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Section 1: 10-Q (10-Q)

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Table of Contents

 

 

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, 2020

OR

 

 

☐  

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

 

For the transition period from                            to                           

Commission File No. 001‑38131


Esquire Financial Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Maryland

    

27-5107901

(State or Other Jurisdiction of
Incorporation or Organization)

 

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

 

 

 

100 Jericho Quadrangle, Suite 100, Jericho, New York

 

11753

(Address of Principal Executive Offices)

 

(Zip Code)

 

(516) 535‑2002

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)


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

 

 

 

 

 

 

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

ESQ

 

The Nasdaq Stock Market LLC

 

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

YES  ☒    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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

Large accelerated filer      ☐

    

Accelerated filer                       ☒

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 Exchange Act).

YES  ☐    NO  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 1, 2020, there were 7,669,440 outstanding shares of the issuer’s common stock.

 

 

 

Table of Contents

Esquire Financial Holdings, Inc.

Form 10‑Q

Table of Contents

 

    

 

    

Page

PART I. FINANCIAL INFORMATION 

 

3

 

 

 

Item 1. 

 

Financial Statements (unaudited)

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Financial Condition

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

7

 

 

 

 

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2. 

 

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

 

22

 

 

 

 

 

Item 3. 

 

Quantitative and Qualitative Disclosures About Market Risk

 

35

 

 

 

 

 

Item 4. 

 

Controls and Procedures

 

35

 

 

 

 

 

PART II. OTHER INFORMATION 

 

36

 

 

 

Item 1. 

 

Legal Proceedings

 

36

 

 

 

 

 

Item 1A. 

 

Risk Factors

 

36

 

 

 

 

 

Item 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

38

 

 

 

 

 

Item 3. 

 

Defaults Upon Senior Securities

 

38

 

 

 

 

 

Item 4. 

 

Mine Safety Disclosures

 

38

 

 

 

 

 

Item 5. 

 

Other Information

 

38

 

 

 

 

 

Item 6. 

 

Exhibits

 

39

 

 

 

 

 

 

 

SIGNATURES

 

40

 

 

 

2

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

    

2020

    

2019

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,379

 

$

61,806

Securities available-for-sale, at fair value

 

 

138,125

 

 

146,419

Securities, restricted, at cost

 

 

2,665

 

 

2,665

 

 

 

 

 

 

 

Loans

 

 

590,397

 

 

565,369

Less: allowance for loan losses

 

 

(8,878)

 

 

(6,989)

Loans, net

 

 

581,519

 

 

558,380

Premises and equipment, net

 

 

2,913

 

 

2,835

Accrued interest receivable

 

 

3,309

 

 

3,242

Other assets

 

 

22,570

 

 

22,661

Total assets

 

$

821,480

 

$

798,008

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Demand

 

$

260,994

 

$

201,837

Savings, NOW and money market

 

 

417,144

 

 

459,037

Time

 

 

19,692

 

 

19,746

Total deposits

 

 

697,830

 

 

680,620

 

 

 

 

 

 

 

Secured borrowings

 

 

85

 

 

86

Accrued expenses and other liabilities

 

 

8,680

 

 

6,240

Total liabilities

 

$

706,595

 

$

686,946

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 —

 

 

 —

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, par value $0.01; authorized 2,000,000 shares; no shares issued and outstanding at March 31, 2020 and December 31, 2019

 

 

 —

 

 

 —

Common stock, par value $0.01; authorized 15,000,000 shares; 7,697,146 and 7,652,170 shares issued, respectively; and 7,669,440 and 7,652,170 shares outstanding, respectively

 

 

77

 

 

77

Additional paid-in capital

 

 

90,360

 

 

89,682

Retained earnings

 

 

23,514

 

 

20,917

Accumulated other comprehensive income

 

 

1,419

 

 

386

Treasury stock at cost, 27,706 and 0 shares, respectively

 

 

(485)

 

 

 —

Total stockholders’ equity

 

 

114,885

 

 

111,062

Total liabilities and stockholders’ equity

 

$

821,480

 

$

798,008

 

See accompanying condensed notes to interim condensed consolidated financial statements.

