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Section 1: 10-Q (10-Q)

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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, 2017
Or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For transition period from              to             
 
Commission File Number 001-35871
 
Westbury Bancorp, Inc.
(Exact Name of Registrant as Specified in Charter)
____________________________________________
Maryland
 
46-1834307
(State or Other Jurisdiction
of Incorporation)
 
(I.R.S. Employer
Identification Number)
 
 
 
200 South Main Street, West Bend, Wisconsin
 
53095
(Address of Principal Executive Officers)
 
(Zip Code)
 
(262) 334-5563
Registrant’s telephone number, including area code
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
____________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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, 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. (Check one):
Large accelerated filer
¨
 
Accelerated filer
¨
 
 
 
 
 
Non-accelerated filer
¨
 
Smaller reporting company
x
 
 
 
 
 
 
 
 
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 



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
Indicate the number of shares outstanding of each of the Issuer’s classes of common stock as of the latest practicable date.
There were 3,978,094 shares of Common Stock, par value $.01 per share, outstanding as of July 26, 2017.



WESTBURY BANCORP, INC. 
Form 10-Q Quarterly Report 
Table of Contents 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I
 
ITEM 1.                                           FINANCIAL STATEMENTS

Westbury Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
June 30, 2017 and September 30, 2016
(In Thousands, except share data)

 
June 30,
2017
 
September 30,
2016
 
(Unaudited)
 
 
Assets
 

 
 

Cash and due from banks
$
35,010

 
$
19,125

Interest-earning deposits
22,512

 
10,488

Cash and cash equivalents
57,522

 
29,613

Securities available-for-sale
122,338

 
93,772

Securities held to maturity, at amortized cost ($2,180 and $2,392 fair value at June 30, 2017 and September 30, 2016, respectively)
2,125

 
2,293

Loans held for sale, at lower of cost or fair value
1,232

 
1,881

Loans, net of allowance for loan losses of $5,612 and $5,244 at June 30, 2017 and September 30, 2016, respectively
571,281

 
533,759

Federal Home Loan Bank stock, at cost
1,316

 
1,330

Foreclosed real estate
118

 
99

Office properties and equipment, net
15,854

 
15,410

Cash surrender value of bank-owned life insurance
14,559

 
14,233

Mortgage servicing rights
760

 
800

Deferred tax asset
4,973

 
5,425

Other assets
3,837

 
4,010

Total assets
$
795,915

 
$
702,625

Liabilities and Stockholders’ Equity
 

 
 

Liabilities
 

 
 

Deposits
$
687,486

 
$
591,977

Long-term advances from Federal Home Loan Bank
20,000

 
20,000

Advance payments by borrowers for property taxes and insurance
3,481

 
5,455

Other liabilities
5,157

 
5,564

Total liabilities
716,124

 
622,996

Stockholders’ Equity
 

 
 

Preferred stock $0.01 par value, 50,000,000 shares authorized; none issued or outstanding

 

Common stock $0.01 par value, 100,000,000 shares authorized; 5,343,841 and 5,347,641 shares issued at June 30, 2017 and September 30, 2016, respectively
54

 
54

Additional paid-in capital
52,539

 
51,463

Retained earnings
54,496

 
52,185

Unearned Employee Stock Ownership Plan (ESOP) shares
(2,880
)
 
(3,188
)
Accumulated other comprehensive income (loss)
(610
)
 
561

Less common stock repurchased, 1,362,209 and 1,249,123 shares at cost, at June 30, 2017 and September 30, 2016, respectively
(23,808
)
 
(21,446
)
Total stockholders’ equity
79,791

 
79,629

Total liabilities and stockholders’ equity
$
795,915

 
$
702,625

 
See Notes to Unaudited Consolidated Financial Statements.

2

Table of Contents
















Westbury Bancorp, Inc. and Subsidiary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Operations
 
 
 
 
 
 
 
Three and Nine Months Ended June 30, 2017 and 2016 (Unaudited)
 
 
 
 
 
 
 
(In Thousands, except per share data)
 
 
 
 
 
 
 
 
Three Months Ended 
 June 30,
 
Nine Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
Interest and dividend income:
 

 
 

 
 

 
 

Loans
$
5,665

 
$
5,266

 
$
16,526

 
$
15,549

Investments - nontaxable
160

 
45

 
431

 
97

Investments - taxable
551

 
418

 
1,346

 
1,320

Interest bearing deposits
66

 
34

 
156

 
97

Total interest and dividend income
6,442

 
5,763

 
18,459

 
17,063

Interest expense:
 

