SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | 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 No. 001-36702
Melrose Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Maryland | 47-0967316 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
638 Main Street, Melrose, Massachusetts | 02176 | |
(Address of Principal Executive Offices) | Zip Code |
(781) 665-2500
(Registrants telephone number)
N/A
(Former name or former address, 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 requirements for the past 90 days. YES ☒ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act. ( )
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if smaller reporting company) | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
As of August 14, 2017, 2,602,079 shares of the Registrants common stock, par value $0.01 per share, were issued and outstanding.
Form 10-Q
Page | ||||||
Part I. Financial Information | ||||||
Item 1. |
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Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016 |
1 | |||||
2 | ||||||
3 | ||||||
4 | ||||||
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016 (unaudited) |
5 | |||||
Notes to Condensed Consolidated Financial Statements (unaudited) |
6 | |||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
31 | ||||
Item 3. |
39 | |||||
Item 4. |
39 | |||||
Part II. Other Information | ||||||
Item 1. |
40 | |||||
Item 1A. |
40 | |||||
Item 2. |
40 | |||||
Item 3. |
40 | |||||
Item 4. |
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Item 5. |
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Item 6. |
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Signature Page | 41 |
Part I. Financial Information
Item 1. | Condensed Consolidated Financial Statements |
MELROSE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
June 30, 2017 |
December 31, 2016 |
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(unaudited) | ||||||||
ASSETS |
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Cash and due from banks |
$ | 13,502 | $ | 11,715 | ||||
Money market funds |
1,903 | 2,077 | ||||||
Federal funds sold |
3,896 | | ||||||
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Cash and cash equivalents |
19,301 | 13,792 | ||||||
Investments in available-for-sale securities (at fair value) |
31,226 | 31,831 | ||||||
Federal Home Loan Bank stock, at cost |
1,680 | 964 | ||||||
Loans, net of allowance for loan losses of $981 at June 30, 2017 and $890 at December 31, 2016 |
232,429 | 213,165 | ||||||
Premises and equipment, net |
1,490 | 1,248 | ||||||
Co-operative Central Bank deposit |
886 | 881 | ||||||
Bank-owned life insurance |
5,951 | 5,874 | ||||||
Accrued interest receivable |
637 | 572 | ||||||
Deferred tax asset, net |
272 | 120 | ||||||
Other assets |
260 | 199 | ||||||
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Total assets |
$ | 294,132 | $ | 268,646 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Deposits: |
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Noninterest-bearing |
$ | 19,553 | $ | 17,586 | ||||
Interest-bearing |
203,719 | 197,180 | ||||||
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Total deposits |
223,272 | 214,766 | ||||||
Federal Home Loan Bank advances |
26,000 | 10,000 | ||||||
Other liabilities |
574 | 576 | ||||||
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Total liabilities |
249,846 | 225,342 | ||||||
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Stockholders equity: |
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Common stock, par value $0.01 per share, authorized 15,000,000 shares; issued 2,602,079 shares at June 30, 2017 and December 31, 2016 |
26 | 26 | ||||||
Additional paid-in-capital |
23,380 | 23,292 | ||||||
Retained earnings |
22,860 | 21,912 | ||||||
Unearned compensation - ESOP (199,956 shares unallocated at June 30, 2017 |
(2,000 | ) | (2,037 | ) | ||||
Unearned compensation - restricted stock |
(518 | ) | (585 | ) | ||||
Accumulated other comprehensive income |
538 | 696 | ||||||
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Total stockholders equity |
44,286 | 43,304 | ||||||
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Total liabilities and stockholders equity |
$ | 294,132 | $ | 268,646 | ||||
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
MELROSE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Data)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Interest and dividend income: |
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Interest and fees on loans |
$ | 2,010 | $ | 1,563 | $ | 3,886 | $ | 3,017 | ||||||||
Interest and dividends on securities: |
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Taxable |
140 | 193 | 269 | 424 | ||||||||||||
Tax-exempt |
16 | 15 | 33 | 29 | ||||||||||||
Other interest |
29 | 16 | 50 | 29 | ||||||||||||
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Total interest and dividend income |
2,195 | 1,787 | 4,238 | 3,499 | ||||||||||||
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Interest expense: |
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Interest on deposits |
437 | 396 | 860 | 757 | ||||||||||||
Interest on Federal Home Loan Bank advances |
62 | | 105 | | ||||||||||||
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Total interest expense |
499 | 396 | 965 | 757 | ||||||||||||
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Net interest and dividend income |
1,696 | 1,391 | 3,273 | 2,742 | ||||||||||||
Provision for loan losses |
111 | 103 | 91 | 162 | ||||||||||||
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Net interest and dividend income after provision for loan losses |
1,585 | 1,288 | 3,182 | 2,580 | ||||||||||||
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Noninterest income: |
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Fees and service charges |
20 | 17 | 40 | 36 | ||||||||||||
Gain on sales of available-for-sale securities, net |
343 | 293 | 807 | 293 | ||||||||||||
Income on bank-owned life insurance |
28 | 24 | 50 | 45 | ||||||||||||
Other income |
2 | 2 | 4 | 7 | ||||||||||||
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Total noninterest income |
393 | 336 | 901 | 381 | ||||||||||||
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Noninterest expense: |
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Salaries and employee benefits |
814 | 687 | 1,621 | 1,363 | ||||||||||||
Occupancy expense |
82 | 76 | 152 | 148 | ||||||||||||
Equipment expense |
10 | 9 | 21 | 18 | ||||||||||||
Data processing expense |
101 | 90 | 197 | 172 | ||||||||||||
Advertising expense |
56 | 38 | 101 | 78 | ||||||||||||
Printing and supplies |
12 | 11 | 29 | 19 | ||||||||||||
FDIC assessment |
15 | 30 | 40 | 55 | ||||||||||||
Audits and examinations |
50 | 48 | 100 | 96 | ||||||||||||
Other professional services |
75 | 187 | 150 | 243 | ||||||||||||
Other expense |
62 | 36 | 106 | 75 | ||||||||||||
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Total noninterest expense |
1,277 | 1,212 | 2,517 | 2,267 | ||||||||||||
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Income before income tax expense |
701 | 412 | 1,566 | 694 | ||||||||||||
Income tax expense |
280 | 138 | 618 | 226 | ||||||||||||
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Net income |
$ | 421 | $ | 274 | $ | 948 | $ | 468 | ||||||||
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Weighted average common shares outstanding: |
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Basic |
2,366,230 | 2,457,190 | 2,364,195 | 2,492,613 | ||||||||||||
Diluted |
2,370,127 | 2,458,020 | 2,368,164 | 2,493,028 | ||||||||||||
Earnings per share: |
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Basic |
$ | 0.18 | $ | 0.11 | $ | 0.40 | $ | 0.19 | ||||||||
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Diluted |
$ | 0.18 | $ | 0.11 | $ | 0.40 | $ | 0.19 | ||||||||
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
MELROSE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income |
$ | 421 | $ | 274 | $ | 948 | $ | 468 | ||||||||
Other comprehensive (loss) income, net of tax: |
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Net unrealized holding gain on available-for-sale securities |
200 | 322 | 497 | 690 | ||||||||||||
Reclassification adjustment for net realized gain included in net income |
(343 | ) | (293 | ) | (807 | ) | (293 | ) | ||||||||
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Other comprehensive (loss) income before income tax effect |
(143 | ) | 29 | (310 | ) | 397 | ||||||||||
Income tax benefit (expense) |
75 | 20 | 152 | (100 | ) | |||||||||||
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Other comprehensive (loss) income, net of tax |
(68 | ) | 49 | (158 | ) | 297 | ||||||||||
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Comprehensive income |
$ | 353 | $ | 323 | $ | 790 | $ | 765 | ||||||||
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
MELROSE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
For the Six Months Ended June 30, 2017 and 2016
(In Thousands, Except Share Data)
(Unaudited)
Common Stock | Additional Paid-in- |
Retained | Unearned Compensation |
Unearned Compensation |
Accumulated Other Comprehensive |
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Shares | Amount | Capital | Earnings | - ESOP | - RSA | Income | Total | |||||||||||||||||||||||||
Balance, December 31, 2015 |
2,787,579 | $ | 28 | $ | 25,994 | $ | 20,490 | $ | (2,113 | ) | $ | | $ | 1,146 | $ | 45,545 | ||||||||||||||||
Net income |
| | | 468 | | | | 468 | ||||||||||||||||||||||||
Other comprehensive income, net of tax |
| | | | | | 297 | 297 | ||||||||||||||||||||||||
Restricted stock awarded |
44,300 | | 670 | | | (670 | ) | | | |||||||||||||||||||||||
Restricted stock award expense |
| | | | | 25 | | 25 | ||||||||||||||||||||||||
Stock option expense |
| | 21 | | | | | 21 | ||||||||||||||||||||||||
Buyback of common stock |
(208,600 | ) | (2 | ) | (3,192 | ) | | | | | (3,194 | ) | ||||||||||||||||||||
Common stock held by ESOP committed to be allocated (7,546 shares annually) |
| | 19 | | 38 | | | 57 | ||||||||||||||||||||||||
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Balance, June 30, 2016 |
2,623,279 | $ | 26 | $ | 23,512 | $ | 20,958 | $ | (2,075 | ) | $ | (645 | ) | $ | 1,443 | $ | 43,219 | |||||||||||||||
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Balance, December 31, 2016 |
2,602,079 | $ | 26 | $ | 23,292 | $ | 21,912 | $ | (2,037 | ) | $ | (585 | ) | $ | 696 | $ | 43,304 | |||||||||||||||
Net income |
| | | 948 | | | | 948 | ||||||||||||||||||||||||
Other comprehensive loss, net of tax |
| | | | | | (158 | ) | (158 | ) | ||||||||||||||||||||||
Shares repurchased for tax withholdings on stock-based compensation |
| | (22 | ) | | | | | (22 | ) | ||||||||||||||||||||||
Restricted stock award expense |
| | | | | 67 | | 67 | ||||||||||||||||||||||||
Stock option expense |
| | 83 | | | | | 83 | ||||||||||||||||||||||||
Common stock held by ESOP committed to be allocated (7,546 shares annually) |
| | 27 | | 37 | | | 64 | ||||||||||||||||||||||||
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Balance, June 30, 2017 |
2,602,079 | $ | 26 | $ | 23,380 | $ | 22,860 | $ | (2,000 | ) | $ | (518 | ) | $ | 538 | $ | 44,286 | |||||||||||||||
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
MELROSE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: |
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Net income |
$ | 948 | $ | 468 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Amortization of securities, net of accretion |
74 | 25 | ||||||
Gain on sales of available-for-sale securities, net |
(807 | ) | (293 | ) | ||||
Provision for loan losses |
91 | 162 | ||||||
Change in net deferred loan costs |
20 | 26 | ||||||
Change in unamortized premiums |
(60 | ) | | |||||
Depreciation and amortization |
48 | 42 | ||||||
Increase in accrued interest receivable |
(65 | ) | (84 | ) | ||||
Increase in other assets |
(61 | ) | (62 | ) | ||||
Decrease in other liabilities |
(2 | ) | (87 | ) | ||||
Income on bank-owned life insurance |
(50 | ) | (45 | ) | ||||
ESOP expense |
64 | 57 | ||||||
Stock-based compensation expense |
150 | 46 | ||||||
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Net cash provided by operating activities |
350 | 255 | ||||||
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Cash flows from investing activities: |
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Purchases of available-for-sale securities |
(2,952 | ) | (2,638 | ) | ||||
Proceeds from sales of available-for-sale securities |
1,544 | 7,864 | ||||||
Proceeds from maturities and calls of available-for-sale securities |
2,436 | 5,554 | ||||||
Purchase of Federal Home Loan Bank stock |
(716 | ) | (77 | ) | ||||
Increase in Cooperative Central Bank Deposit |
(5 | ) | | |||||
Loan originations and principal collections, net |
(9,421 | ) | (14,624 | ) | ||||
Loans purchased |
(9,894 | ) | (12,932 | ) | ||||
Capital expenditures |
(290 | ) | (41 | ) | ||||
Premiums paid on bank-owned life insurance |
(27 | ) | (27 | ) | ||||
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Net cash used in investing activities |
(19,325 | ) | (16,921 | ) | ||||
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Cash flows from financing activities: |
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Net increase in demand deposits, NOW and savings accounts |
4,283 | 3,372 | ||||||
Net increase in time deposits |
4,223 | 25,238 | ||||||
Proceeds from Federal Home Loan Bank advances |
16,000 | | ||||||
Payment of income taxes for shares withheld in stock based award activity |
(22 | ) | | |||||
Repurchase of Melrose Bancorp, Inc. common stock |
| (3,194 | ) | |||||
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Net cash provided by financing activities |
24,484 | 25,416 | ||||||
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Net increase in cash and cash equivalents |
5,509 | 8,750 | ||||||
Cash and cash equivalents at beginning of the period |
13,792 | 16,854 | ||||||
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Cash and cash equivalents at end of the period |
$ | 19,301 | $ | 25,604 | ||||
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Supplemental disclosures: |
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Interest paid |
$ | 970 | $ | 757 | ||||
Income taxes paid |
575 | 254 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Melrose Bancorp, Inc. and Subsidiary
Form 10-Q
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE 1 - NATURE OF OPERATIONS
Melrose Bancorp, Inc. (the Company) was incorporated in February 2014 under the laws of the State of Maryland. The Companys activity consists of owning and supervising its subsidiary, Melrose Cooperative Bank (the Bank). The Bank provides financial services to individuals, families and businesses through our full-service banking office. Our primary business activity consists of taking deposits from the general public in our market area and investing those deposits, together with funds generated from operations, in one- to- four family residential real estate loans, home equity loans and lines of credit, commercial real estate loans, and to a much lesser extent consumer loans. The Bank is a Massachusetts-chartered cooperative bank headquartered in Melrose, Massachusetts. The Bank is subject to the regulations of, and periodic examination by, the Massachusetts Division of Banks (DOB) and the Federal Deposit Insurance Corporation (FDIC). The Banks deposits are insured by the FDIC subject to limitations.
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and Rule 10-01 of Regulation S-X. Information included herein as of June 30, 2017 and for the interim periods ended June 30, 2017 and 2016 is unaudited; however, in the opinion of management, all adjustments considered necessary for a fair presentation have been included and were of a normal recurring nature. These statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Companys Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on March 21, 2017. The results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for future periods, including the year ending December 31, 2017.
The significant accounting policies are summarized below to assist the reader in better understanding the condensed consolidated financial statements and other data contained herein.
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank, and the Banks wholly-owned subsidiary, MCBSC, Inc., which is used to hold investment securities. All significant intercompany accounts and transactions have been eliminated in the consolidation.
USE OF ESTIMATES:
In preparing consolidated financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, impairment of securities and the valuation of deferred tax assets.
6
CASH AND CASH EQUIVALENTS:
For purposes of reporting cash flows, cash and cash equivalents include cash, amounts due from banks, money market funds and federal funds sold.
SECURITIES:
Investments in debt securities are adjusted for amortization of premiums and accretion of discounts computed so as to approximate the interest method. Gains or losses on sales of investment securities are computed on a specific identification basis.
The Company classifies all debt and equity securities as available-for-sale. Available-for-sale securities are carried at fair value on the consolidated balance sheets. Unrealized holding gains and losses are not included in earnings, but are reported as a net amount (less expected tax) in a separate component of stockholders equity until realized. The security classification may be modified after acquisition only under certain specified conditions.
For any debt security with a fair value less than its amortized cost basis, the Company will determine whether it has the intent to sell the debt security or whether it is more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis. If either condition is met, the Company will recognize a full impairment charge to earnings. For all other debt securities that are considered other-than-temporarily impaired and do not meet either condition, the credit loss portion of impairment will be recognized in earnings as realized losses. The other-than-temporary impairment related to all other factors will be recorded in other comprehensive income.
Declines in marketable equity securities below their cost that are deemed other-than-temporary are reflected in earnings as realized losses.
As a member of the Federal Home Loan Bank of Boston (FHLB), the Company is required to invest in $100 par value stock of the FHLB. The FHLB capital structure mandates that members must own stock as determined by their Total Stock Investment Requirement which is the sum of a members Membership Stock Investment Requirement and Activity-Based Stock Investment Requirement. Management evaluates the Companys investment in FHLB stock for other-than-temporary impairment at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation. Based on its most recent analysis of the FHLB as of June 30, 2017, management deems its investment in FHLB stock to be not other-than-temporarily impaired.
LOANS:
Loans receivable that management has the intent and ability to hold until maturity or payoff are reported at their outstanding principal balances adjusted for amounts due to borrowers on outstanding home equity lines of credit, commercial lines of credit and construction loans, any charge-offs, the allowance for loan losses and any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans.
Loan origination and commitment fees and certain direct origination costs are deferred, and the net amount amortized as an adjustment of the related loans yield. The Company is amortizing these amounts over the contractual lives of the related loans.
Residential real estate loans are generally placed on nonaccrual when reaching 90 days past due or are in the process of foreclosure. All closed-end consumer loans 90 days or more past due and any equity line in the process of foreclosure are placed on nonaccrual status. Secured consumer loans are written down to realizable value and unsecured consumer loans are charged off upon reaching 120 or 180 days past due depending on the type of loan. Commercial real estate loans and commercial business loans which are 90 days or more past due are generally placed on nonaccrual status, unless secured by sufficient cash or other assets immediately convertible to cash. When a loan has been placed on nonaccrual status, previously accrued and uncollected interest is reversed against interest on loans. A loan can be returned to accrual status when collectability of principal is reasonably assured and the loan has performed for a period of time, generally six months.
Cash receipts of interest income on impaired loans are credited to principal to the extent necessary to eliminate doubt as to the collectability of the net carrying amount of the loan. Some or all of the cash receipts of interest income on impaired loans are recognized as interest income if the remaining net carrying amount of the loan is deemed to be fully collectible. When recognition of interest income on an impaired loan on a cash basis is appropriate, the amount of income that is recognized is limited to that which would have been accrued on the net carrying amount of the loan at the contractual interest rate. Any cash interest payments received in excess of the limit and not applied to reduce the net carrying amount of the loan are recorded as recoveries of charge-offs until the charge-offs are fully recovered.
7
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a 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 and is based upon managements periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
BANK-OWNED LIFE INSURANCE:
The Company has purchased insurance policies on the lives of certain directors, executive officers and employees. Bank-owned life insurance policies are reflected on the consolidated balance sheets at cash surrender value. Changes in net cash surrender value of the policies, as well as insurance proceeds received, are reflected in non-interest income on the consolidated statements of income and are not subject to income taxes.
PREMISES AND EQUIPMENT:
Land is carried at cost. Buildings and equipment are stated at cost, less accumulated depreciation and amortization. Cost and related allowances for depreciation and amortization of premises and equipment retired or otherwise disposed of are removed from the respective accounts with any gain or loss included in income or expense. Depreciation and amortization are calculated principally on the straight-line method over the estimated useful lives of the assets. Estimated lives are 15 to 40 years for buildings and 3 to 10 years for furniture and equipment.
Premises and equipment are periodically evaluated for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Impairment exists when the expected undiscounted future cash flows of premises and equipment are less than its carrying amount. In that event, the Company records a loss for the difference between the carrying amount and the fair value of the asset based on quoted market prices, if applicable, or a discounted cash flow analysis.
ADVERTISING:
The Company directly expenses costs associated with advertising as they are incurred.
INCOME TAXES:
The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are established for the temporary differences between the accounting basis and the tax basis of the Companys assets and liabilities at enacted tax rates expected to be in effect when the amounts related to such temporary differences are realized or settled.
EMPLOYEE STOCK OWNERSHIP PLAN:
Compensation expense for the Employee Stock Ownership Plan (ESOP) is recorded at an amount equal to the shares allocated by the ESOP multiplied by the average fair value of the shares during the period. Unearned compensation applicable to the ESOP is reflected as a reduction of stockholders equity in the consolidated balance sheets. The difference between the average fair value and the cost of shares allocated by the ESOP is recorded as an adjustment to additional paid-in-capital.
STOCK-BASED COMPENSATION:
The Company recognizes stock-based compensation based on the grant-date fair value of the award. Forfeitures will be recognized when they occur. The Company values share-based stock option awards granted using the Black-Scholes option-pricing model. The Company recognizes compensation expense for its awards on a straight-line basis over the requisite service period for the entire award (straight-line attribution method), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date fair value of the award that is vested at that time.
8
EARNINGS PER SHARE (EPS):
Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding adjusted to exclude the weighted average number of unallocated shares held by the ESOP. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings of the entity. For the purposes of computing diluted EPS, the treasury stock method is used.
The calculation of basic and diluted EPS (unaudited) is presented below.
