UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

(Mark One)

 

 

[ X ]

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

 

 

For the quarterly period ended March 31, 2020

 

 

OR

 

 

[    ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from                                                   to

Commission File Number                        000-13232                                                                            

Juniata Valley Financial Corp.

(Exact name of registrant as specified in its charter)

Pennsylvania

23‑2235254

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

Bridge and Main Streets, Mifflintown, Pennsylvania

17059

(Address of principal executive offices)

(Zip Code)

(855) 582-5101

(Registrant’s telephone number, including area code)

 

 

 

 

 

 

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

 

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

N/A

 

N/A

 

N/A

 

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

[ X ]  Yes        [   ]  No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

[ X ]  Yes        [   ]  No

 

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

 

 

 

Large accelerated filer  [    ]

Accelerated filer  [ X ]

Non-accelerated filer  [    ]

Smaller reporting company  [ X ]

 

Emerging growth company  [    ]

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).

[    ]  Yes       [ X ]  No

 

 

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

 

 

 

 

Class

    

Outstanding as of May 11, 2020

Common Stock ($1.00 par value)

 

5,087,559 shares

 

 

 

 

 

TABLE OF CONTENTS

 

 

PART I - FINANCIAL INFORMATION 

 

 

 

Item 1. 

Financial Statements

 

 

 

 

 

Consolidated Statements of Financial Condition as of March 31, 2020 (Unaudited) and December 31, 2019

3

 

 

 

 

Consolidated Statements of Income for the Three Months Ended March 31, 2020 and 2019 (Unaudited)

4

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and 2019 (Unaudited)

5

 

 

 

 

Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (Unaudited)

6

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (Unaudited)

7

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

8

 

 

 

Item 2. 

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

36

 

 

 

Item 3.

Not applicable.

 

 

 

 

Item 4. 

Controls and Procedures

47

 

PART II - OTHER INFORMATION 

 

 

 

Item 1. 

Legal Proceedings

48

 

 

 

Item 1A. 

Risk Factors

48

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

49

 

 

 

Item 3. 

Defaults upon Senior Securities

50

 

 

 

Item 4. 

Mine Safety Disclosures

50

 

 

 

Item 5. 

Other Information

50

 

 

 

Item 6. 

Exhibits

50

 

 

 

 

Signatures

52

 

 

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Financial Condition (Unaudited)

 

 

 

 

 

 

 

(Dollars in thousands, except share data)

    

March 31, 2020

    

December 31, 2019

ASSETS

 

 

  

 

 

  

Cash and due from banks

 

$

16,826

 

$

12,658

Interest bearing deposits with banks

 

 

10,998

 

 

82

Federal funds sold

 

 

10,000

 

 

 —

Cash and cash equivalents

 

 

37,824

 

 

12,740

Interest bearing time deposits with banks

 

 

1,720

 

 

2,210

Equity securities

 

 

971

 

 

1,144

Debt securities available for sale

 

 

200,638

 

 

210,686

Restricted investment in bank stock

 

 

3,036

 

 

3,442

Total loans

 

 

390,014

 

 

400,590

Less: Allowance for loan losses

 

 

(3,333)

 

 

(2,961)

Total loans, net of allowance for loan losses

 

 

386,681

 

 

397,629

Premises and equipment, net

 

 

9,173

 

 

9,243

Bank owned life insurance and annuities

 

 

16,336

 

 

16,266

Investment in low income housing partnerships

 

 

3,704

 

 

3,904

Core deposit and other intangible assets

 

 

299

 

 

318

Goodwill

 

 

9,047

 

 

9,047

Mortgage servicing rights

 

 

176

 

 

180

Accrued interest receivable and other assets

 

 

4,223

 

 

3,823

Total assets

 

$

673,828

 

$

670,632

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

  

 

 

  

Liabilities:

 

 

  

 

 

  

Deposits:

 

 

  

 

 

  

Non-interest bearing

 

$

139,205

 

$

134,703

Interest bearing

 

 

402,724

 

 

397,234

Total deposits

 

 

541,929

 

 

531,937

Short-term borrowings and repurchase agreements

 

