10-Q 1 ehb-20190630x10q.htm 10-Q ehb_Current_Folio_10Q

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒          Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2019

OR

☐          Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to _______________

Commission File No. 000‑56071

Eureka Homestead Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

Maryland

 

83-4051300

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

 

 

1922 Veterans Memorial Boulevard

 

 

Metairie, Louisiana

 

70005

(Address of Principal Executive Offices)

 

(Zip Code)

 

(504) 834‑0242

(Registrant’s telephone number)

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

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

YES ☐     NO ☒

Indicate by check mark whether the registrant has submitted electronically 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 ☐     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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.:

 

 

 

Large accelerated filer  ☐

Accelerated filer  ☐

Non-accelerated filer  ☒

Smaller reporting company  ☒

 

Emerging growth company  ☒

 

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b‑2 of the Act).  YES ☐   NO ☒

As of August 13, 2019, 1,429,676 shares of the Company’s common stock, par value $0.01 per share, were issued and outstanding.

 

 

 

 

Eureka Homestead Bancorp, Inc.

Form 10‑Q

Index

 

 

 

 

 

 

    

 

    

Page

 

 

Part I. Financial Information

 

 

 

 

 

 

 

Item 1. 

 

Financial Statements

 

 

 

 

 

 

 

 

 

Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018 (audited) 

 

1

 

 

 

 

 

 

 

Statements of Income for the Three Months and Six Months Ended June 30, 2019 and 2018 (unaudited)

 

2

 

 

 

 

 

 

 

Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2019 and 2018 (unaudited)

 

3

 

 

 

 

 

 

 

Statements of Changes in Equity for the Six Months Ended June 30, 2019 and 2018 (unaudited)

 

4

 

 

 

 

 

 

 

Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited)

 

5

 

 

 

 

 

 

 

Notes to Financial Statements (unaudited)

 

6

 

 

 

 

 

Item 2. 

 

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

 

21

 

 

 

 

 

Item 3. 

 

Quantitative and Qualitative Disclosures about Market Risk

 

27

 

 

 

 

 

Item 4. 

 

Controls and Procedures

 

27

 

 

 

 

 

 

 

Part II. Other Information

 

 

 

 

 

 

 

Item 1. 

 

Legal Proceedings

 

28

 

 

 

 

 

Item 1A. 

 

Risk Factors

 

28

 

 

 

 

 

Item 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

28

 

 

 

 

 

Item 3. 

 

Defaults upon Senior Securities

 

28

 

 

 

 

 

Item 4. 

 

Mine Safety Disclosures

 

28

 

 

 

 

 

Item 5. 

 

Other Information

 

28

 

 

 

 

 

Item 6. 

 

Exhibits

 

29

 

 

 

 

 

 

 

Signature Page

 

30

 

 

 

 

EXPLANATORY NOTE

Eureka Homestead Bancorp, Inc., a Maryland corporation (the “Company” or the “Registrant”), was formed on February  25, 2019 to serve as the savings and loan holding company for Eureka Homestead (the “Bank”) as part of the Bank’s mutual-to-stock conversion. As of June 30, 2019, the conversion had not been completed, and, as of that date, the Registrant had only a deposit in the Bank and a payable to the Bank each totaling $12.3 million related to the stock subscription.  Other than these funds, the Registrant had not conducted any business other than that of an organizational nature. Accordingly, financial and other information of the Bank is included in this Quarterly Report.

 

 

 

 

Part I. – Financial Information

Item 1.Financial Statements

EUREKA HOMESTEAD

BALANCE SHEETS

JUNE 30, 2019 AND DECEMBER 31, 2018

(in thousands)

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

    

2019

    

2018

 

 

(Unaudited)

 

(Audited)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

14,584

 

$

3,090

Interest-Bearing Deposits

 

 

750

 

 

750

Investment Securities

 

 

7,308

 

 

5,781

Loans Receivable, Net

 

 

79,935

 

 

81,072

Loans Held-for-Sale

 

 

200

 

 

533

Accrued Interest Receivable

 

 

352

 

 

337

Federal Home Loan Bank Stock

 

 

1,397

 