Three Months Ended June 30, 2017 |
Three Months Ended June 30, 2016 |
Six Months Ended June 30, 2017 |
Six Months Ended June 30, 2016 |
|||||||||||||
(In Thousands, except share data) | ||||||||||||||||
Net income |
$ | 421 | $ | 274 | $ | 948 | $ | 468 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic Common Shares: |
||||||||||||||||
Weighted average common shares outstanding |
2,602,079 | 2,665,635 | 2,602,079 | 2,702,001 | ||||||||||||
Weighted average shares - unearned restricted stock |
(34,950 | ) | | (36,042 | ) | | ||||||||||
Weighted average unallocated ESOP shares |
(200,899 | ) | (208,445 | ) | (201,842 | ) | (209,388 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic weighted average shares outstanding |
2,366,230 | 2,457,190 | 2,364,195 | 2,492,613 | ||||||||||||
Dilutive effect of unvested restricted stock awards |
3,897 | 830 | 3,969 | 415 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted weighted average shares outstanding |
2,370,127 | 2,458,020 | 2,368,164 | 2,493,028 | ||||||||||||
Basic earnings per share |
$ | 0.18 | $ | 0.11 | $ | 0.40 | $ | 0.19 | ||||||||
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|
|
|||||||||
Diluted earnings per share (1) |
$ | 0.18 | $ | 0.11 | $ | 0.40 | $ | 0.19 | ||||||||
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|
|
(1) | Options to purchase 224,200 shares, representing all outstanding options, were not included in the computation of diluted earnings per share for the three and six months ended June 30, 2017 and 2016, respectively, because the effect is anti-dilutive. |
FAIR VALUES OF FINANCIAL INSTRUMENTS:
Accounting Standards Codification (ASC) 825, Financial Instruments, requires that the Company disclose the estimated fair value for its financial instruments. Fair value methods and assumptions used by the Company in estimating its fair value disclosures are as follows:
Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate fair value.
Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.
Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.
Accrued interest receivable: The carrying amount of accrued interest receivable approximates fair value.
Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market 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 certificate accounts are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on certificate accounts.
Federal Home Loan Bank advances: Fair values for Federal Home Loan Bank advances are estimated using a discounted cash flow technique that applies interest rates currently being offered on advances to a schedule of aggregate expected monthly maturities on Federal Home Loan Bank advances.
9
RECENT ACCOUNTING PRONOUNCEMENTS:
As an emerging growth company, as defined in Title 1 of Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, the consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. As of June 30, 2017, there is no significant difference in the comparability of the financial statements as a result of this extended transition period.
In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01, Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments and makes targeted improvements to GAAP as follows:
1. | Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, the entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same manner. |
2. | Simplify the impairment assessment of equity investments without determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. |
3. | Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. |
4. | Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. |
5. | Require an entity to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. |
6. | Require separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. |
7. | Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entitys other deferred tax assets. |
Under the extended transition period for an emerging growth company, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of item 5 above is permitted as of the beginning of fiscal years or interim periods for which financial statements have not been issued. Early adoption of all other amendments in this ASU is not permitted. The Company is currently evaluating the amendments of ASU No. 2016-01 to determine the potential impact the new standard will have on the Companys consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU was issued to increase transparency and comparability among organizations by requiring reporting entities to recognize all leases, including operating, as lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. Under the extended transition period for an emerging growth company, the amendments in this ASU are effective for fiscal years beginning after December 31, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements.
10
In March 2016, the FASB issued ASU No. 2016-09, Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. Some of the key provisions of this new ASU include: (1) companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital (APIC). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, and APIC pools will be eliminated. The guidance also eliminates the requirement that excess tax benefits be realized before companies can recognize them. In addition, the guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity; (2) increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employers statutory income tax withholding obligation. The new guidance will also require an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on its statement of cash flows (current guidance did not specify how these cash flows should be classified); and (3) permit companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. Under the extended transition period for an emerging growth company, ASU No. 2016-09 is effective for annual reporting periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 31, 2018. Early adoption is permitted, but all of the guidance must be adopted in the same period. The Company has adopted this ASU early during the annual reporting period ending December 31, 2017. Forfeitures will be recognized when they occur. The Company has evaluated the provisions of ASU No. 2016-09 and determined the new standard will have an immaterial effect on the Companys consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. Under the extended transition period for an emerging growth company, this update will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted in interim and annual reporting periods beginning after December 15, 2018. The Company is currently evaluating the amendments of ASU No. 2016-13 to determine the potential impact the new standard will have on the Companys consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. Current GAAP is unclear or does not include specific guidance on how to classify certain transactions in the statement of cash flows. This ASU is intended to reduce diversity in practice in how eight particular transactions are classified in the statement of cash flows. Under the extended transition period for an emerging growth company, this update will be effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, provided that all of the amendments are adopted in the same period. Entities will be required to apply the guidance retrospectively. If it is impracticable to apply to the guidance retrospectively for an issue, the amendments related to that issue would be applied prospectively. As this guidance only affects the classification with the statement of cash flows, ASU No. 2016-15 is not expected to have a material impact on the Companys consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18 to provide clarifying guidance on the classification and presentation of changes in restricted cash on an entitys statements of cash flows. The guidance requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amended guidance is effective for the Company on January 1, 2018, with an early adoption permitted, and is to be applied retrospectively to all periods presented. As this guidance only affects the classification within the statement of cash flows, ASU 2016-18 is not expected to have a material impact on the Companys consolidated financial statements.
11
In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities. This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company anticipates the adoption of ASU No. 2017-08 will not have a material impact on the consolidated financial statements.
12
NOTE 3 - INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
Debt and equity securities have been classified in the consolidated balance sheets according to managements intent. The amortized cost basis of securities and their approximate fair values are as follows as of June 30, 2017 (unaudited) and December 31, 2016:
Amortized Cost Basis |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
(In Thousands) | ||||||||||||||||
June 30, 2017: |
||||||||||||||||
U.S. Government and federal agency obligations |
$ | 7,012 | $ | 1 | $ | 84 | $ | 6,929 | ||||||||
Debt securities issued by states of the United States and political subdivisions of the states |
2,685 | 26 | 20 | 2,691 | ||||||||||||
Corporate bonds and notes |
11,533 | 35 | 40 | 11,528 | ||||||||||||
Preferred stock |
3,000 | 49 | | 3,049 | ||||||||||||
Mortgage-backed securities |
1,711 | | 45 | 1,666 | ||||||||||||
Marketable equity securities |
4,385 | 978 | | 5,363 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
$ | 30,326 | $ | 1,089 | $ | 189 | $ | 31,226 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2016: |
||||||||||||||||
U.S. Government and federal agency obligations |
$ | 5,819 | $ | | $ | 131 | $ | 5,688 | ||||||||
Debt securities issued by states of the United States and political subdivisions of the states |
2,695 | 2 | 41 | 2,656 | ||||||||||||
Corporate bonds and notes |
12,537 | 17 | 61 | 12,493 | ||||||||||||
Preferred stock |
3,000 | 20 | 82 | 2,938 | ||||||||||||
Mortgage-backed securities |
1,498 | | 66 | 1,432 | ||||||||||||
Marketable equity securities |
5,072 | 1,557 | 5 | 6,624 | ||||||||||||
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|
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|
|
|||||||||
$ | 30,621 | $ | 1,596 | $ | 386 | $ | 31,831 | |||||||||
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13
The scheduled maturities of debt securities were as follows as of June 30, 2017 (unaudited):
Fair Value |
||||
(In Thousands) | ||||
Due within one year |
$ | 2,170 | ||
Due after one year through five years |
14,124 | |||
Due after five years through ten years |
2,265 | |||
Due after ten years |
2,858 | |||
Mortgage-backed securities |
1,666 | |||
Asset-backed securities |
1,768 | |||
|
|
|||
$ | 24,851 | |||
|
|
Not included in the maturity table above is preferred stock with no stated maturity of $1,012,000 at June 30, 2017 (unaudited).
There were no securities of issuers whose aggregate carrying amount exceeded 10% of stockholders equity as of June 30, 2017 (unaudited) and December 31, 2016.
During the three and six months ended June 30, 2017 (unaudited) proceeds from the sales of available-for-sale securities were $650,000 and $1,544,000, respectively, and gross realized gains on these sales amounted to $343,000 and $807,000, respectively. The tax expense on the realized gains during the three and six months ended June 30, 2017 was $133,000 and $315,000, respectively. During the three and six months ended June 30, 2016 (unaudited) proceeds from the sales of available-for-sale securities were $7,864,000 and gross realized gains on these sales amounted to $293,000. The tax expense on the realized gains during the three and six months ended June 30, 2016 was $96,000.
The Company had no pledged securities as of June 30, 2017 (unaudited) and December 31, 2016.
14
The aggregate fair value and unrealized losses of securities that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more, and are not other-than-temporarily impaired, are as follows as of June 30, 2017 (unaudited) and December 31, 2016:
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
|||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
June 30, 2017 |
|
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U.S. government and federal agency obligations |
$ | 2,996 | $ | 10 | $ | 3,042 | $ | 74 | $ | 6,038 | $ | 84 | ||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states |
298 | 5 | 242 | 15 | 540 | 20 | ||||||||||||||||||
Corporate bonds and notes |
5,455 | 38 | 498 | 2 | 5,953 | 40 | ||||||||||||||||||
Mortgage-backed securities |
| | 1,203 | 45 | 1,203 | 45 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total temporarily impaired securities |
$ | 8,749 | $ | 53 | $ | 4,985 | $ | 136 | $ | 13,734 | $ | 189 | ||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2016 |
|
|||||||||||||||||||||||
U.S. government and federal agency obligations |
$ | 4,359 | $ | 59 | $ | 1,328 | $ | 72 | $ | 5,687 | $ | 131 | ||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states |
1,760 | 28 | 245 | 13 | 2,005 | 41 | ||||||||||||||||||
Corporate bonds and notes |
5,784 | 61 | | | 5,784 | 61 | ||||||||||||||||||
Preferred stock |
1,918 | 82 | | | 1,918 | 82 | ||||||||||||||||||
Mortgage-backed securities |
370 | 8 | 1,062 | 58 | 1,432 | 66 | ||||||||||||||||||
Marketable equity securities |
2,235 | 5 | | | 2,235 | 5 | ||||||||||||||||||
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|
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|
|
|
|||||||||||||
Total temporarily impaired securities |
$ | 16,426 | $ | 243 | $ | 2,635 | $ | 143 | $ | 19,061 | $ | 386 | ||||||||||||
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|
The Company conducts periodic reviews of investment securities with unrealized losses to evaluate whether the impairment is other-than-temporary. The Companys review for impairment generally includes a determination of the cause, severity and duration of the impairment; and an analysis of both positive and negative evidence available. The Company also determines if it has the ability and intent to hold the investment for a period of time sufficient to allow for anticipated recovery to cost basis. In regard to corporate debt, the Company also considers the issuers current financial condition and its ability to make future scheduled interest and principal payments on a timely basis in assessing other-than-temporary impairment.
15
During the three and six months ended June 30, 2017 and 2016, the Company had no writedowns of securities. A summary of the Companys reviews of investment securities deemed to be temporarily impaired is as follows:
Unrealized losses on U.S. Government and federal agency obligations amounted to $84,000 and consisted of twelve securities. The unrealized losses on all but one of these debt securities were individually less than 5% of amortized cost basis, with one of these U.S. government and federal agency obligations at 5.3%. Unrealized losses on municipal bonds amounted to $20,000 and consisted of two securities. The unrealized losses on these two debt securities were individually 1.7% and 5.9% of amortized cost basis. Unrealized losses on corporate bonds amounted to $40,000 and consisted of ten securities. The unrealized losses on all but one of these debt securities were individually less than 2.0% of amortized cost basis, with one of these corporate bonds at 2.36%. Unrealized losses on mortgage-backed securities amounted to $45,000 and consisted of four securities. The unrealized losses on these debt securities were 1.4%, 3.3%, 5.1% and 6.5% of amortized cost basis. These unrealized losses relate principally to the effect of interest rate changes on the fair value of debt securities and not to 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 basis, which may be at maturity, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2017.
16
NOTE 4 - LOANS
Loans consisted of the following at:
June 30, | December 31, | |||||||
2017 | 2016 | |||||||
(In Thousands) | ||||||||
(unaudited) | ||||||||
Real estate loans: |
||||||||
One-to four-family residential |
$ | 182,036 | $ | 168,111 | ||||
Home equity loans and lines of credit |
11,511 | 10,720 | ||||||
Commercial |
23,648 | 23,011 | ||||||
Construction |
15,721 | 11,738 | ||||||
Consumer loans |
50 | 71 | ||||||
|
|
|
|
|||||
Total loans |
232,966 | 213,651 | ||||||
Allowance for loan losses |
(981 | ) | (890 | ) | ||||
Deferred loan costs, net |
12 | 32 | ||||||
Unamortized premiums |
432 | 372 | ||||||
|
|
|
|
|||||
Net loans |
$ | 232,429 | $ | 213,165 | ||||
|
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|
|
17
The following tables set forth information on the allowance for loan losses at and for the periods ending June 30, 2017 and 2016 (unaudited) and as of December 31, 2016:
Real Estate: | ||||||||||||||||||||||||||||
One- to four- family Residential |
Home Equity Loans and Lines of Credit |
Commercial | Construction | Consumer Loans |
Unallocated | Total | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
At June 30, 2017 (unaudited) |
|
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Allowance for loan losses: |
|
|||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Ending balance: |
|
|||||||||||||||||||||||||||
Collectively evaluated for impairment |
451 | 52 | 317 | 131 | 1 | 29 | 981 | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total allowance for loan losses ending balance |
$ | 451 | $ | 52 | $ | 317 | $ | 131 | $ | 1 | $ | 29 | $ | 981 | ||||||||||||||
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|
|
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|
|
|
|||||||||||||||
Loans: |
|
|||||||||||||||||||||||||||
Ending balance: |
|
|||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Ending balance: |
|
|||||||||||||||||||||||||||
Collectively evaluated for impairment |
182,036 | 11,511 | 23,648 | 15,721 | 50 | | 232,966 | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total loans ending balance |
$ | 182,036 | $ | 11,511 | $ | 23,648 | $ | 15,721 | $ | 50 | $ | | $ | 232,966 | ||||||||||||||
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|
|||||||||||||||
Real Estate: | ||||||||||||||||||||||||||||
One- to four- family Residential |
Home Equity Loans and Lines of Credit |
Commercial | Construction | Consumer Loans |
Unallocated | Total | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
December 31, 2016 |
||||||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||||||
Ending Balance: |
||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Ending balance: |
||||||||||||||||||||||||||||
Collectively evaluated for impairment |
418 | 49 | 276 | 117 | 1 | 29 | 890 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total allowance for loan losses ending balance |
$ | 418 | $ | 49 | $ | 276 | $ | 117 | $ | 1 | $ | 29 | $ | 890 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Loans: |
||||||||||||||||||||||||||||
Ending balance: |
||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Ending balance: |
||||||||||||||||||||||||||||
Collectively evaluated for impairment |
168,111 | 10,720 | 23,011 | 11,738 | 71 | | 213,651 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total loans ending balance |
$ | 168,111 | $ | 10,720 | $ | 23,011 | $ | 11,738 | $ | 71 | $ | | $ | 213,651 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Real Estate: | ||||||||||||||||||||||||||||
One- to four- family Residential |
Home Equity Loans and Lines of Credit |
Commercial | Construction | Consumer Loans |
Unallocated | Total | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Six Months Ended June 30, 2017 (unaudited) |
||||||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||||||
Beginning balance |
$ | 418 | $ | 49 | $ | 276 | $ | 117 | $ | 1 | $ | 29 | $ | 890 | ||||||||||||||
Charge offs |
| | | | | | | |||||||||||||||||||||
Recoveries |
| | | | | | | |||||||||||||||||||||
Provision |
33 | 3 | 41 | 14 | | | 91 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Ending balance |
$ | 451 | $ | 52 | $ | 317 | $ | 131 | $ | 1 | $ | 29 | $ | 981 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Real Estate: | ||||||||||||||||||||||||||||
One- to four- family Residential |
Home Equity Loans and Lines of Credit |
Commercial | Construction | Consumer Loans |
Unallocated | Total | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Six Months Ended June 30, 2016 (unaudited) |
||||||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||||||
Beginning balance |
$ | 331 | $ | 49 | $ | 150 | $ | 40 | $ | 1 | $ | 9 | $ | 580 | ||||||||||||||
Charge offs |
| | | | | | | |||||||||||||||||||||
Recoveries |
| | | | | | | |||||||||||||||||||||
Provision (benefit) |
35 | | 102 | 28 | | (3 | ) | 162 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Ending balance |
$ | 366 | $ | 49 | $ | 252 | $ | 68 | $ | 1 | $ | 6 | $ | 742 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Real Estate: | ||||||||||||||||||||||||||||
One- to four- family Residential |
Home Equity Loans and Lines of Credit |
Commercial | Construction | Consumer Loans |
Unallocated | Total | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Three Months Ended June 30, 2017 (unaudited) |
||||||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||||||
Beginning balance |
$ | 442 | $ | 50 | $ | 260 | $ | 98 | $ | 1 | $ | 19 | $ | 870 | ||||||||||||||
Charge offs |
| | | | | | | |||||||||||||||||||||
Recoveries |
| | | | | | | |||||||||||||||||||||
Provision |
9 | 2 | 57 | 33 | | 10 | 111 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Ending balance |
$ | 451 | $ | 52 | $ | 317 | $ | 131 | $ | 1 | $ | 29 | $ | 981 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Real Estate: | ||||||||||||||||||||||||||||
One- to four- family Residential |
Home Equity Loans and Lines of Credit |
Commercial | Construction | Consumer Loans |
Unallocated | Total | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Three Months Ended June 30, 2016 (unaudited) |
||||||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||||||
Beginning balance |
$ | 339 | $ | 49 | $ | 211 | $ | 40 | $ | | $ | | $ | 639 | ||||||||||||||
Charge offs |
| | | | | | | |||||||||||||||||||||
Recoveries |
| | | | | | | |||||||||||||||||||||
Provision |
27 | | 41 | 28 | 1 | 6 | 103 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Ending balance |
$ | 366 | $ | 49 | $ | 252 | $ | 68 | $ | 1 | $ | 6 | $ | 742 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
The following tables set forth information regarding nonaccrual loans and past-due loans as of June 30, 2017 (unaudited) and December 31, 2016:
30 - 59 Days Past Due |
60 - 89 Days Past Due |
90 Days or More Past Due |
Total Past Due |
Total Current |
Total | 90 Days or More Past Due and Accruing |
Non- Accrual |
|||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||
At June 30, 2017 (unaudited) |
||||||||||||||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||||||||||||||
One-to four-family residential |
$ | 147 | $ | 88 | $ | 319 | $ | 554 | $ | 181,482 | $ | 182,036 | $ | | $ | 511 | ||||||||||||||||
Home equity loans and lines of credit |
| | | | 11,511 | 11,511 | | | ||||||||||||||||||||||||
Commercial |
| | | | 23,648 | 23,648 | | | ||||||||||||||||||||||||
Construction |
| | | | 15,721 | 15,721 | | | ||||||||||||||||||||||||
Consumer loans |
| | | | 50 | 50 | | | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 147 | $ | 88 | $ | 319 | $ | 554 | $ | 232,412 | $ | 232,966 | $ | | $ | 511 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
At December 31, 2016 |
||||||||||||||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||||||||||||||
One-to four-family residential |
$ | 518 | $ | 9 | $ | | $ | 527 | $ | 167,584 | $ | 168,111 | $ | | $ | 9 | ||||||||||||||||
Home equity loans and lines of credit |
| | | | 10,720 | 10,720 | | | ||||||||||||||||||||||||
Commercial |
| | | | 23,011 | 23,011 | | | ||||||||||||||||||||||||
Construction |
| | | | 11,738 | 11,738 | | | ||||||||||||||||||||||||
Consumer loans |
| | | | 71 | 71 | | | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 518 | $ | 9 | $ | | $ | 527 | $ | 213,124 | $ | 213,651 | $ | | $ | 9 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and during the three and six months ended June 30, 2017 and 2016 (unaudited) there were no loans that met the definition of an impaired loan in ASC 310-10-35.
During the three and six months ended June 30, 2017 and 2016 (unaudited) there were no loans modified that met the definition of a troubled debt restructured loan in ASC 310-40.
As of June 30, 2017 (unaudited) there is one consumer mortgage loan collateralized by residential real estate property in the process of foreclosure with a recorded investment of $319,000. As of December 31, 2016, the Bank had one consumer mortgage loan with a recorded balance of $321,000 in the process of foreclosure.
