31%. Interest expense on short-term borrowings totaled $80 thousand in the six months ended June 30, 2017, compared to $40 thousand in the six months ended June 30, 2016 while rates paid increased 42 bps.

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Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Loan fees are included in interest income on loans and are insignificant. Yields are not presented on a tax-equivalent basis. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant.

	For the Six Months Ended June 30,
	2017								2016
(Dollars in thousands)	Average Outstanding Balance			Interest Earned/ Paid		Average Yield/ Rate (1)			Average Outstanding Balance			Interest Earned/ Paid		Average Yield/ Rate (1)
Interest-earning assets:
Short-term investments	$	20,172		$	85		0.85	%	$	17,756		$	40		0.47	%
Debt securities:
Taxable		54,556			672		2.49			57,233			670		2.35
Tax-exempt		11,676			147		2.53			8,323			107		2.58
Total loans and loans held for sale		589,598			12,332		4.22			519,786			11,171		4.32
FHLB stock		6,085			116		3.82			5,362			95		3.56
Total interest-earning assets		682,087			13,352		3.95			608,460			12,083		3.99
Allowance for loan losses		(5,442	)							(5,164	)
Total interest-earning assets less allowance for loan losses		676,645								603,296
Non-interest-earning assets		22,607								21,063
Total assets	$	699,252							$	624,359
Interest-bearing liabilities:
Regular savings accounts	$	97,586			219		0.45		$	99,121			225		0.46
NOW checking accounts		34,497			46		0.27			30,747			38		0.25
Money market accounts		105,503			251		0.48			86,179			207		0.48
Certificates of deposit		196,619			1,105		1.13			183,509			1,069		1.17
Total interest-bearing deposits		434,205			1,621		0.75			399,556			1,539		0.77
Short-term borrowings		16,825			80		0.95			14,862			40		0.53
Long-term debt		90,208			585		1.31			74,010			506		1.35
Subordinated debt		9,776			316		6.57			9,746			318		6.52
Total interest-bearing liabilities		551,014			2,602		0.95			498,174			2,403		0.97
Non-interest-bearing demand deposits		88,318								69,846
Other non-interest-bearing liabilities		3,023								2,615
Total liabilities		642,355								570,635
Stockholders’ equity		56,897								53,724
Total liabilities and stockholders’ equity	$	699,252							$	624,359
Net interest income				$	10,750							$	9,680
Net interest rate spread (2)							3.00	%							3.02	%
Net interest-earning assets (3)	$	131,073							$	110,287
Net interest margin (4)							3.18	%							3.20	%
Average total interest-earning assets to average total interest-bearing liabilities		123.79	%							122.14	%

(1) Ratios for the six month periods have been annualized.

(2) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3) Represents total average interest-earning assets less total average interest-bearing liabilities.

(4) Represents net interest income as a percent of average interest-earning assets.

30

Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total increase (decrease) column represents the sum of the prior columns. For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

	Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
	Increase (Decrease) Due to						Total Increase
(In thousands)	Volume			Rate			(Decrease)
Interest-earning assets:
Short-term investments	$	7		$	38		$	45
Debt securities:
Taxable		(34	)		36			2
Tax-exempt		(1	)		41			40
Total loans and loans held for sale		1,487			(326	)		1,161
FHLB stock		10			11			21
Total interest-earning assets		1,469			(200	)		1,269
Interest-bearing liabilities:
Regular savings		(3	)		(3	)		(6	)
NOW checking		5			2			7
Money market		(1	)		46			45
Certificates of deposit		77			(41	)		36
Total interest-bearing deposits		78			4			82
Short-term borrowings		6			34			40
Long-term debt		105			(26	)		79
Subordinated debt		—			(2	)		(2	)
Total interest-bearing liabilities		189			10			199
Increase (decrease) in net interest income	$	1,280		$	(210	)	$	1,070

31

Provision for Loan Losses. The provision for loan losses was $122 thousand for the six months ended June 30, 2017, compared to $187 thousand for the six month period ended June 30, 2016. In the 2017 period, the provision reflects management’s estimate of loan losses based upon historical loan portfolio performance as well as environmental considerations such as the strength of the regional economy and organizational knowledge and expertise.

Analysis of Loan Loss Experience. The following table sets forth an analysis of the allowance for loan losses for the periods indicated.

	Six Months Ended
	June 30,
(Dollars in thousands)	2017			2016
Allowance at beginning of period	$	5,432		$	5,112
Provision for loan losses		122			187
Charge-offs:		(11	)		(113	)
Recoveries		—			—
Net charge- offs		(11	)		(113	)
Allowance at end of period	$	5,543		$	5,186
Allowance for loan losses to nonperforming loans at end of period		953.17	%		605.04	%
Allowance for loan losses to total loans at end of period		0.89	%		0.97	%
Net charge-offs to average loans outstanding during the period		N/A			0.02	%

Non-interest Income. Non-interest income totaled $970 thousand, an increase of $115 thousand, or 13.5%, as income from wealth management fees in 2017 increased $154 thousand as assets under management increased to $339.5 million as of June 30, 2017. Mortgage banking activities in 2017 decreased $76 thousand compared to 2016 due to lower mortgage sales volumes. Miscellaneous income increased $42 thousand due to a $38 thousand increase in fees on customer swaps.

Non-interest Expense. Non-interest expense increased $645 thousand to $8.6 million during the six months ended June 30, 2017, from $8.0 million for the six months ended June 30, 2016. Factors that contributed to the increase in non-interest expense during the 2017 period were increased salaries and employee benefits of $430 thousand, or 9.2%, primarily attributable to the recognition of a full six months of expenses related to our Newton Centre office which opened in April 2016, along with several strategic hires in late 2016. FDIC insurance costs increased $138 thousand, or 86.8%, as new quarterly assessment rates were implemented. Occupancy and equipment expense increased $53 thousand resulting from normal rent increases and additional rent and other expense associated with our Newton Centre office space. Professional fees decreased $114 thousand, as one-time charges were incurred during 2016 for certain staffing searches.

Income Taxes. An income tax provision of $1.2 million was recorded during the six months ended June 30, 2017 compared to a provision of $916 thousand in the comparable 2016 period. The effective tax rate for the 2017 six month period was 39.0%, compared with 38.6% for the 2016 six month period.

Liquidity and Capital Resources

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term and long-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of securities, and borrowings from the FHLB. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, calls of securities and prepayments on loans are greatly influenced by general interest rates, economic conditions and competition.

Management regularly adjusts our investments in liquid assets based upon an assessment of the following: expected loan demand; expected deposit flows; yields available on interest-earning deposits and securities; and, the objectives of our interest-rate risk and investment policies.

32

Our most liquid assets are cash and cash equivalents, interest-bearing deposits in other banks, and securities available for sale. The level of these assets depends on our operating, financing, lending and investing activities during any given period. At June 30, 2017, cash and cash equivalents, which include short-term investments, totaled $22.3 million. Securities classified as available-for-sale, whose aggregate fair value of $66.5 million exceeds cost, and $1.1 million of loans held for sale provide additional sources of liquidity.

At June 30, 2017, we had $24.2 million in short-term borrowings outstanding, represented entirely by FHLB advances, and $100.8 million in long-term debt, also consisting entirely of FHLB advances. At June 30, 2017, we had a total of $13.2 million in unused borrowing capacity from the FHLB. Short-term borrowings are generally used to fund temporary cash needs due to the timing of loan originations and deposit gathering activities. Long-term debt is generally used to provide for longer-term funding needs of the Company, including the match funding of loans originated for portfolio. At June 30, 2017, we also had the ability to borrow $5.0 million from the Co-operative Central Bank on an unsecured basis, a credit line of $5.0 million with a correspondent bank, and $9.8 million from the Federal Reserve Bank under a collateralized borrowing program, none of which was outstanding at that date.

At June 30, 2017, we had $125.7 million in loan commitments outstanding, which included $46.5 million in unadvanced funds on construction loans, $28.3 million in unadvanced home equity lines of credit, $33.8 million in unadvanced commercial lines of credit, and $16.0 million in new loan originations.

Term certificates of deposit due within one year of June 30, 2017 amounted to $132.5 million, or 67.2%, of total term certificates, an increase of $9.5 million from $123.0 million at December 31, 2016. Balances of term certificates maturing in more than one year decreased to $64.6 million as compared to $72.0 million at December 31, 2016. Balances of term certificates that mature within one year reflect customer preferences for greater liquidity of personal funds, while longer-dated certificates reflect a willingness among customers to accept current interest rates for extended time periods. If maturing deposits are not renewed, we will be required to seek other sources of funds, including new term certificates and other borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the existing funds. Management believes, however, based on past experience that a significant portion of our term certificates will be renewed. We have the ability to attract and retain deposits by adjusting the interest rates offered.

The Company is a separate legal entity from the Bank and will have to provide for its own liquidity to pay its operating expenses and other financial obligations. The Company’s primary source of income will be dividends received from the Bank and earnings from investment of net proceeds from the offering retained by the Company. Massachusetts banking law and FDIC regulations limit distributions of capital. In addition, the Company is subject to the policy of the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the Company appears consistent with its capital needs, asset quality and overall financial condition. At June 30, 2017, the Company had $345 thousand of liquid assets as represented by cash and cash equivalents on an unconsolidated basis.

Capital Management. The Bank is subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation and the Massachusetts Commissioner of Banks, including a risk-based capital measure. The Company is also subject to similar capital requirements set by the Federal Reserve Board. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. In July 2013, the Federal Reserve Board released its final rules, which implemented the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. These rules became effective January 1, 2016 for community banks and increased both the quality and quantity of capital held by banks. The final rule implements strict eligibility criteria for regulatory capital instruments and improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. Consistent with the international Basel framework, the final rule included a new minimum capital requirement of common equity Tier I capital to risk-weighted assets of 4.5% and a common equity Tier I capital conservation buffer of 2.5% of risk-weighted assets. The capital conservation buffer is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets, increasing each year until fully implemented to 2.5% on January 1, 2019. At June 30, 2017, the capital conservation buffer was 1.250%. In addition, the final rule raises the minimum ratio of Tier I capital to risk-weighted assets requirement from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations.

At June 30, 2017, the Bank was well-capitalized under the January 1, 2016 rules. Management believes the Bank’s capital levels will be characterized as “well-capitalized” upon full implementation of the new rules.

33

.

We strive to manage our capital for maximum shareholder benefit. The capital from our stock offering significantly increased our liquidity and capital resources. Over time, the initial level of liquidity has been reduced as net proceeds from the stock offering were used for general corporate purposes, including the funding of lending activities. Our financial condition and results of operations were enhanced by the capital from the offering, resulting over time in increased net interest-earning assets and net income. However, the large increase in equity resulting from the capital raised in the offering has had an adverse impact on our return on equity. To help us better manage our capital, we may use such tools as common share repurchases and cash dividends as regulations permit.

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For information about our loan commitments and unused lines of credit see Liquidity Management herein.

For the six months ended June 30, 2017, the Company did not engage in any off-balance sheet transactions reasonably likely to have a material effect on the Company’s financial condition, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Qualitative Aspects of Market Risk

One significant risk affecting the financial condition and operating results of the Company and the Bank is interest rate risk. We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes: originating adjustable-rate loans for retention in our loan portfolio; selling in the secondary market newly originated, conforming longer-term fixed rate residential mortgage loans; promoting core deposit products; adjusting the maturities of borrowings; and, adjusting the investment portfolio mix; and duration.

We have an Asset/Liability Committee, which includes members of management, to communicate, coordinate and control all aspects involving asset-liability management. The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

Quantitative Aspects of Market Risk

We analyze our interest rate sensitivity position to manage the risk associated with interest rate movements through the use of interest income and equity simulations. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest sensitive.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period.

Our goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest income and the present value of our equity. Interest income and equity simulations are completed quarterly and presented to the Asset/Liability Committee and the Board of Directors. The simulations provide an estimate of the impact of changes in interest rates on net interest income and the present value of our equity under a range of assumptions. The simulation incorporates assumptions regarding the potential timing in the repricing of certain assets and liabilities when market rates change and the changes in spreads between different market rates. The simulation analysis incorporates management’s current assessment of the risk that pricing margins will change adversely over time due to competition or other factors.