 

1,376

Premises and Equipment, Net

 

 

738

 

 

767

Cash Surrender Value of Life Insurance

 

 

3,997

 

 

3,950

Deferred Tax Asset

 

 

250

 

 

280

Prepaid Expenses and Other Assets

 

 

834

 

 

134

Total Assets

 

$

110,345

 

$

98,070

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

  

 

 

  

 

 

 

 

 

 

 

Liabilities:

 

 

  

 

 

  

Deposits

 

$

71,631

 

$

56,183

Advances from Federal Home Loan Bank

 

 

23,066

 

 

26,030

Advance Payments by Borrowers for Taxes and Insurance

 

 

1,102

 

 

1,447

Accrued Expenses and Other Liabilities

 

 

2,147

 

 

2,171

Total Liabilities

 

 

97,946

 

 

85,831

 

 

 

 

 

 

 

Commitments and Contingencies (Note 6)

 

 

  

 

 

  

 

 

 

 

 

 

 

Equity:

 

 

  

 

 

  

Retained Earnings

 

 

12,402

 

 

12,335

Accumulated Other Comprehensive Loss 

 

 

(3)

 

 

(96)

Total Equity

 

 

12,399

 

 

12,239

Total Liabilities and Equity

 

$

110,345

 

$

98,070

 

The accompanying notes are an integral part of these financial statements.

1

EUREKA HOMESTEAD

STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30

 

Six Months Ended June 30

 

    

2019

    

2018

    

2019

    

2018

Interest Income:

 

 

  

 

 

  

 

 

  

 

 

  

Loans Receivable

 

$

878

 

$

841

 

$

1,756

 

$

1,685

Investment Securities

 

 

41

 

 

27

 

 

78

 

 

55

Interest-Bearing Deposits

 

 

19

 

 

12

 

 

36

 

 

22

Total Interest Income

 

 

938

 

 

880

 

 

1,870

 

 

1,762

Interest Expense:

 

 

  

 

 

  

 

 

  

 

 

  

Deposits

 

 

330

 

 

216

 

 

611

 

 

403

Advances from Federal Home Loan Bank

 

 

166

 

 

178

 

 

352

 

 

349

Total Interest Expense

 

 

496

 

 

394

 

 

963

 

 

752

Net Interest Income

 

 

442

 

 

486

 

 

907

 

 

1,010

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (Credit) for Loan Losses

 

 

 —

 

 

 —

 

 

(9)

 

 

(11)

Net Interest Income After Provision (Credit) for Loan Losses

 

 

442

 

 

486

 

 

916

 

 

1,021

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Interest Income:

 

 

  

 

 

  

 

 

  

 

 

  

Service Charges and Other Income

 

 

22

 

 

24

 

 

43

 

 

54

Fees on Loans Sold

 

 

105

 

 

86

 

 

172

 

 

103

Income from Life Insurance

 

 

24

 

 

28

 

 

47

 

 

59

Total Non-Interest Income

 

 

151

 

 

138

 

 

262

 

 

216

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Interest Expenses:

 

 

  

 

 

  

 

 

  

 

 

  

Salaries and Employee Benefits

 

 

352

 

 

376

 

 

687

 

 

726

Occupancy Expense

 

 

74

 

 

52

 

 

135

 

 

100

FDIC Deposit Insurance Premium and Examination Fees

 

 

17

 

 

19

 

 

36

 

 

39

Data Processing

 

 

31

 

 

28

 

 

60

 

 

55

Accounting and Consulting

 

 

21

 

 

29

 

 

48

 

 

57

Other Real Estate Expense

 

 

 —

 

 

 —

 

 

 —

 

 

 1

Insurance

 

 

19

 

 

18

 

 

37

 

 

34

Legal fees

 

 

 1

 

 

 —

 

 

 1

 

 

 1

Other

 

 

54

 

 

46

 

 

102

 

 

100

Total Non-Interest Expenses

 

 

569

 

 

568

 

 

1,106

 

 

1,113

Income Before Income Tax Expense

 

 

24

 

 

56

 

 

72

 

 

124

Income Tax Expense

 

 

 —

 

 

 8

 

 

 5

 

 

18

Net Income

 

$

24

 

$

48

 

$

67

 

$

106

 

The accompanying notes are an integral part of these financial statements.

