UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

 

¨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. 001-37504

 

Provident Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

Massachusetts  45-3231576
(State or other jurisdiction of  (I.R.S. Employer
incorporation or organization)  Identification Number)
    
5 Market Street, Amesbury, Massachusetts  01913
(Address of Principal Executive Offices)  Zip Code

 

(978) 834-8555

(Registrant’s telephone number)

 

N/A
(Former name, former address, and former fiscal year if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Common stock, no par value   PVBC   The NASDAQ Stock Market LLC

 

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 x NO ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). YES x NO ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 x
Non-accelerated filer   ¨   Smaller reporting company x
Emerging growth company   x      

 

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. x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

 

As of August 6, 2019, there were 9,621,822 shares of the Registrant’s common stock, no par value per share, outstanding.

 

 

 

 

 

 

Provident Bancorp, Inc.

Form 10-Q

 

     Page
Part I. Financial Information   
      
Item 1. Interim Financial Statements   
      
  Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018  2
      
  Consolidated Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)  3
      
  Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)  4
      
  Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)  5
      
  Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited)  6
      
  Notes to Consolidated Financial Statements (unaudited)  8
      
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation  26
      
Item 3. Quantitative and Qualitative Disclosures about Market Risk  42
      
Item 4. Controls and Procedures  42
      
Part II. Other Information   
      
Item 1. Legal Proceedings  42
      
Item 1A. Risk Factors  42
      
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds  43
      
Item 3. Defaults upon Senior Securities  43
      
Item 4. Mine Safety Disclosures  43
      
Item 5. Other Information  43
      
Item 6. Exhibits  43
      
Signatures  44

 

 

 

 

Part I.Financial Information
Item 1.Financial Statements

 

PROVIDENT BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

 

   At   At 
   June 30,   December 31, 
(Dollars in thousands)  2019   2018 
   (unaudited)     
Assets          
Cash and due from banks  $11,285   $10,941 
Short-term investments   16,996    17,672 
Cash and cash equivalents   28,281    28,613 
Investments in available-for-sale securities (at fair value)   48,590    51,403 
Federal Home Loan Bank stock, at cost   3,836    2,650 
Loans, net   885,126    835,528 
Bank owned life insurance   26,576    26,226 
Premises and equipment, net   22,776    16,086 
Other real estate owned   1,740    1,676 
Accrued interest receivable   3,226    2,638 
Deferred tax asset, net   6,398    6,437 
Other assets   4,626    2,822 
Total assets  $1,031,175   $974,079 
           
Liabilities and Equity          
Deposits:          
Noninterest-bearing  $219,497   $195,293 
Interest-bearing   583,905    572,803 
Total deposits   803,402    768,096 
Borrowings   81,963    68,022 
Operating lease liabilities   3,901    - 
Other liabilities   10,146    12,377 
Total liabilities   899,412    848,495 
Shareholders' equity:          
Preferred stock; authorized 50,000 shares: no shares issued and outstanding   -    - 
Common stock, no par value: 30,000,000 shares authorized; 9,658,284 shares issued, 9,621,822 shares outstanding at June 30, 2019 and 9,662,181 shares issued, 9,625,719 shares outstanding at December 31, 2018   -    - 
Additional paid-in capital   46,567    45,895 
Retained earnings   88,100    83,351 
Accumulated other comprehensive income (loss)   384    (255)
Unearned compensation - ESOP   (2,500)   (2,619)
Treasury stock: 36,462 shares   (788)   (788)
Total shareholders' equity   131,763    125,584 
Total liabilities and shareholders' equity  $1,031,175   $974,079 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 2 

 

 

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(Dollars in thousands, except per share data)  2019  2018 2019 2018
   (unaudited) 
Interest and dividend income:                    
Interest and fees on loans  $12,270   $9,925   $23,969   $19,201 
Interest and dividends on securities   420    410    824    845 
Interest on short-term investments   41    42    67    84 
Total interest and dividend income   12,731    10,377    24,860    20,130 
Interest expense:                    
Interest on deposits   1,531    1,009    2,968    1,929 
Interest on borrowings   599    204    1,133    318 
Total interest expense   2,130    1,213    4,101    2,247 
Net interest and dividend income   10,601    9,164    20,759    17,883 
Provision for loan losses   1,354    638    2,816    1,294 
Net interest and dividend income after provision for loan losses   9,247    8,526    17,943    16,589 
Noninterest income:                    
Customer service fees on deposit accounts   356    339    685    701 
Service charges and fees - other   506    594    918    1,049 
Gain on sale of securities, net   -    -    113    - 
Bank owned life insurance income   173    172    350    343 
Other income   21    13    36    38 
Total noninterest income   1,056    1,118    2,102    2,131 
Noninterest expense:                    
Salaries and employee benefits   4,274    4,269    8,568    8,433 
Occupancy expense   550    417    1,194    867 
Equipment expense   109    121    215    243 
Data processing   150    193    354    397 
Marketing expense   69    61    124    114 
Professional fees   496    329    918    577 
Directors' compensation   188    163    369    326 
Other   1,047    858    1,887    1,830 
Total noninterest expense   6,883    6,411    13,629    12,787 
Income before income tax expense   3,420    3,233    6,416    5,933 
Income tax expense   889    843    1,667    1,521 
Net income  $2,531   $2,390   $4,749   $4,412 
                     
Earnings per share:                    
Basic  $0.27   $0.26   $0.51   $0.48 
Diluted  $0.27   $0.26   $0.51   $0.47 
                     
Weighted Average Shares:                    
Basic   9,280,989    9,233,745    9,274,085    9,226,244 
Diluted   9,348,861    9,302,425    9,329,558    9,294,317 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 3 

 

 

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(In thousands)  2019   2018   2019   2018 
Net income  $2,531   $2,390   $4,749   $4,412 
Other comprehensive income (loss):                    
Unrealized holding gains (losses)   760    (92)   975    (1,305)
Reclassification adjustment for realized gains in net income   -    -    (113)   - 
Unrealized gain (loss)   760    (92)   862    (1,305)
Income tax effect   (190)   (27)   (223)   327 
Net of tax amount   570    (119)   639    (978)
Total comprehensive income  $3,101   $2,271   $5,388   $3,434 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 4 

 

 

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

   For the three months ended June 30, 2019 and 2018 
               Accumulated             
   Shares of   Additional       Other   Unearned         
   Common   Paid-in   Retained   Comprehensive   Compensation   Treasury     
(In thousands, except share data)  Stock   Capital   Earnings   Income (Loss)   ESOP   Stock   Total 
Balance, March 31, 2019   9,621,822   $46,236   $85,569   $(186)  $(2,559)  $(788)  $128,272 
Net income   -    -    2,531    -    -    -    2,531 
Other comprehensive income   -    -    -    570    -    -    570 
Stock-based compensation expense   -    245    -    -    -    -    245 
ESOP shares earned   -    86    -    -    59    -    145 
Balance, June 30, 2019   9,621,822   $46,567   $88,100   $384   $(2,500)  $(788)  $131,763 
                                    
Balance, March 31, 2018   9,628,796   $44,923   $76,069   $(270)  $(2,798)  $(594)  $117,330 
Net income   -    -    2,390    -    -    -    2,390 
Other comprehensive loss   -    -    -    (119)   -    -    (119)
Stock-based compensation expense   -    240    -    -    -    -    240 
ESOP shares earned   -    87    -    -    60    -    147 
Balance, June 30, 2018   9,628,796   $45,250   $78,459   $(389)  $(2,738)  $(594)  $119,988 

 

   For the six months ended June 30, 2019 and 2018 
               Accumulated             
   Shares of   Additional       Other   Unearned         
   Common   Paid-in   Retained   Comprehensive   Compensation   Treasury     
(In thousands, except share data)  Stock   Capital   Earnings   Income (Loss)   ESOP   Stock   Total 
Balance, December 31, 2018   9,625,719   $45,895   $83,351   $(255)  $(2,619)  $(788)  $125,584 
Net income   -    -    4,749    -    -    -    4,749 
Other comprehensive income   -    -    -    639    -    -    639 
Stock-based compensation expense   -    510    -    -    -    -    510 
Restricted stock award grant forfeiture   (3,897)   -    -    -    -    -    - 
ESOP shares earned   -    162    -    -    119    -    281 
Balance, June 30, 2019   9,621,822   $46,567   $88,100   $384   $(2,500)  $(788)  $131,763 
                                    
Balance, December 31, 2017   9,628,796   $44,592   $74,047   $589   $(2,857)  $(594)  $115,777 
Net income   -    -    4,412    -    -    -    4,412 
Other comprehensive loss   -    -    -    (978)   -    -    (978)
Stock-based compensation expense   -    480    -    -    -    -    480 
ESOP shares earned   -    178    -    -    119    -    297 
Balance, June 30, 2018   9,628,796   $45,250   $78,459   $(389)  $(2,738)  $(594)  $119,988 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 5 

 

 

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Six Months Ended 
   June 30, 
(In thousands)  2019   2018 
Cash flows from operating activities:          
Net income  $4,749   $4,412 
Adjustments to reconcile net income to net cash provided by operating activities:          
Amortization of securities premiums, net of accretion   97    147 
ESOP expense   281    297 
Gain on sale of securities, net   (113)   - 
Change in deferred loan fees, net   357    30 
Provision for loan losses   2,816    1,294 
Depreciation and amortization   768    370 
Gain on disposals of premises and equipment   (9)     
Increase in accrued interest receivable   (588)   (149)
Deferred tax benefit   (185)   - 
Share-based compensation expense   510    480 
Increase in cash surrender value of life insurance   (350)   (343)
Principal repayments of operating lease obligations   (36)   - 
Increase in other assets   (1,804)   (7)
(Decrease) increase in other liabilities   (2,129)   1,712 
Net cash provided by operating activities   4,364    8,243 
           
Cash flows from investing activities:          
Purchases of available-for-sale securities   (13,729)   - 
Proceeds from sales of available-for-sale securities   13,565    - 
Proceeds from pay downs, maturities and calls of available-for-sale securities   3,855    4,655 
Purchase of Federal Home Loan Bank stock, net of redemptions   (1,186)   (302)
Loan originations and purchases, net of paydowns   (52,771)   (29,291)
Additions to premises and equipment   (3,698)   (294)
Additions to assets held-for-sale   -    (147)
Proceeds from the sale of equipment   85    - 
Additions to other real estate owned   (64)   - 
Net cash used in investing activities   (53,943)   (25,379)

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 6 

 

 

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

 

   Six Months Ended 
   June 30, 
(In thousands)  2019   2018 
Cash flows from financing activities:          
Net (decrease) increase in demand deposits, NOW and savings accounts   (4,790)   17,574 
Net increase (decrease) increase in time deposits   40,096    (13,362)
Proceeeds from advances from Federal Home Loan Bank   -    10,000 
Net change in short-term borrowings   13,941    3,040 
Net cash provided by financing activities   49,247    17,252 
           
Net (decrease) increase in cash and cash equivalents   (332)   116 
Cash and cash equivalents at beginning of period   28,613    47,689 
Cash and cash equivalents at end of period  $28,281   $47,805 
           
Supplemental disclosures:          
Interest paid  $4,126   $2,328 
Income taxes paid   2,391    1,290 
Recognition of right-of-use assets in premises and equipment (1)   3,836    - 
Recognition of operating lease liabilities (1)   3,938    - 
Reclassification of accrued rent from other liabilities to premises and equipment (1)   102    - 
Assets held-for-sale transferred to premises and equipment   -    3,433 

 

(1) Adoption of ASU 2016-02, Leases (Note 15)

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 7 

 

 

PROVIDENT BANCORP, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

(1)Basis of Presentation

The accompanying unaudited financial statements of Provident Bancorp, Inc., a Massachusetts corporation (the “Company”), were prepared in accordance with the instructions for Form 10-Q and with Regulation S-X and do not include information or footnotes necessary for a complete presentation of the financial condition, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”). However, in the opinion of management, all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and six-month periods ended June 30, 2019 are not necessarily indicative of the results that may be expected for future periods, including the entire fiscal year. Certain amounts in 2018 have been reclassified to be consistent with the 2019 consolidated financial statement presentation, and had no effect on the net income reported in the consolidated statement of income. These financial statements should be read in conjunction with the annual financial statements and notes thereto included in the annual report on Form 10-K the Company filed with the Securities and Exchange Commission on March 14, 2019.

 

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, The Provident Bank (the “Bank”), and the Bank’s wholly owned subsidiaries, Provident Security Corporation and 5 Market Street Security Corporation. Provident Security Corporation and 5 Market Street Security Corporation were established to buy, sell, and hold investments for their own account. All significant inter-company balances and transactions have been eliminated in consolidation.

 

(2)Corporate Structure

Provident Bancorp, Inc. (the “Company”) is a Massachusetts-chartered corporation organized for the purpose of owning all of the outstanding capital stock of The Provident Bank (the “Bank”). Provident Bancorp, the Company’s mutual holding company (the “MHC”), owns approximately 52.3% of the Company’s stock.

 

The Company is headquartered in Amesbury, Massachusetts. The Bank operates its business from seven banking offices located in Amesbury and Newburyport, Massachusetts and Portsmouth, Exeter, Bedford, and Seabrook, New Hampshire. The Bank also has four loan production offices in Boston, Hingham, and Dedham, Massachusetts and Portsmouth, New Hampshire. The Bank provides a variety of financial services to individuals and small businesses. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are commercial mortgages and commercial loans.

 

On June 5, 2019, the Board of Trustees of Provident Bancorp (“MHC”) and the Board of Directors of the Company adopted a Plan of Conversion and Reorganization (the “Plan”). Pursuant to the Plan, the MHC will convert from the mutual holding company form of organization to the fully public form. The MHC will be merged into the Company, and the MHC will no longer exist. The Company will merge into a new Maryland corporation named Provident Bancorp, Inc. As part of the conversion, the MHC’s ownership interest of the Company will be offered for sale in a public offering. The existing publicly held shares of the Company, which represents the remaining ownership interest in the Company, will be exchanged for new shares of common stock of Provident Bancorp, Inc., the new Maryland Corporation. The exchange ratio will ensure that immediately after the conversion and public offering, the public shareholders of the Company will own the same aggregate percentage of Provident Bancorp, Inc. common stock that they owned immediately prior to that time (excluding shares purchased in the stock offering and cash received in lieu of fractional shares), adjusted to reflect assets held by the MHC. When the conversion and public offering are completed, all of the capital stock of The Provident Bank will be owned by Provident Bancorp, Inc., the Maryland corporation.

 

 8 

 

  

The Plan provides for the establishment, upon the completion of the conversion, of special “liquidation accounts” for the benefit of certain depositors of The Provident Bank in an amount equal to the MHC’s ownership interest in the retained earnings of the Company as of the date of the latest balance sheet contained in the prospectus plus the MHC’s net assets (excluding its ownership of the Company). Following the completion of the conversion, the Company and The Provident Bank will not be permitted to pay dividends on their capital stock if the shareholders’ equity of Provident Bancorp, Inc., the Maryland corporation, or the shareholder’s equity of The Provident Bank, would be reduced below the amount of the liquidation accounts. The liquidation accounts will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation accounts.

 

Direct costs of the conversion and public offering will be deferred and reduce the proceeds from the shares sold in the public offering. Costs of $380,000 have been incurred related to the conversion as of June 30, 2019.

 

The Securities and Exchange Commission declared the new Company’s Registration Statement effective August 7, 2019.

 

(3)Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The amendments in this update require lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases. Accounting by lessors will remain largely unchanged. The guidance was effective for the Company on January 1, 2019. In July 2018, the FASB issued 2018-11, which allows a modified retrospective transition where the lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented or as a cumulative effect adjustment as of the date of adoption. The Company adopted ASU 2016-02 on January 1, 2019 as a cumulative effect adjustment as of that date. The Company’s assets and liabilities increased by $3.8 million at the adoption date (see Note 15).

 

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 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and can result in the earlier recognition of credit losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The amendments in this update will be effective for the Company on January 1, 2020. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is currently evaluating the impact of its pending adoption of this guidance on the Company’s financial statements.

 

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (subtopic 310-20): “Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments were effective for the Company on January 1, 2019. The Company adopted this guidance on January 1, 2019 and there was no impact on the Company’s financial statements.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): “Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU will be effective for the Company on January 1, 2020. As the guidance only revises disclosure requirements, the adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

  

 9 

 

 

(4)Investment Securities

The following summarizes the amortized cost of investment securities classified as available-for-sale and their approximate fair values at June 30, 2019 and December 31, 2018:

 

   Amortized   Gross   Gross     
   Cost   Unrealized   Unrealized   Fair 
(In thousands)  Basis   Gains   Losses   Value 
June 30, 2019                    
State and municipal securities  $11,438   $336   $-   $11,774 
Asset-backed securities   5,935    119    -    6,054 
Government mortgage-backed securities   30,717    229    184    30,762 
Total available-for-sale securities  $48,090   $684   $184   $48,590 
                     
December 31, 2018                    
State and municipal securities  $20,118   $272   $135   $20,255 
Asset-backed securities   6,512    -    141    6,371 
Government mortgage-backed securities   25,135    138    496    24,777 
Total available-for-sale securities  $51,765   $410   $772   $51,403 

  

The scheduled maturities of debt securities were as follows at June 30, 2019:

 

   Available-for-Sale 
   Amortized   Fair 
(In thousands)  Cost   Value 
Due in one year or less  $95   $95 
Due after one year through five years   604    607 
Due after five years through ten years   2,026    2,082 
Due after ten years   8,713    8,990 
Government mortgage-backed securities   30,717    30,762 
Asset-backed securities   5,935    6,054 
   $48,090   $48,590 

  

 10 

 

 

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 longer are as follows at June 30, 2019 and December 31, 2018:

 

   Less than 12 Months   12 Months or Longer   Total 
   Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
(In thousands)  Value   Losses   Value   Losses   Value   Losses 
June 30, 2019                        
Temporarily impaired securities:                              
Government mortgage-backed securities  $4,581   $76   $6,470   $108   $11,051   $184 
                               
December 31, 2018                              
Temporarily impaired securities:                              
State and municipal securities  $6,137   $115   $597   $20   $6,734   $135 
Asset-backed securities   3,833    98    2,538    43    6,371    141 
Government mortgage-backed securities   2,864    32    14,152    464    17,016    496 
     Total temporarily impaired securities  $12,834   $245   $17,287   $527   $30,121   $772 

  

Government mortgage-backed securities: Management believes that no individual unrealized loss at June 30, 2019 represents an other-than-temporary impairment (OTTI) because the decline in fair value of these securities is primarily attributable to changes in market interest rates and not credit quality, and because the Company has the intent and ability to hold these investments until market price recovery or maturity.

  

(5) Loans

A summary of loans is as follows:

 

   At   At 
   June 30,   December 31, 
  2019   2018 
(Dollars in thousands)  Amount   Percent   Amount   Percent 
Commercial real estate  $389,068    43.30%  $364,867    43.00%
Commercial   398,277    44.32%   361,782    42.64%
Residential real estate   52,445    5.84%   57,361    6.76%
Construction and land development   40,491    4.51%   44,606    5.26%
Consumer   18,215    2.03%   19,815    2.34%
    898,496    100.00%   848,431    100.00%
Allowance for loan losses   (11,790)        (11,680)     
Deferred loan fees, net   (1,580)        (1,223)     
Net loans  $885,126        $835,528      

  

 11 

 

  

The following tables set forth information regarding the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019 and 2018:

  

   For the three months ended June 30, 
(In thousands)  Commercial
Real Estate
   Commercial   Residential
Real Estate
   Construction
and Land
Development
   Consumer   Unallocated   Total 
Allowance for loan losses:                                   
                                    
Balance at March 31, 2019  $4,247   $5,746   $240   $734   $812   $78   $11,857 
Charge-offs   -    (1,190)   -    -    (266)   -    (1,456)
Recoveries   -    5    4    -    26    -    35 
Provision (credit)   332    728    (13)   (85)   356    36    1,354 
Balance at June 30, 2019  $4,579   $5,289   $231   $649   $928   $114   $11,790 
                                    
Balance at March  31, 2018  $4,607   $3,668   $292   $939   $678   $52   $10,236 
Charge-offs   -    (31)   -    -    (232)   -    (263)
Recoveries   -    -    -    -    19    -    19 
Provision (credit)   (501)   875    (10)   29    270    (25)   638 
Balance at June 30, 2018  $4,106   $4,512   $282   $968   $735   $27   $10,630 
     
   For the six months ended June 30, 
(In thousands)  Commercial
Real Estate
   Commercial   Residential
Real Estate
   Construction
and Land
Development
   Consumer   Unallocated   Total 
Allowance for loan losses:                                   
                                    
Balance at December 31, 2018  $4,152   $5,742   $251   $738   $710   $87   $11,680 
Charge-offs   -    (2,223)   -    -    (547)   -    (2,770)
Recoveries   -    15    4    -    45    -    64 
Provision (credit)   427    1,755    (24)   (89)   720    27    2,816 
Balance at June 30, 2019  $4,579   $5,289   $231   $649   $928   $114   $11,790 
                                    
Balance at December 31, 2017  $4,483   $3,280   $300   $965   $649   $80   $9,757 
Charge-offs   -    (51)   -    -    (398)   -    (449)
Recoveries   -    1    -    -    27    -    28 
Provision (credit)   (377)   1,282    (18)   3    457    (53)   1,294 
Balance at June 30, 2018  $4,106   $4,512   $282   $968   $735   $27   $10,630 

  

 12 

 

  

The following table sets forth information regarding the allowance for loan losses and related loan balances by segment at June 30, 2019 and December 31, 2018:

 

(In thousands)  Commercial
Real Estate
   Commercial   Residential
Real Estate
   Construction
and Land
Development
   Consumer   Unallocated   Total 
June 30, 2019                                   
Allowance for loan losses:                                   
Ending balance:                                   
Individually evaluated for impairment  $-   $163   $-   $-   $-   $-   $163 
Ending balance:                                   
Collectively evaluated  for impairment   4,579    5,126    231    649    928    114    11,627 
Total allowance for loan losses ending balance  $4,579   $5,289   $231   $649   $928   $114   $11,790 
                                    
Loans:                                   
Ending balance:                                   
Individually evaluated for impairment  $1,823   $4,155   $380   $-   $-        $6,358 
Ending balance:                                   
Collectively evaluated for impairment   387,245    394,122    52,065    40,491    18,215         892,138 
Total loans ending balance  $389,068   $398,277   $52,445   $40,491   $18,215        $898,496 
                             
(In thousands)  Commercial
Real Estate
   Commercial   Residential
Real Estate
   Construction
and Land
Development
   Consumer   Unallocated   Total 
December 31, 2018                                   
Allowance for loan losses:                                   
Ending balance:                                   
Individually evaluated for impairment  $62   $1,039   $-   $-   $-   $-   $1,101 
Ending balance:                                   
Collectively evaluated for impairment   4,090    4,703    251    738    710    87    10,579 
Total allowance for loan losses ending balance  $4,152   $5,742   $251   $738   $710   $87   $11,680 
                                    
Loans:                                   
Ending balance:                                   
Individually evaluated for impairment  $1,853   $5,291   $388   $-   $-        $7,532 
Ending balance:                                   
Collectively evaluated  for impairment   363,014    356,491    56,973    44,606    19,815         840,899 
Total loans ending balance  $364,867   $361,782   $57,361   $44,606   $19,815        $848,431 

  

 13 

 

 

The following tables set forth information regarding non-accrual loans and loan delinquencies by portfolio segment at June 30, 2019 and December 31, 2018:

 

