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Section 1: 10-Q (10-Q)

rndb-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) f

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

 

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)

 

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, par value $.01 per share

RNDB

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 filing 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 (§232.405 of this chapter) 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 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 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 April 30, 2020, there were 5,479,884 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, 2020 and December 31, 2019

1

 

Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019

2

 

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019

3

 

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2020 and 2019

4

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019

5

 

Notes to Unaudited 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

35

Item 4. Controls and Procedures

35

PART II—OTHER INFORMATION

35

Item 1. Legal Proceedings

35

Item 1A. Risk Factors

35

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

37

Item 3. Defaults Upon Senior Securities

37

Item 4. Mine Safety Disclosures

37

Item 5. Other Information

37

Item 6. Exhibits

37

SIGNATURE

38

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets (Unaudited)

(In thousands except for share data)

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

4,589

 

 

$

4,371

 

Interest-bearing deposits

 

 

16,656

 

 

 

3,881

 

Total cash and cash equivalents

 

 

21,245

 

 

 

8,252

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 

490

 

 

 

490

 

Securities available for sale, at fair value

 

 

55,465

 

 

 

57,503

 

Loans held for sale, at fair value

 

 

58,781

 

 

 

62,792

 

Loans, net of allowance for loan losses of $4,996 in 2020 and $4,280 in 2019

 

 

476,226

 

 

 

469,131

 

Federal Home Loan Bank of Boston stock, at cost

 

 

2,873

 

 

 

2,417

 

Accrued interest receivable

 

 

1,397

 

 

 

1,393

 

Mortgage servicing rights, net

 

 

7,488

 

 

 

8,556

 

Premises and equipment, net

 

 

5,667

 

 

 

5,748

 

Bank-owned life insurance

 

 

8,486

 

 

 

8,441

 

Foreclosed real estate

 

 

132

 

 

 

 

Other assets

 

 

14,636

 

 

 

6,281

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

652,886

 

 

$

631,004

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Non-interest bearing

 

$

65,017

 

 

$

61,603

 

Interest bearing

 

 

354,051

 

 

 

344,581

 

Brokered

 

 

85,951

 

 

 

90,858

 

Total deposits

 

 

505,019

 

 

 

497,042

 

 

 

 

 

 

 

 

 

 

Federal Home Loan Bank of Boston advances

 

 

52,013

 

 

 

44,403

 

Mortgagors' escrow accounts

 

 

2,074

 

 

 

2,052

 

Post-employment benefit obligations

 

 

2,329

 

 

 

2,464

 

Other liabilities

 

 

12,495

 

 

 

6,581

 

Total liabilities

 

 

573,930

 

 

 

552,542

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

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: 5,466,344 shares at March 31, 2020 and 5,576,855 shares

      at December 31, 2019

 

 

55

 

 

 

56

 

Additional paid-in capital

 

 

50,832

 

 

 

51,127

 

Retained earnings

 

 

30,939

 

 

 

31,757

 

ESOP-Unearned compensation

 

 

(3,897

)

 

 

(3,944

)

Accumulated other comprehensive income (loss), net of tax

 

 

1,027

 

 

 

(534

)

Total stockholders' equity

 

 

78,956

 

 

 

78,462

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

652,886

 

 

$

631,004

 

See accompanying notes to unaudited 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,

 

 

 

2020

 

 

2019

 

Interest and dividend income:

 

 

 

 

 

 

 

 

Loans

 

$

5,620

 

 

$

5,588

 

Securities-taxable

 

 

370

 

 

 

384

 

Securities-tax exempt

 

 

7

 

 

 

16

 

Interest-bearing deposits and certificates of deposit

 

 

56

 

 

 

28

 

Total interest and dividend income

 

 

6,053

 

 

 

6,016

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

Deposits

 

 

1,425

 

 

 

1,160

 

Federal Home Loan Bank of Boston advances

 

 

203

 

 

 

478

 

Total interest expense

 

 

1,628

 

 

 

1,638

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

4,425

 

 

 

4,378

 

Provision for loan losses

 

 

724

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

 

3,701

 

 

 

4,378

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

Customer service fees

 

 

306

 

 

 

329

 

Gain on loan origination and sale activities, net

 

 

7,144

 

 

 

2,588

 

Mortgage servicing fees, net

 

 

(1,254

)

 

 

319

 

Increase in cash surrender value of life insurance

 

 

45

 

 

 

45

 

Other

 

 

210

 

 

 

132

 

Total non-interest income

 

 

6,451

 

 

 

3,413

 

 

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

8,126

 

 

 

5,412

 

Occupancy and equipment

 

 

698

 

 

 

656

 

Data processing

 

 

196

 

 

 

194

 

Professional fees

 

 

405

 

 

 

268

 

Marketing

 

 

152

 

 

 

188

 

FDIC insurance

 

 

56

 

 

 

31

 

Other

 

 

1,326

 

 

 

1,129

 

Total non-interest expenses

 

 

10,959

 

 

 

7,878

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(807

)

 

 

(87

)

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

 

11

 

 

 

(36

)

Net loss

 

$

(818

)

 

$

(51

)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and

   diluted)

 

 

5,158,294

 

 

 

5,478,544

 

Loss per common share (basic and diluted)

 

$

(0.16

)

 

$

(0.01

)

 

See accompanying notes to unaudited consolidated financial statements.

