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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

o         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. 001-39090

Provident Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland

84-4132422

(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

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  o

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  o

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

o

 

Accelerated Filer

x

Non-accelerated Filer

o

 

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  o  NO  x

As of August 3, 2020, there were 19,472,310 shares of the Registrant’s common stock, $0.01 par value per share, outstanding. 
‎

Provident Bancorp, Inc.

Form 10-Q

Part I.

Financial Information

Page

 

 

Item 1.

Interim Financial Statements

2

 

 

 

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

2

 

 

 

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)

3

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)

4

 

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June, 2020 and 2019 (unaudited)

5

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (unaudited)

6

 

 

 

Notes to Consolidated Financial Statements (unaudited)

8

 

 

Item 2.

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

29

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

45

 

 

Item 4.

Controls and Procedures

45

 

 

Part II.

Other Information

46

 

 

Item 1.

Legal Proceedings

45

 

 

Item 1A.

Risk Factors

46

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

 

 

Item 3.

Defaults upon Senior Securities

46

 

 

Item 4.

Mine Safety Disclosures

46

 

 

Item 5.

Other Information

46

 

 

Item 6.

Exhibits

47

 

 

Signatures

 

48

 

 

Part I.Financial Information

Item 1.Financial Statements

PROVIDENT BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

At

At

June 30,

December 31,

2020

2019

(Dollars in thousands)

(unaudited)

Assets

Cash and due from banks

$

12,327

$

11,990

Short-term investments

25,851

47,668

Cash and cash equivalents

38,178

59,658

Debt securities available-for-sale (at fair value)

36,992

41,790

Federal Home Loan Bank stock, at cost

1,050

1,416

Loans, net of allowance for loan losses of $17,158 and $13,844 as of

June 30, 2020 and December 31, 2019, respectively

1,265,091

959,286

Bank owned life insurance

36,225

26,925

Premises and equipment, net

14,771

14,728

Accrued interest receivable

4,756

2,854

Right-of-use assets

4,336

3,713

Other assets

13,413

11,418

Total assets

$

1,414,812

$

1,121,788

Liabilities and Shareholders' Equity

Deposits:

Noninterest-bearing

$

361,022

$

222,088

Interest-bearing

759,463

627,817

Total deposits

1,120,485

849,905

Borrowings

42,021

24,998

Operating lease liabilities

4,534

3,877

Other liabilities

11,450

12,075

Total liabilities

1,178,490

890,855

Shareholders' equity:

Preferred stock; authorized 50,000 shares:

no shares issued and outstanding

—

—

Common stock, $0.01 par value, 100,000,000 shares authorized;

19,472,310 and 19,473,818 shares issued and outstanding

at June 30, 2020 and December 31, 2019, respectively

195

195

Additional paid-in capital

146,778

146,174

Retained earnings

98,057

94,159

Accumulated other comprehensive income

1,002

458

Unearned compensation - ESOP

(9,710)

(10,053)

Total shareholders' equity

236,322

230,933

Total liabilities and shareholders' equity

$

1,414,812

$

1,121,788

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

 

2

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

(Dollars in thousands, except per share data)

(unaudited)

Interest and dividend income:

Interest and fees on loans

$

14,391

$

12,270

$

28,151

$

23,969

Interest and dividends on securities

259

420

517

824

Interest on short-term investments

4

41

75

67

Total interest and dividend income

14,654

12,731

28,743

24,860

Interest expense:

Interest on deposits

1,443

1,531

3,089

2,968

Interest on borrowings

176

599

547

1,133

Total interest expense

1,619

2,130

3,636

4,101

Net interest and dividend income

13,035

10,601

25,107

20,759

Provision for loan losses

872

1,354

3,971

2,816

Net interest and dividend income after provision for loan losses

12,163

9,247

21,136

17,943

Noninterest income:

Customer service fees on deposit accounts

264

356

616

685

Service charges and fees - other

261

506

721

918

Gain on sale of securities, net

—

—

—

113

Bank owned life insurance income

171

173

350

350

Other income

8

21

27

36

Total noninterest income

704

1,056

1,714

2,102

Noninterest expense:

Salaries and employee benefits

5,799

4,274

11,201

8,568

Occupancy expense

429

550

870

1,194

Equipment expense

144

109

281

215

Data processing

195

150

396

354

Marketing expense

71

69

135

124

Professional fees

367

496

753

918

Directors' compensation

171

188

365

369

Software depreciation and implementation

238

182

438

345

Write down of note receivable

—

—

500

—

Other

947

865

1,728

1,542

Total noninterest expense

8,361

6,883

16,667

13,629

Income before income tax expense

4,506

3,420

6,183

6,416

Income tax expense

1,256

889

1,702

1,667

Net income

$

3,250

$

2,531

$

4,481

$

4,749

Earnings per share: (1)

Basic

$

0.18

$

0.13

$

0.25

$

0.25

Diluted

$

0.18

$

0.13

$

0.25

$

0.25

Weighted Average Shares: (1)

Basic

18,150,106

18,758,735

18,131,421

18,744,781

Diluted

18,179,858

18,895,918

18,197,646

18,856,903

(1) Amounts related to periods prior to the date of the Conversion (October 16, 2019) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (2.0212-to-one).

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

 

3

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

(In thousands)

Net income

$

3,250

$

2,531

$

4,481

$

4,749

Other comprehensive income:

Unrealized holding gains arising during the period on debt securities available-for-sale

721

760

731

975

Reclassification adjustment for realized gains in net income

—

—

—

(113)

Unrealized gain

721

760

731

862

Income tax effect

(160)

(190)

(187)

(223)

Total other comprehensive income

561

570

544

639

Comprehensive income

$

3,811

$

3,101

$

5,025

$

5,388

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

 


‎

4

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

For the three months ended June 30, 2020 and 2019

Accumulated

Shares of

Additional

Other

Unearned

Common

Common

Paid-in

Retained

Comprehensive

Compensation

Treasury

(In thousands, except share data)

Stock (1)

Stock

Capital

Earnings

Income (Loss)

ESOP

Stock

Total

Balance, March 31, 2020

19,476,248 

$

195 

$

146,500 

$

95,390 

$

441 

$

(9,868)

$

—

$

232,658 

Net income

—

—

—

3,250 

—

—

—

3,250 

Dividends declared ($0.03 per share)

—

—

—

(583)

—

—

—

(583)

Other comprehensive income

—

—

—

—

561 

—

—

561 

Stock-based compensation expense, net of forfeitures

—

—

242 

—

—

—

—

242 

Restricted stock award forfeiture

(3,938)

—

—

—

—

—

—

—

ESOP shares earned

—

—

36 

—

—

158 

—

194 

Balance, June 30, 2020

19,472,310 

$

195 

$

146,778 

$

98,057 

$

1,002 

$

(9,710)

$

—

$

236,322 

Balance, March 31, 2019

19,447,627 

$

—

$

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

19,447,627

$

—

$

46,567 

$

88,100 

$

384 

$

(2,500)

$

(788)

$

131,763 

For the six months ended June 30, 2020 and 2019

Accumulated

Shares of

Additional

Other

Unearned

Common

Common

Paid-in

Retained

Comprehensive

Compensation

Treasury

(In thousands, except share data)

Stock (1)

Stock

Capital

Earnings

Income (Loss)

ESOP

Stock

Total

Balance, December 31, 2019

19,473,818 

$

195 

$

146,174 

$

94,159 

$

458 

$

(10,053)

$

—

$

230,933 

Net income

—

—

—

4,481 

—

—

—

4,481 

Dividends declared ($0.03 per share)

—

—

—

(583)

—

—

—

(583)

Other comprehensive income

—

—

—

—

544 

—

—

544 

Stock-based compensation expense, net of forfeitures

—

—

503 

—

—

—

—

503 

Restricted stock award grants net of forfeitures

(1,508)

—

—

—

—

—

—

—

ESOP shares earned

—

—

101 

—

—

343 

—

444 

Balance, June 30, 2020

19,472,310 

$

195 

$

146,778 

$

98,057 

$

1,002 

$

(9,710)

$

—

$

236,322 

Balance, December 31, 2018

19,455,503 

$

—

$

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, net of forfeitures

—

—

510 

—

—

—

—

510 

Restricted stock award forfeiture

(7,876)

—

—

—

—

—

—

—

ESOP shares earned

—

—

162 

—

—

119 

—

281 

Balance, June 30, 2019

19,447,627 

$

—

$

46,567 

$

88,100 

$

384 

$

(2,500)

$

(788)

$

131,763 

(1) Amounts related to periods prior to the date of the Conversion (October 16, 2019) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (2.0212-to-one).

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

5

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended

June 30,

(In thousands)

2020

2019

Cash flows from operating activities:

Net income

$

4,481

$

4,749

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

Amortization of securities premiums, net of accretion

144

97

ESOP expense

444

281

Gain on sale of securities, net

—

(113)

Change in deferred loan fees, net

3,198

357

Provision for loan losses

3,971

2,816

Depreciation and amortization

538

768

Gain on disposals of premises and equipment

—

(9)

Increase in accrued interest receivable

(1,652)

(588)

Deferred tax benefit

(1,977)

(185)

Share-based compensation expense

503

510

Bank owned life insurance income

(350)

(350)

Principal repayments of operating lease obligations

(36)

(36)

Increase in other assets

(186)

(1,804)

Decrease in other liabilities

(625)

(2,129)

Net cash provided by operating activities

8,453

4,364

Cash flows from investing activities:

Purchases of debt securities available-for-sale

—

(13,729)

Proceeds from sales of debt securities available-for-sale

—

13,565

Proceeds from pay downs, maturities and calls of debt securities available-for-sale

5,385

3,855

Redemption (purchase) of Federal Home Loan Bank stock

366

(1,186)

Loan originations and purchases, net of paydowns

(246,302)

(52,771)

Cash paid for warehouse asset purchase, net (1)

(66,962)

—

Additions to premises and equipment

(490)

(3,698)

Proceeds from the sale of equipment

—

85

Additions to other real estate owned

—

(64)

Purchase of bank owned life insurance

(8,950)

—

Net cash used in investing activities

(316,953)

(53,943)

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

 
‎

6

PROVIDENT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

Six Months Ended

June 30,

(In thousands)

2020

2019

Cash flows from financing activities:

Net increase in noninterest-bearing accounts

138,934

24,204

Net increase in interest-bearing accounts

131,646

11,102

Cash dividends paid on common stock

(583)

—

Net change in short-term borrowings

25,023

13,941

Payments made on Federal Home Loan Bank long-term advances

(8,000)

—

Net cash provided by financing activities

287,020

49,247

Net decrease in cash and cash equivalents

(21,480)

(332)

Cash and cash equivalents at beginning of period

59,658

28,613

Cash and cash equivalents at end of period

$

38,178

$

28,281

Supplemental disclosures:

Interest paid

$

3,636

$

4,126

Income taxes paid

3,380

2,391

Reclassification of premises and equipment to other assets

3

—

Recognition of right-of-use assets

693

3,836

Recognition of operating lease liabilities

693

3,938

Reclassification of accrued rent from other liabilities to premises and equipment

—

102

(1) See Note 15 for information regarding the warehouse asset purchase.

The accompanying notes are an integral part of the unaudited 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 Maryland 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, 2020 are not necessarily indicative of the results that may be expected for future periods, including the entire fiscal year. Certain amounts in 2019 have been reclassified to be consistent with the 2020 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 (the “SEC”) on March 13, 2020.

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, The Provident Bank, which also operates under the name BankProv (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

The Company is a Maryland corporation that was incorporated in June 2019 to be the successor corporation to Provident Bancorp, Inc. (“Old Provident”), a Massachusetts corporation, upon completion of the second-step mutual-to-stock conversion (the “Conversion”) of Provident Bancorp (the “MHC”), the top tier mutual holding company of Old Provident. Old Provident was the former mid-tier holding company for the Bank. Prior to completion of the Conversion, approximately 52% of the shares of common stock of Old Provident were owned by the MHC. In conjunction with the Conversion, the MHC was merged into the Company (and ceased to exist) and the Company became its successor under the name Provident Bancorp, Inc. The Conversion was completed on October 16, 2019. The Company raised gross proceeds of $102.1 million by selling 10,212,397 shares of common stock at $10.00 per share in the second-step stock offering. The Company utilized $8.2 million of the proceeds to lend to its Employee Stock Ownership Plan (“ESOP”) for the acquisition of an additional 816,992 shares at $10.00 per share. Expenses incurred related to the offering were $2.4 million, and have been recorded against offering proceeds. The Company invested $45.8 million of the net proceeds it received from the sale into the Bank’s operations and has retained the remaining amount for general corporate purposes. Concurrent with the completion of the stock offering, each share of Old Provident common stock owned by public stockholders (stockholders other than the MHC) was exchanged for 2.0212 shares of Company common stock. A total of 19,484,343 shares of common stock were outstanding following the completion of the stock offering.

The Bank, headquartered in Amesbury, Massachusetts 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 two loan production offices in Boston, Massachusetts and Ponte Vedra, Florida. The Bank provides a variety of financial services to small businesses and individuals. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are commercial mortgages and commercial loans.

 

(3)    COVID-19

The outbreak of COVID-19 has adversely impacted a broad range of industries in which the Company’s customers operate and could impair their ability to fulfill their financial obligations. The World Health Organization declared COVID-19 to be a global pandemic indicating that almost all public commerce and related business activities were to be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The spread of the outbreak has caused significant disruption in the U.S. economy and has disrupted banking and other financial activity in the areas in which the Company operates.

The U.S. government and regulatory agencies have taken several actions to provide support to the U.S. economy. Most notably, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020 as a $2 trillion legislative package. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The CARES Act also includes extensive emergency funding for hospitals and providers. In addition to the general impact of the COVID-19 pandemic, certain provisions of the CARES Act, as well as other recent legislative and regulatory relief efforts, are expected to have a material impact on the Company’s operations. Also, the actions of the Board of Governors of the Federal Reserve System (the “FRB”) to combat the

8

economic contraction caused by the COVID-19 pandemic, including the reduction of the target federal funds rate and quantitative easing programs, could, if prolonged, adversely affect the Company’s net interest income and margins, and profitability.

Federal banking agencies issued guidance encouraging financial institutions to work with borrowers that may be unable to meet contractual obligations due to the effects of COVID-19. In addition, section 4013 of the CARES Act states, “banks may elect not to categorize loan modifications as TDRs [troubled debt restructurings] if they are (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020.” The Company did not classify any modifications related to COVID-19 which met other CARES Act conditions as TDRs.

The Company implemented its business continuity and pandemic plans, which include remote working arrangements for the majority of its workforce. While there has been no material impact to the Company’s employees as of this report date, if COVID-19 escalates further it could also potentially create business continuity issues. The Company does not currently anticipate significant challenges to its ability to maintain systems and controls in light of the measures the Company has taken to prevent the spread of COVID-19. While it is not possible to know the full extent of these impacts as of the date of this filing, detailed below are potentially material items of which we are aware.

Financial position and results of operations

The Company’s fee income will be reduced due to COVID-19. In keeping with the guidance from regulators, the Company is actively working with COVID-19 affected customers to waive fees from a variety of sources, such as, but not limited to, insufficient funds, account maintenance, minimum balance, and ATM fees. These reductions in fees are thought to be temporary in conjunction with the length of the expected COVID-19 related economic crisis. At this time, the Company is unable to project the materiality of such an impact.

The Company’s interest income could be reduced due to COVID-19. In keeping with the guidance from the regulators, the Company is actively working with COVID-19 affected borrowers to defer payments, interest and fees. While interest and fees will accrue to income through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. As a result, interest income in future periods could be negatively impacted.

Allowance for loan losses

Continued uncertainty regarding the severity and duration of the COVID-19 pandemic and related economic effects will continue to affect the accounting for credit losses, which could cause the provision for loan losses to increase. It also is possible that asset quality could worsen, expenses associated with collection efforts could increase and loan charge-offs could increase. The Company is actively participating in the Small Business Administration’s (“SBA’s”) Paycheck Protection Program (“PPP”), providing loans to small businesses negatively impacted by the COVID-19 pandemic. PPP loans are fully guaranteed by the U.S. government; if that should change, the Company could be required to increase its allowance for loan losses through an additional provision for loan losses charged to earnings.

In accordance with guidance issued by federal banking agencies, the Company is actively working with borrowers that may be unable to meet contractual obligations due to the effects of COVID-19. As of June 30, 2020, the Company modified 287 loans totaling $264.2 million or 20.6% of the total loan portfolio. In order to mitigate the risk associated with these modifications the Company has incorporated covenants that require borrowers to submit quarterly financial statements, prohibits them from distributing funds to any owner or stockholder (with the exception of payroll) and also prohibits them from making any payments on debt owed to subordinated debt holders for the duration of their modification. If borrowers are unable return to their normal payment plan following their modification period, the Company could be required to increase its allowance for loan losses through an additional provision for loan losses charged to earnings.

Valuation

Valuation and fair value measurement challenges may occur. For example, COVID-19 could cause further and sustained decline in the financial markets or the occurrence of what management would deem a valuation triggering event that could result in an impairment charge to earnings, such as our investment securities.

 

9

(4)    Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 the current “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. On October 16, 2019, FASB approved a delay on the implementation until January 2023 for smaller reporting companies as defined by the SEC. The amendments in this update will be effective for the Company on January 1, 2023. 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 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. The Company adopted the provision of ASU 2018-13 effective January 1, 2020 and the adoption did not have a material impact on the consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This ASU simplifies the accounting for income taxes and is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Certain provisions under ASU 2019-12 require prospective application, some require modified retrospective application through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, while other provisions require retrospective application to all periods presented in the consolidated financial statements upon adoption. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), to ease the potential burden in accounting for recognizing the effects of reference rate reform on financial reporting. Such challenges include the accounting and operational implications for contract modifications and hedge accounting. The provisions in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to loan and lease agreements, contracts, hedging relationships, and other transactions affected by reference rate reform. These provisions apply to contract modifications that reference LIBOR or another reference rate expected to be discounted because of reference rate reform. Qualifying modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification would be considered "minor" so that any existing unamortized deferred loan origination fees and costs would carry forward and continue to be amortized. Qualifying modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for hedge accounting.

 

ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022, with adoption permitted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected, the amendments must be applied prospectively for all eligible contract modifications. The Company is currently evaluating the effect that this ASU will have on the Company’s consolidated financial statements. 

10

(5)    Investment Securities

The following summarizes the amortized cost of investment securities classified as available-for-sale and their approximate fair values at June 30, 2020 and December 31, 2019:

Amortized

Gross

Gross

Cost

Unrealized

Unrealized

Fair

(In thousands)

Basis

Gains

Losses

Value

June 30, 2020

State and municipal securities

$

10,519

$

582

$

—

$

11,101

Asset-backed securities

4,906

220

—

5,126

Government mortgage-backed securities

20,241

536

12

20,765

Total debt securities available-for-sale

$

35,666

$

1,338

$

12

$

36,992

December 31, 2019

State and municipal securities

$

10,808

$

398

$

—

$

11,206

Asset-backed securities

5,433

71

4

5,500

Government mortgage-backed securities

24,954

197

67

25,084

Total debt securities available-for-sale

$

41,195

$

666

$

71

$

41,790

The scheduled maturities of debt securities at June 30, 2020 are summarized in the table below. Actual maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be repaid without any penalties. Because mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary.

Available-for-Sale

Amortized

Fair

(In thousands)

Cost

Value

Due after one year through five years

$

1,204

$

1,229

Due after five years through ten years

912

917

Due after ten years

8,403

8,955

Government mortgage-backed securities

20,241

20,765

Asset-backed securities

4,906

5,126

$

35,666

$

36,992

There were no realized gains or losses on sales and calls during the six months ended June 30, 2020. During the six months ended June 30, 2019, gross realized gains on sales and calls were $216,000, and gross realized losses were $103,000.

Securities with carrying amounts of $25.9 million and $30.6 million were pledged to secure available borrowings with the Federal Reserve Bank and Federal Home Loan Bank at June 30, 2020 and December 31, 2019, respectively.

Other-than-temporary impairment assessment: Management assesses whether the decline in fair value of investment securities is other-than-temporary on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates impairments in value both qualitatively and quantitatively to assess whether they are other-than-temporary.

11

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, 2020 and December 31, 2019:

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, 2020

Temporarily impaired securities:

Government mortgage-backed securities

$

402

$

3

$

509

$

9

$

911

$

12

Total temporarily impaired debt securities

$

402

$

3

$

509

$

9

$

911

$

12

December 31, 2019

Temporarily impaired securities:

Asset-backed securities

$

606

$

4

$

—

$

—

$

606

$

4

Government mortgage-backed securities

5,207

8

5,418

59

10,625

67

Total temporarily impaired debt securities

$

5,813

$

12

$

5,418

$

59

$

11,231

$

71

Government mortgage-backed securities: The gross unrealized losses on government mortgage-backed securities were primarily attributable to relative changes in interest rates since the time of purchase. Management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. Furthermore, the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these securities before recovery of their cost basis, which may be maturity. Therefore, management does not consider these investments to be other-than-temporarily impaired at June 30, 2020.