                           90 Days     
           90 Days   Total           or More     
   30 - 59   60 - 89   or More   Past   Total   Total   Past Due   Non-accrual 
(In thousands)  Days   Days   Past Due   Due   Current   Loans   and Accruing   Loans 
June 30, 2019                                        
Commercial real estate  $632   $-   $519   $1,151   $387,917   $389,068   $-   $519 
Commercial   59    38    346    443    397,834    398,277    -    3,760 
Residential real estate   144    257    481    882    51,563    52,445    -    1,052 
Construction and  land development   -    -    -    -    40,491    40,491    -    - 
Consumer   80    67    82    229    17,986    18,215    -    87 
Total  $915   $362   $1,428   $2,705   $895,791   $898,496   $-   $5,418 
                                         
December 31, 2018                                        
Commercial real estate  $742   $-   $519   $1,261   $363,606   $364,867   $-   $519 
Commercial   40    -    3,167    3,207    358,575    361,782    -    4,830 
Residential real estate   321    223    30    574    56,787    57,361         850 
Construction and  land development   -    -    -    -    44,606    44,606    -    - 
Consumer   62    46    59    167    19,648    19,815    -    62 
Total  $1,165   $269   $3,775   $5,209   $843,222   $848,431   $-   $6,261 

  

 14 

 

  

Information about the Company’s impaired loans by portfolio segment was as follows at and for the six months ended June 30, 2019 and at and for the year ended December 31, 2018:

 

       Unpaid       Average   Interest 
   Recorded   Principal   Related   Recorded   Income 
(In thousands)  Investment   Balance   Allowance   Investment   Recognized 
June 30, 2019                    
With no related allowance recorded:                         
Commercial real estate  $1,823   $1,823   $-   $1,838   $30 
Commercial   896    965    -    1,120    13 
Residential real estate   380    380    -    384    8 
Construction and land development   -    -    -    -    - 
Consumer   -    -    -    -    - 
 Total impaired with no related allowance   3,099    3,168    -    3,342    51 
                          
With an allowance recorded:                         
Commercial real estate   -    -    -    -    - 
Commercial   3,259    3,333    163    4,994    - 
Residential real estate   -    -    -    -    - 
Construction and land development   -    -    -    -    - 
Consumer   -    -    -    -    - 
Total impaired with an allowance recorded   3,259    3,333    163    4,994    - 
                          
Total                         
Commercial real estate   1,823    1,823    -    1,838    30 
Commercial   4,155    4,298    163    6,114    13 
Residential real estate   380    380    -    384    8 
Construction and land development   -    -    -    -    - 
Consumer   -    -    -    -    - 
Total impaired loans  $6,358   $6,501   $163   $8,336   $51 
                          
December 31, 2018                         
With no related allowance recorded:                         
Commercial real estate  $1,334   $1,334   $-   $5,614   $69 
Commercial   4,050    4,110    -    4,894    38 
Residential real estate   388    388    -    396    20 
Construction and land development   -    -    -    -    - 
Consumer   -    -    -    -    - 
 Total impaired with no related allowance   5,772    5,832    -    10,904    127 
                          
With an allowance recorded:                         
Commercial real estate   519    519    62    519    - 
Commercial   1,241    1,267    1,039    1,695    52 
Residential real estate   -    -    -    -    - 
Construction and land development   -    -    -    -    - 
Consumer   -    -    -    -    - 
Total impaired with an allowance recorded   1,760    1,786    1,101    2,214    52 
                          
Total                         
Commercial real estate   1,853    1,853    62    6,133    69 
Commercial   5,291    5,377    1,039    6,589    90 
Residential real estate   388    388    -    396    20 
Construction and land development   -    -    -    -    - 
Consumer   -    -    -    -    - 
Total impaired loans  $7,532   $7,618   $1,101   $13,118   $179 

  

 15 

 

 

The following summarizes troubled debt restructurings entered into during the six months ended June 30, 2019:

 

(Dollars in thousands)  Number
of
Contracts
   Pre-
Modification
Outstanding
Recorded
Investment
   Post-
Modification
Outstanding
Recorded
Investment
 
June 30, 2019               
Troubled debt restructurings:               
Commercial   1   $1,963   $1,963 
    1   $1,963   $1,963 

 

In the six months ended June 30, 2019, the Company approved one troubled debt restructuring totaling $1.9 million. This commercial loan was placed on an extended 12-month interest-only period with re-amortization to follow. An impairment analysis was performed and a specific reserve of $136,000 was allocated to this relationship.

 

There were no troubled debt restructurings during the six months ended June 30, 2018.

 

The following tables present the Company’s loans by risk rating and portfolio segment at June 30, 2019 and December 31, 2018:

  

(In thousands)  Commercial
Real Estate
   Commercial   Residential
Real Estate
   Construction
and Land
Development
   Consumer   Total 
June 30, 2019                              
Grade:                              
 Pass  $366,217   $380,188   $-   $40,198   $-   $786,603 
 Special mention   4,871    13,809    -    -    -    18,680 
 Substandard   17,980    4,280    515    293    -    23,068 
 Not formally rated   -    -    51,930    -    18,215    70,145 
Total  $389,068   $398,277   $52,445   $40,491   $18,215   $898,496 
                               
December 31, 2018                              
Grade:                              
 Pass  $356,415   $339,079   $-   $44,606   $-   $740,100 
 Special mention   6,531    11,339    -    -    -    17,870 
 Substandard   1,921    10,447    571    -    -    12,939 
 Doubtful   -    917    -    -    -    917 
 Not formally rated   -    -    56,790    -    19,815    76,605 
Total  $364,867   $361,782   $57,361   $44,606   $19,815   $848,431 

  

 16 

 

 

Credit Quality Information

The Company utilizes a seven grade internal loan risk rating system for commercial real estate, construction and land development, and commercial loans as follows:

 

Loans rated 1-3: Loans in these categories are considered “pass” rated loans with low to average risk.

 

Loans rated 4: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

 

Loans rated 5: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

 

Loans rated 6: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

 

Loans rated 7: Loans in this category are considered uncollectible “loss” and of such little value that their continuance as loans is not warranted.

 

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and land development, 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 rates such loans as pass. Subsequent risk rating downgrades are based upon the borrower’s payment activity.

 

(6)Deposits

A summary of deposit balances, by type is as follows:

 

   June 30,   December 31, 
(In thousands)  2019   2018 
NOW and demand  $326,794   $332,064 
Regular Savings   119,433    109,322 
Money Market deposits   219,683    229,314 
Total non-certificate accounts   665,910    670,700 
           
Certificate accounts of $250,000 or more   18,075    14,164 
Certificate accounts less than $250,000   119,417    83,232 
Total certificate accounts   137,492    97,396 
Total deposits  $803,402   $768,096 

  

 17 

 

 

(7) Federal Home Loan Bank Advances

Borrowings from the Federal Home Loan Bank (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 commercial real estate loans and other qualified assets.

 

Maturities of advances from the FHLB as of June 30, 2019 are summarized as follows:

 

(In thousands)    
Fiscal Year-End  Dollar Amount 
2019  $56,988 
2020   11,475 
2021   5,000 
2023   8,500 
Total  $81,963 

   

(8)Fair Value Measurements

The Company reports certain assets at fair value in accordance with GAAP, which defines fair value and establishes a framework for measuring fair value in accordance with generally accepted accounting principles. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values:

 

Basis of Fair Value Measurements

·Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
·Level 2 - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability;
·Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

 

An asset’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

 

Fair Values of Assets Measured on a Recurring Basis

 

The Company’s investments in state and municipal, asset-backed and government mortgage-backed available-for-sale securities are generally classified within Level 2 of the fair value hierarchy. For these investments, the Company obtains 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.

 

 18 

 

  

The following summarizes financial instruments measured at fair value on a recurring basis at June 30, 2019 and December 31, 2018:

 

   Fair Value Measurements at Reporting Date Using 
       Quoted Prices in   Significant   Significant 
       Active Markets for   Other Observable   Unobservable 
       Identical Assets   Inputs   Inputs 
(In thousands)  Total   Level 1   Level 2   Level 3 
June 30, 2019                    
State and municipal securities  $11,774   $-   $11,774   $- 
Asset-backed securities   6,054    -    6,054    - 
Mortgage-backed securities   30,762    -    30,762    - 
Totals  $48,590   $-   $48,590   $- 
                     
December 31, 2018                    
State and municipal securities  $20,255   $-   $20,255   $- 
Asset-backed securities   6,371    -    6,371    - 
Mortgage-backed securities   24,777    -    24,777    - 
Totals  $51,403   $-   $51,403   $- 

  

Fair Values of Assets Measured on a Non-Recurring Basis

 

The Company’s only assets measured at fair value on a nonrecurring basis are loans identified as impaired for which a write-off or specific reserve has been recorded, and other real estate owned. Certain impaired loans of the Company are reported at the fair value of the underlying collateral, less estimated selling costs. The Company classifies impaired loans as Level 3 in the fair value hierarchy. Collateral values are estimated using Level 2 inputs based upon appraisals of similar properties obtained from a third party, but can be adjusted and therefore classified as Level 3. The Company classifies other real estate owned as Level 2 in the fair value hierarchy if the Company has received a purchase and sales agreement.

 

The following summarizes assets measured at fair value on a nonrecurring basis at June 30, 2019 and December 31, 2018:

 

   Fair Value Measurements at Reporting Date Using: 
       Quoted Prices in   Significant   Significant 
       Active Markets for   Other Observable   Unobservable 
       Identical Assets   Inputs   Inputs 
(In thousands)  Total   Level 1   Level 2   Level 3 
June 30, 2019                    
Impaired loans  $3,416   $-   $-   $3,416 
Other real estate owned   1,740    -    1,740    - 
                     
December 31, 2018                    
Impaired loans  $659   $-   $-   $659 
Other real estate owned   1,676    -    1,676    - 

  

 19 

 

 

The following is a summary of the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis at June 30, 2019 and December 31, 2018:

   

(In thousands)  Fair Value   Valuation Technique  Unobservable Input
June 30, 2019           
Impaired loans  $3,416    Business valuation   Comparable company evaluations
            
December 31, 2018           
Impaired loans  $659    Real estate appraisals and business valuation   Discount for dated appraisals and comparable company evaluations

  

(9)Fair Value of Financial Instruments

GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

 

The carrying amounts and estimated fair values of the Company's financial instruments, all of which are held or issued for purposes other than trading, are as follows at June 30, 2019 and December 31, 2018:

 

   Carrying   Fair Value 
(In thousands)  Amount   Level 1   Level 2   Level 3   Total 
June 30, 2019                    
Financial assets:                         
Cash and cash equivalents  $28,281   $28,281   $-   $-   $28,281 
Available-for-sale securities   48,590    -    48,590    -    48,590 
Federal Home Loan Bank of Boston stock   3,836    3,836    -    -    3,836 
Loans, net   885,126    -    -    880,744    880,744 
Accrued interest receivable   3,226    -    3,226    -    3,226 
Financial liabilities:                         
Deposits   803,402    -    -    804,117    804,117 
Borrowings   81,963    -    82,259    -    82,259 
                          
December 31, 2018                         
Financial assets:                         
Cash and cash equivalents  $28,613   $28,613   $-   $-   $28,613 
Available-for-sale securities   51,403    -    51,403    -    51,403 
Federal Home Loan Bank of Boston stock   2,650    2,650    -    -    2,650 
Loans, net   835,528    -    -    827,090    827,090 
Accrued interest receivable   2,638    -    2,638    -    2,638 
Financial liabilities:                         
Deposits   768,096    -    -    768,010    768,010 
Borrowings   68,022    -    67,846    -    67,846 

 

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(10)Regulatory Capital

 

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 Federal Deposit Insurance Corporation (“FDIC”), which implement the Basel III regulatory capital reforms and the changes required by the Dodd-Frank Act. The regulations require a new 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 new prompt corrective action regulations, in order to be considered “well capitalized,” the Bank must maintain a CET1 capital ratio of 6.5% and a Tier 1 ratio of 8.0%, a total risk based capital ratio of 10% and a Tier 1 leverage ratio of 5.0%. As of June 30, 2019 and December 31, 2018, the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

 

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement began being phased in starting on January 1, 2016 at 0.625% of risk-weighted assets and increased each year until fully implemented at 2.5% on January 1, 2019. At June 30, 2019, the Bank exceeded the fully phased in regulatory requirement for the capital conservation buffer.

 

The Bank’s actual capital amounts and ratios are presented in the following table.

 

                    To Be Well 
                    Capitalized Under 
           For Capital   Prompt Corrective 
   Actual   Adequacy Purposes   Action Provisions 
(dollars in thousands)  Amount   Ratio   Amount    Ratio   Amount    Ratio 
June 30, 2019                          
Total Capital (to Risk Weighted Assets)  $135,170    14.20%  $76,152 >   8.0%  $95,190 >   10.0%
Tier 1 Capital (to Risk Weighted Assets)   123,380    12.96   $57,114 >   6.0    76,152 >   8.0 
Common Equity Tier 1 Capital (to Risk Weighted Assets)   123,380    12.96   $42,836 >   4.5    61,874 >   6.5 
Tier 1 Capital (to Average Assets)   123,380    12.30   $40,128 >   4.0    50,161 >   5.0 
December 31, 2018                                
Total Capital (to Risk Weighted Assets)  $128,939    14.55%  $70,891 >   8.0%  $88,614 >   10.0%
Tier 1 Capital (to Risk Weighted Assets)   117,855    13.30    53,168 >   6.0    70,891 >   8.0 
Common Equity Tier 1 Capital (to Risk Weighted Assets)   117,855    13.30    39,876 >   4.5    57,599 >   6.5 
Tier 1 Capital (to Average Assets)   117,855    12.69    37,157 >   4.0    46,446 >   5.0 

 

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies, including the FDIC, are required to establish for qualifying institutions with assets of less than $10 billion of assets a “community bank leverage ratio” of between 8% to 10% tangible equity/consolidated assets. Institutions with capital levels meeting or exceeding the specified requirement will be considered to comply with the applicable regulatory capital requirements, including all risk-based requirements. The establishment of the community bank leverage ratio is subject to notice and comment rulemaking by the federal regulators. A proposed rule issued by the federal regulators in December 2018 would specify a 9% community bank leverage ratio minimum for institutions to opt into the alternative framework.

 

 21 

 

 

From time to time, the Company may use capital management tools such as cash dividends and common share repurchases. In January 2017, the Company received a non-objection from the Federal Reserve Board to adopt a stock repurchase program for up to 625,015 shares of its common stock, or approximately 6.6% of the current outstanding shares. Through June 30, 2019, the Company had repurchased at an average price of $21.57 per share, a total of 37,471 shares out of the 625,015 shares authorized for repurchase under the Company’s repurchase program

 

Liquidation Account

 

Upon the completion of the Company’s stock offering in 2015, a special “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to the percentage ownership interest in the equity of the Company to be held by persons other than the MHC as of the date of the latest balance sheet contained in the prospectus utilized in connection with the offering. The Company is not permitted to pay dividends on its capital stock if the Company’s shareholders’ equity would be reduced below the amount of the liquidation account. The liquidation account is reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation account.

 

(11)Employee Stock Ownership Plan

The Bank maintains an Employee Stock Ownership Plan (“ESOP”) to provide eligible employees the opportunity to own Company stock. This plan is a tax-qualified retirement plan for the benefit of Bank employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits. The number of shares committed to be released per year through 2029 is 23,810.

 

The Company loaned funds to the ESOP to purchase 357,152 shares of the Company’s common stock at a price of $10.00 per share. The loan is payable annually over 15 years at a rate per annum equal to the Prime Rate as of December 31 (5.50% at December 31, 2018). Loan payments are principally funded by cash contributions from the Bank.

 

Shares held by the ESOP include the following:

 

   June 30, 2019   December 31, 2018 
Allocated   95,240    71,430 
Committed to be allocated   11,905    23,810 
Unallocated   250,007    261,912 
Total   357,152    357,152 

 

The fair value of unallocated shares was approximately $7.0 million at June 30, 2019.

 

Total compensation expense recognized in connection with the ESOP for the three months ended June 30, 2019 2018 was $145,000 and $147,000, respectively. Total compensation expense recognized for the six months ended June 30, 2019 and 2018 was $281,000 and $297,000, respectively.

 

(12)Earnings Per Common Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Unallocated ESOP shares, treasury stock and unvested restricted stock is not deemed outstanding for earnings per share calculations.

 

 22 

 

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(Dollars in thousands, except per share amounts)  2019   2018   2019   2018 
Net Income attributable to common shareholders  $2,531   $2,390   $4,749   $4,412 
                     
Average number of common shares issued   9,658,284    9,657,319    9,660,222    9,657,319 
Less:                    
average unallocated ESOP shares   (261,674)   (282,918)   (266,573)   (283,833)
average unvested restricted stock   (79,339)   (111,833)   (83,282)   (118,419)
average treasury stock acquired   (36,282)   (28,823)   (36,282)   (28,823)
Average number of common shares outstanding to calculate basic earnings per common share   9,280,989    9,233,745    9,274,085    9,226,244 
                     
Effect of dilutive unvested restricted stock and stock option awards   67,872    68,680    55,473    68,073 
Average number of common shares outstanding to calculate diluted earnings per common share   9,348,861    9,302,425    9,329,558    9,294,317 
                     
Earnings per common share:                    
Basic  $0.27   $0.26   $0.51   $0.48 
Diluted  $0.27   $0.26   $0.51   $0.47 

 

(13)Share-Based Compensation

Under the Provident Bancorp, Inc. 2016 Equity Incentive Plan (the "Equity Plan"), the Company may grant options, restricted stock, restricted units or performance awards to its directors, officers and employees. Both incentive stock options and non-qualified stock options may be granted under the Equity Plan, with the total shares reserved for options equaling 446,440. The exercise price of each option equals the market price of the Company’s stock on the date of grant and the term of each option is generally ten years. The total number of shares reserved for restricted stock or restricted units is 178,575. Options and other awards vest ratably over five years.

 

Expense related to options and restricted stock granted to directors is recognized in directors’ compensation within non-interest expense.

 

Stock Options

 

The fair value of each option is estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:

 

·Volatility is based on peer group volatility because the Company does not have a sufficient trading history.
·Expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term, and the vesting period.
·The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option.

 

 23 

 

 

A summary of the status of the Company’s stock option grants for the six months ended June 30, 2019, is presented in the table below:

 

   Stock Option
Awards
   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Contractual
Term (years)
   Aggregate
Intrinsic Value
 
Outstanding at December 31, 2018   396,438   $17.89           
Granted   -                
Forfeited   -                
Exercised   -                
Outstanding at June 30, 2019   396,438   $17.89    7.51   $4,005,000 
Outstanding and expected to vest at June 30, 2019   396,438   $17.89    7.51   $4,005,000 
Vested and Exercisable at June 30, 2019   151,272   $17.50    7.41   $632,000 
Unrecognized compensation cost  $1,033,000                
Weighted average remaining recognition period (years)   2.51                

 

For the three months ended June 30, 2019 and 2018, total expense for the stock options was $103,000 and $101,000, respectively. Total expense for the stock options was $201,000 for each of the six months ended June 30, 2019 and 2018,

 

Restricted Stock

 

Shares issued upon the granting of restricted stock may be either authorized but unissued shares or reacquired shares held by the Company. Any shares forfeited because vesting requirements are not met will again be available for issuance under the Equity Plan. The fair market value of shares awarded, based on the market prices at the date of grant, is recorded as unearned compensation and amortized over the applicable vesting period.

 

The following table presents the activity in restricted stock awards under the Equity Plan for the six months ended June 30, 2019:

 

   Unvested
Restricted
Stock Awards
   Weighted
Average Grant
Date Price
 
Unvested restricted stock awards at January 1, 2019   98,073   $18.13 
Granted   -      
Forfeited   -      
Unvested restricted stock awards at June 30, 2019   98,073   $18.13 
Unrecognized compensation cost  $1,415,000      
Weighted average remaining recognition period (years)   2.51      

 

For the three months ended June 30, 2019 and 2018, total expense for the restricted stock awards was $142,000 and $140,000, respectively. For the six months ended June 30, 2019 and 2018, total expense for the restricted stock awards was $309,000 and $279,000, respectively

 

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(14)Commitments and Contingencies

 

Litigation

 

In April 2018, the Bank conducted a foreclosure sale of certain real and personal property which secured four non-accruing loans originally made by the Bank. The aggregate outstanding principal balance of these loans was approximately $7.5 million, of which (a) approximately $4.9 million was due and owing to the Bank and (b) approximately $2.6 million was due and owing to another financial institution who purchased participation interests in certain of these loans (the “Participant”). The Bank received approximately $8.3 million in proceeds from this foreclosure sale. The U.S. Small Business Administration (“SBA”), which also made a secured loan to the same obligors, disputed the Bank’s retention of, and claimed priority to, a portion of the proceeds generated from this foreclosure sale, alleging a breach of contract and sought monetary damages in the approximate amount of $2.0 million. As previously disclosed, we had segregated into a separate deposit account the entire amount in dispute, including the amount that would be provided to the participating institution. In June 2019, we settled this matter with the SBA and the participating institution for the amounts we had segregated and the settlement did not have a significant impact on our financial condition or results of operations.

 

(15)Leases

Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842). This standard required the Company to recognize on the balance sheet right-of-use assets and lease liabilities, which approximate the present value of the Company’s remaining lease payments. As of June 30, 2019, the Company recognized right-of-use assets and operating lease liabilities totaling $3.8 million and $3.9 million, respectively. The right-of-use assets are included in the total for premises and equipment net.

 

In July 2018, the FASB issued ASU No. 2018-11, which provided a practical expedient package for lessees. The Company has elected to use the expedient package and did not reassess whether any existing contracts contain leases; did not reassess the lease classification for existing leases; and did not reassess initial direct costs for any existing leases. As a result, all leases are considered operating leases. The Company’s leases do not provide an implicit rate so an incremental borrowing rate based on the information available at adoption date was used in determining the present value of future payments.

 

The lease liabilities recognized by the Company represent three leased branch locations. The Company’s leases have remaining initial contractual lease terms ranging from nine months to 16.5 years. The Company terminated the lease on the Hampton, New Hampshire branch effective May 2019; therefore, the Company chose to account for this lease using the short-term lease exemption and did not apply the new accounting guidance to this lease. Some of the Company’s leases include options to extend the lease for up to 20 years. The lease liabilities recognized include certain lease extensions as it is expected that the Company will use substantially all lease renewal options. Rent expense for the operating leases has been straight lined for the remaining lease term. For the six months ended June 30, 2019, rent expense for the three operating leases totaled $144,000.

 

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The maturities of the annual cash flows for the Company’s lease liabilities and other information as of June 30, 2019 are summarized as follows:

 

(Dollars in thousands)    
Fiscal Year-End  Dollar Amount 
2019  $97 
2020   165 
2021   172 
2022   172 
2023   172 
Thereafter   6,461 
Total lease payments   7,239 
Less imputed interest   (3,338)
Total lease liabilities  $3,901 

 

Weighted-average remaining lease term - operating leases  32.3 years
Weighted-average discount rate - operating leases  3.78%

 

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

 

Management’s discussion and analysis of financial condition and results of operations at June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018 is intended to assist in understanding our financial condition and results of operations. Operating results for the three and six month period ended June 30, 2019 may not be indicative of results for all of 2019 or any other period. The information contained in this section should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto, appearing in Part 1, Item 1 of this report.

 

Forward-Looking Statements

 

This document may contain certain forward-looking statements, such as statements of the Company’s or the Bank’s plans, objectives, expectations, estimates and intentions. Forward-looking statements may be identified by the use of words such as “expects,” “subject,” “believes,” “will,” “intends,” “may,” “will be,” “would” or similar expressions. Readers should not place undue reliance on any forward-looking statements, which reflect management’s analysis of factors only as of the date of which they are given. These statements are subject to change based on various important factors (some of which are beyond the Company’s or the Bank’s control) and actual results may differ materially. These factors include general economic conditions, including trends and levels of interest rates; the ability of our borrowers to repay their loans; the ability of the Company or the Bank to effectively manage its growth; real estate values in the market area; loan demand; competition; changes in accounting policies; changes in laws and regulations; our success in introducing new products or entering new markets; our ability to retain key employees; failures or breaches of our IT systems; and results of regulatory examinations, among other factors. The foregoing list of important factors is not exclusive. Readers should carefully review the factors described in other documents the Company files from time to time with the Securities and Exchange Commission, including Annual and Quarterly Reports on Forms 10-K and 10-Q, and Current Reports on Form 8-K.

