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Section 1: 10-Q (10-Q Q1 18)

rndb-10q_20180331.htm

 

UNITED STATES

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 March 31, 2018

 

Commission File Number: 001-37780

 

Randolph Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

 

Massachusetts

81-1844402

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

10 Cabot Place

 

Stoughton, Massachusetts

02072

(Address of principal executive offices)

(Zip Code)

 

(781) 963-2100

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrants 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No 

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

 

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

 

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 account 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  No 

As of May 8, 2018 there were 6,017,276 shares of the registrant’s common stock outstanding.

 

 

 

 


 

Table of Contents

 

 

Page

PART I - Financial Information

 

Item 1. Financial Statements (Unaudited)

 

 

Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017

1

 

Consolidated Statements of Operations for The Three Months Ended March 31, 2018 and 2017

2

 

Consolidated Statements of Comprehensive Loss for The Three Months Ended March 31, 2018 and 2017

3

 

Consolidated Statements of Changes in Stockholders’ Equity for The Three Months Ended March 31, 2018 and 2017

4

 

Consolidated Statements of Cash Flows for The Three Months Ended March 31, 2018 and 2017

5

 

Notes to Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3. Quantitative and Qualitative Disclosures About Market Risk

33

Item 4. Controls and Procedures

34

PART II—OTHER INFORMATION

34

Item 1. Legal Proceedings

34

Item 1A. Risk Factors

34

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

35

Item 3. Defaults Upon Senior Securities

35

Item 4. Mine Safety Disclosures

35

Item 5. Other Information

35

Item 6. Exhibits

35

SIGNATURE

36

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets (Unaudited)

(In thousands, except share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

4,216

 

 

$

3,562

 

Interest-bearing deposits

 

 

4,748

 

 

 

5,260

 

Total cash and cash equivalents

 

 

8,964

 

 

 

8,822

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 

2,695

 

 

 

2,940

 

Securities available for sale, at fair value

 

 

59,621

 

 

 

61,576

 

Loans held for sale, at fair value

 

 

22,090

 

 

 

25,390

 

Loans, net of allowance for loan losses of $3,844 in 2018 and $3,737 in 2017

 

 

407,309

 

 

 

400,373

 

Federal Home Loan Bank of Boston stock, at cost

 

 

2,604

 

 

 

3,310

 

Accrued interest receivable

 

 

1,335

 

 

 

1,432

 

Mortgage servicing rights, net

 

 

6,599

 

 

 

6,397

 

Premises and equipment, net

 

 

9,256

 

 

 

8,670

 

Bank-owned life insurance

 

 

8,075

 

 

 

8,037

 

Foreclosed real estate

 

 

193

 

 

 

193

 

Other assets

 

 

4,795

 

 

 

4,752

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

533,536

 

 

$

531,892

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Non-interest bearing

 

$

60,378

 

 

$

62,130

 

Interest bearing

 

 

335,214

 

 

 

304,706

 

Total deposits

 

 

395,592

 

 

 

366,836

 

 

 

 

 

 

 

 

 

 

Federal Home Loan Bank of Boston advances

 

 

50,920

 

 

 

75,954

 

Mortgagors' escrow accounts

 

 

1,676

 

 

 

907

 

Post-employment benefit obligations

 

 

2,634

 

 

 

2,750

 

Other liabilities

 

 

2,843

 

 

 

3,962

 

Total liabilities

 

 

453,665

 

 

 

450,409

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Preferred stock, no par value; authorized: 1,000,000 shares; issued: none

 

 

 

 

 

 

Common stock, $.01 par value; authorized: 15,000,000 shares; issued and

 

 

 

 

 

 

 

 

outstanding: 6,029,776 shares at March 31, 2018 and 6,034,276 at December 31, 2017

 

 

61

 

 

 

61

 

Additional paid-in capital

 

 

56,657

 

 

 

56,493

 

Retained earnings

 

 

29,708

 

 

 

30,415

 

ESOP-Unearned compensation

 

 

(4,272

)

 

 

(4,319

)

Accumulated other comprehensive loss, net of tax

 

 

(2,283

)

 

 

(1,167

)

Total stockholders' equity

 

 

79,871

 

 

 

81,483

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

533,536

 

 

$

531,892

 

 

See accompanying notes to consolidated financial statements.

