10-Q
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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

                                            

  

FORM 10-Q

                                         

 

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended June 30, 2020

 

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period __________ to __________

 

Commission File Number: 0-26486

                                            

Auburn National Bancorporation, Inc.

(Exact Name of Registrant as Specified in Its Charter)

                                            

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

63-0885779

(I.R.S. Employer

Identification No.)

 

100 N. Gay Street

Auburn, Alabama 36830

(334) 821-9200

 

(Address and telephone number of principal executive offices)

 

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

                                            

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated filer ☐

Accelerated filer

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

 

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

 

Title of each class

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01

AUBN

 

NASDAQ Global Market

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at August 5, 2020

Common Stock, $0.01 par value per share

 

3,566,221 shares

 

 


Table of Contents

 

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION                                                             

PAGE

 

 

 

 

 

Item 1

Financial Statement

 

 

 

 

 

Consolidated Balance Sheets (Unaudited) as of June 30, 2020 and December 31, 2019

 

3

 

 

Consolidated Statements of Earnings (Unaudited) for the quarter and six months ended June 30, 2020 and 2019

 

4

 

 

Consolidated Statements of Comprehensive Income (Unaudited) for the quarter and six months ended June 30, 2020 and 2019

 

5

 

 

Consolidated Statements of Stockholders’ Equity (Unaudited) for the quarter and six months ended June 30, 2020 and 2019

 

6

 

 

Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2020 and 2019

 

7

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

8

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

 

Table 1 – Explanation of Non-GAAP Financial Measures

 

47

 

 

Table 2 – Selected Quarterly Financial Data

 

48

 

 

Table 3 – Selected Financial Data

 

49

 

 

Table 4 – Average Balances and Net Interest Income Analysis – for the quarter ended June 30, 2020 and 2019

 

50

 

 

Table 5 – Average Balances and Net Interest Income Analysis – for the six months ended June 30, 2020 and 2019

 

51

 

 

Table 6 – Loan Portfolio Composition

 

52

 

 

Table 7 – Allowance for Loan Losses and Nonperforming Assets

 

53

 

 

Table 8 – Allocation of Allowance for Loan Losses

 

54

 

 

Table 9 – CDs and Other Time Deposits of $100,000 or more

 

55

Item 3

Quantitative and Qualitative Disclosures About Market Risk

 

56

Item 4

Controls and Procedures

 

56

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

 

 

Item 1

Legal Proceedings

 

56

Item 1A

Risk Factors

 

56

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

60

Item 3

Defaults Upon Senior Securities

 

60

Item 4

Mine Safety Disclosures

 

60

Item 5

Other Information

 

60

Item 6

Exhibits

 

60

 

 


Table of Contents

 

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

 

 

 

 

 

 

June 30,

 

 

December 31,

(Dollars in thousands, except share data)

 

2020

 

 

2019

Assets:

 

 

 

 

 

Cash and due from banks

$

24,518

 

$

15,172

Federal funds sold

 

17,755

 

 

25,944

Interest-bearing bank deposits

 

95,562

 

 

51,327

 

 

Cash and cash equivalents

 

137,835

 

 

92,443

Securities available-for-sale

 

302,193

 

 

235,902

Loans held for sale

 

2,620

 

 

2,202

Loans, net of unearned income

 

464,274

 

 

460,901

 

Allowance for loan losses

 

(5,308)

 

 

(4,386)

 

 

Loans, net

 

458,966

 

 

456,515

Premises and equipment, net

 

14,451

 

 

14,743

Bank-owned life insurance

 

19,014

 

 

19,202

Other assets

 

7,808

 

 

6,872

 

 

Total assets

$

942,887

 

$

827,879

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing

$

247,429

 

$

196,218

 

Interest-bearing

 

582,381

 

 

527,934

 

 

Total deposits

 

829,810

 

 

724,152

Federal funds purchased and securities sold under agreements to repurchase

 

1,995

 

 

1,069

Accrued expenses and other liabilities

 

5,783

 

 

4,330

 

 

Total liabilities

 

837,588

 

 

729,551

Stockholders' equity:

 

 

 

 

 

Preferred stock of $.01 par value; authorized 200,000 shares;