 

(6)    Loans

A summary of loans is as follows:

At

At

June 30,

December 31,

2020

2019

(Dollars in thousands)

Amount

Amount

Commercial real estate

$

421,836

$

418,356

Commercial

760,828

451,791

Residential real estate

39,401

45,695

Construction and land development

57,087

46,763

Consumer

8,507

12,737

1,287,659

975,342

Allowance for loan losses

(17,158)

(13,844)

Deferred loan fees, net

(5,410)

(2,212)

Net loans

$

1,265,091

$

959,286

12

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, 2020 and 2019:

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, 2020

$

6,499

$

8,057

$

213

$

789

$

1,049

$

67

$

16,674

Charge-offs

—

(142)

—

—

(284)

—

(426)

Recoveries

—

—

—

—

38

—

38

Provision (credit)

259

472

(6)

166

48

(67)

872

Balance at June 30, 2020

$

6,758

$

8,387

$

207

$

955

$

851

$

—

$

17,158

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

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, 2019

$

6,104

$

6,086

$

254

$

749

$

650

$

1

$

13,844

Charge-offs

—

(239)

—

—

(513)

—

(752)

Recoveries

—

7

4

—

84

—

95

Provision (credit)

654

2,533

(51)

206

630

(1)

3,971

Balance at June 30, 2020

$

6,758

$

8,387

$

207

$

955

$

851

$

—

$

17,158

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

13

The following table sets forth information regarding the allowance for loan losses and related loan balances by portfolio segment at June 30, 2020 and December 31, 2019:

(In thousands)

Commercial Real Estate

Commercial

Residential Real Estate

Construction and Land Development

Consumer

Unallocated

Total

June 30, 2020

Allowance for loan losses:

Ending balance:

Individually evaluated

for impairment

$

1,480

$

421

$

—

$

—

$

—

$

—

$

1,901

Ending balance:

Collectively evaluated

for impairment

5,278

7,966

207

955

851

—

15,257

Total allowance for loan

losses ending balance

$

6,758

$

8,387

$

207

$

955

$

851

$

—

$

17,158

Loans:

Ending balance:

Individually evaluated

for impairment

$

22,269

$

4,618

$

163

$

—

$

—

$

27,050

Ending balance:

Collectively evaluated

for impairment

399,567

756,210

39,238

57,087

8,507

1,260,609

Total loans ending balance

$

421,836

$

760,828

$

39,401

$

57,087

$

8,507

$

1,287,659

(In thousands)

Commercial Real Estate

Commercial

Residential Real Estate

Construction and Land Development

Consumer

Unallocated

Total

December 31, 2019

Allowance for loan losses:

Ending balance:

Individually evaluated

for impairment

$

1,508

$

174

$

—

$

—

$

—

$

—

$

1,682

Ending balance:

Collectively evaluated

for impairment

4,596

5,912

254

749

650

1

12,162

Total allowance for loan

losses ending balance

$

6,104

$

6,086

$

254

$

749

$

650

$

1

$

13,844

Loans:

Ending balance:

Individually evaluated

for impairment

$

20,990

$

3,326

$

182

$

165

$

—

$

24,663

Ending balance:

Collectively evaluated

for impairment

397,366

448,465

45,513

46,598

12,737

950,679

Total loans ending balance

$

418,356

$

451,791

$

45,695

$

46,763

$

12,737

$

975,342

14

The following tables set forth information regarding non-accrual loans and loan delinquencies by portfolio segment at June 30, 2020 and December 31, 2019:

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, 2020

Commercial real estate

$

—

$

—

$

786

$

786

$

421,050

$

421,836

$

—

$

20,865

Commercial

—

50

301

351

760,477

760,828

—

4,309

Residential real estate

328

185

721

1,234

38,167

39,401

—

844

Construction and

land development

—

—

—

—

57,087

57,087

—

—

Consumer

38

18

21

77

8,430

8,507

—

21

Total

$

366

$

253

$

1,829

$

2,448

$

1,285,211

$

1,287,659

$

—

$

26,039

December 31, 2019

Commercial real estate

$

473

$

18,256

$

1,368

$

20,097

$

398,259

$

418,356

$

—

$

1,701

Commercial

529

85

484

1,098

450,693

451,791

—

2,955

Residential real estate

715

154

832

1,701

43,994

45,695

—

969

Construction and

land development

—

—

165

165

46,598

46,763

—

165

Consumer

111

58

38

207

12,530

12,737

—

37

Total

$

1,828

$

18,553

$

2,887

$

23,268

$

952,074

$

975,342

$

—

$

5,827

15

The following tables provide information with respect to the Company’s impaired loans:

June 30, 2020

December 31, 2019

Unpaid

Unpaid

Recorded

Principal

Related

Recorded

Principal

Related

(In thousands)

Investment

Balance

Allowance

Investment

Balance

Allowance

With no related allowance recorded:

Commercial real estate

$

1,557

$

1,557

$

—

$

2,070

$

2,082

$

—

Commercial

363

370

—

1,348

1,745

—

Residential real estate

163

163

—

182

182

—

Construction and land development

—

—

—

165

165

—

Consumer

—

—

—

—

—

—

Total impaired with no related allowance

2,083

2,090

—

3,765

4,174

—

With an allowance recorded:

Commercial real estate

20,712

20,792

1,480

18,920

18,921

1,508

Commercial

4,255

4,845

421

1,978

2,085

174

Residential real estate

—

—

—

—

—

—

Construction and land development

—

—

—

—

—

—

Consumer

—

—

—

—

—

—

Total impaired with an allowance recorded

24,967

25,637

1,901

20,898

21,006

1,682

Total

Commercial real estate

22,269

22,349

1,480

20,990

21,003

1,508

Commercial

4,618

5,215

421

3,326

3,830

174

Residential real estate

163

163

—

182

182

—

Construction and land development

—

—

—

165

165

—

Consumer

—

—

—

—

—

—

Total impaired loans

$

27,050

$

27,727

$

1,901

$

24,663

$

25,180

$

1,682

16

Three Months Ended June 30,

2020

2019

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

(In thousands)

Investment

Recognized

Investment

Recognized

With no related allowance recorded:

Commercial real estate

$

1,565

$

9

$

1,831

$

9

Commercial

371

4

1,053

7

Residential real estate

164

2

382

3

Construction and land development

83

—

—

—

Consumer

—

—

—

—

Total impaired with no related allowance

2,183

15

3,266

19

With an allowance recorded:

Commercial real estate

20,879

41

—

—

Commercial

4,484

—

4,701

—

Residential real estate

—

—

—

—

Construction and land development

—

—

—

—

Consumer

—

—

—

—

Total impaired with an allowance recorded

25,363

41

4,701

—

Total

Commercial real estate

22,444

50

1,831

9

Commercial

4,855

4

5,754

7

Residential real estate

164

2

382

3

Construction and land development

83

—

—

—

Consumer

—

—

—

—

Total impaired loans

$

27,546

$

56

$

7,967

$

19

Six Months Ended June 30,

2020

2019

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

(In thousands)

Investment

Recognized

Investment

Recognized

With no related allowance recorded:

Commercial real estate

$

1,573

$

28

$

1,838

$

30

Commercial

383

10

1,120

13

Residential real estate

164

5

384

8

Construction and land development

110

—

—

—

Consumer

—

—

—

—

Total impaired with no related allowance

2,230

43

3,342

51

With an allowance recorded:

Commercial real estate

20,936

252

—

—

Commercial

4,596

1

4,994

—

Residential real estate

—

—

—

—

Construction and land development

—

—

—

—

Consumer

—

—

—

—

Total impaired with an allowance recorded

25,532

253

4,994

—

Total

Commercial real estate

22,509

280

1,838

30

Commercial

4,979

11

6,114

13

Residential real estate

164

5

384

8

Construction and land development

110

—

—

—

Consumer

—

—

—

—

Total impaired loans

$

27,762

$

296

$

8,336

$

51

17

Troubled debt restructurings: Loans are considered to be troubled debt restructurings (“TDRs”) when the Company has granted concessions to a borrower due to the borrower’s financial condition that it otherwise would not have considered. These concessions may include modifications of the terms of the debt such as deferral of payments, extension of maturity, reduction of principal balance, reduction of the stated interest rate other than normal market rate adjustments, or a combination of these concessions. Debt may be bifurcated with separate terms for each tranche of the restructured debt. Restructuring of a loan in lieu of aggressively enforcing the collection of the loan may benefit the Company by increasing the ultimate probability of collection.

Restructured loans are classified as accruing or non-accruing based on management’s assessment of the collectability of the loan. Loans which are already on nonaccrual status at the time of the restructuring generally remain on nonaccrual status for approximately six months before management considers such loans for return to accruing status. Accruing restructured loans are placed into nonaccrual status if and when the borrower fails to comply with the restructured terms and management deems it unlikely that the borrower will return to a status of compliance in the near term.

TDRs are reported as such for at least one year from the date of the restructuring. In years after the restructuring, troubled debt restructured loans are removed from this classification if the restructuring did not involve a below-market rate concession and the loan is not deemed to be impaired based on the terms specified in the restructuring agreement.

The following tables summarize TDRs entered into during the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

2020

2019

(Dollars in thousands)

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Troubled debt restructurings:

Commercial real estate

2

$

165

$

165

—

$

—

$

—

Commercial

1

81

81

—

—

—

3

$

246

$

246

—

$

—

$

—

Six Months Ended June 30,

2020

2019

(Dollars in thousands)

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Troubled debt restructurings:

Commercial real estate

9

$

18,811

$

20,311

—

$

—

$

—

Commercial

1

81

81

1

1,963

1,963

10

$

18,892

$

20,392

1

$

1,963

$

1,963

During the six months ended June 30, 2020, the Company approved 10 TDRs. Of the 10 troubled debt restructurings, seven were for one commercial real estate loan relationship totaling $20.1 million. The Bank analyzed the relationship and modified the relationship as follows:

$16.5 million was placed on interest-only payments for three years at a reduced rate;

$2.1 million was restructured to amortize and pay out over a 10-year term at a reduced rate; and

$1.5 million was advanced for necessary capital expenditures. The advance was placed on interest-only payments for three years at a reduced rate.

This commercial relationship is currently on non-accrual until satisfactory demonstration of payments. An impairment analysis was performed and a specific reserve of $1.4 million was allocated to this relationship. As of June 30, 2020, the loan relationship has been paying as agreed upon in the modified terms.

18

The Bank approved two troubled debt restructurings for another commercial real estate relationship totaling $165,000. These loans have a reduced rate for a period of two years. An impairment analysis was performed and a specific reserve of $8,000 was allocated to this relationship. The Bank also approved one troubled debt restructuring of a commercial loan totaling $81,000. This commercial loan was placed on an extended six-month interest-only period with a new term and re-amortization to follow. An impairment analysis was performed and a specific reserve of $40,000 was allocated to this relationship.

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.

For the three and six months ended June 30, 2020 and 2019 there were no payment defaults on troubled debt restructured loans modified within the previous 12 months.

As of June 30, 2020, there were no significant commitments to lend additional funds to borrowers whose loans had been restructured.

The recorded investment in TDRs was $23.9 million and $4.2 million at June 30, 2020 and December 31, 2019, respectively.

The following tables present the Company’s loans by risk rating and portfolio segment at June 30, 2020 and December 31, 2019:

(In thousands)

Commercial Real Estate

Commercial

Residential Real Estate

Construction
‎and Land
‎Development

Consumer

Total

June 30, 2020

Grade:

Pass

$

386,553

$

738,468

$

—

$

57,087

$

—

$

1,182,108

Special mention

14,418

14,112

—

—

—

28,530

Substandard

20,865

8,248

1,132

—

—

30,245

Not formally rated

—

—

38,269

—

8,507

46,776

Total

$

421,836

$

760,828

$

39,401

$

57,087

$

8,507

$

1,287,659

December 31, 2019

Grade:

Pass

$

396,217

$

433,076

$

—

$

46,598

$

—

$

875,891

Special mention

1,936

14,044

—

—

—

15,980

Substandard

20,203

4,671

1,379

165

—

26,418

Not formally rated

—

—

44,316

—

12,737

57,053

Total

$

418,356

$

451,791

$

45,695

$

46,763

$

12,737

$

975,342

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.

19

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. Ongoing monitoring is based upon the borrower’s payment activity.

 

(7)    Deposits

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

June 30,

December 31,

(In thousands)

2020

2019

NOW and demand

$

502,772

$

369,423

Regular savings

154,747

115,593

Money market deposits

291,872

270,471

Total non-certificate accounts

949,391

755,487

Certificate accounts of $250,000 or more

19,610

15,575

Certificate accounts less than $250,000

151,484

78,843

Total certificate accounts

171,094

94,418

Total deposits

$

1,120,485

$

849,905

 

(8)    Borrowings

Advances consist of funds borrowed the Federal Home Loan Bank (the “FHLB”) and the Federal Reserve Bank (the “FRB”) borrower-in-custody (“BIC”) program. Maturities of advances from the FHLB and FRB as of June 30, 2020 are summarized as follows:

(In thousands)

Fiscal Year-End

Dollar Amount

2020

$

28,521

2021

5,000

2023

8,500

Total

$

42,021

Borrowings from the FRB BIC program are secured by a Uniform Commercial Code (“UCC”) financing statement on qualified collateral, consisting of certain commercial loans and qualified mortgage-backed government securities. At June 30, 2020, FRB borrowings consisted of overnight borrowings totaling $25.0 million and had an interest rate of 0.25%.

Borrowings from the FHLB, which aggregated $17.0 million at June 30, 2020, 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 loans and qualified mortgage-backed government securities. The interest rates on FHLB advances ranged from 1.96% to 3.01%, and the weighted average interest rate on FHLB advances was 2.54% at June 30, 2020. All of the FHLB borrowings at June 30, 2020 are long-term with an original maturity of more than one year.

 

(9)    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:

20

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 debt securities available-for-sale 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, 2020 and December 31, 2019:

Fair Value Measurements at Reporting Date Using

Significant

Significant

Other Observable

Unobservable

Inputs

Inputs

(In thousands)

Total

Level 1

Level 2

Level 3

June 30, 2020

State and municipal securities

$

11,101

$

—

$

11,101

$

—

Asset-backed securities

5,126

—

5,126

—

Mortgage-backed securities

20,765

—

20,765

—

Totals

$

36,992

$

—

$

36,992

$

—

December 31, 2019

State and municipal securities

$

11,206

$

—

$

11,206

$

—

Asset-backed securities

5,500

—

5,500

—

Mortgage-backed securities

25,084

—

25,084

—

Totals

$

41,790

$

—

$

41,790

$

—

Fair Values of Assets Measured on a Non-Recurring Basis

The Company may also be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from the application of lower-of-cost-or market accounting or write-downs of individual assets.

Certain impaired loans were adjusted to fair value, less cost to sell, of the underlying collateral securing these loans resulting in losses. The loss is not recorded directly as an adjustment to current earnings, but rather as a component in determining the allowance for loan losses. Fair value was measured using appraised values of collateral and adjusted as necessary by management based on unobservable inputs for specific properties.

21

The following summarizes assets measured at fair value on a nonrecurring basis at June 30, 2020 and December 31, 2019:

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, 2020

Impaired loans

Commercial real estate

$

553

$

—

$

—

$

553

Commercial

3,834

—

—

3,834

Totals

$

4,387

$

—

$

—

$

4,387

December 31, 2019

Impaired loans

Commercial real estate

$

215

$

—

$

—

$

215

Commercial

1,805

—

—

1,805

Totals

$

2,020

$

—

$

—

$

2,020

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, 2020 and December 31, 2019:

(In thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

June 30, 2020

Impaired loans

Commercial real estate

$

553

Real estate appraisals

Discount for dated appraisals

6 - 10%

Commercial

3,834

Business valuation

Comparable company evaluations

—

December 31, 2019

Impaired loans

Commercial real estate

$

215

Real estate appraisals

Discount for dated appraisals

6 - 10%

Commercial

1,805

Business valuation

Comparable company evaluations

—

Fair Values 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.

22

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, 2020 and December 31, 2019:

Carrying

Fair Value

(In thousands)

Amount

Level 1

Level 2

Level 3

Total

June 30, 2020

Financial assets:

Cash and cash equivalents

$

38,178

$

38,178

$

—

$

—

$

38,178

Available-for-sale securities

36,992

—

36,992

—

36,992

Federal Home Loan Bank of Boston stock

1,050

N/A

N/A

N/A

N/A

Loans, net

1,265,091

—

—

1,278,953

1,278,953

Accrued interest receivable

4,756

—

4,756

—

4,756

Financial liabilities:

Deposits

1,120,485

—

1,121,459

—

1,121,459

Borrowings

42,021

—

42,710

—

42,710

December 31, 2019

Financial assets:

Cash and cash equivalents

$

59,658

$

59,658

$

—

$

—

$

59,658

Available-for-sale securities

41,790

—

41,790

—

41,790

Federal Home Loan Bank of Boston stock

1,416

N/A

N/A

N/A

N/A

Loans, net

959,286

—

—

958,270

958,270

Accrued interest receivable

2,854

—

2,854

—

2,854

Financial liabilities:

Deposits

849,905

—

850,774

—

850,774

Borrowings

24,998

—

25,351

—

25,351

 

(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.

The Bank is subject to capital regulations that require a Common Equity Tier 1 (“CET1”) capital ratio of 4.5%, a minimum Tier 1 capital to risk-weighted assets ratio of 6.0%, a minimum total capital to risk-weighted assets ratio of 8.0% and a minimum Tier 1 leverage ratio of 4.0%. CET1 generally consists of common stock and retained earnings, subject to applicable adjustments and deductions. 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, 2020 and December 31, 2019, the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

Applicable 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. At June 30, 2020, the Bank exceeded the regulatory requirement for the capital conservation buffer.

In September 2019, the federal banking agencies adopted a final rule to implement Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, effective January 1, 2020, establishing a community bank leverage ratio (“CBLR”) framework for community banking organizations having total consolidated assets of less than $10 billion, having a leverage ratio of greater than 9%, and satisfying other criteria, such as limitations on the amount of off-balance sheet exposures and on trading assets and liabilities. A community banking organization that qualifies for and elects to use the CBLR framework and that maintains a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the banking agencies’ generally applicable capital rules and, if applicable, will be considered to have met the well-capitalized ratio requirements for purposes of Section 38 of the Federal Deposit Insurance Act. The final rule includes a two-quarter grace period during which a qualifying banking organization that temporarily fails to meet any of the qualifying criteria, including the greater than 9% leverage ratio requirement, generally would still be deemed well-capitalized so long as the banking organization maintains a leverage ratio greater than 8%. At the end of the grace period, the banking organization must meet all qualifying criteria to remain in the community bank

23

leverage ratio framework or otherwise must comply with and report under the generally applicable rule. The CARES Act temporarily lowered the community bank leverage ratio to 8%. As of June 30, 2020, the Bank has not opted into the CBLR framework.

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, 2020

Total Capital (to Risk Weighted Assets)

$

189,668

14.72

%

103,053

>

8.0

%

$

128,816

>

10.0

%

Tier 1 Capital (to Risk Weighted Assets)

173,553

13.47

77,290

>

6.0

103,053

>

8.0

Common Equity Tier 1 Capital (to Risk Weighted Assets)

173,553

13.47

57,967

>

4.5

83,731

>

6.5

Tier 1 Capital (to Average Assets)

173,553

13.10

52,991

>

4.0

66,239

>

5.0

December 31, 2019

Total Capital (to Risk Weighted Assets)

$

181,135

17.62

%

$

82,238

>

8.0

%

$

102,798

>

10.0

%

Tier 1 Capital (to Risk Weighted Assets)

168,273

16.37

61,679

>

6.0

82,238

>

8.0

Common Equity Tier 1 Capital (to Risk Weighted Assets)

168,273

16.37

46,259

>

4.5

66,819

>

6.5

Tier 1 Capital (to Average Assets)

168,273

15.18

44,352

>

4.0

55,440

>

5.0

Liquidation Accounts

Upon the completion of Old Provident’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 Old Provident 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.

Upon the completion of the Conversion, special “liquidation accounts” for the benefit of certain depositors of the 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 2019 prospectus plus the MHC’s net assets (excluding its ownership of the Company) were established by the Company and the Bank. The Company and the Bank are not permitted to pay dividends on their capital stock if the shareholders’ equity of the Company, or the shareholder’s equity of the 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.

 

(11)    Employee Stock Ownership Plan

Old Provident established an ESOP for its eligible employees to provide eligible employees the opportunity to own Old Provident stock. The plan is a tax-qualified plan for the benefit of all Bank employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax law limits. The ESOP acquired 721,876 shares in Old Provident’s initial stock offering with the proceeds of a loan totaling $3.6 million. The loan was payable annually over 15 years at a rate per annum equal to the prime rate. In conjunction with the Conversion, the Company refinanced the original loan to the ESOP with an additional $8.2 million payable over 15 years at a rate per annum equal to the prime rate (4.75% as December 31, 2019) to acquire an additional 816,992 shares at $10.00 per share, representing 8% of the shares sold in the Company’s second-step offering. After the Conversion, the unallocated shares had an average price of $8.20 per share. Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid. The number of shares committed to be released per year through 2033 is 89,757.

24

Shares held by the ESOP include the following:

June 30, 2020

December 31, 2019

Allocated

282,256

192,499

Committed to be allocated

44,879

89,757

Unallocated

1,211,733

1,256,612

Total

1,538,868

1,538,868

The fair value of unallocated shares was approximately $9.5 million at June 30, 2020.

Share amounts related to periods prior to the date of the Conversion (October 16, 2019) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (2.0212-to-one).

Total compensation expense recognized in connection with the ESOP for the three months ended June 30, 2020 and 2019 was $194,000 and $145,000, respectively. Total compensation expense recognized for the six months ended June 30, 2020 and 2019 was $444,000 and $281,000 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.

Three Months Ended

Six Months Ended

June 30,

June 30,

(Dollars in thousands, except per share amounts)

2020

2019

2020

2019

Net Income attributable to common shareholders

$

3,250

$

2,531

$

4,481

$

4,749

Average number of common shares issued

19,474,950

19,521,324

19,475,599

19,525,241

Less:

average unallocated ESOP shares

(1,219,215)

(528,896)

(1,230,434)

(538,797)

average unvested restricted stock

(105,629)

(160,360)

(113,744)

(168,330)

average treasury stock acquired

—

(73,333)

—

(73,333)

Average number of common shares outstanding

to calculate basic earnings per common share

18,150,106

18,758,735

18,131,421

18,744,781

Effect of dilutive unvested restricted stock and stock option awards

29,752

137,183

66,225

112,122

Average number of common shares outstanding

to calculate diluted earnings per common share

18,179,858

18,895,918

18,197,646

18,856,903

Earnings per common share:

Basic

$

0.18

$

0.13

$

0.25

$

0.25

Diluted

$

0.18

$

0.13

$

0.25

$

0.25

Share amounts related to periods prior to the date of the Conversion (October 16, 2019) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (2.0212-to-one).

 

25

(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 902,344. 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 360,935. Options and other awards vest in equal annual installments on each anniversary of the date of the grant over the vesting period, which is typically three years to 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.

The fair value of options granted in 2020 is based on the following assumptions:

2020

Vesting period (years)

3

Expiration date (years)

10

Expected volatility

30.92%

Expected life (years)

7.5

Expected dividend yield

—%

Risk free interest rate

1.74%

Fair value per option

$

4.60

A summary of the status of the Company’s stock option grants for the six months ended June 30, 2020 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, 2019

816,057

$

8.93

Granted

7,293

12.35

Forfeited

(9,844)

8.61

Exercised

—

—

Outstanding at June 30, 2020

813,506

$

8.96

6.45

$

—

Outstanding and expected to vest

at June 30, 2020

813,506

$

8.96

6.45

$

—

Vested and Exercisable

at June 30, 2020

465,994

$

8.73

6.25

$

—

Unrecognized compensation cost

$

693,000

Weighted average remaining

recognition period (years)

1.74

For the three months ended June 30, 2020 and 2019, total expense for the stock options was $104,000 and $103,000, respectively. For the six months ended June 30, 2020 and 2019, total expense for the stock options was $214,000 and $201,000, respectively.

26

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 six months ended June 30, 2020:

Unvested Restricted Stock Awards

Weighted Average Grant Date Price

Unvested restricted stock awards at January 1, 2020

140,019

$

9.19

Granted

2,430

12.35

Forfeited

(3,938)

8.61

Vested

—

—

Unvested restricted stock awards at June 30, 2020

138,511

$

9.26

Unrecognized compensation cost

$

917,000

Weighted average remaining recognition period (years)

1.70

For the three months ended June 30, 2020 and 2019, total expense for the restricted stock awards was $138,000 and $142,000, respectively. For the six months ended June 30, 2020 and 2019, total expense for the restricted stock awards was $289,000 and $309,000, respectively.

 

(14)    Leases

The Company recognized right-of-use assets totaling $4.3 million and $3.7 million and operating lease liabilities totaling $4.5 million and $3.9 million at June 30, 2020 and December 31, 2019, respectively. The lease liabilities recognized by the Company represent two leased branch locations and one loan production office.

Rent expense for the operating leases has been amortized over a straight line basis for the remaining lease term. For the six months ended June 30, 2020 and 2019, rent expense for the operating leases totaled $150,000 and $144,000, respectively. Variable lease components are expensed as incurred and are not included in the right-of-use assets and operating lease liabilities.

The following table presents information regarding the Company’s operating leases:

June 30,

December 31,

2020

2019

Weighted-average discount rate

3.53%

3.78%

Range of lease expiration dates

3 - 15.5 years

4.5 - 16 years

Range of lease renewal options

5 - 20 years

20 years

Weighted-average remaining lease term

28.0 years

31.9 years

27

The following table presents the undiscounted annual lease payments under the terms of the Company's operating leases at June 30, 2020, including a reconciliation to the present value of operating lease liabilities recognized in the unaudited Consolidated Balance Sheets:

(Dollars in thousands)

Fiscal Year-End

Dollar Amount

2020

$

126

2021

258

2022

261

2023

264

2024

270

Thereafter

6,604

Total lease payments

7,783

Less imputed interest

(3,249)

Total lease liabilities

$

4,534

The lease liabilities recognized include certain lease extensions as it is expected that the Company will use substantially all lease renewal options.

 

(15)    Asset Purchase

On January 17, 2020, the Company completed an asset purchase of a warehouse line of business, which comprised primarily of warehouse loans. This line of business was originally developed by United Bank in Connecticut. People’s United Bank, N.A. acquired United Bank in 2019 and made the business decision to no longer support the warehouse lending business developed by United Bank. On December 20, 2019, the Company entered into an agreement with People’s United Bank, N.A. to complete the asset purchase at par. The Company acquired the loan portfolio, plus aggregate accrued interest and fees, fixed assets, and prepaid expenses. The Company also assumed the employment contracts of the six employees in the department and agreed to pay all costs associated with the acquisition, which totaled $80,000 and were reflected in the Company’s income statement for the six months ended June 30, 2020.

 

The following table summarizes the consideration paid for the warehouse lending business and the amounts of assets purchased:

 

(In thousands)

Consideration:

Cash

$

66,962

Recognized amounts of identifiable assets acquired:

Loans

66,672

Accrued interest and fees

250

Premises and equipment

24

Other assets

16

Total identifiable assets

$

66,962

The Company paid par for the purchase. A valuation was performed and the fair value of the loans purchased approximates the purchase price.

 

(16)    Revenue Recognition

Revenue from contracts with customers in the scope of Accounting Standards Codification (“ASC”) ("Topic 606") is measured based on the consideration specified in the contract with a customer and excludes amounts collected on behalf of third parties. The Company recognizes revenue from contracts with customers when it satisfies its performance obligations.

The Company’s performance obligations are generally satisfied as services are rendered and can either be satisfied at a point in time or over time. Unsatisfied performance obligations at the report date are not material to our consolidated financial statements.

In certain cases, other parties are involved with providing services to our customers. If the Company is a principal in the transaction (providing services itself or through a third party on its behalf), revenues are reported based on the gross consideration received from the customer and any related expenses are reported gross in non-interest expense. If the Company is an agent in the transaction (referring to another party to provide services), the Company reports its net fee or commission retained as revenue.

28

The Company recognizes revenue that is transactional in nature and such revenue is earned at a point in time. Revenue that is recognized at a point in time includes card interchange fees (fee income related to debit card transactions), ATM fees, wire transfer fees, overdraft charge fees, and stop-payment and returned check fees. Additionally, revenue is collected from loan fees, such as letters of credit, line renewal fees and application fees. Such revenue is derived from transactional information and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer’s transaction.