 

Except as required by applicable law and regulation, the Company does not undertake — and specifically disclaims any obligation — to update any forward-looking statements after the date of this quarterly report.

 

Critical Accounting Policies

 

Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes that the most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows:

 

 26 

 

 

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 un-collectability 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 loans in light of historical experience, the size and composition 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.

 

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

 

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, we do not separately identify individual consumer and residential loans for impairment disclosures.

 

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction and land development, commercial and consumer. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no changes in our policies or methodology pertaining to the general component of the allowance for loan losses during the six months ended June 30, 2019 or during the year ended December 31, 2018.

 

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

 

Residential real estate: We generally do not originate loans with a loan-to-value ratio greater than 80% and do not grant subprime loans. Loans with loan to value ratios greater than 80% require the purchase of private mortgage insurance. All loans in this segment are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

 

Commercial real estate: Loans in this segment are primarily income-producing properties throughout Massachusetts and New Hampshire. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management periodically obtains rent rolls and continually monitors the cash flows of these loans.

 

Construction and land development: Loans in this segment primarily include speculative and pre-sold real estate development loans for which payment is derived from sale of the property and a conversion of the construction loans to permanent loans for which payment is then derived from cash flows of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.

 

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

 

Consumer: Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

 

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis for commercial, commercial real estate and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan.

 

We periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring. All troubled debt restructurings are initially classified as impaired.

 

An unallocated component can be maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

 

Stock-based Compensation Plans. The Company measures and recognizes compensation cost relating to stock-based payment transactions based on the grant-date fair value of the equity instruments issued. Stock-based compensation is recognized over the period the employee is required to provide services for the award. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options granted. The determination of fair value involves a number of significant estimates, which require a number of assumptions to determine the model inputs. The fair value of restricted stock is recorded based on the grant date value of the equity instrument issued.

 

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 our assets and liabilities at enacted tax rates expected to be in effect when the amounts related to such temporary differences are realized or settled. A tax valuation allowance is established, as needed, to reduce net deferred tax assets to the amount expected to be realized.

 

The Company examines its significant income tax positions quarterly to determine whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.

 

 28 

 

 

Balance Sheet Analysis

 

Assets. Total assets were $1.0 billion at June 30, 2019, representing an increase of $57.1 million, or 5.9%, from $974.1 million at December 31, 2018. The increase resulted primarily from increases in net loans of $49.6 million premises and equipment of $6.7 million, and other assets of $1.8 million. The increases were partially offset by decreases in available-for-sale investment securities of $2.8 million.

 

Securities. Investments in available-for-sale securities decreased $2.8 million, or 5.5%, to $48.6 million at June 30, 2019 from $51.4 million at December 31, 2018. The decrease is primarily due to principal paydowns on government mortgage-backed securities partially, offset by an increase in the fair value of the securities.

 

Loans. At June 30, 2019, net loans were $885.1 million, or 85.8% of total assets, compared to $835.5 million, or 85.8% of total assets, at December 31, 2018. Increases in commercial loans of $36.5 million, or 10.1%, and in commercial real estate loans of $24.2 million, or 6.6%, were partially offset by decreases in residential real estate loans of $4.9 million, or 8.6%, construction and land development loans of $4.1 million, or 9.2%, and consumer loans of $1.6 million, or 8.1%. Our commercial loan growth is attributed to a continued focus on our specialized renewable energy loans and enterprise value loans. Renewable energy loans increased $4.3 million, or 8.5%, to $54.7 million at June 30, 2019 from $50.4 million at December 31, 2018. Enterprise value loans increased $15.0 million, or 10.8%, to $153.8 million at June 30, 2019 from $138.8 million at December 31, 2018.

 

The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.

 

   At   At 
   June 30,   December 31, 
   2019   2018 
(Dollars in thousands)  Amount   Percent   Amount   Percent 
Commercial real estate  $389,068    43.30%  $364,867    43.00%
Commercial   398,277    44.32%   361,782    42.64%
Residential real estate   52,445    5.84%   57,361    6.76%
Construction and land development   40,491    4.51%   44,606    5.26%
Consumer   18,215    2.03%   19,815    2.34%
    898,496    100.00%   848,431    100.00%
Allowance for loan losses   (11,790)        (11,680)     
Deferred loan fees, net   (1,580)        (1,223)     
Net loans  $885,126        $835,528      

 

Premises and Equipment. Premises and equipment increased $6.7 million, or 41.6%, to $22.8 million at June 30, 2019, from $16.1 million at December 31, 2018. The increase was primarily due to increases in construction in progress costs and the adoption of FASB ASU No. 2016-02, Leases (Topic 842). In January 2017, the Company purchased a building in Portsmouth, New Hampshire with the intention of using a majority of the space for banking operations. The construction in progress costs increased $3.1 million, or 55.4% to $8.6 million at June 30, 2019 from $5.6 million at December 31, 2018. ASU No. 2016-02 became effective January 1, 2019 and required us to recognize on our balance sheet right-of-use assets, which approximate the present value of the remaining lease payments. As of June 30, 2019, the balance of the right-of-use assets was $3.8 million.

 

Other Assets. Other assets increased $1.8 million, or 63.9%, to $4.6 million at June 30, 2019 from $2.8 million at December 31, 2018. The increase is primarily due to an increase in receivables and deferred expenses from our second-step conversion and related stock offering.

 

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Deposits. Total deposits increased $35.3 million, or 4.6%, to $803.4 million at June 30, 2019 from $768.1 million at December 31, 2018. The primary reason for the increase in deposits was due to an increase of $40.1 million, or 41.2%, in time deposits and an increase of $10.1 million, or 9.2%, in savings accounts, partially offset by a decrease in NOW and demand deposits of $5.3 million, or 1.6%, and a decrease of $9.6 million, or 4.2% in money market accounts. The increase in time deposits is primarily due to increases in brokered certificates of deposit of $24.7 million, or 44.4%, and an increase of $15.3 million, or 294.7%, from Qwickrate, where we gather certificates of deposit nationwide by posting rates we will pay on these deposits. The increase in savings accounts is primarily due to municipal deposits. NOW and demand deposits and money market accounts decreased due to the decrease in some of our high rate relationships.

 

Borrowings. Borrowings at June 30, 2019 consisted of Federal Home Loan Bank advances and at December 31, 2018 consisted of Federal Home Loan Bank advances and Federal Reserve Bank borrowings from the borrower-in-custody program. Borrowings increased $13.9 million, or 20.5%, to $82.0 million at June 30, 2019 from $68.0 million at December 31, 2018. The increase was primarily due to funding loan growth.

 

Other Liabilities. Other liabilities decreased $2.2 million, or 18.0%, to $10.1 million at June 30, 2019 from $12.4 million at December 31, 2018. The decrease was primarily due to the settlement of the lawsuit involving certain subordinated lienholders that disputed the priority of the Bank’s liens and the right of the Bank to retain proceeds from a foreclosure sale.

 

Shareholders’ Equity. Total shareholders’ equity increased $6.2 million, or 4.9%, to $131.8 million at June 30, 2019, from $125.6 million at December 31, 2018. The increase was due to year-to-date net income of $4.7 million, other comprehensive income of $639,000, stock-based compensation expense of $510,000, and employee stock option plan shares earned of $281,000. Book value per share increased to $13.69 at June 30, 2019 from $13.05 at December 31, 2018.

 

Asset Quality.

 

The following table sets forth information regarding our non-performing assets at the dates indicated.

 

   At   At 
   June 30,   December 31, 
(Dollars in thousands)  2019   2018 
Non-accrual loans:          
Real estate:          
Commercial  $519   $519 
Residential   1,052    850 
Construction and land development   -    - 
Commercial   3,760    4,830 
Consumer   87    62 
Total non-accrual loans   5,418    6,261 
           
Accruing loans past due 90 days or more   -    - 
Other real estate owned   1,740    1,676 
Total non-performing assets  $7,158   $7,937 
           
Total loans (1)  $896,916   $847,208 
Total assets  $1,031,175   $974,079 
Total non-performing loans to total loans (1)   0.60%   0.74%
Total non-performing assets to total assets   0.69%   0.81%

 

(1) Loans are presented before the allowance for loan losses but include deferred fees/costs.

 

The decrease in non-performing commercial loans at June 30, 2019 compared to December 31, 2018 was primarily due to workouts of the portfolio. Non-accrual loans as of June 30, 2019 consist primarily of three commercial relationships. Of the three relationships, two were originated through the BancAlliance network. BancAlliance has a membership of approximately 200 community banks that together participate in middle market commercial and industrial loans as a way to diversify their commercial portfolio.All impaired loan relationships have been evaluated and specific reserves of $163,000 were allocated as of June 30, 2019.

 

The Company has cooperative relationships with the vast majority of its non-performing loan customers. Repayment of non-performing loans is largely dependent on the return of such loans to performing status or the liquidation of the underlying collateral. The Company pursues the resolution of all non-performing loans through collections, restructures, voluntary liquidation of collateral by the borrower and, where necessary, legal action. When attempts to work with a customer to return a loan to performing status, including restructuring the loan, are unsuccessful, the Company will initiate appropriate legal action seeking to acquire property by deed in lieu of foreclosure or through foreclosure, or to liquidate business assets.

 

Allowance for Loan Losses. The allowance for loan losses is maintained at levels considered adequate by management to provide for probable loan losses inherent in the loan portfolio as of the consolidated balance sheet reporting dates. The allowance for loan losses is based on management’s assessment of various factors affecting the loan portfolio, including portfolio composition, delinquent and non-accrual loans , national and local business conditions and loss experience and an overall evaluation of the quality of the underlying collateral.

 

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The following table sets forth activity in our allowance for loan losses for the periods indicated:

 

   Six Months Ended June 30, 
(Dollars in thousands)  2019   2018 
Allowance at beginning of period  $11,680   $9,757 
Provision for loan losses   2,816    1,294 
Charge offs:          
Real estate:          
Commercial   -    - 
Residential   -    - 
Construction and land development   -    - 
Commercial   2,223    51 
Consumer   547    398 
Total charge-offs   2,770    449 
           
Recoveries:          
Real estate:          
Commercial   -    - 
Residential   4    - 
Construction and land development   -    - 
Commercial   15    1 
Consumer   45    27 
Total recoveries   64    28 
           
Net charge-offs   2,706    421 
           
Allowance at end of period  $11,790   $10,630 
           
Non-performing loans at end of period  $5,418   $7,128 
Total loans outstanding at end of period (1)   896,916    780,735 
Average loans outstanding during the period (1)   872,912    769,887 
           
Allowance to non-performing loans   217.61%   149.13%
Allowance to total loans outstanding at end of period   1.31%   1.36%
Net charge-offs to average loans outstanding during the during the period (annualized)   0.62%   0.11%

 

(1) Loans are presented before the allowance for loan losses but include deferred fees/costs

 

During the six months ended June 30, 2019, total net charge-offs were $2.7 million compared to net charge-offs of $421,000 for the same period in 2018. Charge-offs in 2019 primarily resulted from three commercial relationships. The Bank charged-off $601,000 for a traditional commercial and industrial relationship with the acceptance of a short-sale of the business. In addition, the Bank charged-off one commercial and industrial loan totaling $917,000 and accepted a short-sale of another loan, each of which was originated through the BancAlliance network. The accepted short-sale resulted in a charge-off of $589,000 on a $1.2 million loan relationship. As of June 30, 2019, the Bank has nine BancAlliance loan relationships remaining totaling $12.4 million. Out of the nine relationships, five totaling $6.6 million are pass rated, two totaling $3.4 million are on watch and two totaling $2.4 million are substandard. During the six months ended June 30, 2019, one relationship totaling $1.9 million was put on non-accrual and deemed impaired. We have allocated specific reserves totaling $136,000 for this relationship. Our last BancAlliance loan origination was in February 2017, and at this time we are not anticipating originating any new loans through this network.

 

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Results of Operations for the Three Months Ended June 30, 2019 and 2018

 

General. Net income increased $141,000 to $2.5 million for the three months ended June 30, 2019 from $2.4 million for the three months ended June 30, 2018. The increase was primarily related to an increase of $1.4 million in net interest and dividend income, partially offset by an increase in provision for loan losses of $716,000, and an increase in noninterest expense of $472,000.

 

Interest and Dividend Income. Interest and dividend income increased $2.4 million, or 22.7%, to $12.7 million for the three months ended June 30, 2019 from $10.4 million for the three months ended June 30, 2018. This increase was primarily attributable to an increase in interest and fees on loans, which increased $2.3 million, or 23.6%, to $12.3 million for the three months ended June 30, 2019 from $9.9 million for the three months ended June 30, 2018.

 

The increase in interest income on loans was due to an increase in the average balance of loans of $107.7 million, or 13.9%, to $880.5 million for the three months ended June 30, 2019, from $772.8 million for the three months ended June 30, 2018. In addition, interest income increased due to the yield on loans increasing 43 basis points to 5.57% for the three months ended June 30, 2019 due to our continued focus on higher-yielding commercial lending.

 

Interest Expense. Interest expense increased $917,000, or 75.6%, to $2.1 million for the three months ended June 30, 2019 from $1.2 million for the three months ended June 30, 2018, caused by an increase in interest expense on deposits and borrowings. Interest expense on deposits increased $522,000, or 51.7%, to $1.5 million for the three months ended June 30, 2019 from $1.0 million for the three months ended June 30, 2018, due primarily to an increase in the average rate paid on interest-bearing deposits of 34 basis points to 1.09% for the three months ended June 30, 2019 from 0.75% for the three months ended June 30, 2018. The increase in the average rate was primarily the result of increases in the average rates paid on money market accounts and certificates of deposit. The average rates paid on money market accounts and certificates of deposit increased due to changes in the market rate environment. Interest expense on deposits also increased due to an increase in the average balance of interest-bearing deposits of $25.3 million, or 4.7%, to $564.2 million for the three months ended June 30, 2019 from $538.9 million for the three months ended June 30, 2018. The increase resulted primarily from an increase in the average balance of certificates of deposit, which increased $27.9 million, or 29.4%.

 

Interest expense on borrowings increased $395,000, or 193.6%, to $599,000 for the three months ended June 30, 2019 from $204,000 for the three months ended June 30, 2018. The interest expense on borrowings increased due to the increase in average outstanding balance of $53.8 million, or 145.5%, to $90.7 million for the three months ended June 30, 2019, as we borrowed funds to support loan growth.

 

Net Interest and Dividend Income. Net interest and dividend income increased by $1.4 million, or 15.7%, to $10.6 million for the three months ended June 30, 2019 from $9.2 million for the three months ended June 30, 2018. The increase was due to both higher balances of interest-earning assets and expanding margins. Our net interest rate spread increased one basis point to 4.10% for the three months ended June 30, 2019 from 4.09% for the three months ended June 30, 2018. Our net interest margin increased 15 basis points to 4.50% for the three months ended June 30, 2019 from 4.35% for the three months ended June 30, 2018.

 

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Provision for Loan Losses. The provision for loan losses was $1.4 million for the three months ended June 30, 2019 compared to $638,000 for the three months ended June 30, 2018. The changes in the provision and allowance for loan losses were based on management’s assessment of loan portfolio growth and composition trends, historical charge-off trends, levels of problem loans and other asset quality trends. During the three months ended June 30, 2019, we had $1.4 million in loan net charge-offs, for which we had allocated $786,000 in specific reserves as of March 31, 2019. The charge-offs resulted in provision expense of $636,000.

 

The provision recorded resulted in an allowance for loan losses of $11.8 million, or 1.31% of total loans, at June 30, 2019, compared to $11.7 million, or 1.38% of total loans, at December 31, 2018, and $10.6 million, or 1.36% of total loans, at June 30, 2018. Non-accrual loans as of June 30, 2019 were primarily comprised of three commercial and industrial relationships with a total carrying value of $3.6 million. Impairment was evaluated and specific reserves of $163,000 were allocated to impaired loans as of June 30, 2019.

 

As of June 30, 2019, the Bank has nine BancAlliance relationships remaining totaling $12.4 million. Out of the nine relationships, five totaling $6.6 million are pass rated, two totaling $3.4 million are on watch and two totaling $2.4 million are substandard. During the six months ended June 30, 2019, one relationship totaling $1.9 million was put on non-accrual and deemed impaired. We have allocated specific reserves totaling $136,000 for this relationship. Our last BancAlliance loan origination was in February 2017 and at this time we are not anticipating originating any new loans through this network.

 

Noninterest Income. Noninterest income decreased $62,000, or 5.5%, and was $1.1 million for each of the three months ended June 30, 2019 and 2018. The decrease was primarily caused due to a decrease in other service charges and fees, partially offset by the increase in customer service fees on deposit accounts. Other service charges and fees decreased $88,000, or 14.8%, to $506,000 for the three months ended June 30, 2019 from $594,000 for the three months ended June 30, 2018. Customer Service fees increased $17,000, or 5.0%, to $356,000 for the three months ended June 30, 2019 from $339,000 for the three months ended June 30, 2018. The decrease in other service charges was primarily due to a decrease in loan prepayments compared to the same period in 2018.

 

Noninterest Expense. Noninterest expense increased $472,000, or 7.4%, to $6.9 million for the three months ended June 30, 2019 compared to $6.4 million for the three months ended June 30, 2018. The primary increases for the three months ended June 30, 2019 were occupancy expense, professional fees, and other expense. The increase of $133,000, or 31.9%, in occupancy expense for the three months ended June 30, 2019 was primarily due to the acceleration of our leasehold improvements amortization related to the closure of our Hampton, New Hampshire branch in May 2019. The increase of $167,000, or 50.8%, for the three months ended June 30, 2019 in professional fees was due to increased consulting services to aid in our efforts to implement a continuous improvement culture and our development of deposit products and services. The increase of $189,000, or 22.0%, in other expense was primarily due to other real estate owned expenses and increased telecommunication expenses.

 

Income Tax Provision. We recorded a provision for income taxes of $889,000 for the three months ended June 30, 2019, reflecting an effective tax rate of 26.0%, compared to a provision of $843,000 for the three months ended June 30, 2018, reflecting an effective tax rate of 26.1%.

 

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Average Balance Sheet and Related Yields and Rates

 

The following tables set forth the average balance sheets, annualized average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the amount of tax free interest-earning assets is immaterial. All average balances are daily average balances. 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.

 

   For the Three Months Ended June 30, 
   2019   2018 
       Interest           Interest     
   Average   Earned/   Yield/   Average   Earned/   Yield/ 
(Dollars in thousands)  Balance   Paid   Rate   Balance   Paid   Rate 
Assets:                        
Interest-earning assets:                              
Loans  $880,501   $12,270    5.57%  $772,775   $9,925    5.14%
Short-term investments   8,859    41    1.85%   10,722    42    1.57%
Investment securities   49,188    366    2.98%   56,872    388    2.73%
Federal Home Loan Bank stock   3,986    54    5.42%   2,058    22    4.28%
Total interest-earning assets   942,534    12,731    5.40%   842,427    10,377    4.93%
Non-interest earning assets   60,743              49,966           
                               
Total assets  $1,003,277             $892,393           
                               
Interest-bearing liabilities:                              
Savings accounts  $109,052    78    0.29%  $110,986    56    0.20%
Money market accounts   223,318    667    1.19%   218,775    507    0.93%
NOW accounts   108,963    113    0.41%   114,174    146    0.51%
Certificates of deposit   122,896    673    2.19%   94,998    300    1.26%
Total interest-bearing deposits   564,229    1,531    1.09%   538,933    1,009    0.75%
Borrowings   90,710    599    2.64%   36,947    204    2.21%
Total interest-bearing liabilities   654,939    2,130    1.30%   575,880    1,213    0.84%
Noninterest-bearing liabilities:                              
Noninterest-bearing deposits   203,706              186,719           
Other noninterest-bearing liabilities   14,361              10,913           
Total liabilities   873,006              773,512           
Total equity   130,271              118,881           
Total liabilities and equity  $1,003,277             $892,393           
                               
Net interest income       $10,601             $9,164      
Interest rate spread (1)             4.10%             4.09%
Net interest-earning assets (2)  $287,595             $266,547           
Net interest margin (3)             4.50%             4.35%
Average interest-earning assets to interest-bearing liabilities   143.91%             146.29%          

 

(1) Net interest rate spread represents the difference between the weighted average yield on interest-bearing assets and the weighted average rate of interest-bearing liabilities.

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets        

 

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Rate/Volume Analysis

 

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

 

   For the Three Months Ended June 30, 2019 
   Compared to the Three Months Ended June 30, 2018 
   Increase (Decrease) Due to   Total 
(In thousands)  Rate   Volume   Increase (Decrease) 
Interest-earning assets:               
Loans  $888   $1,457   $2,345 
Short-term investments   7    (8)   (1)
Investment securities   33    (55)   (22)
Federal Home Loan Bank stock   7    25    32 
                
Total interest-earning assets   936    1,418    2,354 
                
Interest-bearing liabilities:               
Savings accounts   23    (1)   22 
Money Market accounts   149    11    160 
NOW accounts   (27)   (6)   (33)
Certificates of deposit   266    107    373 
                
Total interest-bearing deposits   412    110    522 
                
Borrowings   47    348    395 
                
Total interest-bearing liabilities   459    458    917 
                
Change in net interest income  $477   $960   $1,437 

 

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Results of Operations for the Six Months Ended June 30, 2019 and 2018

 

General. Net income increased $337,000 to $4.7 million for the six months ended June 30, 2019 from $4.4 million for the six months ended June 30, 2018. The increase was primarily related to an increase of $2.9 million in net interest and dividend income, partially offset by an increase in provision for loan losses of $1.5 million, an increase in noninterest expense of $842,000, and an increase in income tax expense of $146,000

 

Interest and Dividend Income. Interest and dividend income increased $4.7 million, or 23.5%, to $24.9 million for the six months ended June 30, 2019 from $20.1 million for the six months ended June 30, 2018. This increase was primarily attributable to an increase in interest and fees on loans, which increased $4.8 million, or 24.8%, to $23.9 million for the six months ended June 30, 2019 from $19.2 million for the six months ended June 30, 2018. The increase in interest and fees on loans was partially offset by a decrease in interest on short-term investments of $17,000, or 20.2%, to $67,000 for the six months ended June 30, 2019 from $84,000 for the six months ended June 30, 2018, and a decrease on interest and dividends on securities of $21,000, or 2.5% to $824,000 for the six months ended June 30, 2019.

 

The increase in interest income on loans was due to an increase in the average balance of loans of $103 million, or 13.4%, to $872.9 million for the six months ended June 30, 2019 from $769.9 million for the six months ended June 30, 2018. In addition, interest income increased due to the yield on loans increasing 50 basis points to 5.49% for the six months ended June 30, 2019 due to our continued focus on higher-yielding commercial lending.

 

Interest Expense. Interest expense increased $1.9 million, or 82.5%, to $4.1 million for the six months ended June 30, 2019 from $2.2 million for the six months ended June 30, 2018, caused by an increase in interest expense on deposits and borrowings. Interest expense on deposits increased $1.0 million, or 53.9%, to $3.0 million for the six months ended June 30, 2019 from $1.9 million for the six months ended June 30, 2018, due to an increase in the average rate paid on interest-bearing deposits of 35 basis points to 1.05% for the six months ended June 30, 2019 from 0.70% for the six months ended June 30, 2018. The increase in the average rate was primarily the result of increases in the average rates paid on money market accounts and certificates of deposit. The average rates paid on money market accounts and certificates of deposit increased due to changes in the market rate environment. Interest expense on deposits also increased due to an increase in the average balance of interest-bearing deposits of $19.3 million, or 3.5%, to $566.9 million for the six months ended June 30, 2019 from $547.6 million for the six months ended June 30, 2018. The increase resulted primarily from an increase in the average balance of certificates of deposits, which increased $14.8 million, or 15.0%.