 
 

 
 

 
 

Deposits
844

 
605

 
2,246

 
1,742

Short-term advances from the Federal Home Loan Bank

 
13

 
9

 
36

Long-term advances from the Federal Home Loan Bank
61

 
59

 
162

 
130

Line of credit
1

 

 
1

 

Total interest expense
906

 
677

 
2,418

 
1,908

Net interest income before provision for loan losses
5,536

 
5,086

 
16,041

 
15,155

Provision for loan losses
50

 
250

 
350

 
525

Net interest income after provision for loan losses
5,486

 
4,836

 
15,691

 
14,630

Noninterest income:
 

 
 

 
 

 
 

Service fees on deposit accounts
994

 
975

 
2,915

 
3,000

Gain on sales of loans, net
134

 
187

 
416

 
449

Servicing fee income, net of amortization and impairment
(3
)
 
(90
)
 
194

 
(36
)
Insurance and securities sales commissions
49

 
45

 
151

 
177

Gain on sales of securities
19

 
210

 
23

 
221

Gain on sales of other assets
32

 

 
32

 
1

Increase in cash surrender value of bank-owned life insurance
104

 
105

 
326

 
325

Rental income from real estate operations
107

 
102

 
320

 
328

Other income
50

 
105

 
219

 
345

Total noninterest income
1,486

 
1,639

 
4,596

 
4,810

Noninterest expenses:
 

 
 

 
 

 
 

Compensation and employee benefits
2,994

 
2,545

 
8,742

 
7,451

Occupancy, furniture and equipment
577

 
428

 
1,736

 
1,290

Data processing
872

 
781

 
2,534

 
2,300

Accounting, legal and other professional fees
318

 
261

 
936

 
789

FDIC insurance premiums
109

 
102

 
312

 
309

Other expenses
794

 
1,042

 
2,360

 
2,872

Total noninterest expenses
5,664

 
5,159

 
16,620

 
15,011

Income before income tax expense
1,308

 
1,316

 
3,667

 
4,429

Income tax expense
490

 
410

 
1,356

 
1,611

Net income
$
818

 
$
906

 
$
2,311

 
$
2,818

Earnings per share:
 

 
 

 
 

 
 

Basic
$
0.23

 
$
0.25

 
$
0.64

 
$
0.76

Diluted
$
0.22

 
$
0.25

 
$
0.62

 
$
0.75

See Notes to Unaudited Consolidated Financial Statements.

3

Table of Contents
















Westbury Bancorp, Inc. and Subsidiary
 
Consolidated Statements of Comprehensive Income
Three and Nine Months Ended June 30, 2017 and 2016
(Unaudited)
(In Thousands)
 
 
Three Months Ended 
 June 30,
 
Nine Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
818

 
$
906

 
$
2,311

 
$
2,818

Other comprehensive income (loss), before tax:
 

 
 

 
 

 
 

Unrealized gain (loss) on available-for-sale securities
654

 
624

 
(1,904
)
 
1,229

Reclassification adjustment for realized gains included in net income
(19
)
 
(210
)
 
(23
)
 
(221
)
Other comprehensive income (loss), before tax
635

 
414

 
(1,927
)
 
1,008

Income tax (expense) benefit related to items of other comprehensive income (loss)
(249
)
 
(163
)
 
756

 
(395
)
Other comprehensive income (loss), net of tax
386

 
251

 
(1,171
)
 
613

Comprehensive income
$
1,204

 
$
1,157

 
$
1,140

 
$
3,431

 
See Notes to Unaudited Consolidated Financial Statements.


4

Table of Contents
















Westbury Bancorp, Inc. and Subsidiary
 
Consolidated Statements of Changes in Stockholders’ Equity
Nine Months Ended June 30, 2017 and 2016
(Unaudited)
(In Thousands, except share data)
 
Preferred
Stock
 
Common
Stock
 
Additional
Paid In
Capital
 
Retained
Earnings
 
Unearned
ESOP
Shares
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Common Stock Repurchased
 
Total
Balance, September 30, 2016
$

 
$
54

 
$
51,463

 
$
52,185

 
$
(3,188
)
 
$
561

 
$
(21,446
)
 
$
79,629

Net income

 

 

 
2,311

 

 

 

 
2,311

Other comprehensive loss, net of tax

 

 

 

 

 
(1,171
)
 

 
(1,171
)
Repurchase of 113,086 common stock shares

 