 

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, 2020 and December 31, 2019 and for the three and six months ended June 30, 2020 and 2019 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, 2020 may not be indicative of results for all of 2020 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.

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may have to be increased if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.

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:

29

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, 2020 or during the year ended December 31, 2019.

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.

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.

30

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.

COVID-19 Response

During the second quarter of 2020, the Company has focused on meeting the needs of its customer base during the pandemic. The impact of our response during the second quarter is as follows:

Decreased customer service fees on deposit accounts of $92,000, or 25.8%, and decreased other service charges and fees of $245,000, or 48.4%, when comparing the three months ended June 30, 2020 to the three months ended June 30, 2019 primarily due to fees waived for customers;

Recognized additional reserves of $581,000 to address economic uncertainties and increased unemployment;

Originated loans as part of the SBA’s 7(a) Paycheck Protection Program totaling $78.0 million, which resulted in the collection of $2.8 million in fees from the SBA (which will be accreted as interest income over the shorter of the repayment period or the contractual life of these loans); and

Modified loans under the CARES Act totaling $264.2 million, or 20.6% of total loans.

Balance Sheet Analysis

Assets. Total assets were $1.41 billion at June 30, 2020, representing an increase of $293.0 million, or 26.1%, from $1.12 billion at December 31, 2019. The increase resulted primarily from increases in net loans of $305.8 million, bank owned life insurance of $9.3 million and accrued interest receivable of $1.9 million, partially offset by decreases in cash and cash equivalents of $21.5 million and available-for-sale investment securities of $4.8 million.

Cash and Cash Equivalents. Cash and cash equivalents decreased $21.5 million, or 36.0%, to $38.2 million at June 30, 2020 from $59.7 million at December 31, 2019. The decrease in cash and cash equivalents resulted primarily from the $67.0 million in cash used to purchase the warehouse business line, offset by deposit growth and the increase in borrowings.

Loans. At June 30, 2020, net loans were $1.27 billion, or 89.4% of total assets, compared to $959.3 million, or 85.5% of total assets, at December 31, 2019. Increases in commercial loans of $309.0 million, or 68.4%, construction and land development loans of $10.3 million, or 22.1%, and in commercial real estate loans of $3.5 million, or 0.8%, were partially offset by decreases in residential real estate loans of $6.3 million, or 13.8%, and consumer loans of $4.2 million, or 33.2%. Our commercial loan growth was primarily due to the purchase and continued growth of the warehouse business line, the origination of SBA PPP loans and a continued focus on our specialized enterprise value loans, partially offset by a decrease in our renewable energy loan portfolio. On January 17, 2020, the Company completed an asset purchase of a warehouse line of business from People’s United Bank, N.A. The warehouse business line increased $118.2 million, or 177.2%, to $184.8 million at June 30, 2020 from $66.7 million at January 17, 2020 due to the addition of customers to the portfolio. As of June 30, 2020, the Company originated $78.0 million in SBA PPP loans. Enterprise value loans increased $40.7 million, or 22.9%, to $233.6 million at June 30, 2020 from $178.0 million at December 31, 2019. Renewable energy loans decreased $7.3 million, or 11.1%, to $58.8 million at June 30, 2020 from $66.1 million at December 31, 2019 due to early payoffs.

31

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,

2020

2019

Amount

Percent

Amount

Percent

Commercial real estate

$

421,836

32.76%

$

418,356

42.89%

Commercial

760,828

59.09%

451,791

46.32%

Residential real estate

39,401

3.06%

45,695

4.69%

Construction and land development

57,087

4.43%

46,763

4.79%

Consumer

8,507

0.66%

12,737

1.31%

1,287,659

100.00%

975,342

100.00%

Allowance for loan losses

(17,158)

(13,844)

Deferred loan fees, net

(5,410)

(2,212)

Net loans

$

1,265,091

$

959,286

Securities. Investments in available-for-sale securities decreased $4.8 million, or 11.5%, to $37.0 million at June 30, 2020 from $41.8 million at December 31, 2019. The decrease was primarily due to principal paydowns on government mortgage-backed securities.

Bank Owned Life Insurance. Bank owned life insurance increased $9.3 million, or 34.5%, to $36.2 million at June 30, 2020 from $26.9 million at December 31, 2019. The increase was primarily due to the purchase of new insurance policies.

Accrued Interest Receivable. Accrued interest receivable increased $1.9 million, or 66.6%, to $4.8 million at June 30, 2020 from $2.9 million at December 31, 2019. The increase was primarily due to deferred interest on loan modifications as part of the CARES Act. As of June 30, 2020, we have modified 287 loans totaling $264.2 million, or 20.6%, of total loans. The deferred interest on the modifications will be due at the maturity of the loans which ranges from 2020 to 2049.

Deposits. Total deposits increased $270.6 million, or 31.8%, to $1.12 billion at June 30, 2020 from $849.9 million at December 31, 2019. The primary reason for the increase in deposits was due to an increase of $133.3 million, or 36.1%, in NOW and demand deposits, an increase of $76.7 million, or 81.2%, in time deposits, an increase of $39.2 million, or 33.9%, in savings accounts, and an increase of $21.4 million, or 25.7% in money market accounts. Money market deposits and NOW and demand deposits increased due to funds from the origination of PPP loans and our strategic deposit growth strategy. The increase in time deposits was primarily due to increases in brokered certificates of deposit of $65.6 million, or 135.0%, and an increase of $12.9 million, or 148.8%, from QwickRate, where we gather certificates of deposit nationwide by posting rates we will pay on these deposits. The increase in savings accounts was primarily due to municipal deposits and growth from our online deposit products.

Borrowings. Borrowings at June 30, 2020 consisted of FHLB advances and FRB borrowings from the borrower-in-custody program and at December 31, 2019 consisted of FHLB advances. Borrowings increased $17.0 million, or 68.1%, to $42.0 million at June 30, 2020 from $25.0 million at December 31, 2019. The increase was primarily to funding loan growth.

Shareholders’ Equity. Total shareholders’ equity increased $5.4 million, or 2.3%, to $236.3 million at June 30, 2020, from $230.9 million at December 31, 2019. The increase was due to year-to-date net income of $4.5 million, stock-based compensation expense of $503,000, other comprehensive income of $544,000 and ESOP shares earned of $444,000, partially offset by a decrease of $583,000 from dividends declared. Book value per share increased to $12.14 at June 30, 2020 from $11.86 at December 31, 2019.

32

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)

2020

2019

Non-accrual loans:

Real estate:

Commercial

$

20,865

$

1,701

Residential

844

969

Construction and land development

—

165

Commercial

4,309

2,955

Consumer

21

37

Total non-accrual loans

26,039

5,827

Accruing loans past due 90 days or more

—

—

Other real estate owned

—

—

Total non-performing assets

$

26,039

$

5,827

Total loans (1)

$

1,282,249

$

973,130

Total assets

$

1,414,812

$

1,121,788

Total non-performing loans to total loans (1)

2.03%

0.60%

Total non-performing assets to total assets

1.84%

0.52%

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

Non-accrual loans as of June 30, 2020 consisted primarily of one commercial real estate relationship and two commercial relationships. The commercial real estate loan relationship with a total balance of $20.1 million became impaired in 2019 and in 2020, a troubled debt restructure was completed. The loan was placed on non-accrual status until the relationship can demonstrate the ability to pay the loan under the restructured terms. The loan relationship was evaluated and specific reserves of $1.4 million were allocated in 2019 and remain as of June 30, 2020.

Of the two commercial relationships, the larger relationship totals $2.0 million. The impaired relationship was evaluated and specific reserves of $149,000 were allocated as of June 30, 2020. The other commercial relationship totaling $1.8 million was 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. The impaired loan relationship was evaluated and specific reserves of $126,000 were allocated as of June 30, 2020.

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.

33

The Company is working with customers affected by COVID-19. As a result of the current economic crisis caused by the COVID-19 virus, the Company is engaging in more frequent communication with borrowers to better understand their situation and challenges faced. The extent to which industries, or the tangential impact of those industries to other borrowers or industries are impacted, will likely be in direct proportion to the duration and depth of the COVID-19 pandemic. As COVID-19 has made working-from-home more commonplace the demand for office space has decreased, therefore we identified the office space sector as an additional “at-risk” industry in the second quarter of 2020. We had total balances in the following industry types considered to be “at-risk” of significant impact as of June 30, 2020:

Commercial
‎Real Estate

Commercial

Total

(In thousands)

Amount

Percent

Amount

Percent

Amount

Percent

Restaurant/fast food

$

17,256

4.1

%

$

10,967

1.4

%

$

28,223

2.4

%

Office

51,277

12.2

—

—

51,277

4.3

Hotel/motel/inn

28,147

6.7

120

—

28,267

2.4

Amusement and recreation centers

—

—

14,648

1.9

14,648

1.2

Gas stations

17,689

4.2

1,014

0.1

18,703

1.6

Non-essential retail

33,252

7.9

81,642

10.7

114,894

9.7

$

147,621

35.1

%

$

108,391

14.1

%

$

256,012

21.6

%

We identified 35.1% of total commercial real estate loans and 14.1% of the commercial loans as being at-risk.

The non-essential retail commercial real estate loans are secured by a mix of retail spaces, including strip centers, convenience stores, and apparel and hobby shops. Non-essential retail commercial loans include the following sectors:

(In thousands)

Commercial

Apparel

$

314

Automotive

1,999

Beverage

1,601

Commercial print

2,181

Furniture

4,215

General

855

Home & garden

8,028

Personal services

6,250

Professional services

19,058

Repairs and maintenance

10,427

Sporting goods & hobbies

5,834

Transit services

4,794

Wholesale

16,086

$

81,642

The Company has established a modification program in accordance with applicable regulations to provide economic relief. In working with our borrowers, the Company has provided up to six month payment deferrals. Under the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for the COVID-19 modifications and therefore will not be classified as troubled debt restructurings.

34

The following table summarizes the modifications by deferment period and modification type.

June 30, 2020

Payment Deferred

Interest Only

Total Modified

(Dollars in thousands)

Balance

Number of loans

Balance

Number of loans

Balance

Number of loans

3-month

$

43,350

51

$

18,081

25

$

61,431

76

5-month

4,824

3

—

—

4,824

3

6-month

94,430

116

103,553

92

197,983

208

$

142,604

170

$

121,634

117

$

264,238

287

As of June 30, 2020, the Company modified 287 loans totaling $264.2 million or 20.6% of the total loan portfolio. Included in those modifications were 132 modified commercial real estate loans totaling $139.0 million, or 33.0% of the commercial real estate loan portfolio, 146 modified commercial loans totaling $113.3 million, or 14.9% of the commercial loan portfolio, two modified construction and land development loans totaling $11.2 million, or 19.7% of the construction and land development loan portfolio and seven residential loans totaling $718,000, or 1.8% of the residential loan portfolio. As of June 30, 2020, total deferred interest for all modified loans was $2.2 million. In order to mitigate the risk associated with these modifications the Company has incorporated covenants that require borrowers to submit quarterly financial statements, prohibits them from distributing funds to any owner or stockholder (with the exception of payroll) and also prohibits them from making any payments on debt owed to subordinated debt holders for the duration of their modification. Under the CARES Act, these modifications are not classified as TDRs and are not considered delinquent.

The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) program called the Paycheck Protection Program (“PPP”). An eligible business can apply for a PPP loan up to a greater of: (1) 2.5 times its average monthly “payroll costs;” or (2) $10.0 million. PPP loans will have: (a) an interest rate of 1.0%, (b) a five-year loan term to maturity for loans made on or after June 5, 2020 (loans made prior to June 5, 2020 have a two-year term, however borrowers and lenders may mutually agree to extend the maturity for such loans to five years); and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be forgiven under the PPP if employee and compensation levels of the business are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 4% of the loan proceeds used for other qualifying expenses.

As of June 30, 2020, the Company originated 341 loans totaling $78.0 million under the PPP and received $2.8 million in fee income from the SBA for the origination. The fee income was deferred and is being accreted over the shorter of the repayment period or the contractual life of these loans. The Company recognized $255,000 of this fee income into interest income in the second quarter of 2020.

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 loan growth, portfolio composition, delinquent and non-accrual loans, national and local business and economic conditions and loss experience and an overall evaluation of the quality of the underlying collateral.

35

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

Six Months Ended

June 30,

(Dollars in thousands)

2020

2019

Allowance at beginning of period

$

13,844

$

11,680

Provision for loan losses

3,971

2,816

Charge offs:

Real estate:

Commercial

—

—

Residential

—

—

Construction and land development

—

—

Commercial

239

2,223

Consumer

513

547

Total charge-offs

752

2,770

Recoveries:

Real estate:

Commercial

—

—

Residential

4

4

Construction and land development

—

—

Commercial

7

15

Consumer

84

45

Total recoveries

95

64

Net charge-offs

657

2,706

Allowance at end of period

$

17,158

$

11,790

Non-performing loans at end of period

$

26,039

$

5,418

Total loans outstanding at end of period (1)

1,282,249

896,916

Average loans outstanding during the period (1)

1,138,223

872,912

Allowance to non-performing loans

65.89%

217.61%

Allowance to total loans outstanding at end of period

1.34%

1.31%

Net charge-offs to average loans outstanding during the period (annualized)

0.12%

0.62%

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

During the six months ended June 30, 2020, total net charge-offs were $657,000 compared to net charge-offs of $2.7 million for the same period in 2019. Charge-offs in 2020 primarily resulted from one BancAlliance relationship and purchased consumer loans. The Bank accepted a short-sale that resulted in a charge-off of $97,000 on a $490,000 commercial loan relationship that was originated through the BancAlliance network. As of June 30, 2020, we had $6.4 million in loans originated through BancAlliance network outstanding. Our last BancAlliance loan origination was in 2017, and at this time we are not anticipating originating any new loans through this network.

During the six months ended June 30, 2020, the Bank had net charge-offs of $418,000 in unsecured consumer loans that were purchased through the BancAlliance Lending Club Program. This program encompasses loans risk graded by Lending Club as A through C with a 680 minimum credit score, out of a possible risk grade of A through G. The Lending Club retains the servicing of these loans. As of June 30, 2020, we had $8.2 million in outstanding consumer loans that were purchased through this program. Our last Lending Club investment purchase was in May 2018 and as of May 2019, we have stopped reinvesting any proceeds in new pools. At this time we are not anticipating purchasing any new loans through this network.

 

36

Results of Operations for the Three Months Ended June 30, 2020 and 2019

General. Net income increased $719,000, or 28.4%, to $3.3 million for the three months ended June 30, 2020 from $2.5 million for the three months ended June 30, 2019. The increase was primarily related to an increase of $2.4 million in net interest and dividend income, and a decrease in the provision for loan losses of $482,000, partially offset by a decrease in noninterest income of $352,000 and an increase in noninterest expense of $1.5 million and in increase in income tax expense of $367,000.

Interest and Dividend Income. Interest and dividend income increased $1.9 million, or 15.1%, to $14.6 million for the three months ended June 30, 2020 from $12.7 million for the three months ended June 30, 2019. This increase was attributable to an increase in interest and fees on loans, which increased $2.1 million, or 17.3%, to $14.4 million for the three months ended June 30, 2020 from $12.3 million for the three months ended June 30, 2019, partially offset by a decrease in interest and dividends on securities of $161,000, or 38.3%, to $259,000 for the three months ended June 30, 2020 from $420,000 for the three months ended June 30, 2019.

The increase in interest income on loans was due to an increase in the average balance of loans of $327.4 million, or 37.2%, to $1.21 billion for the three months ended June 30, 2020, from $880.5 million for the three months ended June 30, 2019. The increase was partially offset by a decrease in loan yields of 80 basis points to 4.77% for the three months ended June 30, 2020 due to a decrease in market interest rates.

The decrease in interest and dividends on securities was due to a decrease in the average balance of investment securities of $13.3 million, or 25.1%, to $39.8 million for the three months ended June 30, 2020 from $53.1 million for the three months ended June 30, 2019. In addition, interest and dividend income on securities decreased due to the yield on securities decreasing 56 basis points due to a decrease in market interest rates.

Interest Expense. Interest expense decreased $511,000, or 24.0%, to $1.6 million for the three months ended June 30, 2020 from $2.1 million for the three months ended June 30, 2019. The decrease was caused by a decrease in interest expense on deposits and a decrease in the interest expense on borrowings. Interest expense on borrowings decreased $423,000, or 70.6%, to $176,000 for the three months ended June 30, 2020 from $599,000 for the three months ended June 30, 2019 due to the decrease in market interest rates. The interest expense on borrowings decreased due to a decrease in the average balance of borrowings of $37.3 million, or 41.1%, to $53.4 million for the three months ended June 30, 2020 from $90.7 million for the three months ended June 30, 2019. Interest expense also decreased due to the yield on borrowings decreasing 132 basis points to 1.32% for the three months ended June 30, 2020 from 2.64% for the three months ended June 30, 2019.

Interest expense on deposits decreased $88,000, or 5.7%, to $1.4 million for the three months ended June 30, 2020 from $1.5 million for the three months ended June 30, 2019. This was due primarily to the yield on interest-bearing deposits decreasing 26 basis points to 0.83% for the three months ended June 30, 2020 from 1.09% for the three months ended June 30, 2019. The decrease in yield was partially offset by an increase in the average balance of interest-bearing deposits of $133.3 million, or 23.6%, to $697.5 million for the three months ended June 30, 2020 from $564.2 million for the three months ended June 30, 2019. The increase resulted primarily from an increase in the average balance of certificates of deposit, which increased $37.4 million, or 30.4%, and money market accounts, which increased $58.1 million, or 26.0%.

Net Interest and Dividend Income. Net interest and dividend income increased by $2.4 million, or 23.0%, to $13.0 million for the three months ended June 30, 2020 from $10.6 million for the three months ended June 30, 2019. The growth in net interest and dividend income this quarter over the prior year’s second quarter was primarily the result of an increase in our average interest earning assets of $324.1 million, or 34.4%, partially offset by the decrease in net interest margin of 38 basis points.

Provision for Loan Losses. The provision for loan losses was $872,000 for the three months ended June 30, 2020 compared to $1.4 million for the three months ended June 30, 2019. The changes in the provision were based on management’s assessment of loan portfolio growth and composition changes, historical charge-off trends, levels of problem loans and other asset quality trends. The decrease of $482,000, or 35.6%, was primarily due to net charge-offs of $1.4 million incurred in the second quarter of 2019 as compared to $388,000 of net charge-offs during the second quarter of 2020.

The Company has reviewed certain qualitative factors in light of significant economic deterioration due to COVID-19. As some businesses remain shut down and others operate at reduced capacities, the Company continues to work with borrowers and offer relief in the form of short-term payment deferrals as well as originating PPP loans through the SBA. There remains significant uncertainty of the full impact of COVID-19 as there is no set timeline as to when our customers can return to normal operations. As a result of the economic impact of COVID-19, increased provisions of $581,000 were recognized and 287 loans were modified totaling $264.2 million as of June 30, 2020.

37

The provision recorded resulted in an allowance for loan losses of $17.2 million, or 1.34% of total loans, at June 30, 2020, compared to $13.8 million, or 1.42% of total loans, at December 31, 2019, and $11.8 million, or 1.31% of total loans, at June 30, 2019. Included in total loans at June 30, 2020 was $78.0 million in PPP loans originated as part of the CARES Act where we have not provided for losses due to the SBA guarantee, which has lowered the allowance as a percentage of total loans. Excluding PPP loans, the allowance to total loans as of June 30, 2020 was 1.42%. As of June 30, 2020 the warehouse business line had $184.8 million in outstanding loans. These loans are assessed at a lower credit risk and do not carry the same allocation as a traditional commercial loan. As of June 30, 2020, $462,000 in reserves were allocated to the warehouse business line loans. Non-accrual loans as of June 30, 2020 consisted primarily of two commercial relationships and one commercial real estate relationship. Impairment was evaluated and specific reserves of $1.9 million were allocated to impaired loans as of June 30, 2020.

Noninterest Income. Noninterest income decreased $352,000, or 33.3%, to $704,000 for the three months ended June 30, 2020 compared to $1.1 million for the three months ended June 30, 2019. The decrease was primarily due to a decrease in other service charges and fees of $245,000, or 48.4%, and a decrease in customer service fees on deposit accounts of $92,000, or 25.8%. The decreases in other service charges and fees and customer service fees on deposit accounts were primarily due to waiving fees for customers impacted by COVID-19.

Noninterest Expense. Noninterest expense increased $1.5 million, or 21.5%, to $8.4 million for the three months ended June 30, 2020 compared to $6.9 million for the three months ended June 30, 2019. The increase was primarily due to an increase in salaries and employee benefits expense and other expense, partially offset by a decrease in occupancy expense and professional fees. The increase of $1.5 million, or 35.7%, for the three months ended June 30, 2020 in salary and employee benefits was primarily due to a higher number of sales and operations positions compared to the same period in 2019, the addition of staff from the warehouse business line purchase, and our ESOP expense which increased due to the acquisition of additional shares from our second-step conversion and related stock offering in October 2019. Other expense increased due to increased loan workout expenses. Occupancy expense decreased primarily due to the acceleration of our leasehold improvements amortization related to the closure of our Hampton, New Hampshire branch in 2019. Professional fees decreased primarily due to one-time consulting services incurred in 2019 to aid in implementing a continuous improvement culture and our development of deposit products and services.

Income Tax Provision. We recorded a provision for income taxes of $1.3 million for the three months ended June 30, 2020, reflecting an effective tax rate of 27.9%, compared to a provision of $889,000 for the three months ended June 30, 2019, reflecting an effective tax rate of 26.0%.

 

38

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,

2020

2019

Interest

Interest

Average

Earned/

Yield/

Average

Earned/

Yield/

Balance

Paid

Rate

Balance

Paid

Rate

(Dollars in thousands)

Assets:

Interest-earning assets:

Loans

$

1,207,921

$

14,391

4.77%

$

880,501

$

12,270

5.57%

Short-term investments

18,915

4

0.08%

8,859

41

1.85%

Investment securities

38,503

219

2.28%

49,188

366

2.98%

Federal Home Loan Bank stock

1,323

40

12.09%

3,986

54

5.42%

Total interest-earning assets

1,266,662

14,654

4.63%

942,534

12,731

5.40%

Non-interest earning assets

59,271

60,743

Total assets

$

1,325,933

$

1,003,277

Liabilities and shareholders' equity:

Interest-bearing liabilities:

Savings accounts

$

129,753

$

77

0.24%

$

109,052

$

78

0.29%

Money market accounts

281,457

516

0.73%

223,318

667

1.19%

NOW accounts

126,023

113

0.36%

108,963

113

0.41%

Certificates of deposit

160,295

737

1.84%

122,896

673

2.19%

Total interest-bearing deposits

697,528

1,443

0.83%

564,229

1,531

1.09%

Borrowings

53,438

176

1.32%

90,710

599

2.64%

Total interest-bearing liabilities

750,966

1,619

0.86%

654,939

2,130

1.30%

Noninterest-bearing liabilities:

Noninterest-bearing deposits

324,296

203,706

Other noninterest-bearing liabilities

15,659

14,361

Total liabilities

1,090,921

873,006

Total equity

235,012

130,271

Total liabilities and

equity

$

1,325,933

$

1,003,277

Net interest income

$

13,035

$

10,601

Interest rate spread (1)

3.77%

4.10%

Net interest-earning assets (2)

$

515,696

$

287,595

Net interest margin (3)

4.12%

4.50%

Average interest-earning assets to

interest-bearing liabilities

168.67%

143.91%

(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.

39

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, 2020

Compared to the Three Months Ended June 30, 2019

Increase (Decrease) Due to

Total

Rate

Volume

Increase
‎(Decrease)

(In thousands)

Interest-earning assets:

Loans

$

(1,966)

$

4,087

$

2,121

Short-term investments

(59)

22

(37)

Investment securities

(76)

(72)

(148)

Federal Home Loan Bank stock

38

(51)

(13)

Total interest-earning assets

(2,063)

3,986

1,923

Interest-bearing liabilities:

Savings accounts

(14)

13

(1)

Money market accounts

(298)

147

(151)

NOW accounts

(16)

17

1

Certificates of deposit

(119)

182

63

Total interest-bearing deposits

(447)

359

(88)

Borrowings

(232)

(191)

(423)

Total interest-bearing liabilities

(679)

168

(511)

Change in net interest income

$

(1,384)

$

3,818

$

2,434

 

Results of Operations for the Six Months Ended June 30, 2020 and 2019

General. Net income decreased $268,000, or 5.64%, to $4.4 million for the six months ended June 30, 2020 from $4.7 million for the six months ended June 30, 2019. The decrease was primarily related to an increase of $3.0 million in noninterest expense, an increase in provision for loan losses of $1.2 million, and a decrease in noninterest income of $388,000, partially offset by an increase in net interest and dividend income of $4.3 million.