 

Interest expense on borrowings increased $815,000, or 256.3%, to $1.1 million for the six months ended June 30, 2019 from $318,000 for the six months ended June 30, 2018. The interest expense on borrowings increased primarily due to the increase in average outstanding balance of $55.7 million, or 186.2% to $85.6 million for the six months ended June 30, 2019, as we borrowed funds to support loan growth.

 

Net Interest and Dividend Income. Net interest and dividend income increased $2.9 million, or 16.1%, to $20.8 million for the six months ended June 30, 2019 from $17.9 million for the six months ended June 30, 2018. The increase was due to both higher balances of earning assets and expanding margins. Our net interest rate spread increased six basis points to 4.07% for the six months ended June 30, 2019 from 4.01% for the six months ended June 30, 2018. Our net interest margin increased 19 basis points to 4.45% for the six months ended June 30, 2019 from 4.26% for the six months ended June 30, 2018.

 

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Provision for Loan Losses. The provision for loan losses was $2.8 million for the six months ended June 30, 2019 compared to $1.3 million for the six months ended June 30, 2018. The changes in the provision and allowance for loan losses were based on management’s assessment of loan portfolio growth and composition trends, historical charge-off trends, levels of problem loans and other asset quality trends. During the six months ended June 30, 2019, we had $2.7 million in loan net charge-offs, for which we had allocated $1.1 million in specific reserves as of December 31, 2018. The charge-offs resulted in provision expense of $1.6 million.

 

The provision recorded resulted in an allowance for loan losses of $11.8 million, or 1.31% of total loans at June 30, 2019, compared to $11.7 million, or 1.38% of total loans, at December, 2018 and $10.6 million, or 1.36% of total loans, at June 30, 2018. Non-accrual loans as of June 30, 2019 were primarily comprised of three commercial and industrial relationships with a total carrying value of $3.6 million. Impairment was evaluated and specific reserves of $163,000 were allocated to impaired loans as of June 30, 2019.

 

Our net charge-offs as a percent of average loans increased to 0.62% for the six months ended June 30, 2019 as compared to 0.11% for the same period in 2018. The primary reason for the increase in net charge-offs resulted from our charging-off three commercial loan relationships, totaling $2.1 million, in the first six months of 2019. Two of those relationships that were charged-off totaling $1.5 million were originated through the BancAlliance network.

 

As of June 30, 2019, we had nine BancAlliance relationships remaining totaling $12.4 million. Out of the nine relationships, five totaling $6.6 million are pass rated, two totaling $3.4 million are on watch and two totaling $2.4 million are substandard. During the six months ended June 30, 2019, one of these nine relationships totaling $1.9 million was put on non-accrual and deemed impaired. We have allocated specific reserves totaling $136,000 for this relationship. Our last BancAlliance loan origination was in February 2017 and at this time we are not anticipating originating any new loans through this network.

 

Noninterest Income. Noninterest income decreased $29,000, or 1.4%, and was $2.1 million for each of the six months ended June 30, 2019 and June 30, 2018. The decrease was primarily caused by a decrease in other service charges and fees of $147,000 partially offset by the gain on sales of securities. The decrease in other service charges was primarily due to a decrease in loan prepayments compared to the same period in 2018. Gain on sales of securities was $113,000 for the six months ended June 30, 2019 compared to zero for the six months ended June 30, 2018. We repositioned some of our securities by selling some municipal and mortgage-backed securities that were close to maturity and reinvested into longer-term mortgage-backed securities.

 

Noninterest Expense. Noninterest expense increased $842,000, or 6.6%, to $13.6 million for the six months ended June 30, 2019 from $12.8 million for the six months ended June 30, 2018. The primary increases for the six months ended June 30, 2019 were salary and employee benefits expense, occupancy expense, and professional fees. The increase of $135,000, or 1.6%, to $8.6 million for the six months ended June 30, 2019, compared to $8.4 million for the six months ended June 30, 2018 in salary and employee benefits was primarily due to a higher number of sales and operations positions compared to the same period in 2018. The increase of $327,000, or 37.7%, to $1.2 million for the six months ended June 30, 2019 compared to $867,000 in occupancy expense for the six months ended June 30, 2018 was primarily due to the acceleration of our leasehold improvements amortization related to the closure of our Hampton, New Hampshire branch in May 2019. The increase of $341,000, or 59.1%, to $918,000 for the six months ended June 30, 2019 compared to $577,000 in professional fees for the six months ended June 30, 2018 was due to increased consulting services to aid in our efforts to implement a continuous improvement culture and our development of deposit products and services.

 

Income Tax Provision. We recorded a provision for income taxes of $1.7 million for the six months ended June 30, 2019, reflecting an effective tax rate of 26.0%, compared to a provision of $1.5 million for the six months ended June 30, 2018, reflecting an effective tax rate of 25.6%.

 

 37 

 

  

Average Balance Sheet and Related Yields and Rates

 

The following tables set forth the average balance sheets, annualized average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the amount of tax free interest-earning assets is immaterial. All average balances are daily average balances. 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.

 

   For the Six Months Ended June 30, 
   2019   2018 
       Interest           Interest     
   Average   Earned/   Yield/   Average   Earned/   Yield/ 
(dollars in thousands)  Balance   Paid   Rate   Balance   Paid   Rate 
Assets:                              
Interest-earning assets:                              
Loans  $872,912   $23,969    5.49%  $769,887   $19,201    4.99%
Short-term investments   6,620    67    2.02%   9,707    84    1.73%
Investment securities   49,980    738    2.95%   58,309    795    2.73%
Federal Home Loan Bank stock   3,761    86    4.57%   1,865    50    5.36%
Total interest-earning assets   933,273    24,860    5.33%   839,768    20,130    4.79%
Non-interest earning assets   62,044              49,465           
                               
Total assets  $995,317             $889,233           
                               
                               
Interest-bearing liabilities:                              
Savings accounts  $113,518    186    0.33%  $114,664    126    0.22%
Money market accounts   227,518    1,366    1.20%   221,712    908    0.82%
NOW accounts   112,451    229    0.41%   112,549    300    0.53%
Certificates of deposit   113,431    1,187    2.09%   98,641    595    1.21%
Total interest-bearing deposits   566,918    2,968    1.05%   547,566    1,929    0.70%
Borrowings   85,625    1,133    2.65%   29,920    318    2.13%
Total interest-bearing liabilities   652,543    4,101    1.26%   577,486    2,247    0.78%
Noninterest-bearing liabilities:                              
Noninterest-bearing deposits   196,664              183,801           
Other noninterest-bearing liabilities   15,303              10,083           
 Total liabilities   864,510              771,370           
Total equity   130,807              117,863           
                                        
Total liabilities and equity  $995,317             $889,233           
                               
Net interest income       $20,759             $17,883      
Interest rate spread (1)             4.07%             4.01%
Net interest-earning assets (2)  $280,730             $262,282           
Net interest margin (3)             4.45%             4.26%
Average interest-earning assets to interest-bearing liabilities   143.02%             145.42%          

  

(1)Net interest rate spread represents the difference between the weighted average yield on interest-bearing assets and the weighted average rate of interest-bearing liabilities.
(2)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3)Net interest margin represents net interest income divided by average total interest-earning assets

  

 38 

 

  

Rate/Volume Analysis

 

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

 

   For the Six Months Ended June 30, 2019 
   Compared to the Six Months Ended June 30, 2018 
   Increase (Decrease) Due to   Total 
(in thousands)  Rate   Volume   Increase (Decrease) 
Interest-earning assets:               
Loans  $2,051   $2,717   $4,768 
Short-term investments   13    (30)   (17)
Investment securities   63    (120)   (57)
Federal Home Loan Bank stock   (8)   44    36 
                
Total interest-earning assets   2,118    2,612    4,730 
                
Interest-bearing liabilities:               
Savings accounts   61    (1)   60 
Money Market accounts   434    24    458 
NOW accounts   (71)   -    (71)
Certificates of deposit   492    100    592 
                
Total interest-bearing deposits   916    123    1,039 
                
Borrowings   95    720    815 
                
Total interest-bearing liabilities   1,011    844    1,854 
                
Change in net interest income  $1,107   $1,769   $2,876 

  

 39 

 

 

Management of Market Risk

 

Net Interest Income Simulation. We analyze our sensitivity to changes in interest rates through a net interest income simulation model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period in the current interest rate environment. We then calculate what the net interest income would be for the same period under the assumption that interest rates increase 200 basis points from current market rates and under the assumption that interest rates decrease 200 basis points from current market rates, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

 

The following table presents the estimated changes in net interest income of the Bank, calculated on a bank-only basis, that would result from changes in market interest rates over twelve-month periods beginning June 30, 2019.

 

   At June 30, 
(Dollars in thousands)  2019 
Changes in  Estimated     
Interest Rates  Net Interest Income     
(Basis Points)  Over Next 12 Months   Change 
200  $43,451    (1.58%)
0   44,150    - 
-200   44,059    (0.21%)

 

Economic Value of Equity Simulation. We also analyze the sensitivity of our financial condition to changes in interest rates through an economic value of equity (“EVE”) model. EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities adjusted for the value of off-balance sheet contracts. The EVE ratio represents the dollar amount of our EVE divided by the present value of our total assets for a given interest rate scenario. EVE attempts to quantify our economic value using a discounted cash flow methodology while the EVE ratio reflects that value as a form of capital ratio. We estimate what our EVE would be as of a specific date. We then calculate what EVE would be as of the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate EVE under the assumptions that interest rates increase 100, 200, 300 and 400 basis points from current market rates, and under the assumption that interest rates decrease 100 and 200 basis points from current market rates.

 

The following table presents the estimated changes in EVE of the Bank, calculated on a bank-only basis, that would result from changes in market interest rates as of June 30, 2019.

 

   At June 30, 
(Dollars in thousands)  2019 
Changes in  Economic     
Interest Rates  Value of     
(Basis Points)  Equity   Change 
400  $143,749    2.30%
300   144,823    3.00%
200   145,283    3.30%
100   144,386    2.70%
0   140,581    - 
-100   131,554    (6.40%)
-200   109,614    (22.00%)

  

 40 

 

 

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the tables presented above assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

 

Liquidity and Capital Resources

 

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

 

We regularly review the need to adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short- and intermediate-term securities.

 

Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At June 30, 2019, cash and cash equivalents totaled $28.3 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $48.6 million at June 30, 2019.

 

At June 30, 2019, we had the ability to borrow a total of $211.2 million from the Federal Home Loan Bank of Boston. On that date, we had $82.0 million in advances outstanding . At June 30, 2019, we also had an available line of credit with the Federal Reserve Bank of Boston’s borrower-in-custody program of $165.7 million, none of which was outstanding as of that date.

 

We have no material commitments or demands that are likely to affect our liquidity other than set forth below. In the event loan demand were to increase faster than expected, or any unforeseen demand or commitment were to occur, we could access our borrowing capacity with the Federal Home Loan Bank of Boston or obtain additional funds through brokered certificates of deposit.

 

At June 30, 2019 and December 31, 2018, we had $34.3 million and $42.6 million in loan commitments outstanding, respectively. In addition to commitments to originate loans, at June 30, 2019 and December 31, 2018, we had $191.3 million and $187.8 million in unadvanced funds to borrowers, respectively. We also had $2.0 million and $1.5 million in outstanding letters of credit at June 30, 2019 and December 31, 2018, respectively.

 

Certificates of deposit due within one year of June 30, 2019 totaled $82.9 million, or 10.3% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and Federal Home Loan Bank of Boston advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

 

Our primary investing activities are the origination of loans and the purchase of securities. During the six months ended June 30, 2019, we originated $123.6 million of loans, all of which were intended to be held in our portfolio, and did not purchase any loans. We purchased $13.7 million and sold $13.6 million in securities. During the six months ended June 30, 2018, we originated $117.0 million of loans, all of which were intended to be held in our portfolio and we purchased $3.0 million in loans. We did not purchase any securities.

 

Financing activities consist primarily of activity in deposit accounts and Federal Home Loan Bank advances. We experienced a net increase in total deposits of $35.3 million and $4.2 million for the six months ended June 30, 2019 and 2018, respectively. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive. Borrowings increased $13.9 million and $13.0 million during the six months ended June 30, 2019 and 2018, respectively.

 

 41 

 

 

The Bank is subject to various regulatory capital requirements administered by the Massachusetts Commissioner of Banks and the FDIC. At June 30, 2019, the Bank exceeded all applicable regulatory capital requirements, and was considered “well capitalized” under regulatory guidelines. See Note 10 of the Notes to the Unaudited Consolidated Financial Statements for additional information.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

 

Item 4. Controls and Procedures

 

An evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s 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, 2019. Based on that evaluation, the Company’s management, including the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

 

During the quarter ended June 30, 2019, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Part II – Other Information

 

Item 1. Legal Proceedings

 

Not applicable.

 

Item 1A. Risk Factors

 

Not applicable to a smaller reporting company.

 

 42 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

  

(a)Not applicable.

 

(b)Not applicable.

 

(c)On January 26, 2017, the Company announced a repurchase program under which it would repurchase up to 6.6% of the then-outstanding shares of the Company’s common stock (625,015 shares) from time to time, depending on market conditions. The authorization by the Company’s Board of Directors for the company to repurchase shares of common stock from time to time will remain in effect until the repurchase program is completed or terminated by the Company’s Board of Directors, though there can be no assurance that the Company in fact will repurchase additional shares under the repurchase program. As of June 30, 2019, the Company had repurchased 37,471 shares at an average price of $21.57 per share. For the three months ended June 30, 2019, there were no repurchases of common stock of the Company. 

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

3.1Amended and Restated Articles of Organization of Provident Bancorp, Inc. (1)
3.2By-Laws of Provident Bancorp, Inc. (1)
31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101The following financial statements from the Provident Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Changes in Shareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Unaudited Consolidated Financial Statements.

 

 

(1)Incorporated by reference to the Company’s Registration Statement on Form S-1 (file no. 333-202716), initially filed with the Securities and Exchange Commission on March 13, 2015.

  

 43 

 

 

SIGNATURES

 

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

  

    PROVIDENT BANCORP, INC.
     
     
Date: August 9, 2019 /s/ David P. Mansfield
    David P. Mansfield
    President and Chief Executive Officer
     
     
Date: August 9, 2019 /s/ Carol L. Houle
    Carol L. Houle
    Executive Vice President and Chief Financial Officer

 

 44 

 

 

Exhibit 31.1

 

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, David P. Mansfield, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Provident Bancorp, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:   August 9, 2019 /s/ David P. Mansfield
  David P. Mansfield
  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, Carol L. Houle, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Provident Bancorp, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:    August 9, 2019 /s/ Carol L. Houle
  Carol L. Houle
  Executive 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

 

David P. Mansfield, President and Chief Executive Officer of Provident Bancorp, Inc. (the “Company”), and Carol L. Houle, Executive Vice President and Chief Financial Officer of the Company, each certify in his or her capacity as an officer of the Company that they have reviewed the quarterly report on Form 10-Q for the quarter ended June 30, 2019 (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 9, 2019 /s/ David P. Mansfield
  David P. Mansfield
  President and Chief Executive Officer
   
   
Date:   August 9, 2019 /s/ Carol L. Houle
  Carol L. Houle
  Executive 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.

 

 

 

 

v3.19.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2019
Aug. 06, 2019
Document And Entity Information [Abstract]    
Entity Registrant Name Provident Bancorp, Inc.  
Entity Central Index Key 0001635840  
Trading Symbol pvbc  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   9,621,822
Document Type 10-Q  
Document Period End Date Jun. 30, 2019  
Amendment Flag false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Entity Small Business true  
Entity Emerging Growth Company true  
Entity Ex Transition Period true  
Entity Shell Company false  
v3.19.2
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Assets    
Cash and due from banks $ 11,285 $ 10,941
Short-term investments 16,996 17,672
Cash and cash equivalents 28,281 28,613
Investments in available-for-sale securities (at fair value) 48,590 51,403
Federal Home Loan Bank stock, at cost 3,836 2,650
Loans, net 885,126 835,528
Bank owned life insurance 26,576 26,226
Premises and equipment, net 22,776 16,086
Other real estate owned 1,740 1,676
Accrued interest receivable 3,226 2,638
Deferred tax asset, net 6,398 6,437
Other assets 4,626 2,822
Total assets 1,031,175 974,079
Deposits:    
Noninterest-bearing 219,497 195,293
Interest-bearing 583,905 572,803
Total deposits 803,402 768,096
Borrowings 81,963 68,022
Operating lease liabilities 3,901  
Other liabilities 10,146 12,377
Total liabilities 899,412 848,495
Shareholders' equity:    
Preferred stock; authorized 50,000 shares: no shares issued and outstanding
Common stock, no par value: 30,000,000 shares authorized; 9,658,284 shares issued, 9,621,822 shares outstanding at June 30, 2019 and 9,662,181 shares issued, 9,625,719 shares outstanding at December 31, 2018 0 0
Additional paid-in capital 46,567 45,895
Retained earnings 88,100 83,351
Accumulated other comprehensive income (loss) 384 (255)
Unearned compensation - ESOP (2,500) (2,619)
Treasury stock: 36,462 shares (788) (788)
Total shareholders' equity 131,763 125,584
Total liabilities and shareholders' equity $ 1,031,175 $ 974,079
v3.19.2
CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares
Jun. 30, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Preferred stock, shares authorized 50,000 50,000
Preferred Stock, shares issued 0 0
Preferred Stock, shares outstanding 0 0
Common stock, no par value (in dollars per share) $ 0 $ 0
Common stock, shares authorized 30,000,000 30,000,000
Common stock, shares issued 9,658,284 9,662,181
Common stock, shares outstanding 9,621,822 9,625,719
Treasury stock, shares 36,462 36,462
v3.19.2
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Interest and dividend income:        
Interest and fees on loans $ 12,270 $ 9,925 $ 23,969 $ 19,201
Interest and dividends on securities 420 410 824 845
Interest on short-term investments 41 42 67 84
Total interest and dividend income 12,731 10,377 24,860 20,130
Interest expense:        
Interest on deposits 1,531 1,009 2,968 1,929
Interest on borrowings 599 204 1,133 318
Total interest expense 2,130 1,213 4,101 2,247
Net interest and dividend income 10,601 9,164 20,759 17,883
Provision for loan losses 1,354 638 2,816 1,294
Net interest and dividend income after provision for loan losses 9,247 8,526 17,943 16,589
Noninterest income:        
Gain on sale of securities, net     113  
Bank owned life insurance income 173 172 350 343
Other income 21 13 36 38
Total noninterest income 1,056 1,118 2,102 2,131
Noninterest expense:        
Salaries and employee benefits 4,274 4,269 8,568 8,433
Occupancy expense 550 417 1,194 867
Equipment expense 109 121 215 243
Data processing 150 193 354 397
Marketing expense 69 61 124 114
Professional fees 496 329 918 577
Directors' compensation 188 163 369 326
Other 1,047 858 1,887 1,830
Total noninterest expense 6,883 6,411 13,629 12,787
Income before income tax expense 3,420 3,233 6,416 5,933
Income tax expense 889 843 1,667 1,521
Net income $ 2,531 $ 2,390 $ 4,749 $ 4,412
Earnings per share:        
Basic (in dollars per share) $ 0.27 $ 0.26 $ 0.51 $ 0.48
Diluted (in dollars per share) $ 0.27 $ 0.26 $ 0.51 $ 0.47
Weighted Average Shares:        
Basic (in shares) 9,280,989 9,233,745 9,274,085 9,226,244
Diluted (in shares) 9,348,861 9,302,425 9,329,558 9,294,317
Customer service fees on deposit accounts        
Noninterest income:        
Total noninterest income $ 356 $ 339 $ 685 $ 701
Service charges and fees - other        
Noninterest income:        
Total noninterest income $ 506 $ 594 $ 918 $ 1,049
v3.19.2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement of Comprehensive Income [Abstract]        
Net income $ 2,531 $ 2,390 $ 4,749 $ 4,412
Other comprehensive income (loss):        
Unrealized holding gains (losses) 760 (92) 975 (1,305)
Reclassification adjustment for realized gains in net income     (113)  
Unrealized gain (loss) 760 (92) 862 (1,305)
Income tax effect (190) (27) (223) 327
Net of tax amount 570 (119) 639 (978)
Total comprehensive income $ 3,101 $ 2,271 $ 5,388 $ 3,434
v3.19.2
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) - USD ($)
$ in Thousands
Shares of Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Unearned Compensation ESOP
Treasury Stock
Total
Balance at Dec. 31, 2017   $ 44,592 $ 74,047 $ 589 $ (2,857) $ (594) $ 115,777
Balance (in shares) at Dec. 31, 2017 9,628,796            
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income     4,412       4,412
Other comprehensive income (loss)       (978)     (978)
Stock-based compensation expense   480         480
ESOP shares earned   178     119   297
Balance at Jun. 30, 2018   45,250 78,459 (389) (2,738) (594) 119,988
Balance (in shares) at Jun. 30, 2018 9,628,796            
Balance at Mar. 31, 2018   44,923 76,069 (270) (2,798) (594) 117,330
Balance (in shares) at Mar. 31, 2018 9,628,796            
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income     2,390       2,390
Other comprehensive income (loss)       (119)     (119)
Stock-based compensation expense   240         240
ESOP shares earned   87     60   147
Balance at Jun. 30, 2018   45,250 78,459 (389) (2,738) (594) 119,988
Balance (in shares) at Jun. 30, 2018 9,628,796            
Balance at Dec. 31, 2018   45,895 83,351 (255) (2,619) (788) 125,584
Balance (in shares) at Dec. 31, 2018 9,625,719            
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income     4,749       4,749
Other comprehensive income (loss)       639     639
Stock-based compensation expense   510         510
Restricted stock award grant forfeiture (in shares) (3,897)            
ESOP shares earned   162     119   281
Balance at Jun. 30, 2019   46,567 88,100 384 (2,500) (788) 131,763
Balance (in shares) at Jun. 30, 2019 9,621,822            
Balance at Mar. 31, 2019   46,236 85,569 (186) (2,559) (788) 128,272
Balance (in shares) at Mar. 31, 2019 9,621,822            
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income     2,531       2,531
Other comprehensive income (loss)       570     570
Stock-based compensation expense   245         245
ESOP shares earned   86     59   145
Balance at Jun. 30, 2019   $ 46,567 $ 88,100 $ 384 $ (2,500) $ (788) $ 131,763
Balance (in shares) at Jun. 30, 2019 9,621,822            
v3.19.2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Cash flows from operating activities:    
Net income $ 4,749 $ 4,412
Adjustments to reconcile net income to net cash provided by operating activities:    
Amortization of securities premiums, net of accretion 97 147
ESOP expense 281 297
Gain on sale of securities, net (113)  
Change in deferred loan fees, net 357 30
Provision for loan losses 2,816 1,294
Depreciation and amortization 768 370
Gain on disposals of premises and equipment (9)  
Increase in accrued interest receivable (588) (149)
Deferred tax benefit (185)  
Share-based compensation expense 510 480
Increase in cash surrender value of life insurance (350) (343)
Principal repayments of operating lease obligations (36)  
Increase in other assets (1,804) (7)
(Decrease) increase in other liabilities (2,129) 1,712
Net cash provided by operating activities 4,364 8,243
Cash flows from investing activities:    
Purchases of available-for-sale securities (13,729)  
Proceeds from sales of available-for-sale securities 13,565  
Proceeds from pay downs, maturities and calls of available-for-sale securities 3,855 4,655
Purchase of Federal Home Loan Bank stock, net of redemptions (1,186) (302)
Loan originations and purchases, net of paydowns (52,771) (29,291)
Additions to premises and equipment (3,698) (294)
Additions to assets held-for-sale   (147)
Proceeds from the sale of equipment 85  
Additions to other real estate owned (64)  
Net cash used in investing activities (53,943) (25,379)
Cash flows from financing activities:    
Net (decrease) increase in demand deposits, NOW and savings accounts (4,790) 17,574
Net increase (decrease) increase in time deposits 40,096 (13,362)
Proceeds from advances from Federal Home Loan Bank   10,000
Net change in short-term borrowings 13,941 3,040
Net cash provided by financing activities 49,247 17,252
Net (decrease) increase in cash and cash equivalents (332) 116
Cash and cash equivalents at beginning of period 28,613 47,689
Cash and cash equivalents at end of period 28,281 47,805
Supplemental disclosures:    
Interest paid 4,126 2,328
Income taxes paid 2,391 1,290
Recognition of right-of-use assets in premises and equipment (1) [1] 3,836  
Recognition of operating lease liabilities [1] 3,938  
Reclassification of accrued rent from other liabilities to premises and equipment (1) [1] $ 102  
Assets held-for-sale transferred to premises and equipment   $ 3,433
[1] Adoption of ASU 2016-02, Leases (Note 15)
v3.19.2
Basis of Presentation
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation
(1) Basis of Presentation

The accompanying unaudited financial statements of Provident Bancorp, Inc., a Massachusetts corporation (the “Company”), were prepared in accordance with the instructions for Form 10-Q and with Regulation S-X and do not include information or footnotes necessary for a complete presentation of the financial condition, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”). However, in the opinion of management, all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and six-month periods ended June 30, 2019 are not necessarily indicative of the results that may be expected for future periods, including the entire fiscal year. Certain amounts in 2018 have been reclassified to be consistent with the 2019 consolidated financial statement presentation, and had no effect on the net income reported in the consolidated statement of income. These financial statements should be read in conjunction with the annual financial statements and notes thereto included in the annual report on Form 10-K the Company filed with the Securities and Exchange Commission on March 14, 2019.