 

 

 

 

 
(2,362
)
 
(2,362
)
Exercise of 7,808 stock options

 

 
122

 

 

 

 

 
122

Stock based compensation expense

 

 
631

 

 

 

 

 
631

Allocation, or commitment to be allocated, of 30,855 shares by ESOP

 

 
323

 

 
308

 

 

 
631

Balance, June 30, 2017
$

 
$
54

 
$
52,539

 
$
54,496

 
$
(2,880
)
 
$
(610
)
 
$
(23,808
)
 
$
79,791

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2015
$

 
$
53

 
$
50,145

 
$
48,714

 
$
(3,548
)
 
$
352

 
$
(16,904
)
 
$
78,812

Net income

 

 

 
2,818

 

 

 

 
2,818

Other comprehensive income, net of tax

 

 

 

 

 
613

 

 
613

Repurchase of 237,015 common stock shares

 

 

 

 

 

 
(4,342
)
 
(4,342
)
Exercise of 4,457 stock options

 
1

 
67

 

 

 

 

 
68

Stock based compensation expense

 

 
628

 

 

 

 

 
628

Allocation,or commitment to be allocated, of 25,712 shares by ESOP

 

 
228

 

 
257

 

 

 
485

Balance, June 30, 2016
$

 
$
54

 
$
51,068

 
$
51,532

 
$
(3,291
)
 
$
965

 
$
(21,246
)
 
$
79,082

 
See Notes to Unaudited Consolidated Financial Statements.


5

Table of Contents

















Westbury Bancorp, Inc. and Subsidiary
 
 
 
 
 
 
 
Consolidated Statements of Cash Flows
 
 
 
Nine Months Ended June 30, 2017 and 2016 (Unaudited)
 
 
 
(In Thousands)
 
 
 
 
Nine Months Ended 
 June 30,
 
2017
 
2016
Cash Flows From Operating Activities
 

 
 

Net income
$
2,311

 
$
2,818

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

 
 

Provision for loan losses
350

 
525

Depreciation and amortization
679

 
573

            Depreciation on real estate held for investment

 
66

Net amortization of securities premiums and discounts
554

 
334

Amortization and impairment of mortgage servicing rights
40

 
327

Gain on sales of available-for-sale securities
(23
)
 
(221
)
Gain on sales of other assets
(32
)
 
(1
)
Write-down of real estate held-for-sale

 
137

(Gain) loss on sale of foreclosed real estate
3

 
(28
)
Write-down of foreclosed real estate
9

 
26

Loans originated for sale
(24,265
)
 
(29,678
)
Proceeds from sale of loans
25,330

 
28,371

Gain on sale of loans, net
(416
)
 
(449
)
ESOP compensation expense
631

 
485

Stock based compensation expense
631

 
628

Deferred income taxes
1,208

 
1,610

Increase in cash surrender value of life insurance
(326
)
 
(325
)
Net change in:
 

 
 

Other assets
205

 
(553
)
Other liabilities and advance payments by borrowers for property taxes and insurance
(2,361
)
 
(2,915
)
Net cash provided by operating activities
4,528

 
1,730

Cash Flows From Investing Activities
 

 
 

Purchases of securities available-for-sale
(40,503
)
 
(39,340
)
Proceeds from sales of securities available-for-sale
1,417

 
24,222

Proceeds from maturities, prepayments, and calls of securities available-for-sale
8,062

 
9,045

Proceeds from maturities, prepayments, and calls of securities held to maturity
168

 
166

Purchases of real estate held for investment

 
(18
)
Proceeds from sale of real estate held for investment

 
185

Redemption of FHLB stock
14

 
2,049

Net increase in loans
(37,990
)
 
(26,503
)
Purchase of bank-owned life insurance

 
(637
)
Purchases of office properties and equipment
(1,143
)
 
(174
)
Proceeds from sales of real estate held-for-sale

 
27

Proceeds from sales of foreclosed real estate
87

 
356

Net cash used in investing activities
(69,888
)
 
(30,622
)
Cash Flows From Financing Activities
 

 
 

Net increase in deposits
95,509

 
32,495

Proceeds from long-term Federal Home Loan Bank advances

 
20,000

Net proceeds of short-term Federal Home Loan Bank advances

 
(18,000
)
Proceeds from exercise of stock options
122

 
68

Repurchase of common stock
(2,362
)
 
(4,342
)
Net cash provided by financing activities
93,269

 
30,221

Net increase in cash and cash equivalents
27,909

 
1,329

Cash and cash equivalents at beginning of period
29,613

 
16,488

Cash and cash equivalents at end of period
$
57,522

 
$
17,817

 
 
 
 
Supplemental Disclosures of Cash Flow Information
 

 
 

Interest paid (including amounts credited to deposits)
$
2,417

 
$
1,908

Supplemental Schedules of Non-cash Investing Activities
 

 
 

Loans receivable transferred to foreclosed real estate
$
118

 
$
71

 
See Notes to Unaudited Consolidated Financial Statements.