2


 

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Net loss

 

$

(818

)

 

$

(51

)

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

Unrealized holding gains

 

 

1,564

 

 

 

678

 

Reclassification adjustment for net gains realized in income

 

 

 

 

 

 

Net unrealized gains

 

 

1,564

 

 

 

678

 

Related tax effects

 

 

 

 

 

(38

)

Net-of-tax amount

 

 

1,564

 

 

 

640

 

 

 

 

 

 

 

 

 

 

Supplemental retirement plan:

 

 

 

 

 

 

 

 

Reclassification adjustments (1):

 

 

 

 

 

 

 

 

Actuarial losses

 

 

9

 

 

 

9

 

Prior service credits

 

 

(12

)

 

 

(21

)

 

 

 

(3

)

 

 

(12

)

Related tax effects

 

 

 

 

 

 

Net-of-tax amount

 

 

(3

)

 

 

(12

)

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

1,561

 

 

 

628

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

743

 

 

$

577

 

 

(1)

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

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

3


 

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Three months ended March 31, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Unearned

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Compensation

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

ESOP

 

 

Income (Loss)

 

 

Equity

 

 

 

(Dollars in thousands)

 

Balance at December 31, 2018

 

 

5,903,793

 

 

$

60

 

 

$

55,608

 

 

$

28,329

 

 

$

(4,132

)

 

$

(1,904

)

 

$

77,961

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(51

)

 

 

 

 

 

 

 

 

(51

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

628

 

 

 

628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock repurchased

 

 

(30,500

)

 

 

(1

)

 

 

(428

)

 

 

 

 

 

 

 

 

 

 

 

(429

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards granted

 

 

20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

216

 

 

 

 

 

 

 

 

 

 

 

 

216

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

47

 

 

 

 

 

 

70

 

Balance at March 31, 2019

 

 

5,893,293

 

 

$

59

 

 

$

55,419

 

 

$

28,278

 

 

$

(4,085

)

 

$

(1,276

)

 

$

78,395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

5,576,855

 

 

$

56

 

 

$

51,127

 

 

$

31,757

 

 

$

(3,944

)

 

$

(534

)

 

$

78,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(818

)

 

 

 

 

 

 

 

 

(818

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,561

 

 

 

1,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock repurchased

 

 

(98,800

)

 

 

(1

)

 

 

(1,194

)

 

 

 

 

 

 

 

 

 

 

 

(1,195

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards forfeited

 

 

(7,251

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share redemption for tax withholdings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for restricted stock vesting

 

 

(4,460

)

 

 

 

 

 

(53

)

 

 

 

 

 

 

 

 

 

 

 

(53

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

931

 

 

 

 

 

 

 

 

 

 

 

 

931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

47

 

 

 

 

 

 

68

 

Balance at March 31, 2020

 

 

5,466,344

 

 

$

55

 

 

$

50,832

 

 

$

30,939

 

 

$

(3,897

)

 

$

1,027

 

 

$

78,956

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

4


 

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(818

)

 

$

(51

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

724

 

 

 

 

Loans originated for sale

 

 

(219,471

)

 

 

(107,640

)

Net gain on sales of mortgage loans

 

 

(5,825

)

 

 

(2,070

)

Proceeds from sales of mortgage loans

 

 

229,579

 

 

 

106,466

 

Net amortization of securities

 

 

54

 

 

 

32

 

Net change in deferred loan costs and fees, and purchase premiums

 

 

3

 

 

 

20

 

Depreciation and amortization

 

 

218

 

 

 

209

 

Stock-based compensation

 

 

931

 

 

 

216

 

ESOP expense

 

 

68

 

 

 

70

 

Increase in cash surrender value of life insurance

 

 

(45

)

 

 

(45

)

Net (increase) decrease in mortgage servicing rights

 

 

1,068

 

 

 

(354

)

Other, net

 

 

(2,908

)

 

 

(3,002

)

Net cash provided by (used in) operating activities

 

 

3,578

 

 

 

(6,149

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

Calls/maturities

 