34

Simulation analysis is only an estimate of our interest rate risk exposure at a particular point in time. We continually review the potential effect changes in interest rates could have on the repayment of rate sensitive assets and funding requirements of rate sensitive liabilities. We engaged a new outside vendor in the third quarter of 2016 to increase functionality and sophistication of these simulations.

The table below sets forth an approximation of our exposure as a percentage of estimated net interest income for the next 12 month period using interest income and equity simulations. The simulations use projected repricing of assets and liabilities at June 30, 2017 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Prepayment rates can have a significant impact on the simulations. Because of the large percentage of loans we hold, rising or falling interest rates have a significant impact on the prepayment speeds of our earning assets that, in turn, affect the rate sensitivity position. When interest rates rise, prepayments tend to slow. When interest rates fall, prepayments tend to rise. Our asset sensitivity would be reduced if prepayments slowed and would increase if prepayments accelerated. While we believe such assumptions to be reasonable, there can be no assurance that assumed prepayment rates will occur.

The following table reflects the estimated effects of changes in interest rates on the present value of our equity at June 30, 2017 and on our projected net interest income from June 30, 2017 through June 30, 2018.

		As of June 30, 2017								Over the Next 12 Months Ending June 30, 2018
Basis Point (“bp”)		Present Value of Equity								Projected Net Interest Income
Change in Rates		$ Amount		$ Change			% Change			$ Amount		$ Change			% Change
		(Dollars in thousands)
	300 bp	$	90,069	$	(7,496	)		(7.68	)%	$	21,576	$	(1,281	)		(5.60	)%
	200		94,157		(3,408	)		(3.49	)		22,070		(787	)		(3.44	)
	0		97,565		—			—			22,857		—			—
	(100)		90,347		(7,218	)		(7.40	)		22,406		(451	)		(1.97	)

Item 4. Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, no change in the Company’s internal control over financial reporting occurred during the quarter ended June 30, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

35

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. The Company’s management believes that such routine legal proceedings, in the aggregate, are immaterial to the Company’s financial condition and results of operations.

Item 1A. Risk Factors

For information regarding the Company’s risk factors, see Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 24, 2017. As of June 30, 2017, the risk factors of the Company have not changed materially from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Defaults Upon Senior Securities

Not applicable.

Item 3. Mine Safety Disclosures

Not applicable.

Item 4. Other Information

Not applicable.

Item 5. Exhibits

3.1 Amended and Restated Articles of Incorporation of Wellesley Bancorp, Inc. (1)

3.2 Bylaws of Wellesley Bancorp, Inc. (2)

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.0 Section 1350 Certification

101.1 The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.

(1) Incorporated herein by reference to the exhibits to Wellesley Bancorp, Inc.’s Pre-Effective Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-176764), filed with the Securities and Exchange Commission on November 7, 2011.

(2) Incorporated herein by reference to the exhibits to Wellesley Bancorp, Inc.’s Registration Statement on Form S-1 (File No. 333-176764), filed with the Securities and Exchange Commission on September 9, 2011.

36

SIGNATURES

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

		WELLESLEY BANCORP, INC.
Dated:   August 10, 2017	By:	/s/ Thomas J. Fontaine
		Thomas J. Fontaine
		President and Chief Executive Officer
		(principal executive officer)
Dated:   August 10, 2017	By:	/s/ Michael W. Dvorak
		Michael W. Dvorak
		Chief Financial Officer and Treasurer
		(principal accounting and financial officer)

37

EX-31.1

Exhibit 31.1

Certification

I, Thomas J. Fontaine, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Wellesley Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and in preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:   August 10, 2017	/s/ Thomas J. Fontaine
	Thomas J. Fontaine
	President and Chief Executive Officer
	(principal executive officer)

EX-31.2

Exhibit 31.2

Certification

I, Michael W. Dvorak, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Wellesley Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and in preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:   August 10, 2017	/s/ Michael W. Dvorak
	Michael W. Dvorak
	Chief Financial Officer and Treasurer
	(principal accounting and financial officer)

EX-32.0

Exhibit 32.0

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Wellesley Bancorp, Inc. (the “Company”) for the quarter ended June 30, 2017, as filed with the Securities and Exchange Commission (the “Report”), I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company as of and for the period covered by the Report.

By:	/s/ Thomas J. Fontaine
	Thomas J. Fontaine
	President and Chief Executive Officer
	(principal executive officer)
	August 10, 2017
By:	/s/ Michael W. Dvorak
	Michael W. Dvorak
	Chief Financial Officer and Treasurer
	(principal financial and accounting officer)
	August 10, 2017

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 01, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Entity Registrant Name	Wellesley Bancorp, Inc.
Entity Central Index Key	0001526952
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	WEBK
Entity Common Stock, Shares Outstanding		2,489,852

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 3,455	$ 3,607
Short-term investments	18,818	24,818
Total cash and cash equivalents	22,273	28,425
Certificates of deposit	100	100
Securities available for sale, at fair value	66,471	64,648
Federal Home Loan Bank of Boston stock, at cost	6,436	5,758
Loans held for sale	1,057	1,454
Loans	623,133	581,563
Less allowance for loan losses	(5,543)	(5,432)
Loans, net	617,590	576,131
Bank-owned life insurance	7,417	7,303
Premises and equipment, net	3,665	3,876
Accrued interest receivable	1,626	1,647
Net deferred tax asset	2,674	2,742
Other assets	3,032	3,199
Total assets	732,341	695,283
Deposits:
Non-interest-bearing	96,017	94,946
Interest-bearing	439,217	427,864
Total deposits	535,234	522,810
Short-term borrowings	24,250	21,250
Long-term debt	100,848	83,020
Subordinated debt	9,786	9,769
Accrued expenses and other liabilities	4,557	3,220
Total liabilities	674,675	640,069
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none issued	0	0
Common stock, $0.01 par value; 14,000,000 shares authorized, 2,489,852 and 2,484,852 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively	25	25
Additional paid-in capital	25,134	24,703
Retained earnings	33,593	31,999
Accumulated other comprehensive income (loss)	134	(229)
Unearned compensation - ESOP	(1,220)	(1,284)
Total stockholders' equity	57,666	55,214
Total liabilities and stockholders' equity	$ 732,341	$ 695,283

XML

CONSOLIDATED BALANCE SHEETS [Parenthetical] - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	1,000,000	1,000,000
Preferred Stock, Shares Issued	0	0
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	14,000,000	14,000,000
Common Stock, Shares, Issued	2,489,852	2,484,852
Common Stock, Shares, Outstanding	2,489,852	2,484,852

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Interest and dividend income:
Interest and fees on loans and loans held for sale	$ 6,355	$ 5,614	$ 12,332	$ 11,171
Debt securities:
Taxable	333	340	672	670
Tax-exempt	78	54	147	107
Short-term investments and certificates of deposit	42	17	85	40
FHLB stock	59	49	116	95
Total interest and dividend income	6,867	6,074	13,352	12,083
Interest expense:
Deposits	828	758	1,621	1,539
Short-term borrowings	48	24	80	40
Long-term debt	299	261	585	506
Subordinated debt	158	159	316	318
Total interest expense	1,333	1,202	2,602	2,403
Net interest income	5,534	4,872	10,750	9,680
Provision for loan losses	122	125	122	187
Net interest income, after provision for loan losses	5,412	4,747	10,628	9,493
Non-interest income:
Customer service fees	36	32	70	58
Mortgage banking activities	21	108	64	140
Gain on sale of securities, net	0	16	0	16
Income on bank-owned life insurance	57	57	114	115
Wealth management fees	308	238	603	449
Miscellaneous	27	59	119	77
Total non-interest income	449	510	970	855
Non-interest expense:
Salaries and employee benefits	2,501	2,378	5,110	4,680
Occupancy and equipment	707	687	1,403	1,350
Data processing	220	177	421	373
FDIC insurance	150	82	297	159
Professional fees	182	278	355	469
Other general and administrative	565	465	1,032	942
Total non-interest expense	4,325	4,067	8,618	7,973
Income before income taxes	1,536	1,190	2,980	2,375
Provision for income taxes	599	463	1,162	916
Net income	937	727	1,818	1,459
Other comprehensive income :
Net unrealized holding gains on available-for-sale securities	340	526	577	1,316
Reclassification adjustment for net gain on sale of securities recognized in non-interest income	0	(16)	0	(16)
Income tax expense	(127)	(65)	(214)	(488)
Total other comprehensive income	213	445	363	812
Comprehensive income	$ 1,150	$ 1,172	$ 2,181	$ 2,271
Earnings per common share:
Basic (in dollars per share)	$ 0.40	$ 0.31	$ 0.77	$ 0.63
Diluted (in dollars per share)	$ 0.38	$ 0.31	$ 0.74	$ 0.62
Weighted average shares outstanding:
Basic (in shares)	2,364,581	2,322,147	2,361,336	2,320,542
Diluted (in shares)	2,449,413	2,352,092	2,445,712	2,345,946

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (loss) [Member]	Unearned Compensation - ESOP [Member]
Balance at Dec. 31, 2015	$ 52,178	$ 25	$ 23,992	$ 29,411	$ 162	$ (1,412)
Balance (in shares) at Dec. 31, 2015		2,458,553
Comprehensive income	2,271	$ 0	0	1,459	812	0
Dividends paid to common stockholders	(172)	0	0	(172)	0	0
Share-based compensation - equity incentive plan	254	0	254	0	0	0
Tax benefit from stock based compensation	1	0	1	0	0	0
ESOP shares committed to be allocated	124	0	60	0	0	64
Balance at Jun. 30, 2016	54,656	$ 25	24,307	30,698	974	(1,348)
Balance (in shares) at Jun. 30, 2016		2,458,553
Balance at Dec. 31, 2016	55,214	$ 25	24,703	31,999	(229)	(1,284)
Balance (in shares) at Dec. 31, 2016		2,484,852
Comprehensive income	2,181	$ 0	0	1,818	363	0
Dividends paid to common stockholders	(224)	0	0	(224)	0	0
Issuance of restricted stock	0	$ 0	0	0	0	0
Issuance of restricted stock (in shares)		5,000
Share-based compensation - equity incentive plan	321	$ 0	321	0	0	0
ESOP shares committed to be allocated	174	0	110	0	0	64
Balance at Jun. 30, 2017	$ 57,666	$ 25	$ 25,134	$ 33,593	$ 134	$ (1,220)
Balance (in shares) at Jun. 30, 2017		2,489,852

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY [Parenthetical] - $ / shares	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Dividends paid to common stockholders, per share	$ 0.09	$ 0.07
ESOP shares committed to be allocated, Shares	6,419	6,419

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net income	$ 1,818	$ 1,459
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	122	187
Depreciation and amortization	380	354
Net amortization of securities	115	179
Gain on sale of securities, net	0	(16)
Principal amount of loans sold	5,063	11,697
Loans originated for sale	(4,666)	(13,380)
Accretion of net deferred loan fees	(286)	(300)
Amortization of subordinated debt issuance costs	17	18
Income on bank-owned life insurance	(114)	(115)
Deferred income tax provision (benefit)	(146)	7
ESOP expense	174	124
Share-based compensation	321	254
Net change in other assets and liabilities	1,525	784
Net cash provided by operating activities	4,323	1,252
Activity in securities available for sale:
Maturities, prepayments and calls	1,652	11,381
Purchases	(3,013)	(14,726)
Proceeds from sales of securities, net	0	93
Redemption (purchase) of Federal Home Loan Bank stock	(678)	64
Loan originations, net of principal payments	(41,295)	(22,907)
Additions to premises and equipment	(169)	(839)
Net cash used by investing activities	(43,503)	(26,934)
Cash flows from financing activities:
Net increase in deposits	12,424	20,799
Proceeds from long-term debt	36,000	9,500
Repayments of long-term debt	(18,172)	(8,169)
Increase (decrease) in short-term borrowings	3,000	(750)
Excess tax benefits from share-based compensation	0	1
Cash dividends paid on common stock	(224)	(172)
Net cash provided by financing activities	33,028	21,209
Net change in cash and cash equivalents	(6,152)	(4,473)
Cash and cash equivalents at beginning period	28,425	28,178
Cash and cash equivalents at end of period	22,273	23,705
Supplementary information:
Interest paid	2,550	2,398
Income taxes paid	$ 1,483	$ 825

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BASIS OF PRESENTATION AND CONSOLIDATION

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Accounting [Text Block]

NOTE 1 – BASIS OF PRESENTATION AND CONSOLIDATION

The accompanying unaudited interim consolidated financial statements include the accounts of Wellesley Bancorp, Inc. (the “Company”) and its wholly-owned subsidiary, Wellesley Bank (the “Bank”), the principal operating entity, and its wholly-owned subsidiaries: Wellesley Securities Corporation, which engages in the business of buying, selling and dealing in securities exclusively on its own behalf; Wellesley Investment Partners, LLC, formed to provide investment management services for individuals, not-for-profit entities and businesses; and Central Linden, LLC, to hold, manage and sell foreclosed real estate. All significant intercompany balances and transactions have been eliminated in consolidation. Assets under management at Wellesley Investment Partners, LLC are not included in these consolidated financial statements because they are not assets of the Company. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information, and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2016 Annual Report on Form 10-K. The results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or for any other period.