6


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)



Note 1.                                 Basis of Presentation

 The accompanying unaudited consolidated financial statements of Westbury Bancorp, Inc. and its wholly-owned subsidiary, Westbury Bank, (the "Bank", and collectively, the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.  Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Estimates used in the preparation of the financial statements are based on various factors including the current interest rate environment and the general strength of the local economy.  Changes in the overall interest rate environment can significantly affect the Company’s net interest income and the value of its recorded assets and liabilities.  Actual results could differ from those estimates used in the preparation of the financial statements.  Certain prior period amounts have been reclassified to conform to current period presentation.  These reclassifications did not result in any changes to previously reported net income or stockholders’ equity.
 
In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company’s financial condition as of June 30, 2017 and September 30, 2016 and the results of operations and cash flows for the interim periods ended June 30, 2017 and 2016.  All interim amounts are unaudited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the year.  These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended September 30, 2016 filed with the U.S. Securities and Exchange Commission as part of Westbury Bancorp, Inc.’s Annual Report on Form 10-K for the year ended September 30, 2016.
 
The Jumpstart Our Business Startups Act (the "JOBS Act"), which was signed into law on April 5, 2012, made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.0 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as an “emerging growth company” and believes that it will continue to qualify as an “emerging growth company” until the last day of the Company's fiscal year following the fifth anniversary from the completion of the Company's initial public stock offering in April 2013.

As an “emerging growth company,” the Company has elected 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. Accordingly, the financial statements may not be comparable to the financial statements of companies that comply with such new or revised accounting standards.

Note 2.                                 Recent Accounting Developments
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is intended to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019. Adoption by the Company is not expected to have a material impact on the consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. ASU 2016-01 is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods beginning after December 15, 2019. Adoption by the Company is not expected to have a material impact on the consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key

7


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)


information about leasing arrangements. ASU 2016-02 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company is evaluating the potential impact of ASU 2016-02 on the consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). ASU 2016-09 is intended to simplify the accounting for share-based payment transactions, including income tax consequences, classification of awards as either assets or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted. Adoption by the Company is not expected to have a material impact on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity. ASU 2016-13 replaces the "incurred loss impairment methodology" with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019. The Company is evaluating the potential impact of ASU 2016-13 on the consolidated financial statements and related disclosures.

In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20). ASU 2017-08 is intended to amend the amortization period for certain purchased callable debt securities held at a premium. Under ASU 2017-08, the FASB is shortening the amortization period for the premium to the earliest call date. Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. ASU 2017-08 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Adoption by the Company is not expected to have a material impact on the consolidated financial statements and related disclosures.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718). ASU 2017-09 is intended to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, to a change in the terms or conditions of a share-based payment award. ASU 2017-09 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. Adoption by the Company is not expected to have a material impact on the consolidated financial statements and related disclosures.


Note 3.                                 Earnings Per Share
 
Earnings per common share is computed using the two-class method. Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding, adjusted for weighted average unallocated ESOP shares, during the applicable period, excluding outstanding participating securities. Participating securities include non-vested restricted stock awards to the extent holders of these securities are entitled to receive non-forfeitable dividends or dividend equivalents at the same rate as holders of the Company's common stock. Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method.

8


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)


 
The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share (in thousands, except share and per share data).
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
818

 
$
906

 
$
2,311

 
$
2,818

Basic potential common shares:
 

 
 
 
 
 
 
Weighted average shares outstanding
3,922,855

 
3,961,643

 
3,942,043

 
4,054,921

Weighted average unallocated ESOP shares
(294,845
)
 
(335,982
)
 
(305,541
)
 
(345,153
)
Basic weighted average shares outstanding
3,628,010

 
3,625,661

 
3,636,502

 
3,709,768

Dilutive effect of equity awards
110,261

 
43,580

 
107,819

 
33,525

Diluted weighted average shares outstanding
3,738,271

 
3,669,241

 
3,744,321

 
3,743,293

Basic income per share
$
0.23

 
$
0.25

 
$
0.64

 
$
0.76

Diluted income per share
$
0.22

 
$
0.25

 
$
0.62

 
$
0.75


9


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)