Interest and Dividend Income. Interest and dividend income increased $3.9 million, or 15.7%, to $28.7 million for the six months ended June 30, 2020 from $24.9 million for the six months ended June 30, 2019. This increase was primarily attributable to an increase in interest and fees on loans, which increased $4.2 million, or 17.4%, to $28.2 million for the six months ended June 30, 2020 from $24.0 million for the six months ended June 30, 2019, partially offset by a decrease in interest and dividends on securities of $307,000, or 37.3%, to $517,000 for the six months ended June 30, 2020 from $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 $265.3 million, or 30.4%, to $1.14 billion for the six months ended June 30, 2020, from $872.9 million for the six months ended June 30, 2019. The increase was partially offset by a decrease in loan yields of 54 basis points to 4.95% for the six months ended June 30, 2020 due to a decrease in market interest rates.

The decrease in interest and dividends on securities was due to a decrease in the average balance of investment securities of $11.7 million, or 21.8%, to $42.0 million for the six months ended June 30, 2020 from $53.7 million for the six months ended June 30, 2019. In addition, interest and dividend income decreased due to the yield on securities decreasing 61 basis points due to a decrease in market interest rates.

Interest Expense. Interest expense decreased $465,000, or 11.3%, to $3.6 million for the six months ended June 30, 2020 from $4.1 million for the six months ended June 30, 2019. The decrease was caused by a decrease in interest expense on borrowings, partially offset by an increase in interest expense on deposits. Interest expense on borrowings decreased $586,000, or 51.7%, to $547,000 for the six months ended June 30, 2020 from $1.1 million for the six months ended June 30, 2019. The interest expense on borrowings decreased due to a decrease in the average balance of borrowings of $19.5 million, or 22.7%, to $66.2 million for the three months ended June 30, 2020 from $85.6 million for the three months ended June 30, 2019. Interest expense on borrowings also decreased due to the yield on

40

borrowings decreasing 100 basis points to 1.65% for the six months ended June 30, 2020 from 2.65% for the six months ended June 30, 2019 due to a decrease in market interest rates.

Interest expense on deposits increased $121,000, or 4.1%, to $3.1 million for the six months ended June 30, 2020 from $3.0 million for the three months ended June 30, 2019. This was due primarily to an increase in the average balance of interest-bearing deposits of $99.4 million, or 17.5%, to $666.3 million for the six months ended June 30, 2020 from $566.9 million for the six months ended June 30, 2019. The increase resulted primarily from an increase in the average balance of certificates of deposit, which increased $33.6 million, or 29.6%, and money market accounts, which increased $41.2 million, or 18.1%. The increase was partially offset by a decrease in the yield on interest-bearing deposits of 12 basis points to 0.93% for the six months ended June 30, 2020 from 1.05% for the six months ended June 30, 2019.

Net Interest and Dividend Income. Net interest and dividend income increased by $4.3 million, or 20.9%, to $25.1 million for the six months ended June 30, 2020 from $20.8 million for the six months ended June 30, 2019. The growth in net interest and dividend income was primarily the result of an increase in our average interest earning assets of $266.0 million, or 28.5%, partially offset by the decrease in net interest margin of 26 basis points.

Provision for Loan Losses. The provision for loan losses was $4.0 million for the six months ended June 30, 2020 compared to $2.8 million for the six months ended June 30, 2019. The changes in the provision were based on management’s assessment of economic conditions, including the impact of the COVID-19 pandemic, loan portfolio growth and composition changes, historical charge-off trends, levels of problem loans and other asset quality trends. During the six months ended June 30, 2020, we had $657,000 in loan net charge-offs compared to $2.7 million for the six months ended June 30, 2019.

The Company has reviewed certain qualitative factors in light of significant economic deterioration due to COVID-19. As some businesses remain shut down and others operate at reduced capacities, the Company continues to work with borrowers and offer relief in the form of short-term payment deferrals as well as originating PPP loans through the SBA. There remains significant uncertainty of the full impact of COVID-19 as there is no set timeline as to when our customers can return to normal operations. As a result of the economic impact of COVID-19, increased provisions of $1.3 million were recognized and 287 loans were modified totaling $264.2 million as of June 30, 2020.

The provision recorded resulted in an allowance for loan losses of $17.2 million, or 1.34% of total loans, at June 30, 2020, compared to $13.8 million, or 1.42% of total loans, at December 31, 2019, and $11.8 million, or 1.31% of total loans, at June 30, 2019. Included in total loans at June 30, 2020 was $78.0 million in PPP loans originated as part of the CARES Act where we have not provided for losses due to the SBA guarantee, which has lowered the allowance as a percentage of total loans. Excluding PPP loans, the allowance to total loans as of June 30, 2020 was 1.42%. As of June 30, 2020 the warehouse business line had $184.8 million in outstanding loans. These loans are assessed at a lower credit risk and do not carry the same allocation as a traditional commercial loan. As of June 30, 2020, $462,000 in reserves were allocated to the warehouse business line loans. Non-accrual loans as of June 30, 2020 consisted primarily of two commercial relationships and one commercial real estate relationship. Impairment was evaluated and specific reserves of $1.9 million were allocated to impaired loans as of June 30, 2020.

Noninterest Income. Noninterest income decreased $388,000, or 18.5%, to $1.7 million for the six months ended June 30, 2020 compared to $2.1 million for the six months ended June 30, 2019. The decrease is primarily due to a decrease in the gains on sales of securities of $113,000, or 100.0%. We repositioned some of our securities in 2019 by selling some municipal and mortgage backed securities that were close to maturity and reinvested into longer-term mortgage-backed securities. Other service charges and fees decreased $197,000, or 21.5%, and customer service fees on deposit accounts decreased $69,000, or 10.1%. The decreases in other service charges and fees and customer service fees on deposit accounts was primarily due to waiving fees for customers impacted by COVID-19.

Noninterest Expense. Noninterest expense increased $3.0 million, or 22.3%, to $16.6 million for the six months ended June 30, 2020 compared to $13.6 million for the six months ended June 30, 2019. The increase was primarily due to an increase in salaries and employee benefits expense, write-down of a note receivable, and other expense, partially offset by a decrease in occupancy expense and professional fees. The increase of $2.6 million, or 30.7%, for the six months ended June 30, 2020 in salary and employee benefits was primarily due to a higher number of sales and operations positions compared to the same period in 2019, the addition of staff from the warehouse business line purchase, and our ESOP expense which increased due to the acquisition of additional shares from our second-step conversion and related stock offering in October 2019. A write-down of a note receivable was completed after the Company evaluated the collectability and determined that $500,000 is uncollectible. Other expense increased due to increased loan workout expenses. Occupancy expense decreased primarily due to the acceleration of our leasehold improvements amortization related to the closure of our Hampton, New Hampshire branch in 2019. Professional fees decreased primarily due to one-time consulting services incurred in 2019 to aid in implementing 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, 2020 and 2019, reflecting an effective tax rate of 27.5% and 26.0% for the six months ended June 30, 2020 and 2019, respectively.

41

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,

2020

2019

Interest

Interest

Average

Earned/

Yield/

Average

Earned/

Yield/

Balance

Paid

Rate

Balance

Paid

Rate

(Dollars in thousands)

Assets:

Interest-earning assets:

Loans

$

1,138,223

$

28,151

4.95%

$

872,912

$

23,969

5.49%

Short-term investments

19,045

75

0.79%

6,620

67

2.02%

Investment securities

39,767

457

2.30%

49,980

738

2.95%

Federal Home Loan Bank stock

2,242

60

5.35%

3,761

86

4.57%

Total interest-earning assets

1,199,277

28,743

4.79%

933,273

24,860

5.33%

Non-interest earning assets

58,227

62,044

Total assets

$

1,257,504

$

995,317

Liabilities and shareholders' equity:

Interest-bearing liabilities:

Savings accounts

$

125,430

$

182

0.29%

$

113,518

$

186

0.33%

Money market accounts

268,669

1,221

0.91%

227,518

1,366

1.20%

NOW accounts

125,155

268

0.43%

112,451

229

0.41%

Certificates of deposit

147,057

1,418

1.93%

113,431

1,187

2.09%

Total interest-bearing deposits

666,311

3,089

0.93%

566,918

2,968

1.05%

Borrowings

66,154

547

1.65%

85,625

1,133

2.65%

Total interest-bearing liabilities

732,465

3,636

0.99%

652,543

4,101

1.26%

Noninterest-bearing liabilities:

Noninterest-bearing deposits

275,368

196,664

Other noninterest-bearing liabilities

15,694

15,303

Total liabilities

1,023,527

864,510

Total equity

233,977

130,807

Total liabilities and

equity

$

1,257,504

$

995,317

Net interest income

$

25,107

$

20,759

Interest rate spread (1)

3.80%

4.07%

Net interest-earning assets (2)

$

466,812

$

280,730

Net interest margin (3)

4.19%

4.45%

Average interest-earning assets to

interest-bearing liabilities

163.73%

143.02%

(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.

42

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, 2020

Compared to the Six Months Ended June 30, 2019

Increase (Decrease) Due to

Total

Rate

Volume

Increase
‎(Decrease)

(in thousands)

Interest-earning assets:

Loans

$

(2,558)

$

6,740

$

4,182

Short-term investments

(60)

68

8

Investment securities

(147)

(134)

(281)

Federal Home Loan Bank stock

13

(39)

(26)

Total interest-earning assets

(2,752)

6,635

3,883

Interest-bearing liabilities:

Savings accounts

(22)

19

(3)

Money Market accounts

(366)

221

(145)

NOW accounts

12

27

39

Certificates of deposit

(99)

329

230

Total interest-bearing deposits

(475)

596

121

Borrowings

(365)

(221)

(586)

Total interest-bearing liabilities

(840)

375

(465)

Change in net interest income

$

(1,912)

$

6,260

$

4,348

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 100 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, 2020.

At

June 30,

2020

(Dollars in thousands)

Estimated
‎Net Interest Income
‎Over Next 12 Months

Change

Changes in Interest Rates (Basis Points)

200

$

55,547

0.80%

0

55,095

—

-100

55,171

0.10%

43

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 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, 2020.

At

June 30,

2020

(Dollars in thousands)

Economic
‎Value of
‎Equity

Change

Changes in Interest Rates (Basis Points)

400

$

167,051

23.50%

300

161,027

19.00%

200

153,810

13.70%

100

146,429

8.20%

0

135,294

—

-100

100,579

(25.70)%

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, 2020, cash and cash equivalents totaled $38.2 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $37.0 million at June 30, 2020.

At June 30, 2020, we had the ability to borrow $179.2 million from the Federal Home Loan Bank of Boston. On that date, we had $17.0 million in advances outstanding. At June 30, 2020, we also had an available line of credit with the Federal Reserve Bank of Boston’s borrower-in-custody program of $219.2 million, of which $25.0 million 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, 2020 and December 31, 2019, we had $36.7 million and $29.4 million in loan commitments outstanding, respectively. In addition to commitments to originate loans, at June 30, 2020 and December 31, 2019, we had $203.9 million and $201.9 million in

44

unadvanced funds to borrowers, respectively. We also had $1.2 million and $1.5 million in outstanding letters of credit at June 30, 2020 and December 31, 2019, respectively.

A significant decrease in deposits could result in the Company having to seek other sources of funds, including brokered certificates of deposit, QwickRate deposits, 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. We believe, however, based on past experience that a significant portion of our deposits 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, 2020, excluding PPP loans of $78.0 million and warehouse business line growth of $118.2 million, we originated $179.0 million of loans, all of which were intended to be held in our portfolio, and purchased United Bank’s legacy ResX Warehouse Lending portfolio from People’s United Bank, N.A totaling $66.7 million. We did not purchase or sell any 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.

Financing activities consist primarily of activity in deposit accounts, and Federal Home Loan Bank and Federal Reserve Bank borrowings. We experienced a net increase in total deposits of $270.6 million and $35.3 million for the six months ended June 30, 2020 and 2019, 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 $17.0 million and $13.9 million during the six months ended June 30, 2020 and 2019, respectively.

The Bank is subject to various regulatory capital requirements administered by the Massachusetts Commissioner of Banks and the FDIC. At June 30, 2020, 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.

In October 2019, the Company successfully completed its second-step mutual-to-stock conversion that raised approximately $92 million in capital. The Company down-streamed 50% of the capital raised to the Bank. Based on the additional capital, the Company feels that it has sufficient capital to withstand an extended economic recession brought by the COVID-19. However, regulatory capital could be adversely impacted by further credit losses. With only 50% being down streamed to the Bank, the Company has adequate cash to cover dividend payments in the near term. The Company is prohibited from repurchasing its stock for a period of one year subsequent to the second-step conversion. The Company will not apply for early permission to repurchase its stock and will re-evaluate after the one-year period.

The Company maintains access to multiple sources of liquidity. We have utilized wholesale funding markets and have remained open but with rates that have been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession causes large numbers of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding.

 

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, 2020. 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, 2020, 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.

 

45

Item 1A. Risk Factors

Not applicable to a smaller reporting company.

 

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

(a)Not applicable.

(b)Not applicable.

(c)None.

 

Item 3. Defaults Upon Senior Securities

None.

 

Item 4. Mine Safety Disclosures

Not applicable.

 

Item 5. Other Information

None.

 
‎

46

Item 6. Exhibits

3.1

Articles of Incorporation of Provident Bancorp, Inc. (1)

3.2

Bylaws of Provident Bancorp, Inc. (1)

31.1

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

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following financial statements from the Provident Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, 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. 333-232018), initially filed with the Securities and Exchange Commission on June 7, 2019.

 
‎

47

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 7, 2020

/s/ David P. Mansfield

David P. Mansfield

President and Chief Executive Officer

Date:   August 7, 2020

/s/ Carol L. Houle

Carol L. Houle

Executive Vice President and Chief Financial Officer

 

48

 Exhibit 31.1

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 7, 2020

 

/s/ David P. Mansfield



 

David P. Mansfield



 

President and Chief Executive Officer



 

 



Exhibit 31.2

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 7, 2020

 

/s/ Carol L. Houle



 

Carol L. Houle



 

Executive Vice President and Chief Financial Officer



Exhibit 32

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, 2020 (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 7, 2020

 

/s/ David P. Mansfield



 

David P. Mansfield



 

President and Chief Executive Officer





 

 

Date:   August 7, 2020

 

/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.

v3.20.2
Document and Entity Information - shares
 6 Months Ended
Jun. 30, 2020
Aug. 03, 2020
Document and Entity Information [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 001-39090  
Entity Registrant Name Provident Bancorp, Inc  
Entity Incorporation, State or Country Code MD  
Entity Tax Identification Number 84-4132422  
Entity Address, Address Line One 5 Market Street  
Entity Address, City or Town Amesbury  
Entity Address, State or Province MA  
Entity Address, Postal Zip Code 01913  
City Area Code 978  
Local Phone Number 834-8555  
Title of 12(b) Security Common stock  
Trading Symbol PVBC  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Entity Ex Transition Period true  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   19,472,310
Entity Central Index Key 0001778784  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2020  
v3.20.2
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Assets    
Cash and due from banks $ 12,327 $ 11,990
Short-term investments 25,851 47,668
Cash and cash equivalents 38,178 59,658
Debt securities available-for-sale (at fair value) 36,992 41,790
Federal Home Loan Bank stock, at cost 1,050 1,416
Loans, net of allowance for loan losses of $17,158 and $13,844 as of June 30, 2020 and December 31, 2019, respectively 1,265,091 959,286
Bank owned life insurance 36,225 26,925
Premises and equipment, net 14,771 14,728
Accrued interest receivable 4,756 2,854
Right-of-use assets 4,336 3,713
Other assets 13,413 11,418
Total assets 1,414,812 1,121,788
Deposits:    
Noninterest-bearing 361,022 222,088
Interest-bearing 759,463 627,817
Total deposits 1,120,485 849,905
Borrowings 42,021 24,998
Operating lease liabilities 4,534 3,877
Other liabilities 11,450 12,075
Total liabilities 1,178,490 890,855
Shareholders' equity:    
Preferred stock; authorized 50,000 shares: no shares issued and outstanding
Common stock, $0.01 par value, 100,000,000 shares authorized; 19,472,310 and 19,473,818 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 195 195
Additional paid-in capital 146,778 146,174
Retained earnings 98,057 94,159
Accumulated other comprehensive income 1,002 458
Unearned compensation - ESOP (9,710) (10,053)
Total shareholders' equity 236,322 230,933
Total liabilities and shareholders' equity $ 1,414,812 $ 1,121,788
v3.20.2
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
CONSOLIDATED BALANCE SHEETS [Abstract]    
Loans, net of allowance for loan losses $ 17,158 $ 13,844
Preferred stock, shares authorized 50,000 50,000
Preferred Stock, shares issued 0 0
Preferred Stock, shares outstanding 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 19,472,310 19,473,818
Common stock, shares outstanding 19,472,310 19,473,818
v3.20.2
CONSOLIDATED STATEMENTS OF INCOME - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Interest and dividend income:        
Interest and fees on loans $ 14,391 $ 12,270 $ 28,151 $ 23,969
Interest and dividends on securities 259 420 517 824
Interest on short-term investments 4 41 75 67
Total interest and dividend income 14,654 12,731 28,743 24,860
Interest expense:        
Interest on deposits 1,443 1,531 3,089 2,968
Interest on borrowings 176 599 547 1,133
Total interest expense 1,619 2,130 3,636 4,101
Net interest and dividend income 13,035 10,601 25,107 20,759
Provision for loan losses 872 1,354 3,971 2,816
Net interest and dividend income after provision for loan losses 12,163 9,247 21,136 17,943
Noninterest income:        
Gain on sale of securities, net       113
Bank owned life insurance income 171 173 350 350
Other income 8 21 27 36
Total noninterest income 704 1,056 1,714 2,102
Noninterest expense:        
Salaries and employee benefits 5,799 4,274 11,201 8,568
Occupancy expense 429 550 870 1,194
Equipment expense 144 109 281 215
Data processing 195 150 396 354
Marketing expense 71 69 135 124
Professional fees 367 496 753 918
Directors' compensation 171 188 365 369
Software depreciation and implemenation 238 182 438 345
Write down of note receivable     500  
Other 947 865 1,728 1,542
Total noninterest expense 8,361 6,883 16,667 13,629
Income before income tax expense 4,506 3,420 6,183 6,416
Income tax expense 1,256 889 1,702 1,667
Net income $ 3,250 $ 2,531 $ 4,481 $ 4,749
Earnings per share:        
Basic [1] $ 0.18 $ 0.13 $ 0.25 $ 0.25
Diluted [1] $ 0.18 $ 0.13 $ 0.25 $ 0.25
Weighted Average Shares:        
Basic [1] 18,150,106 18,758,735 18,131,421 18,744,781
Diluted [1] 18,179,858 18,895,918 18,197,646 18,856,903
Customer Service Fees On Deposit Accounts [Member]        
Noninterest income:        
Fees and commission $ 264 $ 356 $ 616 $ 685
Service Charges And Fees - Other [Member]        
Noninterest income:        
Fees and commission $ 261 $ 506 $ 721 $ 918
[1] Amounts related to periods prior to the date of the Conversion (October 16, 2019) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (2.0212-to-one).
v3.20.2
CONSOLIDATED STATEMENTS OF INCOME (Parenthetical)
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
CONSOLIDATED STATEMENTS OF INCOME [Abstract]        
Exchange ratio 2.0212 2.0212 2.0212 2.0212
v3.20.2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]        
Net income $ 3,250 $ 2,531 $ 4,481 $ 4,749
Other comprehensive income:        
Unrealized holding gains arising during the period on debt securities available-for-sale 721 760 731 975
Reclassification adjustment for realized gains in net income       (113)
Unrealized gain 721 760 731 862
Income tax effect (160) (190) (187) (223)
Total other comprehensive income 561 570 544 639
Comprehensive income $ 3,811 $ 3,101 $ 5,025 $ 5,388
v3.20.2
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Unearned Compensation ESOP [Member]
Treasury Stock [Member]
Total
Balance at Dec. 31, 2018   $ 45,895 $ 83,351 $ (255) $ (2,619) $ (788) $ 125,584
Balance (in shares) at Dec. 31, 2018 [1] 19,455,503            
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income     4,749       4,749
Other comprehensive income       639     639
Stock-based compensation expense, net of forfeitures   510         510
Restricted stock award forfeiture (in shares) [1] (7,876)            
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 [1] 19,447,627            
Balance at Mar. 31, 2019   46,236 85,569 (186) (2,559) (788) 128,272
Balance (in shares) at Mar. 31, 2019 [1] 19,447,627            
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income     2,531       2,531
Other comprehensive income       570     570
Stock-based compensation expense, net of forfeitures   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 [1] 19,447,627            
Balance at Dec. 31, 2019 $ 195 146,174 94,159 458 (10,053)   230,933
Balance (in shares) at Dec. 31, 2019 [1] 19,473,818            
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income     4,481       4,481
Dividends declared     (583)       (583)
Other comprehensive income       544     544
Stock-based compensation expense, net of forfeitures   503         503
Restricted stock award grants net of forfeitures (in shares) [1] (1,508)            
ESOP shares earned   101     343   444
Balance at Jun. 30, 2020 $ 195 146,778 98,057 1,002 (9,710)   236,322
Balance (in shares) at Jun. 30, 2020 [1] 19,472,310            
Balance at Mar. 31, 2020 $ 195 146,500 95,390 441 (9,868)   232,658
Balance (in shares) at Mar. 31, 2020 [1] 19,476,248            
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income     3,250       3,250
Dividends declared     (583)       (583)
Other comprehensive income       561     561
Stock-based compensation expense, net of forfeitures   242         242
Restricted stock award forfeiture (in shares) [1] (3,938)            
ESOP shares earned   36     158   194
Balance at Jun. 30, 2020 $ 195 $ 146,778 $ 98,057 $ 1,002 $ (9,710)   $ 236,322
Balance (in shares) at Jun. 30, 2020 [1] 19,472,310            
[1] Amounts related to periods prior to the date of the Conversion (October 16, 2019) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (2.0212-to-one).
v3.20.2
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical)
 3 Months Ended 6 Months Ended
Jun. 30, 2020
$ / shares
Jun. 30, 2020
$ / shares
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY [Abstract]    
Dividends declared, per share $ 0.03 $ 0.03
Exchange ratio 2.0212 2.0212
v3.20.2
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Cash flows from operating activities:    
Net income $ 4,481 $ 4,749
Adjustments to reconcile net income to net cash provided by operating activities:    
Amortization of securities premiums, net of accretion 144 97
ESOP expense 444 281
Gain on sale of securities, net   (113)
Change in deferred loan fees, net 3,198 357
Provision for loan losses 3,971 2,816
Depreciation and amortization 538 768
Gain on disposals of premises and equipment   (9)
Increase in accrued interest receivable (1,652) (588)
Deferred tax benefit (1,977) (185)
Share-based compensation expense 503 510
Bank owned life insurance income (350) (350)
Principal repayments of operating lease obligations (36) (36)
Increase in other assets (186) (1,804)
Decrease in other liabilities (625) (2,129)
Net cash provided by operating activities 8,453 4,364
Cash flows from investing activities:    
Purchases of debt securities available-for-sale   (13,729)
Proceeds from sales of debt securities available-for-sale   13,565
Proceeds from pay downs, maturities and calls of debt securities available-for-sale 5,385 3,855
Redemption (purchase) of Federal Home Loan Bank stock 366 (1,186)
Loan originations and purchases, net of paydowns (246,302) (52,771)
Cash paid for warehouse asset purchase, net [1] (66,962)  
Additions to premises and equipment (490) (3,698)
Proceeds from the sale of equipment   85
Additions to other real estate owned   (64)
Purchase of bank owned life insurance (8,950)  
Net cash used in investing activities (316,953) (53,943)
Cash flows from financing activities:    
Net increase in noninterest-bearing accounts 138,934 24,204
Net increase in interest-bearing accounts 131,646 11,102
Cash dividends paid on common stock (583)  
Net change in short-term borrowings 25,023 13,941
Payments made on Federal Home Loan Bank long-term advances (8,000)  
Net cash provided by financing activities 287,020 49,247
Net decrease in cash and cash equivalents (21,480) (332)
Cash and cash equivalents at beginning of period 59,658 28,613
Cash and cash equivalents at end of period 38,178 28,281
Supplemental disclosures:    
Interest paid 3,636 4,126
Income taxes paid 3,380 2,391
Reclassification of premises and equipment to other assets 3  
Recognition of right-of-use assets 693 3,836
Recognition of operating lease liabilities $ 693 3,938
Reclassification of accrued rent from other liabilities to premises and equipment   $ 102
[1] See Note 15 for information regarding the warehouse asset purchase.
v3.20.2
Basis of Presentation
 6 Months Ended
Jun. 30, 2020
Basis of Presentation [Abstract]  
Basis of Presentation (1)    Basis of Presentation

The accompanying unaudited financial statements of Provident Bancorp, Inc., a Maryland 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, 2020 are not necessarily indicative of the results that may be expected for future periods, including the entire fiscal year. Certain amounts in 2019 have been reclassified to be consistent with the 2020 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 (the “SEC”) on March 13, 2020.