2

EUREKA HOMESTEAD

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30

 

Six Months Ended June 30

 

    

2019

    

2018

    

2019

    

2018

Net Income

 

$

24

 

$

48

 

$

67

 

$

106

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss):

 

 

  

 

 

  

 

 

  

 

 

  

Unrealized Gain (Loss) on Investment Securities

 

 

74

 

 

(26)

 

 

117

 

 

(84)

Income Tax Effect

 

 

(15)

 

 

 6

 

 

(24)

 

 

18

Other Comprehensive Income (Loss), Net of Taxes

 

 

59

 

 

(20)

 

 

93

 

 

(66)

Comprehensive Income

 

$

83

 

$

28

 

$

160

 

$

40

 

The accompanying notes are an integral part of these financial statements.

3

EUREKA HOMESTEAD

STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Retained

 

Comprehensive

 

 

 

 

    

Earnings

    

(Loss)

    

Total

Balance, January 1, 2018

 

$

12,040

 

$

(103)

 

$

11,937

Net Income

 

 

106

 

 

 —

 

 

106

Other Comprehensive Loss

 

 

 —

 

 

(66)

 

 

(66)

Balance, June 30, 2018

 

$

12,146

 

$

(169)

 

$

11,977

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2019

 

$

12,335

 

$

(96)

 

$

12,239

Net Income

 

 

67

 

 

 —

 

 

67

Other Comprehensive Income

 

 

 —

 

 

93

 

 

93

Balance, June 30, 2019

 

$

12,402

 

$

(3)

 

$

12,399

 

The accompanying notes are an integral part of these financial statements.

4

EUREKA HOMESTEAD

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

    

2019

    

2018

Cash Flows from Operating Activities:

 

 

  

 

 

  

Net Income

 

$

67

 

$

106

Adjustments to Reconcile Net Income to Net Cash (Used in) Provided by Operating Activities:

 

 

  

 

 

  

Provision (Credit) for Loan Losses

 

 

(9)

 

 

(11)

Depreciation Expense

 

 

41

 

 

19

Amortization of FHLB Advance Prepayment Penalty

 

 

36

 

 

36

Provision for Deferred Income Taxes

 

 

23

 

 

24

Net Amortization of Premium/Discount on Mortgage-Backed Securities

 

 

10

 

 

 7

Stock Dividend on Federal Home Loan Bank Stock

 

 

(21)

 

 

(15)

Net decrease (increase) in Loans Held-for-Sale

 

 

333

 

 

(570)

Changes in Assets and Liabilities:

 

 

  

 

 

  

Decrease (increase) in Accrued Interest Receivable

 

 

(15)

 

 

 7

(Increase) in CSV of Life Insurance

 

 

(47)

 

 

(46)

(Increase) decrease in Prepaid Expenses and Other Assets

 

 

(723)

 

 

26

(Decrease) increase in Accrued Expenses and Other Liabilities

 

 

(24)

 

 

94

Net Cash (Used in) Provided by Operating Activities

 

 

(329)

 

 

(323)

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

  

 

 

  

Net decrease (increase) in Loans

 

 

1,146

 

 

(2,083)

Purchases of Investment Securities

 

 

(1,991)

 

 

 —

Proceeds from Sales, Calls and Principal Repayments of Investment Securities

 

 

577

 

 

557

Purchases of Premises and Equipment

 

 

(12)

 

 

(25)

Net Cash (Used in) Investing Activities

 

 

(280)

 

 

(1,551)

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

  

 

 

  

Net Increase in Deposits

 

 

3,139

 

 

389

Net increase in Escrow from Stock Conversion

 

 

12,309

 

 

 —

Advances from Federal Home Loan Bank

 

 

3,000

 

 

11,500

Payments on Advances from Federal Home Loan Bank

 

 

(6,000)

 

 

(6,529)

Net (Decrease) in Advance Payments by Borrowers for Taxes and Insurance

 