 

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, The Provident Bank (the “Bank”), and the Bank’s wholly owned subsidiaries, Provident Security Corporation and 5 Market Street Security Corporation. Provident Security Corporation and 5 Market Street Security Corporation were established to buy, sell, and hold investments for their own account. All significant inter-company balances and transactions have been eliminated in consolidation.
v3.19.2
Corporate Structure
6 Months Ended
Jun. 30, 2019
Corporate Structure [Abstract]  
Corporate Structure
(2) Corporate Structure

Provident Bancorp, Inc. (the “Company”) is a Massachusetts-chartered corporation organized for the purpose of owning all of the outstanding capital stock of The Provident Bank (the “Bank”). Provident Bancorp, the Company’s mutual holding company (the “MHC”), owns approximately 52.3% of the Company’s stock.

 

The Company is headquartered in Amesbury, Massachusetts. The Bank operates its business from seven banking offices located in Amesbury and Newburyport, Massachusetts and Portsmouth, Exeter, Bedford, and Seabrook, New Hampshire. The Bank also has four loan production offices in Boston, Hingham, and Dedham, Massachusetts and Portsmouth, New Hampshire. The Bank provides a variety of financial services to individuals and small businesses. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are commercial mortgages and commercial loans.

 

On June 5, 2019, the Board of Trustees of Provident Bancorp (“MHC”) and the Board of Directors of the Company adopted a Plan of Conversion and Reorganization (the “Plan”). Pursuant to the Plan, the MHC will convert from the mutual holding company form of organization to the fully public form. The MHC will be merged into the Company, and the MHC will no longer exist. The Company will merge into a new Maryland corporation named Provident Bancorp, Inc. As part of the conversion, the MHC’s ownership interest of the Company will be offered for sale in a public offering. The existing publicly held shares of the Company, which represents the remaining ownership interest in the Company, will be exchanged for new shares of common stock of Provident Bancorp, Inc., the new Maryland Corporation. The exchange ratio will ensure that immediately after the conversion and public offering, the public shareholders of the Company will own the same aggregate percentage of Provident Bancorp, Inc. common stock that they owned immediately prior to that time (excluding shares purchased in the stock offering and cash received in lieu of fractional shares), adjusted to reflect assets held by the MHC. When the conversion and public offering are completed, all of the capital stock of The Provident Bank will be owned by Provident Bancorp, Inc., the Maryland corporation.

 

The Plan provides for the establishment, upon the completion of the conversion, of special “liquidation accounts” for the benefit of certain depositors of The Provident Bank in an amount equal to the MHC’s ownership interest in the retained earnings of the Company as of the date of the latest balance sheet contained in the prospectus plus the MHC’s net assets (excluding its ownership of the Company). Following the completion of the conversion, the Company and The Provident Bank will not be permitted to pay dividends on their capital stock if the shareholders’ equity of Provident Bancorp, Inc., the Maryland corporation, or the shareholder’s equity of The Provident Bank, would be reduced below the amount of the liquidation accounts. The liquidation accounts will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation accounts.

 

Direct costs of the conversion and public offering will be deferred and reduce the proceeds from the shares sold in the public offering. Costs of $380,000 have been incurred related to the conversion as of June 30, 2019.

 

The Securities and Exchange Commission declared the new Company’s Registration Statement effective August 7, 2019.
v3.19.2
Recent Accounting Pronouncements
6 Months Ended
Jun. 30, 2019
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
Recent Accounting Pronouncements
(3) Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The amendments in this update require lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases. Accounting by lessors will remain largely unchanged. The guidance was effective for the Company on January 1, 2019. In July 2018, the FASB issued 2018-11, which allows a modified retrospective transition where the lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented or as a cumulative effect adjustment as of the date of adoption. The Company adopted ASU 2016-02 on January 1, 2019 as a cumulative effect adjustment as of that date. The Company’s assets and liabilities increased by $3.8 million at the adoption date (see Note 15).

 

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 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and can result in the earlier recognition of credit losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The amendments in this update will be effective for the Company on January 1, 2020. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is currently evaluating the impact of its pending adoption of this guidance on the Company’s financial statements.

 

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (subtopic 310-20): “Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments were effective for the Company on January 1, 2019. The Company adopted this guidance on January 1, 2019 and there was no impact on the Company’s financial statements.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): “Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU will be effective for the Company on January 1, 2020. As the guidance only revises disclosure requirements, the adoption of this guidance is not expected to have a material impact on the Company’s financial statements.
v3.19.2
Investment Securities
6 Months Ended
Jun. 30, 2019
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
(4) Investment Securities

The following summarizes the amortized cost of investment securities classified as available-for-sale and their approximate fair values at June 30, 2019 and December 31, 2018:

 

    Amortized     Gross     Gross        
    Cost     Unrealized     Unrealized     Fair  
(In thousands)   Basis     Gains     Losses     Value  
June 30, 2019                                
State and municipal securities   $ 11,438     $ 336     $ -     $ 11,774  
Asset-backed securities     5,935       119       -       6,054  
Government mortgage-backed securities     30,717       229       184       30,762  
Total available-for-sale securities   $ 48,090     $ 684     $ 184     $ 48,590  
                                 
December 31, 2018                                
State and municipal securities   $ 20,118     $ 272     $ 135     $ 20,255  
Asset-backed securities     6,512       -       141       6,371  
Government mortgage-backed securities     25,135       138       496       24,777  
Total available-for-sale securities   $ 51,765     $ 410     $ 772     $ 51,403  

  

The scheduled maturities of debt securities were as follows at June 30, 2019:

 

    Available-for-Sale  
    Amortized     Fair  
(In thousands)   Cost     Value  
Due in one year or less   $ 95     $ 95  
Due after one year through five years     604       607  
Due after five years through ten years     2,026       2,082  
Due after ten years     8,713       8,990  
Government mortgage-backed securities     30,717       30,762  
Asset-backed securities     5,935       6,054  
    $ 48,090     $ 48,590  

  

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 longer are as follows at June 30, 2019 and December 31, 2018:

 

    Less than 12 Months     12 Months or Longer     Total  
    Fair     Unrealized     Fair     Unrealized     Fair     Unrealized  
(In thousands)   Value     Losses     Value     Losses     Value     Losses  
June 30, 2019                                    
Temporarily impaired securities:                                                
Government mortgage-backed securities   $ 4,581     $ 76     $ 6,470     $ 108     $ 11,051     $ 184  
                                                 
December 31, 2018                                                
Temporarily impaired securities:                                                
State and municipal securities   $ 6,137     $ 115     $ 597     $ 20     $ 6,734     $ 135  
Asset-backed securities     3,833       98       2,538       43       6,371       141  
Government mortgage-backed securities     2,864       32       14,152       464       17,016       496  
     Total temporarily impaired securities   $ 12,834     $ 245     $ 17,287     $ 527     $ 30,121     $ 772  

  

Government mortgage-backed securities: Management believes that no individual unrealized loss at June 30, 2019 represents an other-than-temporary impairment (OTTI) because the decline in fair value of these securities is primarily attributable to changes in market interest rates and not credit quality, and because the Company has the intent and ability to hold these investments until market price recovery or maturity.

v3.19.2
Loans
6 Months Ended
Jun. 30, 2019
Receivables [Abstract]  
Loans

(5) Loans

A summary of loans is as follows:

 

    At     At  
    June 30,     December 31,  
  2019     2018  
(Dollars in thousands)   Amount     Percent     Amount     Percent  
Commercial real estate   $ 389,068       43.30 %   $ 364,867       43.00 %
Commercial     398,277       44.32 %     361,782       42.64 %
Residential real estate     52,445       5.84 %     57,361       6.76 %
Construction and land development     40,491       4.51 %     44,606       5.26 %
Consumer     18,215       2.03 %     19,815       2.34 %
      898,496       100.00 %     848,431       100.00 %
Allowance for loan losses     (11,790 )             (11,680 )        
Deferred loan fees, net     (1,580 )             (1,223 )        
Net loans   $ 885,126             $ 835,528          

 

The following tables set forth information regarding the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019 and 2018:

  

    For the three months ended June 30,  
(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction
and Land
Development
    Consumer     Unallocated     Total  
Allowance for loan losses:                                                        
                                                         
Balance at March 31, 2019   $ 4,247     $ 5,746     $ 240     $ 734     $ 812     $ 78     $ 11,857  
Charge-offs     -       (1,190 )     -       -       (266 )     -       (1,456 )
Recoveries     -       5       4       -       26       -       35  
Provision (credit)     332       728       (13 )     (85 )     356       36       1,354  
Balance at June 30, 2019   $ 4,579     $ 5,289     $ 231     $ 649     $ 928     $ 114     $ 11,790  
                                                         
Balance at March  31, 2018   $ 4,607     $ 3,668     $ 292     $ 939     $ 678     $ 52     $ 10,236  
Charge-offs     -       (31 )     -       -       (232 )     -       (263 )
Recoveries     -       -       -       -       19       -       19  
Provision (credit)     (501 )     875       (10 )     29       270       (25 )     638  
Balance at June 30, 2018   $ 4,106     $ 4,512     $ 282     $ 968     $ 735     $ 27     $ 10,630  
       
    For the six months ended June 30,  
(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction
and Land
Development
    Consumer     Unallocated     Total  
Allowance for loan losses:                                                        
                                                         
Balance at December 31, 2018   $ 4,152     $ 5,742     $ 251     $ 738     $ 710     $ 87     $ 11,680  
Charge-offs     -       (2,223 )     -       -       (547 )     -       (2,770 )
Recoveries     -       15       4       -       45       -       64  
Provision (credit)     427       1,755       (24 )     (89 )     720       27       2,816  
Balance at June 30, 2019   $ 4,579     $ 5,289     $ 231     $ 649     $ 928     $ 114     $ 11,790  
                                                         
Balance at December 31, 2017   $ 4,483     $ 3,280     $ 300     $ 965     $ 649     $ 80     $ 9,757  
Charge-offs     -       (51 )     -       -       (398 )     -       (449 )
Recoveries     -       1       -       -       27       -       28  
Provision (credit)     (377 )     1,282       (18 )     3       457       (53 )     1,294  
Balance at June 30, 2018   $ 4,106     $ 4,512     $ 282     $ 968     $ 735     $ 27     $ 10,630  

  

The following table sets forth information regarding the allowance for loan losses and related loan balances by segment at June 30, 2019 and December 31, 2018:

 

(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction
and Land
Development
    Consumer     Unallocated     Total  
June 30, 2019                                                        
Allowance for loan losses:                                                        
Ending balance:                                                        
Individually evaluated for impairment   $ -     $ 163     $ -     $ -     $ -     $ -     $ 163  
Ending balance:                                                        
Collectively evaluated  for impairment     4,579       5,126       231       649       928       114       11,627  
Total allowance for loan losses ending balance   $ 4,579     $ 5,289     $ 231     $ 649     $ 928     $ 114     $ 11,790  
                                                         
Loans:                                                        
Ending balance:                                                        
Individually evaluated for impairment   $ 1,823     $ 4,155     $ 380     $ -     $ -             $ 6,358  
Ending balance:                                                        
Collectively evaluated for impairment     387,245       394,122       52,065       40,491       18,215               892,138  
Total loans ending balance   $ 389,068     $ 398,277     $ 52,445     $ 40,491     $ 18,215             $ 898,496  
                                           
(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction
and Land
Development
    Consumer     Unallocated     Total  
December 31, 2018                                                        
Allowance for loan losses:                                                        
Ending balance:                                                        
Individually evaluated for impairment   $ 62     $ 1,039     $ -     $ -     $ -     $ -     $ 1,101  
Ending balance:                                                        
Collectively evaluated for impairment     4,090       4,703       251       738       710       87       10,579  
Total allowance for loan losses ending balance   $ 4,152     $ 5,742     $ 251     $ 738     $ 710     $ 87     $ 11,680  
                                                         
Loans:                                                        
Ending balance:                                                        
Individually evaluated for impairment   $ 1,853     $ 5,291     $ 388     $ -     $ -             $ 7,532  
Ending balance:                                                        
Collectively evaluated  for impairment     363,014       356,491       56,973       44,606       19,815               840,899  
Total loans ending balance   $ 364,867     $ 361,782     $ 57,361     $ 44,606     $ 19,815             $ 848,431  

 

The following tables set forth information regarding non-accrual loans and loan delinquencies by portfolio segment at June 30, 2019 and December 31, 2018:

 

                                        90 Days        
                90 Days     Total                 or More        
    30 - 59     60 - 89     or More     Past     Total     Total     Past Due     Non-accrual  
(In thousands)   Days     Days     Past Due     Due     Current     Loans     and Accruing     Loans  
June 30, 2019                                                                
Commercial real estate   $ 632     $ -     $ 519     $ 1,151     $ 387,917     $ 389,068     $ -     $ 519  
Commercial     59       38       346       443       397,834       398,277       -       3,760  
Residential real estate     144       257       481       882       51,563       52,445       -       1,052  
Construction and  land development     -       -       -       -       40,491       40,491       -       -  
Consumer     80       67       82       229       17,986       18,215       -       87  
Total   $ 915     $ 362     $ 1,428     $ 2,705     $ 895,791     $ 898,496     $ -     $ 5,418  
                                                                 
December 31, 2018                                                                
Commercial real estate   $ 742     $ -     $ 519     $ 1,261     $ 363,606     $ 364,867     $ -     $ 519  
Commercial     40       -       3,167       3,207       358,575       361,782       -       4,830  
Residential real estate     321       223       30       574       56,787       57,361               850  
Construction and  land development     -       -       -       -       44,606       44,606       -       -  
Consumer     62       46       59       167       19,648       19,815       -       62  
Total   $ 1,165     $ 269     $ 3,775     $ 5,209     $ 843,222     $ 848,431     $ -     $ 6,261  

  

 

Information about the Company’s impaired loans by portfolio segment was as follows at and for the six months ended June 30, 2019 and at and for the year ended December 31, 2018:

 

          Unpaid           Average     Interest  
    Recorded     Principal     Related     Recorded     Income  
(In thousands)   Investment     Balance     Allowance     Investment     Recognized  
June 30, 2019                              
With no related allowance recorded:                                        
Commercial real estate   $ 1,823     $ 1,823     $ -     $ 1,838     $ 30  
Commercial     896       965       -       1,120       13  
Residential real estate     380       380       -       384       8  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
 Total impaired with no related allowance     3,099       3,168       -       3,342       51  
                                         
With an allowance recorded:                                        
Commercial real estate     -       -       -       -       -  
Commercial     3,259       3,333       163       4,994       -  
Residential real estate     -       -       -       -       -  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
Total impaired with an allowance recorded     3,259       3,333       163       4,994       -  
                                         
Total                                        
Commercial real estate     1,823       1,823       -       1,838       30  
Commercial     4,155       4,298       163       6,114       13  
Residential real estate     380       380       -       384       8  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
Total impaired loans   $ 6,358     $ 6,501     $ 163     $ 8,336     $ 51  
                                         
December 31, 2018                                        
With no related allowance recorded:                                        
Commercial real estate   $ 1,334     $ 1,334     $ -     $ 5,614     $ 69  
Commercial     4,050       4,110       -       4,894       38  
Residential real estate     388       388       -       396       20  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
 Total impaired with no related allowance     5,772       5,832       -       10,904       127  
                                         
With an allowance recorded:                                        
Commercial real estate     519       519       62       519       -  
Commercial     1,241       1,267       1,039       1,695       52  
Residential real estate     -       -       -       -       -  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
Total impaired with an allowance recorded     1,760       1,786       1,101       2,214       52  
                                         
Total                                        
Commercial real estate     1,853       1,853       62       6,133       69  
Commercial     5,291       5,377       1,039       6,589       90  
Residential real estate     388       388       -       396       20  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
Total impaired loans   $ 7,532     $ 7,618     $ 1,101     $ 13,118     $ 179  

 

The following summarizes troubled debt restructurings entered into during the six months ended June 30, 2019: 

(Dollars in thousands)   Number
of
Contracts
    Pre-
Modification
Outstanding
Recorded
Investment
    Post-
Modification
Outstanding
Recorded
Investment
 
June 30, 2019                        
Troubled debt restructurings:                        
Commercial     1     $ 1,963     $ 1,963  
      1     $ 1,963     $ 1,963  

 

In the six months ended June 30, 2019, the Company approved one troubled debt restructuring totaling $1.9 million. This commercial loan was placed on an extended 12-month interest-only period with re-amortization to follow. An impairment analysis was performed and a specific reserve of $136,000 was allocated to this relationship.

 

There were no troubled debt restructurings during the six months ended June 30, 2018.

 

The following tables present the Company’s loans by risk rating and portfolio segment at June 30, 2019 and December 31, 2018:

  

(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction 
and Land 
Development
    Consumer     Total  
June 30, 2019                                                
Grade:                                                
 Pass   $ 366,217     $ 380,188     $ -     $ 40,198     $ -     $ 786,603  
 Special mention     4,871       13,809       -       -       -       18,680  
 Substandard     17,980       4,280       515       293       -       23,068  
 Not formally rated     -       -       51,930       -       18,215       70,145  
Total   $ 389,068     $ 398,277     $ 52,445     $ 40,491     $ 18,215     $ 898,496  
                                                 
December 31, 2018                                                
Grade:                                                
 Pass   $ 356,415     $ 339,079     $ -     $ 44,606     $ -     $ 740,100  
 Special mention     6,531       11,339       -       -       -       17,870  
 Substandard     1,921       10,447       571       -       -       12,939  
 Doubtful     -       917       -       -       -       917  
 Not formally rated     -       -       56,790       -       19,815       76,605  
Total   $ 364,867     $ 361,782     $ 57,361     $ 44,606     $ 19,815     $ 848,431  

  

Credit Quality Information

The Company utilizes a seven grade internal loan risk rating system for commercial real estate, construction and land development, and commercial loans as follows:

 

Loans rated 1-3: Loans in these categories are considered “pass” rated loans with low to average risk.

 

Loans rated 4: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

 

Loans rated 5: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

 

Loans rated 6: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

 

Loans rated 7: Loans in this category are considered uncollectible “loss” and of such little value that their continuance as loans is not warranted.

 

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and land development, 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 rates such loans as pass. Subsequent risk rating downgrades are based upon the borrower’s payment activity.
v3.19.2
Deposits
6 Months Ended
Jun. 30, 2019
Deposits [Abstract]  
Deposits
(6) Deposits

A summary of deposit balances, by type is as follows:

 

    June 30,     December 31,  
(In thousands)   2019     2018  
NOW and demand   $ 326,794     $ 332,064  
Regular Savings     119,433       109,322  
Money Market deposits     219,683       229,314  
Total non-certificate accounts     665,910       670,700  
                 
Certificate accounts of $250,000 or more     18,075       14,164  
Certificate accounts less than $250,000     119,417       83,232  
Total certificate accounts     137,492       97,396  
Total deposits   $ 803,402     $ 768,096  
v3.19.2
Federal Home Loan Bank Advances
6 Months Ended
Jun. 30, 2019
Advances from Federal Home Loan Banks [Abstract]  
Federal Home Loan Bank Advances

(7) Federal Home Loan Bank Advances

Borrowings from the Federal Home Loan Bank (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 commercial real estate loans and other qualified assets.

 

Maturities of advances from the FHLB as of June 30, 2019 are summarized as follows:

 

(In thousands)      
Fiscal Year-End   Dollar Amount  
2019   $ 56,988  
2020     11,475  
2021     5,000  
2023     8,500  
Total   $ 81,963  
v3.19.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
(8) Fair Value Measurements

The Company reports certain assets at fair value in accordance with GAAP, which defines fair value and establishes a framework for measuring fair value in accordance with generally accepted accounting principles. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values:

 

Basis of Fair Value Measurements

· Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
· Level 2 - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability;
· Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

 

An asset’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

 

Fair Values of Assets Measured on a Recurring Basis

 

The Company’s investments in state and municipal, asset-backed and government mortgage-backed available-for-sale securities are generally classified within Level 2 of the fair value hierarchy. For these investments, the Company obtains 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. 

  

The following summarizes financial instruments measured at fair value on a recurring basis at June 30, 2019 and December 31, 2018:

 

    Fair Value Measurements at Reporting Date Using  
          Quoted Prices in     Significant     Significant  
          Active Markets for     Other Observable     Unobservable  
          Identical Assets     Inputs     Inputs  
(In thousands)   Total     Level 1     Level 2     Level 3  
June 30, 2019                                
State and municipal securities   $ 11,774     $ -     $ 11,774     $ -  
Asset-backed securities     6,054       -       6,054       -  
Mortgage-backed securities     30,762       -       30,762       -  
Totals   $ 48,590     $ -     $ 48,590     $ -  
                                 
December 31, 2018                                
State and municipal securities   $ 20,255     $ -     $ 20,255     $ -  
Asset-backed securities     6,371       -       6,371       -  
Mortgage-backed securities     24,777       -       24,777       -  
Totals   $ 51,403     $ -     $ 51,403     $ -  

  

Fair Values of Assets Measured on a Non-Recurring Basis

 

The Company’s only assets measured at fair value on a nonrecurring basis are loans identified as impaired for which a write-off or specific reserve has been recorded, and other real estate owned. Certain impaired loans of the Company are reported at the fair value of the underlying collateral, less estimated selling costs. The Company classifies impaired loans as Level 3 in the fair value hierarchy. Collateral values are estimated using Level 2 inputs based upon appraisals of similar properties obtained from a third party, but can be adjusted and therefore classified as Level 3. The Company classifies other real estate owned as Level 2 in the fair value hierarchy if the Company has received a purchase and sales agreement.