 

1


 

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands except per share amounts)

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Interest and dividend income:

 

 

 

 

 

 

 

 

Loans

 

$

4,295

 

 

$

3,416

 

Securities-taxable

 

 

338

 

 

 

358

 

Securities-tax exempt

 

 

65

 

 

 

89

 

Interest-bearing deposits and certificates of deposit

 

 

29

 

 

 

21

 

Total interest and dividend income

 

 

4,727

 

 

 

3,884

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

Deposits

 

 

480

 

 

 

336

 

Federal Home Loan Bank of Boston advances

 

 

265

 

 

 

64

 

Total interest expense

 

 

745

 

 

 

400

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

3,982

 

 

 

3,484

 

Provision for loan losses

 

 

95

 

 

 

235

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

 

3,887

 

 

 

3,249

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

Customer service fees

 

 

301

 

 

 

372

 

Net gain on sales of mortgage loans

 

 

1,547

 

 

 

2,038

 

Mortgage servicing fees, net

 

 

334

 

 

 

660

 

Gain on sales of securities

 

 

49

 

 

 

 

Increase in cash surrender value of life insurance

 

 

38

 

 

 

38

 

Other

 

 

139

 

 

 

302

 

Total non-interest income

 

 

2,408

 

 

 

3,410

 

 

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

4,436

 

 

 

4,676

 

Occupancy and equipment

 

 

699

 

 

 

656

 

Data processing

 

 

170

 

 

 

182

 

Professional fees

 

 

252

 

 

 

302

 

Marketing

 

 

303

 

 

 

148

 

FDIC insurance

 

 

40

 

 

 

43

 

Merger and integration costs

 

 

 

 

 

167

 

Other

 

 

1,098

 

 

 

955

 

Total non-interest expenses

 

 

6,998

 

 

 

7,129

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(703

)

 

 

(470

)

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

 

4

 

 

 

(23

)

Net loss

 

$

(707

)

 

$

(447

)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

 

5,603,886

 

 

 

5,420,356

 

Loss per common share (basic and diluted)

 

$

(0.13

)

 

$

(0.08

)

 

See accompanying notes to consolidated financial statements.

2


 

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Loss (Unaudited)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Net loss

 

$

(707

)

 

$

(447

)

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

Unrealized holding gains (losses)

 

 

(1,055

)

 

 

74

 

Reclassification adjustment for net gains realized in income (1)

 

 

(49

)

 

 

 

Net unrealized gains (losses)

 

 

(1,104

)

 

 

74

 

Related tax effect

 

 

 

 

 

(26

)

Net-of-tax amount

 

 

(1,104

)

 

 

48

 

 

 

 

 

 

 

 

 

 

Supplemental retirement plan:

 

 

 

 

 

 

 

 

Reclassification adjustments (2):

 

 

 

 

 

 

 

 

Actuarial losses

 

 

9

 

 

 

9

 

Prior service credits recognized

 

 

(21

)

 

 

(22

)

 

 

 

(12

)

 

 

(13

)

Related tax effect

 

 

 

 

 

 

Net-of-tax amount

 

 

(12

)

 

 

(13

)

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

(1,116

)

 

 

35

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$

(1,823

)

 

$

(412

)

 

1) Amounts are included in gain on sales of securities in the consolidated statements of operations.

2) Amounts are included in other non-interest expenses in the consolidated statements of operations.

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

3


 

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Three Months Ended March 31, 2018 and 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Unearned

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Compensation

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

ESOP

 

 

Loss

 

 

Equity

 

 

 

(Dollars in thousands)

 

Balance at December 31, 2016

 

 

5,868,726

 

 

$

59

 

 

$

56,373

 

 

$

32,661

 

 

$

(4,507

)

 

$

(1,284

)

 

$

83,302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(447

)

 

 

 

 

 

 

 

 

(447

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35

 

 

 

35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

47

 

 

 

 

 

 

72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2017

 

 

5,868,726

 

 

$

59

 

 

$

56,398

 

 

$

32,214

 

 

$

(4,460

)

 

$

(1,249

)

 

$

82,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

 

6,034,276

 

 

$

61

 

 

$

56,493

 

 

$

30,415

 

 

$

(4,319

)

 

$

(1,167

)

 

 

81,483

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(707

)

 

 

 

 

 

 

 

 

(707

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,116

)

 

 

(1,116

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock repurchased

 

 

(4,500

)

 

 

 

 

 

(70

)

 

 

 

 

 

 

 

 

 

 

 

(70

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

207

 

 

 

 

 

 

 

 

 

 

 

 

207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released

 

 

 

 

 

 

 

 

27

 

 

 

 

 

 

47

 

 

 

 

 

 

74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2018

 

 

6,029,776

 

 

$

61

 

 

$

56,657

 

 

$

29,708

 

 

$

(4,272

)

 

$

(2,283

)

 

$

79,871

 

 

See accompanying notes to consolidated financial statements.