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, The Provident Bank, which also operates under the name BankProv (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.

 
v3.20.2
Corporate Structure
 6 Months Ended
Jun. 30, 2020
Corporate Structure [Abstract]  
Corporate Structure (2)    Corporate Structure

The Company is a Maryland corporation that was incorporated in June 2019 to be the successor corporation to Provident Bancorp, Inc. (“Old Provident”), a Massachusetts corporation, upon completion of the second-step mutual-to-stock conversion (the “Conversion”) of Provident Bancorp (the “MHC”), the top tier mutual holding company of Old Provident. Old Provident was the former mid-tier holding company for the Bank. Prior to completion of the Conversion, approximately 52% of the shares of common stock of Old Provident were owned by the MHC. In conjunction with the Conversion, the MHC was merged into the Company (and ceased to exist) and the Company became its successor under the name Provident Bancorp, Inc. The Conversion was completed on October 16, 2019. The Company raised gross proceeds of $102.1 million by selling 10,212,397 shares of common stock at $10.00 per share in the second-step stock offering. The Company utilized $8.2 million of the proceeds to lend to its Employee Stock Ownership Plan (“ESOP”) for the acquisition of an additional 816,992 shares at $10.00 per share. Expenses incurred related to the offering were $2.4 million, and have been recorded against offering proceeds. The Company invested $45.8 million of the net proceeds it received from the sale into the Bank’s operations and has retained the remaining amount for general corporate purposes. Concurrent with the completion of the stock offering, each share of Old Provident common stock owned by public stockholders (stockholders other than the MHC) was exchanged for 2.0212 shares of Company common stock. A total of 19,484,343 shares of common stock were outstanding following the completion of the stock offering.

The Bank, headquartered in Amesbury, Massachusetts 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 two loan production offices in Boston, Massachusetts and Ponte Vedra, Florida. The Bank provides a variety of financial services to small businesses and individuals. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are commercial mortgages and commercial loans.

 
v3.20.2
COVID-19
 6 Months Ended
Jun. 30, 2020
COVID-19 [Abstract]  
COVID-19 (3)    COVID-19

The outbreak of COVID-19 has adversely impacted a broad range of industries in which the Company’s customers operate and could impair their ability to fulfill their financial obligations. The World Health Organization declared COVID-19 to be a global pandemic indicating that almost all public commerce and related business activities were to be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The spread of the outbreak has caused significant disruption in the U.S. economy and has disrupted banking and other financial activity in the areas in which the Company operates.

The U.S. government and regulatory agencies have taken several actions to provide support to the U.S. economy. Most notably, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020 as a $2 trillion legislative package. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The CARES Act also includes extensive emergency funding for hospitals and providers. In addition to the general impact of the COVID-19 pandemic, certain provisions of the CARES Act, as well as other recent legislative and regulatory relief efforts, are expected to have a material impact on the Company’s operations. Also, the actions of the Board of Governors of the Federal Reserve System (the “FRB”) to combat the

economic contraction caused by the COVID-19 pandemic, including the reduction of the target federal funds rate and quantitative easing programs, could, if prolonged, adversely affect the Company’s net interest income and margins, and profitability.

Federal banking agencies issued guidance encouraging financial institutions to work with borrowers that may be unable to meet contractual obligations due to the effects of COVID-19. In addition, section 4013 of the CARES Act states, “banks may elect not to categorize loan modifications as TDRs [troubled debt restructurings] if they are (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020.” The Company did not classify any modifications related to COVID-19 which met other CARES Act conditions as TDRs.

The Company implemented its business continuity and pandemic plans, which include remote working arrangements for the majority of its workforce. While there has been no material impact to the Company’s employees as of this report date, if COVID-19 escalates further it could also potentially create business continuity issues. The Company does not currently anticipate significant challenges to its ability to maintain systems and controls in light of the measures the Company has taken to prevent the spread of COVID-19. While it is not possible to know the full extent of these impacts as of the date of this filing, detailed below are potentially material items of which we are aware.

Financial position and results of operations

The Company’s fee income will be reduced due to COVID-19. In keeping with the guidance from regulators, the Company is actively working with COVID-19 affected customers to waive fees from a variety of sources, such as, but not limited to, insufficient funds, account maintenance, minimum balance, and ATM fees. These reductions in fees are thought to be temporary in conjunction with the length of the expected COVID-19 related economic crisis. At this time, the Company is unable to project the materiality of such an impact.

The Company’s interest income could be reduced due to COVID-19. In keeping with the guidance from the regulators, the Company is actively working with COVID-19 affected borrowers to defer payments, interest and fees. While interest and fees will accrue to income through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. As a result, interest income in future periods could be negatively impacted.

Allowance for loan losses

Continued uncertainty regarding the severity and duration of the COVID-19 pandemic and related economic effects will continue to affect the accounting for credit losses, which could cause the provision for loan losses to increase. It also is possible that asset quality could worsen, expenses associated with collection efforts could increase and loan charge-offs could increase. The Company is actively participating in the Small Business Administration’s (“SBA’s”) Paycheck Protection Program (“PPP”), providing loans to small businesses negatively impacted by the COVID-19 pandemic. PPP loans are fully guaranteed by the U.S. government; if that should change, the Company could be required to increase its allowance for loan losses through an additional provision for loan losses charged to earnings.

In accordance with guidance issued by federal banking agencies, the Company is actively working with borrowers that may be unable to meet contractual obligations due to the effects of COVID-19. As of June 30, 2020, the Company modified 287 loans totaling $264.2 million or 20.6% of the total loan portfolio. In order to mitigate the risk associated with these modifications the Company has incorporated covenants that require borrowers to submit quarterly financial statements, prohibits them from distributing funds to any owner or stockholder (with the exception of payroll) and also prohibits them from making any payments on debt owed to subordinated debt holders for the duration of their modification. If borrowers are unable return to their normal payment plan following their modification period, the Company could be required to increase its allowance for loan losses through an additional provision for loan losses charged to earnings.

Valuation

Valuation and fair value measurement challenges may occur. For example, COVID-19 could cause further and sustained decline in the financial markets or the occurrence of what management would deem a valuation triggering event that could result in an impairment charge to earnings, such as our investment securities.

 
v3.20.2
Recent Accounting Pronouncements
 6 Months Ended
Jun. 30, 2020
Recent Accounting Pronouncements [Abstract]  
Recent Accounting Pronouncements (4)    Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 the current “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. On October 16, 2019, FASB approved a delay on the implementation until January 2023 for smaller reporting companies as defined by the SEC. The amendments in this update will be effective for the Company on January 1, 2023. 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 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. The Company adopted the provision of ASU 2018-13 effective January 1, 2020 and the adoption did not have a material impact on the consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This ASU simplifies the accounting for income taxes and is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Certain provisions under ASU 2019-12 require prospective application, some require modified retrospective application through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, while other provisions require retrospective application to all periods presented in the consolidated financial statements upon adoption. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), to ease the potential burden in accounting for recognizing the effects of reference rate reform on financial reporting. Such challenges include the accounting and operational implications for contract modifications and hedge accounting. The provisions in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to loan and lease agreements, contracts, hedging relationships, and other transactions affected by reference rate reform. These provisions apply to contract modifications that reference LIBOR or another reference rate expected to be discounted because of reference rate reform. Qualifying modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification would be considered "minor" so that any existing unamortized deferred loan origination fees and costs would carry forward and continue to be amortized. Qualifying modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for hedge accounting.

 

ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022, with adoption permitted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected, the amendments must be applied prospectively for all eligible contract modifications. The Company is currently evaluating the effect that this ASU will have on the Company’s consolidated financial statements. 
v3.20.2
Investment Securities
 6 Months Ended
Jun. 30, 2020
Investment Securities [Abstract]  
Investment Securities (5)    Investment Securities

The following summarizes the amortized cost of investment securities classified as available-for-sale and their approximate fair values at June 30, 2020 and December 31, 2019:

Amortized

Gross

Gross

Cost

Unrealized

Unrealized

Fair

(In thousands)

Basis

Gains

Losses

Value

June 30, 2020

State and municipal securities

$

10,519

$

582

$

—

$

11,101

Asset-backed securities

4,906

220

—

5,126

Government mortgage-backed securities

20,241

536

12

20,765

Total debt securities available-for-sale

$

35,666

$

1,338

$

12

$

36,992

December 31, 2019

State and municipal securities

$

10,808

$

398

$

—

$

11,206

Asset-backed securities

5,433

71

4

5,500

Government mortgage-backed securities

24,954

197

67

25,084

Total debt securities available-for-sale

$

41,195

$

666

$

71

$

41,790

The scheduled maturities of debt securities at June 30, 2020 are summarized in the table below. Actual maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be repaid without any penalties. Because mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary.

Available-for-Sale

Amortized

Fair

(In thousands)

Cost

Value

Due after one year through five years

$

1,204

$

1,229

Due after five years through ten years

912

917

Due after ten years

8,403

8,955

Government mortgage-backed securities

20,241

20,765

Asset-backed securities

4,906

5,126

$

35,666

$

36,992

There were no realized gains or losses on sales and calls during the six months ended June 30, 2020. During the six months ended June 30, 2019, gross realized gains on sales and calls were $216,000, and gross realized losses were $103,000.

Securities with carrying amounts of $25.9 million and $30.6 million were pledged to secure available borrowings with the Federal Reserve Bank and Federal Home Loan Bank at June 30, 2020 and December 31, 2019, respectively.

Other-than-temporary impairment assessment: Management assesses whether the decline in fair value of investment securities is other-than-temporary on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates impairments in value both qualitatively and quantitatively to assess whether they are other-than-temporary.

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, 2020 and December 31, 2019:

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, 2020

Temporarily impaired securities:

Government mortgage-backed securities

$

402

$

3

$

509

$

9

$

911

$

12

Total temporarily impaired debt securities

$

402

$

3

$

509

$

9

$

911

$

12

December 31, 2019

Temporarily impaired securities:

Asset-backed securities

$

606

$

4

$

—

$

—

$

606

$

4

Government mortgage-backed securities

5,207

8

5,418

59

10,625

67

Total temporarily impaired debt securities

$

5,813

$

12

$

5,418

$

59

$

11,231

$

71

Government mortgage-backed securities: The gross unrealized losses on government mortgage-backed securities were primarily attributable to relative changes in interest rates since the time of purchase. Management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. Furthermore, the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these securities before recovery of their cost basis, which may be maturity. Therefore, management does not consider these investments to be other-than-temporarily impaired at June 30, 2020.

 
v3.20.2
Loans
 6 Months Ended
Jun. 30, 2020
Loans [Abstract]  
Loans (6)    Loans

A summary of loans is as follows:

At

At

June 30,

December 31,

2020

2019

(Dollars in thousands)

Amount

Amount

Commercial real estate

$

421,836

$

418,356

Commercial

760,828

451,791

Residential real estate

39,401

45,695

Construction and land development

57,087

46,763

Consumer

8,507

12,737

1,287,659

975,342

Allowance for loan losses

(17,158)

(13,844)

Deferred loan fees, net

(5,410)

(2,212)

Net loans

$

1,265,091

$

959,286

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, 2020 and 2019:

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, 2020

$

6,499

$

8,057

$

213

$

789

$

1,049

$

67

$

16,674

Charge-offs

—

(142)

—

—

(284)

—

(426)

Recoveries

—

—

—

—

38

—

38

Provision (credit)

259

472

(6)

166

48

(67)

872

Balance at June 30, 2020

$

6,758

$

8,387

$

207

$

955

$

851

$

—

$

17,158

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

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, 2019

$

6,104

$

6,086

$

254

$

749

$

650

$

1

$

13,844

Charge-offs

—

(239)

—

—

(513)

—

(752)

Recoveries

—

7

4

—

84

—

95

Provision (credit)

654

2,533

(51)

206

630

(1)

3,971

Balance at June 30, 2020

$

6,758

$

8,387

$

207

$

955

$

851

$

—

$

17,158

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

The following table sets forth information regarding the allowance for loan losses and related loan balances by portfolio segment at June 30, 2020 and December 31, 2019:

(In thousands)

Commercial Real Estate

Commercial

Residential Real Estate

Construction and Land Development

Consumer

Unallocated

Total

June 30, 2020

Allowance for loan losses:

Ending balance:

Individually evaluated

for impairment

$

1,480

$

421

$

—

$

—

$

—

$

—

$

1,901

Ending balance:

Collectively evaluated

for impairment

5,278

7,966

207

955

851

—

15,257

Total allowance for loan

losses ending balance

$

6,758

$

8,387

$

207

$

955

$

851

$

—

$

17,158

Loans:

Ending balance:

Individually evaluated

for impairment

$

22,269

$

4,618

$

163

$

—

$

—

$

27,050

Ending balance:

Collectively evaluated

for impairment

399,567

756,210

39,238

57,087

8,507

1,260,609

Total loans ending balance

$

421,836

$

760,828

$

39,401

$

57,087

$

8,507

$

1,287,659

(In thousands)

Commercial Real Estate

Commercial

Residential Real Estate

Construction and Land Development

Consumer

Unallocated

Total

December 31, 2019

Allowance for loan losses:

Ending balance:

Individually evaluated

for impairment

$

1,508

$

174

$

—

$

—

$

—

$

—

$

1,682

Ending balance:

Collectively evaluated

for impairment

4,596

5,912

254

749

650

1

12,162

Total allowance for loan

losses ending balance

$

6,104

$

6,086

$

254

$

749

$

650

$

1

$

13,844

Loans:

Ending balance:

Individually evaluated

for impairment

$

20,990

$

3,326

$

182

$

165

$

—

$

24,663

Ending balance:

Collectively evaluated

for impairment

397,366

448,465

45,513

46,598

12,737

950,679

Total loans ending balance

$

418,356

$

451,791

$

45,695

$

46,763

$

12,737

$

975,342

The following tables set forth information regarding non-accrual loans and loan delinquencies by portfolio segment at June 30, 2020 and December 31, 2019:

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, 2020

Commercial real estate

$

—

$

—

$

786

$

786

$

421,050

$

421,836

$

—

$

20,865

Commercial

—

50

301

351

760,477

760,828

—

4,309

Residential real estate

328

185

721

1,234

38,167

39,401

—

844

Construction and

land development

—

—

—

—

57,087

57,087

—

—

Consumer

38

18

21

77

8,430

8,507

—

21

Total

$

366

$

253

$

1,829

$

2,448

$

1,285,211

$

1,287,659

$

—

$

26,039

December 31, 2019

Commercial real estate

$

473

$

18,256

$

1,368

$

20,097

$

398,259

$

418,356

$

—

$

1,701

Commercial

529

85

484

1,098

450,693

451,791

—

2,955

Residential real estate

715

154

832

1,701

43,994

45,695

—

969

Construction and

land development

—

—

165

165

46,598

46,763

—

165

Consumer

111

58

38

207

12,530

12,737

—

37

Total

$

1,828

$

18,553

$

2,887

$

23,268

$

952,074

$

975,342

$

—

$

5,827

The following tables provide information with respect to the Company’s impaired loans:

June 30, 2020

December 31, 2019

Unpaid

Unpaid

Recorded

Principal

Related

Recorded

Principal

Related

(In thousands)

Investment

Balance

Allowance

Investment

Balance

Allowance

With no related allowance recorded:

Commercial real estate

$

1,557

$

1,557

$

—

$

2,070

$

2,082

$

—

Commercial

363

370

—

1,348

1,745

—

Residential real estate

163

163

—

182

182

—

Construction and land development

—

—

—

165

165

—

Consumer

—

—

—

—

—

—

Total impaired with no related allowance

2,083

2,090

—

3,765

4,174

—

With an allowance recorded:

Commercial real estate

20,712

20,792

1,480

18,920

18,921

1,508

Commercial

4,255

4,845

421

1,978

2,085

174

Residential real estate

—

—

—

—

—

—

Construction and land development

—

—

—

—

—

—

Consumer

—

—

—

—

—

—

Total impaired with an allowance recorded

24,967

25,637

1,901

20,898

21,006

1,682

Total

Commercial real estate

22,269

22,349

1,480

20,990

21,003

1,508

Commercial

4,618

5,215

421

3,326

3,830

174

Residential real estate

163

163

—

182

182

—

Construction and land development

—

—

—

165

165

—

Consumer

—

—

—

—

—

—

Total impaired loans

$

27,050

$

27,727

$

1,901

$

24,663

$

25,180

$

1,682

Three Months Ended June 30,

2020

2019

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

(In thousands)

Investment

Recognized

Investment

Recognized

With no related allowance recorded:

Commercial real estate

$

1,565

$

9

$

1,831

$

9

Commercial

371

4

1,053

7

Residential real estate

164

2

382

3

Construction and land development

83

—

—

—

Consumer

—

—

—

—

Total impaired with no related allowance

2,183

15

3,266

19

With an allowance recorded:

Commercial real estate

20,879

41

—

—

Commercial

4,484

—

4,701

—

Residential real estate

—

—

—

—

Construction and land development

—

—

—

—

Consumer

—

—

—

—

Total impaired with an allowance recorded

25,363

41

4,701

—

Total

Commercial real estate

22,444

50

1,831

9

Commercial

4,855

4

5,754

7

Residential real estate

164

2

382

3

Construction and land development

83

—

—

—

Consumer

—

—

—

—

Total impaired loans

$

27,546

$

56

$

7,967

$

19

Six Months Ended June 30,

2020

2019

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

(In thousands)

Investment

Recognized

Investment

Recognized

With no related allowance recorded:

Commercial real estate

$

1,573

$

28

$

1,838

$

30

Commercial

383

10

1,120

13

Residential real estate

164

5

384

8

Construction and land development

110

—

—

—

Consumer

—

—

—

—

Total impaired with no related allowance

2,230

43

3,342

51

With an allowance recorded:

Commercial real estate

20,936

252

—

—

Commercial

4,596

1

4,994

—

Residential real estate

—

—

—

—

Construction and land development

—

—

—

—

Consumer

—

—

—

—

Total impaired with an allowance recorded

25,532

253

4,994

—

Total

Commercial real estate

22,509

280

1,838

30

Commercial

4,979

11

6,114

13

Residential real estate

164

5

384

8

Construction and land development

110

—

—

—

Consumer

—

—

—

—

Total impaired loans

$

27,762

$

296

$

8,336

$

51

Troubled debt restructurings: Loans are considered to be troubled debt restructurings (“TDRs”) when the Company has granted concessions to a borrower due to the borrower’s financial condition that it otherwise would not have considered. These concessions may include modifications of the terms of the debt such as deferral of payments, extension of maturity, reduction of principal balance, reduction of the stated interest rate other than normal market rate adjustments, or a combination of these concessions. Debt may be bifurcated with separate terms for each tranche of the restructured debt. Restructuring of a loan in lieu of aggressively enforcing the collection of the loan may benefit the Company by increasing the ultimate probability of collection.

Restructured loans are classified as accruing or non-accruing based on management’s assessment of the collectability of the loan. Loans which are already on nonaccrual status at the time of the restructuring generally remain on nonaccrual status for approximately six months before management considers such loans for return to accruing status. Accruing restructured loans are placed into nonaccrual status if and when the borrower fails to comply with the restructured terms and management deems it unlikely that the borrower will return to a status of compliance in the near term.

TDRs are reported as such for at least one year from the date of the restructuring. In years after the restructuring, troubled debt restructured loans are removed from this classification if the restructuring did not involve a below-market rate concession and the loan is not deemed to be impaired based on the terms specified in the restructuring agreement.

The following tables summarize TDRs entered into during the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

2020

2019

(Dollars in thousands)

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Troubled debt restructurings:

Commercial real estate

2

$

165

$

165

—

$

—

$

—

Commercial

1

81

81

—

—

—

3

$

246

$

246

—

$

—

$

—

Six Months Ended June 30,

2020

2019

(Dollars in thousands)

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Troubled debt restructurings:

Commercial real estate

9

$

18,811

$

20,311

—

$

—

$

—

Commercial

1

81

81

1

1,963

1,963

10

$

18,892

$

20,392

1

$

1,963

$

1,963

During the six months ended June 30, 2020, the Company approved 10 TDRs. Of the 10 troubled debt restructurings, seven were for one commercial real estate loan relationship totaling $20.1 million. The Bank analyzed the relationship and modified the relationship as follows:

$16.5 million was placed on interest-only payments for three years at a reduced rate;

$2.1 million was restructured to amortize and pay out over a 10-year term at a reduced rate; and

$1.5 million was advanced for necessary capital expenditures. The advance was placed on interest-only payments for three years at a reduced rate.

This commercial relationship is currently on non-accrual until satisfactory demonstration of payments. An impairment analysis was performed and a specific reserve of $1.4 million was allocated to this relationship. As of June 30, 2020, the loan relationship has been paying as agreed upon in the modified terms.

The Bank approved two troubled debt restructurings for another commercial real estate relationship totaling $165,000. These loans have a reduced rate for a period of two years. An impairment analysis was performed and a specific reserve of $8,000 was allocated to this relationship. The Bank also approved one troubled debt restructuring of a commercial loan totaling $81,000. This commercial loan was placed on an extended six-month interest-only period with a new term and re-amortization to follow. An impairment analysis was performed and a specific reserve of $40,000 was allocated to this relationship.

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.

For the three and six months ended June 30, 2020 and 2019 there were no payment defaults on troubled debt restructured loans modified within the previous 12 months.

As of June 30, 2020, there were no significant commitments to lend additional funds to borrowers whose loans had been restructured.

The recorded investment in TDRs was $23.9 million and $4.2 million at June 30, 2020 and December 31, 2019, respectively.

The following tables present the Company’s loans by risk rating and portfolio segment at June 30, 2020 and December 31, 2019:

(In thousands)

Commercial Real Estate

Commercial

Residential Real Estate

Construction
‎and Land
‎Development

Consumer

Total

June 30, 2020

Grade:

Pass

$

386,553

$

738,468

$

—

$

57,087

$

—

$

1,182,108

Special mention

14,418

14,112

—

—

—

28,530

Substandard

20,865

8,248

1,132

—

—

30,245

Not formally rated

—

—

38,269

—

8,507

46,776

Total

$

421,836

$

760,828

$

39,401

$

57,087

$

8,507

$

1,287,659

December 31, 2019

Grade:

Pass

$

396,217

$

433,076

$

—

$

46,598

$

—

$

875,891

Special mention

1,936

14,044

—

—

—

15,980

Substandard

20,203

4,671

1,379

165

—

26,418

Not formally rated

—

—

44,316

—

12,737

57,053

Total

$

418,356

$

451,791

$

45,695

$

46,763

$

12,737

$

975,342

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. Ongoing monitoring is based upon the borrower’s payment activity.

 
v3.20.2
Deposits
 6 Months Ended
Jun. 30, 2020
Deposits [Abstract]  
Deposits (7)    Deposits

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

June 30,

December 31,

(In thousands)

2020

2019

NOW and demand

$

502,772

$

369,423

Regular savings

154,747

115,593

Money market deposits

291,872

270,471

Total non-certificate accounts

949,391

755,487

Certificate accounts of $250,000 or more

19,610

15,575

Certificate accounts less than $250,000

151,484

78,843

Total certificate accounts

171,094

94,418

Total deposits

$

1,120,485

$

849,905

 
v3.20.2
Borrowings
 6 Months Ended
Jun. 30, 2020
Borrowings [Abstract]  
Borrowings (8)    Borrowings

Advances consist of funds borrowed the Federal Home Loan Bank (the “FHLB”) and the Federal Reserve Bank (the “FRB”) borrower-in-custody (“BIC”) program. Maturities of advances from the FHLB and FRB as of June 30, 2020 are summarized as follows:

(In thousands)

Fiscal Year-End

Dollar Amount

2020

$

28,521

2021

5,000

2023

8,500

Total

$

42,021

Borrowings from the FRB BIC program are secured by a Uniform Commercial Code (“UCC”) financing statement on qualified collateral, consisting of certain commercial loans and qualified mortgage-backed government securities. At June 30, 2020, FRB borrowings consisted of overnight borrowings totaling $25.0 million and had an interest rate of 0.25%.