 

 

 

 

 

 

no shares issued

 

 

 

Common stock of $.01 par value; authorized 8,500,000 shares;

 

 

 

 

 

 

issued 3,957,135 shares

 

39

 

 

39

Additional paid-in capital

 

3,785

 

 

3,784

Retained earnings

 

103,444

 

 

101,801

Accumulated other comprehensive income, net

 

7,386

 

 

2,059

Less treasury stock, at cost - 390,959 shares and 390,989 at June 30, 2020

 

 

 

 

 

 

and December 31, 2019 , respectively

 

(9,355)

 

 

(9,355)

 

 

Total stockholders’ equity

 

105,299

 

 

98,328

 

 

Total liabilities and stockholders’ equity

$

942,887

 

$

827,879

See accompanying notes to consolidated financial statements

 

 

 

 

 

3


Table of Contents

 

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings

(Unaudited)

 

 

 

 

 

Quarter ended June 30,

 

 

Six months ended June 30,

(In thousands, except share and per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

$

5,494

 

$

5,763

 

$

10,906

 

$

11,490

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

1,056

 

 

985

 

 

2,167

 

 

2,000

 

 

Tax-exempt

 

476

 

 

544

 

 

929

 

 

1,093

 

Federal funds sold and interest-bearing bank deposits

 

27

 

 

311

 

 

306

 

 

663

 

 

 

 

Total interest income

 

7,053

 

 

7,603

 

 

14,308

 

 

15,246

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

981

 

 

1,004

 

 

2,022

 

 

2,025

 

Short-term borrowings

 

2

 

 

2

 

 

4

 

 

4

 

 

 

 

Total interest expense

 

983

 

 

1,006

 

 

2,026

 

 

2,029

 

Net interest income

 

6,070

 

 

6,597

 

 

12,282

 

 

13,217

Provision for loan losses

 

450

 

 

 

 

850

 

 

 

 

Net interest income after provision for loan losses

 

5,620

 

 

6,597

 

 

11,432

 

 

13,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

126

 

 

176

 

 

298

 

 

360

 

Mortgage lending

 

683

 

 

187

 

 

913

 

 

376

 

Bank-owned life insurance

 

108

 

 

107

 

 

506

 

 

217

 

Other

 

365

 

 

407

 

 

794

 

 

1,079

 

Securities gains, net

 

81

 

 

8

 

 

87

 

 

13

 

 

Total noninterest income

 

1,363

 

 

885

 

 

2,598

 

 

2,045

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

2,597

 

 

2,799

 

 

5,428

 

 

5,737

 

Net occupancy and equipment

 

920

 

 

381

 

 

1,517

 

 

765

 

Professional fees

 

389

 

 

275

 

 

647

 

 

503

 

Other

 

1,053

 

 

1,174

 

 

2,223

 

 

2,235

 

 

Total noninterest expense

 

4,959

 

 

4,629

 

 

9,815

 

 

9,240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

2,024

 

 

2,853

 

 

4,215

 

 

6,022

Income tax expense

 

363

 

 

546

 

 

753

 

 

1,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$

1,661

 

$

2,307

 

$

3,462

 

$

4,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

$

0.47

 

$

0.64

 

$

0.97

 

$

1.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

3,566,166

 

 

3,577,409

 

 

3,566,156

 

 

3,595,972

See accompanying notes to consolidated financial statements

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AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended June 30,

 

 

Six months ended June 30,

(Dollars in thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

Net earnings

$

1,661

 

$

2,307

 

$

3,462

 

$

4,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net holding gain on securities

 

1,043

 

 

2,057

 

 

5,392

 

 

4,453

 

Reclassification adjustment for net gain on securities

 

 

 

 

 

 

 

 

 

 

 

 

 

recognized in net earnings

 

(60)

 

 

(6)

 

 

(65)

 

 

(10)

Other comprehensive income

 

983

 

 

2,051

 

 

5,327

 

 

4,443

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

$

2,644

 

$

4,358

 

$

8,789

 

$

9,293

See accompanying notes to consolidated financial statements

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AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common

 

 

 

 

Additional

 

 

 

other

 

 

 

 

 