 

2,783

 

 

13,129

Long-term debt

 

 

45,000

 

 

45,000

Other interest bearing liabilities

 

 

1,574

 

 

1,603

Accrued interest payable and other liabilities

 

 

5,176

 

 

5,256

Total liabilities

 

 

596,462

 

 

596,925

Commitments and contingent liabilities

 

 

 

 

 

 

Stockholders’ Equity:

 

 

  

 

 

  

Preferred stock, no par value:  Authorized - 500,000 shares, none issued

 

 

 —

 

 

 —

Common stock, par value $1.00 per share:  Authorized 20,000,000 shares Issued - 5,151,279 shares at March 31, 2020; 5,141,749 shares at December 31, 2019 Outstanding - 5,093,859 shares at March 31, 2020; 5,099,729 shares at December 31, 2019

 

 

5,151

 

 

5,142

Surplus

 

 

24,918

 

 

24,898

Retained earnings

 

 

43,870

 

 

43,954

Accumulated other comprehensive income

 

 

4,416

 

 

516

Cost of common stock in Treasury: 57,420 shares at March 31, 2020; 42,020 shares at December 31, 2019

 

 

(989)

 

 

(803)

Total stockholders’ equity

 

 

77,366

 

 

73,707

Total liabilities and stockholders’ equity

 

$

673,828

 

$

670,632

 

See Notes to Consolidated Financial Statements

3

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Income (Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

(Dollars in thousands, except share data)

 

March 31, 

 

    

2020

    

2019

Interest and dividend income:

 

 

  

 

 

Loans, including fees

 

$

4,878

 

$

5,255

Taxable securities

 

 

1,173

 

 

849

Tax-exempt securities

 

 

23

 

 

61

Other interest income

 

 

55

 

 

53

Total interest income

 

 

6,129

 

 

6,218

Interest expense:

 

 

  

 

 

  

Deposits

 

 

830

 

 

863

Short-term borrowings and repurchase agreements

 

 

 8

 

 

24

Long-term debt

 

 

283

 

 

161

Other interest bearing liabilities

 

 

 7

 

 

11

Total interest expense

 

 

1,128

 

 

1,059

Net interest income

 

 

5,001

 

 

5,159

Provision for loan losses

 

 

356

 

 

15

Net interest income after provision for loan losses

 

 

4,645

 

 

5,144

Non-interest income:

 

 

  

 

 

  

Customer service fees

 

 

415

 

 

422

Debit card fee income

 

 

324

 

 

308

Earnings on bank-owned life insurance and annuities

 

 

64

 

 

69

Trust fees

 

 

113

 

 

99

Commissions from sales of non-deposit products

 

 

74

 

 

71

Fees derived from loan activity

 

 

67

 

 

70

Mortgage banking income

 

 

16

 

 

17

Gain (loss) on sales and calls of securities

 

 

11

 

 

(56)

Change in value of equity securities

 

 

(172)

 

 

 9

Other non-interest income

 

 

82

 

 

85

Total non-interest income

 

 

994

 

 

1,094

Non-interest expense:

 

 

  

 

 

  

Employee compensation expense

 

 

2,003

 

 

1,968

Employee benefits

 

 

728

 

 

741

Occupancy

 

 

314

 

 

349

Equipment

 

 

234

 

 

214

Data processing expense

 

 

501

 

 

461

Director compensation

 

 

57

 

 

51

Professional fees

 

 

173

 

 

197

Taxes, other than income

 

 

138

 

 

134

FDIC Insurance premiums

 

 

40

 

 

56

Amortization of intangible assets

 

 

19

 

 

22

Amortization of investment in low-income housing partnerships

 

 

200

 

 

200

Other non-interest expense

 

 

353

 

 

442

Total non-interest expense

 

 

4,760

 

 

4,835

Income before income taxes

 

 

879

 

 

1,403

Income tax provision (benefit)

 

 

(159)

 

 

(10)

Net income

 

$

1,038

 

$

1,413

Earnings per share

 

 

  

 

 

  

Basic

 

$

0.20

 