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LOAN POLICIES

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Loan Portfolio [Text Block]

NOTE 2 – LOAN POLICIES

The loan portfolio consists of real estate, commercial and other loans to the Company’s customers in our primary market areas in eastern Massachusetts. The ability of the Company’s debtors to honor their contracts is dependent upon the economy in general and the real estate and construction sectors within our markets.

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred loan origination fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

Interest is generally not accrued on loans which are identified as impaired or loans which are ninety days or more past due. Past due status is based on the contractual terms of the loan. Interest income previously accrued on such loans is reversed against current period interest income. Interest income on non-accrual loans is recognized only to the extent of interest payments received and is first applied to the outstanding principal balance when collectibility of principal is in doubt. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured through sustained payment performance for at least six months.

Allowance for loan losses

The allowance for loan losses is established through a provision for loan losses charged to earnings as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes the uncollectibility of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components.

General component

The general component is based on the following loan segments: residential real estate, commercial real estate, construction, commercial, home equity lines of credit and other consumer. Management considers a rolling average of historical losses for each segment based on a time frame appropriate to capture relevant loss data for each loan segment, generally three and 10 years. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume, concentrations and terms of loans; level of collateral protection; effects of changes in risk selection and underwriting standards; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no significant changes to the Company’s policies or methodology pertaining to the general component of the allowance during 2017 or 2016.

The qualitative factor adjustments are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate – The Company generally does not originate loans with a loan-to-value ratio greater than 80 percent and does not originate subprime loans. Most loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Commercial real estate – Loans in this segment are primarily income-producing properties in the Company’s primary market areas in eastern Massachusetts. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management typically obtains rent rolls annually and continually monitors the cash flows of these loans.

Construction – Loans in this segment include speculative construction loans primarily on residential properties for which payment is derived from the sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.    Residential construction loans in this segment also include loans to build one-to-four family owner-occupied properties which are subject to the same credit quality factors as residential real estate.

Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Home equity lines of credit – Loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Other consumer – Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

Allocated component

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the fair value of the loan or, if the loan is collateral dependent, by the fair value of the collateral, less estimated costs to sell. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan are lower than the carrying value of that loan. Large groups of smaller-balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify performing individual residential and consumer loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring ("TDR"). All TDRs are initially classified as impaired.

Unallocated component

An unallocated component is maintained to cover additional uncertainties in management’s estimation of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

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COMPREHENSIVE INCOME

6 Months Ended

Jun. 30, 2017

Stockholders' Equity Note [Abstract]

Comprehensive Income (Loss) Note [Text Block]

NOTE 3 – COMPREHENSIVE INCOME

Accounting principles generally require that recognized revenue, expenses, and gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the stockholders’ equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income/loss.

The components of accumulated other comprehensive income (loss) and related tax effects are as follows:

	June 30,		December 31,
	2017		2016
	(In thousands)
Unrealized holding gains (losses) on securities available for sale	$	203	$	(374)
Tax effect		(69)		145
Net-of tax amount	$	134	$	(229)

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RECENT ACCOUNTING AND REGULATORY PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2017

Accounting Changes and Error Corrections [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

NOTE 4 – RECENT ACCOUNTING AND REGULATORY PRONOUNCEMENTS

Effective January 1, 2017, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718). This update is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The adoption of this update did not have a significant impact on the consolidated financial statements.

During the quarter ended March 31, 2017, the FASB issued ASU 2017-08, Receivables - Non-refundable Fees and Other Costs (Subtopic 310-20), which shortens the period of amortization of the premium on certain callable debt securities to the earliest call date. For the Company, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. Management elected to early adopt this ASU effective January 1, 2017 and the adoption did not have a material impact on the Company’s financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this update supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public companies, this ASU is effective for annual reporting periods, including interim periods, beginning after December 15, 2017. The Company's primary source of revenue is interest income on financial assets, which is explicitly excluded from the scope of the new guidance. In addition, management has determined that the timing of the Company’s recognition of wealth management fees will not change materially. Certain implementation issues relevant to the financial institutions industry are still pending resolution. Management will continue to evaluate any impact as additional guidance is issued.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10), to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The key provision included in the ASU is that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) will be measured at fair value with changes in fair value recognized in net income and the elimination of the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost.  For public entities such as the Company, this ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this update will not have a significant impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires a lessee to record a right-to-use asset and liability representing the obligation to make lease payments for long-term leases. This ASU will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption date; however, based on the current level of long-term leases in place, this is not expected to be material to the Company's results of operations or financial position. Management continues to evaluate the extent of potential impact the new guidance will have on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Credit losses on available-for-sale debt securities should be measured in a manner similar to current GAAP; however, recognized credit losses will be presented as an allowance rather than as a write-down. This ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods. Management is evaluating the provisions of the Update, and will closely monitor developments and additional guidance to determine the potential impact on the Company's consolidated financial statements. Management is currently working with a third party software service provider to ensure proper mapping and alignment of critical instrument-specific data.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU provide cash flow statement classification guidance for certain areas where diversification existed in practice. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted, including adoption in an interim period. The adoption of this update will not have a significant impact on the consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this update require that in the statement of cash flows, amounts generally described as restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this update will not have a significant impact on the consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change in terms or conditions of a share-based payment award. For public business entities, the amendments are effective for fiscal periods beginning December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The adoption of this update will not have a significant impact on the consolidated financial statements.

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SECURITIES AVAILABLE FOR SALE

6 Months Ended

Jun. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 5 – SECURITIES AVAILABLE FOR SALE

The amortized cost and fair value of securities available for sale, with gross unrealized gains and losses, follows:

	June 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
Residential mortgage-backed securities:
Government National Mortgage Association	$	3,619	$	47	$	(35)	$	3,631
Government-sponsored enterprises		12,507		110		(77)		12,540
SBA and other asset-backed securities		11,882		122		(75)		11,929
State and municipal bonds		12,380		226		(46)		12,560
Government-sponsored enterprise obligations		8,000		—		(131)		7,869
Corporate bonds		17,880		102		(40)		17,942
	$	66,268	$	607	$	(404)	$	66,471

	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
Residential mortgage-backed securities:
Government National Mortgage Association	$	3,876	$	55	$	(33)	$	3,898
Government-sponsored enterprises		13,134		73		(97)		13,110
SBA and other asset-backed securities		12,571		70		(140)		12,501
State and municipal bonds		9,533		93		(156)		9,470
Government-sponsored enterprise obligations		8,000		—		(197)		7,803
Corporate bonds		17,908		55		(97)		17,866
	$	65,022	$	346	$	(720)	$	64,648

There were no proceeds from sales of available-for-sale securities for the three and six months ended June 30, 2017.

For the three and six months ended June 30, 2016, proceeds from sales of available-for-sale securities amounted to $93 thousand with gross realized gains of $16 thousand and no gross realized losses.

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2017 are as follows. Expected maturities may differ from contractual maturities because the issuer, in certain instances, has the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(In thousands)
Within 1 year	$	3,019	$	3,020
After 1 year to 5 years		12,627		12,642
After 5 years to 10 years		15,044		15,066
After 10 years		7,570		7,643
		38,260		38,371
Mortgage- and asset-backed securities		28,008		28,100
	$	66,268	$	66,471

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than Twelve Months				Over Twelve Months
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
	(In thousands)
June 30, 2017
Residential mortgage-backed securities:
Government National Mortgage Association	$	(15)	$	941	$	(20)	$	851
Government-sponsored enterprises		(56)		3,756		(21)		488
SBA and other asset-backed securities		(75)		3,379		—		—
State and municipal bonds		(45)		3,644		(1)		100
Government-sponsored enterprise obligations		(131)		7,869		—		—
Corporate bonds		(37)		2,718		(3)		994
	$	(359)	$	22,307	$	(45)	$	2,433
December 31, 2016
Residential mortgage-backed securities:
Government National Mortgage Association	$	(11)	$	1,214	$	(22)	$	849
Government-sponsored enterprises		(85)		6,771		(12)		540
SBA and other asset-backed securities		(115)		6,109		(25)		1,608
State and municipal bonds		(154)		5,257		(2)		396
Government-sponsored enterprise obligations		(197)		7,803		—		—
Corporate bonds		(93)		7,360		(4)		992
	$	(655)	$	34,514	$	(65)	$	4,385

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluations. At June 30, 2017, various debt securities have unrealized losses with aggregate depreciation of 1.6% from their aggregate amortized cost basis. These unrealized losses relate principally to the effect of interest rate changes on the fair value of debt securities and not an increase in credit risk of the issuers. As the Company does not intend to sell the securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost, which may be maturity, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2017.

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LOANS AND ALLOWANCE FOR LOAN LOSSES

6 Months Ended

Jun. 30, 2017

Notes and Loans Payable, Current [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 6 – LOANS AND ALLOWANCE FOR LOAN LOSSES

A summary of the ending balances of loans is as follows:

	June 30,		December 31,
	2017		2016
	(In thousands)
Real estate loans:
Residential – fixed	$	26,086	$	18,573
Residential – variable		271,018		249,486
Commercial		123,882		121,134
Construction		118,320		110,390
		539,306		499,583
Commercial loans:
Secured		50,274		49,126
Unsecured		222		221
		50,496		49,347
Consumer loans:
Home equity lines of credit		33,015		32,437
Other		223		216
		33,238		32,653
Total loans		623,040		581,583
Less:
Allowance for loan losses		(5,543)		(5,432)
Net deferred origination costs (fees)		93		(20)
Loans, net	$	617,590	$	576,131

The following table summarizes the changes in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2017 and 2016:

	Residential		Commercial						Home		Other
	Real Estate		Real Estate		Construction		Commercial		Equity		Consumer		Unallocated		Total
	(In thousands)
Three Months Ended June 30, 2017
Allowance at March 31, 2017	$	1,487	$	1,134	$	1,695	$	710	$	211	$	3	$	181	$	5,421
Provision (credit) for loan losses		76		37		65		4		4		(1)		(63)		122
Allowance at June 30, 2017	$	1,563	$	1,171	$	1,760	$	714	$	215	$	2	$	118	$	5,543
Three Months Ended June 30, 2016
Allowance at March 31, 2016	$	1,520	$	1,043	$	1,587	$	589	$	221	$	2	$	212	$	5,174
Provision (credit) for loan losses		(45)		(7)		117		54		39		1		(34)		125
Loans charged off		(102)		—		—		—		(11)		—		—		(113)
Allowance at June 30, 2016	$	1,373	$	1,036	$	1,704	$	643	$	249	$	3	$	178	$	5,186
Six Months Ended June 30, 2017
Allowance at December 31, 2016	$	1,422	$	1,145	$	1,827	$	703	$	211	$	3	$	121	$	5,432
Provision (credit) for loan losses		141		26		(67)		11		4		10		(3)		122
Loans charged off		—		—		—		—		—		(11)		—		(11)
Allowance at June 30, 2017	$	1,563	$	1,171	$	1,760	$	714	$	215	$	2	$	118	$	5,543
Six Months Ended June 30, 2016
Allowance at December 31, 2014	$	1,490	$	1,025	$	1,684	$	509	$	238	$	2	$	164	$	5,112
Provision (credit) for loan losses		(15)		11		20		134		22		1		14		187
Loans charged off		(102)		—		—		—		(11)		—		—		(113)
Allowance at June 30, 2016	$	1,373	$	1,036	$	1,704	$	643	$	249	$	3	$	178	$	5,186