3

Table of Contents

ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

For the Three Months

 

 

Ended March 31, 

 

    

2020

    

2019

Interest income:

 

 

 

 

 

 

Loans

 

$

8,441

 

$

7,192

Securities

 

 

886

 

 

1,065

Interest earning deposits and other

 

 

246

 

 

226

Total interest income

 

 

9,573

 

 

8,483

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

Savings, NOW and money market deposits

 

 

297

 

 

429

Time deposits

 

 

96

 

 

125

Borrowings

 

 

 1

 

 

 1

Total interest expense

 

 

394

 

 

555

 

 

 

 

 

 

 

Net interest income

 

 

9,179

 

 

7,928

Provision for loan losses

 

 

1,900

 

 

425

Net interest income after provision for loan losses

 

 

7,279

 

 

7,503

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

Merchant processing income

 

 

2,956

 

 

1,814

Customer related fees and service charges

 

 

165

 

 

267

Total noninterest income

 

 

3,121

 

 

2,081

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

Employee compensation and benefits

 

 

3,978

 

 

3,436

Occupancy and equipment

 

 

546

 

 

439

Professional and consulting services

 

 

847

 

 

494

FDIC and regulatory assessments

 

 

91

 

 

86

Advertising and marketing

 

 

104

 

 

68

Travel and business relations

 

 

127

 

 

112

Data processing

 

 

729

 

 

506

Other operating expenses

 

 

444

 

 

340

Total noninterest expense

 

 

6,866

 

 

5,481

 

 

 

 

 

 

 

Net income before income taxes

 

 

3,534

 

 

4,103

Income tax expense

 

 

937

 

 

1,118

 

 

 

 

 

 

 

Net income

 

$

2,597

 

$

2,985

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

Basic

 

$

0.35

 

$

0.40

Diluted

 

$

0.33

 

$

0.39

 

See accompanying condensed notes to interim condensed consolidated financial statements

4

Table of Contents

ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

March 31, 

 

    

2020

    

2019

Net income

 

$

2,597

 

$

2,985

Other comprehensive income:

 

 

 

 

 

 

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

 

 

1,445

 

 

1,963

Reclassification adjustment for net gains included in net income

 

 

 —

 

 

 —

Tax effect

 

 

(412)

 

 

(519)

Total other comprehensive income

 

 

1,033

 

 

1,444

Total comprehensive income

 

$

3,630

 

$

4,429

 

See accompanying condensed notes to interim condensed consolidated financial statements.

5

Table of Contents

ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

other

 

 

 

 

 

Total

 

Preferred

 

Common

 

 

Preferred

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

Treasury

 

 

stockholders'

 

shares

 

shares

 

 

stock

 

 

stock

 

 

capital

 

 

earnings

 

 

income

 

 

stock

 

 

equity

Balance at January 1, 2020

 —

 

7,652,170

 

$

 —

 

$

77

 

$

89,682

 

$

20,917

 

$

386

 

$

 —

 

 

111,062

Net income

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,597

 

 

 —

 

 

 —

 

 

2,597

Other comprehensive income

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,033

 

 

 —

 

 

1,033

Exercise of stock options, net of repurchases (20,224 shares)

 —

 

44,976

 

 

 —

 

 

 —

 

 

290

 

 

 —

 

 

 —

 

 

 —

 

 

290

Stock compensation expense

 —

 

 —

 

 

 —

 

 

 —

 

 

388

 

 

 —

 

 

 —

 

 

 —

 

 

388

Purchase of common stock

 —

 

(27,706)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(485)

 

 

(485)

Balance at March 31, 2020

 —

 

7,669,440

 

$

 —

 

$

77

 

$

90,360

 

$

23,514

 

$

1,419

 

$

(485)

 

$

114,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

other

 

 

 

 

 

Total

 

Preferred

 

Common

 

 

Preferred

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

Treasury

 

 

stockholders'

 

shares

 

shares

 

 

stock

 