$

0.28

Diluted

 

$

0.20

 

$

0.28

 

See Notes to Consolidated Financial Statements

4

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 

 

 

2020

 

2019

 

 

Before Tax

 

Tax

 

Net of Tax

 

Before Tax

 

Tax

 

Net of Tax

 

    

Amount

    

Effect

    

Amount

    

Amount

    

Effect

    

Amount

Net income

 

$

879

 

$

159

 

$

1,038

 

$

1,403

 

$

10

 

$

1,413

Other comprehensive income:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Available for sale securities:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Unrealized holding gains (losses) arising during the period

 

 

4,948

 

 

(1,039)

 

 

3,909

 

 

1,793

 

 

(377)

 

 

1,416

Less reclassification adjustment for (gains) losses included in net income for sales of debt securities (1) (3)

 

 

(11)

 

 

 2

 

 

(9)

 

 

56

 

 

(12)

 

 

44

Amortization of pension net actuarial loss (2) (3)

 

 

 —

 

 

 —

 

 

 —

 

 

29

 

 

(6)

 

 

23

Other comprehensive income

 

 

4,937

 

 

(1,037)

 

 

3,900

 

 

1,878

 

 

(395)

 

 

1,483

Total comprehensive income

 

$

5,816

 

$

(878)

 

$

4,938

 

$

3,281

 

$

(385)

 

$

2,896

 


(1)

Amounts are included in (loss) gain on sales and calls of securities on the consolidated statements of income as a separate element within total non-interest income.

(2)

Amounts are included in the computation of net periodic benefit cost and are included in employee benefits expense on the consolidated statements of income as a separate element within total non-interest expense.

(3)

Income tax amounts are included in the provision for income taxes on the consolidated statements of income.

See Notes to Consolidated Financial Statements

5

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Stockholders’ Equity (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

(Dollars in thousands, except share data)

 

Number 

 

 

 

 

 

 

 

 

Other

 

 

 

Total

 

 

of Shares

    

Common

    

 

    

Retained

    

Comprehensive

    

Treasury

    

Stockholders’

 

    

Outstanding

    

Stock

    

Surplus

    

Earnings

 

Income

    

Stock

    

Equity

Balance, January 1, 2020

 

5,099,729

 

$

5,142

 

$

24,898

 

$

43,954

 

$

516

 

$

(803)

 

$

73,707

Net income

 

  

 

 

  

 

 

  

 

 

1,038

 

 

  

 

 

  

 

 

1,038

Other comprehensive income

 

  

 

 

  

 

 

  

 

 

 

 

 

3,900

 

 

  

 

 

3,900

Cash dividends at $0.22 per share

 

  

 

 

  

 

 

  

 

 

(1,122)

 

 

  

 

 

  

 

 

(1,122)

Stock-based compensation

 

  

 

 

  

 

 

29

 

 

  

 

 

  

 

 

  

 

 

29

Purchase of treasury stock

 

(15,400)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(186)

 

 

(186)

Common stock issued for stock plans

 

9,530

 

 

 9

 

 

(9)

 

 

  

 

 

  

 

 

  

 

 

 —

Balance, March 31, 2020

 

5,093,859

 

$

5,151

 

$

24,918

 

$

43,870

 

$

4,416

 

$

(989)

 

$

77,366

 

 

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Stockholders’ Equity (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

(Dollars in thousands, except share data)

 

Number 

 

 

 

 

 

 

 

 

Other

 

 

 

Total

 

 

of Shares

    

Common

    

 

    

Retained

    

Comprehensive

    

Treasury

    

Stockholders’

 

    

Outstanding

    

Stock

    

Surplus

    

Earnings

 

Income (Loss)

    

Stock

    

Equity

Balance, January 1, 2019

 

5,092,048

 

$

5,134

 

$

24,821

 

$

42,525

 

$

(4,299)

 

$

(803)

 

$

67,378

Net income

 

  

 

 

  

 

 

  

 

 

1,413

 

 

  

 

 

  

 

 

1,413

Other comprehensive income

 

  

 

 

  

 

 

  

 

 

  

 

 