Additional information pertaining to the allowance for loan losses is as follows:

	Residential		Commercial						Home		Other
	Real Estate		Real Estate		Construction		Commercial		Equity		Consumer		Unallocated		Total
	(In thousands)
June 30, 2017
Allowance related to impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Allowance related to non-impaired loans		1,563		1,171		1,760		714		215		2		118		5,543
Total allowance	$	1,563	$	1,171	$	1,760	$	714	$	215	$	2	$	118	$	5,543
Impaired loan balances	$	175	$	582	$	—	$	—	$	—	$	—	$	—	$	757
Non-impaired loan balances		296,929		123,300		118,320		50,496		33,015		223		—		622,283
Total loans	$	297,104	$	123,882	$	118,320	$	50,496	$	33,015	$	223	$	—	$	623,040
December 31, 2016
Allowance related to impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Allowance related to non-impaired loans		1,422		1,145		1,827		703		211		3		121		5,432
Total allowance	$	1,422	$	1,145	$	1,827	$	703	$	211	$	3	$	121	$	5,432
Impaired loan balances	$	179		591	$	—	$	—	$	—	$	—	$	—	$	770
Non-impaired loan balances		267,880		120,543		110,390		49,347		32,437		216		—		580,813
Total loans	$	268,059	$	121,134	$	110,390	$	49,347	$	32,437	$	216	$	—	$	581,583

The following is a summary of past due and non-accrual loans:

									Past Due 90
					Past Due 90				Days or More
	30-59 Days		60-89 Days		Days or		Total		and Still		Non-accrual
	Past Due		Past Due		More		Past Due		Accruing		Loans
	(In thousands)
June 30, 2017
Commercial real estate	$	964	$	—	$	—	$	964	$	—	$	582
December 31, 2016
Commercial real estate	$	—	$	979	$	591	$	1,570	$	—	$	591
Home equity lines of credit		—		208		—		208		—		—
Total	$	—	$	1,187	$	591	$	1,778	$	—	$	591

The following is a summary of impaired loans:

	June 30, 2017				December 31, 2016
			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal
	Investment		Balance		Investment		Balance
	(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	175	$	193	$	179	$	196
Commercial real estate		582		714		591		646
Total impaired loans	$	757	$	907	$	770	$	842

Additional information pertaining to impaired loans follows:

	Three Months Ended June 30, 2017						Six Months Ended June 30, 2017
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
	(In thousands)
Residential real estate	$	176	$	2	$	—	$	177	$	3	$	—
Commercial real estate		581		43		43		583		43		43
Total	$	757	$	45	$	43	$	760	$	46	$	43

	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
	(In thousands)
Residential real estate	$	468	$	5	$	3	$	516	$	11	$	8
Commercial real estate		626		—		—		633		—		—
Commercial		8		—		—		9		—		—
Home equity lines of credit		32		—		—		33		1		1
Total	$	1,134	$	5	$	3	$	1,191	$	12	$	9

No additional funds are committed to be advanced in connection with impaired loans.

The following is a summary of troubled debt restructurings recorded for the three and six months ended June 30, 2017.

			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
	(In thousands)
Commercial real estate	$	1	$	572	$	582

The Company recorded a TDR for one commercial borrower which capitalized past-due interest over the remaining term of the loan in accordance with their bankruptcy filing during the three and six months ended June 30, 2017.

There were no TDRs recorded during the three and six months ended June 30, 2016.

There were no TDRs that defaulted during the three and six months ended June 30, 2017 and 2016, and for which default was within one year of the restructure date.

Credit Quality Information

The Company utilizes an eleven-grade internal loan rating system for commercial real estate, construction and commercial loans.

Loans rated 1-4: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 5: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 6: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 7: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 8: Loans in this category are considered “loss” or uncollectible and of such little value that their continuance as loans is not warranted.

Loans rated 9: Loans in this category only include commercial loans under $25 thousand with no other outstandings or relationships with the Company that are not rated for credit quality on an annual basis.

Loans rated 10: Loans in this category include loans which otherwise require rating but which have not been rated, or loans for which the Company’s loan policy does not require rating.

Loans rated 11: Loans in this category include credit commitments/relationships that cannot be rated due to a lack of financial information or inaccurate financial information. If, within 60 days of the assignment of an 11 rating, information is still not available to allow a standard rating, the credit will be rated 6.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial loans. During each calendar year, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. On a monthly basis, the Company reviews the residential real estate and consumer loan portfolio for credit quality primarily through the use of delinquency reports.

The following table presents the Company’s loans by risk rating:

	June 30, 2017								December 31, 2016
	Commercial								Commercial
	Real Estate		Construction		Commercial		Total		Real Estate		Construction		Commercial		Total
	(In thousands)
Loans rated 1 -4	$	119,111	$	118,320	$	49,473	$	286,904	$	115,110	$	110,390	$	46,820	$	272,320
Loans rated 5		4,189		—		325		4,514		5,433		—		1,569		7,002
Loans rated 6		—		—		698		698		—		—		958		958
Loans rated 7		582		—		—		582		591		—		—		591
Total	$	123,882	$	118,320	$	50,496	$	292,698	$	121,134	$	110,390	$	49,347	$	280,871

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FAIR VALUES OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2017

Financial Liabilities Fair Value Disclosure [Abstract]

Financial Instruments Disclosure [Text Block]

NOTE 7 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value hierarchy

The Company groups its assets generally 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 – Valuation is based on quoted market prices in active exchange markets for identical assets and liabilities. Valuations are obtained from readily available pricing sources.

Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. Valuations are obtained from readily available pricing sources.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as those for which the determination of fair value requires significant management judgment or estimation.

Transfers between levels are recognized at the end of a reporting period, if applicable.

Determination of fair value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The following methods and assumptions were used by the Company in estimating fair value disclosures:

Cash, cash equivalents and certificates of deposit: The carrying amounts approximate fair values based on the short-term nature of the assets.

Securities available for sale: Fair value measurements are obtained from a third-party pricing service and are not adjusted by management. All securities are measured at fair value in Level 2 based on valuation models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

Federal Home Loan Bank (“FHLB”) stock: The carrying value of FHLB stock is deemed to approximate fair value based on the redemption provisions of the FHLB of Boston.

Loans held for sale: Fair values are based on commitments in effect from investors or prevailing market prices.

Loans, net: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposits: The fair values disclosed for non-certificate deposit accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings: The carrying amount of short-term borrowings approximates fair value, based on the short-term nature of the liabilities.

Long-term debt: The fair values of long-term debt are estimated using discounted cash flow analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.

Subordinated debt: The fair values reported for subordinated debentures are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on instruments with similar terms and maturities.

Accrued interest: The carrying amounts of accrued interest approximate fair value.

Forward loan sale commitments and derivative loan commitments: The fair value of forward loan sale commitments and derivative loan commitments are based on fair values of the underlying mortgage loans, including servicing values as applicable. The fair value of derivative loan commitments also considers the probability of such commitments being exercised.

Off-balance sheet instruments: Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair values of these instruments are considered immaterial.

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis at June 30, 2017 and December 31, 2016 are summarized below.

							Total
	Level 1		Level 2		Level 3		Fair Value
	(In thousands)
June 30, 2017
Assets
Securities available for sale	$	—	$	66,471	$	—	$	66,471
Forward loan sale commitments		—		24		—		24
Total assets	$	—	$	66,495	$	—	$	66,495
Liabilities
Derivative loan commitments	$	—	$	9	$	—	$	9
December 31, 2016
Assets
Securities available for sale	$	—	$	64,648	$	—	$	64,648
Forward loan sale commitments		—		72		—		72
Total assets	$	—	$	64,720	$	—	$	64,720
Liabilities
Derivative loan commitments	$	—	$	17	$	—	$	17

Assets measured at fair value on a non-recurring basis

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market (“LOCOM”) accounting or write-downs of individual assets. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets.

There are no liabilities measured at fair value on a non-recurring basis at June 30, 2017 and December 31, 2016.

	June 30, 2017						December 31, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	(In thousands)
Loans held for sale	$	—	$	—	$	1,057	$	—	$	—	$	1,454

The following table presents the total losses on loans held for sale and impaired loans for the three and six month periods ended June 30, 2017 and 2016.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
	(In thousands)
Loans held for sale	$	(5)	$	(8)	$	(5)	$	(8)
Impaired loans		—		(113)		—		(113)
	$	(5)	$	(121)	$	(5)	$	(121)

Loans held for sale (“LHFS”) are evaluated for losses associated with the application of LOCOM accounting. At June 30, 2017, a rise in market interest rates above contractual loan rates from the time LHFS were recorded is reflected as a reduction in the carrying value of the asset and a loss is recognized in current period earnings. Losses applicable to certain impaired loans are estimated using the appraised value of the underlying collateral considering discounting factors and adjusted for selling costs. The loss is not recorded directly as an adjustment to current earnings, but rather as a component in determining the overall adequacy of the allowance for loan losses. Adjustments to the estimated fair value of impaired loans may result in increases or decreases to the provision for loan losses.

Summary of fair values of financial instruments

The estimated fair values and related carrying amounts of the Company’s financial instruments are outlined in the table below. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.

	Fair Value
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
	(In thousands)
June 30, 2017
Financial assets:
Cash and cash equivalents	$	22,273	$	22,273	$	—	$	—	$	22,273
Certificates of deposit		100		100		—		—		100
Securities available for sale		66,471		—		66,471		—		66,471
FHLB stock		6,436		—		—		6,436		6,436
Loans held for sale		1,057		—		—		1,057		1,057
Loans, net		617,590		—		—		630,440		630,440
Accrued interest receivable		1,626		—		—		1,626		1,626
Forward loan sale commitments		24		—		—		24		24
Financial liabilities:
Deposits	$	535,234	$	—	$	—	$	536,311	$	536,311
Short-term borrowings		24,250		—		24,250		—		24,250
Long-term debt		100,848		—		101,109		—		101,109
Subordinated debt		9,786		—		—		9,552		9,552
Accrued interest payable		193		—		—		193		193
Derivative loan commitments		9		—		9		—		9
December 31, 2016
Financial assets:
Cash and cash equivalents	$	28,425	$	28,425	$	—	$	—	$	28,425
Certificate of deposit		100		100		—		—		100
Securities available for sale		64,648		—		64,648		—		64,648
FHLB stock		5,758		—		—		5,758		5,758
Loans held for sale		1,454		—		—		1,454		1,454
Loans, net		576,131		—		—		591,450		591,450
Accrued interest receivable		1,647		—		—		1,647		1,647
Forward loan sale commitments		72		—		72		—		72
Financial liabilities:
Deposits	$	522,810	$	—	$	—	$	523,479	$	523,479
Short-term borrowings		21,250		—		21,250		—		21,250
Long-term debt		83,020		—		83,254		—		83,254
Subordinated debt		9,769		—		—		9,506		9,506
Accrued interest payable		140		—		—		140		140
Derivative loan commitments		17		—		17		—		17

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EMPLOYEE STOCK OWNERSHIP PLAN

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Compensation and Employee Benefit Plans [Text Block]

NOTE 8 – EMPLOYEE STOCK OWNERSHIP PLAN

The Bank maintains an Employee Stock Ownership Plan (the “ESOP”) to provide eligible employees the opportunity to own Company stock. This plan is a tax-qualified retirement plan for the benefit of all Company employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits.