Note 4.                                 Investment Securities
 
The amortized cost and fair value of investment securities are summarized as follows:
 
 
June 30, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available for Sale
 
 
 
 
 
 
 
U.S. Government and agency securities
$
25

 
$

 
$

 
$
25

U.S. Government agency residential mortgage-backed securities
54,242

 
169

 
(616
)
 
53,795

U.S. Government agency collateralized mortgage obligations
6,633

 
36

 
(113
)
 
6,556

U.S. Government agency commercial mortgage-backed securities
18,603

 
34

 
(119
)
 
18,518

Municipal securities-tax exempt
31,968

 
104

 
(507
)
 
31,565

Municipal securities-taxable
11,871

 
58

 
(50
)
 
11,879

Total Available for Sale
123,342

 
401

 
(1,405
)
 
122,338

Held to Maturity
 
 
 
 
 
 
 
Municipal securities-tax exempt
2,125

 
55

 

 
2,180

Total Investment Securities
$
125,467

 
$
456


$
(1,405
)

$
124,518

 
 
 
 
 
 
 
 
 
September 30, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available for Sale
 
 
 
 
 
 
 
U.S. Government and agency securities
$
24

 
$
1

 
$

 
$
25

U.S. Government agency residential mortgage-backed securities
40,289

 
504

 
(43
)
 
40,750

U.S. Government agency collateralized mortgage obligations
2,674

 
24

 
(18
)
 
2,680

U.S. Government agency commercial mortgage-backed securities
11,376

 
150

 

 
11,526

Municipal securities-tax exempt
25,730

 
51

 
(99
)
 
25,682

Municipal securities-taxable
12,756

 
358

 
(5
)
 
13,109

Total Available for Sale
92,849

 
1,088

 
(165
)
 
93,772

Held to Maturity
 
 
 
 
 
 
 
Municipal securities-tax exempt
2,293

 
99

 

 
2,392

Total Investment Securities
$
95,142

 
$
1,187

 
$
(165
)
 
$
96,164



10


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)



The amortized cost and fair value of investment securities, by contractual maturity, at June 30, 2017 are shown in the following table.  Actual maturities differ from contractual maturities for mortgage-backed securities and collateralized mortgage obligations because the mortgages underlying the securities may be called or repaid without penalty.  Therefore, these securities are not presented in the maturity categories in the table below.
 
 
June 30, 2017
 
Amortized Cost
 
Fair Value
Available for sale:
 
 
 
Due in one year or less
$
940

 
$
941

Due after one year through five years
15,431

 
15,416

Due after five years through ten years
22,593

 
22,318

Due after ten years
4,900

 
4,794

U.S. Government agency residential mortgage-backed securities
54,242

 
53,795

U.S. Government agency collateralized mortgage obligations
6,633

 
6,556

U.S. Government agency commercial mortgage-backed securities
18,603

 
18,518

 
123,342

 
122,338

 
 
 
 
Held to maturity:
 
 
 
Due in one year or less
171

 
171

Due after one year through five years
717

 
728

Due after five years through ten years
1,013

 
1,049

Due after ten years
224

 
232

 
2,125

 
2,180

Total
$
125,467

 
$
124,518

 
Proceeds from sales of securities available for sale during the three months ended June 30, 2017 and 2016, were $588 and $15,482, respectively. Gross realized gains, during the three months ended June 30, 2017 and 2016, on these sales amounted to $19 and $211, respectively. Gross realized losses on these sales were zero and $1, during the three months ended June 30, 2017 and 2016, respectively.

Proceeds from sales of securities available for sale during the nine months ended June 30, 2017 and 2016, were $1,417 and $24,222, respectively. Gross realized gains, during the nine months ended June 30, 2017 and 2016, on these sales amounted to $23 and $234, respectively. Gross realized losses on these sales were zero and $13, during the nine months ended June 30, 2017 and 2016, respectively.


Securities with carrying values of $38,886 and $24,364 at June 30, 2017 and September 30, 2016, respectively, were pledged for purposes required or permitted by law.