Credit Quality Information
The Company has established a 11 point internal loan rating system for commercial real estate, construction and commercial loans. For residential real estate and consumer loans, the Company initially assesses credit quality based upon the borrowers ability to pay and subsequently monitors these loans based on the
20
borrowers ability to pay. The new risk rating system will assist the Company in better understanding the risk inherent in each loan. The new loan ratings are as follows:
Loans rated 1: Secured by cash collateral or highly liquid diversified marketable securities.
Loans rated 2 3: Strongest quality loans in the portfolio not secured by cash. Defined by consistent, solid profits, strong cash flow and are well secured. Very little vulnerability to changing economic conditions and compare favorably to their industry.
Loans rated 4 5: These loans are pass rated. Borrower will show average to strong cash flow, strong to adequate collateral coverage, and will have a generally sound balance sheet. Inclusive in the 5 rating are all open and closed end residential and retail loans which are paying as agreed.
Loans rated 6: Loans with above average risk but still considered pass. Generally this rating is reserved for projects currently under construction or borrowers with modest cash flow, although still meeting all loan covenants.
Loans rated 6W: Contain all the risks of a 6 rated credit but have an inherent weakness that requires close monitoring. This rating also generally includes open and closed-end residential and retail loans which are greater than 30 days past due but display no other inherent weakness.
Loans rated 7: Potential weaknesses which warrant managements close attention. If weaknesses are uncorrected, repayment prospects may be weakened. This is typically a transitional rating.
Loans rated 8: Considered substandard. There is a likelihood of loss if the deficiencies are not corrected. Generally, open and closed end retail loans, as well as automotive and other consumer loans past 90 cumulative days from the contractual due date should be classified as an 8.
Loans rated 9: Borrower has a pronounced weakness and all current information indicates collection or liquidation of all debts in full is improbable and highly questionable.
Loans rated 10: Uncollectable and a loss will be taken. Open and closed end loans secured by residential real estate that are beyond 180 days past due will be assessed for value and any outstanding loan balance in excess of said value, less cost to sell, will be classified as a 10.
On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate and construction loans over $350,000.
As of June 30, 2017 (unaudited), there were no one- to four- family residential real estate loans that had a risk rating of 8 - substandard. There was one, one- to four- family residential real estate loan with a balance of $319,000 with a risk rating of 7, and two one- to four- family residential real estate loans with balances totaling $281,000 with a risk rating of 6W and all other loans outstanding had a risk rating of 1 to 6 - pass.
As of December 31, 2016, one- to four- family residential real estate loans with balances totaling $287,000 had a risk rating of 8 - substandard and all other loans outstanding had a risk rating of 1 to 6 - pass.
21
NOTE 5 - PREMISES AND EQUIPMENT
The following is a summary of premises and equipment:
June 30, | December 31, | |||||||
2017 | 2016 | |||||||
(In Thousands) | ||||||||
(unaudited) | ||||||||
Land |
$ | 393 | $ | 393 | ||||
Building and improvements |
2,115 | 1,840 | ||||||
Furniture and equipment |
553 | 549 | ||||||
Data processing equipment |
314 | 303 | ||||||
|
|
|
|
|||||
3,375 | 3,085 | |||||||
Accumulated depreciation |
(1,885 | ) | (1,837 | ) | ||||
|
|
|
|
|||||
$ | 1,490 | $ | 1,248 | |||||
|
|
|
|
NOTE 6 - DEPOSITS
The aggregate amount of time deposit amounts in denominations that meet or exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 as of June 30, 2017 (unaudited) and December 31, 2016 amounted to $23,245,000 and $23,434,000, respectively.
For time deposits as of June 30, 2017 (unaudited) the scheduled maturities for each of the following periods ending June 30 are as follows:
(In Thousands) | ||||
2018 |
$ | 83,439 | ||
2019 |
24,305 | |||
2020 |
1,524 | |||
2021 |
6,973 | |||
2022 |
1,587 | |||
|
|
|||
$ | 117,828 | |||
|
|
Deposits from related parties held by the Bank as of June 30, 2017 (unaudited) and December 31, 2016 amounted to $3,371,000 and $3,782,000, respectively.
22
NOTE 7 - BORROWED FUNDS
The Bank is a member of the Federal Home Loan Bank of Boston (FHLB). Borrowings from the FHLB are secured by a blanket lien on qualified collateral, consisting primarily of loans with first mortgages secured by one-to-four family properties, certain unencumbered investment securities and other qualified assets. The remaining maximum borrowing capacity with the FHLB at June 30, 2017 (unaudited) was approximately $81.5 million subject to the purchase of additional FHLB stock. The Bank had outstanding FHLB borrowings of $26.0 million at June 30, 2017 (unaudited). Additionally, at June 30, 2017, the Bank had the ability to borrow up to $5.0 million on a Federal Funds line of credit with the Co-Operative Central Bank.
The following is a summary of FHLB borrowings as of June 30, 2017 (unaudited) and December 31, 2016:
At June 30, | At December 31, | |||||||
2017 | 2016 | |||||||
(Dollars in thousands) | ||||||||
Balance |
$ | 26,000 | $ | 10,000 | ||||
Average balance during the year |
15,845 | 2,363 | ||||||
Maximum outstanding at any month end |
26,000 | 10,000 | ||||||
Weighted average interest rate at period end |
1.71 | % | 1.45 | % |
NOTE 8 - FINANCIAL INSTRUMENTS
The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to originate loans and unadvanced funds on loans. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
Commitments to originate loans are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on managements credit evaluation of the borrower. Collateral held varies, but may include secured interests in mortgages, accounts receivable, inventory, property, plant and equipment and income-producing properties.
23
Amounts of financial instrument liabilities with off-balance sheet credit risk are as follows as of June 30, 2017 (unaudited) and December 31, 2016:
June 30, | December 31, | |||||||
2017 | 2016 | |||||||
(In Thousands) | ||||||||
Commitments to originate loans |
$ | 6,447 | $ | 7,864 | ||||
Unused lines of credit |
15,359 | 13,742 | ||||||
Due to borrowers on unadvanced construction loans |
4,061 | 3,852 | ||||||
|
|
|
|
|||||
$ | 25,867 | $ | 25,458 | |||||
|
|
|
|
NOTE 9 - FAIR VALUE MEASUREMENTS
ASC 820-10, Fair Value Measurements and Disclosures, provides a framework for measuring fair value under generally accepted accounting principles. This guidance also allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis.
In accordance with ASC 820-10, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.
Level 3 - Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, are not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.
A financial instruments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Companys financial assets and financial liabilities carried at fair value for June 30, 2017 (unaudited) and December 31, 2016. The Company did not have any significant transfers of assets between levels 1 and 2 of the fair value hierarchy during the three and six months ended June 30, 2017 (unaudited) and the year ended December 31, 2016.
The Companys investments in preferred stock and marketable equity securities are generally classified within level 1 of the fair value hierarchy because they are valued using quoted market prices.
24
The Companys investment in debt securities available-for-sale is generally classified within level 2 of the fair value hierarchy. For these securities, we obtain fair value measurements from independent pricing services. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instruments terms and conditions.
Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, managements best estimate is used. Subsequent to inception, management only changes level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalization and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows.
The following summarizes assets measured at fair value on a recurring basis as of June 30, 2017 (unaudited) and December 31, 2016:
Fair Value Measurements at Reporting Date Using: | ||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets Level 1 |
Significant Other Observable Inputs Level 2 |
Significant Unobservable Inputs Level 3 |
|||||||||||||
(In Thousands) | ||||||||||||||||
June 30, 2017: |
||||||||||||||||
U.S. Government and federal agency obligations |
$ | 6,929 | $ | | $ | 6,929 | $ | | ||||||||
Debt securities issued by states of the United States and political subdivisions of the states |
2,691 | | 2,691 | | ||||||||||||
Corporate bonds and notes |
11,528 | | 11,528 | | ||||||||||||
Preferred stock |
3,049 | 3,049 | | | ||||||||||||
Mortgage-backed securities |
1,666 | | 1,666 | | ||||||||||||
Marketable equity securities |
5,363 | 5,363 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Totals |
$ | 31,226 | $ | 8,412 | $ | 22,814 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2016: |
||||||||||||||||
U.S. Government and federal agency obligations |
$ | 5,688 | $ | | $ | 5,688 | $ | | ||||||||
Debt securities issued by states of the United States and political subdivisions of the states |
2,656 | | 2,656 | | ||||||||||||
Corporate bonds and notes |
12,493 | | 12,493 | | ||||||||||||
Preferred stock |
2,938 | 2,938 | | | ||||||||||||
Mortgage-backed securities |
1,432 | | 1,432 | | ||||||||||||
Marketable equity securities |
6,624 | 6,624 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Totals |
$ | 31,831 | $ | 9,562 | $ | 22,269 | $ | | ||||||||
|
|
|
|
|
|
|
|
25
Under certain circumstances the Company makes adjustments to fair value for its assets and liabilities although they are not measured at fair value on a recurring basis. At June 30, 2017 (unaudited) and December 31, 2016, there were no assets or liabilities carried on the consolidated balance sheets for which a nonrecurring change in fair value has been recorded.
26
The estimated fair values of the Companys financial instruments, all of which are held or issued for purposes other than trading, are as follows:
June 30, 2017 (unaudited) | ||||||||||||||||||||
Carrying Amount |
Fair Value | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Financial assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 19,301 | $ | 19,301 | $ | | $ | | $ | 19,301 | ||||||||||
Available-for-sale securities |
31,226 | 8,412 | 22,814 | | 31,226 | |||||||||||||||
Federal Home Loan Bank stock |
1,680 | 1,680 | | | 1,680 | |||||||||||||||
Loans, net |
232,429 | | | 232,828 | 232,828 | |||||||||||||||
Co-operative Central Bank deposit |
886 | 886 | | | 886 | |||||||||||||||
Accrued interest receivable |
637 | 637 | | | 637 | |||||||||||||||
Financial liabilities: |
||||||||||||||||||||
Deposits |
223,272 | | 223,057 | | 223,057 | |||||||||||||||
FHLB advances |
26,000 | | 25,985 | | 25,985 | |||||||||||||||
December 31, 2016 | ||||||||||||||||||||
Carrying | Fair Value | |||||||||||||||||||
Amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Financial assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 13,792 | $ | 13,792 | $ | | $ | | $ | 13,792 | ||||||||||
Available-for-sale securities |
31,831 | 9,562 | 22,269 | | 31,831 | |||||||||||||||
Federal Home Loan Bank stock |
964 | 964 | | | 964 | |||||||||||||||
Loans, net |
213,165 | | | 213,582 | 213,582 | |||||||||||||||
Co-operative Central Bank deposit |
881 | 881 | | | 881 | |||||||||||||||
Accrued interest receivable |
572 | 572 | | | 572 | |||||||||||||||
Financial liabilities: |
||||||||||||||||||||
Deposits |
214,766 | | 215,443 | | 215,443 | |||||||||||||||
FHLB advances |
10,000 | | 9,930 | | 9,930 |
The carrying amounts of financial instruments shown in the above tables are included in the consolidated balance sheets under the indicated captions. Accounting policies related to financial instruments are described in Note 2.
27
NOTE 10 - OTHER COMPREHENSIVE (LOSS) INCOME
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities 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.
The components of other comprehensive (loss) income, included in stockholders equity, are as follows:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In Thousands) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Net unrealized holding gain on available-for-sale securities |
$ | 200 | $ | 322 | $ | 497 | $ | 690 | ||||||||
Reclassification adjustment for net realized gain included in net income (1) |
(343 | ) | (293 | ) | (807 | ) | (293 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive (loss) income before income tax effect |
(143 | ) | 29 | (310 | ) | 397 | ||||||||||
Income tax benefit (expense) |
75 | 20 | 152 | (100 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive (loss) income, net of tax |
$ | (68 | ) | $ | 49 | $ | (158 | ) | $ | 297 | ||||||
|
|
|
|
|
|
|
|
(1) | Reclassification adjustments include net realized securities gains. Realized gains have been reclassified out of accumulated other comprehensive income and affect certain captions in the consolidated statements of income as follows: pre-tax amount for the three and six months ended June 30, 2017, is reflected as a gain on sale of available-for-sale securities, net of $343,000 and $807,000, respectively. The tax effect, included in income tax expense for the three and six months ended June 30, 2017, was $133,000 and $315,000, respectively. Pre-tax amounts for the three and six months ended June 30, 2016 is reflected as a gain on sale of securities, net of 293,000. The tax effect, for the three and six months ended June 30, 2016 was $95,000. |
Accumulated other comprehensive income as of June 30, 2017 (unaudited) and December 31, 2016 consists of net unrealized holding gains on available-for-sale securities, net of taxes.
NOTE 11 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Banks financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Effective January 1, 2015, (with a phase-in period of two to four years for certain components), the Bank became subject to capital regulations adopted by the Board of Governors of the Federal Reserve System (FRB) and the FDIC, which implement the Basel III regulatory capital reforms and the changes required by the Dodd-Frank Act. The regulations require a common equity Tier 1 (CET1) capital ratio of 4.5%, a minimum Tier 1 capital to risk-weighted assets ratio of 6.0%, a minimum total capital to risk-weighted assets ratio of 8.0% and a minimum Tier 1 leverage ratio of 4.0%. CET1 generally consists of common stock and retained earnings, subject to applicable adjustments and deductions. Under prompt corrective action regulations, in order to be considered well capitalized, the Bank must maintain a CET1 capital ratio of 6.5%, a Tier 1 risk based capital ratio of 8.0%, a total risk based capital ratio of 10.0%, and a Tier 1 leverage ratio of 5.0%. In addition, the regulations establish a capital conservation buffer above the required capital ratios that phases in beginning January 1, 2016 at 0.625% of risk-weighted assets and increases each year by 0.625% until it is fully phased in at 2.5% effective January 1, 2019. Failure to maintain the capital conservation buffer will limit the ability of the Bank and the Company to pay dividends, repurchase shares or pay discretionary bonuses. At June 30, 2017, the Bank exceeded the fully phased in regulatory requirement for the capital conservation buffer.
Management believes, as of June 30, 2017, that the Bank meets all capital adequacy requirements to which it is subject.
As of June 30, 2017, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum Common Equity Tier 1 risk-based, total risk-based, Tier 1 risk-based and Tier 1 leverage capital ratios as set forth in the following table. There were no conditions or events since that notification that management believes have changed the Banks category.
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The Banks actual capital amounts and ratios as of June 30, 2017 (unaudited) and December 31, 2016 are presented in the following table.
Actual | For Capital Adequacy Purposes |
To Be Well Capitalized Under Prompt Corrective Action Provisions |
||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||||||
As of June 30, 2017 (unaudited): |
||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets) |
$ | 36,161 | 19.53 | % | $ | 14,815 | 8.0 | % | $ | 18,518 | 10.0 | % | ||||||||||||
Tier 1 Capital (to Risk Weighted Assets) |
34,740 | 18.76 | 11,111 | 6.0 | 14,815 | 8.0 | ||||||||||||||||||
Common Equity Tier 1 Capital (to Risk Weighted Assets) |
34,740 | 18.76 | 8,333 | 4.5 | 12,037 | 6.5 | ||||||||||||||||||
Tier 1 Capital (to Average Assets) |
34,740 | 12.72 | 10,922 | 4.0 | 13,653 | 5.0 | ||||||||||||||||||
As of December 31, 2016: |
||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets) |
$ | 35,236 | 21.09 | % | $ | 13,368 | 8.0 | % | $ | 16,710 | 10.0 | % | ||||||||||||
Tier 1 Capital (to Risk Weighted Assets) |
33,648 | 20.14 | 10,026 | 6.0 | 13,368 | 8.0 | ||||||||||||||||||
Common Equity Tier 1 Capital (to Risk Weighted Assets) |
33,648 | 20.14 | 7,519 | 4.5 | 10,861 | 6.5 | ||||||||||||||||||
Tier 1 Capital (to Average Assets) |
33,648 | 13.58 | 9,909 | 4.0 | 12,386 | 5.0 |
NOTE 12 COMMON STOCK REPURCHASES
From time to time, our board of directors authorizes stock repurchase plans. In general, stock repurchase plans allow us to proactively manage our capital position and return excess capital to shareholders. Shares purchased under such plans also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. Our board of directors authorized a stock repurchase program, allowing us to repurchase up to 283,000 shares of our common stock from time to time at various prices in the open market or through private transactions. The actual amount and timing of future share repurchases, if any, will depend on market conditions, applicable SEC rules and various other factors.
During the six months ended June 30, 2017 (unaudited), no shares of common stock were repurchased.
During the six months ended June 30, 2016 (unaudited), a total of 208,600 shares of common stock were repurchased at an average cost of $15.31.
NOTE 13 STOCK BASED COMPENSATION
Melrose Bancorp, Inc. adopted the Melrose Bancorp, Inc. 2015 Equity Incentive Plan (the 2015 Equity Incentive Plan) to provide directors, officers, and employees of the Company and Melrose Cooperative Bank with additional incentives to promote growth and performance of the Company and Melrose Cooperative Bank. The 2015 Equity Incentive Plan authorizes the issuance or delivery to participants of up to 396,140 shares of Melrose Bancorp, Inc. common stock pursuant to grants of incentive and non-statutory stock options, restricted stock awards, and restricted stock units. Of this number, the maximum number of shares of Melrose Bancorp, Inc. common stock that may be issued under the 2015 Equity Incentive Plan pursuant to the exercise of stock options is 282,957 shares, and the maximum number of shares of Melrose Bancorp, Inc. common stock that may be issued as restricted stock awards or restricted stock units is 113,183 shares. The 2015 Equity Incentive Plan was effective upon approval by stockholders at the November 23, 2015 annual meeting.
On May 12, 2016, the Company issued 44,300 shares of common stock restricted stock awards. The restricted stock award expense is based on $15.13 per share, and shares vest over 5 years commencing one year from the grant date. The total expense recognized for the three and six months ended June 30, 2017, in connection with the restricted
29
stock awards was $33,000, and $67,000 (unaudited), respectively, and the recognized tax benefit was $13,000 and $26,000 (unaudited), respectively. During the three and six months ending June 30, 2016, the expense was $25,000. The recognized tax benefit was $10,000.
On May 12, 2016, the Company granted 224,200 stock options. The stock options have an exercise price of $15.13 per share, and vest ratably over 5 years commencing one year from the date of the grant. The stock option expense is equal to the number of options expected to vest each year times the grant date fair value of the shares as determined using the Black-Scholes option pricing model. The Company completed an analysis of seven peer banks to determine the expected volatility of 20.24%. The exercise price used in the pricing model was $15.13, the closing price of the stock on the grant date. The expected life was estimated to be 6.5 years and the 7 year treasury rate of 1.54% was used as the annual risk free interest rate. The expected forfeiture rate is 0%. Using these variables, the estimated fair value is $3.71 per share. The aggregate intrinsic value is $621,000 as of June 30, 2017. The total expense recognized for the three and six months ended June 30, 2017, in connection with the stock options was $41,000 and $83,000 (unaudited), respectively, and the recognized tax benefit was $11,000 and $23,000 (unaudited), respectively. During the three and six month periods ending June 30, 2016 the stock option expense was $21,000. The recognized tax benefit was $8,000.
At June 30, 2017 (unaudited), the unrecognized share based compensation expense related to the 35,440 unvested restricted stock awards amounted to $518,000. The unrecognized expense will be recognized over a weighted average life of 3.8 years.
At June 30, 2017 (unaudited), 51,044 of the 224,200 stock options outstanding are exercisable, and the remaining contractual life is 8.8 years. The unrecognized expense related to the unvested options is $642,000 and will be recognized over a weighted average life of 3.8 years.
The Company adopted ASU 2016-09, Compensation Stock Compensation (Topic 718), early during the annual reporting period ending December 31, 2017. Provisions of this new ASU include, the company will no longer record excess tax benefits and certain deficiencies in additional paid-in-capital (APIC), instead we will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. The Company has evaluated these provisions and determined the new standard to have an immaterial effect on the Companys consolidated financial statements.