The Company granted a loan to the ESOP for the purchase shares of the Company’s common stock on the closing date of the Company’s mutual to stock conversion in 2012. As of June 30, 2017, the ESOP held 182,526 shares or 7.30% of the common stock outstanding on that date. The loan obtained by the ESOP from the Company to purchase common stock is payable annually over 15 years at the rate of 3.25% per annum. The loan can be prepaid without penalty. Loan payments are expected to be funded by cash contributions from the Bank. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. Cash dividends paid on allocated shares will be distributed to participants and cash dividends paid on unallocated shares will be used to repay the outstanding debt of the ESOP. Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid.

Shares held by the ESOP at June 30, 2017 include the following:

Allocated	54,144
Committed to be allocated	6,419
Unallocated	121,963
	182,526

The fair value of unallocated shares was $3.4 million at June 30, 2017.

Total compensation expense recognized in connection with the ESOP for the three and six month periods ended June 30, 2017 was $87 thousand and $174 thousand, respectively.

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EQUITY INCENTIVE PLANS

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 9 – EQUITY INCENTIVE PLANS

Under the Company’s 2016 Equity Incentive Plan (the “2016 Equity Incentive Plan”), effective July 27, 2016, the Company may grant restricted stock awards to its employees and directors for up to 75,000 shares of its common stock. A restricted stock award (the “award”) is a grant of shares of Company common stock for no consideration, subject to a vesting schedule or the satisfaction of market conditions or performance criteria. Awarded shares are held in reserve for each grantee by the Company’s transfer agent, and will be issued from previously authorized but unissued shares upon vesting. The fair value of the stock awards, based on the market price at the grant date, will be recognized over the five-year vesting period.

Under the Company’s 2012 Equity Incentive Plan (the “2012 Equity Incentive Plan”), the Company granted stock options to its employees and directors in the form of incentive stock options and non-qualified stock options totaling 231,894 shares of its common stock. The exercise price of each stock option was not less than the fair market value of the Company’s common stock on the date of grant, and the maximum term of each option is 10 years from the date of each award. The vesting period is five years from the date of grant, with vesting at 20% per year.

Under the 2012 Equity Incentive Plan, the Company also granted stock awards to management, employees and directors. Awarded shares are held in reserve for each grantee by the Company’s transfer agent, and will be issued from previously authorized but unissued shares upon vesting. The fair value of the stock awards, based on the market price at the grant date, is recognized over the five-year vesting period.

The Company’s 2012 Equity Incentive Plan was terminated upon approval of the 2016 Equity Incentive Plan.

Stock Options

A summary of option activity under the 2012 Equity Incentive Plan for the six months ended June 30, 2017 is presented below:

					Weighted
					Average
			Weighted		Remaining
	Number of		Average		Contractual		Aggregate
Options	Shares		Exercise Price		Term		Intrinsic Value
	(In thousands)				(In years)		(In thousands)
Outstanding at beginning of period		222	$	16.02		5.92
Granted		—		—		—
Exercised		—		—		—
Forfeited		—		—		—
Outstanding at end of period		222	$	16.02		5.67	$	2,597
Options exercisable at end of period		158	$	15.40		5.32	$	1,879

For the three months ended June 30, 2017 and 2016, compensation expense applicable to the stock options was $53 thousand, and the recognized tax benefit related to this expense was $9 thousand, in both periods.

For the six months ended June 30, 2017 and 2016, compensation expense applicable to the stock options was $106 thousand, and the recognized tax benefit related to this expense was $19 thousand in both years.

Unrecognized compensation expense for non-vested stock options totaled $133 thousand as of June 30, 2017, which will be recognized over the remaining weighted average vesting period of 0.67 years.

Stock Awards

The following table presents the activity in non-vested stock awards under the Equity Incentive Plans for the six months ended June 30, 2017:

	Number of		Grant-date
	Shares		Fair Value
	(In thousands)
Non-vested stock awards at beginning of year		51	$	19.38
Restricted shares granted		5		27.65
Non-vested stock awards at end of period		56	$	20.11

For the three months ended June 30, 2017 and 2016, compensation expense applicable to the stock awards was $113 thousand and $74 thousand, respectively, and the recognized tax benefit related to this expense was $45 thousand and $28 thousand, respectively.

For the six months ended June 30, 2017 and 2016, compensation expense applicable to the stock awards was $214 thousand and $148 thousand, respectively, and the recognized tax benefit related to this expense was $86 thousand and $59 thousand, respectively.

Unrecognized compensation expense for non-vested restricted stock totaled $813 thousand as of June 30, 2017, which will be recognized over the remaining weighted average vesting period of 2.88 years.

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EARNINGS PER COMMON SHARE

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 10 – EARNINGS PER COMMON SHARE

Basic earnings per share represents net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. Under the Company’s 2012 and 2016 Equity Incentive Plans, stock awards contain non-forfeitable dividend rights. Accordingly, these shares are considered outstanding for computation of basic earnings per share. Potential common shares that may be issued by the Company relate to outstanding stock options and are determined using the treasury stock method.

Earnings per common share have been computed as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
	(In thousands, except per share data)
Net income applicable to common stock	$	937	$	727	$	1,818	$	1,459
Average number of common shares issued		2,488		2,458		2,486		2,458
Less: Average unallocated ESOP shares		(123)		(136)		(125)		(138)
Average number of common shares outstanding used to calculate basic earnings per common share		2,365		2,322		2,361		2,320
Effect of dilutive stock options		85		30		85		26
Average number of common shares outstanding used to calculate diluted earnings per share		2,450		2,352		2,446		2,346
Earnings per common share:
Basic	$	0.40	$	0.31	$	0.77	$	0.63
Diluted	$	0.38	$	0.31	$	0.74	$	0.62

All options were included in the computations of diluted earnings per share for the three and six months ended at June 30, 2017.

For the three and six months ended June 30, 2016, options for 43,400 shares were not included in the computations of diluted earnings per share because to do so would have been anti-dilutive. Anti-dilutive shares are common stock equivalents with exercise prices in excess of the average market value of the Company’s stock for the periods presented.

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LOAN POLICIES (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

LOAN POLICIES

The loan portfolio consists of real estate, commercial and other loans to the Company’s customers in our primary market areas in eastern Massachusetts. The ability of the Company’s debtors to honor their contracts is dependent upon the economy in general and the real estate and construction sectors within our markets.

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred loan origination fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

Interest is generally not accrued on loans which are identified as impaired or loans which are ninety days or more past due. Past due status is based on the contractual terms of the loan. Interest income previously accrued on such loans is reversed against current period interest income. Interest income on non-accrual loans is recognized only to the extent of interest payments received and is first applied to the outstanding principal balance when collectibility of principal is in doubt. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured through sustained payment performance for at least six months.

Allowance for loan losses

The allowance for loan losses is established through a provision for loan losses charged to earnings as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes the uncollectibility of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components.

General component

The general component is based on the following loan segments: residential real estate, commercial real estate, construction, commercial, home equity lines of credit and other consumer. Management considers a rolling average of historical losses for each segment based on a time frame appropriate to capture relevant loss data for each loan segment, generally three and 10 years. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume, concentrations and terms of loans; level of collateral protection; effects of changes in risk selection and underwriting standards; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no significant changes to the Company’s policies or methodology pertaining to the general component of the allowance during 2017 or 2016.

The qualitative factor adjustments are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate – The Company generally does not originate loans with a loan-to-value ratio greater than 80 percent and does not originate subprime loans. Most loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Commercial real estate – Loans in this segment are primarily income-producing properties in the Company’s primary market areas in eastern Massachusetts. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management typically obtains rent rolls annually and continually monitors the cash flows of these loans.

Construction – Loans in this segment include speculative construction loans primarily on residential properties for which payment is derived from the sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.    Residential construction loans in this segment also include loans to build one-to-four family owner-occupied properties which are subject to the same credit quality factors as residential real estate.

Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Home equity lines of credit – Loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Other consumer – Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

Allocated component

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the fair value of the loan or, if the loan is collateral dependent, by the fair value of the collateral, less estimated costs to sell. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan are lower than the carrying value of that loan. Large groups of smaller-balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify performing individual residential and consumer loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring ("TDR"). All TDRs are initially classified as impaired.

Unallocated component

An unallocated component is maintained to cover additional uncertainties in management’s estimation of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

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COMPREHENSIVE INCOME (Tables)

6 Months Ended

Jun. 30, 2017

Stockholders' Equity Note [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The components of accumulated other comprehensive income (loss) and related tax effects are as follows:

	June 30,		December 31,
	2017		2016
	(In thousands)
Unrealized holding gains (losses) on securities available for sale	$	203	$	(374)
Tax effect		(69)		145
Net-of tax amount	$	134	$	(229)

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SECURITIES AVAILABLE FOR SALE (Tables)

6 Months Ended

Jun. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Available-for-sale Securities [Table Text Block]

The amortized cost and fair value of securities available for sale, with gross unrealized gains and losses, follows:

	June 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
Residential mortgage-backed securities:
Government National Mortgage Association	$	3,619	$	47	$	(35)	$	3,631
Government-sponsored enterprises		12,507		110		(77)		12,540
SBA and other asset-backed securities		11,882		122		(75)		11,929
State and municipal bonds		12,380		226		(46)		12,560
Government-sponsored enterprise obligations		8,000		—		(131)		7,869
Corporate bonds		17,880		102		(40)		17,942
	$	66,268	$	607	$	(404)	$	66,471

	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
Residential mortgage-backed securities:
Government National Mortgage Association	$	3,876	$	55	$	(33)	$	3,898
Government-sponsored enterprises		13,134		73		(97)		13,110
SBA and other asset-backed securities		12,571		70		(140)		12,501
State and municipal bonds		9,533		93		(156)		9,470
Government-sponsored enterprise obligations		8,000		—		(197)		7,803
Corporate bonds		17,908		55		(97)		17,866
	$	65,022	$	346	$	(720)	$	64,648

Investments Classified by Contractual Maturity Date [Table Text Block]

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2017 are as follows. Expected maturities may differ from contractual maturities because the issuer, in certain instances, has the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(In thousands)
Within 1 year	$	3,019	$	3,020
After 1 year to 5 years		12,627		12,642
After 5 years to 10 years		15,044		15,066
After 10 years		7,570		7,643
		38,260		38,371
Mortgage- and asset-backed securities		28,008		28,100
	$	66,268	$	66,471

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Table Text Block]

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than Twelve Months				Over Twelve Months
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
	(In thousands)
June 30, 2017
Residential mortgage-backed securities:
Government National Mortgage Association	$	(15)	$	941	$	(20)	$	851
Government-sponsored enterprises		(56)		3,756		(21)		488
SBA and other asset-backed securities		(75)		3,379		—		—
State and municipal bonds		(45)		3,644		(1)		100
Government-sponsored enterprise obligations		(131)		7,869		—		—
Corporate bonds		(37)		2,718		(3)		994
	$	(359)	$	22,307	$	(45)	$	2,433
December 31, 2016
Residential mortgage-backed securities:
Government National Mortgage Association	$	(11)	$	1,214	$	(22)	$	849
Government-sponsored enterprises		(85)		6,771		(12)		540
SBA and other asset-backed securities		(115)		6,109		(25)		1,608
State and municipal bonds		(154)		5,257		(2)		396
Government-sponsored enterprise obligations		(197)		7,803		—		—
Corporate bonds		(93)		7,360		(4)		992
	$	(655)	$	34,514	$	(65)	$	4,385

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)

6 Months Ended

Jun. 30, 2017

Notes and Loans Payable, Current [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

A summary of the ending balances of loans is as follows:

	June 30,		December 31,
	2017		2016
	(In thousands)
Real estate loans:
Residential – fixed	$	26,086	$	18,573
Residential – variable		271,018		249,486
Commercial		123,882		121,134
Construction		118,320		110,390
		539,306		499,583
Commercial loans:
Secured		50,274		49,126
Unsecured		222		221
		50,496		49,347
Consumer loans:
Home equity lines of credit		33,015		32,437
Other		223		216
		33,238		32,653
Total loans		623,040		581,583
Less:
Allowance for loan losses		(5,543)		(5,432)
Net deferred origination costs (fees)		93		(20)
Loans, net	$	617,590	$	576,131

Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent [Table Text Block]

The following table summarizes the changes in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2017 and 2016:

	Residential		Commercial						Home		Other
	Real Estate		Real Estate		Construction		Commercial		Equity		Consumer		Unallocated		Total
	(In thousands)
Three Months Ended June 30, 2017
Allowance at March 31, 2017	$	1,487	$	1,134	$	1,695	$	710	$	211	$	3	$	181	$	5,421
Provision (credit) for loan losses		76		37		65		4		4		(1)		(63)		122
Allowance at June 30, 2017	$	1,563	$	1,171	$	1,760	$	714	$	215	$	2	$	118	$	5,543
Three Months Ended June 30, 2016
Allowance at March 31, 2016	$	1,520	$	1,043	$	1,587	$	589	$	221	$	2	$	212	$	5,174
Provision (credit) for loan losses		(45)		(7)		117		54		39		1		(34)		125
Loans charged off		(102)		—		—		—		(11)		—		—		(113)
Allowance at June 30, 2016	$	1,373	$	1,036	$	1,704	$	643	$	249	$	3	$	178	$	5,186
Six Months Ended June 30, 2017
Allowance at December 31, 2016	$	1,422	$	1,145	$	1,827	$	703	$	211	$	3	$	121	$	5,432
Provision (credit) for loan losses		141		26		(67)		11		4		10		(3)		122
Loans charged off		—		—		—		—		—		(11)		—		(11)
Allowance at June 30, 2017	$	1,563	$	1,171	$	1,760	$	714	$	215	$	2	$	118	$	5,543
Six Months Ended June 30, 2016
Allowance at December 31, 2014	$	1,490	$	1,025	$	1,684	$	509	$	238	$	2	$	164	$	5,112
Provision (credit) for loan losses		(15)		11		20		134		22		1		14		187
Loans charged off		(102)		—		—		—		(11)		—		—		(113)
Allowance at June 30, 2016	$	1,373	$	1,036	$	1,704	$	643	$	249	$	3	$	178	$	5,186

Allowance for Credit Losses on Financing Receivables [Table Text Block]

Additional information pertaining to the allowance for loan losses is as follows:

	Residential		Commercial						Home		Other
	Real Estate		Real Estate		Construction		Commercial		Equity		Consumer		Unallocated		Total
	(In thousands)
June 30, 2017
Allowance related to impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Allowance related to non-impaired loans		1,563		1,171		1,760		714		215		2		118		5,543
Total allowance	$	1,563	$	1,171	$	1,760	$	714	$	215	$	2	$	118	$	5,543
Impaired loan balances	$	175	$	582	$	—	$	—	$	—	$	—	$	—	$	757
Non-impaired loan balances		296,929		123,300		118,320		50,496		33,015		223		—		622,283
Total loans	$	297,104	$	123,882	$	118,320	$	50,496	$	33,015	$	223	$	—	$	623,040
December 31, 2016
Allowance related to impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Allowance related to non-impaired loans		1,422		1,145		1,827		703		211		3		121		5,432
Total allowance	$	1,422	$	1,145	$	1,827	$	703	$	211	$	3	$	121	$	5,432
Impaired loan balances	$	179		591	$	—	$	—	$	—	$	—	$	—	$	770
Non-impaired loan balances		267,880		120,543		110,390		49,347		32,437		216		—		580,813
Total loans	$	268,059	$	121,134	$	110,390	$	49,347	$	32,437	$	216	$	—	$	581,583

Past Due Financing Receivables [Table Text Block]

The following is a summary of past due and non-accrual loans:

									Past Due 90
					Past Due 90				Days or More
	30-59 Days		60-89 Days		Days or		Total		and Still		Non-accrual
	Past Due		Past Due		More		Past Due		Accruing		Loans
	(In thousands)
June 30, 2017
Commercial real estate	$	964	$	—	$	—	$	964	$	—	$	582
December 31, 2016
Commercial real estate	$	—	$	979	$	591	$	1,570	$	—	$	591
Home equity lines of credit		—		208		—		208		—		—
Total	$	—	$	1,187	$	591	$	1,778	$	—	$	591

Impaired Financing Receivables [Table Text Block]

The following is a summary of impaired loans:

	June 30, 2017				December 31, 2016
			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal
	Investment		Balance		Investment		Balance
	(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	175	$	193	$	179	$	196
Commercial real estate		582		714		591		646
Total impaired loans	$	757	$	907	$	770	$	842

Impaired Financing Receivables By Class Of Loans [Table Text Block]

Additional information pertaining to impaired loans follows:

	Three Months Ended June 30, 2017						Six Months Ended June 30, 2017
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
	(In thousands)
Residential real estate	$	176	$	2	$	—	$	177	$	3	$	—
Commercial real estate		581		43		43		583		43		43
Total	$	757	$	45	$	43	$	760	$	46	$	43

	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
	(In thousands)
Residential real estate	$	468	$	5	$	3	$	516	$	11	$	8
Commercial real estate		626		—		—		633		—		—
Commercial		8		—		—		9		—		—
Home equity lines of credit		32		—		—		33		1		1
Total	$	1,134	$	5	$	3	$	1,191	$	12	$	9

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

The following is a summary of troubled debt restructurings recorded for the three and six months ended June 30, 2017.

			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
	(In thousands)
Commercial real estate	$	1	$	572	$	582

Financing Receivable Credit Quality Indicators [Table Text Block]

The following table presents the Company’s loans by risk rating:

	June 30, 2017								December 31, 2016
	Commercial								Commercial
	Real Estate		Construction		Commercial		Total		Real Estate		Construction		Commercial		Total
	(In thousands)
Loans rated 1 -4	$	119,111	$	118,320	$	49,473	$	286,904	$	115,110	$	110,390	$	46,820	$	272,320
Loans rated 5		4,189		—		325		4,514		5,433		—		1,569		7,002
Loans rated 6		—		—		698		698		—		—		958		958
Loans rated 7		582		—		—		582		591		—		—		591
Total	$	123,882	$	118,320	$	50,496	$	292,698	$	121,134	$	110,390	$	49,347	$	280,871

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FAIR VALUES OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2017

Financial Liabilities Fair Value Disclosure [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

Assets and liabilities measured at fair value on a recurring basis at June 30, 2017 and December 31, 2016 are summarized below.

							Total
	Level 1		Level 2		Level 3		Fair Value
	(In thousands)
June 30, 2017
Assets
Securities available for sale	$	—	$	66,471	$	—	$	66,471
Forward loan sale commitments		—		24		—		24
Total assets	$	—	$	66,495	$	—	$	66,495
Liabilities
Derivative loan commitments	$	—	$	9	$	—	$	9
December 31, 2016
Assets
Securities available for sale	$	—	$	64,648	$	—	$	64,648
Forward loan sale commitments		—		72		—		72
Total assets	$	—	$	64,720	$	—	$	64,720
Liabilities
Derivative loan commitments	$	—	$	17	$	—	$	17

Fair Value Measurements, Nonrecurring [Table Text Block]

The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets.

There are no liabilities measured at fair value on a non-recurring basis at June 30, 2017 and December 31, 2016.

	June 30, 2017						December 31, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	(In thousands)
Loans held for sale	$	—	$	—	$	1,057	$	—	$	—	$	1,454

Gain Loss On Assets And Liabilities Measured At Fair Value On Nonrecurring Basis [Table Text Block]

The following table presents the total losses on loans held for sale and impaired loans for the three and six month periods ended June 30, 2017 and 2016.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
	(In thousands)
Loans held for sale	$	(5)	$	(8)	$	(5)	$	(8)
Impaired loans		—		(113)		—		(113)
	$	(5)	$	(121)	$	(5)	$	(121)

Fair Value, by Balance Sheet Grouping [Table Text Block]

Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.

	Fair Value
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
	(In thousands)
June 30, 2017
Financial assets:
Cash and cash equivalents	$	22,273	$	22,273	$	—	$	—	$	22,273
Certificates of deposit		100		100		—		—		100
Securities available for sale		66,471		—		66,471		—		66,471
FHLB stock		6,436		—		—		6,436		6,436
Loans held for sale		1,057		—		—		1,057		1,057
Loans, net		617,590		—		—		630,440		630,440
Accrued interest receivable		1,626		—		—		1,626		1,626
Forward loan sale commitments		24		—		—		24		24
Financial liabilities:
Deposits	$	535,234	$	—	$	—	$	536,311	$	536,311
Short-term borrowings		24,250		—		24,250		—		24,250
Long-term debt		100,848		—		101,109		—		101,109
Subordinated debt		9,786		—		—		9,552		9,552
Accrued interest payable		193		—		—		193		193
Derivative loan commitments		9		—		9		—		9
December 31, 2016
Financial assets:
Cash and cash equivalents	$	28,425	$	28,425	$	—	$	—	$	28,425
Certificate of deposit		100		100		—		—		100
Securities available for sale		64,648		—		64,648		—		64,648
FHLB stock		5,758		—		—		5,758		5,758
Loans held for sale		1,454		—		—		1,454		1,454
Loans, net		576,131		—		—		591,450		591,450
Accrued interest receivable		1,647		—		—		1,647		1,647
Forward loan sale commitments		72		—		72		—		72
Financial liabilities:
Deposits	$	522,810	$	—	$	—	$	523,479	$	523,479
Short-term borrowings		21,250		—		21,250		—		21,250
Long-term debt		83,020		—		83,254		—		83,254
Subordinated debt		9,769		—		—		9,506		9,506
Accrued interest payable		140		—		—		140		140
Derivative loan commitments		17		—		17		—		17

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EMPLOYEE STOCK OWNERSHIP PLAN (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Stock Ownership Plan ESOP Status Of Entity Shares Held [Table Text Block]

Shares held by the ESOP at June 30, 2017 include the following:

Allocated	54,144
Committed to be allocated	6,419
Unallocated	121,963
	182,526

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EQUITY INCENTIVE PLANS (Tables)

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

A summary of option activity under the 2012 Equity Incentive Plan for the six months ended June 30, 2017 is presented below:

					Weighted
					Average
			Weighted		Remaining
	Number of		Average		Contractual		Aggregate
Options	Shares		Exercise Price		Term		Intrinsic Value
	(In thousands)				(In years)		(In thousands)
Outstanding at beginning of period		222	$	16.02		5.92
Granted		—		—		—
Exercised		—		—		—
Forfeited		—		—		—
Outstanding at end of period		222	$	16.02		5.67	$	2,597
Options exercisable at end of period		158	$	15.40		5.32	$	1,879

Schedule of Nonvested Share Activity [Table Text Block]

The following table presents the activity in non-vested stock awards under the Equity Incentive Plans for the six months ended June 30, 2017:

	Number of		Grant-date
	Shares		Fair Value
	(In thousands)
Non-vested stock awards at beginning of year		51	$	19.38
Restricted shares granted		5		27.65
Non-vested stock awards at end of period		56	$	20.11

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EARNINGS PER COMMON SHARE (Tables)

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Earnings per common share have been computed as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
	(In thousands, except per share data)
Net income applicable to common stock	$	937	$	727	$	1,818	$	1,459
Average number of common shares issued		2,488		2,458		2,486		2,458
Less: Average unallocated ESOP shares		(123)		(136)		(125)		(138)
Average number of common shares outstanding used to calculate basic earnings per common share		2,365		2,322		2,361		2,320
Effect of dilutive stock options		85		30		85		26
Average number of common shares outstanding used to calculate diluted earnings per share		2,450		2,352		2,446		2,346
Earnings per common share:
Basic	$	0.40	$	0.31	$	0.77	$	0.63
Diluted	$	0.38	$	0.31	$	0.74	$	0.62

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LOAN POLICIES (Details Textual)	6 Months Ended
	Jun. 30, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan Payments Delinquency Period Beyond Which Loans Considered Non Accrual	90 days
Residential Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan To Value Ratio	80.00%
Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Time Period To Capture Relevant Loan Loss Data	10 years
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Time Period To Capture Relevant Loan Loss Data	3 years