 

 

 

 

Shares

 

 

Common

 

paid-in

 

Retained

comprehensive

Treasury

 

 

 

(Dollars in thousands, except share data)

Outstanding

 

 

Stock

 

capital

 

earnings

income (loss)

stock

 

Total

Quarter ended June 30, 2020

Balance, March 31, 2020

3,566,146

 

$

39

 

$

3,784

 

$

102,692

 

$

6,403

 

$

(9,355)

 

$

103,563

Net earnings

 

 

 

 

 

 

1,661

 

 

 

 

 

 

1,661

Other comprehensive income

 

 

 

 

 

 

 

 

983

 

 

 

 

983

Cash dividends paid ($.255 per share)

 

 

 

 

 

 

(909)

 

 

 

 

 

 

(909)

Sale of treasury stock

30

 

 

 

 

1

 

 

 

 

 

 

 

 

1

Balance, June 30, 2020

3,566,176

 

$

39

 

$

3,785

 

$

103,444

 

$

7,386

 

$

(9,355)

 

$

105,299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended June 30, 2019

Balance, March 31, 2019

3,581,485

 

$

39

 

$

3,783

 

$

97,280

 

$

(1,371)

 

$

(8,782)

 

$

90,949

Net earnings

 

 

 

 

 

 

2,307

 

 

 

 

 

 

2,307

Other comprehensive income

 

 

 

 

 

 

 

 

2,051

 

 

 

 

2,051

Cash dividends paid ($.25 per share)

 

 

 

 

 

 

(893)

 

 

 

 

 

 

(893)

Stock repurchases

(9,687)

 

 

 

 

 

 

 

 

 

 

(350)

 

 

(350)

Sale of treasury stock

30

 

 

 

 

 

 

 

 

 

 

1

 

 

1

Balance, June 30, 2019

3,571,828

 

$

39

 

$

3,783

 

$

98,694

 

$

680

 

$

(9,131)

 

$

94,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2020

Balance, December 31, 2019

3,566,146

 

$

39

 

$

3,784

 

$

101,801

 

$

2,059

 

$

(9,355)

 

$

98,328

Net earnings

 

 

 

 

 

 

3,462

 

 

 

 

 

 

3,462

Other comprehensive income

 

 

 

 

 

 

 

 

5,327

 

 

 

 

5,327

Cash dividends paid ($.51 per share)

 

 

 

 

 

 

(1,819)

 

 

 

 

 

 

(1,819)

Sale of treasury stock

30

 

 

 

 

1

 

 

 

 

 

 

 

 

1

Balance, June 30, 2020

3,566,176

 

$

39

 

$

3,785

 

$

103,444

 

$

7,386

 

$

(9,355)

 

$

105,299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2019

Balance, December 31, 2018

3,643,868

 

$

39

 

$

3,779

 

$

95,635

 

$

(3,763)

 

$

(6,635)

 

$

89,055

Net earnings

 

 

 

 

 

 

4,850

 

 

 

 

 

 

4,850

Other comprehensive income

 

 

 

 

 

 

 

 

4,443

 

 

 

 

4,443

Cash dividends paid ($.50 per share)

 

 

 

 

 

 

(1,791)

 

 

 

 

 

 

(1,791)

Stock repurchases

(72,205)

 

 

 

 

 

 

 

 

 

 

(2,497)

 

 

(2,497)

Sale of treasury stock

165

 

 

 

 

4

 

 

 

 

 

 

1

 

 

5

Balance, June 30, 2019

3,571,828

 

$

39

 

$

3,783

 

$

98,694

 

$

680

 

$

(9,131)

 

$

94,065

See accompanying notes to consolidated financial statements

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Table of Contents

 

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

Six months ended June 30,

(In thousands)

 

2020

 

 

2019

Cash flows from operating activities:

 

 

 

 

 

Net earnings

$

3,462

 

$

4,850

Adjustments to reconcile net earnings to net cash provided by

 

 

 

 

 

operating activities:

 

 

 

 

 

 

Provision for loan losses

 

850

 

 

 

Depreciation and amortization

 

989

 

 

448

 

Premium amortization and discount accretion, net

 

1,081

 

 