30
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
General
Managements discussion and analysis of the financial condition at June 30, 2017 and the results of operations for the three and six months ended June 30, 2017 and 2016 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements, which can be identified by the use of words such as estimate, project, believe, intend, anticipate, plan, seek, expect and words of similar meaning. These forward-looking statements include, but are not limited to:
| statements of our goals, intentions and expectations; |
| statements regarding our business plans, prospects, growth and operating strategies; |
| statements regarding the quality of our loan and investment portfolios; and |
| estimates of our risks and future costs and benefits. |
These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
| general economic conditions, either nationally or in our market area, that are worse than expected; |
| our success in growing our commercial real estate loan portfolio; |
| increased competition among depository and other financial institutions; |
| inflation and changes in the interest rate environment that reduce our margins and yields, reduce the fair value of financial instruments or increase our funding costs; |
| changes in laws or government regulations or policies that adversely affect financial institutions, including changes in regulatory fees and capital requirements; |
| our ability to manage operations in the current economic conditions; |
| our ability to capitalize on growth opportunities; |
| changes in consumer spending, borrowing and savings habits; |
| changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; |
| changes in our organization, compensation and benefit plans; |
| changes in the level of government support for housing finance; |
| significant increases in delinquencies and our loan losses; and |
| changes in our financial condition or results of operations that reduce capital. |
31
Comparison of Financial Condition at June 30, 2017 (unaudited) and December 31, 2016
Total assets increased $25.5 million, or 9.4%, to $294.1 million at June 30, 2017 from $268.6 million at December 31, 2016. The increase was primarily the result of an increase in cash and cash equivalents and net loans, partly offset by a decrease in available-for-sale securities.
Cash and cash equivalents increased $5.5 million, or 39.9%, to $19.3 million at June 30, 2017 from $13.8 million at December 31, 2016. This increase was due primarily to an increase in deposits and Federal Home Loan Bank advances, partly offset by new loan originations.
Securities available-for-sale decreased $605,000, or 1.9%, to $31.2 million at June 30, 2017 from $31.8 million at December 31, 2016. The decrease in securities available-for-sale during the period was primarily a result of changes in fair value and sales, maturities, and calls of available-for-sale securities.
Federal Home Loan Bank (FHLB) stock increased $716,000, or 74.2%, to $1.7 million at June 30, 2017 from $964,000 at December 31, 2016. The increase in FHLB stock was the result of an increase in FHLB borrowings to $26.0 million at June 30, 2017, from $10.0 million at December 31, 2016. The borrowings are being used to fund new loan originations and purchases of one- to four-family residential real estate loans.
Net loans increased $19.2 million, or 9.0%, to $232.4 million at June 30, 2017 from $213.2 million at December 31, 2016. The increase in net loans was due primarily to an increase of $13.9 million, or 8.3%, in one-to four-family residential loans, an increase of $791,000, or 7.4%, in home equity lines of credit, and an increase of $637,000, or 2.8%, in commercial real estate loans. The increase in one-to four-family residential loans includes $9.9 million in purchased loans.
At June 30, 2017 our investment in bank-owned life insurance was $6.0 million, an increase of $77,000, or 1.3%, from $5.9 million at December 31, 2016. We invest in bank-owned life insurance to provide us with a funding offset for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable.
Total deposits increased $8.5 million, or 4.0%, to $223.3 million at June 30, 2017 from $214.8 million at December 31, 2016. The increase in deposits was due primarily to an increase of $4.2 million, or 3.7%, in time deposits, an increase of $1.6 million, or 9.3%, in demand deposit accounts, an increase of $1.5 million, or 11.2%, in NOW accounts, and an increase of $948,000, or 2.9%, in savings accounts. The increase in time deposits was a result of special promotions, as well as, offering listed certificates of deposit through QwickRate. QwickRate is an online marketplace for CD buyers and sellers. The bank utilizes this national CD market as a source of time certificates of deposit. Depositors in this market are institutional, non-consumer entities such as credit unions, banking institutions, public entities, CD brokers and some private corporations or non-profit organizations.
Borrowings increased $16.0 million, or 160.0%, to $26.0 million at June 30, 2017 from $10.0 million at December 31, 2016. At June 30, 2017, we had the ability to borrow an additional $81.5 million from the Federal Home Loan Bank of Boston, subject to certain collateral requirements. The proceeds from the borrowings are used to fund new loan originations and purchases of one- to four-family residential loans. Additionally at June 30, 2017, we had the ability to borrow up to $5.0 million on a Federal Funds line of credit with the Co-operative Central Bank.
Total stockholders equity increased $982,000, or 2.3%, to $44.3 million at June 30, 2017 from $43.3 million at December 31, 2016. The increase was primarily due to net income of $948,000, a decrease in unearned compensation of $104,000, and an increase in additional paid-in-capital of $88,000, partly offset by a decrease in accumulated other comprehensive income of $158,000.
32
Comparison of Operating Results for the Three Months Ended June 30, 2017 and 2016 (unaudited)
General. Net income increased $147,000, or 53.6%, to $421,000 for the three months ended June 30, 2017 from $274,000 for the three months ended June 30, 2016. Net income increased primarily due to gains on sales of available-for-sale securities, and an increase in interest income, partially offset by an increase in interest expense, noninterest expense and income tax expense.
Interest and Dividend Income. Interest and dividend income increased $408,000, or 22.8%, to $2.2 million for the three months ended June 30, 2017 from $1.8 million for the three months ended June 30, 2016 primarily due to an increase in interest and fees on loans of $447,000, or 28.6%, to $2.0 million for the three months ended June 30, 2017 from $1.6 million for the three months ended June 30, 2016. The increase in interest and fees on loans was primarily the result of an increase in new loan originations and purchases.
Interest and dividends on securities decreased $52,000, or 25.0%, to $156,000 for the three months ended June 30, 2017 from $208,000 for the three months ended June 30, 2016 resulting primarily from a decrease in the average balance of available-for-sale securities of $6.5 million, or 17.1%, to $31.2 million for the three months ended June 30, 2017 from $37.7 million for the three months ended June 30, 2016.
Other interest income increased $13,000, or 81.3%, to $29,000 for the three months ended June 30, 2017 from $16,000 for the three months ended June 30, 2016, primarily due to increased interest rates on balances held at corresponding banks. There was a decrease of $6.3 million in the average balance of other interest-earning assets quarter to quarter.
Interest Expense. Interest expense increased $103,000, or 26.0%, to $499,000 for the three months ended June 30, 2017 from $396,000 for the three months ended June 30, 2016. The increase was primarily due to an increase of $15.3 million, or 8.2%, in the average balance of interest-bearing deposits. In addition, there was an increase in interest paid on Federal Home Loan Bank borrowings of $62,000, for the three months ended June 30, 2017, as there were no borrowings outstanding for the three months ended June 30, 2016.
Net Interest and Dividend Income. Net interest and dividend income increased $305,000, or 21.9%, to $1.7 million for the three months ended June 30, 2017 from $1.4 million for the three months ended June 30, 2016 primarily due to the increase in interest and fees on loans as a result of the increase in average loans of $48.4 million, or 27.3%, to $225.4 million for the three months ended June 30, 2017 from $177.0 million for the three months ended June 30, 2016. There was an increase in the net interest margin of 14 basis points to 2.48% for the three months ended June 30, 2017 from 2.34% for the three months ended June 30, 2016. This was due primarily to an increased yield on average other interest-earning assets, specifically deposits held at correspondent banks, of 41 basis points to 0.68% for three months ended June 30, 2017, from 0.27% for the three months ended June 30, 2016.
Provision for Loan Losses. We recorded a provision for loan losses of $111,000 for the three months ended June 30, 2017, an increase of $8,000 from the provision of $103,000 for the three months ended June 30, 2016. The provision was primarily due to the increase in one- to four-family residential loans, commercial real estate loans and commercial construction loans during the three months ended June 30, 2017.
There were no charge-offs for the quarters ended June 30, 2017 and June 30, 2016. The allowance for loan losses was $981,000, or 0.42%, of total loans, at June 30, 2017, an increase of $91,000, or 10.2%, compared to $890,000, or 0.42% of total loans, at December 31, 2016. There was $511,000 in nonperforming loans at June 30, 2017 and $339,000 as of June 30, 2016.
33
Noninterest Income. Noninterest income increased $57,000, or 17.0%, to $393,000 for the three months ended June 30, 2017 from $336,000, for the three months ended June 30, 2016, primarily due to an increase in the gain on sales of available-for-sale securities, net of $343,000 for the three months ended June 30, 2017, from $293,000, for the three months ended June 30, 2016.
Noninterest Expense. Noninterest expense increased $65,000, or 5.4%, to $1.3 million for the three months ended June 30, 2017 from $1.2 million for the three months ended June 30, 2016. Noninterest expense increased primarily due to an increase in salary and employee benefits, data processing expenses, other expenses and advertising, partially offset by a decrease in other professional services.
Salaries and employee benefit expense increased $127,000, or 18.5%, to $814,000 for the three months ended June 30, 2017 from $687,000 for the three months ended June 30, 2016, primarily due to an increase in stock based compensation, normal salary increases and increases in payroll taxes. Data processing expenses increased $11,000, or 12.2%, to $101,000 for the three months ended June 30, 2017 from $90,000 for the three months ended June 30, 2016. Advertising expenses increased $18,000, or 47.4%, to $56,000 for the three months ended June 30, 2017, from $38,000 for the three months ended June 30, 2016. Other expenses increased $26,000, or 72.2%, to $62,000 for the three months ended June 30, 2017, from $36,000 for the three months ended June 30, 2016. The increase in other expenses was due primarily to an increase in the off balance sheet reserve of $19,000. The increases were partially offset by a decrease in other professional service expense of $112,000, or 59.9%, to $75,000 for the six months ended June 30, 2017, from $187,000 for the six months ended June 30, 2016. The decrease is primarily due to the Bank incurring additional professional service expenses during the three months ended June 30, 2016 associated with the 2015 Equity Incentive Plan and strategic planning.
Income Tax Expense. The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income, and the effect of changes in valuation allowances maintained against deferred tax benefits. Income tax expense for the three months ended June 30, 2017 was $280,000 compared to $138,000 for the three months ended June 30, 2016. The increase in income tax expense period over period is consistent with the increase in pre-tax income of $289,000, or 70.1%, to $701,000 for the three months ended June 30, 2017 from $412,000 for the three months ended June 30, 2016. The effective tax rate for the three months ended June 30, 2017 and June 30, 2016 was 39.9% and 33.4%, respectively. The increased effective tax rate was caused by the amount of tax-exempt income primarily due to a solar tax credit commencing in May 2017 that was not included in the tax calculation for the three month period ended June 30, 2017.
Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information for the three months ended June 30, 2017 and 2016 (unaudited). All average balances are daily average balances based upon amortized cost. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Yields/rates for the three months ended June 30, 2017 and 2016 are annualized.
34
Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Outstanding | Outstanding | |||||||||||||||||||||||
Balance | Interest | Yield/Rate | Balance | Interest | Yield/Rate | |||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans |
$ | 225,424 | $ | 2,010 | 3.57 | % | $ | 176,991 | $ | 1,563 | 3.53 | % | ||||||||||||
Securities (1) |
31,234 | 156 | 2.00 | % | 37,693 | 208 | 2.21 | % | ||||||||||||||||
Other interest-earning assets |
17,096 | 29 | 0.68 | % | 23,390 | 16 | 0.27 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest-earning assets |
273,754 | 2,195 | 3.21 | % | 238,074 | 1,787 | 3.00 | % | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Non-interest earning assets |
9,327 | 8,050 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total assets |
$ | 283,081 | $ | 246,124 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
Savings accounts |
$ | 33,160 | $ | 17 | 0.21 | % | $ | 32,271 | $ | 16 | 0.20 | % | ||||||||||||
Certificates of deposit |
116,944 | 380 | 1.30 | % | 104,151 | 342 | 1.31 | % | ||||||||||||||||
Money market accounts |
37,629 | 35 | 0.37 | % | 35,364 | 33 | 0.37 | % | ||||||||||||||||
NOW accounts |
13,705 | 5 | 0.15 | % | 14,356 | 5 | 0.14 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest-bearing deposits |
201,438 | 437 | 0.87 | % | 186,142 | 396 | 0.85 | % | ||||||||||||||||
Borrowings |
19,055 | 62 | 1.30 | % | | | 0.00 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest-bearing liabilities |
220,493 | 499 | 0.91 | % | 186,142 | 396 | 0.85 | % | ||||||||||||||||
Demand deposit accounts |
17,789 | 15,328 | ||||||||||||||||||||||
Other noninterest-bearing liabilities |
500 | 628 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total liabilites |
238,782 | 202,098 | ||||||||||||||||||||||
Stockholders equity |
44,299 | 44,026 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total liabilities and stockholders equity |
$ | 283,081 | $ | 246,124 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Net interest income |
$ | 1,696 | $ | 1,391 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Net interest rate spread (2) |
2.30 | % | 2.15 | % | ||||||||||||||||||||
Net interest-earning assets (3) |
$ | 53,261 | $ | 51,932 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Net interest margin (4) |
2.48 | % | 2.34 | % | ||||||||||||||||||||
Average of interest-earning assets to interest-bearing liabilities |
124.16 | % | 127.90 | % |
(1) | No tax equivalent adjustment was applied to tax exempt income for the three months ended June 30, 2017 and 2016 as the amount is not significant. |
35
(2) | Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. |
(3) | Net interest -earning assets represents total interest-earning assets less total interest-bearing liabilities. |
(4) | Net interest margin represents net interest income as a percentage of average interest-earning assets. |
Comparison of Operating Results for the Six Months Ended June 30, 2017 and 2016
General. Net income increased $480,000, or 102.6%, to $948,000 for the six months ended June 30, 2017 from $468,000 for the six months ended June 30, 2016. Net income increased primarily due to gains on sales of available-for-sale securities, and an increase in interest income, partially offset by an increase in interest expense, noninterest expense and income tax expense.
Interest and Dividend Income. Interest and dividend income increased $739,000, or 21.1%, to $4.2 million for the six months ended June 30, 2017 from $3.5 million for the six months ended June 30, 2016 primarily due to an increase in interest and fees on loans of $869,000, or 28.8%, to $3.9 million for the six months ended June 30, 2017 from $3.0 million for the six months ended June 30, 2016. The increase in interest and fees on loans was primarily the result of an increase in new loan originations and purchases.
Interest and dividends on securities decreased $151,000, or 33.3%, to $302,000 for the six months ended June 30, 2017 from $453,000 for the six months ended June 30, 2016 resulting primarily from a decrease in the average balance of available-for-sale securities of $10.0 million, or 24.1%, to $31.3 million for the six months ended June 30, 2017 from $41.3 million for the six months ended June 30, 2016.
Other interest income increased $21,000, or 72.4%, to $50,000 for the six months ended June 30, 2017 from $29,000 for the six months ended June 30, 2016, primarily due to increased interest rates on balances held at corresponding banks. There was a decrease of $5.0 million in the average balance of other interest earning assets for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.
Interest Expense. Interest expense increased $208,000, or 27.5%, to $965,000 for the six months ended June 30, 2017 from $757,000 for the six months ended June 30, 2016. The increase was primarily due to an increase of $18.5 million, or 10.2%, in the average balance of interest-bearing deposits and an increase in interest expense on Federal Home Loan Bank borrowings of $105,000, for the six months ended June 30, 2017.
Net Interest and Dividend Income. Net interest and dividend income increased $531,000, or 19.4%, to $3.3 million for the six months ended June 30, 2017 from $2.7 million for the six months ended June 30, 2016 primarily due to the increase in interest and fees on loans as a result of the increase in average loans of $50.5 million, or 29.7%, to $220.2 million for the six months ended June 30, 2017 from $169.7 million for the six months ended June 30, 2016. There was a decrease in the net interest margin of 7 basis points to 2.28% for the six months ended June 30, 2017 from 2.35% for the six months ended June 30, 2016. This was due primarily to a decrease in yield on average loans for the period of 3 basis points to 3.53% and a decrease in the yield on average securities for the period of 27 basis points to 1.93% partially offset by an increased yield on average other interest-earning assets specifically deposits held at correspondent banks of 33 basis points to 0.59% for six months ended June 30, 2017 from 0.26% for the six months ended June 30, 2016.
Provision for Loan Losses. We recorded a provision for loan losses of $91,000 for the six months ended June 30, 2017, a decrease of $71,000 from the provision of $162,000 for the six months ended June 30, 2016. The provision was primarily due to the increase in one- to four-family residential loans, commercial real estate loans and commercial construction loans during the six months ended June 30, 2017.
36
Noninterest Income. Noninterest income increased $520,000, or 136.5%, to $901,000 for the six months ended June 30, 2017 from $381,000 for the six months ended June 30, 2016, primarily due to an increase in the gain on sales of available-for-sale securities, net to $807,000 for the six months ended June 30, 2017, from $293,000 for the six months ended June 30, 2016.
Noninterest Expense. Noninterest expense increased $250,000, or 11.0%, to $2.5 million for the six months ended June 30, 2017 from $2.3 million for the six months ended June 30, 2016. Noninterest expense increased primarily due to an increase to salary and employee benefits, data processing expenses, advertising and other expenses, partially offset by a decrease in other professional services.
Salaries and employee benefit expense increased $258,000, or 18.9%, to $1.6 million for the six months ended June 30, 2017 from $1.4 million for the six months ended June 30, 2016, primarily due to an increase in stock based compensation, normal salary increases and increases in payroll taxes. Data processing expenses increased $25,000, or 14.5%, to $197,000 for the six months ended June 30, 2017, from $172,000 for the six months ended June 30, 2016. The increase was primarily due to the beginning stages of purchasing software and preparing systems to provide online account opening to customers. Advertising expenses increased $23,000, or 29.5%, to $101,000 for the six months ended June 30, 2017, from $78,000 for the six months ended June 30, 2016. Printing and supplies expense increased $10,000, or 52.6%, to $29,000 for the six months ended June 30, 2017, from $19,000 for the six months ended June 30, 2016. The increases in advertising expense and printing and supplies expense are due primarily to the Banks re-branding efforts of changing the Banks name and logo to Melrose Bank, in conjunction with the online account opening project. Other expenses increased $31,000, or 41.3%, to $106,000 for the six months ended June 30, 2017, from $75,000 for the six months ended June 30, 2016. The increase in other expenses was primarily due to the Bank recording an off-balance sheet reserve of $19,000 during the six months ended June 30, 2017. The increases were partially offset by a decrease in other professional services expense of $93,000, or 38.3%, to $150,000 for the six months ended June 30, 2017, from $243,000 for the six months ended June 30, 2016. The decrease in other professional services was primarily due to additional legal services associated with the 2015 Equity Incentive Plan and strategic planning occurring during the six months ended June 30, 2016.
Income Tax Expense. The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income, and the effect of changes in valuation allowances maintained against deferred tax benefits. Income tax expense for the six months ended June 30, 2017 was $618,000 compared to $226,000 for the six months ended June 30, 2016. The increase in income tax expense period over period is consistent with the increase in pre-tax income of $872,000, or 125.6%, to $1.6 million for the six months ended June 30, 2017 from $694,000 for the six months ended June 30, 2016. The effective tax rate for the six months ended June 30, 2017 and June 30, 2016 was 39.5% and 32.5%, respectively. The increased effective tax rate was caused by the amount of tax-exempt income primarily due to a solar tax credit commencing in May 2017 that was not included in the tax calculation for the three month period ended June 30, 2017.
Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information for the six months ended June 30, 2017 and 2016 (unaudited). All average balances are daily average balances based upon amortized cost. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Yields/rates for the six months ended June 30, 2017 and 2016 are annualized.