 

(345)

 

 

(234)

Net Cash Provided by Financing Activities

 

 

12,103

 

 

5,126

Net (Decrease) Increase in Cash and Cash Equivalents

 

 

11,494

 

 

3,252

 

 

 

 

 

 

 

Cash and Cash Equivalents at Beginning of Period

 

 

3,090

 

 

713

Cash and Cash Equivalents at End of Period

 

$

14,584

 

$

3,965

 

 

 

 

 

 

 

Supplemental Disclosures for Cash Flow Information:

 

 

  

 

 

  

Cash Paid for:

 

 

  

 

 

  

Interest

 

$

943

 

$

740

 

 

 

 

 

 

 

Supplemental Schedule for Noncash Investing and Financing Activities:

 

 

  

 

 

  

Change in the Unrealized Gain/Loss on Investment Securities

 

$

117

 

$

(84)

 

The accompanying notes are an integral part of these financial statements.

5

Eureka Homestead

Form 10‑Q

EUREKA HOMESTEAD

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2019 (Unaudited)

Note 1 – Basis of Presentation -

The accompanying unaudited financial statements of Eureka Homestead (the “Bank”) were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three-month and six-month periods ended June 30, 2019 are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the Financial Statements and notes thereto for the year ended December 31, 2018 included in the Form S-1 of Eureka Homestead Bancorp, Inc. as filed with the Securities and Exchange Commission (“SEC”). Reference is made to the accounting policies of the Bank described in the Notes to the Financial Statements contained in the Form S-1.

In preparing the financial statements, the Bank is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Bank’s financial condition, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

 

Note 2 Recent Accounting Pronouncements -

 

Emerging Growth Company Status

Eureka Homestead Bancorp, Inc. (the “Company”) qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Company is an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies. An emerging growth company may elect to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, but must make such election when the company is first required to file a registration statement. The Company has elected to use the extended transition period described above and intends to maintain its emerging growth company status as allowed under the JOBS Act.

In May 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers. The provisions of the update requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In March, 2016 the FASB issued ASU 2016‑08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the guidance in determining revenue recognition as principal versus agent. In April 2016, the FASB issued ASU 2016‑10, Identifying Performance Obligations and Licensing, which provides guidance in accounting for immaterial performance obligations and shipping and handling. In May 2016, the FASB issued ASU 2016‑12, Narrow-Scope Improvements and Practical Expedients which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. This ASU also provides a practical

6

expedient for contract modifications. For an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Bank is currently assessing the amendment but does not anticipate it will have a material impact on the Bank’s Financial Statements.

In January 2016, the FASB issued ASU No. 2016‑01, Financial Instruments - Overall (Subtopic 825‑ 10), Recognition and Measurement of Financial Assets and Financial Liabilities. The provisions of the update require equity investments to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment. The update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. It also eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities, and eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. ASU No. 2016‑01 requires public business entities to use the price notion when measuring the fair value of financial instruments for disclosure purposes. It also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The update requires separate presentation of financial assets and financial liabilities by category and form on the balance sheet or the accompanying notes to the financial statements. In addition, the update clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The adoption of this ASU is not expected to have a material impact on the Bank’s Financial Statements.

In February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842), Conforming Amendments Related to Leases. This ASU amends the codification regarding leases in order to increase transparency and comparability. The ASU requires companies to recognize lease assets and liabilities on the statement of condition and disclose key information about leasing arrangements. A lessee would recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. For an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The FASB, in July 2019, discussed the issuance of a proposal to delay the effective date of this ASU for Emerging Growth Companies to fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.  The exposure draft is anticipated to be issued in the third quarter of 2019.  The adoption of this ASU is not expected to have a material effect on the Bank’s Financial Statements.