 

The following summarizes assets measured at fair value on a nonrecurring basis at June 30, 2019 and December 31, 2018:

 

    Fair Value Measurements at Reporting Date Using:  
          Quoted Prices in     Significant     Significant  
          Active Markets for     Other Observable     Unobservable  
          Identical Assets     Inputs     Inputs  
(In thousands)   Total     Level 1     Level 2     Level 3  
June 30, 2019                                
Impaired loans   $ 3,416     $ -     $ -     $ 3,416  
Other real estate owned     1,740       -       1,740       -  
                                 
December 31, 2018                                
Impaired loans   $ 659     $ -     $ -     $ 659  
Other real estate owned     1,676       -       1,676       -  

 

The following is a summary of the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis at June 30, 2019 and December 31, 2018:

   

(In thousands)   Fair Value     Valuation Technique   Unobservable Input
June 30, 2019                
Impaired loans   $ 3,416      Business valuation    Comparable company evaluations
                 
December 31, 2018                
Impaired loans   $ 659      Real estate appraisals and business valuation    Discount for dated appraisals and comparable company evaluations
v3.19.2
Fair Value of Financial Instruments
6 Months Ended
Jun. 30, 2019
Fair Value Of Financial Instrument [Abstract]  
Fair Value of Financial Instruments
(9) Fair Value of Financial Instruments

GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

 

The carrying amounts and estimated fair values of the Company's financial instruments, all of which are held or issued for purposes other than trading, are as follows at June 30, 2019 and December 31, 2018:

 

    Carrying     Fair Value  
(In thousands)   Amount     Level 1     Level 2     Level 3     Total  
June 30, 2019                              
Financial assets:                                        
Cash and cash equivalents   $ 28,281     $ 28,281     $ -     $ -     $ 28,281  
Available-for-sale securities     48,590       -       48,590       -       48,590  
Federal Home Loan Bank of Boston stock     3,836       3,836       -       -       3,836  
Loans, net     885,126       -       -       880,744       880,744  
Accrued interest receivable     3,226       -       3,226       -       3,226  
Financial liabilities:                                        
Deposits     803,402       -       -       804,117       804,117  
Borrowings     81,963       -       82,259       -       82,259  
                                         
December 31, 2018                                        
Financial assets:                                        
Cash and cash equivalents   $ 28,613     $ 28,613     $ -     $ -     $ 28,613  
Available-for-sale securities     51,403       -       51,403       -       51,403  
Federal Home Loan Bank of Boston stock     2,650       2,650       -       -       2,650  
Loans, net     835,528       -       -       827,090       827,090  
Accrued interest receivable     2,638       -       2,638       -       2,638  
Financial liabilities:                                        
Deposits     768,096       -       -       768,010       768,010  
Borrowings     68,022       -       67,846       -       67,846  
v3.19.2
Regulatory Capital
6 Months Ended
Jun. 30, 2019
Banking and Thrift [Abstract]  
Regulatory Capital
(10) Regulatory Capital

 

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 Federal Deposit Insurance Corporation (“FDIC”), which implement the Basel III regulatory capital reforms and the changes required by the Dodd-Frank Act. The regulations require a new 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 new prompt corrective action regulations, in order to be considered “well capitalized,” the Bank must maintain a CET1 capital ratio of 6.5% and a Tier 1 ratio of 8.0%, a total risk based capital ratio of 10% and a Tier 1 leverage ratio of 5.0%. As of June 30, 2019 and December 31, 2018, the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

 

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement began being phased in starting on January 1, 2016 at 0.625% of risk-weighted assets and increased each year until fully implemented at 2.5% on January 1, 2019. At June 30, 2019, the Bank exceeded the fully phased in regulatory requirement for the capital conservation buffer.

 

The Bank’s actual capital amounts and ratios are presented in the following table.

 

                            To Be Well  
                            Capitalized Under  
                For Capital     Prompt Corrective  
    Actual     Adequacy Purposes     Action Provisions  
(dollars in thousands)   Amount     Ratio     Amount     Ratio     Amount     Ratio  
June 30, 2019                                    
Total Capital (to Risk Weighted Assets)   $ 135,170       14.20 %   $ 76,152 >     8.0 %   $ 95,190 >     10.0 %
Tier 1 Capital (to Risk Weighted Assets)     123,380       12.96     $ 57,114 >     6.0       76,152 >     8.0  
Common Equity Tier 1 Capital (to Risk Weighted Assets)     123,380       12.96     $ 42,836 >     4.5       61,874 >     6.5  
Tier 1 Capital (to Average Assets)     123,380       12.30     $ 40,128 >     4.0       50,161 >     5.0  
December 31, 2018                                                
Total Capital (to Risk Weighted Assets)   $ 128,939       14.55 %   $ 70,891 >     8.0 %   $ 88,614 >     10.0 %
Tier 1 Capital (to Risk Weighted Assets)     117,855       13.30       53,168 >     6.0       70,891 >     8.0  
Common Equity Tier 1 Capital (to Risk Weighted Assets)     117,855       13.30       39,876 >     4.5       57,599 >     6.5  
Tier 1 Capital (to Average Assets)     117,855       12.69       37,157 >     4.0       46,446 >     5.0  

 

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies, including the FDIC, are required to establish for qualifying institutions with assets of less than $10 billion of assets a “community bank leverage ratio” of between 8% to 10% tangible equity/consolidated assets. Institutions with capital levels meeting or exceeding the specified requirement will be considered to comply with the applicable regulatory capital requirements, including all risk-based requirements. The establishment of the community bank leverage ratio is subject to notice and comment rulemaking by the federal regulators. A proposed rule issued by the federal regulators in December 2018 would specify a 9% community bank leverage ratio minimum for institutions to opt into the alternative framework.

 

From time to time, the Company may use capital management tools such as cash dividends and common share repurchases. In January 2017, the Company received a non-objection from the Federal Reserve Board to adopt a stock repurchase program for up to 625,015 shares of its common stock, or approximately 6.6% of the current outstanding shares. Through June 30, 2019, the Company had repurchased at an average price of $21.57 per share, a total of 37,471 shares out of the 625,015 shares authorized for repurchase under the Company’s repurchase program

 

Liquidation Account

 

Upon the completion of the Company’s stock offering in 2015, a special “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to the percentage ownership interest in the equity of the Company to be held by persons other than the MHC as of the date of the latest balance sheet contained in the prospectus utilized in connection with the offering. The Company is not permitted to pay dividends on its capital stock if the Company’s shareholders’ equity would be reduced below the amount of the liquidation account. The liquidation account is reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation account.

v3.19.2
Employee Stock Ownership Plan
6 Months Ended
Jun. 30, 2019
Employee Stock Ownership Plan [Abstract]  
Employee Stock Ownership Plan
(11) Employee Stock Ownership Plan

The Bank maintains an Employee Stock Ownership Plan (“ESOP”) to provide eligible employees the opportunity to own Company stock. This plan is a tax-qualified retirement plan for the benefit of Bank employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits. The number of shares committed to be released per year through 2029 is 23,810.

 

The Company loaned funds to the ESOP to purchase 357,152 shares of the Company’s common stock at a price of $10.00 per share. The loan is payable annually over 15 years at a rate per annum equal to the Prime Rate as of December 31 (5.50% at December 31, 2018). Loan payments are principally funded by cash contributions from the Bank.

 

Shares held by the ESOP include the following:

 

    June 30, 2019     December 31, 2018  
Allocated     95,240       71,430  
Committed to be allocated     11,905       23,810  
Unallocated     250,007       261,912  
Total     357,152       357,152  

 

The fair value of unallocated shares was approximately $7.0 million at June 30, 2019.

 

Total compensation expense recognized in connection with the ESOP for the three months ended June 30, 2019 2018 was $145,000 and $147,000, respectively. Total compensation expense recognized for the six months ended June 30, 2019 and 2018 was $281,000 and $297,000, respectively.

v3.19.2
Earnings Per Common Share
6 Months Ended
Jun. 30, 2019
Earnings Per Share [Abstract]  
Earnings Per Common Share
(12) Earnings Per Common Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Unallocated ESOP shares, treasury stock and unvested restricted stock is not deemed outstanding for earnings per share calculations.

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(Dollars in thousands, except per share amounts)   2019     2018     2019     2018  
Net Income attributable to common shareholders   $ 2,531     $ 2,390     $ 4,749     $ 4,412  
                                 
Average number of common shares issued     9,658,284       9,657,319       9,660,222       9,657,319  
Less:                                
average unallocated ESOP shares     (261,674 )     (282,918 )     (266,573 )     (283,833 )
average unvested restricted stock     (79,339 )     (111,833 )     (83,282 )     (118,419 )
average treasury stock acquired     (36,282 )     (28,823 )     (36,282 )     (28,823 )
Average number of common shares outstanding to calculate basic earnings per common share     9,280,989       9,233,745       9,274,085       9,226,244  
                                 
Effect of dilutive unvested restricted stock and stock option awards     67,872       68,680       55,473       68,073  
Average number of common shares outstanding to calculate diluted earnings per common share     9,348,861       9,302,425       9,329,558       9,294,317  
                                 
Earnings per common share:                                
Basic   $ 0.27     $ 0.26     $ 0.51     $ 0.48  
Diluted   $ 0.27     $ 0.26     $ 0.51     $ 0.47  
v3.19.2
Share-Based Compensation
6 Months Ended
Jun. 30, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
(13) Share-Based Compensation

Under the Provident Bancorp, Inc. 2016 Equity Incentive Plan (the "Equity Plan"), the Company may grant options, restricted stock, restricted units or performance awards to its directors, officers and employees. Both incentive stock options and non-qualified stock options may be granted under the Equity Plan, with the total shares reserved for options equaling 446,440. The exercise price of each option equals the market price of the Company’s stock on the date of grant and the term of each option is generally ten years. The total number of shares reserved for restricted stock or restricted units is 178,575. Options and other awards vest ratably over five years.

 

Expense related to options and restricted stock granted to directors is recognized in directors’ compensation within non-interest expense.

 

Stock Options

 

The fair value of each option is estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:

 

· Volatility is based on peer group volatility because the Company does not have a sufficient trading history.
· Expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term, and the vesting period.
· The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option.
 

A summary of the status of the Company’s stock option grants for the six months ended June 30, 2019, is presented in the table below:

 

    Stock Option
Awards
    Weighted
Average 
Exercise
Price
    Weighted
Average
Remaining
Contractual 
Term (years)
    Aggregate
Intrinsic Value
 
Outstanding at December 31, 2018     396,438     $ 17.89                  
Granted     -                          
Forfeited     -                          
Exercised     -                          
Outstanding at June 30, 2019     396,438     $ 17.89       7.51     $ 4,005,000  
Outstanding and expected to vest at June 30, 2019     396,438     $ 17.89       7.51     $ 4,005,000  
Vested and Exercisable at June 30, 2019     151,272     $ 17.50       7.41     $ 632,000  
Unrecognized compensation cost   $ 1,033,000                          
Weighted average remaining recognition period (years)     2.51                          

 

For the three months ended June 30, 2019 and 2018, total expense for the stock options was $103,000 and $101,000, respectively. Total expense for the stock options was $201,000 for each of the six months ended June 30, 2019 and 2018,

 

Restricted Stock

 

Shares issued upon the granting of restricted stock may be either authorized but unissued shares or reacquired shares held by the Company. Any shares forfeited because vesting requirements are not met will again be available for issuance under the Equity Plan. The fair market value of shares awarded, based on the market prices at the date of grant, is recorded as unearned compensation and amortized over the applicable vesting period.

 

The following table presents the activity in restricted stock awards under the Equity Plan for the six months ended June 30, 2019:

 

    Unvested
Restricted 
Stock Awards
    Weighted
Average Grant
Date Price
 
Unvested restricted stock awards at January 1, 2019     98,073     $ 18.13  
Granted     -          
Forfeited     -          
Unvested restricted stock awards at June 30, 2019     98,073     $ 18.13  
Unrecognized compensation cost   $ 1,415,000          
Weighted average remaining recognition period (years)     2.51          

 

For the three months ended June 30, 2019 and 2018, total expense for the restricted stock awards was $142,000 and $140,000, respectively. For the six months ended June 30, 2019 and 2018, total expense for the restricted stock awards was $309,000 and $279,000, respectively
v3.19.2
Commitments and Contingencies
6 Months Ended
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
(14) Commitments and Contingencies

 

Litigation

 

In April 2018, the Bank conducted a foreclosure sale of certain real and personal property which secured four non-accruing loans originally made by the Bank. The aggregate outstanding principal balance of these loans was approximately $7.5 million, of which (a) approximately $4.9 million was due and owing to the Bank and (b) approximately $2.6 million was due and owing to another financial institution who purchased participation interests in certain of these loans (the “Participant”). The Bank received approximately $8.3 million in proceeds from this foreclosure sale. The U.S. Small Business Administration (“SBA”), which also made a secured loan to the same obligors, disputed the Bank’s retention of, and claimed priority to, a portion of the proceeds generated from this foreclosure sale, alleging a breach of contract and sought monetary damages in the approximate amount of $2.0 million. As previously disclosed, we had segregated into a separate deposit account the entire amount in dispute, including the amount that would be provided to the participating institution. In June 2019, we settled this matter with the SBA and the participating institution for the amounts we had segregated and the settlement did not have a significant impact on our financial condition or results of operations.
v3.19.2
Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases
(15) Leases

Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842). This standard required the Company to recognize on the balance sheet right-of-use assets and lease liabilities, which approximate the present value of the Company’s remaining lease payments. As of June 30, 2019, the Company recognized right-of-use assets and operating lease liabilities totaling $3.8 million and $3.9 million, respectively. The right-of-use assets are included in the total for premises and equipment net.

 

In July 2018, the FASB issued ASU No. 2018-11, which provided a practical expedient package for lessees. The Company has elected to use the expedient package and did not reassess whether any existing contracts contain leases; did not reassess the lease classification for existing leases; and did not reassess initial direct costs for any existing leases. As a result, all leases are considered operating leases. The Company’s leases do not provide an implicit rate so an incremental borrowing rate based on the information available at adoption date was used in determining the present value of future payments.

 

The lease liabilities recognized by the Company represent three leased branch locations. The Company’s leases have remaining initial contractual lease terms ranging from nine months to 16.5 years. The Company terminated the lease on the Hampton, New Hampshire branch effective May 2019; therefore, the Company chose to account for this lease using the short-term lease exemption and did not apply the new accounting guidance to this lease. Some of the Company’s leases include options to extend the lease for up to 20 years. The lease liabilities recognized include certain lease extensions as it is expected that the Company will use substantially all lease renewal options. Rent expense for the operating leases has been straight lined for the remaining lease term. For the six months ended June 30, 2019, rent expense for the three operating leases totaled $144,000.

 

The maturities of the annual cash flows for the Company’s lease liabilities and other information as of June 30, 2019 are summarized as follows:

 

(Dollars in thousands)      
Fiscal Year-End   Dollar Amount  
2019   $ 97  
2020     165  
2021     172  
2022     172  
2023     172  
Thereafter     6,461  
Total lease payments     7,239  
Less imputed interest     (3,338 )
Total lease liabilities   $ 3,901  

 

Weighted-average remaining lease term - operating leases   32.3 years
Weighted-average discount rate - operating leases   3.78%
v3.19.2
Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation

The accompanying unaudited financial statements of Provident Bancorp, Inc., a Massachusetts corporation (the “Company”), were prepared in accordance with the instructions for Form 10-Q and with Regulation S-X and do not include information or footnotes necessary for a complete presentation of the financial condition, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”). However, in the opinion of management, all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and six-month periods ended June 30, 2019 are not necessarily indicative of the results that may be expected for future periods, including the entire fiscal year. Certain amounts in 2018 have been reclassified to be consistent with the 2019 consolidated financial statement presentation, and had no effect on the net income reported in the consolidated statement of income. These financial statements should be read in conjunction with the annual financial statements and notes thereto included in the annual report on Form 10-K the Company filed with the Securities and Exchange Commission on March 14, 2019.

 

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, The Provident Bank (the “Bank”), and the Bank’s wholly owned subsidiaries, Provident Security Corporation and 5 Market Street Security Corporation. Provident Security Corporation and 5 Market Street Security Corporation were established to buy, sell, and hold investments for their own account. All significant inter-company balances and transactions have been eliminated in consolidation.
Recent Accounting Pronouncements
Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The amendments in this update require lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases. Accounting by lessors will remain largely unchanged. The guidance was effective for the Company on January 1, 2019. In July 2018, the FASB issued 2018-11, which allows a modified retrospective transition where the lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented or as a cumulative effect adjustment as of the date of adoption. The Company adopted ASU 2016-02 on January 1, 2019 as a cumulative effect adjustment as of that date. The Company’s assets and liabilities increased by $3.8 million at the adoption date (see Note 15).

 

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 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and can result in the earlier recognition of credit losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The amendments in this update will be effective for the Company on January 1, 2020. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is currently evaluating the impact of its pending adoption of this guidance on the Company’s financial statements.

 

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (subtopic 310-20): “Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments were effective for the Company on January 1, 2019. The Company adopted this guidance on January 1, 2019 and there was no impact on the Company’s financial statements.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): “Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU will be effective for the Company on January 1, 2020. As the guidance only revises disclosure requirements, the adoption of this guidance is not expected to have a material impact on the Company’s financial statements.
v3.19.2
Investment Securities (Tables)
6 Months Ended
Jun. 30, 2019
Investments, Debt and Equity Securities [Abstract]  
Schedule of amortized cost of investment securities classified as available-for-sale and their approximate fair values
Amortized     Gross     Gross        
    Cost     Unrealized     Unrealized     Fair  
(In thousands)   Basis     Gains     Losses     Value  
June 30, 2019                                
State and municipal securities   $ 11,438     $ 336     $ -     $ 11,774  
Asset-backed securities     5,935       119       -       6,054  
Government mortgage-backed securities     30,717       229       184       30,762  
Total available-for-sale securities   $ 48,090     $ 684     $ 184     $ 48,590  
                                 
December 31, 2018                                
State and municipal securities   $ 20,118     $ 272     $ 135     $ 20,255  
Asset-backed securities     6,512       -       141       6,371  
Government mortgage-backed securities     25,135       138       496       24,777  
Total available-for-sale securities   $ 51,765     $ 410     $ 772     $ 51,403  
Schedule of maturities of debt securities
    Available-for-Sale  
    Amortized     Fair  
(In thousands)   Cost     Value  
Due in one year or less   $ 95     $ 95  
Due after one year through five years     604       607  
Due after five years through ten years     2,026       2,082  
Due after ten years     8,713       8,990  
Government mortgage-backed securities     30,717       30,762  
Asset-backed securities     5,935       6,054  
    $ 48,090     $ 48,590  
Schedule of aggregate fair value and unrealized losses of securities that have been in a continuous unrealized-loss position
    Less than 12 Months     12 Months or Longer     Total  
    Fair     Unrealized     Fair     Unrealized     Fair     Unrealized  
(In thousands)   Value     Losses     Value     Losses     Value     Losses  
June 30, 2019                                    
Temporarily impaired securities:                                                
Government mortgage-backed securities   $ 4,581     $ 76     $ 6,470     $ 108     $ 11,051     $ 184  
                                                 
December 31, 2018                                                
Temporarily impaired securities:                                                
State and municipal securities   $ 6,137     $ 115     $ 597     $ 20     $ 6,734     $ 135  
Asset-backed securities     3,833       98       2,538       43       6,371       141  
Government mortgage-backed securities     2,864       32       14,152       464       17,016       496  
     Total temporarily impaired securities   $ 12,834     $ 245     $ 17,287     $ 527     $ 30,121     $ 772  
v3.19.2
Loans (Tables)
6 Months Ended
Jun. 30, 2019
Receivables [Abstract]  
Schedule of loans
    June 30,     December 31,  
  2019     2018  
(Dollars in thousands)   Amount     Percent     Amount     Percent  
Commercial real estate   $ 389,068       43.30 %   $ 364,867       43.00 %
Commercial     398,277       44.32 %     361,782       42.64 %
Residential real estate     52,445       5.84 %     57,361       6.76 %
Construction and land development     40,491       4.51 %     44,606       5.26 %
Consumer     18,215       2.03 %     19,815       2.34 %
      898,496       100.00 %     848,431       100.00 %
Allowance for loan losses     (11,790 )             (11,680 )        
Deferred loan fees, net     (1,580 )             (1,223 )        
Net loans   $ 885,126             $ 835,528          
Schedule of allowance for loan losses by portfolio segment
    For the three months ended June 30,  
(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction
and Land
Development
    Consumer     Unallocated     Total  
Allowance for loan losses:                                                        
                                                         
Balance at March 31, 2019   $ 4,247     $ 5,746     $ 240     $ 734     $ 812     $ 78     $ 11,857  
Charge-offs     -       (1,190 )     -       -       (266 )     -       (1,456 )
Recoveries     -       5       4       -       26       -       35  
Provision (credit)     332       728       (13 )     (85 )     356       36       1,354  
Balance at June 30, 2019   $ 4,579     $ 5,289     $ 231     $ 649     $ 928     $ 114     $ 11,790  
                                                         
Balance at March  31, 2018   $ 4,607     $ 3,668     $ 292     $ 939     $ 678     $ 52     $ 10,236  
Charge-offs     -       (31 )     -       -       (232 )     -       (263 )
Recoveries     -       -       -       -       19       -       19  
Provision (credit)     (501 )     875       (10 )     29       270       (25 )     638  
Balance at June 30, 2018   $ 4,106     $ 4,512     $ 282     $ 968     $ 735     $ 27     $ 10,630  
       
    For the six months ended June 30,  
(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction
and Land
Development
    Consumer     Unallocated     Total  
Allowance for loan losses:                                                        
                                                         
Balance at December 31, 2018   $ 4,152     $ 5,742     $ 251     $ 738     $ 710     $ 87     $ 11,680  
Charge-offs     -       (2,223 )     -       -       (547 )     -       (2,770 )
Recoveries     -       15       4       -       45       -       64  
Provision (credit)     427       1,755       (24 )     (89 )     720       27       2,816  
Balance at June 30, 2019   $ 4,579     $ 5,289     $ 231     $ 649     $ 928     $ 114     $ 11,790  
                                                         
Balance at December 31, 2017   $ 4,483     $ 3,280     $ 300     $ 965     $ 649     $ 80     $ 9,757  
Charge-offs     -       (51 )     -       -       (398 )     -       (449 )
Recoveries     -       1       -       -       27       -       28  
Provision (credit)     (377 )     1,282       (18 )     3       457       (53 )     1,294  
Balance at June 30, 2018   $ 4,106     $ 4,512     $ 282     $ 968     $ 735     $ 27     $ 10,630  
Schedule of loan balances by segment
(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction
and Land
Development
    Consumer     Unallocated     Total  
June 30, 2019                                                        
Allowance for loan losses:                                                        
Ending balance:                                                        
Individually evaluated for impairment   $ -     $ 163     $ -     $ -     $ -     $ -     $ 163  
Ending balance:                                                        
Collectively evaluated  for impairment     4,579       5,126       231       649       928       114       11,627  
Total allowance for loan losses ending balance   $ 4,579     $ 5,289     $ 231     $ 649     $ 928     $ 114     $ 11,790  
                                                         
Loans:                                                        
Ending balance:                                                        
Individually evaluated for impairment   $ 1,823     $ 4,155     $ 380     $ -     $ -             $ 6,358  
Ending balance:                                                        
Collectively evaluated for impairment     387,245       394,122       52,065       40,491       18,215               892,138  
Total loans ending balance   $ 389,068     $ 398,277     $ 52,445     $ 40,491     $ 18,215             $ 898,496  
                                           