11


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)



Information pertaining to securities with gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are summarized as follows:
 
 
June 30, 2017
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
U.S. Government and agency securities
$

 
$

 
$

 
$

 
$

 
$

U.S. Government agency residential mortgage-backed securities
34,258

 
(563
)
 
2,612

 
(53
)
 
36,870

 
(616
)
U.S. Government agency collateralized mortgage obligations
5,073

 
(87
)
 
492

 
(26
)
 
5,565

 
(113
)
U.S Government agency commercial mortgage-backed securities
10,714

 
(119
)
 

 

 
10,714

 
(119
)
Municipal securities-tax exempt
24,550

 
(501
)
 
217

 
(6
)
 
24,767

 
(507
)
Municipal securities-taxable
4,267

 
(35
)
 
283

 
(15
)
 
4,550

 
(50
)
Total Available for Sale
$
78,862

 
$
(1,305
)
 
$
3,604

 
$
(100
)
 
$
82,466

 
$
(1,405
)
Held to Maturity
 
 
 
 
 
 
 
 
 
 
 
Municipal securities-tax exempt

 

 

 

 

 

Total Investment Securities
$
78,862

 
$
(1,305
)
 
$
3,604

 
$
(100
)
 
$
82,466

 
$
(1,405
)
 
 
September 30, 2016
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
U.S. Government and agency securities
$

 
$

 
$

 
$

 
$

 
$

U.S. Government agency residential mortgage-backed securities
2,726

 
(5
)
 
3,020

 
(38
)
 
5,746

 
(43
)
U.S. Government agency collateralized mortgage obligations

 

 
576

 
(18
)
 
576

 
(18
)
U.S. Government agency commercial mortgage-backed securities

 

 

 

 

 

Municipal securities-tax exempt
18,314

 
(99
)
 

 

 
18,314

 
(99
)
Municipal securities-taxable
550

 
(5
)
 

 

 
550

 
(5
)
Total Available for Sale
$
21,590

 
$
(109
)
 
$
3,596

 
$
(56
)
 
$
25,186

 
$
(165
)
Held to Maturity
 
 
 
 
 
 
 
 
 
 
 
Municipal securities-tax exempt

 

 

 

 

 

Total Investment Securities
$
21,590

 
$
(109
)
 
$
3,596

 
$
(56
)
 
$
25,186

 
$
(165
)
 
At June 30, 2017, the investment portfolio included 7 securities available-for-sale, which had been in an unrealized loss position for greater than twelve months, and 130 securities available-for-sale, which had been in an unrealized loss position for less than twelve months. At September 30, 2016, the investment portfolio included 5 securities available-for-sale, which had been in an unrealized loss position for greater than twelve months, and 58 securities available-for-sale, which had been in an unrealized loss position for less than twelve months.

These securities are considered to be acceptable credit risks. Based upon an evaluation of the available evidence, including recent changes in market rates, credit rating information and information obtained from regulatory filings, management believes the decline in fair value for these securities is temporary. In addition, the Company does not intend to sell these investment securities prior to a period of time sufficient to allow for anticipated recovery. The Company does not have any current requirement to sell its investment in any issuer prior to any anticipated recovery in fair value.

12


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)





Note 5.                                 Loans
 
A summary of the balances of loans as of the dates indicated follows:
 
 
June 30, 2017
 
September 30, 2016
Real estate:
 

 
 

Single family
$
161,280

 
$
158,541

Multifamily
129,084

 
123,623

Commercial real estate non-owner occupied
136,482

 
117,971

Commercial real estate owner occupied
68,842

 
63,108

Construction and land development
16,321

 
16,230

Total real estate
512,009

 
479,473

Commercial business
47,783

 
40,836

Consumer:
 

 
 

Home equity lines of credit
13,772

 
14,969

Education
2,958

 
3,401

Other
461

 
462

Total consumer
17,191

 
18,832

Total loans
576,983

 
539,141

Less:
 

 
 

Net deferred loan fees
90

 
138

Allowance for loan losses
5,612

 
5,244

Net loans
$
571,281

 
$
533,759


The following tables present the contractual aging of the Company's recorded investment in past due loans by class of loans as of June 30, 2017 and September 30, 2016:
 
June 30, 2017
 
Current
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
Loans Past
Due 90 Days
or More
 
Total
Real estate:
 
 
 
 
 
 
 
 
 
 
Single Family
 
$
160,730

 
$
499

 
$

 
$
51

 
$
161,280

Multifamily
 
129,084

 

 

 

 
129,084

Commercial real estate non-owner occupied
 
136,482

 

 

 

 
136,482

Commercial real estate owner occupied
 
68,842

 

 

 