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Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Average Outstanding Balance |
Interest | Yield/Rate | Average Outstanding Balance |
Interest | Yield/Rate | |||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans |
$ | 220,213 | $ | 3,886 | 3.53 | % | $ | 169,724 | $ | 3,017 | 3.56 | % | ||||||||||||
Securities (1) |
31,311 | 302 | 1.93 | % | 41,265 | 453 | 2.20 | % | ||||||||||||||||
Other interest-earning assets |
17,086 | 50 | 0.59 | % | 22,064 | 29 | 0.26 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest-earning assets |
286,610 | 4,238 | 2.96 | % | 233,053 | 3,499 | 3.00 | % | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Non-interest earning assets |
9,105 | 7,859 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total assets |
$ | 277,715 | $ | 240,912 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
Savings accounts |
$ | 32,976 | $ | 35 | 0.21 | % | $ | 32,591 | $ | 32 | 0.20 | % | ||||||||||||
Certificates of deposit |
116,371 | 749 | 1.29 | % | 98,376 | 650 | 1.32 | % | ||||||||||||||||
Money market accounts |
37,154 | 68 | 0.37 | % | 35,285 | 65 | 0.37 | % | ||||||||||||||||
NOW accounts |
13,139 | 8 | 0.12 | % | 14,884 | 10 | 0.13 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest-bearing deposits |
199,640 | 860 | 0.86 | % | 181,136 | 757 | 0.84 | % | ||||||||||||||||
Borrowings |
15,845 | 105 | 1.33 | % | | | 0.00 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total interest-bearing liabilities |
215,485 | 965 | 0.90 | % | 181,136 | 757 | 0.84 | % | ||||||||||||||||
Demand deposit accounts |
17,678 | 14,697 | ||||||||||||||||||||||
Other noninterest-bearing liabilities |
504 | 565 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total liabilites |
233,667 | 196,398 | ||||||||||||||||||||||
Stockholders equity |
44,048 | 44,514 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total liabilities and stockholders equity |
$ | 277,715 | $ | 240,912 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Net interest income |
$ | 3,273 | $ | 2,742 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Net interest rate spread (2) |
2.06 | % | 2.16 | % | ||||||||||||||||||||
Net interest-earning assets (3) |
$ | 71,125 | $ | 51,917 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Net interest margin (4) |
2.28 | % | 2.35 | % | ||||||||||||||||||||
Average of interest-earning assets to interest-bearing liabilities |
133.01 | % | 128.66 | % |
(1) | No tax equivalent adjustment was applied to tax exempt income for the six months ended June 30, 2017 and 2016 as the amount is not significant. |
(2) | Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. |
(3) | Net interest -earning assets represents total interest-earning assets less total interest-bearing liabilities. |
(4) | Net interest margin represents net interest income as a percentage of average interest-earning assets. |
38
Rate/Volume Analysis. The following table presents the effects of changing interest rates and volumes on our net interest income for the time period indicated. The rate column shows the effects attributable to changes in rate (change in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (change in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, 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 |
Six months ended June 30, 2017, compared to six months ended June 30, 2016 |
|||||||||||||||||||||||
Increase (Decrease) Due to | Total Increase (Decrease) |
Increase (Decrease) Due to | Total Increase (Decrease) |
|||||||||||||||||||||
Volume | Rate | Volume | Rate | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans (1) |
$ | 432 | $ | 15 | $ | 447 | $ | 891 | $ | (22 | ) | $ | 869 | |||||||||||
Securities (2) |
(33 | ) | (19 | ) | (52 | ) | (100 | ) | (51 | ) | (151 | ) | ||||||||||||
Other interest-earning assets (3) |
(3 | ) | 16 | 13 | (5 | ) | 26 | 21 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total interest-earning assets |
396 | 12 | 408 | 786 | (47 | ) | 739 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest-bearing liabilities |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
Savings accounts |
| 1 | 1 | | 3 | 3 | ||||||||||||||||||
Certificates of deposit |
42 | (4 | ) | 38 | 115 | (16 | ) | 99 | ||||||||||||||||
Money market accounts |
2 | | 2 | | 3 | 3 | ||||||||||||||||||
NOW accounts |
| | | | (2 | ) | (2 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total interest-bearing deposits |
44 | (3 | ) | 41 | 16 | 87 | 103 | |||||||||||||||||
Borrowings |
62 | | 62 | 105 | | 105 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total interest-bearing liabilities |
106 | (3 | ) | 103 | 121 | 87 | 208 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Change in net interest income |
$ | 290 | $ | 15 | $ | 305 | $ | 665 | $ | (134 | ) | $ | 531 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Includes non-accrual loans and interest received on such loans. |
(2) | Includes short-term investments. |
(3) | Includes Federal Home Loan Bank of Boston stock and deposits with Cooperative Central Bank. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable, as the Registrant is a smaller reporting company.
Item 4. | Controls and Procedures |
An evaluation was performed under the supervision and with the participation of the Companys management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of June 30, 2017. Based on that evaluation, the Companys management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrants disclosure controls and procedures were effective.
During the quarter ended June 30, 2017, there have been no changes in the Companys internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
39
Item 1. | Legal Proceedings |
We are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Banks or the Companys financial condition or results of operations.
Item 1A. | Risk Factors |
The presentation of Risk Factors is not required for smaller reporting companies such as Melrose Bancorp, Inc.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
(a) | Sales of Unregistered Securities. Not applicable. |
(b) | Use of Proceeds. Not applicable |
(c) | The Company did not repurchase any shares of its common stock during the six months ended June 30, 2017. |
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information |
On August 10, 2017, the Board of Directors of the Company amended the Companys Bylaws. Specifically, Article II, Section 12(a) of the Companys Bylaws was amended in order to remove Article II, Section 12(a)(iv) of the Bylaws which requires a director of the Company or of Melrose Cooperative Bank (the Bank), at the time of his or her first election or appointment to the Board of Directors of the Company or of the Bank, to have maintained his or her principal residence within the Commonwealth of Massachusetts for a period of at least one year prior to the date of his or her purported nomination, election or appointment to the Board of Directors. A copy of the Amended Bylaws is attached to this Quarterly Report on Form 10-Q as Exhibit 3(ii).
Item 6. | Exhibits |
3(ii) | Amended Bylaws of Melrose Bancorp. Inc | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
40
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.
MELROSE BANCORP, INC. | ||||||
Date: August 14, 2017 | /s/ Jeffrey D. Jones | |||||
Jeffrey D. Jones | ||||||
President and Chief Executive Officer | ||||||
Date: August 14, 2017 | /s/ Diane Indorato | |||||
Diane Indorato | ||||||
Senior Vice President and Chief Financial Officer |
41
Exhibit 3(ii)
MELROSE BANCORP, INC.
BYLAWS
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
Melrose Bancorp, Inc. (the Corporation) shall hold an annual meeting of its stockholders to elect directors and to transact any other business within its powers, at such place, on such date and at such time as the Board of Directors shall fix. Failure to hold an annual meeting does not invalidate the Corporations existence or affect any otherwise valid corporate act.
Section 2. Special Meetings.
Special meetings of stockholders of the Corporation may be called by the Chairperson of the Board, the President, the Chief Executive Officer or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors that the Corporation would have if there were no vacancies on the Board of Directors (hereinafter the Whole Board). Special meetings of the stockholders shall be called by the Secretary at the request of stockholders only on the written request of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting. Such written request shall state the purpose or purposes of the meeting and the matters proposed to be acted upon at the meeting, and shall be delivered at the principal office of the Corporation addressed to the President or the Secretary. The Secretary shall inform the stockholders who make the request of the reasonably estimated cost of preparing and mailing a notice of the meeting and, upon payment of these costs to the Corporation, notify each stockholder entitled to notice of the meeting. The Board of Directors shall have the sole power to fix (i) the record date for determining stockholders entitled to request a special meeting of stockholders and the record date for determining stockholders entitled to notice of and to vote at the special meeting and (ii) the date, time and place of the special meeting and the means of remote communication, if any, by which stockholders and proxy holders may be considered present in person and may vote at the special meeting.
Section 3. Notice of Meetings; Adjournment.
Not less than 10 nor more than 90 days before each stockholders meeting, the Secretary shall give notice of the meeting in writing or by electronic transmission to each stockholder entitled to vote at the meeting and to each other stockholder entitled to notice of the meeting. The notice shall state the time and place of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and may vote at the meeting, and, if the meeting is a special meeting or notice of the purpose is required by statute, the purpose of the meeting. Notice is given to a stockholder when it is personally delivered to the stockholder, left at the stockholders residence or usual place of business, mailed to the stockholder at his or her address as it appears on the records of the Corporation, or transmitted to the stockholder by an electronic transmission to any address or number of the
stockholder at which the stockholder receives electronic transmissions. If the Corporation has received a request from a stockholder that notice not be sent by electronic transmission, the Corporation may not provide notice to the stockholder by electronic transmission. Notwithstanding the foregoing provisions, each person who is entitled to notice waives notice if such person, before or after the meeting, delivers a written waiver or waiver by electronic transmission which is filed with the records of the stockholders meetings, or is present at the meeting in person or by proxy.
A meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice to a date not more than 120 days after the original record date. A meeting may be adjourned by a resolution adopted by a majority of the Whole Board or by the vote of a majority of the stockholders present at the meeting, whether or not a quorum is present at such meeting. At any adjourned meeting, any business may be transacted that might have been transacted at the original meeting.
A meeting of stockholders may be postponed to a date not more than 120 days after the original record date. A meeting may be postponed by a resolution adopted by a majority of the Whole Board. Notice of the date, time and place to which the meeting is postponed shall be given not less than ten days prior to such date and otherwise in the manner set forth in this Section 3. At any postponed meeting, any business may be transacted that might have been transacted at the meeting as originally scheduled.
If a meeting shall be adjourned or postponed to a date not more than 120 days after the original record date, a new record date need not be established, and the original record date may be used for the purpose of determining which stockholders are entitled to notice of, and to vote at, the adjourned or postponed meeting. Any writing authorizing another person to act as proxy at a meeting of stockholders shall remain valid for use at any adjournment or postponement of such meeting unless such proxy is revoked or a later dated proxy is provided by such stockholder. If a meeting shall be adjourned or postponed to a date not more than 120 days after the original record date, a new record date need not be established, and the original record date may be used for the purpose of determining which stockholders are entitled to notice of, and to vote at, the adjourned or postponed meeting.
As used in these Bylaws, the term electronic transmission shall have the meaning given to such term by Section 1-101 of the Maryland General Corporation Law (the MGCL) or any successor provision.
Section 4. Quorum.
Unless the Articles of the Corporation provide otherwise, where a separate vote by a class or classes is required, a majority of the shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairperson of the meeting or the holders of a majority of the shares of stock who are present at the meeting, in person or by proxy, may, in accordance with Section 3 of this Article I, adjourn the meeting to another place, date or time.
2
Section 5. Organization and Conduct of Business.
The Chairperson of the Board of the Corporation, or in his or her absence, the Chief Executive Officer or the President, or in his or her absence, such other person as may be designated by a majority of the Whole Board, shall call to order any meeting of the stockholders and act as chairperson of the meeting. In the absence of the Secretary, the secretary of the meeting shall be such person as the chairperson appoints. The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her to be in order.
Section 6. Advance Notice Provisions for Business to be Transacted at Annual Meetings and Elections of Directors.
(a) At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting: (i) as specified in the Corporations notice of the meeting; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the Corporation who (1) is a stockholder of record on the date such stockholder gives the notice provided for in this Section 6(a) and on the record date for the determination of stockholders entitled to vote at such annual meeting, and (2) complies with the notice procedures set forth in this Section 6(a). For business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of the immediately preceding sentence, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such business must otherwise be a proper matter for action by stockholders.
To be timely, a stockholders notice must be delivered or mailed to and received by the Secretary at the principal executive office of the Corporation not less than 110 days nor more than 120 days prior to the anniversary of the prior years annual meeting of stockholders; provided, that if (A) less than 90 days prior public disclosure of the date of the meeting is given to stockholders and (B) the date of the annual meeting is advanced more than 30 days prior to or delayed more than 30 days after the anniversary of the preceding years annual meeting, such written notice also shall be timely if delivered or mailed to and received by the Secretary of the Corporation at the principal executive office of the Corporation not later than the tenth day following the day on which public disclosure of the date of such meeting is first made. The advance notice periods provided in this paragraph, once established by the initial notice or public disclosure of a date for the annual meeting of stockholders, shall remain in effect regardless of whether a subsequent notice or public disclosure shall provide that the meeting shall have been adjourned or that the date of the meeting shall have been postponed or otherwise changed from the date provided in the initial notice or public disclosure. With respect to the first annual meeting of stockholders of the Corporation following the Corporation becoming the sole stockholder of Melrose Cooperative Bank, notice by the stockholder shall be timely if delivered or mailed to and received by the Secretary of the Corporation not later than the close of business on the later of (i) the 120th day prior to the date of the annual meeting and (ii) the 10th day following the day on which public disclosure of the date of the annual meeting is first made. No adjournment or postponement of a meeting of stockholders shall commence a new period for the giving of notice hereunder.
3
A stockholders notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address of such stockholder as they appear on the Corporations books and of the beneficial owner, if any, on whose behalf the proposal is made; (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder and such beneficial owner; (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business; and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.
Notwithstanding anything in these Bylaws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this Section 6(a). The officer of the Corporation or other person presiding over the annual meeting shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 6(a) and, if he or she should so determine, he or she shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted.
At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting pursuant to the Corporations notice of the meeting.
(b) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders at which directors are to be elected only (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who (1) is a stockholder of record on the date such stockholder gives the notice provided for in this Section 6(b) and on the record date for the determination of stockholders entitled to vote at such meeting, and (2) complies with the notice procedures set forth in this Section 6(b). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation. To be timely, a stockholders notice must be delivered or mailed to and received by the Secretary at the principal executive office of the Corporation not less than 110 days nor more than 120 days prior to prior to the anniversary of the prior years annual meeting of stockholders; provided, that if (A) less than 90 days prior public disclosure of the date of the meeting is given to stockholders and (B) the date of the annual meeting is advanced more than 30 days prior to or delayed more than 30 days after the anniversary of the preceding years annual meeting, such written notice also shall be timely if delivered or mailed to and received by the Secretary of the Corporation at the principal executive office of the Corporation not later than the tenth day following the day on which public disclosure of the date of such meeting is first made. The advance notice periods provided in this paragraph, once established by the initial notice or public disclosure of a date for the annual meeting of stockholders, shall remain in effect regardless of whether a subsequent notice or public disclosure shall provide that the meeting shall have been adjourned or that the date of the meeting shall have been postponed or otherwise changed from the date provided in the initial notice or public disclosure. With respect to the first annual
4
meeting of stockholders of the Corporation following the Corporation becoming the sole stockholder of Melrose Cooperative Bank, notice by the stockholder shall be timely if delivered or mailed to and received by the Secretary of the Corporation not later than the close of business on the later of (i) the 120th day prior to the date of the annual meeting and (ii) the 10th day following the day on which public disclosure of the date of the annual meeting is first made. No adjournment or postponement of a meeting of stockholders shall commence a new period for the giving of notice hereunder.
A stockholders notice must be in writing and set forth (a) as to each person whom the stockholder proposes to nominate for election as a director, (i) all information relating to such person that would indicate such persons qualification to serve on the Board of Directors of the Corporation; (ii) an affidavit that such person would not be disqualified under the provisions of Article II, Section 12 of these Bylaws; (iii) such information relating to such person that is required to be disclosed in connection with solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the Exchange Act), or any successor rule or regulation and (iv) a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected; and (b) as to the stockholder giving the notice: (i) the name and address of such stockholder as they appear on the Corporations books and of the beneficial owner, if any, on whose behalf the nomination is made; (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder and such beneficial owner; (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder; (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act or any successor rule or regulation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this Section 6(b). The chairperson of the meeting shall, if the facts so warrant, determine that a nomination was not made in accordance with such provisions and, if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.
(c) For purposes of subsections (a) and (b) of this Section 6, the term public disclosure shall mean disclosure (i) in a press release issued through a nationally recognized news service, (ii) in a document publicly filed or furnished by the Corporation with the U.S. Securities and Exchange Commission or (iii) on a website maintained by the Corporation. The timely notice requirements provided in subsections (a) and (b) of this Section 6 shall apply to all stockholder nominations for election as a director and all stockholder proposals for business to be conducted at an annual meeting regardless of whether such proposal is submitted for inclusion in the Corporations proxy materials pursuant to Rule 14a-8 of Regulation 14A under the Exchange Act.
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Section 7. Proxies and Voting.
Unless the Articles of the Corporation provide for a greater or lesser number of votes per share or limit or deny voting rights, each outstanding share of stock, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of stockholders; however, a share is not entitled to be voted if any installment payable on it is overdue and unpaid. In all elections for directors, directors shall be determined by a plurality of the votes cast, and except as otherwise required by law or as provided in the Articles of the Corporation, all other matters voted on by stockholders shall be determined by a majority of the votes cast on the matter.
A stockholder may vote the stock the stockholder owns of record either in person or by proxy. A stockholder may sign a writing authorizing another person to act as proxy. Signing may be accomplished by the stockholder or the stockholders authorized agent signing the writing or causing the stockholders signature to be affixed to the writing by any reasonable means, including facsimile signature. A stockholder may authorize another person to act as proxy by transmitting, or authorizing the transmission of, an authorization for the person to act as the proxy to the person authorized to act as proxy or to any other person authorized to receive the proxy authorization on behalf of the person authorized to act as the proxy, including a proxy solicitation firm or proxy support service organization. The authorization may be transmitted by a electronic mail or any other electronic or telephonic means. Unless a proxy provides otherwise, it is not valid more than 11 months after its date. A proxy is revocable by a stockholder at any time without condition or qualification unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy may be made irrevocable for as long as it is coupled with an interest. The interest with which a proxy may be coupled includes an interest in the stock to be voted under the proxy or another general interest in the Corporation or its assets or liabilities.
Section 8. Conduct of Voting
The Board of Directors shall, in advance of any meeting of stockholders, appoint one or more persons as inspectors of election, to act at the meeting or any adjournment thereof and make a written report thereof, in accordance with applicable law. If one or more inspectors are not so elected, the Chairperson of the Board, or in his or her absence, the Vice Chairperson of the Board, if any shall have been elected, or in his or her absence, such other person as may be designated by a majority of the Whole Board to serve as chair of the meeting, shall make such appointment at the meeting of stockholders. At all meetings of stockholders, the proxies and ballots shall be received, and all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided or determined by the inspector of election. All voting, including on the election of directors but excepting where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or his or her proxy or the chairperson of the meeting, a written vote shall be taken. Every written vote shall be taken by ballot, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. No candidate for election as a director at a meeting shall serve as an inspector at such meeting.
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Section 9. Control Share Acquisition Act.
Notwithstanding any other provision of the Articles of the Corporation or these Bylaws, Title 3, Subtitle 7 of the MGCL (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This Section 9 may be repealed by a majority of the Whole Board, in whole or in part, at any time, whether before or after an acquisition of Control Shares (as defined in Section 3-701(d) of the MGCL, or any successor provision) and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent Control Share Acquisition (as defined in Section 3-701(d) of the MGCL, or any successor provision).
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The number of directors of the Corporation shall, by virtue of the Corporations election made hereby to be governed by Section 3-804(b) of the MGCL, be fixed from time to time exclusively by vote of the Board of Directors; provided, however, that such number shall never be less than the minimum number of directors required by the MGCL now or hereafter in force. The Board of Directors shall annually elect a Chairperson of the Board from among its members and shall designate the Chairperson of the Board or his or her designee to preside at its meetings. The Board of Directors may also annually elect a Vice Chairperson. In the absence of the Chairperson of the Board, the Vice Chairperson of the Board, if any shall be elected, and in his or her absence the Chief Executive Officer, and in her or her absence such other person as may be designated by a majority of the Whole Board shall preside at the meetings of the Board of Directors.
The directors, other than those who may be elected by the holders of any series of preferred stock, shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the first annual meeting of stockholders, the term of office of the second class to expire at the annual meeting of stockholders one year thereafter and the term of office of the third class to expire at the annual meeting of stockholders two years thereafter, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the first annual meeting, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election or for such shorter period of time as the Board of Directors may determine, with each director to hold office until his or her successor shall have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
By virtue of the Corporations election made hereby to be subject to Section 3-804(c) of the MGCL, any vacancies in the Board of Directors resulting from an increase in the size of the Board of Directors or the death, resignation or removal of a director may be filled only by the
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affirmative vote of two-thirds of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or places or by means of remote communication, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required. Any regular meeting of the Board of Directors may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third (1/3) of the directors then in office (rounded up to the nearest whole number), the Chairperson of the Board, or by the Vice Chairperson of the Board, if any shall have been elected, and shall be held at such place or by means of remote communication, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given to each director who has not waived notice by mailing and post-marking written notice not less than five days before the meeting, or by facsimile or other electronic transmission of the same not less than 24 hours before the meeting. Any director may waive notice of any special meeting, either before or after such meeting, by delivering a written waiver or a waiver by electronic transmission that is filed with the records of the meeting. Attendance of a director at a special meeting shall constitute a waiver of notice of such meeting, except where the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted nor the purpose of any special meeting of the Board of Directors need be specified in the notice of such meeting. Any special meeting of the Board of Directors may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the Whole Board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings by Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at such meeting.
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Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided in these Bylaws or the Corporations Articles or required by law. Action may be taken by the Board of Directors without a meeting if a unanimous consent which sets forth the action is given in writing or by electronic transmission by each member of the Board of Directors and filed in paper or electronic form with the minutes of proceedings of the Board of Directors.
Section 8. Powers.
All powers of the Corporation may be exercised by or under the authority of the Board of Directors except as provided by the Articles of the Corporation. Consistent with the foregoing, the Board of Directors shall have, among other powers, the unqualified power:
(i) | To declare dividends from time to time in accordance with law; |
(ii) | To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine; |
(iii) | To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith; |
(iv) | To remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being; |
(v) | To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents; |
(vi) | To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; |
(vii) | To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and |
(viii) | To adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the Corporations business and affairs. |
Section 9. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors.
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Section 10. Resignation.
Any director may resign at any time by giving written notice of such resignation to the President or the Secretary at the principal office of the Corporation. Unless otherwise specified therein, such resignation shall take effect upon receipt thereof.
Section 11. Presumption of Assent.