 

stock

 

 

capital

 

 

earnings

 

 

loss

 

 

stock

 

 

equity

Balance at January 1, 2019

 —

 

7,532,723

 

$

 —

 

$

75

 

$

88,539

 

$

6,774

 

$

(2,614)

 

$

 —

 

$

92,774

Net income

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,985

 

 

 —

 

 

 —

 

 

2,985

Other comprehensive income

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,444

 

 

 —

 

 

1,444

Stock compensation expense

 —

 

 —

 

 

 —

 

 

 —

 

 

270

 

 

 —

 

 

 —

 

 

 —

 

 

270

Balance at March 31, 2019

 —

 

7,532,723

 

$

 —

 

$

75

 

$

88,809

 

$

9,759

 

$

(1,170)

 

$

 —

 

$

97,473

 

See accompanying condensed notes to interim condensed consolidated financial statements.

6

Table of Contents

ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 

 

    

2020

    

2019

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

2,597

 

$

2,985

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

Net cash used in operating activities:

 

 

 

 

 

 

Provision for loan losses

 

 

1,900

 

 

425

Depreciation

 

 

139

 

 

107

Stock compensation expense

 

 

388

 

 

270

Net amortization:

 

 

 

 

 

 

Securities

 

 

192

 

 

95

Loans

 

 

79

 

 

177

Right of use asset

 

 

111

 

 

90

Changes in other assets and liabilities:

 

 

 

 

 

 

Accrued interest receivable

 

 

(67)

 

 

134

Other assets

 

 

111

 

 

(5,584)

Operating lease liability

 

 

(102)

 

 

(99)

Accrued expenses and other liabilities

 

 

1,999

 

 

1,966

Net cash provided by operating activities

 

 

7,347

 

 

566

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Net change in loans

 

 

(25,118)

 

 

(22,100)

Purchases of securities available-for-sale

 

 

 —

 

 

(9,918)

Principal repayments on securities available-for-sale

 

 

9,547

 

 

4,575

Purchases of premises and equipment

 

 

(217)

 

 

(333)

Net cash used in investing activities

 

 

(15,788)

 

 

(27,776)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Net increase in deposits

 

 

17,210

 

 

46,561

Decrease in secured borrowings

 

 

(1)

 

 

 —

Exercise of stock options

 

 

290

 

 

 —

Purchase of common stock

 

 

(485)

 

 

 —

Net cash provided by financing activities

 

 

17,014

 

 

46,561

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

 

8,573

 

 

19,351

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of the period

 

 

61,806

 

 

30,562

 

 

 

 

 

 

 

Cash and cash equivalents at end of the period

 

$

70,379

 

$

49,913

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

395

 

$

555

Taxes

 

 

182

 

 

51

Noncash transactions:

 

 

 

 

 

 

Right of use asset obtained in exchange for lease liability

 

 

543

 

 

3,640

 

See accompanying condensed notes to interim condensed consolidated financial statements.

7

Table of Contents

ESQUIRE FINANCIAL HOLDINGS, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Interim Consolidated Financial Statements include the accounts of Esquire Financial Holdings, Inc. and its wholly owned subsidiary, Esquire Bank, N.A, are collectively referred to as “the Company.” All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial information. In the opinion of management, the interim statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis and all such adjustments are recurring in nature. These financial statements and the accompanying notes should be read in conjunction with the Company’s audited financial statements for the years ended December 31, 2019 and 2018. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any other period. Certain balances in the prior year financial statements were reclassified to conform to current presentation. The reclassifications had no effect on prior year net income or stockholders’ equity.

Risks and Uncertainties

On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic as a result of the global spread of the coronavirus illness. In response to the outbreak, federal and state authorities in the U.S. introduced various measures to try to limit or slow the spread of the virus, including travel restrictions, nonessential business closures, stay-at-home orders, and strict social distancing. The full impact of COVID-19 is unknown and rapidly evolving.