886

 

Net gain on securities available-for-sale

 

(87)

 

 

(13)

 

Net gain on sale of loans held for sale

 

(847)

 

 

(188)

 

Net gain on other real estate owned

 

(17)

 

 

 

Loans originated for sale

 

(36,385)

 

 

(11,312)

 

Proceeds from sale of loans

 

36,576

 

 

9,786

 

Increase in cash surrender value of bank-owned life insurance

 

(224)

 

 

(217)

 

Income recognized from death benefit on bank-owned life insurance

 

(282)

 

 

 

Net increase in other assets

 

(1,014)

 

 

(900)

 

Net (decrease) increase in accrued expenses and other liabilities

 

(334)

 

 

983

 

 

 

Net cash provided by operating activities

 

3,768

 

 

4,323

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Proceeds from sales of securities available-for-sale

 

9,062

 

 

7,662

Proceeds from prepayments and maturities of securities available-for-sale

 

22,085

 

 

22,222

Purchase of securities available-for-sale

 

(91,318)

 

 

(33,839)

(Increase) decrease in loans, net

 

(3,400)

 

 

826

Net purchases of premises and equipment

 

(372)

 

 

(1,459)

Proceeds from bank-owned life insurance death benefit

 

694

 

 

(Increase) decrease in FHLB stock

 

(9)

 

 

32

Proceeds from sale of other real estate owned

 

116

 

 

 

 

 

Net cash used in investing activities

 

(63,142)

 

 

(4,556)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net increase in noninterest-bearing deposits

 

51,211

 

 

5,223

Net increase in interest-bearing deposits

 

54,447

 

 

11,085

Net increase (decrease) in federal funds purchased and securities sold

 

 

 

 

 

 

under agreements to repurchase

 

926

 

 

(1,200)

Proceeds from sale of treasury stock

 

1

 

 

5

Stock repurchases

 

 

 

(2,497)

Dividends paid

 

(1,819)

 

 

(1,791)

 

 

 

Net cash provided by financing activities

 

104,766

 

 

10,825

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

45,392

 

 

10,592

Cash and cash equivalents at beginning of period

 

92,443

 

 

65,076

Cash and cash equivalents at end of period

$

137,835

 

$

75,668

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

$

2,023

 

$

2,029

Income taxes

 

678

 

 

1,499

Supplemental disclosure of non-cash transactions:

 

 

 

 

 

Initial recognition of operating lease right of use assets

 

 

 

891

Initial recognition of operating lease liabilities

 

 

 

889

Real estate acquired through foreclosure

 

99

 

 

82

See accompanying notes to consolidated financial statements

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Table of Contents

 

 

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

 

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

General

 

Auburn National Bancorporation, Inc. (the “Company”) provides a full range of banking services to individual and corporate customers in Lee County, Alabama and surrounding counties through its wholly owned subsidiary, AuburnBank (the “Bank”). The Company does not have any segments other than banking that are considered material.

 

Basis of Presentation and Use of Estimates

 

The unaudited consolidated financial statements in this report have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited consolidated financial statements include, in the opinion of management, all adjustments necessary to present a fair statement of the financial position and the results of operations for all periods presented. All such adjustments are of a normal recurring nature. The results of operations in the interim statements are not necessarily indicative of the results of operations that the Company and its subsidiaries may achieve for future interim periods or the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

 

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany transactions and accounts are eliminated in consolidation.

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include other-than-temporary impairment on investment securities, the determination of the allowance for loan losses, fair value of financial instruments, and the valuation of deferred tax assets and other real estate owned (“OREO”).

 

Revenue Recognition

 

On January 1, 2018, the Company implemented Accounting Standards Update (“ASU” or “updates”) 2014-09, Revenue from Contracts with Customers, codified at Accounting Standards Codification (“ASC”) 606. The Company adopted ASC 606 using the modified retrospective transition method. The majority of the Company’s revenue stream is generated from interest income on loans and deposits which are outside the scope of ASC 606.