Borrowings from the FHLB, which aggregated $17.0 million at June 30, 2020, 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 loans and qualified mortgage-backed government securities. The interest rates on FHLB advances ranged from 1.96% to 3.01%, and the weighted average interest rate on FHLB advances was 2.54% at June 30, 2020. All of the FHLB borrowings at June 30, 2020 are long-term with an original maturity of more than one year.

 
v3.20.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2020
Fair Value Measurements [Abstract]  
Fair Value Measurements (9)    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 debt securities available-for-sale 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, 2020 and December 31, 2019:

Fair Value Measurements at Reporting Date Using

Significant

Significant

Other Observable

Unobservable

Inputs

Inputs

(In thousands)

Total

Level 1

Level 2

Level 3

June 30, 2020

State and municipal securities

$

11,101

$

—

$

11,101

$

—

Asset-backed securities

5,126

—

5,126

—

Mortgage-backed securities

20,765

—

20,765

—

Totals

$

36,992

$

—

$

36,992

$

—

December 31, 2019

State and municipal securities

$

11,206

$

—

$

11,206

$

—

Asset-backed securities

5,500

—

5,500

—

Mortgage-backed securities

25,084

—

25,084

—

Totals

$

41,790

$

—

$

41,790

$

—

Fair Values of Assets Measured on a Non-Recurring Basis

The Company may also be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from the application of lower-of-cost-or market accounting or write-downs of individual assets.

Certain impaired loans were adjusted to fair value, less cost to sell, of the underlying collateral securing these loans resulting in losses. The loss is not recorded directly as an adjustment to current earnings, but rather as a component in determining the allowance for loan losses. Fair value was measured using appraised values of collateral and adjusted as necessary by management based on unobservable inputs for specific properties.

The following summarizes assets measured at fair value on a nonrecurring basis at June 30, 2020 and December 31, 2019:

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, 2020

Impaired loans

Commercial real estate

$

553

$

—

$

—

$

553

Commercial

3,834

—

—

3,834

Totals

$

4,387

$

—

$

—

$

4,387

December 31, 2019

Impaired loans

Commercial real estate

$

215

$

—

$

—

$

215

Commercial

1,805

—

—

1,805

Totals

$

2,020

$

—

$

—

$

2,020

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, 2020 and December 31, 2019:

(In thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

June 30, 2020

Impaired loans

Commercial real estate

$

553

Real estate appraisals

Discount for dated appraisals

6 - 10%

Commercial

3,834

Business valuation

Comparable company evaluations

—

December 31, 2019

Impaired loans

Commercial real estate

$

215

Real estate appraisals

Discount for dated appraisals

6 - 10%

Commercial

1,805

Business valuation

Comparable company evaluations

—

Fair Values 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, 2020 and December 31, 2019:

Carrying

Fair Value

(In thousands)

Amount

Level 1

Level 2

Level 3

Total

June 30, 2020

Financial assets:

Cash and cash equivalents

$

38,178

$

38,178

$

—

$

—

$

38,178

Available-for-sale securities

36,992

—

36,992

—

36,992

Federal Home Loan Bank of Boston stock

1,050

N/A

N/A

N/A

N/A

Loans, net

1,265,091

—

—

1,278,953

1,278,953

Accrued interest receivable

4,756

—

4,756

—

4,756

Financial liabilities:

Deposits

1,120,485

—

1,121,459

—

1,121,459

Borrowings

42,021

—

42,710

—

42,710

December 31, 2019

Financial assets:

Cash and cash equivalents

$

59,658

$

59,658

$

—

$

—

$

59,658

Available-for-sale securities

41,790

—

41,790

—

41,790

Federal Home Loan Bank of Boston stock

1,416

N/A

N/A

N/A

N/A

Loans, net

959,286

—

—

958,270

958,270

Accrued interest receivable

2,854

—

2,854

—

2,854

Financial liabilities:

Deposits

849,905

—

850,774

—

850,774

Borrowings

24,998

—

25,351

—

25,351

 
v3.20.2
Regulatory Capital
 6 Months Ended
Jun. 30, 2020
Regulatory Capital [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.

The Bank is subject to capital regulations that require a Common Equity Tier 1 (“CET1”) capital ratio of 4.5%, a minimum Tier 1 capital to risk-weighted assets ratio of 6.0%, a minimum total capital to risk-weighted assets ratio of 8.0% and a minimum Tier 1 leverage ratio of 4.0%. CET1 generally consists of common stock and retained earnings, subject to applicable adjustments and deductions. 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, 2020 and December 31, 2019, the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

Applicable 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. At June 30, 2020, the Bank exceeded the regulatory requirement for the capital conservation buffer.

In September 2019, the federal banking agencies adopted a final rule to implement Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, effective January 1, 2020, establishing a community bank leverage ratio (“CBLR”) framework for community banking organizations having total consolidated assets of less than $10 billion, having a leverage ratio of greater than 9%, and satisfying other criteria, such as limitations on the amount of off-balance sheet exposures and on trading assets and liabilities. A community banking organization that qualifies for and elects to use the CBLR framework and that maintains a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the banking agencies’ generally applicable capital rules and, if applicable, will be considered to have met the well-capitalized ratio requirements for purposes of Section 38 of the Federal Deposit Insurance Act. The final rule includes a two-quarter grace period during which a qualifying banking organization that temporarily fails to meet any of the qualifying criteria, including the greater than 9% leverage ratio requirement, generally would still be deemed well-capitalized so long as the banking organization maintains a leverage ratio greater than 8%. At the end of the grace period, the banking organization must meet all qualifying criteria to remain in the community bank

leverage ratio framework or otherwise must comply with and report under the generally applicable rule. The CARES Act temporarily lowered the community bank leverage ratio to 8%. As of June 30, 2020, the Bank has not opted into the CBLR framework.

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, 2020

Total Capital (to Risk Weighted Assets)

$

189,668

14.72

%

103,053

>

8.0

%

$

128,816

>

10.0

%

Tier 1 Capital (to Risk Weighted Assets)

173,553

13.47

77,290

>

6.0

103,053

>

8.0

Common Equity Tier 1 Capital (to Risk Weighted Assets)

173,553

13.47

57,967

>

4.5

83,731

>

6.5

Tier 1 Capital (to Average Assets)

173,553

13.10

52,991

>

4.0

66,239

>

5.0

December 31, 2019

Total Capital (to Risk Weighted Assets)

$

181,135

17.62

%

$

82,238

>

8.0

%

$

102,798

>

10.0

%

Tier 1 Capital (to Risk Weighted Assets)

168,273

16.37

61,679

>

6.0

82,238

>

8.0

Common Equity Tier 1 Capital (to Risk Weighted Assets)

168,273

16.37

46,259

>

4.5

66,819

>

6.5

Tier 1 Capital (to Average Assets)

168,273

15.18

44,352

>

4.0

55,440

>

5.0

Liquidation Accounts

Upon the completion of Old Provident’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 Old Provident 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.

Upon the completion of the Conversion, special “liquidation accounts” for the benefit of certain depositors of the 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 2019 prospectus plus the MHC’s net assets (excluding its ownership of the Company) were established by the Company and the Bank. The Company and the Bank are not permitted to pay dividends on their capital stock if the shareholders’ equity of the Company, or the shareholder’s equity of the 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.

 
v3.20.2
Employee Stock Ownership Plan
 6 Months Ended
Jun. 30, 2020
Employee Stock Ownership Plan [Abstract]  
Employee Stock Ownership Plan (11)    Employee Stock Ownership Plan

Old Provident established an ESOP for its eligible employees to provide eligible employees the opportunity to own Old Provident stock. The plan is a tax-qualified plan for the benefit of all Bank employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax law limits. The ESOP acquired 721,876 shares in Old Provident’s initial stock offering with the proceeds of a loan totaling $3.6 million. The loan was payable annually over 15 years at a rate per annum equal to the prime rate. In conjunction with the Conversion, the Company refinanced the original loan to the ESOP with an additional $8.2 million payable over 15 years at a rate per annum equal to the prime rate (4.75% as December 31, 2019) to acquire an additional 816,992 shares at $10.00 per share, representing 8% of the shares sold in the Company’s second-step offering. After the Conversion, the unallocated shares had an average price of $8.20 per share. Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid. The number of shares committed to be released per year through 2033 is 89,757.

Shares held by the ESOP include the following:

June 30, 2020

December 31, 2019

Allocated

282,256

192,499

Committed to be allocated

44,879

89,757

Unallocated

1,211,733

1,256,612

Total

1,538,868

1,538,868

The fair value of unallocated shares was approximately $9.5 million at June 30, 2020.

Share amounts related to periods prior to the date of the Conversion (October 16, 2019) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (2.0212-to-one).

Total compensation expense recognized in connection with the ESOP for the three months ended June 30, 2020 and 2019 was $194,000 and $145,000, respectively. Total compensation expense recognized for the six months ended June 30, 2020 and 2019 was $444,000 and $281,000 respectively.

 
v3.20.2
Earnings Per Common Share
 6 Months Ended
Jun. 30, 2020
Earnings Per Common 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)

2020

2019

2020

2019

Net Income attributable to common shareholders

$

3,250

$

2,531

$

4,481

$

4,749

Average number of common shares issued

19,474,950

19,521,324

19,475,599

19,525,241

Less:

average unallocated ESOP shares

(1,219,215)

(528,896)

(1,230,434)

(538,797)

average unvested restricted stock

(105,629)

(160,360)

(113,744)

(168,330)

average treasury stock acquired

—

(73,333)

—

(73,333)

Average number of common shares outstanding

to calculate basic earnings per common share

18,150,106

18,758,735

18,131,421

18,744,781

Effect of dilutive unvested restricted stock and stock option awards

29,752

137,183

66,225

112,122

Average number of common shares outstanding

to calculate diluted earnings per common share

18,179,858

18,895,918

18,197,646

18,856,903

Earnings per common share:

Basic

$

0.18

$

0.13

$

0.25

$

0.25

Diluted

$

0.18

$

0.13

$

0.25

$

0.25

Share amounts related to periods prior to the date of the Conversion (October 16, 2019) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (2.0212-to-one).

 
v3.20.2
Share-Based Compensation
 6 Months Ended
Jun. 30, 2020
Share-Based Compensation [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 902,344. 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 360,935. Options and other awards vest in equal annual installments on each anniversary of the date of the grant over the vesting period, which is typically three years to 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.

The fair value of options granted in 2020 is based on the following assumptions:

2020

Vesting period (years)

3

Expiration date (years)

10

Expected volatility

30.92%

Expected life (years)

7.5

Expected dividend yield

—%

Risk free interest rate

1.74%

Fair value per option

$

4.60

A summary of the status of the Company’s stock option grants for the six months ended June 30, 2020 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, 2019

816,057

$

8.93

Granted

7,293

12.35

Forfeited

(9,844)

8.61

Exercised

—

—

Outstanding at June 30, 2020

813,506

$

8.96

6.45

$

—

Outstanding and expected to vest

at June 30, 2020

813,506

$

8.96

6.45

$

—

Vested and Exercisable

at June 30, 2020

465,994

$

8.73

6.25

$

—

Unrecognized compensation cost

$

693,000

Weighted average remaining

recognition period (years)

1.74

For the three months ended June 30, 2020 and 2019, total expense for the stock options was $104,000 and $103,000, respectively. For the six months ended June 30, 2020 and 2019, total expense for the stock options was $214,000 and $201,000, respectively.

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 six months ended June 30, 2020:

Unvested Restricted Stock Awards

Weighted Average Grant Date Price

Unvested restricted stock awards at January 1, 2020

140,019

$

9.19

Granted

2,430

12.35

Forfeited

(3,938)

8.61

Vested

—

—

Unvested restricted stock awards at June 30, 2020

138,511

$

9.26

Unrecognized compensation cost

$

917,000

Weighted average remaining recognition period (years)

1.70

For the three months ended June 30, 2020 and 2019, total expense for the restricted stock awards was $138,000 and $142,000, respectively. For the six months ended June 30, 2020 and 2019, total expense for the restricted stock awards was $289,000 and $309,000, respectively.

 
v3.20.2
Leases
 6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Leases (14)    Leases

The Company recognized right-of-use assets totaling $4.3 million and $3.7 million and operating lease liabilities totaling $4.5 million and $3.9 million at June 30, 2020 and December 31, 2019, respectively. The lease liabilities recognized by the Company represent two leased branch locations and one loan production office.

Rent expense for the operating leases has been amortized over a straight line basis for the remaining lease term. For the six months ended June 30, 2020 and 2019, rent expense for the operating leases totaled $150,000 and $144,000, respectively. Variable lease components are expensed as incurred and are not included in the right-of-use assets and operating lease liabilities.

The following table presents information regarding the Company’s operating leases:

June 30,

December 31,

2020

2019

Weighted-average discount rate

3.53%

3.78%

Range of lease expiration dates

3 - 15.5 years

4.5 - 16 years

Range of lease renewal options

5 - 20 years

20 years

Weighted-average remaining lease term

28.0 years

31.9 years

The following table presents the undiscounted annual lease payments under the terms of the Company's operating leases at June 30, 2020, including a reconciliation to the present value of operating lease liabilities recognized in the unaudited Consolidated Balance Sheets:

(Dollars in thousands)

Fiscal Year-End

Dollar Amount

2020

$

126

2021

258

2022

261

2023

264

2024

270

Thereafter

6,604

Total lease payments

7,783

Less imputed interest

(3,249)

Total lease liabilities

$

4,534

The lease liabilities recognized include certain lease extensions as it is expected that the Company will use substantially all lease renewal options.

 
v3.20.2
Asset Purchase
 6 Months Ended
Jun. 30, 2020
Asset Purchase [Abstract]  
Asset Purchase (15)    Asset Purchase

On January 17, 2020, the Company completed an asset purchase of a warehouse line of business, which comprised primarily of warehouse loans. This line of business was originally developed by United Bank in Connecticut. People’s United Bank, N.A. acquired United Bank in 2019 and made the business decision to no longer support the warehouse lending business developed by United Bank. On December 20, 2019, the Company entered into an agreement with People’s United Bank, N.A. to complete the asset purchase at par. The Company acquired the loan portfolio, plus aggregate accrued interest and fees, fixed assets, and prepaid expenses. The Company also assumed the employment contracts of the six employees in the department and agreed to pay all costs associated with the acquisition, which totaled $80,000 and were reflected in the Company’s income statement for the six months ended June 30, 2020.

 

The following table summarizes the consideration paid for the warehouse lending business and the amounts of assets purchased:

 

(In thousands)

Consideration:

Cash

$

66,962

Recognized amounts of identifiable assets acquired:

Loans

66,672

Accrued interest and fees

250

Premises and equipment

24

Other assets

16

Total identifiable assets

$

66,962

The Company paid par for the purchase. A valuation was performed and the fair value of the loans purchased approximates the purchase price.

 
v3.20.2
Revenue Recognition
 6 Months Ended
Jun. 30, 2020
Revenue Recognition [Abstract]  
Revenue Recognition (16)    Revenue Recognition

Revenue from contracts with customers in the scope of Accounting Standards Codification (“ASC”) ("Topic 606") is measured based on the consideration specified in the contract with a customer and excludes amounts collected on behalf of third parties. The Company recognizes revenue from contracts with customers when it satisfies its performance obligations.

The Company’s performance obligations are generally satisfied as services are rendered and can either be satisfied at a point in time or over time. Unsatisfied performance obligations at the report date are not material to our consolidated financial statements.

In certain cases, other parties are involved with providing services to our customers. If the Company is a principal in the transaction (providing services itself or through a third party on its behalf), revenues are reported based on the gross consideration received from the customer and any related expenses are reported gross in non-interest expense. If the Company is an agent in the transaction (referring to another party to provide services), the Company reports its net fee or commission retained as revenue.

The Company recognizes revenue that is transactional in nature and such revenue is earned at a point in time. Revenue that is recognized at a point in time includes card interchange fees (fee income related to debit card transactions), ATM fees, wire transfer fees, overdraft charge fees, and stop-payment and returned check fees. Additionally, revenue is collected from loan fees, such as letters of credit, line renewal fees and application fees. Such revenue is derived from transactional information and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer’s transaction.

 
v3.20.2
Basis of Presentation (Policy)
 6 Months Ended
Jun. 30, 2020
Basis of Presentation [Abstract]  
Basis of Presentation The accompanying unaudited financial statements of Provident Bancorp, Inc., a Maryland 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, 2020 are not necessarily indicative of the results that may be expected for future periods, including the entire fiscal year. Certain amounts in 2019 have been reclassified to be consistent with the 2020 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 (the “SEC”) on March 13, 2020.

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, The Provident Bank, which also operates under the name BankProv (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.
v3.20.2
Recent Accounting Pronouncements (Policy)
 6 Months Ended
Jun. 30, 2020
Recent Accounting Pronouncements [Abstract]  
Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 the current “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. On October 16, 2019, FASB approved a delay on the implementation until January 2023 for smaller reporting companies as defined by the SEC. The amendments in this update will be effective for the Company on January 1, 2023. 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 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. The Company adopted the provision of ASU 2018-13 effective January 1, 2020 and the adoption did not have a material impact on the consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This ASU simplifies the accounting for income taxes and is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Certain provisions under ASU 2019-12 require prospective application, some require modified retrospective application through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, while other provisions require retrospective application to all periods presented in the consolidated financial statements upon adoption. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), to ease the potential burden in accounting for recognizing the effects of reference rate reform on financial reporting. Such challenges include the accounting and operational implications for contract modifications and hedge accounting. The provisions in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to loan and lease agreements, contracts, hedging relationships, and other transactions affected by reference rate reform. These provisions apply to contract modifications that reference LIBOR or another reference rate expected to be discounted because of reference rate reform. Qualifying modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification would be considered "minor" so that any existing unamortized deferred loan origination fees and costs would carry forward and continue to be amortized. Qualifying modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for hedge accounting.

 

ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022, with adoption permitted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected, the amendments must be applied prospectively for all eligible contract modifications. The Company is currently evaluating the effect that this ASU will have on the Company’s consolidated financial statements.
v3.20.2
Investment Securities (Tables)
 6 Months Ended
Jun. 30, 2020
Investment Securities [Abstract]  
Summary 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, 2020

State and municipal securities

$

10,519

$

582

$

—

$

11,101

Asset-backed securities

4,906

220

—

5,126

Government mortgage-backed securities

20,241

536

12

20,765

Total debt securities available-for-sale

$

35,666

$

1,338

$

12

$

36,992

December 31, 2019

State and municipal securities

$

10,808

$

398

$

—

$

11,206

Asset-backed securities

5,433

71

4

5,500

Government mortgage-backed securities

24,954

197

67

25,084

Total debt securities available-for-sale

$

41,195

$

666

$

71

$

41,790
Schedule of Maturities of Debt Securities

Available-for-Sale

Amortized

Fair

(In thousands)

Cost

Value

Due after one year through five years

$

1,204

$

1,229

Due after five years through ten years

912

917

Due after ten years

8,403

8,955

Government mortgage-backed securities

20,241

20,765

Asset-backed securities

4,906

5,126

$

35,666

$

36,992
Schedule of Aggregate Fair Value and Unrealized Losses of Securities

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, 2020

Temporarily impaired securities:

Government mortgage-backed securities

$

402

$

3

$

509

$

9

$

911

$

12

Total temporarily impaired debt securities

$

402

$

3

$

509

$

9

$

911

$

12

December 31, 2019

Temporarily impaired securities:

Asset-backed securities

$

606

$

4

$

—

$

—

$

606

$

4

Government mortgage-backed securities

5,207

8

5,418

59

10,625

67

Total temporarily impaired debt securities

$

5,813

$

12

$

5,418

$

59

$

11,231

$

71
v3.20.2
Loans (Tables)
 6 Months Ended
Jun. 30, 2020
Loans [Abstract]  
Schedule of Loans

At

At

June 30,

December 31,

2020

2019

(Dollars in thousands)

Amount

Amount

Commercial real estate

$

421,836

$

418,356

Commercial

760,828

451,791

Residential real estate

39,401

45,695

Construction and land development

57,087

46,763

Consumer

8,507

12,737

1,287,659

975,342

Allowance for loan losses

(17,158)

(13,844)

Deferred loan fees, net

(5,410)

(2,212)

Net loans

$

1,265,091

$

959,286
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, 2020

$

6,499

$

8,057

$

213

$

789

$

1,049

$

67

$

16,674

Charge-offs

—

(142)

—

—

(284)

—

(426)

Recoveries

—

—

—

—

38

—

38

Provision (credit)

259

472

(6)

166

48

(67)

872

Balance at June 30, 2020

$

6,758

$

8,387

$

207

$

955

$

851

$

—

$

17,158

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

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, 2019

$

6,104

$

6,086

$

254

$

749

$

650

$

1

$

13,844

Charge-offs

—

(239)

—

—

(513)

—

(752)

Recoveries

—

7

4

—

84

—

95

Provision (credit)

654

2,533

(51)

206

630

(1)

3,971

Balance at June 30, 2020

$

6,758

$

8,387

$

207

$

955

$

851

$

—

$

17,158

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
Schedule of Loan Balances by Segment

(In thousands)

Commercial Real Estate

Commercial

Residential Real Estate

Construction and Land Development

Consumer

Unallocated

Total

June 30, 2020

Allowance for loan losses:

Ending balance:

Individually evaluated

for impairment

$

1,480

$

421

$

—

$

—

$

—

$

—

$

1,901

Ending balance:

Collectively evaluated

for impairment

5,278

7,966

207

955

851

—

15,257

Total allowance for loan

losses ending balance

$

6,758

$

8,387

$

207

$

955

$

851

$

—

$

17,158

Loans:

Ending balance:

Individually evaluated

for impairment

$

22,269

$

4,618

$

163

$

—

$

—

$

27,050

Ending balance:

Collectively evaluated

for impairment

399,567

756,210

39,238

57,087

8,507

1,260,609

Total loans ending balance

$

421,836

$

760,828

$

39,401

$

57,087

$

8,507

$

1,287,659

(In thousands)

Commercial Real Estate

Commercial

Residential Real Estate

Construction and Land Development

Consumer

Unallocated

Total

December 31, 2019

Allowance for loan losses:

Ending balance:

Individually evaluated

for impairment

$

1,508

$

174

$

—

$

—

$

—

$

—

$

1,682

Ending balance:

Collectively evaluated

for impairment

4,596

5,912

254

749

650

1

12,162

Total allowance for loan

losses ending balance

$

6,104

$

6,086

$

254

$

749

$

650

$

1

$

13,844

Loans:

Ending balance:

Individually evaluated

for impairment

$

20,990

$

3,326

$

182

$

165

$

—

$

24,663

Ending balance:

Collectively evaluated

for impairment

397,366

448,465

45,513

46,598

12,737

950,679

Total loans ending balance

$

418,356

$

451,791

$

45,695

$

46,763

$

12,737

$

975,342
Schedule of Non-Accrual Loans and Loan Delinquencies 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, 2020

Commercial real estate

$

—

$

—

$

786

$

786

$

421,050

$

421,836

$

—

$

20,865

Commercial

—

50

301

351

760,477

760,828

—

4,309

Residential real estate

328

185

721

1,234

38,167

39,401

—

844

Construction and

land development

—

—

—

—

57,087

57,087

—

—

Consumer

38

18

21

77

8,430

8,507

—

21

Total

$

366

$

253

$

1,829

$

2,448

$

1,285,211

$

1,287,659

$

—

$

26,039

December 31, 2019

Commercial real estate

$

473

$

18,256

$

1,368

$

20,097

$

398,259

$

418,356

$

—

$

1,701

Commercial

529

85

484

1,098

450,693

451,791

—

2,955

Residential real estate

715

154

832

1,701

43,994

45,695

—

969

Construction and

land development

—

—

165

165

46,598

46,763

—

165

Consumer

111

58

38

207

12,530

12,737

—

37

Total

$

1,828

$

18,553

$

2,887

$

23,268

$

952,074

$

975,342

$

—

$

5,827
Schedule of Impaired Loans

June 30, 2020

December 31, 2019

Unpaid

Unpaid

Recorded

Principal

Related

Recorded

Principal

Related

(In thousands)

Investment

Balance

Allowance

Investment

Balance

Allowance

With no related allowance recorded:

Commercial real estate

$

1,557

$

1,557

$

—

$

2,070

$

2,082

$

—

Commercial

363

370

—

1,348

1,745

—

Residential real estate

163

163

—

182

182

—

Construction and land development

—

—

—

165

165

—

Consumer

—

—

—

—

—

—

Total impaired with no related allowance

2,083

2,090

—

3,765

4,174

—

With an allowance recorded:

Commercial real estate

20,712

20,792

1,480

18,920

18,921

1,508

Commercial

4,255

4,845

421

1,978

2,085

174

Residential real estate

—

—

—

—

—

—

Construction and land development

—

—

—

—

—

—

Consumer

—

—

—

—

—

—

Total impaired with an allowance recorded

24,967

25,637

1,901

20,898

21,006

1,682

Total

Commercial real estate

22,269

22,349

1,480

20,990

21,003

1,508

Commercial

4,618

5,215

421

3,326

3,830

174

Residential real estate

163

163

—

182

182

—

Construction and land development

—

—

—

165

165

—

Consumer

—

—

—

—

—

—

Total impaired loans

$

27,050

$

27,727

$

1,901

$

24,663

$

25,180

$

1,682

Three Months Ended June 30,

2020

2019

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

(In thousands)

Investment

Recognized

Investment

Recognized

With no related allowance recorded:

Commercial real estate

$

1,565

$

9

$

1,831

$

9

Commercial

371

4

1,053

7

Residential real estate

164

2

382

3

Construction and land development

83

—

—

—

Consumer

—

—

—

—

Total impaired with no related allowance

2,183

15

3,266

19

With an allowance recorded:

Commercial real estate

20,879

41

—

—

Commercial

4,484

—

4,701

—

Residential real estate

—

—

—

—

Construction and land development

—

—

—

—

Consumer

—

—

—

—

Total impaired with an allowance recorded

25,363

41

4,701

—

Total

Commercial real estate

22,444

50

1,831

9

Commercial

4,855

4

5,754

7

Residential real estate

164

2

382

3

Construction and land development

83

—

—

—

Consumer

—

—

—

—

Total impaired loans

$

27,546

$

56

$

7,967

$

19

Six Months Ended June 30,

2020

2019

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

(In thousands)

Investment

Recognized

Investment

Recognized

With no related allowance recorded:

Commercial real estate

$

1,573

$

28

$

1,838

$

30

Commercial

383

10

1,120

13

Residential real estate

164

5

384

8

Construction and land development

110

—

—

—

Consumer

—

—

—

—

Total impaired with no related allowance

2,230

43

3,342

51

With an allowance recorded:

Commercial real estate

20,936

252

—

—

Commercial

4,596

1

4,994

—

Residential real estate

—

—

—

—

Construction and land development

—

—

—

—

Consumer

—

—

—

—

Total impaired with an allowance recorded

25,532

253

4,994

—

Total

Commercial real estate

22,509

280

1,838

30

Commercial

4,979

11

6,114

13

Residential real estate

164

5

384

8

Construction and land development

110

—

—

—

Consumer

—

—

—

—

Total impaired loans

$

27,762

$

296

$

8,336

$

51
Schedule of Troubled Debt Restructurings

Three Months Ended June 30,

2020

2019

(Dollars in thousands)

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Troubled debt restructurings:

Commercial real estate

2

$

165

$

165

—

$

—

$

—

Commercial

1

81

81

—

—

—

3

$

246

$

246

—

$

—

$

—

Six Months Ended June 30,

2020

2019

(Dollars in thousands)

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Number of Contracts

Pre-
‎Modification
‎Outstanding
‎Recorded
‎Investment

Post-Modification
‎Outstanding
‎Recorded
‎Investment

Troubled debt restructurings:

Commercial real estate

9

$

18,811

$

20,311

—

$

—

$

—

Commercial

1

81

81

1

1,963

1,963

10

$

18,892

$

20,392

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, 2020

Grade:

Pass

$

386,553

$

738,468

$

—

$

57,087

$

—

$

1,182,108

Special mention

14,418

14,112

—

—

—

28,530

Substandard

20,865

8,248

1,132

—

—

30,245

Not formally rated

—

—

38,269

—

8,507

46,776

Total

$

421,836

$

760,828

$

39,401

$

57,087

$

8,507

$

1,287,659

December 31, 2019

Grade:

Pass

$

396,217

$

433,076

$

—

$

46,598

$

—

$

875,891

Special mention

1,936

14,044

—

—

—

15,980

Substandard

20,203

4,671

1,379

165

—

26,418

Not formally rated

—

—

44,316

—

12,737

57,053

Total

$

418,356

$

451,791

$

45,695

$

46,763

$

12,737

$

975,342
v3.20.2
Deposits (Tables)
 6 Months Ended
Jun. 30, 2020
Deposits [Abstract]  
Schedule of Deposit Balances by Type

June 30,

December 31,

(In thousands)

2020

2019

NOW and demand

$

502,772

$

369,423

Regular savings

154,747

115,593

Money market deposits

291,872

270,471

Total non-certificate accounts

949,391

755,487

Certificate accounts of $250,000 or more

19,610

15,575

Certificate accounts less than $250,000

151,484

78,843

Total certificate accounts

171,094

94,418

Total deposits

$

1,120,485

$

849,905
v3.20.2
Borrowings (Tables)
 6 Months Ended
Jun. 30, 2020
Borrowings [Abstract]  
Schedule of Maturities of Advances from FHLB and FRB

(In thousands)

Fiscal Year-End

Dollar Amount

2020

$

28,521

2021

5,000

2023

8,500

Total

$

42,021
v3.20.2
Fair Value Measurements (Tables)
 6 Months Ended
Jun. 30, 2020
Fair Value Measurements [Abstract]  
Schedule of Financial Instruments Measured at Fair Value on a Recurring Basis

Fair Value Measurements at Reporting Date Using

Significant

Significant

Other Observable

Unobservable

Inputs

Inputs

(In thousands)

Total

Level 1

Level 2

Level 3

June 30, 2020

State and municipal securities

$

11,101

$

—

$

11,101

$

—

Asset-backed securities

5,126

—

5,126

—

Mortgage-backed securities

20,765

—

20,765

—

Totals

$

36,992

$

—

$

36,992

$

—

December 31, 2019

State and municipal securities

$

11,206

$

—

$

11,206

$

—

Asset-backed securities

5,500

—

5,500

—

Mortgage-backed securities

25,084

—

25,084

—

Totals

$

41,790

$

—

$

41,790

$

—
Schedule of Assets 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, 2020

Impaired loans

Commercial real estate

$

553

$

—

$

—

$

553

Commercial

3,834

—

—

3,834

Totals

$

4,387

$

—

$

—

$

4,387

December 31, 2019

Impaired loans

Commercial real estate

$

215

$

—

$

—

$

215

Commercial

1,805

—

—

1,805

Totals

$

2,020

$

—

$

—

$

2,020
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

Range

June 30, 2020

Impaired loans

Commercial real estate

$

553

Real estate appraisals

Discount for dated appraisals

6 - 10%

Commercial

3,834

Business valuation

Comparable company evaluations

—

December 31, 2019

Impaired loans

Commercial real estate

$

215

Real estate appraisals

Discount for dated appraisals

6 - 10%

Commercial

1,805

Business valuation

Comparable company evaluations

—
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, 2020

Financial assets:

Cash and cash equivalents

$

38,178

$

38,178

$

—

$

—

$

38,178

Available-for-sale securities

36,992

—

36,992

—

36,992

Federal Home Loan Bank of Boston stock

1,050

N/A

N/A

N/A

N/A

Loans, net

1,265,091

—

—

1,278,953

1,278,953

Accrued interest receivable

4,756

—

4,756

—

4,756

Financial liabilities:

Deposits

1,120,485

—

1,121,459

—

1,121,459

Borrowings

42,021

—

42,710

—

42,710

December 31, 2019

Financial assets:

Cash and cash equivalents

$

59,658

$

59,658

$

—

$

—

$

59,658

Available-for-sale securities

41,790

—

41,790

—

41,790

Federal Home Loan Bank of Boston stock

1,416

N/A

N/A

N/A

N/A

Loans, net

959,286

—

—

958,270

958,270

Accrued interest receivable

2,854

—

2,854

—

2,854

Financial liabilities:

Deposits

849,905

—

850,774

—

850,774

Borrowings

24,998

—

25,351

—

25,351
v3.20.2
Regulatory Capital (Tables)
 6 Months Ended
Jun. 30, 2020
Regulatory Capital [Abstract]  
Schedule of Bank's Actual Capital Amounts and Ratios

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, 2020

Total Capital (to Risk Weighted Assets)

$

189,668

14.72

%

103,053

>

8.0

%

$

128,816

>

10.0

%

Tier 1 Capital (to Risk Weighted Assets)

173,553

13.47

77,290

>

6.0

103,053

>

8.0

Common Equity Tier 1 Capital (to Risk Weighted Assets)

173,553

13.47

57,967

>

4.5

83,731

>

6.5

Tier 1 Capital (to Average Assets)

173,553

13.10

52,991

>

4.0

66,239

>

5.0

December 31, 2019

Total Capital (to Risk Weighted Assets)

$

181,135

17.62

%

$

82,238

>

8.0

%

$

102,798

>

10.0

%

Tier 1 Capital (to Risk Weighted Assets)

168,273

16.37

61,679

>

6.0

82,238

>

8.0

Common Equity Tier 1 Capital (to Risk Weighted Assets)

168,273

16.37

46,259

>

4.5

66,819

>

6.5

Tier 1 Capital (to Average Assets)

168,273

15.18

44,352

>

4.0

55,440

>

5.0
v3.20.2
Employee Stock Ownership Plan (Tables)
 6 Months Ended
Jun. 30, 2020
Employee Stock Ownership Plan [Abstract]  
Schedule of Shares Held by the ESOP

June 30, 2020

December 31, 2019

Allocated

282,256

192,499

Committed to be allocated

44,879

89,757

Unallocated

1,211,733

1,256,612

Total

1,538,868

1,538,868
v3.20.2
Earnings Per Common Share (Tables)
 6 Months Ended
Jun. 30, 2020
Earnings Per Common Share [Abstract]  
Schedule of Earning per Share

Three Months Ended

Six Months Ended

June 30,

June 30,

(Dollars in thousands, except per share amounts)

2020

2019

2020

2019

Net Income attributable to common shareholders

$

3,250

$

2,531

$

4,481

$

4,749

Average number of common shares issued

19,474,950

19,521,324

19,475,599

19,525,241

Less:

average unallocated ESOP shares

(1,219,215)

(528,896)

(1,230,434)

(538,797)

average unvested restricted stock

(105,629)

(160,360)

(113,744)

(168,330)

average treasury stock acquired

—

(73,333)

—

(73,333)

Average number of common shares outstanding

to calculate basic earnings per common share

18,150,106

18,758,735

18,131,421

18,744,781

Effect of dilutive unvested restricted stock and stock option awards

29,752

137,183

66,225

112,122

Average number of common shares outstanding

to calculate diluted earnings per common share

18,179,858

18,895,918

18,197,646

18,856,903

Earnings per common share:

Basic

$

0.18

$

0.13

$

0.25

$

0.25

Diluted

$

0.18

$

0.13

$

0.25

$

0.25
v3.20.2
Share-Based Compensation (Tables)
 6 Months Ended
Jun. 30, 2020
Share-Based Compensation [Abstract]  
Schedule of Fair Value of Options Granted Assumptions

2020

Vesting period (years)

3

Expiration date (years)

10

Expected volatility

30.92%

Expected life (years)

7.5

Expected dividend yield

—%

Risk free interest rate

1.74%

Fair value per option

$

4.60
Schedule of Stock Option Grants Activity

Stock Option Awards

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term (years)

Aggregate Intrinsic Value

Outstanding at December 31, 2019

816,057

$

8.93

Granted

7,293

12.35

Forfeited

(9,844)

8.61

Exercised

—

—

Outstanding at June 30, 2020

813,506

$

8.96

6.45

$

—

Outstanding and expected to vest

at June 30, 2020

813,506

$

8.96

6.45

$

—

Vested and Exercisable

at June 30, 2020

465,994

$

8.73

6.25

$

—

Unrecognized compensation cost

$

693,000

Weighted average remaining

recognition period (years)

1.74
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, 2020

140,019

$

9.19

Granted

2,430

12.35

Forfeited

(3,938)

8.61

Vested

—

—

Unvested restricted stock awards at June 30, 2020

138,511

$

9.26

Unrecognized compensation cost

$

917,000

Weighted average remaining recognition period (years)

1.70
v3.20.2
Leases (Tables)
 6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Schedule of Information Regarding Operating Leases

June 30,

December 31,

2020

2019

Weighted-average discount rate

3.53%

3.78%

Range of lease expiration dates

3 - 15.5 years

4.5 - 16 years

Range of lease renewal options

5 - 20 years

20 years

Weighted-average remaining lease term

28.0 years

31.9 years
Schedule of Maturities of Lease Liabilities

(Dollars in thousands)

Fiscal Year-End

Dollar Amount

2020

$

126

2021

258

2022

261

2023

264

2024

270

Thereafter

6,604

Total lease payments

7,783

Less imputed interest

(3,249)

Total lease liabilities

$

4,534
v3.20.2
Asset Purchase (Tables)
 6 Months Ended
Jun. 30, 2020
Asset Purchase [Abstract]  
Summary of Consideration Paid for the Warehouse Lending Business and the Amounts of Assets Acquired

(In thousands)

Consideration:

Cash

$

66,962

Recognized amounts of identifiable assets acquired:

Loans

66,672

Accrued interest and fees

250

Premises and equipment

24

Other assets

16

Total identifiable assets

$

66,962
v3.20.2
Corporate Structure (Narrative) (Details)
$ / shares in Units, $ in Millions
 3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
item
shares
Jun. 30, 2019
Jun. 30, 2020
USD ($)
item
$ / shares
shares
Jun. 30, 2019
Dec. 31, 2019
USD ($)
shares
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]          
Common Stock, Shares, Outstanding | shares 19,472,310   19,472,310   19,473,818
Exchange ratio 2.0212 2.0212 2.0212 2.0212  
Proceeds used to fund ESOP | $         $ 8.2
Purchase by ESOP (in shares) | shares         816,992
Number of banking offices | item 7   7    
Number of loan production offices | item 2   2    
Second-step Stock Offering [Member]          
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]          
Gross proceeds | $     $ 102.1    
Common stock, shares sold (in shares) | shares     10,212,397    
Common stock, share issue price per share (in dollars per share) | $ / shares     $ 10.00    
Proceeds used to fund ESOP | $     $ 8.2    
Purchase by ESOP (in shares) | shares     816,992    
Purchase by ESOP (in dollars per share) | $ / shares     $ 10.00    
Share issue, related expenses | $     $ 2.4    
Net proceeds invested in Bank's operations | $     $ 45.8    
Mutual Holding Company Mhc [Member]          
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]          
Percentage of ownership (as a percent) 52.00%   52.00%    
Common Stock, Shares, Outstanding | shares 19,484,343   19,484,343    
Exchange ratio     2.0212    
v3.20.2
COVID-19 (Narrative) (Details)
$ in Millions
Jun. 30, 2020
USD ($)
loan
COVID-19 [Abstract]  
Number of modified loans | loan 287
Total amount of modified loans | $ $ 264.2
Percentage of modified loans in total loan portfolio 20.60%
v3.20.2
Investment Securities (Narrative) (Details) - USD ($)
 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Investment Securities [Abstract]      
Gross realized gains or losses on sales and calls $ 0 $ 216,000  
Gross losses realized   $ 103,000  
Securities pledged to secure available borrowings with the Federal Reserve Bank and Federal Home Loan Bank $ 25,900,000   $ 30,600,000
v3.20.2
Investment Securities (Summary of Amortized Cost of Investment Securities Classified as Available-for-sale and their Approximate Fair Values) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost Basis $ 35,666 $ 41,195
Gross Unrealized Gains 1,338 666
Gross Unrealized Losses 12 71
Fair Value 36,992 41,790
State and Municipal Securities [Member]    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost Basis 10,519 10,808
Gross Unrealized Gains 582 398
Fair Value 11,101 11,206
Asset-backed Securities [Member]    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost Basis 4,906 5,433
Gross Unrealized Gains 220 71
Gross Unrealized Losses   4
Fair Value 5,126 5,500
Government Mortgage-backed Securities [Member]    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost Basis 20,241 24,954
Gross Unrealized Gains 536 197
Gross Unrealized Losses 12 67
Fair Value $ 20,765 $ 25,084
v3.20.2
Investment Securities (Schedule of Maturities of Debt Securities) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Available-for-Sale, Amortized Cost    
Due after one year through five years $ 1,204  
Due after five years through ten years 912  
Due after ten years 8,403  
Amortized Cost 35,666 $ 41,195
Available-for-Sale, Fair Value    
Due after one year through five years 1,229  
Due after five years through ten years 917  
Due after ten years 8,955  
Fair Value 36,992 41,790
Government Mortgage-backed Securities [Member]    
Available-for-Sale, Amortized Cost    
Amortized Cost 20,241 24,954
Available-for-Sale, Fair Value    
Fair Value 20,765 25,084
Asset-backed Securities [Member]    
Available-for-Sale, Amortized Cost    
Amortized Cost 4,906 5,433
Available-for-Sale, Fair Value    
Fair Value $ 5,126 $ 5,500
v3.20.2
Investment Securities (Schedule of Aggregate Fair Value and Unrealized Losses of Securities) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]    
Fair Value, Less than 12 Months $ 402 $ 5,813
Unrealized Losses, Less than 12 Months 3 12
Fair Value, 12 Months or Longer 509 5,418
Unrealized Losses, 12 Months or Longer 9 59
Fair Value, Total 911 11,231
Unrealized Losses, Total 12 71
Asset-backed Securities [Member]    
Debt Securities, Available-for-sale [Line Items]    
Fair Value, Less than 12 Months   606
Unrealized Losses, Less than 12 Months   4
Fair Value, Total   606
Unrealized Losses, Total   4
Government Mortgage-backed Securities [Member]    
Debt Securities, Available-for-sale [Line Items]    
Fair Value, Less than 12 Months 402 5,207
Unrealized Losses, Less than 12 Months 3 8
Fair Value, 12 Months or Longer 509 5,418
Unrealized Losses, 12 Months or Longer 9 59
Fair Value, Total 911 10,625
Unrealized Losses, Total $ 12 $ 67
v3.20.2
Loans (Narrative) (Details)
 3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
contract
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
contract
Jun. 30, 2019
USD ($)
contract
Dec. 31, 2019
USD ($)
Financing Receivable, Troubled Debt Restructuring [Line Items]          
Number of TDR contracts | contract 3   10 1  
Troubled debt restructurings $ 23,900,000   $ 23,900,000   $ 4,200,000
Payment defaults on TDR loans modified 0 $ 0 $ 0 $ 0  
Commercial Real Estate One [Member]          
Financing Receivable, Troubled Debt Restructuring [Line Items]          
Number of TDR contracts | contract     7    
Troubled debt restructurings 20,100,000   $ 20,100,000    
Impairment analysis performed and specific reserve       $ 1,400,000  
Commercial Real Estate One [Member] | Interest Only [Member]          
Financing Receivable, Troubled Debt Restructuring [Line Items]          
Troubled debt restructurings 16,500,000   $ 16,500,000    
Period for interest-only at reduced rate     3 years    
Commercial Real Estate One [Member] | Restructured to Amortize and Payout [Member]          
Financing Receivable, Troubled Debt Restructuring [Line Items]          
Troubled debt restructurings 2,100,000   $ 2,100,000    
Commercial Real Estate One [Member] | Restructured to Amortize and Payout [Member] | Minimum [Member]          
Financing Receivable, Troubled Debt Restructuring [Line Items]          
Pay out period     10 years    
Commercial Real Estate One [Member] | Advance for Capital Expenditures [Member]          
Financing Receivable, Troubled Debt Restructuring [Line Items]          
Troubled debt restructurings 1,500,000   $ 1,500,000    
Period for interest-only at reduced rate     3 years    
Commercial Real Estate Two [Member]          
Financing Receivable, Troubled Debt Restructuring [Line Items]          
Number of TDR contracts | contract     2    
Troubled debt restructurings $ 165,000   $ 165,000    
Period for interest-only at reduced rate     2 years    
Impairment analysis performed and specific reserve     $ 8,000    
Commercial Real Estate [Member]          
Financing Receivable, Troubled Debt Restructuring [Line Items]          
Number of TDR contracts | contract 2   9    
Commercial [Member]          
Financing Receivable, Troubled Debt Restructuring [Line Items]          
Number of TDR contracts | contract 1   1 1  
Troubled debt restructurings $ 81,000 $ 1,900,000 $ 81,000 $ 1,900,000  
Impairment analysis performed and specific reserve     $ 40,000 $ 136,000  
v3.20.2
Loans (Schedule of Loans) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Mar. 31, 2020
Dec. 31, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount $ 1,287,659   $ 975,342      
Allowance for loan losses (17,158) $ (16,674) (13,844) $ (11,790) $ (11,857) $ (11,680)
Deferred loan fees, net (5,410)   (2,212)      
Net loans 1,265,091   959,286      
Commercial Real Estate [Member]            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount 421,836   418,356      
Allowance for loan losses (6,758) (6,499) (6,104) (4,579) (4,247) (4,152)
Commercial [Member]            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount 760,828   451,791      
Allowance for loan losses (8,387) (8,057) (6,086) (5,289) (5,746) (5,742)
Residential Real Estate [Member]            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount 39,401   45,695      
Allowance for loan losses (207) (213) (254) (231) (240) (251)
Construction and Land Development [Member]            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount 57,087   46,763      
Allowance for loan losses (955) (789) (749) (649) (734) (738)
Consumer [Member]            
Loans and Leases Receivable Disclosure [Line Items]            
Gross loans, Amount 8,507   12,737      
Allowance for loan losses $ (851) $ (1,049) $ (650) $ (928) $ (812) $ (710)
v3.20.2
Loans (Schedule of Allowance for Loan Losses by Portfolio Segment) (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Dec. 31, 2019
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance $ 16,674 $ 11,857 $ 13,844 $ 11,680    
Charge-offs (426) (1,456) (752) (2,770)    
Recoveries 38 35 95 64    
Provision (credit) 872 1,354 3,971 2,816    
Ending balance 17,158 11,790 17,158 11,790    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         $ 1,901 $ 1,682
Ending balance: Collectively evaluated for impairment         15,257 12,162
Total allowance for loan losses ending balance 16,674 11,790 13,844 11,680 17,158 13,844
Loans:            
Ending balance: Individually evaluated for impairment         27,050 24,663
Ending balance: Collectively evaluated for impairment         1,260,609 950,679
Total loans ending balance         1,287,659 975,342
Commercial Real Estate [Member]            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 6,499 4,247 6,104 4,152    
Charge-offs    
Recoveries    
Provision (credit) 259 332 654 427    
Ending balance 6,758 4,579 6,758 4,579    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         1,480 1,508
Ending balance: Collectively evaluated for impairment         5,278 4,596
Total allowance for loan losses ending balance 6,758 4,579 6,758 4,152 6,758 6,104
Loans:            
Ending balance: Individually evaluated for impairment         22,269 20,990
Ending balance: Collectively evaluated for impairment         399,567 397,366
Total loans ending balance         421,836 418,356
Commercial [Member]            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 8,057 5,746 6,086 5,742    
Charge-offs (142) (1,190) (239) (2,223)    
Recoveries 5 7 15    
Provision (credit) 472 728 2,533 1,755    
Ending balance 8,387 5,289 8,387 5,289    
Allowance for loan losses:            
Ending balance: Individually evaluated for impairment         421 174
Ending balance: Collectively evaluated for impairment         7,966 5,912
Total allowance for loan losses ending balance 8,387 5,289 8,387 5,289 8,387 6,086
Loans:            
Ending balance: Individually evaluated for impairment         4,618 3,326
Ending balance: Collectively evaluated for impairment         756,210 448,465
Total loans ending balance         760,828 451,791
Residential Real Estate [Member]            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 213 240 254 251    
Charge-offs    
Recoveries 4 4 4    
Provision (credit) (6) (13) (51) (24)    
Ending balance 207 231 207 231    
Allowance for loan losses:            
Ending balance: Collectively evaluated for impairment         207 254
Total allowance for loan losses ending balance 207 231 254 251 207 254
Loans:            
Ending balance: Individually evaluated for impairment         163 182
Ending balance: Collectively evaluated for impairment         39,238 45,513
Total loans ending balance         39,401 45,695
Construction and Land Development [Member]            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 789 734 749 738    
Charge-offs    
Recoveries    
Provision (credit) 166 (85) 206 (89)    
Ending balance 955 649 955 649    
Allowance for loan losses:            
Ending balance: Collectively evaluated for impairment         955 749
Total allowance for loan losses ending balance 955 649 749 738 955 749
Loans:            
Ending balance: Individually evaluated for impairment           165
Ending balance: Collectively evaluated for impairment         57,087 46,598
Total loans ending balance         57,087 46,763
Consumer [Member]            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 1,049 812 650 710    
Charge-offs (284) (266) (513) (547)    
Recoveries 38 26 84 45    
Provision (credit) 48 356 630 720    
Ending balance 851 928 851 928    
Allowance for loan losses:            
Ending balance: Collectively evaluated for impairment         851 650
Total allowance for loan losses ending balance 851 928 650 928 851 650
Loans:            
Ending balance: Collectively evaluated for impairment         8,507 12,737
Total loans ending balance         8,507 12,737
Unallocated [Member]            
Allowance for Loan and Lease Losses [Roll Forward]            
Beginning balance 67 78 1 87    
Charge-offs    
Recoveries    
Provision (credit) (67) 36 (1) 27    
Ending balance 114 114    
Allowance for loan losses:            
Ending balance: Collectively evaluated for impairment           1
Total allowance for loan losses ending balance $ 67 $ 114 $ 1 $ 87 $ 1
v3.20.2
Loans (Schedule of Non-Accrual Loans and Loan Delinquencies by Portfolio Segment) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due $ 2,448 $ 23,268
Total Current 1,285,211 952,074
Total Loans 1,287,659 975,342
Non-accrual Loans 26,039 5,827
30 - 59 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 366 1,828
60 - 89 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 253 18,553
90 Days or More Past Due [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 1,829 2,887
Commercial Real Estate [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 786 20,097
Total Current 421,050 398,259
Total Loans 421,836 418,356
Non-accrual Loans 20,865 1,701
Commercial Real Estate [Member] | 30 - 59 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due   473
Commercial Real Estate [Member] | 60 - 89 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due   18,256
Commercial Real Estate [Member] | 90 Days or More Past Due [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 786 1,368
Commercial [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 351 1,098
Total Current 760,477 450,693
Total Loans 760,828 451,791
Non-accrual Loans 4,309 2,955
Commercial [Member] | 30 - 59 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due   529
Commercial [Member] | 60 - 89 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 50 85
Commercial [Member] | 90 Days or More Past Due [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 301 484
Residential Real Estate [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 1,234 1,701
Total Current 38,167 43,994
Total Loans 39,401 45,695
Non-accrual Loans 844 969
Residential Real Estate [Member] | 30 - 59 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 328 715
Residential Real Estate [Member] | 60 - 89 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 185 154
Residential Real Estate [Member] | 90 Days or More Past Due [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 721 832
Construction and Land Development [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due   165
Total Current 57,087 46,598
Total Loans 57,087 46,763
Non-accrual Loans   165
Construction and Land Development [Member] | 90 Days or More Past Due [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due   165
Consumer [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 77 207
Total Current 8,430 12,530
Total Loans 8,507 12,737
Non-accrual Loans 21 37
Consumer [Member] | 30 - 59 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 38 111
Consumer [Member] | 60 - 89 Days [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due 18 58
Consumer [Member] | 90 Days or More Past Due [Member]    
Financing Receivable, Recorded Investment, Past Due [Line Items]    
Total Past Due $ 21 $ 38
v3.20.2
Loans (Schedule of Impaired Loans) (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
With no related allowance recorded:          
Recorded Investment $ 2,083   $ 2,083   $ 3,765
Unpaid Principal Balance 2,090   2,090   4,174
Average Recorded Investment 2,183 $ 3,266 2,230 $ 3,342  
Interest Income Recognized 15 19 43 51  
With an allowance recorded:          
Recorded Investment 24,967   24,967   20,898
Unpaid Principal Balance 25,637   25,637   21,006
Related Allowance 1,901   1,901   1,682
Average Recorded Investment 25,363 4,701 25,532 4,994  
Interest Income Recognized 41   253    
Total          
Recorded Investment 27,050   27,050   24,663
Unpaid Principal Balance 27,727   27,727   25,180
Related Allowance 1,901   1,901   1,682
Average Recorded Investment 27,546 7,967 27,762 8,336  
Interest Income Recognized 56 19 296 51  
Commercial Real Estate [Member]          
With no related allowance recorded:          
Recorded Investment 1,557   1,557   2,070
Unpaid Principal Balance 1,557   1,557   2,082
Average Recorded Investment 1,565 1,831 1,573 1,838  
Interest Income Recognized 9 9 28 30  
With an allowance recorded:          
Recorded Investment 20,712   20,712   18,920
Unpaid Principal Balance 20,792   20,792   18,921
Related Allowance 1,480   1,480   1,508
Average Recorded Investment 20,879   20,936    
Interest Income Recognized 41   252    
Total          
Recorded Investment 22,269   22,269   20,990
Unpaid Principal Balance 22,349   22,349   21,003
Related Allowance 1,480   1,480   1,508
Average Recorded Investment 22,444 1,831 22,509 1,838  
Interest Income Recognized 50 9 280 30  
Commercial [Member]          
With no related allowance recorded:          
Recorded Investment 363   363   1,348
Unpaid Principal Balance 370   370   1,745
Average Recorded Investment 371 1,053 383 1,120  
Interest Income Recognized 4 7 10 13  
With an allowance recorded:          
Recorded Investment 4,255   4,255   1,978
Unpaid Principal Balance 4,845   4,845   2,085
Related Allowance 421   421   174
Average Recorded Investment 4,484 4,701 4,596 4,994  
Interest Income Recognized     1    
Total          
Recorded Investment 4,618   4,618   3,326
Unpaid Principal Balance 5,215   5,215   3,830
Related Allowance 421   421   174
Average Recorded Investment 4,855 5,754 4,979 6,114  
Interest Income Recognized 4 7 11 13  
Residential Real Estate [Member]          
With no related allowance recorded:          
Recorded Investment 163   163   182
Unpaid Principal Balance 163   163   182
Average Recorded Investment 164 382 164 384  
Interest Income Recognized 2 3 5 8  
Total          
Recorded Investment 163   163   182
Unpaid Principal Balance 163   163   182
Average Recorded Investment 164 382 164 384  
Interest Income Recognized 2 $ 3 5 $ 8  
Construction and Land Development [Member]          
With no related allowance recorded:          
Recorded Investment         165
Unpaid Principal Balance         165
Average Recorded Investment 83   110    
Total          
Recorded Investment         165
Unpaid Principal Balance         $ 165
Average Recorded Investment $ 83   $ 110    
v3.20.2
Loans (Schedule of Troubled Debt Restructurings) (Details)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
contract
Jun. 30, 2020
USD ($)
contract
Jun. 30, 2019
USD ($)
contract
Financing Receivable, Troubled Debt Restructuring [Line Items]      
Number of Contracts | contract 3 10 1
Pre- Modification Outstanding Recorded Investment $ 246 $ 18,892 $ 1,963
Post-Modification Outstanding Recorded Investment $ 246 $ 20,392 $ 1,963
Commercial Real Estate [Member]      
Financing Receivable, Troubled Debt Restructuring [Line Items]      
Number of Contracts | contract 2 9  
Pre- Modification Outstanding Recorded Investment $ 165 $ 18,811  
Post-Modification Outstanding Recorded Investment $ 165 $ 20,311  
Commercial [Member]      
Financing Receivable, Troubled Debt Restructuring [Line Items]      
Number of Contracts | contract 1 1 1
Pre- Modification Outstanding Recorded Investment $ 81 $ 81 $ 1,963
Post-Modification Outstanding Recorded Investment $ 81 $ 81 $ 1,963
v3.20.2
Loans (Schedule of Loans by Risk Rating and Portfolio Segment) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Financing Receivable, Recorded Investment [Line Items]    
Total Loans $ 1,287,659 $ 975,342
Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 1,182,108 875,891
Special Mention [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 28,530 15,980
Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 30,245 26,418
Not Formally Rated [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 46,776 57,053
Commercial Real Estate [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 421,836 418,356
Commercial Real Estate [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 386,553 396,217
Commercial Real Estate [Member] | Special Mention [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 14,418 1,936
Commercial Real Estate [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 20,865 20,203
Commercial [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 760,828 451,791
Commercial [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 738,468 433,076
Commercial [Member] | Special Mention [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 14,112 14,044
Commercial [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 8,248 4,671
Residential Real Estate [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 39,401 45,695
Residential Real Estate [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 1,132 1,379
Residential Real Estate [Member] | Not Formally Rated [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 38,269 44,316
Construction and Land Development [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 57,087 46,763
Construction and Land Development [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 57,087 46,598
Construction and Land Development [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans   165
Consumer [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans 8,507 12,737
Consumer [Member] | Not Formally Rated [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total Loans $ 8,507 $ 12,737
v3.20.2
Deposits (Schedule of Deposit Balances by Type) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Deposits [Abstract]    
NOW and demand $ 502,772 $ 369,423
Regular savings 154,747 115,593
Money market deposits 291,872 270,471
Total non-certificate accounts 949,391 755,487
Certificate accounts of $250,000 or more 19,610 15,575
Certificate accounts less than $250,000 151,484 78,843
Total certificate accounts 171,094 94,418
Total deposits $ 1,120,485 $ 849,905
v3.20.2
Borrowings (Narrative) (Details)
$ in Millions
 6 Months Ended
Jun. 30, 2020
USD ($)
Federal Reserve Bank of Boston's [Member]  
Federal Home Loan Bank, Advances [Line Items]  
Overnight borrowings $ 25.0
Interest rate on overnight borrowings 0.25%
Federal Home Loan Bank of Boston [Member]  
Federal Home Loan Bank, Advances [Line Items]  
Aggregate borrowings from FHLB $ 17.0
Federal Home Loan Bank of Boston [Member] | Minimum [Member]  
Federal Home Loan Bank, Advances [Line Items]  
Interest rates on FHLB advances ranged from 1.96%
Term of FHLB borrowings 1 year
Federal Home Loan Bank of Boston [Member] | Maximum [Member]  
Federal Home Loan Bank, Advances [Line Items]  
Interest rates on FHLB advances ranged from 3.01%
Federal Home Loan Bank of Boston [Member] | Weighted Average [Member]  
Federal Home Loan Bank, Advances [Line Items]  
Interest rates on FHLB advances ranged from 2.54%
v3.20.2
Borrowings (Schedule of Maturities of Advances from FHLB and FRB) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Borrowings [Abstract]    
2020 $ 28,521  
2021 5,000  
2023 8,500  
Total $ 42,021 $ 24,998
v3.20.2
Fair Value Measurements (Schedule of Financial Instruments Measured at Fair Value on a Recurring Basis) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) $ 36,992 $ 41,790
State and Municipal Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 11,101 11,206
Asset-backed Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 5,126 5,500
Government Mortgage-backed Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 20,765 25,084
Recurring Basis [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 36,992 41,790
Recurring Basis [Member] | State and Municipal Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 11,101 11,206
Recurring Basis [Member] | Asset-backed Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 5,126 5,500
Recurring Basis [Member] | Government Mortgage-backed Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 20,765 25,084
Recurring Basis [Member] | Level 2 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 36,992 41,790
Recurring Basis [Member] | Level 2 [Member] | State and Municipal Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 11,101 11,206
Recurring Basis [Member] | Level 2 [Member] | Asset-backed Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) 5,126 5,500
Recurring Basis [Member] | Level 2 [Member] | Government Mortgage-backed Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Debt securities available-for-sale (at fair value) $ 20,765 $ 25,084
v3.20.2
Fair Value Measurements (Schedule of Assets Measured at Fair Value on a Nonrecurring Basis) (Details) - Nonrecurring Basis [Member] - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans $ 4,387 $ 2,020
Level 3 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans 4,387 2,020
Commercial Real Estate [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans 553 215
Commercial Real Estate [Member] | Level 3 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans 553 215
Commercial [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans 3,834 1,805
Commercial [Member] | Level 3 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans $ 3,834 $ 1,805
v3.20.2
Fair Value Measurements (Schedule of Valuation Methodology and Unobservable Inputs for Level 3 Assets Measured at Fair Value on a Nonrecurring Basis) (Details) - Nonrecurring Basis [Member] - USD ($)
$ in Thousands
 6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Impaired loans Fair Value $ 4,387 $ 2,020
Level 3 [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Impaired loans Fair Value 4,387 2,020
Commercial Real Estate [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Impaired loans Fair Value 553 215
Commercial Real Estate [Member] | Level 3 [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Impaired loans Fair Value $ 553 $ 215
Commercial Real Estate [Member] | Level 3 [Member] | Minimum [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Percentage of valuation technique 6.00% 6.00%
Commercial Real Estate [Member] | Level 3 [Member] | Maximum [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Percentage of valuation technique 10.00% 10.00%
Commercial [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Impaired loans Fair Value $ 3,834 $ 1,805
Commercial [Member] | Level 3 [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Impaired loans Fair Value $ 3,834 $ 1,805
v3.20.2
Fair Value Measurements (Schedule of Carrying Amounts and Estimated Fair Values of Financial Instruments, Held or Issued for Purposes Other Than Trading) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Dec. 31, 2018
Financial assets:        
Cash and cash equivalents $ 38,178 $ 59,658 $ 28,281 $ 28,613
Available-for-sale securities 36,992 41,790    
Federal Home Loan Bank of Boston stock 1,050 1,416    
Loans, net 1,265,091 959,286    
Accrued interest receivable 4,756 2,854    
Financial liabilities:        
Borrowings 42,021 24,998    
Carrying Amount [Member]        
Financial assets:        
Cash and cash equivalents 38,178 59,658    
Available-for-sale securities 36,992 41,790    
Federal Home Loan Bank of Boston stock 1,050 1,416    
Loans, net 1,265,091 959,286    
Accrued interest receivable 4,756 2,854    
Financial liabilities:        
Deposits 1,120,485 849,905    
Borrowings 42,021 24,998    
Fair Value [Member]        
Financial assets:        
Cash and cash equivalents 38,178 59,658    
Available-for-sale securities 36,992 41,790    
Loans, net 1,278,953 958,270    
Accrued interest receivable 4,756 2,854    
Financial liabilities:        
Deposits 1,121,459 850,774    
Borrowings 42,710 25,351    
Level 1 [Member] | Fair Value [Member]        
Financial assets:        
Cash and cash equivalents 38,178 59,658    
Level 2 [Member] | Fair Value [Member]        
Financial assets:        
Available-for-sale securities 36,992 41,790    
Accrued interest receivable 4,756 2,854    
Financial liabilities:        
Deposits 1,121,459 850,774    
Borrowings 42,710 25,351    
Level 3 [Member] | Fair Value [Member]        
Financial assets:        
Loans, net $ 1,278,953 $ 958,270    
v3.20.2
Regulatory Capital (Narrative) (Details) - USD ($)
$ in Billions
 6 Months Ended
Jun. 30, 2020
Jan. 01, 2020
Dec. 31, 2019
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
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 2.50%    
Minimum [Member]      
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
Tier 1 ratio 8.00%    
Growth Act [Member] | Minimum [Member]      
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
CBLR leverage ratio 9.00% 9.00%  
Growth Act [Member] | Maximum [Member]      
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
CBLR total consolidated assets   $ 10  
CARES Act [Member]      
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
CBLR leverage ratio 8.00%    
v3.20.2
Regulatory Capital (Schedule of Bank's Actual Capital Amounts and Ratios) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Regulatory Capital [Abstract]    
Total Capital (to Risk Weighted Assets), Actual, Amount $ 189,668 $ 181,135
Total Capital (to Risk Weighted Assets), Actual, Ratio 14.72% 17.62%
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Amount $ 103,053 $ 82,238
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 $ 128,816 $ 102,798
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 $ 173,553 $ 168,273
Tier 1 Capital (to Risk Weighted Assets), Actual Capital, Ratio 13.47% 16.37%
Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes, Amount $ 77,290 $ 61,679
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 $ 103,053 $ 82,238
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 $ 173,553 $ 168,273
Common Equity Tier 1 Capital to Risk-Weighted Assets, Actual Capital, Ratio 13.47% 16.37%
Common Equity Tier 1 Capital to Risk-Weighted Assets, For Capital Adequacy Purposes, Amount $ 57,967 $ 46,259
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 $ 83,731 $ 66,819
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 $ 173,553 $ 168,273
Tier 1 Capital (to Average Assets), Actual Capital, Ratio 13.10% 15.18%
Tier 1 Capital (to Average Assets), For Capital Adequacy Purposes, Amount $ 52,991 $ 44,352
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 $ 66,239 $ 55,440
Tier 1 Capital (to Average Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio 5.00% 5.00%
v3.20.2
Employee Stock Ownership Plan (Narrative) (Details)
$ / shares in Units, $ in Thousands
 3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
USD ($)
shares
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
$ / shares
shares
Jun. 30, 2019
USD ($)
Dec. 31, 2019
USD ($)
$ / shares
shares
Dec. 31, 2015
USD ($)
shares
Employee Stock Ownership Plan [Abstract]            
ESOP shares | shares 1,538,868   1,538,868   1,538,868 721,876
Initial stock offering           $ 3,600
ESOP payable term         15 years 15 years
Additional amount funded         $ 8,200  
ESOP prime rate percentage         4.75%  
Purchase by ESOP (in shares) | shares         816,992  
Purchase by ESOP (in dollars per share) | $ / shares         $ 10.00  
Purchase by ESOP, as a percentage of shares sold in the Company's second-step offering         8.00%  
Average price of unallocated shares | $ / shares     $ 8.20      
Number of shares committed to be released per year through 2033 | shares 89,757   89,757      
Fair value of unallocated shares $ 9,500   $ 9,500      
Exchange ratio 2.0212 2.0212 2.0212 2.0212    
Compensation expense $ 194 $ 145 $ 444 $ 281    
v3.20.2
Employee Stock Ownership Plan (Schedule of Shares Held by the ESOP) (Details) - shares
Jun. 30, 2020
Dec. 31, 2019
Dec. 31, 2015
Share-Based Compensation      
Allocated 282,256 192,499  
Committed to be allocated 44,879 89,757  
Unallocated 1,211,733 1,256,612  
Total 1,538,868 1,538,868 721,876
v3.20.2
Earnings Per Common Share (Schedule of Earning per Share) (Details)
$ / shares in Units, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
$ / shares
shares
Jun. 30, 2019
USD ($)
$ / shares
shares
Jun. 30, 2020
USD ($)
$ / shares
shares
Jun. 30, 2019
USD ($)
$ / shares
shares
Earnings Per Common Share [Abstract]        
Net Income attributable to common shareholders | $ $ 3,250 $ 2,531 $ 4,481 $ 4,749
Average number of common shares issued 19,474,950 19,521,324 19,475,599 19,525,241
Less:        
average unallocated ESOP shares (1,219,215) (528,896) (1,230,434) (538,797)
average unvested restricted stock (105,629) (160,360) (113,744) (168,330)
average treasury stock acquired   (73,333)   (73,333)
Average number of common shares outstanding to calculate basic earnings per common share [1] 18,150,106 18,758,735 18,131,421 18,744,781
Effect of dilutive unvested restricted stock and stock option awards 29,752 137,183 66,225 112,122
Average number of common shares outstanding to calculate diluted earnings per common share [1] 18,179,858 18,895,918 18,197,646 18,856,903
Earnings per common share:        
Basic (in dollars per share) | $ / shares [1] $ 0.18 $ 0.13 $ 0.25 $ 0.25
Diluted (in dollars per share) | $ / shares [1] $ 0.18 $ 0.13 $ 0.25 $ 0.25
Exchange ratio 2.0212 2.0212 2.0212 2.0212
[1] Amounts related to periods prior to the date of the Conversion (October 16, 2019) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (2.0212-to-one).
v3.20.2
Share-Based Compensation (Narrative) (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Stock Option [Member]        
Share-Based Compensation        
Options expiration period     10 years  
Vesting period (years)     3 years  
Share based compensation expenses $ 104 $ 103 $ 214 $ 201
Restricted Stock [Member]        
Share-Based Compensation        
Share based compensation expenses $ 138 $ 142 $ 289 $ 309
2016 Equity Incentive Plan (the "Equity Plan") [Member] | Stock Option [Member]        
Share-Based Compensation        
Shares reserved for future issuance 902,344   902,344  
Options expiration period     10 years  
2016 Equity Incentive Plan (the "Equity Plan") [Member] | Restricted Stock [Member]        
Share-Based Compensation        
Shares reserved for future issuance 360,935   360,935  
Minimum [Member]        
Share-Based Compensation        
Vesting period (years)     3 years  
Maximum [Member] | 2016 Equity Incentive Plan (the "Equity Plan") [Member]        
Share-Based Compensation        
Vesting period (years)     5 years  
v3.20.2
Share-Based Compensation (Schedule of Fair Value of Options Granted Assumptions) (Details) - Stock Option [Member]
 6 Months Ended
Jun. 30, 2020
$ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Vesting period (years) 3 years
Expiration date (years) 10 years
Expected volatility 30.92%
Expected life (years) 7 years 6 months
Expected dividend yield
Risk free interest rate 1.74%
Fair value per option $ 4.60
v3.20.2
Share-Based Compensation (Schedule of Stock Option Grants Activity) (Details) - Stock Option [Member]
$ / shares in Units, $ in Thousands
 6 Months Ended
Jun. 30, 2020
USD ($)
$ / shares
shares
Stock Option Awards  
Outstanding at December 31, 2019 | shares 816,057
Granted | shares 7,293
Forfeited | shares (9,844)
Exercised | shares
Outstanding at June 30, 2020 | shares 813,506
Outstanding and expected to vest at June 30, 2020 | shares 813,506
Vested and Exercisable at June 30, 2020 | shares 465,994
Unrecognized compensation cost | $ $ 693,000
Weighted average remaining recognition period (years) 1 year 8 months 26 days
Weighted Average Exercise Price  
Outstanding at December 31, 2019 | $ / shares $ 8.93
Granted | $ / shares 12.35
Forfeited | $ / shares 8.61
Exercised | $ / shares
Outstanding at June 30, 2020 | $ / shares 8.96
Outstanding and expected to vest at June 30, 2020 | $ / shares 8.96
Vested and Exercisable at June 30, 2020 | $ / shares $ 8.73
Weighted Average Remaining Contractual Term (years)  
Outstanding at June 30, 2020 6 years 5 months 12 days
Outstanding and expected to vest at June 30, 2020 6 years 5 months 12 days
Vested and Exercisable at June 30, 2020 6 years 3 months
v3.20.2
Share-Based Compensation (Schedule of Activity in Restricted Stock Awards Under the Equity Plan) (Details) - Restricted Stock [Member]
$ / shares in Units, $ in Thousands
 6 Months Ended
Jun. 30, 2020
USD ($)
$ / shares
shares
Unvested Restricted Stock Awards  
Unvested restricted stock awards at January 1, 2020 | shares 140,019
Granted | shares 2,430
Forfeited | shares (3,938)
Vested | shares
Unvested restricted stock awards at June 30, 2020 | shares 138,511
Unrecognized compensation cost | $ $ 917,000
Weighted average remaining recognition period (years) 1 year 8 months 12 days
Weighted Average Grant Date Price  
Unvested restricted stock awards at January 1, 2020 | $ / shares $ 9.19
Granted | $ / shares 12.35
Forfeited | $ / shares 8.61
Vested | $ / shares
Unvested restricted stock awards at June 30, 2020 | $ / shares $ 9.26
v3.20.2
Leases (Narrative) (Details)
$ in Thousands
 6 Months Ended
Jun. 30, 2020
USD ($)
item
Jun. 30, 2019
USD ($)
Dec. 31, 2019
USD ($)
Leases [Abstract]      
Operating right-of-use assets $ 4,336   $ 3,713
Operating lease liabilities $ 4,534   $ 3,877
Number of leases branch location | item 2    
Number of production offices | item 1    
Operating leases rent expense $ 150 $ 144  
v3.20.2
Leases (Schedule of Information Regarding Operating Leases) (Details)
Jun. 30, 2020
Dec. 31, 2019
Leases [Line Items]    
Weighted-average discount rate - operating leases 3.53% 3.78%
Range of lease renewal options   20 years
Weighted-average remaining lease term - operating leases 28 years 31 years 10 months 24 days
Minimum [Member]    
Leases [Line Items]    
Range of lease expiration dates 3 years 4 years 6 months
Range of lease renewal options 5 years  
Maximum [Member]    
Leases [Line Items]    
Range of lease expiration dates 15 years 6 months 16 years
Range of lease renewal options 20 years  
v3.20.2
Leases (Schedule of Maturities of Lease Liabilities) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Fiscal Year-End    
2020 $ 126  
2021 258  
2022 261  
2023 264  
2024 270  
Thereafter 6,604  
Total lease payments 7,783  
Less imputed interest (3,249)  
Total lease liabilities $ 4,534 $ 3,877
v3.20.2
Asset Purchase (Narrative) (Details) - Warehouse Lending Business [Member]
 6 Months Ended
Jun. 30, 2020
USD ($)
employee
Business Acquisition [Line Items]  
Number of employees assumed for employment contracts | employee 6
Assumption of employment contracts $ 80,000
Consideration:  
Cash 66,962,000
Recognized amounts of identifiable assets acquired:  
Loans 66,672,000
Accrued interest and fees 250,000
Premises and equipment 24,000
Other assets 16,000
Total identifiable assets $ 66,962,000