We have implemented a customer payment deferral program (principal and interest) to assist business borrowers and certain consumers that may be experiencing financial hardship due to COVID-19 related challenges. These loans will continue to accrue interest during the deferral period unless otherwise classified as nonperforming. Consistent with regulatory guidance and the provisions of the CARES Act, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals will continue to be reported as current loans during the deferral period and not evaluated as to whether they are troubled debt restructurings. There were no delinquent loans upon adoption of our payment deferral program.

At this time, it is difficult to quantify the impact COVID-19 will have on the rest of 2020, but the Company currently expects it to negatively impact us more in the remaining portion of 2020 than experienced in the first quarter. This could cause the Company to experience a material adverse effect on our business operations, asset valuations, financial condition, and results of operations. Material adverse impacts may include all or a combination of an increase in the allowance for loan losses, valuation impairments on our investments or deferred tax assets. The Company has evaluated the impact of the effects of COVID-19 and determined that there were no material or systematic adverse impacts on the Company's first quarter 2020 Consolidated Statement of Financial Condition and Consolidated Statement of Income except for an increase in our general provision for loan losses and related allowance for loan losses.

As of March 31, 2020, the Company had no loan modification agreements related to the COVID-19 crisis.

Subsequent Events

The Company has evaluated subsequent events for recognition and disclosure through the date of issuance.

8

Table of Contents

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the Consolidated Financial Statements.

New Accounting Pronouncements

On June 16, 2016, the FASB issued Accounting Standards Update No. 2016‑13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (the ASU). This ASU replaces the incurred loss model with an expected loss model, referred to as “current expected credit loss” (CECL) model. It will significantly change estimates for credit losses related to financial assets measured at amortized cost, including loans receivable and certain other contracts. This ASU was originally effective for the Company in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. At its July 17, 2019 public meeting, FASB issued a proposal to delay the effective date of ASU 2016-13 for certain entities, including SEC filers classified as smaller reporting companies. On October 16, 2019, FASB voted for the delay, the revised effective date for adoption for the Company, which is classified as a smaller reporting company, is January 1, 2023. Due to this change in effective date, the Company plans to adopt ASU 2016-13 on or before January 1, 2023, using the required modified retrospective method with a cumulative effect adjustment as of the beginning of the reporting period. The Company has gathered the necessary data and continues to prepare for the implementation of this standard.

NOTE 2 — Debt Securities

Available-for-Sale Securities

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

    

Cost

    

Gains

    

Losses

    

Value

 

 

(In thousands)

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities – agency

 

$

23,697

 

$

997

 

$

 —

 

$

24,694

Collateralized mortgage obligations (CMO’s) – agency

 

 

112,443

 

 

1,049

 

 

(61)

 

 

113,431

Total available-for-sale

 

$

136,140

 

$

2,046

 

$

(61)

 

$

138,125

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities – agency

 

$

24,603

 

$

524

 

$

(90)

 

$

25,037

Collateralized mortgage obligations (CMO’s) – agency

 

 

121,276

 

 

451

 

 

(345)

 

 

121,382

Total available-for-sale

 

$

145,879

 

$

975

 

$

(435)

 

$

146,419

 

Mortgage-backed securities include all residential pass-through certificates guaranteed by FHLMC, FNMA, or GNMA and the CMO’s are backed by government agency pass-through certificates. The 2020 and 2019 pass-through certificates are fixed rate instruments. CMO’s, by virtue of the underlying residential collateral or structure, are fixed rate current pay sequentials or planned amortization classes (PAC’s). As actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations, these securities are not considered to have a single maturity date.

There were no sales or calls of securities for the three ended March 31, 2020.

At March 31, 2020, securities having a fair value of $114.8 million were pledged to the Federal Home Loan Bank of New York (FHLB) for borrowing capacity totaling $110.3 million. At December 31, 2019, securities having a

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fair value of $122.8 million were pledged to the FHLB for borrowing capacity totaling $116.7 million. At March 30, 2020 and December 31, 2019, the Company had no outstanding FHLB advances.