In September 2016, the FASB issued ASU 2016‑13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments introduce an impairment model that is based on expected credit losses (“ECL”), rather than incurred losses, to estimate credit losses on certain types of financial instruments (eg. loans and held to maturity securities), including certain off-balance sheet financial instruments (eg. commitments to extend credit and standby letters of credit that are not unconditionally cancellable). The ECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. Financial instruments with similar risk characteristics may be grouped together when estimating the ECL. The ASU also amends the current available for sale security impairment model for debt securities whereby credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses. For an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The amendments will be applied through a modified retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The FASB, in July 2019, discussed the issuance of a proposal to delay the effective date of this ASU for Emerging Growth Companies to fiscal years beginning after December 15, 2022, and interim periods within

7

fiscal years beginning after December 15, 2023.  The exposure draft is anticipated to be issued in the third quarter of 2019.  The Bank is currently planning for the implementation of this accounting standard. It is too early to assess the impact this ASU will have on the Bank’s Financial Statements.

In August 2016, FASB issued ASU No. 2016‑15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU clarify the proper classification for certain cash receipts and cash payments, including clarification on debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, among others. For an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Bank is currently assessing the amendment but does not anticipate it will have a material impact on the Bank’s Financial Statements.

In June 2018, FASB issued ASU No. 2018‑07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. For an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Bank is currently assessing the amendment but does not anticipate it will have a material impact on the Bank’s Financial Statements.

In August 2018, FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements related to fair value. Certain provisions under ASU 2018‑13 require prospective application, while other provisions require retrospective application to all period presented in the financial statements upon adoption. For an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Bank is currently assessing the amendment but does not anticipate it will have a material impact on the Bank’s Financial Statements.

Note 3 – Investment Securities -

The amortized cost and fair values of investment securities available-for-sale were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

 

 

June 30, 2019:

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

(in thousands)

    

Cost

    

Gains

    

(Losses)

    

Value

Mortgage-Backed Securities:

 

 

  

 

 

  

 

 

  

 

 

  

FHLMC

 

$

3,792

 

$

 2

 

$

(25)

 

$

3,769

FNMA

 

 

189

 

 

 1

 

 

 —

 

 

190

GNMA

 

 

547

 

 

12

 

 

 —

 

 

559

SBA 7a Pools

 

 

2,783

 

 

 9

 

 

(2)

 

 

2,790

Total Investment Securities Available-for-Sale

 

$

7,311

 

$

24

 

$

(27)

 

$

7,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

 

 

December 31, 2018:

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

(in thousands)

    

Cost

    

Gains

    

(Losses)

    

Value

Mortgage-Backed Securities:

 

 

  

 

 

  

 

 

  

 

 

  

FHLMC

 

$

3,139

 

$

 —

 

$

(117)

 

$

3,022

FNMA

 

 

232

 

 

 —

 

 

(2)

 

 

230

GNMA

 

 

612

 

 

 8

 

 

 —

 

 

620

SBA 7a Pools

 

 

1,920

 

 

 —

 

 

(11)

 

 

1,909

Total Investment Securities Available-for-Sale

 

$

5,903

 

$

 8

 

$

(130)

 

$

5,781

 

8

All investment securities held on June 30, 2019 and December 31, 2018, were government-sponsored mortgage-backed or SBA pool securities.

The amortized cost and fair values of the investment securities available-for-sale at June 30, 2019, by contractual maturity, are shown below.  For mortgage-backed securities and SBA 7a pools, expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

 

 

 

 

 

 

 

 

Available-for-Sale

June 30, 2019

 

Amortized

 

Fair

(in thousands)

    

Cost

    

Value

Amounts Maturing:

 

 

  

 

 

  

After One Year through Five Years

 

$

1,087

 

$

1,087

After Five Years through Ten Years

 

 

1,807

 

 

1,805

After Ten Years

 

 

4,417

 

 

4,416

 

 

$

7,311

 

$

7,308

 

No investment securities were pledged to secure advances from the FHLB at June 30, 2019 and December 31, 2018.

Proceeds from sales and calls of available-for-sale investment securities were approximately $‑0‑ for the six months ended June 30, 2019 and $1,076,000 for the year ended December 31, 2018, resulting in approximately $‑0‑ and $55,000 realized losses for the six months ended June 30, 2019 and for year ended December 31, 2018, respectively.