 

The Company’s sources of income that fall within the scope of ASC 606 include service charges on deposits, investment services, interchange fees and gains and losses on sales of other real estate, all of which are presented as components of noninterest income. The following is a summary of the revenue streams that fall within the scope of ASC 606:

Service charges on deposits, investment services, ATM and interchange fees – Fees from these services are either transaction-based, for which the performance obligations are satisfied when the individual transaction is processed, or set periodic service charges, for which the performance obligations are satisfied over the period the service is provided. Transaction-based fees are recognized at the time the transaction is processed, and periodic service charges are recognized over the service period.

Gains on sales of OREOA gain on sale should be recognized when a contract for sale exists and control of the asset has been transferred to the buyer. ASC 606 lists several criteria required to conclude that a contract for sale exists, including a determination that the institution will collect substantially all of the consideration to which it is entitled. In addition to the loan-to-value, the analysis is based on various other factors, including the credit quality of the borrower, the structure of the loan, and any other factors that may affect collectability.

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Table of Contents

 

 

Reclassifications

 

Certain amounts reported in the prior period have been reclassified to conform to the current-period presentation. These reclassifications had no impact on the Company’s previously reported net earnings or total stockholders’ equity.

 

Subsequent Events

 

The Company has evaluated the effects of events and transactions through the date of this filing that have occurred subsequent to June 30, 2020. The Company does not believe there were any material subsequent events during this period that would have required further recognition or disclosure in the unaudited consolidated financial statements included in this report.

 

Accounting Developments

 

In the first six months of 2020, the Company adopted new guidance related to the following ASUs:

 

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement; and

 

ASU 2018-15, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.

 

Information about these pronouncements is described in more detail below.

 

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, improves the disclosure requirements on fair value measurements by eliminating the requirements to disclose (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (ii) the policy for timing of transfers between levels; and (iii) the valuation processes for Level 3 fair value measurements. This ASU also added specific disclosure requirements for fair value measurements for public entities including the requirement to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

 

The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2019, and all interim periods within those fiscal years. Early adoption was permitted upon issuance of the ASU. Entities are permitted to early adopt amendments that remove or modify disclosures and delay the adoption of the additional disclosures until their effective date. The Company adopted this ASU on January 1, 2020. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

 

ASU 2018- 15, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include internal-use software license). This ASU requires entities to use the guidance in FASB ASC 350-40, Intangibles - Goodwill and Other - Internal Use Software, to determine whether to capitalize or expense implementation costs related to the service contract. This ASU also requires entities to (i) expense capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement; (ii) present the expense related to the capitalized implementation costs in the same line item on the income statement as fees associated with the hosting element of the arrangement; (iii) classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element; and (iv) present the capitalized implementation costs in the same balance sheet line item that a prepayment for the fees associated with the hosting arrangement would be presented.

 

The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption was permitted. The Company adopted this ASU on January 1, 2020. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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NOTE 2: BASIC AND DILUTED NET EARNINGS PER SHARE

 

Basic net earnings per share is computed by dividing net earnings by the weighted average common shares outstanding for the respective period. Diluted net earnings per share reflect the potential dilution that could occur upon exercise of securities or other rights for, or convertible into, shares of the Company’s common stock. At June 30, 2020 and 2019, respectively, the Company had no such securities or rights issued or outstanding, and therefore, no dilutive effect to consider for the diluted net earnings per share calculation.

 

The basic and diluted net earnings per share computations for the respective periods are presented below.

 

 

 

 

 

Quarter ended June 30,

 

 

Six months ended June 30,

(In thousands, except share and per share data)

 

 

2020

 

 

2019

 

 

2020

 

 

2019

Basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

1,661

 

$

2,307

 

$

3,462

 

$

4,850

 

Weighted average common shares outstanding

 

 

3,566,166

 

 

3,577,409

 

 

3,566,156

 

 

3,595,972

 

 

Net earnings per share

 

$

0.47

 

$

0.64

 

$

0.97

 

$

1.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTE 3: SECURITIES

 

At June 30, 2020 and December 31, 2019, respectively, all securities within the scope of ASC 320, Investments – Debt and Equity Securities, were classified as available-for-sale. The fair value and amortized cost for securities available-for-sale by contractual maturity at June 30, 2020 and December 31, 2019, respectively, are presented below.

 

 

 

 

1 year

1 to 5