A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to such action unless such director announces his or her dissent at the meeting and (a) such directors dissent is entered in the minutes of the meeting, (b) such director files his or her written dissent to such action with the secretary of the meeting before the adjournment thereof, or (c) such director forwards his or her written dissent within 24 hours after the meeting is adjourned, by certified mail, return receipt requested, bearing a postmark from the United States Postal Service, to the secretary of the meeting or the Secretary of the Corporation. Such right to dissent shall not apply to a director who voted in favor of such action or failed to make his or her dissent known at the meeting.
Section 12. Director Qualifications
(a) No person shall be eligible for election or appointment to the Board of Directors: (i) if a financial or securities regulatory agency has issued a cease and desist, consent or other formal order, other than a civil money penalty, against such person, which order is subject to public disclosure by such agency; (ii) if such person has been convicted of a crime involving dishonesty or breach of trust which is punishable by imprisonment for a term exceeding one year under state or federal law; or (iii) if such person is currently charged in any information, indictment, or other complaint with the commission of or participation in such a crime. No person may serve on the Board of Directors if such person (i) is at the same time, a director, officer, employee or 10% or more stockholder of a bank, savings institution, credit union, mortgage banking company, consumer loan company or similar organization, other than a subsidiary of the Corporation, that engages in business activities or solicits customers, whether through a physical presence or electronically, in the same market area as the Corporation or any of its subsidiaries, (ii) does not agree in writing to comply with all of the Corporations policies applicable to directors including but not limited to its confidentiality policy, and confirm in writing his or her qualifications hereunder, (iii) is a party to any agreement or arrangement with a party other than the Corporation or a subsidiary that (x) provides him with material benefits which are tied to or contingent on the Corporation entering into a merger, sale of control or similar transaction in which it is not the surviving institution, (y) materially limits his or her voting discretion as a member of the Board of Directors of the Corporation, or (z) materially impairs his or her ability to discharge his or her fiduciary duties with respect to the fundamental strategic direction of the Corporation, or (iv) is the nominee or representative, as those terms are defined in the regulations of the Board of Governors of the Federal Reserve System, 12 C.F.R §212.2(n), of a company or other entity of which any of the directors, partners, trustees or 10% stockholders would not be eligible for election or appointment to the Board of Directors under this Section 12(a).
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(b) No person 75 years of age shall be eligible for election, reelection, appointment or reappointment to the board of the Corporation. No director shall serve as a director of the Corporation beyond the annual meeting of the shareholders of the Corporation immediately following the director becoming 75 years of age.
(c) The Board of Directors shall have the power to construe and apply the provisions of this Section 12 and to make all determinations necessary or desirable to implement such provisions.
Section 13. Attendance at Board Meetings.
The Board of Directors shall have the right to remove any director from the board upon a directors unexcused absence from (i) three consecutive regularly scheduled meetings of the Board of Directors or (ii) five regularly scheduled meetings of the Board of Directors in any fiscal year of the Corporation.
ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors.
(a) General Provisions. The Board of Directors may appoint from among its members an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, and such other committees as the Board of Directors deems necessary or desirable. The Board of Directors may delegate to any committee so appointed any of the powers and authorities of the Board of Directors to the fullest extent permitted by the MGCL and any other applicable law.
(b) Composition. Each committee shall be composed of one or more directors or any other number of members specified in these Bylaws or required by applicable regulations or stock exchange rules or listing standards. The Chairperson of the Board may recommend committees, committee memberships, and committee chairs to the Board of Directors. The Board of Directors shall have the power at any time to appoint the chairperson and the members of any committee, change the membership of any committee, to fill all vacancies on committees, to designate alternate members to replace or act in the place of any absent or disqualified member of a committee, or to dissolve any committee. A member of a committee may resign from that committee at any time by giving written notice of such resignation to the Chairperson of the Board. Unless otherwise specified therein, such resignation from the committee shall take effect upon receipt thereof.
(c) Issuance of Stock. If the Board of Directors has given general authorization for the issuance of stock providing for or establishing a method or procedure for determining the maximum number of shares to be issued, a committee of the Board of Directors, in accordance with that general authorization or any stock option or other plan or program adopted by the Board of Directors, may authorize or fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors. Any committee so designated may exercise the power and authority of the Board of Directors if the resolution that designated the committee or a supplemental resolution of the Board of Directors shall so provide.
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Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third of the members shall constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if a unanimous consent which sets forth the action is given in writing or by electronic transmission by each member of the committee and filed in paper or electronic form with the minutes of the proceedings of such committee. The members of any committee may conduct any meeting thereof by conference telephone or other communications equipment in accordance with the provisions of Section 6 of Article II.
ARTICLE IV
OFFICERS
Section 1. Generally.
(a) The Board of Directors as soon as may be practicable after the annual meeting of stockholders shall choose a Chairperson of the Board, Chief Executive Officer, President, one or more Vice Presidents, a Secretary and a Chief Financial Officer/Treasurer and from time to time may choose such other officers as it may deem proper. Any number of offices may be held by the same person, except that no person may concurrently serve as both President and Vice President of the Corporation.
(b) The term of office of all officers shall be until the next annual election of officers and until their respective successors are chosen, but any officer may be removed from office at any time by the affirmative vote of a majority of the Whole Board.
(c) All officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof.
Section 2. Chairperson of the Board of Directors.
The Chairperson of the Board of Directors of the Corporation shall perform all duties and have all powers which are commonly incident to the office of Chairperson of the Board or which are delegated to him or her by the Board of Directors. He or she shall have power to sign all stock certificates, contracts and other instruments of the Corporation that are authorized.
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Section 3. Vice Chairperson of the Board of Directors.
If appointed, the Vice Chairperson of the Board of Directors of the Corporation shall perform all duties and have all powers which are commonly incident to the office of Chairperson of the Board, with such duties to be performed and powers to be held in the absence of the Chairperson of the Board, or which are delegated to him or her by the Board of Directors.
Section 4. Chief Executive Officer.
The Chief Executive Officer, subject to the control of the Board of Directors, shall serve in general executive capacity and have general power over the management and oversight of the administration and operation of the Corporations business and general supervisory power and authority over its policies and affairs. The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect.
Section 5. President.
The President shall perform the duties of the Chief Executive Officer in the Chief Executive Officers absence or during his or her disability to act. In addition, the President shall perform the duties and exercise the powers usually incident to their respective office and/or such other duties and powers as may be properly assigned to the President from time to time by the Board of Directors, the Chairperson of the Board or the Chief Executive Officer.
Section 6. Vice President.
The Vice President or Vice Presidents (including Executive Vice Presidents or other levels of Vice President designated by the Board of Directors), if any, shall perform the duties of the Chief Executive Officer in the absence of both the Chief Executive Officer and the President, or during their disability to act. In addition, the Vice Presidents shall perform the duties and exercise the powers usually incident to their respective office and/or such other duties and powers as may be properly assigned to the Vice Presidents from time to time by the Board of Directors, the Chairperson of the Board or the Chief Executive Officer.
Section 7. Secretary.
The Secretary or an Assistant Secretary shall issue notices of meetings, shall keep the minutes of meetings, shall have charge of the seal and the corporate books, shall perform such other duties and exercise such other powers as are usually incident to such offices and/or such other duties and powers as are properly assigned thereto by the Board of Directors, the Chairperson of the Board or the Chief Executive Officer.
Section 8. Chief Financial Officer/Treasurer.
The Chief Financial Officer/Treasurer shall have charge of all monies and securities of the Corporation, other than monies and securities of any division of the Corporation that has a treasurer or financial officer appointed by the Board of Directors, and shall keep regular books of account. The funds of the Corporation shall be deposited in the name of the Corporation by the Chief Financial Officer/Treasurer with such banks or trust companies or other entities as the
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Board of Directors from time to time shall designate. The Chief Financial Officer/Treasurer shall sign or countersign such instruments as require his or her signature, shall perform all such duties and have all such powers as are usually incident to such office and/or such other duties and powers as are properly assigned to him or her by the Board of Directors, the Chairperson of the Board or the Chief Executive Officer, and may be required to give bond for the faithful performance of his or her duties in such sum and with such surety as may be required by the Board of Directors.
Section 9. Other Officers.
The Board of Directors may designate and fill such other offices in its discretion and the persons holding such other offices shall have such powers and shall perform such duties as the Board of Directors or Chief Executive Officer may from time to time assign.
Section 10. Action with Respect to Securities of Other Corporations
Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the Chief Executive Officer, the President, a Vice President, or a proxy appointed by either of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution.
ARTICLE V
STOCK
Section 1. Certificates of Stock.
The Board of Directors may determine to issue certificated or uncertificated shares of capital stock and other securities of the Corporation. For certificated stock, each stockholder is entitled to certificates which represent and certify the shares of stock he or she holds in the Corporation. Each stock certificate shall include on its face the name of the Corporation, the name of the stockholder or other person to whom it is issued, and the class of stock and number of shares it represents. It shall also include on its face or back (a) a statement of any restrictions on transferability and a statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the stock of each class which the Corporation is authorized to issue, of the differences in the relative rights and preferences between the shares of each series of preferred stock which the Corporation is authorized to issue, to the extent they have been set, and of the authority of the Board of Directors to set the relative rights and preferences of subsequent series of preferred stock or (b) a statement which provides in substance that the Corporation will furnish a full statement of such information to any stockholder on request and without charge. Such request may be made to the Secretary or to the Corporations transfer agent. Upon the issuance of uncertificated shares of capital stock, the Corporation shall send the stockholder a written statement of the same information required above with respect to stock certificates. Each stock certificate shall be in such form, not inconsistent with law or with the Corporations Articles, as shall be approved by the Board of Directors or any officer or officers designated for such purpose by resolution of the Board of Directors. Each stock certificate shall be signed by
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the Chairperson of the Board, the Chief Executive Officer, the President, or a Vice President, and countersigned by the Secretary, an Assistant Secretary, the Chief Financial Officer, the Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the actual corporate seal or a facsimile of it or in any other form and the signatures may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. A certificate may not be issued until the stock represented by it is fully paid.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of Article V of these Bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Dates or Closing of Transfer Books.
The Board of Directors may, and shall have the power to, set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to notice of a meeting, vote at a meeting, receive a dividend, or be allotted other rights. The record date may not be prior to the close of business on the day the record date is fixed nor, subject to Section 3 of Article I of these Bylaws, more than 90 days before the date on which the action requiring the determination will be taken; the transfer books may not be closed for a period longer than 20 days; and, in the case of a meeting of stockholders, the record date or the closing of the transfer books shall be at least ten days before the date of the meeting. Any shares of the Corporations own stock acquired by the Corporation between the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders and the time of the meeting may be voted at the meeting by the holder of record as of the record date and shall be counted in determining the total number of outstanding shares entitled to be voted at the meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
The Board of Directors of the Corporation may determine the conditions for issuing a new stock certificate in place of one which is alleged to have been lost, stolen, or destroyed, or the Board of Directors may delegate such power to any officer or officers of the Corporation or to the transfer agent designated to transfer shares of the stock of the Corporation. In their discretion, the Board of Directors or such officer or officers may require the owner of the certificate to give a bond, with sufficient surety, to indemnify the Corporation against any loss or claim arising as a result of the issuance of a new certificate. In their discretion, the Board of Directors or such officer or officers may refuse to issue such new certificate without the order of a court having jurisdiction over the matter.
Section 5. Stock Ledger.
The Corporation shall maintain a stock ledger which contains the name and address of each stockholder and the number of shares of stock of each class which the stockholder holds.
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The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kept at the offices of a transfer agent for the particular class of stock or, if none, at the principal executive office of the Corporation.
Section 6. Regulations.
The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.
ARTICLE VI
MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, bearing the name of the Corporation, which shall be in the charge of the Secretary. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. If the Corporation is required to place its corporate seal to a document, it is sufficient to meet the requirement of any law, rule, or regulation relating to a corporate seal to place the word (seal) adjacent to the signature of the person authorized to sign the document on behalf of the Corporation.
Section 3. Books and Records.
The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of any committee when exercising any of the powers of the Board of Directors. The books and records of the Corporation may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction. The original or a certified copy of these Bylaws shall be kept at the principal office of the Corporation.
Section 4. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of Directors, and each officer and agent of the Corporation shall, in the performance of his or her duties, in addition to any protections conferred upon him or her by law, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director, committee member, officer or agent reasonably believes are within such other persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
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Section 5. Fiscal Year.
The fiscal year of the Corporation shall commence on the first day of January and end on the last day of December in each year.
Section 6. Time Periods.
In applying any provision of these Bylaws that requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded and the day of the event shall be included.
Section 7. Checks, Drafts, Etc.
All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness, issued in the name of the Corporation, shall be signed by any officer, employee or agent of the Corporation that is authorized by the Board of Directors.
Section 8. Mail.
Any notice or other document that is required by these Bylaws to be mailed shall be deposited in the United States mail, postage prepaid.
Section 9. Contracts and Agreements.
To the extent permitted by applicable law, and except as otherwise prescribed by the Articles or these Bylaws, the Board of Directors may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances. A person who holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer.
ARTICLE VIII
AMENDMENTS
These Bylaws may be adopted, amended or repealed as provided in the Articles of the Corporation.
Adopted and effective as of August 10, 2017.
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Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Jeffrey D. Jones, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Melrose 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 registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-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 subsidiary, 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 the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: August 14, 2017 | /s/ Jeffrey D. Jones | |||||
Jeffrey D. Jones | ||||||
President and Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Diane Indorato, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Melrose 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 registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-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 subsidiary, 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 the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: August 14, 2017 | /s/ Diane Indorato | |||||
Diane Indorato | ||||||
Senior Vice President and Chief Financial Officer |
Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Jeffrey D. Jones, President and Chief Executive Officer of Melrose Bancorp, Inc., (the Company) and Diane Indorato, Senior Vice President and Chief Financial Officer of the Company, each certify in their capacity as an officer of the Company that they have reviewed the quarterly report on Form 10-Q for the quarter ended June 30, 2017 (the Report) and that to the best of their knowledge:
1. | the Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 14, 2017 | /s/ Jeffrey D. Jones | |||||
Jeffrey D. Jones | ||||||
President and Chief Executive Officer | ||||||
Date: August 14, 2017 | /s/ Diane Indorato | |||||
Diane Indorato | ||||||
Senior Vice President and Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Document and Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2017 |
Aug. 14, 2017 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | MELR | |
Entity Registrant Name | MELROSE BANCORP, INC. | |
Entity Central Index Key | 0001600890 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 2,602,079 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
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Statement of Financial Position [Abstract] | ||
Allowance for loan losses | $ 981 | $ 890 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 15,000,000 | 15,000,000 |
Common stock, shares issued | 2,602,079 | 2,602,079 |
ESOP number of shares unallocated | 199,956 | 203,728 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 421 | $ 274 | $ 948 | $ 468 |
Other comprehensive (loss) income, net of tax: | ||||
Net unrealized holding gain on available-for-sale securities | 200 | 322 | 497 | 690 |
Reclassification adjustment for net realized gain included in net income | (343) | (293) | (807) | (293) |
Other comprehensive (loss) income before income tax effect | (143) | 29 | (310) | 397 |
Income tax benefit (expense) | 75 | 20 | 152 | (100) |
Other comprehensive (loss) income, net of tax | (68) | 49 | (158) | 297 |
Comprehensive income | $ 353 | $ 323 | $ 790 | $ 765 |
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - shares |
6 Months Ended | |
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Jun. 30, 2017 |
Jun. 30, 2016 |
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Statement of Stockholders' Equity [Abstract] | ||
Common stock held by ESOP committed to be allocated, shares | 7,546 | 7,546 |
Nature of Operations |
6 Months Ended |
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Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | NOTE 1 - NATURE OF OPERATIONS Melrose Bancorp, Inc. (the “Company”) was incorporated in February 2014 under the laws of the State of Maryland. The Company’s activity consists of owning and supervising its subsidiary, Melrose Cooperative Bank (the “Bank”). The Bank provides financial services to individuals, families and businesses through our full-service banking office. Our primary business activity consists of taking deposits from the general public in our market area and investing those deposits, together with funds generated from operations, in one- to- four family residential real estate loans, home equity loans and lines of credit, commercial real estate loans, and to a much lesser extent consumer loans. The Bank is a Massachusetts-chartered cooperative bank headquartered in Melrose, Massachusetts. The Bank is subject to the regulations of, and periodic examination by, the Massachusetts Division of Banks (“DOB”) and the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s deposits are insured by the FDIC subject to limitations. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and Rule 10-01 of Regulation S-X. Information included herein as of June 30, 2017 and for the interim periods ended June 30, 2017 and 2016 is unaudited; however, in the opinion of management, all adjustments considered necessary for a fair presentation have been included and were of a normal recurring nature. These statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on March 21, 2017. The results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for future periods, including the year ending December 31, 2017. The significant accounting policies are summarized below to assist the reader in better understanding the condensed consolidated financial statements and other data contained herein. BASIS OF PRESENTATION: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank, and the Bank’s wholly-owned subsidiary, MCBSC, Inc., which is used to hold investment securities. All significant intercompany accounts and transactions have been eliminated in the consolidation. USE OF ESTIMATES: In preparing consolidated financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, impairment of securities and the valuation of deferred tax assets.
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, cash and cash equivalents include cash, amounts due from banks, money market funds and federal funds sold. SECURITIES: Investments in debt securities are adjusted for amortization of premiums and accretion of discounts computed so as to approximate the interest method. Gains or losses on sales of investment securities are computed on a specific identification basis. The Company classifies all debt and equity securities as available-for-sale. Available-for-sale securities are carried at fair value on the consolidated balance sheets. Unrealized holding gains and losses are not included in earnings, but are reported as a net amount (less expected tax) in a separate component of stockholders’ equity until realized. The security classification may be modified after acquisition only under certain specified conditions. For any debt security with a fair value less than its amortized cost basis, the Company will determine whether it has the intent to sell the debt security or whether it is more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis. If either condition is met, the Company will recognize a full impairment charge to earnings. For all other debt securities that are considered other-than-temporarily impaired and do not meet either condition, the credit loss portion of impairment will be recognized in earnings as realized losses. The other-than-temporary impairment related to all other factors will be recorded in other comprehensive income. Declines in marketable equity securities below their cost that are deemed other-than-temporary are reflected in earnings as realized losses. As a member of the Federal Home Loan Bank of Boston (FHLB), the Company is required to invest in $100 par value stock of the FHLB. The FHLB capital structure mandates that members must own stock as determined by their Total Stock Investment Requirement which is the sum of a member’s Membership Stock Investment Requirement and Activity-Based Stock Investment Requirement. Management evaluates the Company’s investment in FHLB stock for other-than-temporary impairment at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation. Based on its most recent analysis of the FHLB as of June 30, 2017, management deems its investment in FHLB stock to be not other-than-temporarily impaired. LOANS: Loans receivable that management has the intent and ability to hold until maturity or payoff are reported at their outstanding principal balances adjusted for amounts due to borrowers on outstanding home equity lines of credit, commercial lines of credit and construction loans, any charge-offs, the allowance for loan losses and any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans. Loan origination and commitment fees and certain direct origination costs are deferred, and the net amount amortized as an adjustment of the related loan’s yield. The Company is amortizing these amounts over the contractual lives of the related loans. Residential real estate loans are generally placed on nonaccrual when reaching 90 days past due or are in the process of foreclosure. All closed-end consumer loans 90 days or more past due and any equity line in the process of foreclosure are placed on nonaccrual status. Secured consumer loans are written down to realizable value and unsecured consumer loans are charged off upon reaching 120 or 180 days past due depending on the type of loan. Commercial real estate loans and commercial business loans which are 90 days or more past due are generally placed on nonaccrual status, unless secured by sufficient cash or other assets immediately convertible to cash. When a loan has been placed on nonaccrual status, previously accrued and uncollected interest is reversed against interest on loans. A loan can be returned to accrual status when collectability of principal is reasonably assured and the loan has performed for a period of time, generally six months.