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COMPREHENSIVE INCOME (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Unrealized holding gains (losses) on securities available for sale	$ 203	$ (374)
Tax effect	(69)	145
Net-of tax amount	$ 134	$ (229)

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SECURITIES AVAILABLE FOR SALE (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 66,268	$ 65,022
Gross Unrealized Gains	607	346
Gross Unrealized Losses	(404)	(720)
Fair Value	66,471	64,648
SBA and other asset-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	11,882	12,571
Gross Unrealized Gains	122	70
Gross Unrealized Losses	(75)	(140)
Fair Value	11,929	12,501
State and municipal bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	12,380	9,533
Gross Unrealized Gains	226	93
Gross Unrealized Losses	(46)	(156)
Fair Value	12,560	9,470
Government-sponsored enterprise obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	8,000	8,000
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(131)	(197)
Fair Value	7,869	7,803
Corporate bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	17,880	17,908
Gross Unrealized Gains	102	55
Gross Unrealized Losses	(40)	(97)
Fair Value	17,942	17,866
Residential mortgage-backed securities [Member] | Government National Mortgage Association [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,619	3,876
Gross Unrealized Gains	47	55
Gross Unrealized Losses	(35)	(33)
Fair Value	3,631	3,898
Residential mortgage-backed securities [Member] | Government-sponsored enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	12,507	13,134
Gross Unrealized Gains	110	73
Gross Unrealized Losses	(77)	(97)
Fair Value	$ 12,540	$ 13,110

XML

SECURITIES AVAILABLE FOR SALE (Details 1) $ in Thousands	Jun. 30, 2017 USD ($)
Available-for-sale Securities, Debt Maturities, Amortized Cost
Within 1 year	$ 3,019
After 1 year to 5 years	12,627
After 5 years to 10 years	15,044
After 10 years	7,570
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Amortized Cost Basis, Total	38,260
Mortgage- and asset-backed securities	28,008
Available-for-sale Debt Securities, Amortized Cost Basis, Total	66,268
Available-for-sale Securities, Debt Maturities, Fair Value
Within 1 year	3,020
After 1 year to 5 years	12,642
After 5 years to 10 years	15,066
After 10 years	7,643
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Fair Value Total	38,371
Mortgage- and asset-backed securities	28,100
Available-for-sale Securities, Debt Securities, Fair Value Total	$ 66,471

XML

SECURITIES AVAILABLE FOR SALE (Details 2) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months Gross Unrealized Losses	$ (359)	$ (655)
Less Than Twelve Months Fair Value	22,307	34,514
Over Twelve Months Gross Unrealized Losses	(45)	(65)
Over Twelve Months Fair Value	2,433	4,385
SBA and other asset-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months Gross Unrealized Losses	(75)	(115)
Less Than Twelve Months Fair Value	3,379	6,109
Over Twelve Months Gross Unrealized Losses	0	(25)
Over Twelve Months Fair Value	0	1,608
State and municipal bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months Gross Unrealized Losses	(45)	(154)
Less Than Twelve Months Fair Value	3,644	5,257
Over Twelve Months Gross Unrealized Losses	(1)	(2)
Over Twelve Months Fair Value	100	396
Government-sponsored enterprise obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months Gross Unrealized Losses	(131)	(197)
Less Than Twelve Months Fair Value	7,869	7,803
Over Twelve Months Gross Unrealized Losses	0	0
Over Twelve Months Fair Value	0	0
Corporate bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months Gross Unrealized Losses	(37)	(93)
Less Than Twelve Months Fair Value	2,718	7,360
Over Twelve Months Gross Unrealized Losses	(3)	(4)
Over Twelve Months Fair Value	994	992
Residential mortgage-backed securities [Member] | Government National Mortgage Association [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months Gross Unrealized Losses	(15)	(11)
Less Than Twelve Months Fair Value	941	1,214
Over Twelve Months Gross Unrealized Losses	(20)	(22)
Over Twelve Months Fair Value	851	849
Residential mortgage-backed securities [Member] | Government-sponsored enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months Gross Unrealized Losses	(56)	(85)
Less Than Twelve Months Fair Value	3,756	6,771
Over Twelve Months Gross Unrealized Losses	(21)	(12)
Over Twelve Months Fair Value	$ 488	$ 540

XML

SECURITIES AVAILABLE FOR SALE (Details Textual) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Schedule of Available-for-sale Securities [Line Items]
Unrealized Losses Debt Securities Aggregate Depreciation Percentage		1.60%
Proceeds from Sale of Available-for-sale Securities	$ 93	$ 0	$ 93
Available-for-sale Securities, Gross Realized Gains	16		16
Available-for-sale Securities, Gross Realized Losses	$ 0		$ 0

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Total loans	$ 623,040	$ 581,583
Less: Allowance for loan losses	(5,543)	(5,432)
Net deferred origination costs (fees)	93	(20)
Loans, net	617,590	576,131
Commercial loan [Member]
Total loans	50,496	49,347
Consumer loan [Member]
Total loans	33,238	32,653
Residential - fixed [Member]
Total loans	26,086	18,573
Residential - variable [Member]
Total loans	271,018	249,486
Commercial Real Estate [Member]
Total loans	123,882	121,134
Construction [Member]
Total loans	118,320	110,390
Secured [Member]
Total loans	50,274	49,126
Unsecured [Member]
Total loans	222	221
Home equity lines of credit [Member]
Total loans	33,015	32,437
Other Consumer [Member]
Total loans	223	216
Real estate loans [Member]
Total loans	$ 539,306	$ 499,583

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 1) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Allowance Beginning Balance	$ 5,421	$ 5,174	$ 5,432	$ 5,112
Provision (credit) for loan losses	122	125	122	187
Loans charged off		(113)	(11)	(113)
Allowance Ending Balance	5,543	5,186	5,543	5,186
Commercial [Member]
Allowance Beginning Balance	710	589	703	509
Provision (credit) for loan losses	4	54	11	134
Loans charged off		0	0	0
Allowance Ending Balance	714	643	714	643
Residential Real Estate [Member]
Allowance Beginning Balance	1,487	1,520	1,422	1,490
Provision (credit) for loan losses	76	(45)	141	(15)
Loans charged off		(102)	0	(102)
Allowance Ending Balance	1,563	1,373	1,563	1,373
Commercial Real Estate [Member]
Allowance Beginning Balance	1,134	1,043	1,145	1,025
Provision (credit) for loan losses	37	(7)	26	11
Loans charged off		0	0	0
Allowance Ending Balance	1,171	1,036	1,171	1,036
Construction [Member]
Allowance Beginning Balance	1,695	1,587	1,827	1,684
Provision (credit) for loan losses	65	117	(67)	20
Loans charged off		0	0	0
Allowance Ending Balance	1,760	1,704	1,760	1,704
Home equity lines of credit [Member]
Allowance Beginning Balance	211	221	211	238
Provision (credit) for loan losses	4	39	4	22
Loans charged off		(11)	0	(11)
Allowance Ending Balance	215	249	215	249
Other Consumer [Member]
Allowance Beginning Balance	3	2	3	2
Provision (credit) for loan losses	(1)	1	10	1
Loans charged off		0	(11)	0
Allowance Ending Balance	2	3	2	3
Unallocated [Member]
Allowance Beginning Balance	181	212	121	164
Provision (credit) for loan losses	(63)	(34)	(3)	14
Loans charged off		0	0	0
Allowance Ending Balance	$ 118	$ 178	$ 118	$ 178

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 2) - USD ($) $ in Thousands	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Allowance related to impaired loans	$ 0		$ 0
Allowance related to non-impaired loans	5,543		5,432
Total allowance	5,543	$ 5,421	5,432	$ 5,186	$ 5,174	$ 5,112
Impaired loan balances	757		770
Non-impaired loan balances	622,283		580,813
Total loans	623,040		581,583
Commercial [Member]
Allowance related to impaired loans	0		0
Allowance related to non-impaired loans	714		703
Total allowance	714	710	703	643	589	509
Impaired loan balances	0		0
Non-impaired loan balances	50,496		49,347
Total loans	50,496		49,347
Residential Real Estate [Member]
Allowance related to impaired loans	0		0
Allowance related to non-impaired loans	1,563		1,422
Total allowance	1,563	1,487	1,422	1,373	1,520	1,490
Impaired loan balances	175		179
Non-impaired loan balances	296,929		267,880
Total loans	297,104		268,059
Commercial Real Estate [Member]
Allowance related to impaired loans	0		0
Allowance related to non-impaired loans	1,171		1,145
Total allowance	1,171	1,134	1,145	1,036	1,043	1,025
Impaired loan balances	582		591
Non-impaired loan balances	123,300		120,543
Total loans	123,882		121,134
Construction [Member]
Allowance related to impaired loans	0		0
Allowance related to non-impaired loans	1,760		1,827
Total allowance	1,760	1,695	1,827	1,704	1,587	1,684
Impaired loan balances	0		0
Non-impaired loan balances	118,320		110,390
Total loans	118,320		110,390
Home equity lines of credit [Member]
Allowance related to impaired loans	0		0
Allowance related to non-impaired loans	215		211
Total allowance	215	211	211	249	221	238
Impaired loan balances	0		0
Non-impaired loan balances	33,015		32,437
Total loans	33,015		32,437
Other Consumer [Member]
Allowance related to impaired loans	0		0
Allowance related to non-impaired loans	2		3
Total allowance	2	3	3	3	2	2
Impaired loan balances	0		0
Non-impaired loan balances	223		216
Total loans	223		216
Unallocated [Member]
Allowance related to impaired loans	0		0
Allowance related to non-impaired loans	118		121
Total allowance	118	$ 181	121	$ 178	$ 212	$ 164
Impaired loan balances	0		0
Non-impaired loan balances	0		0
Total loans	$ 0		$ 0

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 3) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Total Past Due		$ 1,778
Past Due 90 Days or More and Still Accruing		0
Non-accrual Loans		591
Financing Receivables, 30 to 59 Days Past Due [Member]
Total Past Due		0
Financing Receivables, 60 to 89 Days Past Due [Member]
Total Past Due		1,187
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due		591
Commercial Real Estate [Member]
Total Past Due	$ 964	1,570
Past Due 90 Days or More and Still Accruing	0	0
Non-accrual Loans	582	591
Commercial Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total Past Due	964	0
Commercial Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total Past Due	0	979
Commercial Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due	$ 0	591
Home equity lines of credit [Member]
Total Past Due		208
Past Due 90 Days or More and Still Accruing		0
Non-accrual Loans		0
Home equity lines of credit [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Total Past Due		0
Home equity lines of credit [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Total Past Due		208
Home equity lines of credit [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due		$ 0

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 4) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Total impaired loans Recorded Investment	$ 757	$ 770
Total impaired loans Unpaid Principal Balance	907	842
Residential Real Estate [Member]
Impaired loans Recorded Investment, Without a Valuation Allowance	175	179
Impaired loans Unpaid Principal Balance, Without a Valuation Allowance	193	196
Commercial Real Estate [Member]
Impaired loans Recorded Investment, Without a Valuation Allowance	582	591
Impaired loans Unpaid Principal Balance, Without a Valuation Allowance	$ 714	$ 646

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 5) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Average Recorded Investment	$ 757	$ 1,134	$ 760	$ 1,191
Interest Income Recognized	45	5	46	12
Interest Income Recognized on Cash Basis	43	3	43	9
Commercial [Member]
Average Recorded Investment		8		9
Interest Income Recognized		0		0
Interest Income Recognized on Cash Basis		0		0
Residential real estate [Member]
Average Recorded Investment	176	468	177	516
Interest Income Recognized	2	5	3	11
Interest Income Recognized on Cash Basis	0	3	0	8
Commercial real estate [Member]
Average Recorded Investment	581	626	583	633
Interest Income Recognized	43	0	43	0
Interest Income Recognized on Cash Basis	$ 43	0	$ 43	0
Home equity lines of credit [Member]
Average Recorded Investment		32		33
Interest Income Recognized		0		1
Interest Income Recognized on Cash Basis		$ 0		$ 1