 

 

4


 

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(707

)

 

$

(447

)

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

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

95

 

 

 

235

 

Loans originated for sale

 

 

(70,797

)

 

 

(89,440

)

Net gain on sales of mortgage loans

 

 

(1,547

)

 

 

(2,038

)

Proceeds from sales of mortgage loans

 

 

75,644

 

 

 

102,007

 

Net amortization of securities

 

 

53

 

 

 

70

 

Net change in deferred loan costs and fees

 

 

(7

)

 

 

(38

)

Gain on sales of securities

 

 

(49

)

 

 

 

Depreciation and amortization

 

 

145

 

 

 

135

 

Stock-based compensation

 

 

207

 

 

 

 

ESOP expense

 

 

74

 

 

 

72

 

Increase in cash surrender value of life insurance

 

 

(38

)

 

 

(38

)

Net increase in mortgage servicing rights

 

 

(202

)

 

 

(392

)

Other, net

 

 

(1,181

)

 

 

(827

)

Net cash provided by operating activities

 

 

1,690

 

 

 

9,299

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Redemption of certificates of deposit

 

 

245

 

 

 

490

 

Securities available for sale:

 

 

 

 

 

 

 

 

Calls/maturities

 

 

930

 

 

 

135

 

Purchases

 

 

(9,993

)

 

 

 

Sales

 

 

8,958

 

 

 

 

Principal payments on mortgage-backed securities

 

 

952

 

 

 

1,039

 

Loan originations, net of principal repayments

 

 

(7,036

)

 

 

(9,779

)

Loans purchased, net of principal repayments

 

 

 

 

 

(10,390

)

Redemption of Federal Home Loan Bank of Boston stock

 

 

706

 

 

 

277

 

Purchases of premises and equipment

 

 

(731

)

 

 

(374

)

Net cash used in investing activities

 

 

(5,969

)

 

 

(18,602

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net increase in deposits

 

 

28,756

 

 

 

10,918

 

Net decrease in short-term Federal Home Loan Bank of Boston borrowings

 

 

(22,904

)

 

 

(8,016

)

Repayments of long-term Federal Home Loan Bank of Boston advances

 

 

(2,130

)

 

 

(164

)

Net increase in mortgagors' escrow accounts

 

 

769

 

 

 

132

 

Repurchase of common stock

 

 

(70

)

 

 

 

Net cash provided by financing activities

 

 

4,421

 

 

 

2,870

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

142

 

 

 

(6,433

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

8,822

 

 

 

14,849

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

8,964

 

 

$

8,416

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Interest paid on deposits and borrowed funds

 

$

734

 

 

$

404

 

Income taxes paid

 

$

16

 

 

$

3

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

5


 

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

March 31, 2018 and 2017

 

1.

BASIS OF FINANCIAL STATEMENT PRESENTATION

 

The consolidated financial statements include the accounts of Randolph Bancorp, Inc. (“Bancorp”) and its wholly-owned subsidiary, Envision Bank (the “Bank”, together with Bancorp, the “Company”). The Bank has subsidiaries involved in owning investment securities and foreclosed real estate properties and a subsidiary which provides loan closing services. All intercompany accounts and transactions have been eliminated in consolidation.

 

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying interim financial statements do not include all information required under GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, primarily consisting of normal recurring adjustments, have been included. The operating results for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or any other interim period.

 

Prior to 2018, the Company’s operations were managed, and financial performance was evaluated, by the chief operating decision-maker on a company-wide basis. As a result, management had determined there to be a single business segment for financial reporting purposes through December 31, 2017. Due to the significance of the Company’s mortgage banking operations and its strategic focus on this business, management prepared its 2018 operating budget by breaking-out its mortgage banking activities, including residential loan origination and loan servicing. As a result, effective January 1, 2018, the Company is reporting two business segments, namely, “Envision Bank” and “Envision Mortgage”. As part of this process, management analyzed costs incurred by departments providing services to both segments (indirect costs), such as IT, Marketing, Accounting and Administration, to determine the allocation of indirect costs to each business segment in order to fully measure each segment’s results of operations. See Note 15 for disclosure of the Company’s segment information.