Gross unrealized losses in investment securities at June 30, 2019 and December 31, 2018, existing for continuous periods of less than 12 months and for continuous periods of 12 months or more, are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Less Than 12 Months

 

12 Months or More

 

Totals

Security

 

 

 

 

Unrealized

 

 

 

 

Unrealized

 

 

 

 

Unrealized

Description

    

Fair Value

    

(Losses)

    

Fair Value

    

(Losses)

    

Fair Value

    

(Losses)

Mortgage-Backed

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Securities:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

FHLMC

 

$

897

 

$

(1)

 

$

2,269

 

$

(24)

 

$

3,166

 

$

(25)

SBA 7a Pools

 

 

1,805

 

 

(2)

 

 

 —

 

 

 —

 

 

1,805

 

 

(2)

 

 

$

2,702

 

$

(3)

 

$

2,269

 

$

(24)

 

$

4,971

 

$

(27)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Less Than 12 Months

 

12 Months or More

 

Totals

Security

 

 

 

 

Unrealized

 

 

 

 

Unrealized

 

 

 

 

Unrealized

Description

    

Fair Value

    

(Losses)

    

Fair Value

    

(Losses)

    

Fair Value

    

(Losses)

Mortgage-Backed

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Securities:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

FHLMC

 

$

 —

 

$

 —

 

$

3,022

 

$

(117)

 

$

3,022

 

$

(117)

FNMA

 

 

230

 

 

(2)

 

 

 —

 

 

 —

 

 

230

 

 

(2)

SBA 7a Pools

 

 

1,909

 

 

(11)

 

 

 —

 

 

 —

 

 

1,909

 

 

(11)

 

 

$

2,139

 

$

(13)

 

$

3,022

 

$

(117)

 

$

5,161

 

$

(130)

 

Management evaluates securities for other-than temporary impairment on a periodic and regular basis, as well as when economic or market concerns warrant such evaluation. No declines at June 30, 2019 and December 31, 2018, were deemed to be other-than-temporary.

In analyzing an issuer’s financial condition, management considers whether the federal government or its agencies issued the securities, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial statements.

 

9

Note 4 – Loans Receivable and the Allowance for Loan Losses -

Loans receivable at June 30, 2019 and December 31, 2018 are summarized as follows:

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

(in thousands)

    

2019

    

2018

Mortgage Loans

 

 

  

 

 

  

1-4 Family

 

$

74,166

 

$

75,185

Multifamily

 

 

4,048

 

 

4,117

Commercial real estate

 

 

1,147

 

 

1,175

Consumer Loans

 

 

210

 

 

211

 

 

 

79,571

 

 

80,688

Plus (Less):

 

 

  

 

 

  

Unamortized Loan Fees/Costs

 

 

1,214

 

 

1,234

Allowance for Loan Losses

 

 

(850)

 

 

(850)

Net Loans Receivable

 

$

79,935

 

$

81,072

 

The performing mortgage loans are pledged, under a blanket lien, as collateral securing advances from the FHLB at June 30, 2019 and December 31, 2018.

Management segregates the loan portfolio into portfolio segments which is defined as the level at which the Bank develops and documents a systematic method for determining its allowance for loan losses.  The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.  The following tables set forth, as of June 30, 2019 and December 31, 2018, the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually.  The allowance for loan losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments.

10

Allowance for Loan Losses and Recorded Investment in Loans Receivable
June 30, 2019 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-

 

 

 

 

 

 

 

 

Mortgage-

 

Mortgage-

 

Commercial

 

 

 

 

 

 

 

    

1-4 Family

    

Multifamily

    

Real Estate

    

Consumer

    

Total

Allowance for Loan Losses:

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

Beginning Balance

 

$

807

 

$

31

 

$

12

 

$

 —

 

$

850

Charge-Offs

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Recoveries

 

 

 9

 

 

 —

 

 

 —

 

 

 —

 

 

 9

Provision

 

 

(7)

 

 

(1)

 

 

(1)

 

 

 —

 

 

(9)

Ending Balance

 

$

809

 

$

30

 

$

11

 

$

 —

 

$

850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Individually Evaluated for Impairment

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively Evaluated for Impairment

 

$

809

 

$

30

 

$