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 6) - Commercial Real Estate Portfolio Segment [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Financing Receivable, Modifications [Line Items]
Number of Contracts	1
Pre-Modification Outstanding Recorded Investment	$ 572
Post-Modification Outstanding Recorded Investment	$ 582

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 7) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Loans	$ 292,698	$ 280,871
Loans rated 1-4 [Member]
Loans	286,904	272,320
Loans rated 5 [Member]
Loans	4,514	7,002
Loans rated 6 [Member]
Loans	698	958
Loans rated 7 [Member]
Loans	582	591
Commercial Real Estate [Member]
Loans	123,882	121,134
Commercial Real Estate [Member] | Loans rated 1-4 [Member]
Loans	119,111	115,110
Commercial Real Estate [Member] | Loans rated 5 [Member]
Loans	4,189	5,433
Commercial Real Estate [Member] | Loans rated 6 [Member]
Loans	0	0
Commercial Real Estate [Member] | Loans rated 7 [Member]
Loans	582	591
Construction [Member]
Loans	118,320	110,390
Construction [Member] | Loans rated 1-4 [Member]
Loans	118,320	110,390
Construction [Member] | Loans rated 5 [Member]
Loans	0	0
Construction [Member] | Loans rated 6 [Member]
Loans	0	0
Construction [Member] | Loans rated 7 [Member]
Loans	0	0
Commercial [Member]
Loans	50,496	49,347
Commercial [Member] | Loans rated 1-4 [Member]
Loans	49,473	46,820
Commercial [Member] | Loans rated 5 [Member]
Loans	325	1,569
Commercial [Member] | Loans rated 6 [Member]
Loans	698	958
Commercial [Member] | Loans rated 7 [Member]
Loans	$ 0	$ 0

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details Textual) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Loans and Leases Receivable, Gross	$ 623,040	$ 581,583
Loan rated 9 [Member] | Maximum [Member] | Commercial Loan [Member]
Loans and Leases Receivable, Gross	$ 25
Credit Rating Eleven [Member] | Maximum [Member]
Period After Credit Rating Assignment	60 days

XML

FAIR VALUES OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	$ 66,495	$ 64,720
Derivative loan commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total liabilities	9	17
Forward loan sale commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	24
Total liabilities		72
Securities available for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	66,471	64,648
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Fair Value, Inputs, Level 1 [Member] | Derivative loan commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total liabilities	0	0
Fair Value, Inputs, Level 1 [Member] | Forward loan sale commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0
Total liabilities		0
Fair Value, Inputs, Level 1 [Member] | Securities available for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	66,495	64,720
Fair Value, Inputs, Level 2 [Member] | Derivative loan commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total liabilities	9	17
Fair Value, Inputs, Level 2 [Member] | Forward loan sale commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	24
Total liabilities		72
Fair Value, Inputs, Level 2 [Member] | Securities available for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	66,471	64,648
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0
Fair Value, Inputs, Level 3 [Member] | Derivative loan commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total liabilities	0	0
Fair Value, Inputs, Level 3 [Member] | Forward loan sale commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0
Total liabilities		0
Fair Value, Inputs, Level 3 [Member] | Securities available for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	$ 0	$ 0

XML

FAIR VALUES OF FINANCIAL INSTRUMENTS (Details 1) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Loans held for sale	$ 1,057	$ 1,454
Fair Value, Inputs, Level 1 [Member]
Loans held for sale	0	0
Fair Value, Inputs, Level 2 [Member]
Loans held for sale	0	0
Fair Value, Inputs, Level 3 [Member]
Loans held for sale	$ 1,057	$ 1,454

XML

FAIR VALUES OF FINANCIAL INSTRUMENTS (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Fair Value, Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total gain (Loss)	$ (5)	$ (121)	$ (5)	$ (121)
Loans Held For Sale [Member]
Fair Value, Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total gain (Loss)	(5)	(8)	(5)	(8)
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Non Recurring Basis [Line Items]
Total gain (Loss)	$ 0	$ (113)	$ 0	$ (113)

XML

FAIR VALUES OF FINANCIAL INSTRUMENTS (Details 3) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016	Dec. 31, 2015
Financial assets:
Cash and cash equivalents, Carrying Amount	$ 22,273	$ 28,425	$ 23,705	$ 28,178
Certificate of deposit, Carrying Amount	100	100
Securities available for sale, Carrying Amount	66,471	64,648
FHLB stock, Carrying Amount	6,436	5,758
Loans held for sale, Carrying Amount	1,057	1,454
Loans, net, Carrying Amount	617,590	576,131
Accrued interest receivable, Carrying Amount	1,626	1,647
Forward loan sale commitments, Carrying Amount	24	72
Cash and cash equivalents, Fair Value	22,273	28,425
Certificates of deposit, Fair Value	100	100
Securities available for sale, Fair Value	66,471	64,648
FHLB stock, Fair Value	6,436	5,758
Loans held for sale, Fair Value	1,057	1,454
Loans, net, Fair Value	630,440	591,450
Accrued interest receivable, Fair Value	1,626	1,647
Forward loan sale commitments, Fair Value	24	72
Financial liabilities:
Deposits, Carrying Amount	535,234	522,810
Short-term borrowings, Carrying Amount	24,250	21,250
Long-term debt, Carrying Amount	100,848	83,020
Subordinated debt, Carrying Amount	9,786	9,769
Accrued interest payable, Carrying Amount	193	140
Derivative loan commitments, Carrying Amount	9	17
Deposits, Fair Value	536,311	523,479
Short-term borrowings, Fair Value	24,250	21,250
Long-term debt, Fair Value	101,109	83,254
Subordinated debt, Fair Value	9,552	9,506
Accrued interest payable, Fair Value	193	140
Derivative loan commitments, Fair Value	9	17
Fair Value, Inputs, Level 1 [Member]
Financial assets:
Securities available for sale, Carrying Amount	0	0
Cash and cash equivalents, Fair Value	22,273	28,425
Certificates of deposit, Fair Value	100	100
Securities available for sale, Fair Value	0	0
FHLB stock, Fair Value	0	0
Loans held for sale, Fair Value	0	0
Loans, net, Fair Value	0	0
Accrued interest receivable, Fair Value	0	0
Forward loan sale commitments, Fair Value	0	0
Financial liabilities:
Derivative loan commitments, Carrying Amount	0	0
Deposits, Fair Value	0	0
Short-term borrowings, Fair Value	0	0
Long-term debt, Fair Value	0	0
Subordinated debt, Fair Value	0	0
Accrued interest payable, Fair Value	0	0
Derivative loan commitments, Fair Value	0	0
Fair Value, Inputs, Level 2 [Member]
Financial assets:
Securities available for sale, Carrying Amount	66,471	64,648
Cash and cash equivalents, Fair Value	0	0
Certificates of deposit, Fair Value	0	0
Securities available for sale, Fair Value	66,471	64,648
FHLB stock, Fair Value	0	0
Loans held for sale, Fair Value	0	0
Loans, net, Fair Value	0	0
Accrued interest receivable, Fair Value	0	0
Forward loan sale commitments, Fair Value	0	72
Financial liabilities:
Derivative loan commitments, Carrying Amount	9	17
Deposits, Fair Value	0	0
Short-term borrowings, Fair Value	24,250	21,250
Long-term debt, Fair Value	101,109	83,254
Subordinated debt, Fair Value	0	0
Accrued interest payable, Fair Value	0	0
Derivative loan commitments, Fair Value	9	17
Fair Value, Inputs, Level 3 [Member]
Financial assets:
Securities available for sale, Carrying Amount	0	0
Cash and cash equivalents, Fair Value	0	0
Certificates of deposit, Fair Value	0	0
Securities available for sale, Fair Value	0	0
FHLB stock, Fair Value	6,436	5,758
Loans held for sale, Fair Value	1,057	1,454
Loans, net, Fair Value	630,440	591,450
Accrued interest receivable, Fair Value	1,626	1,647
Forward loan sale commitments, Fair Value	24	0
Financial liabilities:
Derivative loan commitments, Carrying Amount	0	0
Deposits, Fair Value	536,311	523,479
Short-term borrowings, Fair Value	0	0
Long-term debt, Fair Value	0	0
Subordinated debt, Fair Value	9,552	9,506
Accrued interest payable, Fair Value	193	140
Derivative loan commitments, Fair Value	$ 0	$ 0

XML

EMPLOYEE STOCK OWNERSHIP PLAN (Details) - shares	Jun. 30, 2017	Jun. 30, 2016
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Allocated	54,144
Committed to be allocated	6,419	6,419
Unallocated	121,963
Employee Stock Ownership Plan (ESOP), Shares in ESOP	182,526

XML

EMPLOYEE STOCK OWNERSHIP PLAN (Details Textual) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2017	Jun. 30, 2016
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Employee Stock Ownership Plan ESOP Percent Of Shares Authorized To Be Purchased		7.30%
Employee Stock Ownership Plan ESOP Debt Structure Direct Loan Term		15 years
Employee Stock Ownership Plan ESOP Debt Structure Direct Loan Interest Rate		3.25%
Employee Stock Ownership Plan ESOP Cost Of Committed To Be Released Shares		$ 3,400
Employee Stock Ownership Plan (ESOP), Shares in ESOP	182,526	182,526
Employee Stock Ownership Plan (ESOP), Compensation Expense	$ 87	$ 174	$ 124

XML

EQUITY INCENTIVE PLANS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Options
Outstanding at beginning of period	222
Granted	0
Exercised	0
Forfeited	0
Outstanding at end of period	222	222
Options exercisable at end of period	158
Weighted Average Exercise Price
Outstanding at beginning of period	$ 16.02
Outstanding at end of period	16.02	$ 16.02
Options exercisable at end of period	$ 15.40
Weighted Average Remaining Contractual Term
Outstanding at beginning of period	5 years 8 months 1 day	5 years 11 months 1 day
Options exercisable at end of period	5 years 3 months 25 days
Aggregate intrinsic value
Aggregate intrinsic value	$ 2,597
Options exercisable at end of period	$ 1,879

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EQUITY INCENTIVE PLANS (Details 1) shares in Thousands	6 Months Ended
	Jun. 30, 2017 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Non-vested stock awards at beginning of year | shares	51
Restricted shares granted | shares	5
Non-vested stock awards at end of year | shares	56
Non-vested stock awards at beginning of year | $ / shares	$ 19.38
Restricted shares granted | $ / shares	27.65
Non-vested stock awards at end of year | $ / shares	$ 20.11

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EQUITY INCENTIVE PLANS (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense for non-vested stock options	$ 133		$ 133
Unrecognized compensation expense, recognition period			8 months 1 day
Compensation expense for stock award plan	113	$ 74	$ 214	$ 148
Recognize tax Benefit	45	28	86	59
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense for non-vested stock options	86		$ 86
Unrecognized compensation expense, recognition period			2 years 10 months 17 days
Recognize tax Benefit	9	9	$ 19	19
Share base compensation expenses applicable to stock option plan	$ 53	$ 53	$ 106	$ 106
2012 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity Incentive Plan, options granted	231,894		231,894
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			20.00%
2016 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity Incentive Plan, options granted	75,000		75,000

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EARNINGS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Schedule Of Computation Of Basic And Diluted Earnings Per Common Share [Line Items]
Net income applicable to common stock	$ 937	$ 727	$ 1,818	$ 1,459
Average number of common shares issued	2,488,000	2,458,000	2,486,000	2,458,000
Less: Average unallocated ESOP shares	(123,000)	(136,000)	(125,000)	(138,000)
Average number of common shares outstanding used to calculate basic earnings per common share	2,364,581	2,322,147	2,361,336	2,320,542
Effect of dilutive stock options	85,000	30,000	85,000	26,000
Average number of common shares outstanding used to calculate diluted earnings per share	2,449,413	2,352,092	2,445,712	2,345,946
Earnings per common share:
Basic	$ 0.40	$ 0.31	$ 0.77	$ 0.63
Diluted	$ 0.38	$ 0.31	$ 0.74	$ 0.62

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EARNINGS PER COMMON SHARE (Details Textual) - shares	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	43,400	43,400