(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction
and Land
Development
    Consumer     Unallocated     Total  
December 31, 2018                                                        
Allowance for loan losses:                                                        
Ending balance:                                                        
Individually evaluated for impairment   $ 62     $ 1,039     $ -     $ -     $ -     $ -     $ 1,101  
Ending balance:                                                        
Collectively evaluated for impairment     4,090       4,703       251       738       710       87       10,579  
Total allowance for loan losses ending balance   $ 4,152     $ 5,742     $ 251     $ 738     $ 710     $ 87     $ 11,680  
                                                         
Loans:                                                        
Ending balance:                                                        
Individually evaluated for impairment   $ 1,853     $ 5,291     $ 388     $ -     $ -             $ 7,532  
Ending balance:                                                        
Collectively evaluated  for impairment     363,014       356,491       56,973       44,606       19,815               840,899  
Total loans ending balance   $ 364,867     $ 361,782     $ 57,361     $ 44,606     $ 19,815             $ 848,431  
Schedule of non accrual loans and past-due loans by portfolio segment
                                        90 Days        
                90 Days     Total                 or More        
    30 - 59     60 - 89     or More     Past     Total     Total     Past Due     Non-accrual  
(In thousands)   Days     Days     Past Due     Due     Current     Loans     and Accruing     Loans  
June 30, 2019                                                                
Commercial real estate   $ 632     $ -     $ 519     $ 1,151     $ 387,917     $ 389,068     $ -     $ 519  
Commercial     59       38       346       443       397,834       398,277       -       3,760  
Residential real estate     144       257       481       882       51,563       52,445       -       1,052  
Construction and  land development     -       -       -       -       40,491       40,491       -       -  
Consumer     80       67       82       229       17,986       18,215       -       87  
Total   $ 915     $ 362     $ 1,428     $ 2,705     $ 895,791     $ 898,496     $ -     $ 5,418  
                                                                 
December 31, 2018                                                                
Commercial real estate   $ 742     $ -     $ 519     $ 1,261     $ 363,606     $ 364,867     $ -     $ 519  
Commercial     40       -       3,167       3,207       358,575       361,782       -       4,830  
Residential real estate     321       223       30       574       56,787       57,361               850  
Construction and  land development     -       -       -       -       44,606       44,606       -       -  
Consumer     62       46       59       167       19,648       19,815       -       62  
Total   $ 1,165     $ 269     $ 3,775     $ 5,209     $ 843,222     $ 848,431     $ -     $ 6,261  
Schedule of impaired loans by portfolio segment
          Unpaid           Average     Interest  
    Recorded     Principal     Related     Recorded     Income  
(In thousands)   Investment     Balance     Allowance     Investment     Recognized  
June 30, 2019                              
With no related allowance recorded:                                        
Commercial real estate   $ 1,823     $ 1,823     $ -     $ 1,838     $ 30  
Commercial     896       965       -       1,120       13  
Residential real estate     380       380       -       384       8  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
 Total impaired with no related allowance     3,099       3,168       -       3,342       51  
                                         
With an allowance recorded:                                        
Commercial real estate     -       -       -       -       -  
Commercial     3,259       3,333       163       4,994       -  
Residential real estate     -       -       -       -       -  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
Total impaired with an allowance recorded     3,259       3,333       163       4,994       -  
                                         
Total                                        
Commercial real estate     1,823       1,823       -       1,838       30  
Commercial     4,155       4,298       163       6,114       13  
Residential real estate     380       380       -       384       8  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
Total impaired loans   $ 6,358     $ 6,501     $ 163     $ 8,336     $ 51  
                                         
December 31, 2018                                        
With no related allowance recorded:                                        
Commercial real estate   $ 1,334     $ 1,334     $ -     $ 5,614     $ 69  
Commercial     4,050       4,110       -       4,894       38  
Residential real estate     388       388       -       396       20  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
 Total impaired with no related allowance     5,772       5,832       -       10,904       127  
                                         
With an allowance recorded:                                        
Commercial real estate     519       519       62       519       -  
Commercial     1,241       1,267       1,039       1,695       52  
Residential real estate     -       -       -       -       -  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
Total impaired with an allowance recorded     1,760       1,786       1,101       2,214       52  
                                         
Total                                        
Commercial real estate     1,853       1,853       62       6,133       69  
Commercial     5,291       5,377       1,039       6,589       90  
Residential real estate     388       388       -       396       20  
Construction and land development     -       -       -       -       -  
Consumer     -       -       -       -       -  
Total impaired loans   $ 7,532     $ 7,618     $ 1,101     $ 13,118     $ 179  
Schedule of troubled debt restructuring
(Dollars in thousands)   Number
of
Contracts
    Pre-
Modification
Outstanding
Recorded
Investment
    Post-
Modification
Outstanding
Recorded
Investment
 
June 30, 2019                        
Troubled debt restructurings:                        
Commercial     1     $ 1,963     $ 1,963  
      1     $ 1,963     $ 1,963  
Schedule of loans by risk rating and portfolio segment
(In thousands)   Commercial
Real Estate
    Commercial     Residential
Real Estate
    Construction 
and Land 
Development
    Consumer     Total  
June 30, 2019                                                
Grade:                                                
 Pass   $ 366,217     $ 380,188     $ -     $ 40,198     $ -     $ 786,603  
 Special mention     4,871       13,809       -       -       -       18,680  
 Substandard     17,980       4,280       515       293       -       23,068  
 Not formally rated     -       -       51,930       -       18,215       70,145  
Total   $ 389,068     $ 398,277     $ 52,445     $ 40,491     $ 18,215     $ 898,496  
                                                 
December 31, 2018                                                
Grade:                                                
 Pass   $ 356,415     $ 339,079     $ -     $ 44,606     $ -     $ 740,100  
 Special mention     6,531       11,339       -       -       -       17,870  
 Substandard     1,921       10,447       571       -       -       12,939  
 Doubtful     -       917       -       -       -       917  
 Not formally rated     -       -       56,790       -       19,815       76,605  
Total   $ 364,867     $ 361,782     $ 57,361     $ 44,606     $ 19,815     $ 848,431  
v3.19.2
Deposits (Tables)
6 Months Ended
Jun. 30, 2019
Deposits [Abstract]  
Schedule of deposit balances by type
    June 30,     December 31,  
(In thousands)   2019     2018  
NOW and demand   $ 326,794     $ 332,064  
Regular Savings     119,433       109,322  
Money Market deposits     219,683       229,314  
Total non-certificate accounts     665,910       670,700  
                 
Certificate accounts of $250,000 or more     18,075       14,164  
Certificate accounts less than $250,000     119,417       83,232  
Total certificate accounts     137,492       97,396  
Total deposits   $ 803,402     $ 768,096  
v3.19.2
Federal Home Loan Bank Advances (Tables)
6 Months Ended
Jun. 30, 2019
Advances from Federal Home Loan Banks [Abstract]  
Schedule of maturities of advances from the FHLB
(In thousands)      
Fiscal Year-End   Dollar Amount  
2019   $ 56,988  
2020     11,475  
2021     5,000  
2023     8,500  
Total   $ 81,963  
v3.19.2
Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Schedule of activity for Level 3 financial instruments measured at fair value on a recurring basis
    Fair Value Measurements at Reporting Date Using  
          Quoted Prices in     Significant     Significant  
          Active Markets for     Other Observable     Unobservable  
          Identical Assets     Inputs     Inputs  
(In thousands)   Total     Level 1     Level 2     Level 3  
June 30, 2019                                
State and municipal securities   $ 11,774     $ -     $ 11,774     $ -  
Asset-backed securities     6,054       -       6,054       -  
Mortgage-backed securities     30,762       -       30,762       -  
Totals   $ 48,590     $ -     $ 48,590     $ -  
                                 
December 31, 2018                                
State and municipal securities   $ 20,255     $ -     $ 20,255     $ -  
Asset-backed securities     6,371       -       6,371       -  
Mortgage-backed securities     24,777       -       24,777       -  
Totals   $ 51,403     $ -     $ 51,403     $ -  
Schedule of financial instruments measured at fair value on a nonrecurring basis
    Fair Value Measurements at Reporting Date Using:  
          Quoted Prices in     Significant     Significant  
          Active Markets for     Other Observable     Unobservable  
          Identical Assets     Inputs     Inputs  
(In thousands)   Total     Level 1     Level 2     Level 3  
June 30, 2019                                
Impaired loans   $ 3,416     $ -     $ -     $ 3,416  
Other real estate owned     1,740       -       1,740       -  
                                 
December 31, 2018                                
Impaired loans   $ 659     $ -     $ -     $ 659  
Other real estate owned     1,676       -       1,676       -  
Schedule of valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis
(In thousands)   Fair Value     Valuation Technique   Unobservable Input
June 30, 2019                
Impaired loans   $ 3,416      Business valuation    Comparable company evaluations
                 
December 31, 2018                
Impaired loans   $ 659      Real estate appraisals and business valuation    Discount for dated appraisals and comparable company evaluations
v3.19.2
Fair Value of Financial Instruments (Tables)
6 Months Ended
Jun. 30, 2019
Fair Value Of Financial Instrument [Abstract]  
Schedule of carrying amounts and estimated fair values of financial instruments, held or issued for purposes other than trading
    Carrying     Fair Value  
(In thousands)   Amount     Level 1     Level 2     Level 3     Total  
June 30, 2019                              
Financial assets:                                        
Cash and cash equivalents   $ 28,281     $ 28,281     $ -     $ -     $ 28,281  
Available-for-sale securities     48,590       -       48,590       -       48,590  
Federal Home Loan Bank of Boston stock     3,836       3,836       -       -       3,836  
Loans, net     885,126       -       -       880,744       880,744  
Accrued interest receivable     3,226       -       3,226       -       3,226  
Financial liabilities:                                        
Deposits     803,402       -       -       804,117       804,117  
Borrowings     81,963       -       82,259       -       82,259  
                                         
December 31, 2018                                        
Financial assets:                                        
Cash and cash equivalents   $ 28,613     $ 28,613     $ -     $ -     $ 28,613  
Available-for-sale securities     51,403       -       51,403       -       51,403  
Federal Home Loan Bank of Boston stock     2,650       2,650       -       -       2,650  
Loans, net     835,528       -       -       827,090       827,090  
Accrued interest receivable     2,638       -       2,638       -       2,638  
Financial liabilities:                                        
Deposits     768,096       -       -       768,010       768,010  
Borrowings     68,022       -       67,846       -       67,846  
v3.19.2
Regulatory Capital (Tables)
6 Months Ended
Jun. 30, 2019
Banking and Thrift [Abstract]  
Schedule of actual capital amounts and ratios
                            Capitalized Under  
                For Capital     Prompt Corrective  
    Actual     Adequacy Purposes     Action Provisions  
(dollars in thousands)   Amount     Ratio     Amount     Ratio     Amount     Ratio  
June 30, 2019                                    
Total Capital (to Risk Weighted Assets)   $ 135,170       14.20 %   $ 76,152 >     8.0 %   $ 95,190 >     10.0 %
Tier 1 Capital (to Risk Weighted Assets)     123,380       12.96     $ 57,114 >     6.0       76,152 >     8.0  
Common Equity Tier 1 Capital (to Risk Weighted Assets)     123,380       12.96     $ 42,836 >     4.5       61,874 >     6.5  
Tier 1 Capital (to Average Assets)     123,380       12.30     $ 40,128 >     4.0       50,161 >     5.0  
December 31, 2018                                                
Total Capital (to Risk Weighted Assets)   $ 128,939       14.55 %   $ 70,891 >     8.0 %   $ 88,614 >     10.0 %
Tier 1 Capital (to Risk Weighted Assets)     117,855       13.30       53,168 >     6.0       70,891 >     8.0  
Common Equity Tier 1 Capital (to Risk Weighted Assets)     117,855       13.30       39,876 >     4.5       57,599 >     6.5  
Tier 1 Capital (to Average Assets)     117,855       12.69       37,157 >     4.0       46,446 >     5.0
v3.19.2
Employee Stock Ownership Plan (Tables)
6 Months Ended
Jun. 30, 2019
Employee Stock Ownership Plan [Abstract]  
Schedule of Employee Stock Ownership Plan
    June 30, 2019     December 31, 2018  
Allocated     95,240       71,430  
Committed to be allocated     11,905       23,810  
Unallocated     250,007       261,912  
Total     357,152       357,152  
v3.19.2
Earnings Per Common Share (Tables)
6 Months Ended
Jun. 30, 2019
Earnings Per Share [Abstract]  
Schedule of earning per share
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(Dollars in thousands, except per share amounts)   2019     2018     2019     2018  
Net Income attributable to common shareholders   $ 2,531     $ 2,390     $ 4,749     $ 4,412  
                                 
Average number of common shares issued     9,658,284       9,657,319       9,660,222       9,657,319  
Less:                                
average unallocated ESOP shares     (261,674 )     (282,918 )     (266,573 )     (283,833 )
average unvested restricted stock     (79,339 )     (111,833 )     (83,282 )     (118,419 )
average treasury stock acquired     (36,282 )     (28,823 )     (36,282 )     (28,823 )
Average number of common shares outstanding to calculate basic earnings per common share     9,280,989       9,233,745       9,274,085       9,226,244  
                                 
Effect of dilutive unvested restricted stock and stock option awards     67,872       68,680       55,473       68,073  
Average number of common shares outstanding to calculate diluted earnings per common share     9,348,861       9,302,425       9,329,558       9,294,317  
                                 
Earnings per common share:                                
Basic   $ 0.27     $ 0.26     $ 0.51     $ 0.48  
Diluted   $ 0.27     $ 0.26     $ 0.51     $ 0.47  
v3.19.2
Share-Based Compensation (Tables)
6 Months Ended
Jun. 30, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of stock option activity
    Stock Option
Awards
    Weighted
Average 
Exercise
Price
    Weighted
Average
Remaining
Contractual 
Term (years)
    Aggregate
Intrinsic Value
 
Outstanding at December 31, 2018     396,438     $ 17.89                  
Granted     -                          
Forfeited     -                          
Exercised     -                          
Outstanding at June 30, 2019     396,438     $ 17.89       7.51     $ 4,005,000  
Outstanding and expected to vest at June 30, 2019     396,438     $ 17.89       7.51     $ 4,005,000  
Vested and Exercisable at June 30, 2019     151,272     $ 17.50       7.41     $ 632,000  
Unrecognized compensation cost   $ 1,033,000                          
Weighted average remaining recognition period (years)     2.51                          
Schedule of activity in restricted stock awards under the Equity Plan
    Unvested
Restricted 
Stock Awards
    Weighted
Average Grant
Date Price
 
Unvested restricted stock awards at January 1, 2019     98,073     $ 18.13  
Granted     -          
Forfeited     -          
Unvested restricted stock awards at June 30, 2019     98,073     $ 18.13  
Unrecognized compensation cost   $ 1,415,000          
Weighted average remaining recognition period (years)     2.51          
v3.19.2
Leases (Tables)
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Schedule of lease liabilities
(Dollars in thousands)      
Fiscal Year-End   Dollar Amount  
2019   $ 97  
2020     165  
2021     172  
2022     172  
2023     172  
Thereafter     6,461  
Total lease payments     7,239  
Less imputed interest     (3,338 )
Total lease liabilities   $ 3,901  

 