 

1,000

 

 

 

 

Principal payments on mortgage-backed securities

 

 

2,548

 

 

 

1,013

 

Loan originations, net of principal repayments

 

 

(6,435

)

 

 

3,655

 

Loan purchases

 

 

(1,519

)

 

 

(1,002

)

Redemptions (purchases) of Federal Home Loan Bank of Boston stock

 

 

(456

)

 

 

1,050

 

Purchases of premises and equipment

 

 

(137

)

 

 

(148

)

Net cash (used in) provided by investing activities

 

 

(4,999

)

 

 

4,568

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net increase in non-brokered deposits

 

 

12,884

 

 

 

6,916

 

Net decrease in brokered deposits

 

 

(4,907

)

 

 

(225

)

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

 

 

(19,822

)

 

 

(3,827

)

Issuance (repayments) of long-term Federal Home Loan Bank of Boston advances, net

 

 

27,432

 

 

 

(1,567

)

Net increase (decrease) in mortgagors' escrow accounts

 

 

22

 

 

 

(137

)

Repurchases of common stock

 

 

(1,195

)

 

 

(429

)

Net cash provided by financing activities

 

 

14,414

 

 

 

731

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

12,993

 

 

 

(850

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

8,252

 

 

 

7,118

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

21,245

 

 

$

6,268

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Interest paid on deposits and borrowed funds

 

$

1,728

 

 

$

1,657

 

Income taxes paid

 

$

225

 

 

$

15

 

Non-cash item:

 

 

 

 

 

 

 

 

Transfer of portfolio loan to foreclosed real estate

 

$

132

 

 

$

 

See accompanying notes to unaudited consolidated financial statements.

 

5


 

RANDOLPH BANCORP, INC. AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

March 31, 2020 and 2019

 

1.

BASIS OF FINANCIAL STATEMENT PRESENTATION

The unaudited 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 unaudited 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, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or any other interim period.

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, 2019, as filed with the SEC.

 

2.

RECENT ACCOUNTING PRONOUNCEMENTS

 

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. In October 2019, FASB approved the extension of the effective date for adoption of ASU 2016-02 for smaller reporting companies to fiscal years beginning after December 31, 2020 and interim periods beginning in 2021. The Company’s assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the time of adoption. 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 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. In November 2019, FASB issued ASU 2019-10 which extended the effective date for adoption of ASU 2016-13 for smaller reporting companies to fiscal years beginning after December 31, 2022, including interim periods therein. Early adoption is permitted. The Company has formed a working group consisting of accounting, credit and data systems personnel to lead our implementation of this ASU. The working group is evaluating the alternative methodologies which are available and has engaged professional advisors to assist in implementation.

 

3.

GLOBAL PANDEMIC AFFECTING RANDOLPH BANCORP, INC. IN THE FIRST QUARTER OF 2020

 

On March 13, 2020, the United States Government declared a national emergency in response to the coronavirus (“COVID-19”) outbreak. This outbreak has caused, among other things, widespread shutdowns of businesses and volatile markets and has severely disrupted normal economic activity in the region the Company serves as well as across the nation.

 

The following summarizes the more significant financial repercussions of this national emergency for the Company.

 

Credit Quality and Allowance for Loan Losses

 

The Company established a $357,000 allowance for loan losses in the first quarter of 2020 directly related to the initial estimate, based on available information, of probable incurred losses resulting from the impact of the COVID-19 pandemic. As the Company acquires additional information on overall economic prospects together with further assessments of the impact on individual borrowers, the loss

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estimated will be revised as needed, and these revisions could be material. The Company’s approach to estimating the impact of this pandemic on credit quality is presented in Note 6 – “Loans and Allowance for Loan Losses.

 

Disaster Response Plan Costs

 

The Company implemented its disaster response plans when the national emergency was declared and a stay at home order was issued in the Commonwealth of Massachusetts. To operate in this mode the Company incurred expenses for, among other things, buying equipment for a remote workforce, cleaning of office and branch buildings, and communications with customers regarding the status of the Company’s operations. These plan costs were immaterial for first quarter of 2020.

 

Loan Payment Deferral and Paycheck Protection Program

 

In response to the pandemic’s effect on our customers, the Company implemented a series of measures through the date of this report, including participation in the Small Business Administration’s (“SBA”) Paycheck Protection Program (the “PPP”) and granting payment deferrals for residential mortgage, home equity and certain commercial borrowers who were current in their payments. Information regarding these programs is presented in Note 17 – “Subsequent Events.”

 

4.

ACCUMULATED OTHER COMPREHENSIVE INCOME (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 income (loss), included in total stockholders’ equity, are as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Securities available for sale: