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 September 30, 2014

 

OR

 

¨

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

 

For the transition period from _______________ to _______________

 

Commission File No. 000-55005

 

Sunnyside Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

Maryland		46-3001280
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
56 Main Street, Irvington, New York		10533
(Address of Principal Executive Offices)		Zip Code

 

(914) 591-8000

(Registrant’s telephone number)

 

N/A

(Former name or former address, 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 requirements for the past 90 days.

YES x     NO ¨

 

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 ¨

 

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. (Check one)

 

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ¨		Smaller reporting company x
(Do not check if smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨     NO x

 

As of November 13, 2014, 793,500 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding.

 

 

 

Sunnyside Bancorp, Inc.

Form 10-Q

 

Index

 

				Page
Part I. Financial Information
Item 1.		Condensed Consolidated Financial Statements
		Condensed Consolidated Statements of Financial Condition as of September 30, 2014 (unaudited) and December 31, 2013		1
		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013 (unaudited)		2 – 3
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2014 and 2013 (unaudited)		4 – 5
		Condensed Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2014 (unaudited)		6
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013 (unaudited)		7
		Notes to Condensed Consolidated Financial Statements (unaudited)		8 – 24
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		25 – 29
Item 3.		Quantitative and Qualitative Disclosures about Market Risk		29
Item 4.		Controls and Procedures		29
Part II. Other Information
Item 1.		Legal Proceedings		30
Item 1A.		Risk Factors		30
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3.		Defaults upon Senior Securities		30
Item 4.		Mine Safety Disclosures		30
Item 5.		Other Information		30
Item 6.		Exhibits		30
		Signature Page		31

 

 

Part I. – Financial Information

 

Item 1.

Financial Statements

 

SUNNYSIDE BANCORP, INC AND SUBSIDIARY

Condensed CONSOLIDATED Statements of Financial Condition

 

		September 30,				December 31,
		2014				2013
Assets
Cash and cash equivalents		$	8,051,308			$	2,636,523
Securities held to maturity, net			5,704,330				4,666,508
Securities available for sale			35,293,366				38,240,458
Loans receivable, net			39,767,522				40,040,109
Premises and equipment, net			1,614,155				1,602,451
Federal Home Loan Bank of New York and other stock, at cost			195,320				222,420
Accrued interest receivable			252,297				267,796
Cash surrender value of life insurance			2,058,146				2,008,494
Deferred income taxes			829,909				1,046,964
Other assets			738,245				519,277
Total Assets		$	94,504,598			$	91,251,000
Liabilities and Stockholders' Equity
Liabilities:
Deposits		$	81,391,273			$	78,024,604
Advances from borrowers for taxes and insurance			372,761				693,183
Other liabilities			638,635				597,210
Total Liabilities			82,402,669				79,314,997
Commitments and contingencies			-				-
Stockholders' equity:
Serial prefered stock; par value $0.01, 1,000,000 shares authorized, no shares issued			-				-
Common stock; par value $0.01, 30,000,000 shares authorized and 793,500 shares issued at September 30, 2014 and December 31, 2013, respectively			7,935				7,935
Additional paid-in capital			7,081,810				7,082,343
Unallocated common stock held by the Employee Stock Ownership Plan			(516,571	)			(533,229	)
Retained earnings, substantially restricted			6,477,744				6,645,906
Accumulated other comprehensive (loss)			(948,989	)			(1,266,952	)
Total Stockholders' Equity			12,101,929				11,936,003
Total Liabilities and Stockholders' Equity		$	94,504,598			$	91,251,000

 

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

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Condensed CONSOLIDATED Statements of Operations

 

		Three Months Ended
		September 30,
		2014				2013
		(Unaudited)
Interest and dividend income:
Loans		$	447,471			$	474,371
Investment securities			44,259				30,001
Mortgage-backed securities			160,262				171,395
Federal funds sold and other earning assets			5,039				1,992
Total interest and dividend income			657,031				677,759
Interest expense:
Deposits			99,654				140,144
Borrowings			73				-
Total interest expense			99,727				140,144
Net interest income			557,304				537,615
Provision for loan losses			-				-
Net interest income after provision for loan losses			557,304				537,615
Non-interest income:
Fees and service charges			32,614				26,643
Net gain on sale of securities			-				28,638
Income on bank owned life insurance			16,657				15,333
Total non-interest income			49,271				70,614
Non-Interest Expense:
Compensation and benefits			336,070				341,112
Occupancy and equipment, net			103,406				87,404
Data processing service fees			46,513				39,133
Professional fees			82,315				104,600
Federal deposit insurance premiums			15,500				15,328
Advertising and promotion			40,986				24,293
Other			69,022				64,342
Total non-interest expense			693,812				676,212
(Loss) before income taxes			(87,237	)			(67,983	)
Income tax (benefit)			(30,558	)			(37,218	)
Net income (loss)		$	(56,679	)		$	(30,765	)
Basic income (loss) per share		$	(0.08	)			NM
Weighted average shares outstanding, basic and diluted			741,654				NM

 

(NM) Not meaningful or not applicable because the company went public on July 15, 2013.

 

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

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Condensed CONSOLIDATED Statements of Operations

 

		Nine Months Ended
		September 30,
		2014				2013
		(Unaudited)
Interest and dividend income:
Loans		$	1,369,137			$	1,461,672
Investment securities			118,538				96,075
Mortgage-backed securities			514,329				447,301
Federal funds sold and other earning assets			8,566				4,341
Total interest and dividend income			2,010,570				2,009,389
Interest expense:
Deposits			302,420				436,957
Borrowings			354				35
Total interest expense			302,774				436,992
Net interest income			1,707,796				1,572,397
Provision for loan losses			10,000				9,500
Net interest income after provision for loan losses			1,697,796				1,562,897
Non-interest income:
Fees and service charges			75,562				78,715
Net gain on sale of securities			18,078				121,283
Income on bank owned life insurance			49,652				47,399
Total non-interest income			143,292				247,397
Non-Interest Expense:
Compensation and benefits			1,006,640				980,745
Occupancy and equipment, net			316,055				287,458
Data processing service fees			149,774				118,762
Professional fees			360,268				206,666
Federal deposit insurance premiums			45,478				48,178
Advertising and promotion			104,978				57,582
Other			173,513				151,994
Total non-interest expense			2,156,706				1,851,385
(Loss) before income taxes			(315,618	)			(41,091	)
Income tax (benefit)			(147,456	)			(42,118	)
Net income (loss)		$	(168,162	)		$	1,027
Basic income (loss) per share		$	(0.23	)			NM
Weighted average shares outstanding, basic and diluted			741,104				NM

 

(NM) Not meaningful or not applicable because the company went public on July 15, 2013.