1,483

 

 

  

 

 

1,483

Cash dividends at $0.22 per share

 

  

 

 

  

 

 

  

 

 

(1,120)

 

 

  

 

 

  

 

 

(1,120)

Stock-based compensation

 

  

 

 

  

 

 

19

 

 

  

 

 

  

 

 

  

 

 

19

Forfeiture of restricted stock

 

(800)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

Common stock issued for stock plans

 

7,500

 

 

 8

 

 

(8)

 

 

  

 

 

  

 

 

  

 

 

 —

Balance, March 31, 2019

 

5,098,748

 

$

5,142

 

$

24,832

 

$

42,818

 

$

(2,816)

 

$

(803)

 

$

69,173

 

See Notes to Consolidated Financial Statements

6

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

 

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 

 

    

2020

    

2019

Operating activities:

 

 

 

 

 

Net income

 

$

1,038

 

$

1,413

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

 

 

  

 

 

  

Provision for loan losses

 

 

356

 

 

15

Depreciation

 

 

206

 

 

196

Net amortization of securities premiums

 

 

228

 

 

133

Net amortization of loan origination fees

 

 

 5

 

 

20

Deferred net loan origination costs

 

 

(83)

 

 

(47)

Amortization of intangibles

 

 

19

 

 

22

Amortization of investment in low income housing partnerships

 

 

200

 

 

200

Net amortization of purchase fair value adjustments

 

 

(27)

 

 

(31)

Net realized (gain) loss on sales and calls of available for sale securities

 

 

(11)

 

 

56

Change in value of equity securities

 

 

172

 

 

(9)

Earnings on bank owned life insurance and annuities

 

 

(64)

 

 

(69)

Deferred income tax expense

 

 

125

 

 

24

Stock-based compensation expense

 

 

29

 

 

19

Proceeds from mortgage loans sold to others

 

 

20

 

 

24

Mortgage banking income

 

 

(16)

 

 

(17)

(Increase) decrease in accrued interest receivable and other assets

 

 

(1,561)

 

 

483

Decrease in accrued interest payable and other liabilities

 

 

(109)

 

 

(61)

Net cash provided by operating activities

 

 

527

 

 

2,371

Investing activities:

 

 

  

 

 

  

Purchases of:

 

 

  

 

 

  

Securities available for sale

 

 

(23,275)

 

 

(11,214)

FHLB stock

 

 

 —

 

 

(94)

Premises and equipment

 

 

(136)

 

 

(96)

Bank owned life insurance and annuities

 

 

(6)

 

 

(6)

Proceeds from:

 

 

 

 

 

  

Sales of securities available for sale

 

 

15,704

 

 

11,107

Maturities of and principal repayments on securities available for sale

 

 

22,339

 

 

3,512

Redemption of FHLB stock

 

 

406

 

 

 —

Investment in low income housing partnerships

 

 

 —

 

 

(90)

Net decrease in interest bearing time deposits with banks

 

 

490

 

 

490

Net decrease in loans

 

 

10,698

 

 

2,654

Net cash provided by investing activities

 

 

26,220

 

 

6,263

Financing activities:

 

 

  

 

 

  

Net increase in deposits

 

 

9,991

 

 

2,135

Net decrease in short-term borrowings and securities sold under agreements to repurchase

 

 

(10,346)

 

 

(11,828)

Issuance of long-term debt

 

 

 —

 

 

15,000

Repayment of long-term debt

 

 

 —

 

 

(5,000)

Cash dividends

 

 

(1,122)

 

 

(1,120)

Purchase of treasury stock

 

 

(186)

 

 

 —

Net cash used in financing activities

 

 

(1,663)

 

 

(813)

Net increase in cash and cash equivalents

 

 

25,084

 

 

7,821

Cash and cash equivalents at beginning of year

 

 

12,740

 

 

16,456

Cash and cash equivalents at end of period

 

$

37,824

 

$

24,277

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Three Months Ended March 31, 

 

    

2020

    

2019

Supplemental information:

 

 

 

 

 

 

Interest paid

 

$

1,135

 