Weighted-average remaining lease term - operating leases   32.3 years
Weighted-average discount rate - operating leases   3.78%
v3.19.2
Corporate Structure (Details)
$ in Thousands
Jun. 30, 2019
USD ($)
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]  
Deferred Offering Costs $ 380,000
Mutual Holding Company Mhc  
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]  
Percentage of ownership of mutual holding company 52.30%
v3.19.2
Recent Accounting Pronouncements (Details)
$ in Millions
Feb. 29, 2016
USD ($)
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
Increased assets and liabilities $ 3.8
v3.19.2
Investment Securities (Details) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost Basis $ 48,090 $ 51,765
Gross Unrealized Gains 684 410
Gross Unrealized Losses 184 772
Fair Value 48,590 51,403
State and municipal securities    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost Basis 11,438 20,118
Gross Unrealized Gains 336 272
Gross Unrealized Losses 0 135
Fair Value 11,774 20,255
Asset-backed securities    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost Basis 5,935 6,512
Gross Unrealized Gains 119 0
Gross Unrealized Losses 0 141
Fair Value 6,054 6,371
Government mortgage-backed securities    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost Basis 30,717 25,135
Gross Unrealized Gains 229 138
Gross Unrealized Losses 184 496
Fair Value $ 30,762 $ 24,777
v3.19.2
Investment Securities (Details 1) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Available-for-Sale Amortized Cost    
Due in one year or less $ 95  
Due after one year through five years 604  
Due after five years through ten years 2,026  
Due after ten years 8,713  
Amortized Cost 48,090 $ 51,765
Available-for-Sale Fair Value    
Due in one year or less 95  
Due after one year through five years 607  
Due after five years through ten years 2,082  
Due after ten years 8,990  
Fair Value 48,590 51,403
Government mortgage-backed securities    
Available-for-Sale Amortized Cost    
Amortized Cost 30,717 25,135
Available-for-Sale Fair Value    
Fair Value 30,762 24,777
Asset-backed securities    
Available-for-Sale Amortized Cost    
Amortized Cost 5,935 6,512
Available-for-Sale Fair Value    
Fair Value $ 6,054 $ 6,371
v3.19.2
Investment Securities (Details 2) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]    
Fair Value, Less than 12 Months   $ 12,834
Unrealized Losses, Less than 12 Months   245
Fair Value, 12 Months or Longer   17,287
Unrealized Losses, 12 Months or Longer   527
Fair Value, Total   30,121
Unrealized Losses, Total   772
State and municipal securities    
Debt Securities, Available-for-sale [Line Items]    
Fair Value, Less than 12 Months   6,137
Unrealized Losses, Less than 12 Months   115
Fair Value, 12 Months or Longer   597
Unrealized Losses, 12 Months or Longer   20
Fair Value, Total   6,734
Unrealized Losses, Total   135
Asset-backed securities    
Debt Securities, Available-for-sale [Line Items]    
Fair Value, Less than 12 Months   3,833
Unrealized Losses, Less than 12 Months   98
Fair Value, 12 Months or Longer   2,538
Unrealized Losses, 12 Months or Longer   43
Fair Value, Total   6,371
Unrealized Losses, Total   141
Government mortgage-backed securities    
Debt Securities, Available-for-sale [Line Items]    
Fair Value, Less than 12 Months $ 4,581 2,864
Unrealized Losses, Less than 12 Months 76 32
Fair Value, 12 Months or Longer 6,470 14,152
Unrealized Losses, 12 Months or Longer 108 464
Fair Value, Total 11,051 17,016
Unrealized Losses, Total $ 184 $ 496
v3.19.2
Loans (Details) - USD ($)
$ in Thousands
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount $ 898,496   $ 848,431      
Gross loans, Percent 100.00%   100.00%      
Allowance for loan losses $ (11,790) $ (11,857) $ (11,680) $ (10,630) $ (10,236) $ (9,757)
Deferred loan fees, net (1,580)   (1,223)      
Net loans 885,126   835,528      
Commercial real estate            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount $ 389,068   $ 364,867      
Gross loans, Percent 43.30%   43.00%      
Allowance for loan losses $ (4,579) (4,247) $ (4,152) (4,106) (4,607) (4,483)
Commercial            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount $ 398,277   $ 361,782      
Gross loans, Percent 44.32%   42.64%      
Allowance for loan losses $ (5,289) (5,746) $ (5,742) (4,512) (3,668) (3,280)
Residential real estate            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount $ 52,445   $ 57,361      
Gross loans, Percent 5.84%   6.76%      
Allowance for loan losses $ (231) (240) $ (251) (282) (292) (300)
Construction and land development            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount $ 40,491   $ 44,606      
Gross loans, Percent 4.51%   5.26%      
Allowance for loan losses $ (649) (734) $ (738) (968) (939) (965)
Consumer            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount $ 18,215   $ 19,815      
Gross loans, Percent 2.03%   2.34%      
Allowance for loan losses $ (928) $ (812) $ (710) $ (735) $ (678) $ (649)
v3.19.2
Loans (Details 1) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Dec. 31, 2018
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance $ 11,857 $ 10,236 $ 11,680 $ 9,757    
Charge-offs (1,456) (263) (2,770) (449)    
Recoveries 35 19 64 28    
Provision (credit) 1,354 638 2,816 1,294    
Ending balance 11,790 10,630 11,790 10,630    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         $ 163 $ 1,101
Ending balance: Collectively evaluated for impairment         11,627 10,579
Total allowance for loan losses ending balance 11,790 10,236 11,680 10,630 11,790 11,680
Loans:            
Ending balance: Individually evaluated for impairment         6,358 7,532
Ending balance: Collectively evaluated for impairment         892,138 840,899
Total loans ending balance         898,496 848,431
Commercial Real Estate            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 4,247 4,607 4,152 4,483    
Charge-offs 0 0 0 0    
Recoveries 0 0 0 0    
Provision (credit) 332 (501) 427 (377)    
Ending balance 4,579 4,106 4,579 4,106    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         0 62
Ending balance: Collectively evaluated for impairment         4,579 4,090
Total allowance for loan losses ending balance 4,579 4,607 4,152 4,106 4,579 4,152
Loans:            
Ending balance: Individually evaluated for impairment         1,823 1,853
Ending balance: Collectively evaluated for impairment         387,245 363,014
Total loans ending balance         389,068 364,867
Commercial            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 5,746 3,668 5,742 3,280    
Charge-offs (1,190) (31) (2,223) (51)    
Recoveries 5 0 15 1    
Provision (credit) 728 875 1,755 1,282    
Ending balance 5,289 4,512 5,289 4,512    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         163 1,039
Ending balance: Collectively evaluated for impairment         5,126 4,703
Total allowance for loan losses ending balance 5,289 3,668 5,742 4,512 5,289 5,742
Loans:            
Ending balance: Individually evaluated for impairment         4,155 5,291
Ending balance: Collectively evaluated for impairment         394,122 356,491
Total loans ending balance         398,277 361,782
Residential Real Estate            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 240 292 251 300    
Charge-offs 0 0 0 0    
Recoveries 4 0 4 0    
Provision (credit) (13) (10) (24) (18)    
Ending balance 231 282 231 282    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         0 0
Ending balance: Collectively evaluated for impairment         231 251
Total allowance for loan losses ending balance 231 292 251 282 231 251
Loans:            
Ending balance: Individually evaluated for impairment         380 388
Ending balance: Collectively evaluated for impairment         52,065 56,973
Total loans ending balance         52,445 57,361
Construction and Land Development            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 734 939 738 965    
Charge-offs 0 0 0 0    
Recoveries 0 0 0 0    
Provision (credit) (85) 29 (89) 3    
Ending balance 649 968 649 968    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         0 0
Ending balance: Collectively evaluated for impairment         649 738
Total allowance for loan losses ending balance 649 939 738 968 649 738
Loans:            
Ending balance: Individually evaluated for impairment         0 0
Ending balance: Collectively evaluated for impairment         40,491 44,606
Total loans ending balance         40,491 44,606
Consumer            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 812 678 710 649    
Charge-offs (266) (232) (547) (398)    
Recoveries 26 19 45 27    
Provision (credit) 356 270 720 457    
Ending balance 928 735 928 735    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         0 0
Ending balance: Collectively evaluated for impairment         928 710
Total allowance for loan losses ending balance 928 678 710 735 928 710
Loans:            
Ending balance: Individually evaluated for impairment         0 0
Ending balance: Collectively evaluated for impairment         18,215 19,815
Total loans ending balance         18,215 19,815
Unallocated            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 78 52 87 80    
Charge-offs 0 0 0 0    
Recoveries 0 0 0 0    
Provision (credit) 36 (25) 27 (53)    
Ending balance 114 27 114 27    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         0 0
Ending balance: Collectively evaluated for impairment         114 87
Total allowance for loan losses ending balance $ 114 $ 52 $ 87 $ 27 $ 114 $ 87
v3.19.2
Loans (Details 2) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due $ 2,705 $ 5,209
Total Current 895,791 843,222
Total Loans 898,496 848,431
90 Days or More Past Due and Accruing 0 0
Nonaccrual Loans 5,418 6,261
30 - 59 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 915 1,165
60 - 89 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 362 269
90 Days or More Past Due    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 1,428 3,775
Commercial real estate    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 1,151 1,261
Total Current 387,917 363,606
Total Loans 389,068 364,867
90 Days or More Past Due and Accruing 0 0
Nonaccrual Loans 519 519
Commercial real estate | 30 - 59 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 632 742
Commercial real estate | 60 - 89 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 0 0
Commercial real estate | 90 Days or More Past Due    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 519 519
Commercial    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 443 3,207
Total Current 397,834 358,575
Total Loans 398,277 361,782
90 Days or More Past Due and Accruing 0 0
Nonaccrual Loans 3,760 4,830
Commercial | 30 - 59 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 59 40
Commercial | 60 - 89 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 38 0
Commercial | 90 Days or More Past Due    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 346 3,167
Residential real estate    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 882 574
Total Current 51,563 56,787
Total Loans 52,445 57,361
90 Days or More Past Due and Accruing 0 0
Nonaccrual Loans 1,052 850
Residential real estate | 30 - 59 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 144 321
Residential real estate | 60 - 89 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 257 223
Residential real estate | 90 Days or More Past Due    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 481 30
Construction and land development    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 0 0
Total Current 40,491 44,606
Total Loans 40,491 44,606
90 Days or More Past Due and Accruing 0 0
Nonaccrual Loans 0 0
Construction and land development | 30 - 59 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 0 0
Construction and land development | 60 - 89 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 0 0
Construction and land development | 90 Days or More Past Due    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 0 0
Consumer    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 229 167
Total Current 17,986 19,648
Total Loans 18,215 19,815
90 Days or More Past Due and Accruing 0 0
Nonaccrual Loans 87 62
Consumer | 30 - 59 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 80 62
Consumer | 60 - 89 Days    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 67 46
Consumer | 90 Days or More Past Due    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due $ 82 $ 59
v3.19.2
Loans (Details 3) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2019
Dec. 31, 2018
With no related allowance recorded:    
Recorded Investment $ 3,099 $ 5,772
Unpaid Principal Balance 3,168 5,832
Average Recorded Investment 3,342 10,904
Interest Income Recognized 51 127
With an allowance recorded:    
Recorded Investment 3,259 1,760
Unpaid Principal Balance 3,333 1,786
Related Allowance 163 1,101
Average Recorded Investment 4,994 2,214
Interest Income Recognized 0 52
Total    
Recorded Investment 6,358 7,532
Unpaid Principal Balance 6,501 7,618
Related Allowance 163 1,101
Average Recorded Investment 8,336 13,118
Interest Income Recognized 51 179
Commercial real estate    
With no related allowance recorded:    
Recorded Investment 1,823 1,334
Unpaid Principal Balance 1,823 1,334
Average Recorded Investment 1,838 5,614
Interest Income Recognized 30 69
With an allowance recorded:    
Recorded Investment 0 519
Unpaid Principal Balance 0 519
Related Allowance 0 62
Average Recorded Investment 0 519
Interest Income Recognized 0 0
Total    
Recorded Investment 1,823 1,853
Unpaid Principal Balance 1,823 1,853
Related Allowance 0 62
Average Recorded Investment 1,838 6,133
Interest Income Recognized 30 69
Commercial    
With no related allowance recorded:    
Recorded Investment 896 4,050
Unpaid Principal Balance 965 4,110
Average Recorded Investment 1,120 4,894
Interest Income Recognized 13 38
With an allowance recorded:    
Recorded Investment 3,259 1,241
Unpaid Principal Balance 3,333 1,267
Related Allowance 163 1,039
Average Recorded Investment 4,994 1,695
Interest Income Recognized 0 52
Total    
Recorded Investment 4,155 5,291
Unpaid Principal Balance 4,298 5,377
Related Allowance 163 1,039
Average Recorded Investment 6,114 6,589
Interest Income Recognized 13 90
Residential real estate    
With no related allowance recorded:    
Recorded Investment 380 388
Unpaid Principal Balance 380 388
Average Recorded Investment 384 396
Interest Income Recognized 8 20
With an allowance recorded:    
Recorded Investment 0 0
Unpaid Principal Balance 0 0
Related Allowance 0 0
Average Recorded Investment 0 0
Interest Income Recognized 0 0
Total    
Recorded Investment 380 388
Unpaid Principal Balance 380 388
Related Allowance 0 0
Average Recorded Investment 384 396
Interest Income Recognized 8 20
Construction and land development    
With no related allowance recorded:    
Recorded Investment 0 0
Unpaid Principal Balance 0 0
Average Recorded Investment 0 0
Interest Income Recognized 0 0
With an allowance recorded:    
Recorded Investment 0 0
Unpaid Principal Balance 0 0
Related Allowance 0 0
Average Recorded Investment 0 0
Interest Income Recognized 0 0
Total    
Recorded Investment 0 0
Unpaid Principal Balance 0 0
Related Allowance 0 0
Average Recorded Investment 0 0
Interest Income Recognized 0 0
Consumer    
With no related allowance recorded:    
Recorded Investment 0 0
Unpaid Principal Balance 0 0
Average Recorded Investment 0 0
Interest Income Recognized 0 0
With an allowance recorded:    
Recorded Investment 0 0
Unpaid Principal Balance 0 0
Related Allowance 0 0
Average Recorded Investment 0 0
Interest Income Recognized 0 0
Total    
Recorded Investment 0 0
Unpaid Principal Balance 0 0
Related Allowance 0 0
Average Recorded Investment 0 0
Interest Income Recognized $ 0 $ 0
v3.19.2
Loans (Details 4)
$ in Thousands
6 Months Ended
Jun. 30, 2019
USD ($)
Contract
Troubled debt restructuring:  
Number of Contracts | Contract 1
Pre- Modification Outstanding Recorded Investment $ 1,963
Post-Modification Outstanding Recorded Investment $ 1,963
Commercial  
Troubled debt restructuring:  
Number of Contracts | Contract 1
Pre- Modification Outstanding Recorded Investment $ 1,963
Post-Modification Outstanding Recorded Investment $ 1,963
v3.19.2
Loans (Details 5) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Financing Receivable, Recorded Investment [Line Items]    
Total Loans $ 898,496 $ 848,431
Pass    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 786,603 740,100
Special mention    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 18,680 17,870
Substandard    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 23,068 12,939
Doubtful    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans   917
Not formally rated    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 70,145 76,605
Commercial Real Estate    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 389,068 364,867
Commercial Real Estate | Pass    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 366,217 356,415
Commercial Real Estate | Special mention    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 4,871 6,531
Commercial Real Estate | Substandard    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 17,980 1,921
Commercial Real Estate | Doubtful    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans   0
Commercial Real Estate | Not formally rated    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 0 0
Commercial    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 398,277 361,782
Commercial | Pass    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 380,188 339,079
Commercial | Special mention    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 13,809 11,339
Commercial | Substandard    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 4,280 10,447
Commercial | Doubtful    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans   917
Commercial | Not formally rated    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 0 0
Residential Real Estate    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 52,445 57,361
Residential Real Estate | Pass    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 0 0
Residential Real Estate | Special mention    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 0 0
Residential Real Estate | Substandard    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 515 571
Residential Real Estate | Doubtful    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans   0
Residential Real Estate | Not formally rated    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 51,930 56,790
Construction and Land Development    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 40,491 44,606
Construction and Land Development | Pass    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 40,198 44,606
Construction and Land Development | Special mention    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 0 0
Construction and Land Development | Substandard    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 293 0
Construction and Land Development | Doubtful    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans   0
Construction and Land Development | Not formally rated    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 0 0
Consumer    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 18,215 19,815
Consumer | Pass    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 0 0
Consumer | Special mention    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 0 0
Consumer | Substandard    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 0 0
Consumer | Doubtful    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans   0
Consumer | Not formally rated    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans $ 18,215 $ 19,815
v3.19.2
Loans (Detail Textuals)
6 Months Ended
Jun. 30, 2019
USD ($)
Receivables [Abstract]  
Troubled debt restructuring, total $ 1,900,000
Re-amortization term of commercial loan 12 months
Impairment analysis performed and specific reserve $ 136,000
v3.19.2
Deposits (Details) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Deposits [Abstract]    
NOW and demand $ 326,794 $ 332,064
Regular savings 119,433 109,322
Money market deposits 219,683 229,314
Total non-certificate accounts 665,910 670,700
Certificate accounts of $250,000 or more 18,075 14,164
Certificate accounts less than $250,000 119,417 83,232
Total certificate accounts 137,492 97,396
Total deposits $ 803,402 $ 768,096
v3.19.2
Federal Home Loan Bank Advances (Details)
$ in Thousands
Jun. 30, 2019
USD ($)
Advances from Federal Home Loan Banks [Abstract]  
2019 $ 56,988
2020 11,475
2021 5,000
2023 8,500
Total $ 81,963
v3.19.2
Fair Value Measurements (Details) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) $ 48,590 $ 51,403
State and municipal securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 11,774 20,255
Asset-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 6,054 6,371
Mortgage-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 30,762 24,777
Quoted Prices in Active Markets for Identical Assets Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 0 0
Significant Other Observable Inputs Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 48,590 51,403
Significant Unobservable Inputs Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 0 0
Recurring basis    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 48,590 51,403
Recurring basis | State and municipal securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 11,774 20,255
Recurring basis | Asset-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 6,054 6,371
Recurring basis | Mortgage-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 30,762 24,777
Recurring basis | Quoted Prices in Active Markets for Identical Assets Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 0 0
Recurring basis | Quoted Prices in Active Markets for Identical Assets Level 1 | State and municipal securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 0 0
Recurring basis | Quoted Prices in Active Markets for Identical Assets Level 1 | Asset-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 0 0
Recurring basis | Quoted Prices in Active Markets for Identical Assets Level 1 | Mortgage-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 0 0
Recurring basis | Significant Other Observable Inputs Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 48,590 51,403
Recurring basis | Significant Other Observable Inputs Level 2 | State and municipal securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 11,774 20,255
Recurring basis | Significant Other Observable Inputs Level 2 | Asset-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 6,054 6,371
Recurring basis | Significant Other Observable Inputs Level 2 | Mortgage-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 30,762 24,777
Recurring basis | Significant Unobservable Inputs Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 0 0
Recurring basis | Significant Unobservable Inputs Level 3 | State and municipal securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 0 0
Recurring basis | Significant Unobservable Inputs Level 3 | Asset-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) 0 0
Recurring basis | Significant Unobservable Inputs Level 3 | Mortgage-backed securities    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Investments in available-for-sale securities (at fair value) $ 0 $ 0
v3.19.2
Fair Value Measurements (Details 1) - Nonrecurring basis - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans $ 3,416 $ 659
Other real estate owned 1,740 1,676
Quoted Prices in Active Markets for Identical Assets Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans 0 0
Other real estate owned 0 0
Significant Other Observable Inputs Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans 0 0
Other real estate owned 1,740 1,676
Significant Unobservable Inputs Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans 3,416 659
Other real estate owned $ 0 $ 0
v3.19.2
Fair Value Measurements (Details 2) - Nonrecurring basis - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Impaired loans Fair Value $ 3,416 $ 659
Fair Value Level 3    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Impaired loans Fair Value $ 3,416 $ 659
v3.19.2
Fair Value of Financial Instruments (Details) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Jun. 30, 2018
Dec. 31, 2017
Financial assets:        
Cash and cash equivalents $ 28,281 $ 28,613 $ 47,805 $ 47,689
Available-for-sale securities 48,590 51,403    
Federal Home Loan Bank of Boston stock 3,836 2,650    
Accrued interest receivable 3,226 2,638    
Financial liabilities:        
Borrowings 81,963 68,022    
Carrying Amount        
Financial assets:        
Cash and cash equivalents 28,281 28,613    
Available-for-sale securities 48,590 51,403    
Federal Home Loan Bank of Boston stock 3,836 2,650    
Loans, net 885,126 835,528    
Accrued interest receivable 3,226 2,638    
Financial liabilities:        
Deposits 803,402 768,096    
Borrowings 81,963 68,022    
Fair Value        
Financial assets:        
Cash and cash equivalents 28,281 28,613    
Available-for-sale securities 48,590 51,403    
Federal Home Loan Bank of Boston stock 3,836 2,650    
Loans, net 880,744 827,090    
Accrued interest receivable 3,226 2,638    
Financial liabilities:        
Deposits 804,117 768,010    
Borrowings 82,259 67,846    
Fair Value Level 1        
Financial assets:        
Cash and cash equivalents 28,281 28,613    
Available-for-sale securities 0 0    
Federal Home Loan Bank of Boston stock 3,836 2,650    
Loans, net 0 0    
Accrued interest receivable 0 0    
Financial liabilities:        
Deposits 0 0    
Borrowings 0 0    
Fair Value Level 2        
Financial assets:        
Cash and cash equivalents 0 0    
Available-for-sale securities 48,590 51,403    
Federal Home Loan Bank of Boston stock 0 0    
Loans, net 0 0    
Accrued interest receivable 3,226 2,638    
Financial liabilities:        
Deposits 0 0    
Borrowings 82,259 67,846    
Fair Value Level 3        
Financial assets:        
Cash and cash equivalents 0 0    
Available-for-sale securities 0 0    
Federal Home Loan Bank of Boston stock 0 0    
Loans, net 880,744 827,090    
Accrued interest receivable 0 0    
Financial liabilities:        
Deposits 804,117 768,010    
Borrowings $ 0 $ 0    
v3.19.2
Regulatory Capital (Details) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Banking and Thrift [Abstract]    
Total Capital (to Risk Weighted Assets), Actual Capital, Amount $ 135,170 $ 128,939
Total Capital (to Risk Weighted Assets), Actual Capital, Ratio 14.20% 14.55%
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Amount $ 76,152 $ 70,891
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Ratio 8.00% 8.00%
Total Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount $ 95,190 $ 88,614
Total Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio 10.00% 10.00%
Tier 1 Capital (to Risk Weighted Assets), Actual Capital, Amount $ 123,380 $ 117,855
Tier 1 Capital (to Risk Weighted Assets), Actual Capital, Ratio 12.96% 13.30%
Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Amount $ 57,114 $ 53,168
Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Ratio 6.00% 6.00%
Tier 1 Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount $ 76,152 $ 70,891
Tier 1 Capital (to Risk Weighted Assets),To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio 8.00% 8.00%
Common Equity Tier 1 Capital (to Risk Weighted Assets), Actual Capital, Amount $ 123,380 $ 117,855
Common Equity Tier 1 Capital (to Risk Weighted Assets), Actual Capital, Ratio 12.96% 13.30%
Common Equity Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Amount $ 42,836 $ 39,876
Common Equity Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Ratio 4.50% 4.50%
Common Equity Tier 1 Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount $ 61,874 $ 57,599
Common Equity Tier 1 Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio 6.50% 6.50%
Tier 1 Capital (to Average Assets), Actual Capital, Amount $ 123,380 $ 117,855
Tier 1 Capital (to Average Assets), Actual Capital, Ratio 12.30% 12.69%
Tier 1 Capital (to Average Assets), For Capital Adequacy Purposes, Amount $ 40,128 $ 37,157
Tier 1 Capital (to Average Assets), For Capital Adequacy Purposes, Ratio 4.00% 4.00%
Tier 1 Capital (to Average Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount $ 50,161 $ 46,446
Tier 1 Capital (to Average Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio 5.00% 5.00%
v3.19.2
Regulatory Capital (Detail Textuals) - $ / shares
6 Months Ended
Jun. 30, 2019
Dec. 31, 2018
Banking and Thrift [Abstract]    
Common equity Tier 1 ("CETI") capital ratio 4.50% 4.50%
Minimum Tier 1 capital to risk-weighted assets ratio 6.00% 6.00%
Minimum total capital to risk-weighted assets ratio 8.00% 8.00%
Minimum Tier 1 leverage ratio 4.00% 4.00%
CETI capital ratio 6.50% 6.50%
Tier 1 ratio 8.00% 8.00%
Total risk based capital ratio 10.00% 10.00%
Tier 1 leverage ratio 5.00%  
Capital conservation buffer above required capital ratios in beginning January 1, 2016 0.625%  
Capital conservation buffer fully phased 2.50%  
Percentage of stock repurchase plan authorized 6.60%  
Number of shares repurchased 37,471  
Average cost per share of stock repurchase $ 21.57  
Number of shares authorized to repurchased 625,015  
v3.19.2
Employee Stock Ownership Plan (Details) - shares
Jun. 30, 2019
Dec. 31, 2018
Shares held by the ESOP include the following:    
Allocated 95,240 71,430
Committed to be allocated 11,905 23,810
Unallocated 250,007 261,912
Total 357,152 357,152
v3.19.2
Employee Stock Ownership Plan (Detail Textuals) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Dec. 31, 2018
Employee Stock Ownership Plan [Abstract]          
Number of shares committed to be released per year through 2029 23,810   23,810    
ESOP shares 357,152   357,152   357,152
Share price $ 10.00   $ 10.00    
ESOP payable term     15 years    
ESOP prime rate percentage         5.50%
Fair value of unallocated shares $ 7,000   $ 7,000    
Compensation expense $ 145 $ 147 $ 281 $ 297  
v3.19.2
Earnings Per Common Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Earnings Per Share [Abstract]        
Net Income attributable to common shareholders $ 2,531 $ 2,390 $ 4,749 $ 4,412
Average number of common shares issued 9,658,284 9,657,319 9,660,222 9,657,319
Less:        
average unallocated ESOP shares (261,674) (282,918) (266,573) (283,833)
average unvested restricted stock (79,339) (111,833) (83,282) (118,419)
average treasury stock acquired (36,282) (28,823) (36,282) (28,823)
Average number of common shares outstanding to calculate basic earnings per common share 9,280,989 9,233,745 9,274,085 9,226,244
Effect of dilutive unvested restricted stock and stock option awards 67,872 68,680 55,473 68,073
Average number of common shares outstanding to calculate diluted earnings per common share 9,348,861 9,302,425 9,329,558 9,294,317
Earnings per common share:        
Basic (in dollars per share) $ 0.27 $ 0.26 $ 0.51 $ 0.48
Diluted (in dollars per share) $ 0.27 $ 0.26 $ 0.51 $ 0.47
v3.19.2
Share-Based Compensation (Details) - Stock option
$ / shares in Units, $ in Thousands
6 Months Ended
Jun. 30, 2019
USD ($)
$ / shares
shares
Stock Option Awards  
Outstanding at December 31, 2018 | shares 396,438
Granted | shares 0
Forfeited | shares 0
Exercised | shares 0
Outstanding at March 31, 2019 | shares 396,438
Outstanding and expected to vest at March 31, 2019 | shares 396,438
Vested and Exercisable at March 31, 2019 | shares 151,272
Unrecognized compensation cost | $ $ 1,033,000
Weighted average remaining recognition period (years) 2 years 6 months 4 days
Weighted Average Exercise Price  
Outstanding at December 31, 2018 | $ / shares $ 17.89
Granted | $ / shares 0
Forfeited | $ / shares 0
Exercised | $ / shares 0
Outstanding at March 31, 2019 | $ / shares 17.89
Outstanding and expected to vest at March 31, 2019 | $ / shares 17.89
Vested and Exercisable at March 31, 2019 | $ / shares $ 17.50
Weighted Average Remaining Contractual Term (years)  
Outstanding at March 31, 2019 7 years 6 months 4 days
Outstanding and expected to vest at March 31, 2019 7 years 6 months 4 days
Vested and Exercisable at March 31, 2019 7 years 4 months 28 days
Aggregate Intrinsic Value  
Outstanding at March 31, 2019 | $ $ 4,005,000
Outstanding and expected to vest at March 31, 2019 | $ 4,005,000
Vested and Exercisable at March 31, 2019 | $ $ 632,000
v3.19.2
Share-Based Compensation (Details 1) - Restricted stock
$ / shares in Units, $ in Thousands
6 Months Ended
Jun. 30, 2019
USD ($)
$ / shares
shares
Unvested Restricted Stock Awards  
Unvested restricted stock awards at December 31, 2018 | shares 98,073
Granted | shares 0
Forfeited | shares 0
Unvested restricted stock awards at March 31, 2019 | shares 98,073
Unrecognized compensation cost | $ $ 1,415,000
Weighted average remaining recognition period (years) 2 years 6 months 4 days
Weighted Average Grant Date Price  
Unvested restricted stock awards at December 31, 2018 | $ / shares $ 18.13
Granted | $ / shares 0
Forfeited | $ / shares 0
Unvested restricted stock awards at March 31, 2019 | $ / shares $ 18.13
v3.19.2
Share-Based Compensation (Detail Textuals) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Stock option        
Defined Benefit Plan Disclosure [Line Items]        
Share based compensation expenses $ 103,000 $ 101,000 $ 201,000 $ 201,000
Restricted stock        
Defined Benefit Plan Disclosure [Line Items]        
Share based compensation expenses $ 142,000 $ 140,000 $ 309,000 $ 279,000
2016 Equity Incentive Plan (the "Equity Plan")        
Defined Benefit Plan Disclosure [Line Items]        
Options expiration period     10 years  
2016 Equity Incentive Plan (the "Equity Plan") | Stock option        
Defined Benefit Plan Disclosure [Line Items]        
Shares reserved for future issuance 446,440   446,440  
Vesting period (years)     5 years  
2016 Equity Incentive Plan (the "Equity Plan") | Restricted stock        
Defined Benefit Plan Disclosure [Line Items]        
Shares reserved for future issuance 178,575   178,575  
v3.19.2
Commitments and Contingencies (Detail Textuals)
$ in Millions
1 Months Ended
Apr. 30, 2018
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
Aggregate principal outstanding balance foreclosure sale $ 7.5
Aggregate principal outstanding balance retain by bank 4.9
Aggregate principal outstanding balance retain by another institution 2.6
Proceeds from sale of foreclosed assets 8.3
Amount retain from proceeds of foreclosure sale $ 2.0
v3.19.2
Leases (Details)
$ in Thousands
Jun. 30, 2019
USD ($)
Fiscal Year-End  
Total lease liabilities $ 3,901
Adopted ASU No. 2016-02, Leases (Topic 842)  
Fiscal Year-End  
2019 97
2020 165
2021 172
2022 172
2023 172
Thereafter 6,461
Total lease payments 7,239
Less imputed interest (3,338)
Total lease liabilities $ 3,901
v3.19.2
Leases (Details 1) - Adopted ASU No. 2016-02, Leases (Topic 842)
Jun. 30, 2019
Leases [Line Items]  
Weighted-average remaining lease term - operating leases 32 years 3 months 18 days
Weighted-average discount rate - operating leases 3.78%
v3.19.2
Leases (Detail Textuals)
6 Months Ended
Jun. 30, 2019
USD ($)
Leased_Branch
Operating_Lease
Leases [Line Items]  
Operating lease liabilities $ 3,901,000
Adopted ASU No. 2016-02, Leases (Topic 842)  
Leases [Line Items]  
Recognized right-of-use assets 3,800,000
Operating lease liabilities $ 3,901,000
Number of leases branch location | Leased_Branch 3
Description of leases options to extend Leases include options to extend the lease for up to 20 years
Number of leases | Operating_Lease 3
Operating leases rent expense $ 144,000
Adopted ASU No. 2016-02, Leases (Topic 842) | Minimum  
Leases [Line Items]  
Leases remaining initial contractual lease terms 9 months
Adopted ASU No. 2016-02, Leases (Topic 842) | Maximum  
Leases [Line Items]  
Leases remaining initial contractual lease terms 16 years 6 months