At March 31, 2020, securities having a fair value of $23.3 million were pledged to the Federal Reserve Bank of New York (FRB) for borrowing capacity totaling $23.1 million. At December 31, 2019, securities having a fair value of $23.6 million were pledged to the FRB for borrowing capacity totaling $22.9 million. At March 31, 2020 and December 31, 2018, the Company had no outstanding FRB borrowings.

The following table provides the gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Than 12 Months

 

12 Months or Longer

 

Total

 

    

Fair
Value

    

Gross
Unrealized
Losses

    

Fair
Value

    

Gross
Unrealized
Losses

    

Fair
Value

    

Gross
Unrealized
Losses

 

 

(In thousands)

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities – agency

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

CMO’s – agency

 

 

7,375

 

 

(19)

 

 

5,302

 

 

(42)

 

 

12,677

 

 

(61)

Total temporarily impaired securities

 

$

7,375

 

$

(19)

 

$

5,302

 

$

(42)

 

$

12,677

 

$

(61)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities - agency

 

$

 —

 

$

 —

 

$

9,529

 

$

(90)

 

$

9,529

 

$

(90)

CMO's - Agency

 

 

20,639

 

 

(66)

 

 

22,295

 

 

(279)

 

 

42,934

 

 

(345)

Total temporarily impaired securities

 

$

20,639

 

$

(66)

 

$

31,824

 

$

(369)

 

$

52,463

 

$

(435)

 

Management reviews the investment portfolio on a quarterly basis to determine the cause, magnitude and duration of declines in the fair value of each security. In estimating other-than-temporary impairment (OTTI), management considers many factors including: (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The assessment of whether any other than temporary decline exists may involve a high degree of subjectivity and judgment and is based on the information available to management at a point in time. Management evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

At March 31, 2020, securities in unrealized loss positions were issuances from government sponsored entities. Due to the decline in fair value being attributable to changes in interest rates, not credit quality and because the Company does not have the intent to sell the securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider the securities to be other-than-temporarily impaired at March 31, 2020.

No impairment charges were recorded for the three months ended March 31, 2020.

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NOTE 3 — Loans

The composition of loans by class is summarized as follows:

 

 

 

 

 

 

 

 

    

March 31, 2020

 

December 31, 2019

 

 

(In thousands)

1 – 4 family residential

 

$

51,738

        

$

48,140

Commercial

 

 

292,343

 

 

257,957

Multifamily

 

 

147,333

 

 

152,633

Commercial real estate

 

 

51,126

 

 

52,477

Construction

 

 

 -

 

 

6,450

Consumer

 

 

47,479

 

 

47,322

Total Loans

 

 

590,019

 

 

564,979

 

 

 

 

 

 

 

Deferred costs and unearned premiums, net

 

 

378

 

 

390

Allowance for loan losses

 

 

(8,878)

 

 

(6,989)

Loans, net

 

$

581,519

 

$

558,380

 

The following tables present the activity in the allowance for loan losses by class for the three months ending March 31, 2020 and 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 Family

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

    

Residential

    

Commercial

    

Multifamily

    

Real Estate

    

Construction

    

Consumer

    

Total

 

 

(In thousands)

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

344

 

$

4,048

 

$

1,048

 

$

560

 

$

161

 

$

828

 

$

6,989

Provision (credit) for loan losses

 

 

153

 

 

1,038

 

 

393

 

 

257

 

 

(161)

 

 

220

 

 

1,900

Recoveries

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Loans charged-off

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(11)

 

 

(11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ending allowance balance

 

$

497

 

$

5,086

 

$

1,441

 

$

817

 

$

 —

 

$

1,037

 

$

8,878

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

407

 

$

3,110

 

$

952

 

$

357

 

$

149

 

$

654

 

$

5,629

Provision (credit) for loan losses

 

 

(27)

 

 

381

 

 

(3)

 

 

51

 

 

10

 

 

13

 

 

425

Recoveries

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Loans charged-off

 

 

 —

 

 

(5)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ending allowance balance

 

$

380

 

$

3,486

 

$

949

 

$

408

 

$

159

 

$

667

 

$