$

933

Supplemental schedule of noncash investing and financing activities:

 

 

  

 

 

  

Right-of-Use assets obtained in exchange for lease obligations

 

 

 —

 

 

556

 

See Notes to Consolidated Financial Statements

7

JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The consolidated financial statements include the accounts of Juniata Valley Financial Corp. (the “Company” or “Juniata”) and its wholly owned subsidiary, The Juniata Valley Bank (the “Bank” or “JVB”). All significant intercompany accounts and transactions have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences could be material to the financial statements. Additionally, effects of the COVID-19 pandemic may negatively impact significant estimates. Estimates that are particularly susceptible to material change include the determination of the allowance for loan losses, and goodwill and other intangible assets. 

In the opinion of management, all adjustments considered necessary for fair presentation have been included. Operating results for the three month periods ended March 31, 2020 are not necessarily indicative of the results for the year ending December 31, 2020. For further information, refer to the consolidated financial statements and notes thereto included in Juniata Valley Financial Corp.’s Annual Report on Form 10‑K (“Annual Report”) for the year ended December 31, 2019.

The Company has evaluated events and transactions occurring subsequent to the consolidated statement of financial condition date of March 31, 2020 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

 

2. RECENT ACCOUNTING STANDARDS UPDATES

ASU 2016‑13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

Issued: June 2016

Summary: ASU 2016‑13 requires credit losses on most financial assets to be measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.

The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above.

Further, the ASU made certain targeted amendments to the existing impairment model for available for sale debt securities. For an available for sale debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis.

8

Effective Date: On October 16, 2019, the FASB voted and approved to delay the effective date of this ASU for smaller reporting companies until fiscal years beginning after December 15, 2022. Since the Company is a smaller reporting company, the delay of the effective date of ASU 2016-13 approved by the FASB applies to the Company. While the Company’s senior management is currently in the process of evaluating the impact of the amended guidance on its consolidated financial statements and disclosures, it expects the allowance for loan and lease losses (“ALLL”) to increase upon adoption because the allowance will be required to cover the full remaining expected life of the portfolio, rather than the incurred loss under current U.S. GAAP. The extent of this increase is still being evaluated and will depend on economic conditions and the composition of the Company’s loan portfolio at the time of adoption. In preparation, the Company has taken steps to prepare for the implementation when it becomes effective by forming an internal taskforce, gathering pertinent data, participating in training courses, and partnering with a software provider that specializes in ALLL analysis, as well as assessing the sufficiency of data currently available through its core database.

 

3. ACCUMULATED OTHER COMPREHENSIVE INCOME

Components of accumulated other comprehensive income, net of tax, consisted of the following:

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

March 31, 2020

    

Unrealized Gains and Losses on Available for Sale Securities

    

Defined Benefit Pension Items

    

Total

Beginning balance, December 31, 2019

 

$

516

 

$

 —

 

$

516

Current period other comprehensive income:

 

 

 

 

 

 

 

 

 

Other comprehensive income before reclassification

 

 

3,909

 

 

 —

 

 

3,909

Amounts reclassified from accumulated other comprehensive income

 

 

(9)

 

 

 —

 

 

(9)

Net current period other comprehensive income

 

 

3,900

 

 

 —

 

 

3,900

Ending balance, March 31, 2020

 

$

4,416

 

$

 —

 

$

4,416

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

December 31, 2019

    

Unrealized Gains and Losses on Available for Sale Securities

    

Defined Benefit Pension Items

    

Total

Beginning balance, December 31, 2018

 

$

(2,647)

 

$

(1,652)

 

$

(4,299)

Current period other comprehensive income:

 

 

 

 

 

 

 

 

 

Other comprehensive income before reclassification

 

 

3,129

 

 

634

 

 

3,763

Amounts reclassified from accumulated other comprehensive income

 

 

34

 

 

1,101

 

 

1,135

Net current period other comprehensive income

 

 

3,163

 

 

1,735

 

 

4,898

Reclassification for ASU 2018-02

 

 

 —

 

 

(83)

 

 

(83)

Ending balance, December 31, 2019

 