 
68,842

Construction and land development
 
16,279

 
42

 

 

 
16,321

Commercial business
 
47,783

 

 

 

 
47,783

Consumer and other:
 
 

 
 

 
 

 
 

 
 

Home equity lines of credit
 
13,745

 

 

 
27

 
13,772

Education
 
2,838

 
20

 

 
100

 
2,958

Other
 
461

 

 

 

 
461

 
 
$
576,244

 
$
561

 
$

 
$
178

 
$
576,983

 

13


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)


September 30, 2016
 
Current
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
Loans Past
Due 90 Days
or More
 
Total
Real estate:
 
 
 
 
 
 
 
 
 
 
Single Family
 
$
157,803

 
$
239

 
$
426

 
$
73

 
$
158,541

Multifamily
 
123,623

 

 

 

 
123,623

Commercial real estate non-owner occupied
 
117,971

 

 

 

 
117,971

Commercial real estate owner occupied
 
63,108

 

 

 

 
63,108

Construction and land development
 
16,230

 

 

 

 
16,230

Commercial business
 
40,836

 

 

 

 
40,836

Consumer and other:
 
 

 
 

 
 

 
 

 
 

Home equity lines of credit
 
14,942

 

 

 
27

 
14,969

Education
 
3,202

 
11

 
39

 
149

 
3,401

Other
 
462

 

 

 

 
462

 
 
$
538,177

 
$
250

 
$
465

 
$
249

 
$
539,141

 
There were no loans past due ninety days or more and still accruing interest as of June 30, 2017 and September 30, 2016.
 
The following table presents the recorded investment in nonaccrual loans by class of loans as of June 30, 2017 and September 30, 2016:
 
 
June 30, 2017
 
September 30,
2016
Real estate:
 
 
 
Single Family
$
66

 
$
338

Multifamily

 

Commercial real estate non-owner occupied

 

Commercial real estate owner occupied

 

Construction and land development

 

Commercial business

 

Consumer and other:
 
 
 
Home equity lines of credit
34

 
36

Education
100

 
188

Other

 

 
$
200

 
$
562

 
As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt and comply with various terms of their underlying loan agreements.  The Company considers current financial information, historical payment experience, credit documentation, public information and current economic trends when catgorizing its loans into risk categories.  Generally, all sizable credits receive a financial review no less than annually to monitor and adjust, if necessary, the credit’s risk profile.  Credits classified as special mention, substandard or doubtful generally receive a review quarterly.

The Company categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt:
  
Pass — A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less costs to acquire and sell in a timely manner, of any underlying collateral.
 

14


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)


Watch — A watch asset has potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Watch assets are not adversely classified and do not expose the Company to sufficient risk to warrant further classification.

Special Mention — A special mention asset has characteristics of deterioration in quality exhibited by any number of well-defined weaknesses requiring significant corrective action.  The repayment ability of the borrower has not been validated, or has become marginal or weak, and the loan may have exhibited some overdue payments or payment extensions and/or renewals.
 
Substandard — A substandard asset is an asset with a well-defined weakness that jeopardizes repayment, in whole or in part, of the debt.  These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged.  These assets are characterized by the distinct possibility that the Company will or has sustained some loss of principal and/or interest if the deficiencies are not corrected.

Doubtful — A doubtful asset is an asset that has all the weaknesses inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.  These credits have a high probability for loss, yet because certain important and reasonably specific pending factors may work toward the strengthening of the asset, its classification of loss is deferred until its more exact status can be determined.
 
Homogeneous loan types are assessed for credit quality based on the contractual aging status of the loan and payment activity.  In certain cases, based upon payment performance, the loan being related with another commercial type loan or for other reasons, a loan may be categorized into one of the risk categories noted above.  Such assessment is completed at the end of each reporting period.
 
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging of our loan portfolio as of June 30, 2017 and September 30, 2016:
 
June 30, 2017
 
Pass
 
Watch
 
Special Mention
 
Substandard
 
Doubtful
 
Total
Real estate:
 
 
 
 
 
 
 
 
 
 
 
 
Single Family
 
$
160,000

 
$

 
$

 
$
1,280

 
$

 
$
161,280

Multifamily
 
129,084

 

 

 

 

 
129,084

Commercial real estate non-owner occupied
 
136,102

 
380

 

 

 

 
136,482

Commercial real estate owner occupied
 
65,948

 
2,894

 

 

 

 
68,842

Construction and land development
 
16,320

 

 

 
1

 