Cash receipts of interest income on impaired loans are credited to principal to the extent necessary to eliminate doubt as to the collectability of the net carrying amount of the loan. Some or all of the cash receipts of interest income on impaired loans are recognized as interest income if the remaining net carrying amount of the loan is deemed to be fully collectible. When recognition of interest income on an impaired loan on a cash basis is appropriate, the amount of income that is recognized is limited to that which would have been accrued on the net carrying amount of the loan at the contractual interest rate. Any cash interest payments received in excess of the limit and not applied to reduce the net carrying amount of the loan are recorded as recoveries of charge-offs until the charge-offs are fully recovered.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a 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 and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. BANK-OWNED LIFE INSURANCE: The Company has purchased insurance policies on the lives of certain directors, executive officers and employees. Bank-owned life insurance policies are reflected on the consolidated balance sheets at cash surrender value. Changes in net cash surrender value of the policies, as well as insurance proceeds received, are reflected in non-interest income on the consolidated statements of income and are not subject to income taxes. PREMISES AND EQUIPMENT: Land is carried at cost. Buildings and equipment are stated at cost, less accumulated depreciation and amortization. Cost and related allowances for depreciation and amortization of premises and equipment retired or otherwise disposed of are removed from the respective accounts with any gain or loss included in income or expense. Depreciation and amortization are calculated principally on the straight-line method over the estimated useful lives of the assets. Estimated lives are 15 to 40 years for buildings and 3 to 10 years for furniture and equipment. Premises and equipment are periodically evaluated for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Impairment exists when the expected undiscounted future cash flows of premises and equipment are less than its carrying amount. In that event, the Company records a loss for the difference between the carrying amount and the fair value of the asset based on quoted market prices, if applicable, or a discounted cash flow analysis. ADVERTISING: The Company directly expenses costs associated with advertising as they are incurred. INCOME TAXES: The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are established for the temporary differences between the accounting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when the amounts related to such temporary differences are realized or settled. EMPLOYEE STOCK OWNERSHIP PLAN: Compensation expense for the Employee Stock Ownership Plan (“ESOP”) is recorded at an amount equal to the shares allocated by the ESOP multiplied by the average fair value of the shares during the period. Unearned compensation applicable to the ESOP is reflected as a reduction of stockholders’ equity in the consolidated balance sheets. The difference between the average fair value and the cost of shares allocated by the ESOP is recorded as an adjustment to additional paid-in-capital. STOCK-BASED COMPENSATION: The Company recognizes stock-based compensation based on the grant-date fair value of the award. Forfeitures will be recognized when they occur. The Company values share-based stock option awards granted using the Black-Scholes option-pricing model. The Company recognizes compensation expense for its awards on a straight-line basis over the requisite service period for the entire award (straight-line attribution method), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date fair value of the award that is vested at that time. EARNINGS PER SHARE (EPS): Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding adjusted to exclude the weighted average number of unallocated shares held by the ESOP. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings of the entity. For the purposes of computing diluted EPS, the treasury stock method is used. The calculation of basic and diluted EPS (unaudited) is presented below.
FAIR VALUES OF FINANCIAL INSTRUMENTS: Accounting Standards Codification (ASC) 825, “Financial Instruments,” requires that the Company disclose the estimated fair value for its financial instruments. Fair value methods and assumptions used by the Company in estimating its fair value disclosures are as follows: Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate fair value. Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Accrued interest receivable: The carrying amount of accrued interest receivable approximates fair value. Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market 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 certificate accounts are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on certificate accounts. Federal Home Loan Bank advances: Fair values for Federal Home Loan Bank advances are estimated using a discounted cash flow technique that applies interest rates currently being offered on advances to a schedule of aggregate expected monthly maturities on Federal Home Loan Bank advances. RECENT ACCOUNTING PRONOUNCEMENTS: As an “emerging growth company,” as defined in Title 1 of Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, the consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. As of June 30, 2017, there is no significant difference in the comparability of the financial statements as a result of this extended transition period. In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments and makes targeted improvements to GAAP as follows:
Under the extended transition period for an emerging growth company, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of item 5 above is permitted as of the beginning of fiscal years or interim periods for which financial statements have not been issued. Early adoption of all other amendments in this ASU is not permitted. The Company is currently evaluating the amendments of ASU No. 2016-01 to determine the potential impact the new standard will have on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This ASU was issued to increase transparency and comparability among organizations by requiring reporting entities to recognize all leases, including operating, as lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. Under the extended transition period for an emerging growth company, the amendments in this ASU are effective for fiscal years beginning after December 31, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. Some of the key provisions of this new ASU include: (1) companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, and APIC pools will be eliminated. The guidance also eliminates the requirement that excess tax benefits be realized before companies can recognize them. In addition, the guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity; (2) increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. The new guidance will also require an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on its statement of cash flows (current guidance did not specify how these cash flows should be classified); and (3) permit companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. Under the extended transition period for an emerging growth company, ASU No. 2016-09 is effective for annual reporting periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 31, 2018. Early adoption is permitted, but all of the guidance must be adopted in the same period. The Company has adopted this ASU early during the annual reporting period ending December 31, 2017. Forfeitures will be recognized when they occur. The Company has evaluated the provisions of ASU No. 2016-09 and determined the new standard will have an immaterial effect on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. Under the extended transition period for an emerging growth company, this update will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted in interim and annual reporting periods beginning after December 15, 2018. The Company is currently evaluating the amendments of ASU No. 2016-13 to determine the potential impact the new standard will have on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” Current GAAP is unclear or does not include specific guidance on how to classify certain transactions in the statement of cash flows. This ASU is intended to reduce diversity in practice in how eight particular transactions are classified in the statement of cash flows. Under the extended transition period for an emerging growth company, this update will be effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, provided that all of the amendments are adopted in the same period. Entities will be required to apply the guidance retrospectively. If it is impracticable to apply to the guidance retrospectively for an issue, the amendments related to that issue would be applied prospectively. As this guidance only affects the classification with the statement of cash flows, ASU No. 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements. In November 2016, the FASB issued ASU 2016-18 to provide clarifying guidance on the classification and presentation of changes in restricted cash on an entity’s statements of cash flows. The guidance requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amended guidance is effective for the Company on January 1, 2018, with an early adoption permitted, and is to be applied retrospectively to all periods presented. As this guidance only affects the classification within the statement of cash flows, ASU 2016-18 is not expected to have a material impact on the Company’s consolidated financial statements. In March 2017, the FASB issued ASU 2017-08, “Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company anticipates the adoption of ASU No. 2017-08 will not have a material impact on the consolidated financial statements. |
Investments in Available-For-Sale Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Available-For-Sale Securities | NOTE 3 - INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost basis of securities and their approximate fair values are as follows as of June 30, 2017 (unaudited) and December 31, 2016:
The scheduled maturities of debt securities were as follows as of June 30, 2017 (unaudited):
Not included in the maturity table above is preferred stock with no stated maturity of $1,012,000 at June 30, 2017 (unaudited). There were no securities of issuers whose aggregate carrying amount exceeded 10% of stockholders’ equity as of June 30, 2017 (unaudited) and December 31, 2016. During the three and six months ended June 30, 2017 (unaudited) proceeds from the sales of available-for-sale securities were $650,000 and $1,544,000, respectively, and gross realized gains on these sales amounted to $343,000 and $807,000, respectively. The tax expense on the realized gains during the three and six months ended June 30, 2017 was $133,000 and $315,000, respectively. During the three and six months ended June 30, 2016 (unaudited) proceeds from the sales of available-for-sale securities were $7,864,000 and gross realized gains on these sales amounted to $293,000. The tax expense on the realized gains during the three and six months ended June 30, 2016 was $96,000. The Company had no pledged securities as of June 30, 2017 (unaudited) and December 31, 2016.
The aggregate fair value and unrealized losses of securities that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more, and are not other-than-temporarily impaired, are as follows as of June 30, 2017 (unaudited) and December 31, 2016:
The Company conducts periodic reviews of investment securities with unrealized losses to evaluate whether the impairment is other-than-temporary. The Company’s review for impairment generally includes a determination of the cause, severity and duration of the impairment; and an analysis of both positive and negative evidence available. The Company also determines if it has the ability and intent to hold the investment for a period of time sufficient to allow for anticipated recovery to cost basis. In regard to corporate debt, the Company also considers the issuer’s current financial condition and its ability to make future scheduled interest and principal payments on a timely basis in assessing other-than-temporary impairment.
During the three and six months ended June 30, 2017 and 2016, the Company had no writedowns of securities. A summary of the Company’s reviews of investment securities deemed to be temporarily impaired is as follows: Unrealized losses on U.S. Government and federal agency obligations amounted to $84,000 and consisted of twelve securities. The unrealized losses on all but one of these debt securities were individually less than 5% of amortized cost basis, with one of these U.S. government and federal agency obligations at 5.3%. Unrealized losses on municipal bonds amounted to $20,000 and consisted of two securities. The unrealized losses on these two debt securities were individually 1.7% and 5.9% of amortized cost basis. Unrealized losses on corporate bonds amounted to $40,000 and consisted of ten securities. The unrealized losses on all but one of these debt securities were individually less than 2.0% of amortized cost basis, with one of these corporate bonds at 2.36%. Unrealized losses on mortgage-backed securities amounted to $45,000 and consisted of four securities. The unrealized losses on these debt securities were 1.4%, 3.3%, 5.1% and 6.5% of amortized cost basis. These unrealized losses relate principally to the effect of interest rate changes on the fair value of debt securities and not to 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 basis, which may be at maturity, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2017. |
Loans |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | NOTE 4 - LOANS Loans consisted of the following at:
The following tables set forth information on the allowance for loan losses at and for the periods ending June 30, 2017 and 2016 (unaudited) and as of December 31, 2016:
The following tables set forth information regarding nonaccrual loans and past-due loans as of June 30, 2017 (unaudited) and December 31, 2016:
As of and during the three and six months ended June 30, 2017 and 2016 (unaudited) there were no loans that met the definition of an impaired loan in ASC 310-10-35. During the three and six months ended June 30, 2017 and 2016 (unaudited) there were no loans modified that met the definition of a troubled debt restructured loan in ASC 310-40. As of June 30, 2017 (unaudited) there is one consumer mortgage loan collateralized by residential real estate property in the process of foreclosure with a recorded investment of $319,000. As of December 31, 2016, the Bank had one consumer mortgage loan with a recorded balance of $321,000 in the process of foreclosure. Credit Quality Information The Company has established a 11 point internal loan rating system for commercial real estate, construction and commercial loans. For residential real estate and consumer loans, the Company initially assesses credit quality based upon the borrower’s ability to pay and subsequently monitors these loans based on the borrower’s ability to pay. The new risk rating system will assist the Company in better understanding the risk inherent in each loan. The new loan ratings are as follows: Loans rated 1: Secured by cash collateral or highly liquid diversified marketable securities. Loans rated 2 – 3: Strongest quality loans in the portfolio not secured by cash. Defined by consistent, solid profits, strong cash flow and are well secured. Very little vulnerability to changing economic conditions and compare favorably to their industry. Loans rated 4 – 5: These loans are pass rated. Borrower will show average to strong cash flow, strong to adequate collateral coverage, and will have a generally sound balance sheet. Inclusive in the 5 rating are all open and closed – end residential and retail loans which are paying as agreed. Loans rated 6: Loans with above average risk but still considered pass. Generally this rating is reserved for projects currently under construction or borrowers with modest cash flow, although still meeting all loan covenants. Loans rated 6W: Contain all the risks of a 6 rated credit but have an inherent weakness that requires close monitoring. This rating also generally includes open and closed-end residential and retail loans which are greater than 30 days past due but display no other inherent weakness. Loans rated 7: Potential weaknesses which warrant management’s close attention. If weaknesses are uncorrected, repayment prospects may be weakened. This is typically a transitional rating. Loans rated 8: Considered substandard. There is a likelihood of loss if the deficiencies are not corrected. Generally, open and closed – end retail loans, as well as automotive and other consumer loans past 90 cumulative days from the contractual due date should be classified as an 8. Loans rated 9: Borrower has a pronounced weakness and all current information indicates collection or liquidation of all debts in full is improbable and highly questionable. Loans rated 10: Uncollectable and a loss will be taken. Open and closed – end loans secured by residential real estate that are beyond 180 days past due will be assessed for value and any outstanding loan balance in excess of said value, less cost to sell, will be classified as a 10. On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate and construction loans over $350,000. As of June 30, 2017 (unaudited), there were no one- to four- family residential real estate loans that had a risk rating of “8 - substandard.” There was one, one- to four- family residential real estate loan with a balance of $319,000 with a risk rating of “7,” and two one- to four- family residential real estate loans with balances totaling $281,000 with a risk rating of “6W” and all other loans outstanding had a risk rating of “1 to 6 - pass.” As of December 31, 2016, one- to four- family residential real estate loans with balances totaling $287,000 had a risk rating of “8 - substandard” and all other loans outstanding had a risk rating of “1 to 6 - pass.”
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Premises and Equipment |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Premises and Equipment | NOTE 5 - PREMISES AND EQUIPMENT The following is a summary of premises and equipment:
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Deposits |
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Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | NOTE 6 - DEPOSITS The aggregate amount of time deposit amounts in denominations that meet or exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 as of June 30, 2017 (unaudited) and December 31, 2016 amounted to $23,245,000 and $23,434,000, respectively. For time deposits as of June 30, 2017 (unaudited) the scheduled maturities for each of the following periods ending June 30 are as follows:
Deposits from related parties held by the Bank as of June 30, 2017 (unaudited) and December 31, 2016 amounted to $3,371,000 and $3,782,000, respectively. |
Borrowed Funds |
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Brokers and Dealers [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowed Funds | NOTE 7 - BORROWED FUNDS The Bank is a member of the Federal Home Loan Bank of Boston (FHLB). Borrowings from the FHLB are secured by a blanket lien on qualified collateral, consisting primarily of loans with first mortgages secured by one-to-four family properties, certain unencumbered investment securities and other qualified assets. The remaining maximum borrowing capacity with the FHLB at June 30, 2017 (unaudited) was approximately $81.5 million subject to the purchase of additional FHLB stock. The Bank had outstanding FHLB borrowings of $26.0 million at June 30, 2017 (unaudited). Additionally, at June 30, 2017, the Bank had the ability to borrow up to $5.0 million on a Federal Funds line of credit with the Co-Operative Central Bank. The following is a summary of FHLB borrowings as of June 30, 2017 (unaudited) and December 31, 2016:
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Financial Instruments |
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Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | NOTE 8 - FINANCIAL INSTRUMENTS The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to originate loans and unadvanced funds on loans. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to originate loans are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include secured interests in mortgages, accounts receivable, inventory, property, plant and equipment and income-producing properties.
Amounts of financial instrument liabilities with off-balance sheet credit risk are as follows as of June 30, 2017 (unaudited) and December 31, 2016:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | NOTE 9 - FAIR VALUE MEASUREMENTS ASC 820-10, “Fair Value Measurements and Disclosures,” provides a framework for measuring fair value under generally accepted accounting principles. This guidance also allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. In accordance with ASC 820-10, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities. Level 3 - Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, are not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value for June 30, 2017 (unaudited) and December 31, 2016. The Company did not have any significant transfers of assets between levels 1 and 2 of the fair value hierarchy during the three and six months ended June 30, 2017 (unaudited) and the year ended December 31, 2016. The Company’s investments in preferred stock and marketable equity securities are generally classified within level 1 of the fair value hierarchy because they are valued using quoted market prices.
The Company’s investment in debt securities available-for-sale is generally classified within level 2 of the fair value hierarchy. For these securities, we obtain fair value measurements from independent pricing services. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions. Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Subsequent to inception, management only changes level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalization and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows. The following summarizes assets measured at fair value on a recurring basis as of June 30, 2017 (unaudited) and December 31, 2016:
Under certain circumstances the Company makes adjustments to fair value for its assets and liabilities although they are not measured at fair value on a recurring basis. At June 30, 2017 (unaudited) and December 31, 2016, there were no assets or liabilities carried on the consolidated balance sheets for which a nonrecurring change in fair value has been recorded.
The estimated fair values of the Company’s financial instruments, all of which are held or issued for purposes other than trading, are as follows:
The carrying amounts of financial instruments shown in the above tables are included in the consolidated balance sheets under the indicated captions. Accounting policies related to financial instruments are described in Note 2. |
Other Comprehensive (Loss) Income |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive (Loss) Income | NOTE 10 - OTHER COMPREHENSIVE (LOSS) INCOME Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities 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. The components of other comprehensive (loss) income, included in stockholders’ equity, are as follows:
Accumulated other comprehensive income as of June 30, 2017 (unaudited) and December 31, 2016 consists of net unrealized holding gains on available-for-sale securities, net of taxes. |
Regulatory Matters |
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Regulatory Matters | NOTE 11 - REGULATORY MATTERS The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Effective January 1, 2015, (with a phase-in period of two to four years for certain components), the Bank became subject to capital regulations adopted by the Board of Governors of the Federal Reserve System (“FRB”) and the FDIC, which implement the Basel III regulatory capital reforms and the changes required by the Dodd-Frank Act. The regulations require a common equity Tier 1 (“CET1”) capital ratio of 4.5%, a minimum Tier 1 capital to risk-weighted assets ratio of 6.0%, a minimum total capital to risk-weighted assets ratio of 8.0% and a minimum Tier 1 leverage ratio of 4.0%. CET1 generally consists of common stock and retained earnings, subject to applicable adjustments and deductions. Under prompt corrective action regulations, in order to be considered “well capitalized,” the Bank must maintain a CET1 capital ratio of 6.5%, a Tier 1 risk based capital ratio of 8.0%, a total risk based capital ratio of 10.0%, and a Tier 1 leverage ratio of 5.0%. In addition, the regulations establish a capital conservation buffer above the required capital ratios that phases in beginning January 1, 2016 at 0.625% of risk-weighted assets and increases each year by 0.625% until it is fully phased in at 2.5% effective January 1, 2019. Failure to maintain the capital conservation buffer will limit the ability of the Bank and the Company to pay dividends, repurchase shares or pay discretionary bonuses. At June 30, 2017, the Bank exceeded the fully phased in regulatory requirement for the capital conservation buffer. Management believes, as of June 30, 2017, that the Bank meets all capital adequacy requirements to which it is subject. As of June 30, 2017, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum Common Equity Tier 1 risk-based, total risk-based, Tier 1 risk-based and Tier 1 leverage capital ratios as set forth in the following table. There were no conditions or events since that notification that management believes have changed the Bank’s category.
The Bank’s actual capital amounts and ratios as of June 30, 2017 (unaudited) and December 31, 2016 are presented in the following table.
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Common Stock Repurchases |
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Equity [Abstract] | |
Common Stock Repurchases | NOTE 12 – COMMON STOCK REPURCHASES From time to time, our board of directors authorizes stock repurchase plans. In general, stock repurchase plans allow us to proactively manage our capital position and return excess capital to shareholders. Shares purchased under such plans also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. Our board of directors authorized a stock repurchase program, allowing us to repurchase up to 283,000 shares of our common stock from time to time at various prices in the open market or through private transactions. The actual amount and timing of future share repurchases, if any, will depend on market conditions, applicable SEC rules and various other factors. During the six months ended June 30, 2017 (unaudited), no shares of common stock were repurchased. During the six months ended June 30, 2016 (unaudited), a total of 208,600 shares of common stock were repurchased at an average cost of $15.31. |
Stock Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Based Compensation | NOTE 13 – STOCK BASED COMPENSATION Melrose Bancorp, Inc. adopted the Melrose Bancorp, Inc. 2015 Equity Incentive Plan (the “2015 Equity Incentive Plan”) to provide directors, officers, and employees of the Company and Melrose Cooperative Bank with additional incentives to promote growth and performance of the Company and Melrose Cooperative Bank. The 2015 Equity Incentive Plan authorizes the issuance or delivery to participants of up to 396,140 shares of Melrose Bancorp, Inc. common stock pursuant to grants of incentive and non-statutory stock options, restricted stock awards, and restricted stock units. Of this number, the maximum number of shares of Melrose Bancorp, Inc. common stock that may be issued under the 2015 Equity Incentive Plan pursuant to the exercise of stock options is 282,957 shares, and the maximum number of shares of Melrose Bancorp, Inc. common stock that may be issued as restricted stock awards or restricted stock units is 113,183 shares. The 2015 Equity Incentive Plan was effective upon approval by stockholders at the November 23, 2015 annual meeting. On May 12, 2016, the Company issued 44,300 shares of common stock restricted stock awards. The restricted stock award expense is based on $15.13 per share, and shares vest over 5 years commencing one year from the grant date. The total expense recognized for the three and six months ended June 30, 2017, in connection with the restricted stock awards was $33,000, and $67,000 (unaudited), respectively, and the recognized tax benefit was $13,000 and $26,000 (unaudited), respectively. During the three and six months ending June 30, 2016, the expense was $25,000. The recognized tax benefit was $10,000. On May 12, 2016, the Company granted 224,200 stock options. The stock options have an exercise price of $15.13 per share, and vest ratably over 5 years commencing one year from the date of the grant. The stock option expense is equal to the number of options expected to vest each year times the grant date fair value of the shares as determined using the Black-Scholes option pricing model. The Company completed an analysis of seven peer banks to determine the expected volatility of 20.24%. The exercise price used in the pricing model was $15.13, the closing price of the stock on the grant date. The expected life was estimated to be 6.5 years and the 7 year treasury rate of 1.54% was used as the annual risk free interest rate. The expected forfeiture rate is 0%. Using these variables, the estimated fair value is $3.71 per share. The aggregate intrinsic value is $621,000 as of June 30, 2017. The total expense recognized for the three and six months ended June 30, 2017, in connection with the stock options was $41,000 and $83,000 (unaudited), respectively, and the recognized tax benefit was $11,000 and $23,000 (unaudited), respectively. During the three and six month periods ending June 30, 2016 the stock option expense was $21,000. The recognized tax benefit was $8,000. At June 30, 2017 (unaudited), the unrecognized share based compensation expense related to the 35,440 unvested restricted stock awards amounted to $518,000. The unrecognized expense will be recognized over a weighted average life of 3.8 years. At June 30, 2017 (unaudited), 51,044 of the 224,200 stock options outstanding are exercisable, and the remaining contractual life is 8.8 years. The unrecognized expense related to the unvested options is $642,000 and will be recognized over a weighted average life of 3.8 years. The Company adopted ASU 2016-09, “Compensation – Stock Compensation (Topic 718),” early during the annual reporting period ending December 31, 2017. Provisions of this new ASU include, the company will no longer record excess tax benefits and certain deficiencies in additional paid-in-capital (APIC), instead we will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. The Company has evaluated these provisions and determined the new standard to have an immaterial effect on the Company’s consolidated financial statements.