$

516

 

$

 —

 

$

516

 

 

4. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

9

The following table sets forth the computation of basic and diluted earnings per share:

 

 

 

 

 

 

 

(Dollars in thousands, except earnings per share data)

 

Three Months Ended March 31, 

 

 

2020

    

2019

Net income

 

$

1,038

 

$

1,413

Weighted-average common shares outstanding

 

 

5,103

 

 

5,095

Basic earnings per share

 

$

0.20

 

$

0.28

Weighted-average common shares outstanding

 

 

5,103

 

 

5,095

Common stock equivalents due to effect of stock options

 

 

 8

 

 

22

Total weighted-average common shares and equivalents

 

 

5,111

 

 

5,117

Diluted earnings per share

 

$

0.20

 

$

0.28

Anti-dilutive stock options outstanding

 

 

 5

 

 

 —

 

 

 

 

5. SECURITIES

Equity Securities

Equity securities owned by the Company consist of common stock of various financial services providers. ASC Topic 321, Investments – Equity Securities requires all equity securities within its scope to be measured at fair value with changes in fair value recognized in net income. As of March 31, 2020, the Company had $971,000 in equity securities recorded at fair value and $1,144,000 in equity securities recorded at fair value at December 31, 2019. The Company recorded a net loss of $172,000 during the three months ended March 31, 2020 and a net gain of $9,000 during the three months ended March 31, 2019 as a result of  the change in fair value of the Company’s equity securities during the applicable period.

Debt Securities Available for Sale

Debt securities classified as available for sale, which include marketable investment securities, are within the scope of ASC Topic 320, Investments – Debt Securities. Topic 320 requires all debt securities within its scope to be stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of other comprehensive income (loss). Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Interest and dividends are recognized as income when earned. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains or losses on the disposition of securities available for sale are based on the net proceeds and the adjusted carrying amount of the securities sold, determined on a specific identification basis.

The Company’s available for sale investment portfolio includes primarily bonds issued by U.S. Government sponsored enterprises (approximately 5% of the investment portfolio), mortgage-backed securities issued by Government-sponsored entities and backed by residential mortgages (approximately 91%), municipal bonds (approximately 3%) and a corporate debt security (approximately 1%) as of March 31, 2020. Most of the municipal bonds are general obligation bonds with maturities or pre-refunding dates within 5 years.

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The amortized cost and fair value of securities available for sale as of March 31, 2020 and December 31, 2019, by contractual maturity, are shown in the tables below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without prepayment penalties.

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

    

March 31, 2020

 

 

 

 

 

 

Gross

    

Gross

 

 

Amortized

 

Fair

 

Unrealized

 

Unrealized

Debt Securities Available for Sale

    

Cost

    

Value

    

Gains

    

Losses

Type and Maturity

 

 

  

 

 

  

 

 

  

 

 

  

Obligations of U.S. Government sponsored enterprises

 

 

  

 

 

  

 

 

 

 

 

  

After one year but within five years

 

$

6,000

 

$

6,015

 

$

15

 

$

 —

After five years but within ten years

 

 

4,000

 

 

4,030

 

 

30

 

 

 —

 

 

 

10,000

 

 

10,045

 

 

45

 

 

 —

Obligations of state and political subdivisions

 

 

  

 

 

  

 

 

  

 

 

  

Within one year

 

 

850

 

 

853

 

 

 3

 

 

 —

After one year but within five years

 

 

2,808

 

 

2,823

 

 

15

 

 

 —

After five years but within ten years

 

 

2,790

 

 

2,936

 

 

146

 

 

 —

 

 

 

6,448

 

 

6,612

 

 

164

 

 

 —

Corporate debt securities

 

 

  

 

 

  

 

 

  

 

 

  

Within one year

 

 

1,023

 

 

1,035

 

 

12

 

 

 —

 

 

 

1,023

 

 

1,035

 

 

12

 

 

 —

Mortgage-backed securities

 

 

177,584

 

 

182,946

 

 

5,363

 

 

(1)

Total

 

$

195,055

 

$

200,638

 

$

5,584

 

$

(1)