 
16,321

Commercial business
 
44,708

 
2,025

 

 
1,050

 

 
47,783

Consumer and other:
 
 

 
 

 
 

 
 

 
 

 
 

Home equity lines of credit
 
13,680

 

 

 
92

 

 
13,772

Education
 
2,958

 

 

 

 

 
2,958

Other
 
461

 

 

 

 

 
461

Total
 
$
569,261

 
$
5,299

 
$

 
$
2,423

 
$

 
$
576,983

 

15


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)


September 30, 2016
 
Pass
 
Watch
 
Special Mention
 
Substandard
 
Doubtful
 
Total
Real estate:
 
 
 
 
 
 
 
 
 
 
 
 
Single Family
 
$
156,042

 
$
744

 
$

 
$
1,755

 
$

 
$
158,541

Multifamily
 
121,878

 
1,745

 

 

 

 
123,623

Commercial real estate non-owner occupied
 
116,880

 
695

 
396

 

 

 
117,971

Commercial real estate owner occupied
 
59,993

 
3,115

 

 

 

 
63,108

Construction and land development
 
16,228

 

 

 
2

 

 
16,230

Commercial business
 
31,677

 
8,945

 
214

 

 

 
40,836

Consumer and other:
 
 

 
 

 
 

 
 

 
 

 
 

Home equity lines of credit
 
14,874

 

 

 
95

 

 
14,969

Education
 
3,401

 

 

 

 

 
3,401

Other
 
462

 

 

 

 

 
462

 
 
$
521,435

 
$
15,244

 
$
610

 
$
1,852

 
$

 
$
539,141


16


Westbury Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements
(Dollars in Thousands, except per share data)


The following tables provide additional detail of the activity in the allowance for loan losses, by portfolio segment, for the three months ended June 30, 2017 and 2016:
 
Three Months Ended
June 30, 2017
 
Single Family
 
Multifamily
 
Commercial Real Estate - Non-owner Occupied
 
Commercial Real Estate - Owner-Occupied
 
Construction and
Land  Development
 
Commercial
Business
 
Consumer
and Other
 
Total
Allowance for loan losses:
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

Beginning balance
 
$
930

 
$
856

 
$
1,485

 
$
1,138

 
$
339

 
$
743

 
$
69

 
$
5,560

Provision for loan losses
 
(76
)
 
322

 
212

 
(185
)
 
(38
)
 
(182
)
 
(3
)
 
50

Loans charged-off
 

 

 

 

 
(2
)
 

 

 
(2
)
Recoveries
 

 

 

 

 

 
2

 
2

 
4

Ending balance
 
$
854

 
$
1,178

 
$
1,697

 
$
953

 
$
299

 
$
563

 
$
68

 
$
5,612

Period-ended amount allocated for:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
 
$
1

 
$

 
$

 
$

 
$

 
$

 
$
50

 
$
51

Collectively evaluated for impairment
 
853

 
1,178

 
1,697

 
953

 
299

 
563

 
18

 
5,561

Ending balance
 
$
854

 
$
1,178

 
$
1,697

 
$
953

 
$
299

 
$
563

 
$
68

 
$
5,612

Loans:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
 
$
1,407

 
$
310

 
$

 
$

 
$

 
$

 
$
83

 
$
1,800

Collectively evaluated for impairment
 
159,873

 
128,774

 
136,482

 
68,842

 
16,321

 
47,783

 
17,108

 
575,183

Ending balance
 
$
161,280

 
$
129,084

 
$
136,482

 
$
68,842

 
$
16,321

 
$
47,783

 
$
17,191

 
$
576,983

 
Three Months Ended
June 30, 2016
 
Single Family
 
Multifamily
 
Commercial Real Estate - Non-owner Occupied
 
Commercial Real Estate - Owner-Occupied
 
Construction and
Land  Development
 
Commercial
Business
 
Consumer
and Other
 
Total
Allowance for loan losses:
 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

Beginning balance
 
$
1,058

 
$
1,180

 
$
1,221

 
$
580

 
$
335

 
$
420

 
$
69

 
$
4,863

Provision for loan losses
 
(7
)
 
23

 
156

 
77

 
(8
)
 
5

 
4

 
250

Loans charged-off
 
(59
)
 

 

 

 

 

 

 
(59
)
Recoveries
 

 

 

 

 

 
7

 
1

 
8

Ending balance
 
$
992

 
$
1,203

 
$
1,377

 
$
657

 
$
327

 
$