 

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

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

CONDENSED CONSOLIDATED Statements of Comprehensive Income (Loss)

 

		Three Months Ended
		September 30,
		2014				2013
		(Unaudited)
Net income (loss)		$	(56,679	)		$	(30,765	)
Other comprehensive income (loss), before tax:
Defined benefit pension plans			-				(22,869	)
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period			(247,916	)			(564,265	)
Reclassification adjustment for (gains) losses included in operations			-				258
Other comprehensive income (loss), before tax			(247,916	)			(586,876	)
Income tax expense (benefit) related to items of other comprehensive income			(90,908	)			(296,962	)
Other comprehensive income (loss), net of tax			(157,008	)			(289,914	)
Comprehensive income (loss)		$	(213,687	)		$	(320,679	)

 

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

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

CONDENSED CONSOLIDATED Statements of Comprehensive Income (Loss)

 

		Nine Months Ended
		September 30,
		2014				2013
		(Unaudited)
Net income (loss)		$	(168,162	)		$	1,027
Other comprehensive income (loss), before tax:
Defined benefit pension plans			-				-
Unrealized gains on securities available for sale:
Unrealized holding gains (losses) arising during the period			548,671				(1,127,796	)
Reclassification adjustment for (gains) losses included in operations			(13,653	)			(4,796	)
Other comprehensive income (loss), before tax			535,018				(1,132,592	)
Income tax expense (benefit) related to items of other comprehensive income			217,055				(506,750	)
Other comprehensive income (loss), net of tax			317,963				(625,842	)
Comprehensive income (loss)		$	149,801			$	(624,815	)

 

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

 

 

SUNNYSIDE BANCORP, INC AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

										Unallocated								Accumulated
										Common Stock								Other
		Common				Additional				Held By				Retained				Comprehensive				Total
		Stock				Paid-in Capital				ESOP				Earnings				Income (Loss)				Equity
										(Unaudited)
Balance at December 31, 2013		$	7,935			$	7,082,343			$	(533,229	)		$	6,645,906			$	(1,266,952	)		$	11,936,003
Net loss for the nine months ended September 30, 2014			-				-				-				(168,162	)			-				(168,162	)
Amortization of ESOP shares			-				(533	)			16,658				-				-				16,125
Other comprehensive income, net of tax			-				-				-				-				317,963				317,963
Balance at September 30, 2014		$	7,935			$	7,081,810			$	(516,571	)		$	6,477,744			$	(948,989	)		$	12,101,929

 

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

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Condensed cONSOLIDATED StatementS of Cash Flows

 

		Nine Months Ended
		September 30,
		2014				2013
		(Unaudited)
Cash flows from operating activities:
Net income (loss)		$	(168,162	)		$	1,027
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense			113,356				99,024
Amortization of premiums and accretion of discounts, net			153,311				252,660
Amortization of deferred loan fees and costs, net			19,447				11,247
Net gain on sales of securities			(18,078	)			(121,283	)
Provision for loan losses			10,000				9,500
Decrease in accrued interest receivable			15,499				14,334
Increase in cash surrender value of life insurance			(49,652	)			(47,399	)
Amortization of ESOP shares			16,125				3,703
Net (increase) decrease in other assets			(218,969	)			330,591
Net increase (decrease) in other liabilities			41,425				(428,106	)
Net cash (used in) provided by operating activities			(85,698	)			125,298
Cash flows from investing activities:
Purchases of securities available for sale			(2,000,000	)			(20,007,438	)
Purchases of securities held to maturity			(2,000,000	)			-
Repayments and maturities of securities held to maturity			510,459				2,384,163
Repayments and maturities of securities available for sale			3,465,098				7,906,362
Proceeds from sales/calls of securities held to maturity			455,771				1,987,721
Proceeds from sales of securities available for sale			1,877,729				7,381,400
Loans purchased			-				(2,235,964	)
Loan originations, net of principal repayments			243,140				1,506,329
Purchases of bank premises and equiment			(125,060	)			(43,410	)
(Purchase) redemption of FHLB stock			27,100				(21,300	)
Net cash provided by (used in) investing activities			2,454,237				(1,142,137	)
Cash flows from financing activities:
Net inecrease (decrease ) in deposits			3,366,669				(8,009,644	)
Net decrease in advances from borrowers
for taxes and insurance			(320,423	)			(322,180	)
Net proceeds from stock conversion			-				6,534,828
Net cash provided by (used in) financing activities			3,046,246				(1,796,996	)
Net increase (decrease) in cash and cash equivalents			5,414,785				(2,813,835	)
Cash and cash equivalents at beginning of year			2,636,523				5,434,472
Cash and cash equivalents at end of period		$	8,051,308			$	2,620,637
Supplemental Information:
Cash paid for:
Interest		$	302,674			$	436,994
Income taxes (refunds received), net		$	15,000			$	-

 

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

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

Notes to Condensed Consolidated Financial Statements

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The following is a description of the more significant policies used in the presentation of the accompanying consolidated financial statements of Sunnyside Bancorp, Inc. and Subsidiary, (collectively, the “Company”).

 

Principles of Consolidation

 

The consolidated financial statements are comprised of the accounts of Sunnyside Bancorp. Inc., and its wholly-owned subsidiary, Sunnyside Federal Savings and Loan Association of Irvington (“Sunnyside Federal” or the “Association”). All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Business

 

Sunnyside Federal is a community-oriented savings institution whose primary business is accepting deposits from customers within its market area (Westchester County, New York) and investing those funds in mortgage loans secured by one-to-four family residences and in mortgage-backed and other securities. To a significantly lesser extent, funds are invested in multi-family and commercial mortgage loans, commercial loans, and consumer loans. Customer deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation. As a federally-chartered savings association, Sunnyside Federal’s primary regulator is the Office of the Controller of the Currency (the “OCC”).

 

Basis of Financial Statement Presentation

 

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with instructions for Form 10-Q, and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. However, such information presented reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of the Company’s management, necessary for a fair statement of results for the interim period.

 

The results of operations for the three and nine months ended September 30, 2014, are not necessarily indicative of the results to be expected for the year ended December 31, 2014, or any other future interim period. The unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2013 included in the Company’s annual report on Form 10-K.

 

Cash and Cash Equivalents

 

For purposes of reporting cash flows, the Company considers all cash and amounts due from depository institutions and interest-bearing deposits in other depository institutions with original maturities of three months or less to be cash equivalents.

 

Investment and Mortgage-Backed Securities

 

Securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Securities classified as available-for-sale securities are reported at fair value, with unrealized holding gains or losses reported in a separate component of shareholders’ equity in accumulated other comprehensive income. As of September 30, 2014 and December 31, 2013, the Company had no securities classified as held for trading.

 

The Company conducts a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security below its cost basis is other-than-temporary. The evaluation of other-than-temporary impairment considers the duration and severity of the impairment, the Company’s intent and ability to hold the securities and assessments of the reason for the decline in value and the likelihood of a near-term recovery. If such a decline is deemed other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged to income as a component of non-interest expense.

 

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

 

Premiums and discounts on securities are amortized by use of the level-yield method, over the life of the individual securities. Gain or loss on sales of securities is based upon the specific identification method.

 

Loans Receivable

 

Loans receivable are stated at unpaid principal balances less the allowance for loan losses and net deferred loan fees.

 

Recognition of interest on the accrual method is generally discontinued when interest or principal payments are ninety days or more in arrears, or when other factors indicate that the collection of such amounts is doubtful. At that time, a loan is placed on a nonaccrual status, and all previously accrued and uncollected interest is reversed against interest income in the current period. Interest on such loans, if appropriate, is recognized as income when payments are received. A loan is returned to an accrual status when factors indicating doubtful collectability no longer exist.

 

Allowance for Loan Losses

 

An allowance for loan losses is maintained at a level, to the best of management’s knowledge, to cover all known and inherent losses in the portfolio that are both probable and reasonable to estimate. Management of the Company, in determining the provision for loan losses considers the risks inherent in its loan portfolio and changes in the nature and volume of its loan activities, along with the general economic and real estate market conditions. The Company utilizes a two tier approach: (1) identification of problem loans and establishment of specific loss allowances on such loans; and (2) establishment of general valuation allowances on the remainder of its loan portfolio. The Company maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potential problem loans. Such system takes into consideration, among other things, delinquency status, size of loans, type of collateral, and financial condition of the borrowers. Specific loan losses are established for identified loans based on a review of such information and appraisals of the underlying collateral. General loan losses are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of the loan portfolio, current economic conditions, and management's judgment. Although management believes that adequate specific and general loan loss allowances are established, actual losses are dependent upon future events and, as such, further additions to the level of specific and general loan loss allowances may be necessary.