 

For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC.

 

2.

RECENT ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers. This Update provides a revenue recognition framework for any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts are within the scope of other accounting standards. This ASU, as amended by ASU 2015-14, is effective for emerging growth companies in fiscal years beginning after December 15, 2018, including interim periods therein with early adoption permitted. The timing of the Company’s revenue recognition is not expected to materially change. The Company's revenue relates principally to financial instruments, which are explicitly excluded from the scope of the new guidance. Management continues to evaluate the potential impact of this ASU on the Company’s consolidated financial statements but does not anticipate, at this time, that adoption of this standard will have a significant impact.

 

In January 2016, FASB issued ASU 2016-01, Financial Instruments. This ASU revises the accounting related to the classification and measurement of investments in equity securities, and the presentation of certain fair value changes for financial liabilities measured at fair value.  It also amends certain disclosure requirements associated with the fair value of financial instruments.  This ASU is effective for emerging growth companies for annual periods beginning after December 31, 2018, including interim periods therein.  The Company is currently assessing the impact of this ASU on the consolidated financial statements.

 

In February 2016, FASB issued ASU 2016-02, Leases. This ASU requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current accounting requirements. For lessors, this ASU modifies the classification criteria and the accounting for sales-type and direct financing leases. This ASU is effective for emerging growth companies in fiscal years beginning after December 15, 2019, including interim periods therein. Earlier adoption is permitted. The Company is currently assessing the impact of the adoption of this ASU on its consolidated balance sheet.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. The ASU sets forth a “current expected credit loss” (“CECL”) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing

6


 

probable incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgements used in determining the allowance for loan losses, as well as the credit quality and underwriting standards of an organization’s loan portfolio. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. This ASU is effective for emerging growth companies in fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption is permitted in fiscal years beginning after December 31, 2018. The Company is currently assessing its data and system needs and is evaluating the impact of the adoption of this ASU on the consolidated financial statements.

 

In April 2017, the FASB issued ASU 2017-08 Receivables – Non-refundable Fees and Other Costs, which shortens the period of amortization of the premium on certain callable debt securities to the earliest call date. Currently, generally accepted accounting principles (“GAAP”) excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. This ASU requires that premiums on certain callable debt securities be amortized to the shortest call date. Securities within the scope of this paragraph are those that have explicit, noncontingent call features that are callable at fixed prices and on preset dates. This ASU is effective for emerging growth companies for annual periods beginning after December 15, 2019, including interim periods therein. Early adoption is permitted, including adoption in an interim period. The impact of adopting this ASU is dependent on the materiality of callable debt securities at the time of adoption.

 

3.

ACCUMULATED OTHER COMPREHENSIVE LOSS

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income (loss).  Although certain changes in assets and liabilities are reported as a separate component of stockholders’ equity, such items, along with net income (loss), are components of comprehensive income (loss).

The components of accumulated other comprehensive loss, included in total stockholders’ equity, are as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

 

(In thousands)

 

Securities available for sale:

 

 

 

 

 

 

 

 

Net unrealized loss

 

$

(1,728

)

 

$

(624

)

Tax effect

 

 

(313

)

 

 

(313

)

Net-of-tax amount

 

 

(2,041

)

 

 

(937

)

 

 

 

 

 

 

 

 

 

Supplemental retirement plan

 

 

 

 

 

 

 

 

Unrecognized net actuarial loss

 

 

(658

)

 

 

(667

)

Unrecognized net prior service credit

 

 

463

 

 

 

484

 

 

 

 

(195

)

 

 

(183

)

Tax effect

 

 

(47

)

 

 

(47

)

Net-of-tax amount

 

 

(242

)

 

 

(230

)

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

$

(2,283

)

 

$

(1,167

)

 

7


 

4.

SECURITIES AVAILABLE FOR SALE

The amortized cost and fair value of securities available for sale, including gross unrealized gains and losses, are as follows:

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

 

 

(In thousands)

 

March 31, 2018

 

 

 

 

 

 

 

 

 

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