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION | BASIS OF PRESENTATION: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank, and the Bank’s wholly-owned subsidiary, MCBSC, Inc., which is used to hold investment securities. All significant intercompany accounts and transactions have been eliminated in the consolidation. |
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USE OF ESTIMATES | USE OF ESTIMATES: In preparing consolidated financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, impairment of securities and the valuation of deferred tax assets. |
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CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, cash and cash equivalents include cash, amounts due from banks, money market funds and federal funds sold. |
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SECURITIES | SECURITIES: Investments in debt securities are adjusted for amortization of premiums and accretion of discounts computed so as to approximate the interest method. Gains or losses on sales of investment securities are computed on a specific identification basis. The Company classifies all debt and equity securities as available-for-sale. Available-for-sale securities are carried at fair value on the consolidated balance sheets. Unrealized holding gains and losses are not included in earnings, but are reported as a net amount (less expected tax) in a separate component of stockholders’ equity until realized. The security classification may be modified after acquisition only under certain specified conditions. For any debt security with a fair value less than its amortized cost basis, the Company will determine whether it has the intent to sell the debt security or whether it is more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis. If either condition is met, the Company will recognize a full impairment charge to earnings. For all other debt securities that are considered other-than-temporarily impaired and do not meet either condition, the credit loss portion of impairment will be recognized in earnings as realized losses. The other-than-temporary impairment related to all other factors will be recorded in other comprehensive income. Declines in marketable equity securities below their cost that are deemed other-than-temporary are reflected in earnings as realized losses. As a member of the Federal Home Loan Bank of Boston (FHLB), the Company is required to invest in $100 par value stock of the FHLB. The FHLB capital structure mandates that members must own stock as determined by their Total Stock Investment Requirement which is the sum of a member’s Membership Stock Investment Requirement and Activity-Based Stock Investment Requirement. Management evaluates the Company’s investment in FHLB stock for other-than-temporary impairment at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation. Based on its most recent analysis of the FHLB as of June 30, 2017, management deems its investment in FHLB stock to be not other-than-temporarily impaired. |
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LOANS | LOANS: Loans receivable that management has the intent and ability to hold until maturity or payoff are reported at their outstanding principal balances adjusted for amounts due to borrowers on outstanding home equity lines of credit, commercial lines of credit and construction loans, any charge-offs, the allowance for loan losses and any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans. Loan origination and commitment fees and certain direct origination costs are deferred, and the net amount amortized as an adjustment of the related loan’s yield. The Company is amortizing these amounts over the contractual lives of the related loans. Residential real estate loans are generally placed on nonaccrual when reaching 90 days past due or are in the process of foreclosure. All closed-end consumer loans 90 days or more past due and any equity line in the process of foreclosure are placed on nonaccrual status. Secured consumer loans are written down to realizable value and unsecured consumer loans are charged off upon reaching 120 or 180 days past due depending on the type of loan. Commercial real estate loans and commercial business loans which are 90 days or more past due are generally placed on nonaccrual status, unless secured by sufficient cash or other assets immediately convertible to cash. When a loan has been placed on nonaccrual status, previously accrued and uncollected interest is reversed against interest on loans. A loan can be returned to accrual status when collectability of principal is reasonably assured and the loan has performed for a period of time, generally six months.
Cash receipts of interest income on impaired loans are credited to principal to the extent necessary to eliminate doubt as to the collectability of the net carrying amount of the loan. Some or all of the cash receipts of interest income on impaired loans are recognized as interest income if the remaining net carrying amount of the loan is deemed to be fully collectible. When recognition of interest income on an impaired loan on a cash basis is appropriate, the amount of income that is recognized is limited to that which would have been accrued on the net carrying amount of the loan at the contractual interest rate. Any cash interest payments received in excess of the limit and not applied to reduce the net carrying amount of the loan are recorded as recoveries of charge-offs until the charge-offs are fully recovered. |
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ALLOWANCE FOR LOAN LOSSES | ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a 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 and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. |
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BANK-OWNED LIFE INSURANCE | BANK-OWNED LIFE INSURANCE: The Company has purchased insurance policies on the lives of certain directors, executive officers and employees. Bank-owned life insurance policies are reflected on the consolidated balance sheets at cash surrender value. Changes in net cash surrender value of the policies, as well as insurance proceeds received, are reflected in non-interest income on the consolidated statements of income and are not subject to income taxes. |
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PREMISES AND EQUIPMENT | PREMISES AND EQUIPMENT: Land is carried at cost. Buildings and equipment are stated at cost, less accumulated depreciation and amortization. Cost and related allowances for depreciation and amortization of premises and equipment retired or otherwise disposed of are removed from the respective accounts with any gain or loss included in income or expense. Depreciation and amortization are calculated principally on the straight-line method over the estimated useful lives of the assets. Estimated lives are 15 to 40 years for buildings and 3 to 10 years for furniture and equipment. Premises and equipment are periodically evaluated for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Impairment exists when the expected undiscounted future cash flows of premises and equipment are less than its carrying amount. In that event, the Company records a loss for the difference between the carrying amount and the fair value of the asset based on quoted market prices, if applicable, or a discounted cash flow analysis. |
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ADVERTISING | ADVERTISING: The Company directly expenses costs associated with advertising as they are incurred. |
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INCOME TAXES | INCOME TAXES: The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are established for the temporary differences between the accounting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when the amounts related to such temporary differences are realized or settled. |
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EMPLOYEE STOCK OWNERSHIP PLAN | EMPLOYEE STOCK OWNERSHIP PLAN: Compensation expense for the Employee Stock Ownership Plan (“ESOP”) is recorded at an amount equal to the shares allocated by the ESOP multiplied by the average fair value of the shares during the period. Unearned compensation applicable to the ESOP is reflected as a reduction of stockholders’ equity in the consolidated balance sheets. The difference between the average fair value and the cost of shares allocated by the ESOP is recorded as an adjustment to additional paid-in-capital. |
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STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION: The Company recognizes stock-based compensation based on the grant-date fair value of the award. Forfeitures will be recognized when they occur. The Company values share-based stock option awards granted using the Black-Scholes option-pricing model. The Company recognizes compensation expense for its awards on a straight-line basis over the requisite service period for the entire award (straight-line attribution method), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date fair value of the award that is vested at that time. |
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EARNINGS PER SHARE (EPS) | EARNINGS PER SHARE (EPS): Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding adjusted to exclude the weighted average number of unallocated shares held by the ESOP. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings of the entity. For the purposes of computing diluted EPS, the treasury stock method is used. The calculation of basic and diluted EPS (unaudited) is presented below.
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FAIR VALUES OF FINANCIAL INSTRUMENTS | FAIR VALUES OF FINANCIAL INSTRUMENTS: Accounting Standards Codification (ASC) 825, “Financial Instruments,” requires that the Company disclose the estimated fair value for its financial instruments. Fair value methods and assumptions used by the Company in estimating its fair value disclosures are as follows: Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate fair value. Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Accrued interest receivable: The carrying amount of accrued interest receivable approximates fair value. Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market 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 certificate accounts are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on certificate accounts. Federal Home Loan Bank advances: Fair values for Federal Home Loan Bank advances are estimated using a discounted cash flow technique that applies interest rates currently being offered on advances to a schedule of aggregate expected monthly maturities on Federal Home Loan Bank advances. |
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RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS: As an “emerging growth company,” as defined in Title 1 of Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, the consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. As of June 30, 2017, there is no significant difference in the comparability of the financial statements as a result of this extended transition period. In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments and makes targeted improvements to GAAP as follows:
Under the extended transition period for an emerging growth company, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of item 5 above is permitted as of the beginning of fiscal years or interim periods for which financial statements have not been issued. Early adoption of all other amendments in this ASU is not permitted. The Company is currently evaluating the amendments of ASU No. 2016-01 to determine the potential impact the new standard will have on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This ASU was issued to increase transparency and comparability among organizations by requiring reporting entities to recognize all leases, including operating, as lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. Under the extended transition period for an emerging growth company, the amendments in this ASU are effective for fiscal years beginning after December 31, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. Some of the key provisions of this new ASU include: (1) companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, and APIC pools will be eliminated. The guidance also eliminates the requirement that excess tax benefits be realized before companies can recognize them. In addition, the guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity; (2) increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. The new guidance will also require an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on its statement of cash flows (current guidance did not specify how these cash flows should be classified); and (3) permit companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. Under the extended transition period for an emerging growth company, ASU No. 2016-09 is effective for annual reporting periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 31, 2018. Early adoption is permitted, but all of the guidance must be adopted in the same period. The Company has adopted this ASU early during the annual reporting period ending December 31, 2017. Forfeitures will be recognized when they occur. The Company has evaluated the provisions of ASU No. 2016-09 and determined the new standard will have an immaterial effect on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. Under the extended transition period for an emerging growth company, this update will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted in interim and annual reporting periods beginning after December 15, 2018. The Company is currently evaluating the amendments of ASU No. 2016-13 to determine the potential impact the new standard will have on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” Current GAAP is unclear or does not include specific guidance on how to classify certain transactions in the statement of cash flows. This ASU is intended to reduce diversity in practice in how eight particular transactions are classified in the statement of cash flows. Under the extended transition period for an emerging growth company, this update will be effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, provided that all of the amendments are adopted in the same period. Entities will be required to apply the guidance retrospectively. If it is impracticable to apply to the guidance retrospectively for an issue, the amendments related to that issue would be applied prospectively. As this guidance only affects the classification with the statement of cash flows, ASU No. 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements. In November 2016, the FASB issued ASU 2016-18 to provide clarifying guidance on the classification and presentation of changes in restricted cash on an entity’s statements of cash flows. The guidance requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amended guidance is effective for the Company on January 1, 2018, with an early adoption permitted, and is to be applied retrospectively to all periods presented. As this guidance only affects the classification within the statement of cash flows, ASU 2016-18 is not expected to have a material impact on the Company’s consolidated financial statements. In March 2017, the FASB issued ASU 2017-08, “Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company anticipates the adoption of ASU No. 2017-08 will not have a material impact on the consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Calculation of Basic and Diluted EPS | The calculation of basic and diluted EPS (unaudited) is presented below.
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Investments in Available-For-Sale Securities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost Basis of Securities and Their Approximate Fair Values | The amortized cost basis of securities and their approximate fair values are as follows as of June 30, 2017 (unaudited) and December 31, 2016:
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Scheduled Maturities of Debt Securities | The scheduled maturities of debt securities were as follows as of June 30, 2017 (unaudited):
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Aggregate Fair Value and Unrealized Losses of Securities in Continuous Unrealized Loss Position | The aggregate fair value and unrealized losses of securities that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more, and are not other-than-temporarily impaired, are as follows as of June 30, 2017 (unaudited) and December 31, 2016:
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Loans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Loans | Loans consisted of the following at:
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Information Regarding Nonaccrual Loans and Past-due Loans | The following tables set forth information on the allowance for loan losses at and for the periods ending June 30, 2017 and 2016 (unaudited) and as of December 31, 2016:
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Summary of Changes in Allowance for Loan Losses | The following tables set forth information regarding nonaccrual loans and past-due loans as of June 30, 2017 (unaudited) and December 31, 2016:
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Premises and Equipment (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Premises and Equipment | The following is a summary of premises and equipment:
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Deposits (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Scheduled Maturities of Time Deposits | For time deposits as of June 30, 2017 (unaudited) the scheduled maturities for each of the following periods ending June 30 are as follows:
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Borrowed Funds (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brokers and Dealers [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of FHLB Borrowings | The following is a summary of FHLB borrowings as of June 30, 2017 (unaudited) and December 31, 2016:
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Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Amounts of Financial Instrument Liabilities with off-Balance Sheet Credit Risk | Amounts of financial instrument liabilities with off-balance sheet credit risk are as follows as of June 30, 2017 (unaudited) and December 31, 2016:
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Fair Value Measurements (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Assets Measured at Fair Value on Recurring Basis | The following summarizes assets measured at fair value on a recurring basis as of June 30, 2017 (unaudited) and December 31, 2016:
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Summary of Estimated Fair Values of Bank's Financial Instruments | The estimated fair values of the Company’s financial instruments, all of which are held or issued for purposes other than trading, are as follows:
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Other Comprehensive (Loss) Income (Tables) |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Other Comprehensive (Loss) Income Included in Stockholders' Equity | The components of other comprehensive (loss) income, included in stockholders’ equity, are as follows:
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Regulatory Matters (Tables) |
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Banking and Thrift [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Actual Capital Amounts and Ratios | The Bank’s actual capital amounts and ratios as of June 30, 2017 (unaudited) and December 31, 2016 are presented in the following table.
|
Nature of Operations - Additional Information (Detail) |
6 Months Ended |
---|---|
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Entity incorporation date | Feb. 01, 2014 |
Summary of Significant Accounting Policies - Additional Information (Detail) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
|
Significant Accounting Policies [Line Items] | ||
Par value stock | $ 0.01 | $ 0.01 |
Building [Member] | Minimum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Estimated useful lives | 15 years | |
Building [Member] | Maximum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Estimated useful lives | 40 years | |
Furniture and Equipment [Member] | Minimum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Estimated useful lives | 3 years | |
Furniture and Equipment [Member] | Maximum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Estimated useful lives | 10 years | |
Federal Home Loan Bank of Boston [Member] | ||
Significant Accounting Policies [Line Items] | ||
Par value stock | $ 100 |
Summary of Significant Accounting Policies - Summary of Calculation of Basic and Diluted EPS (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Earnings Per Share [Abstract] | ||||
Net income | $ 421 | $ 274 | $ 948 | $ 468 |
Basic Common Shares: | ||||
Weighted average common shares outstanding | 2,602,079 | 2,665,635 | 2,602,079 | 2,702,001 |
Weighted average shares - unearned restricted stock | (34,950) | (36,042) | ||
Weighted average unallocated ESOP shares | (200,899) | (208,445) | (201,842) | (209,388) |
Basic weighted average shares outstanding | 2,366,230 | 2,457,190 | 2,364,195 | 2,492,613 |
Dilutive effect of unvested restricted stock awards | 3,897 | 830 | 3,969 | 415 |
Diluted weighted average shares outstanding | 2,370,127 | 2,458,020 | 2,368,164 | 2,493,028 |
Basic earnings per share | $ 0.18 | $ 0.11 | $ 0.40 | $ 0.19 |
Diluted earnings per share | $ 0.18 | $ 0.11 | $ 0.40 | $ 0.19 |
Summary of Significant Accounting Policies - Summary of Calculation of Basic and Diluted EPS (Parenthetical) (Detail) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Earnings Per Share [Abstract] | ||||
Anti-dilutive securities excluded from computation of diluted earnings | 224,200 | 224,200 | 224,200 | 224,200 |
Investments in Available-For-Sale Securities - Scheduled Maturities of Debt Securities (Detail) $ in Thousands |
Jun. 30, 2017
USD ($)
|
---|---|
Schedule of Available-for-sale Securities [Line Items] | |
Due within one year | $ 2,170 |
Due after one year through five years | 14,124 |
Due after five years through ten years | 2,265 |
Due after ten years | 2,858 |
Debt security, fair value | 24,851 |
Mortgage-backed Securities [Member] | |
Schedule of Available-for-sale Securities [Line Items] | |
Debt securities | 1,666 |
Asset-backed Securities [Member] | |
Schedule of Available-for-sale Securities [Line Items] | |
Debt securities | $ 1,768 |
Premises and Equipment - Summary of Premises and Equipment (Detail) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Premises and equipment, gross | $ 3,375 | $ 3,085 |
Accumulated depreciation | (1,885) | (1,837) |
Premises and equipment, net | 1,490 | 1,248 |
Land [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Premises and equipment, gross | 393 | 393 |
Building and Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Premises and equipment, gross | 2,115 | 1,840 |
Furniture and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Premises and equipment, gross | 553 | 549 |
Data Processing Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Premises and equipment, gross | $ 314 | $ 303 |
Deposits - Additional Information (Detail) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Banking and Thrift [Abstract] | ||
FDIC insurance limit | $ 250,000 | $ 250,000 |
Aggregate amount of time deposit | 23,245,000 | 23,434,000 |
Deposits from related parties held by bank | $ 3,371,000 | $ 3,782,000 |
Deposits - Scheduled Maturities of Time Deposits (Detail) $ in Thousands |
Jun. 30, 2017
USD ($)
|
---|---|
Banking and Thrift [Abstract] | |
2018 | $ 83,439 |
2019 | 24,305 |
2020 | 1,524 |
2021 | 6,973 |
2022 | 1,587 |
Total | $ 117,828 |
Borrowed Funds - Additional Information (Detail) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items] | ||
FHLB Borrowings | $ 26,000,000 | $ 10,000,000 |
Cooperative Central Bank [Member] | ||
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items] | ||
Maximum borrowing capacity | 5,000,000 | |
Federal Home Loan Bank of Boston [Member] | ||
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items] | ||
Federal Home Loan Bank, remaining maximum borrowing capacity | 81,500,000 | |
FHLB Borrowings | $ 26,000,000 |
Borrowed Funds - Summary of FHLB Borrowings (Detail) - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
|
Federal Home Loan Banks [Abstract] | ||
Balance | $ 26,000,000 | $ 10,000,000 |
Average balance during the year | 15,845,000 | 2,363,000 |
Maximum outstanding at any month end | $ 26,000,000 | $ 10,000,000 |
Weighted average interest rate at period end | 1.71% | 1.45% |
Financial Instruments - Summary of Amounts of Financial Instrument Liabilities with off-Balance Sheet Credit Risk (Detail) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Financial instrument liabilities with off-balance sheet credit risk | $ 25,867 | $ 25,458 |
Commitments to Originate Loans [Member] | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Financial instrument liabilities with off-balance sheet credit risk | 6,447 | 7,864 |
Unused Lines of Credit [Member] | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Financial instrument liabilities with off-balance sheet credit risk | 15,359 | 13,742 |
Due to Borrowers on Unadvanced Construction Loans [Member] | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Financial instrument liabilities with off-balance sheet credit risk | $ 4,061 | $ 3,852 |
Other Comprehensive (Loss) Income - Components of Other Comprehensive (Loss) Income Included in Stockholders' Equity (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent [Abstract] | ||||
Net unrealized holding gain on available-for-sale securities | $ 200 | $ 322 | $ 497 | $ 690 |
Reclassification adjustment for net realized gain included in net income | (343) | (293) | (807) | (293) |
Other comprehensive (loss) income before income tax effect | (143) | 29 | (310) | 397 |
Income tax benefit (expense) | 75 | 20 | 152 | (100) |
Other comprehensive (loss) income, net of tax | $ (68) | $ 49 | $ (158) | $ 297 |
Other Comprehensive (Loss) Income - Components of Other Comprehensive (Loss) Income Included in Stockholders' Equity (Parenthetical) (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Reclassification adjustment for net realized gain in net income | $ 343,000 | $ 293,000 | $ 807,000 | $ 293,000 |
Reclassified Out of Accumulated Other Comprehensive Income (Loss) [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Reclassification adjustment for net realized gain in net income | 343,000 | 293,000 | 807,000 | 293,000 |
Tax benefit, included in income tax expense | $ 133,000 | $ 95,000 | $ 315,000 | $ 95,000 |
Common Stock Repurchases - Additional Information (Detail) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Equity, Class of Treasury Stock [Line Items] | ||
Total number of shares repurchased | 0 | 208,600 |
Average cost of shares repurchased | $ 15.31 | |
Maximum [Member] | ||
Equity, Class of Treasury Stock [Line Items] | ||
Number of shares authorized to be repurchased | 283,000 |
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