 

A loan evaluated for impairment is deemed to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. An insignificant payment delay, which is defined as up to ninety days by the Company, will not cause a loan to be classified as impaired. A loan is not impaired during a period of delay in payment if the Company expects to collect all amounts due, including interest accrued at the contractual interest rate for the period of delay. The amount of loan impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. All loans identified as impaired are evaluated independently. The Company does not aggregate such loans for evaluation purposes. Payments received on impaired loans are applied first to accrued interest receivable and then to principal.

 

Federal Home Loan Bank of New York stock

 

As a member of the Federal Home Loan Bank of New York (“FHLB”), the Company is required to acquire and hold shares of FHLB Class B stock. The holding requirement varies based on the Company’s activities, primarily its outstanding borrowings, with the FHLB. The investment in FHLB stock is carried at cost. The Company conducts a periodic review and evaluation of its FHLB stock to determine if any impairment exists.

 

Premises and Equipment

 

Premises and equipment are comprised of land, building, and furniture, fixtures, and equipment, at cost, less accumulated depreciation. Depreciation charges are computed on the straight-line method over the following estimated useful lives:

 

Building and improvements	5 to 40 years
Furniture, fixtures and equipment	2 to 10 years

 

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

 

Bank-Owned Life Insurance

 

Bank-owned life insurance (“BOLI”) is accounted for in accordance with FASB guidance. The cash surrender value of BOLI is recorded on the consolidated statement of financial condition as an asset and the change in the cash surrender value is recorded as non-interest income. The amount by which any death benefits received exceeds a policy’s cash surrender value is recorded in non-interest income at the time of receipt. A liability is also recorded on the consolidated statement of financial condition for postretirement death benefits provided by the split-dollar endorsement policy. A corresponding expense is recorded in non-interest expense for the accrual of benefits over the period during which employees provide services to earn the benefits.

 

Income Taxes

 

Federal and state income taxes have been provided on the basis of reported income. The amounts reflected on the tax return differ from these provisions due principally to temporary differences in the reporting of certain items for financial reporting and income tax reporting purposes. The tax effect of these temporary differences is accounted as deferred taxes applicable to future periods. Deferred income tax expense or benefit is determined by recognizing deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. The realization of deferred tax assets is assessed and a valuation allowance provided, when necessary, for that portion of the asset which is not likely to be realized.

 

Employee Benefits

 

Defined Benefit Plans:

 

The accounting guidance related to retirement benefits requires an employer to: (a) recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year; and (c) recognize, in comprehensive income, changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. The accounting guidance requires that plan assets and benefit obligations be measured as of the date of the employer’s fiscal year-end statement of financial condition.

 

401(K) Plan:

 

The Company has a 401(k) plan covering substantially all employees. The Company matches 50% of the first 6% contributed by participants and recognizes expense as its contributions are made.

 

Employee Stock Ownership Plan:

 

The employee stock ownership plan (ESOP) is accounted for in accordance with the provisions of ASC 718-40, “Employers’ Accounting for Employee Stock Ownership Plans.” The funds borrowed by the ESOP from the Company to purchase the Company’s common stock are being repaid from the Association’s contributions over a period of up to 25 years. The Company’s common stock not yet allocated to participants is recorded as a reduction of stockholders’ equity at cost. Compensation expense for the ESOP is based on the market price of the Company’s stock and is recognized as shares are committed to be released to participants.

 

Equity Incentive Plan:

 

On July 17, 2014, the Board of Directors adopted the 2014 Employee Stock Ownership Plan (the “2014 Stock Incentive Plan”) which was ratified by shareholders at the Company’s 2014 Annual Meeting of Shareholders held on September 16, 2014. Stock options and restricted stock may be granted to directors, officers and other employees of the Company. The maximum number of shares which may be issued upon exercise of the options under the plan cannot exceed 79,350 shares. The maximum number of shares of stock that may be issued as restricted stock awards cannot exceed 23,805.

 

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

 

The Stock Incentive Plan will remain in effect as long as any awards under it are outstanding; however, no awards may be granted under the Stock Incentive Plan on or after the 10-year anniversary of the effective date of the Equity Incentive Plan or July 17, 2024.

 

Under FASB ASC Topic 718, the Company will recognize compensation expense on its income statement over the requisite service period or performance period based on the grant date fair value of stock options and other equity-based compensation (such as restricted stock). No awards have been granted under the 2014 Stock Incentive Plan and therefore, no compensation expense was recognized at September 30, 2014.

 

Comprehensive Income

 

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, and the actuarial gains and losses of the pension plan, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

 

Concentration of Credit Risk and Interest-Rate Risk

 

Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, investment and mortgage-backed securities and loans. Cash and cash equivalents include amounts placed with highly rated financial institutions. Investment securities include securities backed by the U.S. Government and other highly rated instruments. The Company’s lending activity is primarily concentrated in loans collateralized by real estate in the State of New York. As a result, credit risk is broadly dependent on the real estate market and general economic conditions in the State.

 

The Company is principally engaged in the business of attracting deposits from the general public and using these deposits, together with borrowings and other funds, to make loans primarily secured by real estate in the State of New York. The potential for interest-rate risk exists as a result of the shorter duration of the Company's interest-sensitive liabilities compared to the generally longer duration of interest-sensitive assets. In a rising rate environment, liabilities will reprice faster than assets, thereby reducing net interest income. For this reason, management regularly monitors the maturity structure of the Company's assets and liabilities in order to measure its level of interest-rate risk and to plan for future volatility.

 

Advertising Costs

 

It is the Company’s policy to expense advertising costs in the period in which they are incurred.

 

Earnings Per Share

 

Basic and diluted earnings per share is computed by dividing net income for the period by the weighted average number of shares of common stock outstanding adjusted for unearned shares of the Employee Stock Ownership Plan (“ESOP”).

 

Subsequent Events

 

The Company has evaluated all events subsequent to the balance sheet date of September 30, 2014 through the date of this report, and has determined that there are no subsequent events that require disclosure under FASB guidance.

 

2. MUTUAL TO STOCK CONVERSION AND LIQUIDATION ACCOUNT

 

On July 15, 2013, the Association completed its mutual-to-stock conversion, and the Company consummated its initial stock offering. The Company sold 793,500 shares of its common stock, including 55,545 shares purchased by the Association’s ESOP, at a price of $10.00 per share, in a subscription offering, for gross offering proceeds of $7,935,000. The cost of conversion and the stock offering were deferred and deducted from the proceeds of the offering. Conversion costs incurred totaled $845,000 resulting in net proceeds of $6.5 million after also deducting the shares acquired by the ESOP.

 

In accordance with applicable federal conversion regulations, at the time of the completion of our mutual-to-stock conversion, the Company established a liquidation account in the Association in an amount equal to the Association’s total retained earnings as of the latest balance sheet date in the final prospectus used in the

 

 

Conversion.  Each eligible account holder or supplemental account holder is entitled to a proportionate share of this liquidation account in the event of a complete liquidation of the Association, and only in such event.  This share will be reduced if the eligible account holder’s or supplemental account holder’s deposit balance falls below the amounts on the date of record as of any December 31 and will cease to exist if the account is closed.  The liquidation account will never be increased despite any increase after conversion in the related deposit balance.

 

The Company may not declare, pay a dividend on, or repurchase any of its capital stock, if the effect thereof would cause retained earnings to be reduced below the liquidation account amount or regulatory capital requirements

 

3. SECURITIES

 

		September 30, 2014
		Amortized				Gross Unrealized								Fair
		Cost				Gains				Losses				Value
Securities held to maturity:
U.S.government and agency obligations		$	2,000,000			$	42,196			$	-			$	2,042,196
State, county, and municipal obligations			264,591				10,143				-				274,734
Mortgage-backed securities			3,439,739				124,213				-				3,563,952
		$	5,704,330			$	176,552			$	-			$	5,880,882
Securities available for sale:
U.S. government and agency obligations		$	5,997,204			$	-			$	98,580			$	5,898,624
Mortgage-backed securities			29,657,179				137,588				400,025				29,394,742
		$	35,654,383			$	137,588			$	498,605			$	35,293,366

 

		December 31, 2013
		Amortized				Gross Unrealized								Fair
		Cost				Gains				Losses				Value
Securities held to maturity:
State, county, and municipal obligations		$	489,566			$	17,035			$	-			$	506,601
Mortgage-backed securities			4,176,942				125,291				-				4,302,233
		$	4,666,508			$	142,326			$	-			$	4,808,834
Securities available for sale:
U.S. government and agency obligations		$	3,996,781			$	-			$	225,048			$	3,771,733
Mortgage-backed securities			35,139,713				100,428				771,416				34,468,725
		$	39,136,494			$	100,428			$	996,464			$	38,240,458

 

At September 30, 2014 and December 31, 2013, securities with a carrying amount of $3.0 million and $0, respectively, were pledged as collateral to secure borrowings with the Federal Home Loan Bank of New York. (FHLBNY).

 

Mortgage-backed securities consist primarily of securities guaranteed by Ginnie Mae, Fannie Mae, Freddie Mac, and the Small Business Administration with amortized costs of $5.3 million, $14.5 million, $7.6 million, and $5.7 million, respectively, at September 30, 2014 ($6.3 million, $16.4 million, $9.1 million, and $7.5 million, respectively, at December 31, 2013).

 

Proceeds from the sale of securities held to maturity amounted to $0 and $566,129 for the three months ended September 30, 2014 and 2013, respectively. Net gains of $0 and $28,896 were recognized on those sales for the three months ended September 30, 2014 and 2013, respectively. The sale of the securities occurred after the Company had already collected a substantial portion (at least 85%) of the principal outstanding due to prepayments on the debt securities.

 

 

3. SECURITIES (Cont’d)

 

Proceeds from the sale of securities available for sale amounted to $0 and $5,115,202 for the three months ended September 30, 2014 and 2013, respectively. Net losses of $0 and $258 were recognized on those sales for the three months ended September 30, 2014 and 2013, respectively.

 

Proceeds from the sale of securities held to maturity amounted to $230,771 and $1,987,721 for the nine months September 30, 2014 and 2013, respectively. Net gains of $4,425 and $116,487 were recognized on those sales during the nine months ended September 30, 2014 and 2013, respectively. The sale of the securities occurred after the Company had already collected a substantial portion (at least 85%) of the principal outstanding at acquisition due to prepayments on the debt securities.

 

Proceeds from the sale of securities available for sale amounted to $1,877,729 and $7,381,400 for the nine months ended September 30, 2014 and 2013, respectively. Net gains of $13,653 and $4,796 were recognized on those sales for the nine months ended, September 30, 2014 and 2013, respectively.

 

The following is a summary of the amortized cost and fair value of securities at September 30, 2014 and December 31, 2013, by remaining period to contractual maturity. Actual maturities may differ from these amounts because certain debt security issuers have the right to call or redeem their obligations prior to contractual maturity. In addition, mortgage backed securities that amortize monthly are listed in the period the security is legally set to pay off in full.

 

		September 30, 2014
		Held to Maturity								Available for Sale
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
Within one year		$	-			$	-			$	-			$	-
After one to five years			110,056				114,088				2,998,286				2,979,497
After five to ten years			154,535				160,462				10,168,885				10,126,241
After ten years			5,439,739				5,606,332				22,487,212				22,187,628
		$	5,704,330			$	5,880,882			$	35,654,383			$	35,293,366

 

		December 31, 2013
		Held to Maturity								Available for Sale
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
Within one year		$	-			$	-			$	-			$	-
After one to five years			110,095				116,846				574,576				577,199
After five to ten years			379,471				389,755				12,429,566				12,191,416
After ten years			4,176,942				4,302,233				26,132,352				25,471,843
		$	4,666,508			$	4,808,834			$	39,136,494			$	38,240,458

 

 

3. SECURITIES (Cont’d)

 

The following tables summarize the fair values and unrealized losses of securities with an unrealized loss at September 30, 2014 and December 31, 2013, segregated between securities that have been in an unrealized loss position for less than one year, or one year or longer, at the respective dates.

 

		September 30, 2014
		Under One Year								One Year or More
						Gross								Gross
		Fair				Unrealized				Fair				Unrealized
		Value				Loss				Value				Loss
Securities available for sale:
U.S. government and agency obligations		$	988,956			$	11,044			$	2,909,668			$	87,536
Mortgage-backed securities			8,518,266				73,174				8,762,795				326,851
		$	9,507,222			$	84,218			$	11,672,463			$	414,387

 

		December 31, 2013
		Under One Year								One Year or More
						Gross								Gross
		Fair				Unrealized				Fair				Unrealized
		Value				Loss				Value				Loss
Securities available for sale:
U.S. government and agency obligations		$	3,771,733			$	225,048			$	-			$	-
Mortgage-backed securities			20,801,105				447,844				3,941,749				323,572
		$	24,572,838			$	672,892			$	3,941,749			$	323,572

 

The unrealized losses are primarily due to changes in market interest rates subsequent to purchase. At September 30, 2014, a total of 27 securities were in an unrealized loss position (33 at December 31, 2013). The Company generally purchases securities issued by Government Sponsored Enterprises (GSE). Accordingly, it is expected that the GSE securities would not be settled at a price less than the Company’s amortized cost basis. The Company does not consider these investments to be other-than-temporarily impaired at September 30, 2014 and December 31, 2013 since the decline in market value is attributable to changes in interest rates and not credit quality and the Company has the intent and ability to hold these investments until there is a full recovery of the unrealized loss, which may be at maturity.

 

 

4. LOANS RECEIVABLE, NET

 

		September 30,				December 31,
		2014				2013
Mortgage loans:
Residential 1-4 family			31,251,193			$	34,616,130
Commercial and multi-family			6,866,247				4,458,768
Home equity lines of credit			372,385				689,805
			38,489,825				39,764,703
Other loans:
Commercial			1,498,438				500,000
Secured by savings accounts			39,691				43,683
Student			37,292				-
			1,575,421				543,683
Total loans			40,065,246				40,308,386
Less:
Deferred loan fees (costs), net			(52,421	)			(71,868	)
Allowance for loan losses			350,145				340,145
			297,724				268,277
		$	39,767,522			$	40,040,109

 

In the ordinary course of business, the Company makes loans to its directors, executive officers, and their associates (related parties) on the same terms as those prevailing at the time of origination for comparable loans with other borrowers. The unpaid principal balances of related party loans were approximately $236,000 and $260,000 at September 30, 2014 and December 31, 2013, respectively.

 

 

4. LOANS RECEIVABLE, NET (Cont’d)

 

Activity in the allowance for loan losses is summarized as follows:

 

		Three Months Ended
		September 30,
		2014				2013
Balance at beginning of period		$	350,145			$	325,145
Provision for loan losses			-				-
Charge offs			-				-
Recoveries			-				-
Balance at end of period		$	350,145			$	325,145

 

		Nine Months Ended
		September 30,
		2014				2013
Balance at beginning of period		$	340,145			$	314,490
Provision for loan losses			10,000				9,500
Charge offs			-				-
Recoveries			-				1,155
Balance at end of period		$	350,145			$	325,145

 

The allowance for loan losses consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. There are no specific allowances as of September 30, 2014 and December 31, 2013. The general component covers pools of loans by loan class not considered impaired, as well as smaller balance homogeneous loans, such as one-to-four family real estate, home equity lines of credit and other consumer loans.  These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors.  These qualitative risk factors include:

 

1.

Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.

 

2.

National, regional, and local economic and business conditions including the value of underlying collateral for collateral dependent loans.

 

3.

Nature and volume of the portfolio and terms of loans.

 

4.

Experience, ability, and depth of lending management and staff and the quality of the Company’s loan review system.

 

5.

Volume and severity of past due, classified and nonaccrual loans.

 

6.

Existence and effect of any concentrations of credit and changes in the level of such concentrations.

 

7.

Effect of external factors, such as competition and legal and regulatory requirements.

 

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

 

 

4. LOANS RECEIVABLE, NET (Cont’d)

 

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

 

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated when credit deficiencies arise, such as delinquent loan payments. Credit quality risk ratings include regulatory classifications of pass, special mention, substandard, doubtful and loss.

 

Loan classifications are defined as follows:

 

•

Pass — These loans are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner.

 

•

Special Mention — These loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects.

 

•

Substandard — These loans are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

 

•

Doubtful — These loans have all the weaknesses inherent in a loan classified substandard with the added characteristic that the weaknesses make the full recovery of our principal balance highly questionable and improbable on the basis of currently known facts, conditions, and values. The likelihood of a loss on an asset or portion of an asset classified as doubtful is high. Its classification as Loss is not appropriate, however, because pending events are expected to materially affect the amount of loss.

 

•

Loss — These loans are considered uncollectible and of such little value that a charge-off is warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery will occur.

 

One of the primary methods the Company uses as an indicator of the credit quality of their portfolio is the regulatory classification system. The following table reflects the credit quality indicators by portfolio segment and class, at the dates indicated:

 

		September 30, 2014
		Mortgage Loans
						Commercial
		Residential				and				Home Equity				Commercial
		1-4 Family				Multi-Family				LOC				and other				Total
		(In thousands)
Pass		$	30,829			$	6,400			$	373			$	1,575			$	39,177
Special Mention			-				466				-				-				466
Substandard			422				-				-				-				422
Total		$	31,251			$	6,866			$	373			$	1,575			$	40,065

 

 

4. LOANS RECEIVABLE, NET (Cont’d)

 

		December 31, 2013
		Mortgage Loans
						Commercial
		Residential				and				Home Equity				Commercial
		1-4 Family				Multi-Family				LOC				and other				Total
		(In thousands)
Pass		$	34,109			$	3,958			$	690			$	543			$	39,300
Special Mention			138				501				-				-				639
Substandard			369				-				-				-				369
Total		$	34,616			$	4,459			$	690			$	543			$	40,308

 

The following table provides information about loan delinquencies at the dates indicated:

 

		September 30, 2014
																										90 Days
										90 Days																or More
		30-59 Days				60-89 Days				or More				Total				Current				Total				Past Due
		Past Due				Past Due				Past Due				Past Due				Loans				Loans				and Accruing
														(In thousands)
Residential 1-4 family		$	-			$	201			$	422			$	623			$	30,628			$	31,251			$	-
Commercial and multi- family			-				-				-				-				6,866				6,866				-
Home equity lines of credit			-				-				-				-				372				372				-
Other loans			-				-				-				-				1,576				1,576				-
		$	-			$	201			$	422			$	623			$	39,442			$	40,065			$	-
		December 31, 2013
																										90 Days
										90 Days																or More
		30-59 Days				60-89 Days				or More				Total				Current				Total				Past Due
		Past Due				Past Due				Past Due				Past Due				Loans				Loans				and Accruing
		(In thousands)
Residential 1-4 family		$	138			$	-			$	369			$	507			$	34,109			$	34,616			$	-
Commercial and multi- family			-				-				-				-				4,459				4,459				-
Home equity lines of credit			-				198				-				198				492				690				-
Other loans			-				-				-				-				543				543				-
		$	138			$	198			$	369			$	705			$	39,603			$	40,308			$	-

 

There were no troubled debt restructured loans at September 30, 2014 or December 31, 2013.

 

 

4. LOANS RECEIVABLE, NET (Cont’d)

 

The following is a summary of loans, by loan type, on which the accrual of income has been discontinued and loans that are contractually past due 90 days or more but have not been classified as non-accrual at the dates indicated:

 

		September 30,				December 31,
		2014				2013
		(In thousands)
Residential 1-4 family		$	422			$	369
Commercial and multi-family			-				-
Home equity lines of credit			-				-
Other Loans			-				-
Total non-accrual loans			422				369
Accruing loans delinquent 90 days or more			-				-
Total non-performing loans		$	422			$	369

 

The total amount of interest income on non-accrual loans that would have been recognized if interest on all such loans had been recorded based upon original contract terms amounted to approximately $6,000 and $5,600 for the three months ended September 30, 2014 and 2013, respectively. The total amount of interest income recognized on non-accrual loans amounted to approximately $4,300 and $0 during the three months ended September 30, 2014 and 2013, respectively.

 

For the nine months ended September 30, 2014 and 2013, such interest income that would have been recognized on non-accrual loans totaled approximately $20,300 and $13,600, respectively. The total amount of interest income recognized on non-accrual loans amounted to approximately $7,100 and $0 during the nine months ended September 30, 2014 and 2013, respectively.

 

The following tables present the activity in the allowance for loan losses by loan type for the periods indicated:

 

		Three Months Ended
		September 30, 2014
		Mortgage Loans
						Commercial
		Residential				and				Home Equity
		1-4 Family				Multi-Family				LOC				Other				Unallocated				Total
		(In thousands)
Beginning balance		$	280			$	44			$	7			$	12			$	7			$	350
Provision for loan losses			(5	)			5				(4	)			1				3				-
Ending Balance		$	275			$	49			$	3			$	13			$	10			$	350

 

 

4. LOANS RECEIVABLE, NET (Cont’d)

 

		Three Months Ended
		September 30, 2013
		Mortgage Loans
						Commercial
		Residential				and				Home Equity
		1-4 Family				Multi-Family				LOC				Other				Unallocated				Total
										(In thousands)
Beginning balance		$	291			$	24			$	6			$	4			$	-			$	325
Provision for loan losses			(7	)			7				-				-				-				-
Ending Balance		$	284			$	31			$	6			$	4			$	-			$	325
		Nine Months Ended
		September 30, 2014
		Mortgage Loans
						Commercial
		Residential				and				Home Equity
		1-4 Family				Multi-Family				LOC				Other				Unallocated				Total
										(In thousands)
Beginning balance		$	295			$	34			$	6			$	5			$	-			$	340
Provision for loan losses			(20	)			15				(3	)			8				10				10
Ending Balance		$	275			$	49			$	3			$	13			$	10			$	350
		Nine Months Ended
		September 30, 2013
		Mortgage Loans
						Commercial
		Residential				and				Home Equity
		1-4 Family				Multi-Family				LOC				Other				Unallocated				Total
		(In thousands)
Beginning balance		$	128			$	59			$	5			$	4			$	118			$	314
Provision for loan losses			156				(28	)			1				(2	)			(118	)			9
Recoveries			-				-				-				2				-				2
Ending Balance		$	284			$	31			$	6			$	4			$	-			$	325

 

 

5. ACCUMULATED OTHER COMPREHENSIVE LOSS

 

The components of accumulated other comprehensive loss included in equity are as follows:

 

		September 30,				December 31,
		2014				2013
Unrealized net loss on pension plan		$	(1,204,899	)		$	(1,204,899	)
Unrealized loss on securities available for sale			(361,017	)			(896,035	)
Accumulated other comprehensive loss before taxes			(1,565,916	)			(2,100,934	)
Tax effect			616,927				833,982
Accumulated other comprehensive loss		$	(948,989	)		$	(1,266,952	)

 

6. FAIR VALUE MEASUREMENTS AND DISCLOSURES

 

A. Fair Value Measurements

 

The Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC Topic 820 applies only to fair value measurements already required or permitted by other accounting standards and does not impose requirements for additional fair value measures. ASC Topic 820 was issued to increase consistency and comparability in reporting fair values.

 

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. The Company did not have any liabilities that were measured at fair value at September 30, 2014 and December 31, 2013. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as foreclosed real estate owned and certain impaired loans. These non-recurring fair value adjustments generally involve the write-down of individual assets due to impairment losses.

 

In accordance with ASC Topic 820, the Company groups its assets at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

 

•

Level 1 — Valuation is based upon quoted prices for identical instruments traded in active markets.

 

•

Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

 

•

Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

 

The Company bases its fair values on the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. ASC Topic 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

 

6. FAIR VALUE MEASUREMENTS AND DISCLOSURES (Cont’d)

 

A. Fair Value Measurements (Cont’d)

 

Assets that are measured on a recurring basis are limited to the available-for-sale securities portfolio. The available-for-sale portfolio is carried at estimated fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders’ equity. Substantially all of the available-for-sale portfolio consists of investment securities issued by government-sponsored enterprises. The fair values for substantially all of these securities are obtained from an independent securities broker. Based on the nature of the securities, the securities broker provides the Company with prices which are categorized as Level 2 since quoted prices in active markets for identical assets are generally not available for the majority of securities in the portfolio.

 

The following table provides the level of valuation assumptions used to determine the carrying value of assets measured at fair value on a recurring basis at September 30, 2014 and December 31, 2013:

 

		Carrying				Markets for Identical				Observable Inputs				Unobservable Inputs
Description		Value				Assets (Level 1)				(Level 2)				(Level 3)
September 30, 2014:
Securities available for sale		$	35,293,366			$	-			$	35,293,366			$	-
December 31, 2013:
Securities available for sale		$	38,240,458			$	-			$	38,240,458			$	-

 

There were no assets measured at fair value on a non-recurring basis at September 30, 2014 and December 31, 2013.

 

B. Fair Value Disclosures

 

The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein.

 

Cash and Cash Equivalents

 

For cash and due from banks and federal funds sold, the carrying amount approximates the fair value (Level 1).

 

Securities

 

The fair value of securities is estimated based on bid quotations received from securities dealers, if available (Level 1). If a quoted market price was not available, fair value was estimated using quoted market prices of similar instruments, adjusted for differences between the quoted instruments and the instruments being valued (Level 2).

 

FHLB Stock

 

The fair value for FHLB stock is its carrying value, since this is the amount for which it could be redeemed. There is no active market for this stock, and the Company is required to maintain a minimum balance based upon the unpaid principal of home mortgage loans and outstanding indebtedness with the FHLB (Level 2).

 

Loans Receivable

 

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential mortgage, commercial, and consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming categories (Level 3).

 

 

6. FAIR VALUE MEASUREMENTS AND DISCLOSURES (Cont’d)

 

B. Fair Value Disclosures (Cont’d)

 

Deposits

 

The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings, and NOW and money market accounts, is equal to the amount payable on demand (Level 1). The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits with similar remaining maturities (Level 2).

 

Short-Term Borrowings

 

The carrying amounts of federal funds purchased, and other short-term borrowings maturing within 90 days approximate their fair values. Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements (Level 1).

 

Long-Term Borrowings

 

The fair value of long-term borrowings is estimated using discounted cash flow analysis based on the current incremental borrowing rates for similar types of borrowing arrangements (Level 2).

 

Off-Balance-Sheet Instruments

 

In the ordinary course of business the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit. Such financial instruments are recorded in the financial statements when they are funded. Their fair value would approximate fees currently charged to enter into similar agreements.

 

The carrying values and estimated fair values of financial instruments are as follows (in thousands):

 

		September 30,								December 31,
		2014								2013
		Carrying				Estimated				Carrying				Estimated
		Value				Fair Value				Value				Fair Value
		(In Thousands)
Financial assets:
Cash and cash equivalents		$	8,051			$	8,051			$	2,637			$	2,637
Securities held to maturity			5,704				5,881				4,667				4,809
Securities available for sale			35,293				35,293				38,240				38,240
Loans receivable			39,768				40,559				40,040				40,180
FHLB and other stock, at cost			195				195				222				222
Accrued interest receivable			252				252				268				268
Financial liabilities:
Deposits			81,391				81,760				78,025				78,533

 

The fair value estimates are made at a discrete point in time based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Further, the foregoing estimates may not reflect the actual amount that could be realized if all or substantially all of the financial instruments were offered for sale.

 

 

6. FAIR VALUE MEASUREMENTS AND DISCLOSURES (Cont’d)

 

B. Fair Value Disclosures (Cont’d)

 

In addition, the fair value estimates were based on existing on-and-off balance sheet financial instruments without attempting to value the anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment and advances from borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of the unrealized gains and losses have a significant effect on fair value estimates and have not been considered in any of the estimates.

 

Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. The lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.

 

7. RECENT ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, "Revenue from Contracts with Customers," (Topic 606) ("ASU 2014-09").  ASU 2014-09 impacts any entity that either enters into contracts with customers to transfer goods or services, or that enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (i.e. insurance contracts or lease contracts).  Under ASU 2014-09, an entity is required to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU 2014-09 also requires disclosure of sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, as well as qualitative and quantitative disclosure related to contracts with certain customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.  ASU 2014-09 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016.  Adoption of ASU 2014-09 is not expected to have a material impact upon the Company's consolidated financial position or results of operations.

 

ASU 2013-11, Income Taxes (Topic 740): “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists,” requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carry-forward, a similar tax loss, or a tax credit carry-forward. If a net operating loss carry-forward, a similar tax loss, or a tax credit carry-forward is not available at the reporting date, the unrecognized tax benefit should be presented in the financial statements as a liability and not combined with deferred tax assets. This guidance is effective prospectively for fiscal years, and interim periods within those years beginning after December 15, 2014, with early adoption permitted. The Company is evaluating the effect the adoption of ASU 2013-11 on January 1, 2015 may have on the operating results or financial position of the Company. 

 

ASU 2014-04, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014, with early adoption permitted. The adoption of this guidance on January 1, 2015 is not expected to have a material effect on the operating results or financial position of the Company. 

 

 

Item 2.

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

 

General

 

Management’s discussion and analysis of the financial condition and results of operations at and for three and nine months ended September 30, 2014 and 2013 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:

 

·

statements of our goals, intentions and expectations;

 

·

statements regarding our business plans, prospects, growth and operating strategies;

 

·

statements regarding the quality of our loan and investment portfolios; and

 

·

estimates of our risks and future costs and benefits.

 

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

 

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

 

·

general economic conditions, either nationally or in our market areas, that are worse than expected;

 

·

competition among depository and other financial institutions;

 

·

inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

 

·

adverse changes in the securities markets;

 

·

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

 

·

our ability to enter new markets successfully and capitalize on growth opportunities;

 

·

our ability to successfully integrate de novo or acquired branches, if any;

 

·

our ability to execute on our business strategy to increase commercial real estate and multi-family lending and commercial lending, including implementing an SBA lending program;

 

·

changes in consumer spending, borrowing and savings habits;

 

·

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

 

·

changes in our organization, compensation and benefit plans; and

 

·

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

 

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

 

Critical Accounting Policies

 

There are no material changes to the critical accounting policies disclosed in the Company’s Form 10-K for the year ended December 31, 2013.

 

Comparison of Financial Condition at September 30, 2014 and December 31, 2013

 

Total assets increased $3.3 million, or 3.6%, to $94.5 million at September 30, 2014 from $91.3 million at December 31, 2013. The increase was primarily due to a $5.4 million increase in cash and cash equivalents partly offset by a $1.9 million decrease in securities.

 

Cash and cash equivalents increased $5.4 million to $8.1 million at September 30, 2014 from $2.6 million at December 31, 2013 mainly due to an increase of $3.4 million in deposits and a $1.9 million decrease in securities. Securities available for sale decreased $2.9 million, or 7.7%, to $35.3 million at September 30, 2014 from $38.2 million at December 31, 2013 reflecting maturities and repayments of $3.5 million and sales of $1.9 million partially offset by $2.0 million of securities purchased and a decrease in the unrealized loss of $535 thousand. Securities held to maturity increased $1.0 million, or 22.2%, to $5.7 million at September 30, 2014 from $4.7 million at December 31, 2013 reflecting additional purchases which were partly offset by principal repayments and the sale of mortgage backed securities classified as held to maturity after collection of a substantial portion (at least 85%) of principal outstanding at acquisition.

 

Net loans receivable decreased $273 thousand or 0.7%, to $39.8 million at September 30, 2014 from $40.0 million at December 31, 2013. The decrease in loans receivable was due primarily to loan repayments exceeding loan originations.

 

At September 30, 2014, our investment in bank-owned life insurance increased $50,000 to $2.1 million from $2.0 million at December 31, 2013. We invest in bank-owned life insurance to provide us with a funding offset for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for loan losses, and we have not made any additional contributions to our bank-owned life insurance since 2002.

 

Other assets, consisting primarily of accrued interest receivable, refundable income taxes, an annuity contract for a former director, and deferred income taxes were $1.6 million at September 30, 2014 relatively unchanged compared to December 31, 2013.

 

Total deposits increased $3.4 million or 4.3%, to $81.4 million at September 30, 2014 from $78.0 million at December 31, 2013. The increase resulted primarily from increases in non-interest bearing checking of $1.7 million, increases in NOW accounts of $1.2 million and increases in savings deposits of $889,000, partly offset by a $469,000 decrease in certificates of deposit. As part of our efforts to reduce reliance on higher costing certificates of deposit as well as for funding needs, we accepted $4 million in brokered certificates for two years at a rate of 65 basis points and allowed higher rate certificates to run-off totaling $4.5 million.

 

At September 30, 2014 and December 31, 2013, we had no outstanding borrowings. At September 30, 2014, we had the ability to borrow up to 30 percent of the Association’s assets in FHLB advances and $2.0 million on a Fed Funds line of credit with Atlantic Central Bankers Bank.

 

Total equity increased to $12.1 million at September 30, 2014 from $11.9 million at December 31, 2013 primarily resulting from a decrease in accumulated other comprehensive loss of $318,000 partly offset by a net loss for the nine months ended September 30, 2014 of $168,000.

 

 

Comparison of Results of Operations for the Quarters Ended September 30, 2014 and September 30, 2013

 

General. We had a net loss of $57,000 for the quarter ended September 30, 2014 compared to a net loss of $31,000 for the quarter ended September 30, 2013. The increase in our net loss resulted primarily from a decrease in non-interest income and an increase in non-interest expense, which was partially offset by an increase in net interest income, when comparing the 2014 quarter to the 2013 quarter.

 

Net Interest Income. Net interest income increased $20,000, or 3.7%, to $557,000 for the quarter ended September 30, 2014 from $538,000 for the quarter ended September 30, 2013. The increase resulted from a $40,000 or 28.9% decrease in interest expense on deposits partly offset by a $21,000 or 3.1% decrease in interest and dividend income quarter to quarter. The decrease in interest expense was primarily due to lower certificate of deposit rates, and the decrease in interest and dividend income was primarily driven by declining market interest rates during the quarter ended September 30, 2014. The average yield on our loans decreased 34 basis points while the average yield on our investment and mortgage-backed securities increased 22 basis points during the quarter ended September 30, 2014 compared to the 2013 quarter. Our net interest rate spread increased 8 basis points to 2.50% for the quarter ended September 30, 2014 from 2.42% for the quarter ended September 30, 2013 and our net interest margin increased 6 basis points to 2.56% for the 2014 quarter from 2.50% for the 2013 period. Average interest-earning assets increased to $86.4 million for the quarter ended September 30, 2014 from $86.1 million for the prior year quarter.

 

Interest and Dividend Income. Interest and dividend income decreased $21,000 to $657,000 for the quarter ended September 30, 2014 from $678,000 for the quarter ended September 30, 2013. The decrease resulted primarily from a $27,000 decrease in interest income on loans and an $11,000 decrease in interest income on mortgage-backed securities partly offset by an increase in investment securities interest income of $14,000 and federal funds sold interest income of $3,000.

 

Interest income on loans decreased $27,000 or 5.7%, to $447,000 for the quarter ended September 30, 2014 from $474,000 for the quarter ended September 30, 2013. The decrease resulted primarily from a decrease of 34 basis points in the average yield on loans to 4.45% for the 2014 quarter from 4.79% for the 2013 quarter, reflecting lower market interest rates, partially offset by an increase in the average balance of loans outstanding of $211,000, or 0.5%, to $39.9 million for the quarter ended September 30, 2014 from $39.7 million for the quarter ended September 30, 2013.

 

Interest and dividend income on investment and mortgage-backed securities increased $3,000 to $205,000 for the quarter ended September 30, 2014 from $201,000 for the quarter ended September 30, 2013 due to an increase in the average yield on securities to 2.02% during the 2014 quarter from 1.80% during the 2013 quarter, partly offset by a decrease in the average balance of securities to $40.2 million for the 2014 quarter from $44.9 million for the 2013 quarter.

 

Interest Expense. Interest expense, primarily the cost of interest-bearing deposits, decreased $40,000, or 28.8%, to $100,000 for the quarter ended September 30, 2014 from $140,000 for the quarter ended September 30, 2013.  The decrease in the cost of interest-bearing deposits was due to a decrease of 21 basis points in the average rate paid on interest-bearing deposits to 0.52% for the quarter ended September 30, 2014 from 0.73% for the quarter ended September 30, 2013, primarily due to lower interest paid on certificates of deposit reflecting lower market interest rates.  Average interest-bearing liabilities decreased to $77.2 million for the quarter ended September 30, 2014 from $77.4 million for the quarter ended September 30, 2013, as higher cost interest-bearing certificates of deposits decreased and lower-cost NOW and money market accounts increased.  Lower rates on certificates of deposit as well as the change in the composition of our interest-bearing deposits helped reduce the cost of funds from 0.68% for the quarter ended September 30, 2013 to 0.48% for the quarter ended September 30, 2014.

 

Provision for Loan Losses. We establish provisions for loan losses that are charged to operations in order to maintain the allowance for loan losses at a level believed, to the best of management’s knowledge, to cover all known and inherent losses in the portfolio both probable and reasonable to estimate at each reporting date. There was no provision for loan losses recorded for the quarter ended September 30, 2014 or for the quarter ended September 30, 2013. The allowance for loan losses was $350,000 at September 30, 2014 compared to $325,000 at September 30, 2013. Non-performing loans at September 30, 2014 totaled $422,000 and $369,000 at September 30, 2013. During the quarters ended September 30, 2014 and September 30, 2013 there were no loan charge-offs or recoveries.

 

Noninterest Income. Noninterest income decreased $21,000 to $49,000 for the quarter ended September 30, 2014 from $71,000 for the quarter ended September 30, 2013. The decrease was primarily due to a decline in

 

 

security gains of $29,000 partly offset by increases in fees and services charges of $6,000 and an increase in bank owned life insurance income of $1,000.

 

Noninterest Expense. Noninterest expense increased $18,000 or 2.6% to $694,000 for the quarter ended September 30, 2014 from $676,000 for the quarter ended September 30, 2013. The increase was primarily due to higher advertising and promotion, occupancy and equipment expense and data processing expense partly offset by lower professional fees. Advertising and promotion expense increased $17,000 due to initiatives the Company is undertaking to acquire customer relationships and to improve its product set. Occupancy and equipment expense increased $16,000 to $103,000 for the quarter ended September 30, 2014 from $87,000 for the quarter ended September 30, 2013, as a result of higher office building maintenance and related expenses. Data processing expenses increased $7,000 as a result of higher costs related to its core processing and additional costs to support new products and initiatives.

 

Income Tax Expense (Benefit). We recorded a $31,000 income tax benefit for the quarter ended September 30, 2014 and a $37,000 income tax benefit for the quarter ended September 30, 2013. Income tax expense (benefit) is calculated based on pre-tax income or (loss) adjusted for permanent book to tax differences, such as non-taxable interest income on municipal securities and income on bank owned life insurance.

 

Comparison of Results of Operations for the nine months ended September 30, 2014 and September 30, 2013

 

General. We had a net loss of $168,000 for the nine months ended September 30, 2014 compared to net income of $1,000 for the nine months ended September 30, 2013. The decrease in net income for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 resulted primarily from a decrease in non-interest income and an increase in non-interest expense partly offset by a decrease in interest expense and a higher tax benefit.

 

Net Interest Income. Net interest income increased $135,000, or 8.6%, to $1.7 million for the nine months ended September 30, 2014 from $1.6 million for the nine months ended September 30, 2013. The increase was primarily due to a $134,000 decrease in interest expense on deposits. Loan interest income was $93,000 lower for the nine months ended September 30, 2014 compared to the same period in 2013 but was offset by an $89,000 increase in interest income on investment and mortgage-backed securities. The decrease in loan interest was primarily driven by declining market interest rates during the nine months ended September 30, 2014. The increase in investment income was mainly due to higher portfolio returns. The average yield on our loans decreased 28 basis points and the average yield on our investment and mortgage-backed securities increased 36 basis points during the nine months ended September 30, 2014. Our net interest rate spread increased 24 basis points to 2.66% for the nine months ended September 30, 2014 from 2.42% for the nine months ended September 30, 2013 and our net interest margin increased 25 basis points to 2.72% for the 2014 period from 2.47% for the 2013 period. Average interest-earning assets decreased $500,000 to $84.0 million for the nine months ended September 30, 2014 from $84.5 million for the prior year period.

 

Interest and Dividend Income. Interest and dividend income increased slightly by $1,000 for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013.

 

Interest income on loans decreased $93,000 or 6.3%, to $1.4 million for the nine months ended September 30, 2014 from $1.5 million for the nine months ended September 30, 2013. The decrease resulted primarily from a decrease of 28 basis points in the average yield on loans to 4.55% for the 2014 period from 4.83% for the 2013 period, reflecting lower market interest rates.

 

Interest and dividend income on investment and mortgage-backed securities increased $89,000 to $633,000 for the nine months ended September 30, 2014 from $543,000 for the nine months ended September 30, 2013 primarily due to an increase in the average yield on securities to 2.04% during the 2014 period from 1.68% during the 2013 period.

 

 

Interest Expense. Interest expense, consisting primarily of the cost of interest-bearing deposits, decreased $134,000 or 30.7%, to $303,000 for the nine months ended September 30, 2014 from $437,000 for the nine months ended September 30, 2013.  The decrease in the cost of interest-bearing deposits was due to a decrease of 19 basis points in the average rate paid on interest-bearing deposits to 0.54% for the nine months ended September 30, 2014 from 0.73% for the nine months ended September 30, 2013, primarily due to lower interest paid on certificates of deposit reflecting lower market interest rates.  Average interest-bearing liabilities decreased $5.1 million or 6.4% to $74.6 million for the nine months ended September 30, 2014 from $79.7 million for the nine months ended September 30, 2013. Higher cost interest-bearing certificates of deposits decreased $3.6 million while savings deposits decreased $1.6 million. The decrease in rates on certificates of deposit helped reduce the cost of funds from 0.70% for the nine months ended September 30, 2013 to 0.51% for the nine months ended September 30, 2014.

 

Provision for Loan Losses. We establish provisions for loan losses that are charged to operations in order to maintain the allowance for loan losses at a level believed, to the best of management’s knowledge, to cover all known and inherent losses in the portfolio both probable and reasonable to estimate at each reporting date. There was a $10,000 provision for loan losses recorded for the nine month period ended September 30, 2014 and a $9,500 provision for loan losses recorded for the nine month period ended September 30, 2013. Recoveries of previously charged-off loans amounted to $0 and $2,000 during the nine months ended September 30, 2014 and 2013, respectively.

 

Noninterest Income. Noninterest income decreased $104,000 or 42.1% to $143,000 for the nine months ended September 30, 2014 from $247,000 for the nine months ended September 30, 2013. The decrease was primarily due to higher security gains recognized during the 2013 period.

 

Noninterest Expense. Noninterest expense increased $305,000, or 16.5%, to $2.2 million for the nine months ended September 30, 2014 from $1.9 million for the nine months ended September 30, 2013. The increase was primarily due to increases in professional fees, data processing, occupancy and equipment and advertising and promotion expenses. Professional fees increased $154,000 or 74.3% due to higher consulting fees, legal fees and accounting fees due to the costs of compliance and being a newly formed public company as well as professional fees incurred to fill the interim CFO position. Advertising and promotion expense increased $47,000 or 82.3% due to initiatives the Company is undertaking to acquire customer relationships and to improve its product set. Data processing expenses increased $31,000 or 26.1% as a result of higher costs related to its core processing and additional costs to support new products and initiatives. Occupancy and equipment expense increased $29,000 or 9.9%, to $316,000 for the nine months ended September 30, 2014 from $287,000 for the nine months ended September 30, 2013, as a result of an increase in office building maintenance and related expenses. Other non-interest expenses increased $22,000 or14.2% to $174,000 for the nine months ended September 30, 2014 from $152,000 for the nine months ended September 30, 2013. The increase was mainly due to proxy/annual meeting costs as well as higher check fraud charge-offs, staff development and training.

 

Income Tax Expense (Benefit). We recorded a $147,000 income tax benefit for the nine months ended September 30, 2014 and a $42,000 income tax benefit for the nine months ended September 30, 2013. Income tax expense (benefit) is calculated based on pre-tax income or (loss) adjusted for permanent book to tax differences, such as non-taxable interest income on municipal securities and income on bank owned life insurance.

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable, as the Registrant is a smaller reporting company.

 

Item 4.

Controls and Procedures

 

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2014. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

 

During the quarter ended September 30, 2014, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

Part II – Other Information

 

Item 1.

Legal Proceedings

 

The Company is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Association’s or the Company’s financial condition or results of operations.

 

Item 1A.

Risk Factors

 

Not applicable, as the Registrant is a smaller reporting company.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

(a)

There were no sales of unregistered securities during the period covered by this Report.

 

(b)

Not applicable.

 

(c)

There were no issuer repurchases of securities during the period covered by this Report.

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures

 

Not applicable.

 

Item 5.

Other Information

 

None.

 

Item 6.

Exhibits

 

31

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS XBRL Instance Document

 

101.SCH XBRL Taxonomy Extension Schema Document

 

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

 

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		SUNNYSIDE BANCORP, INC.
Date:  November 13, 2014		/s/ Timothy D. Sullivan
		Timothy D. Sullivan
		President and Chief Executive Officer
		/s/ Edward J. Lipkus
		Edward J. Lipkus
		Vice President, Chief Financial Officer, and
		Treasurer