Company Quick10K Filing
Sunnyside Bancorp
Price12.50 EPS-0
Shares1 P/E-47
MCap9 P/FCF-137
Net Debt-1 EBIT0
TEV8 TEV/EBIT46
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-10
10-Q 2020-06-30 Filed 2020-08-11
10-Q 2020-03-31 Filed 2020-05-14
10-K 2019-12-31 Filed 2020-03-27
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-13
10-K 2018-12-31 Filed 2019-03-28
10-Q 2018-09-30 Filed 2018-11-13
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-14
10-K 2017-12-31 Filed 2018-03-28
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-11
10-Q 2017-03-31 Filed 2017-05-12
10-K 2016-12-31 Filed 2017-03-30
10-Q 2016-09-30 Filed 2016-11-10
10-Q 2016-06-30 Filed 2016-08-12
10-Q 2016-03-31 Filed 2016-05-11
10-K 2015-12-31 Filed 2016-03-25
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-12
10-Q 2015-03-31 Filed 2015-05-12
10-K 2014-12-31 Filed 2015-03-25
10-Q 2014-09-30 Filed 2014-11-13
10-Q 2014-06-30 Filed 2014-08-12
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-03-28
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-06-28
8-K 2020-06-24
8-K 2019-06-12
8-K 2018-06-13
8-K 2018-03-20
8-K 2018-03-08

SNNY 10Q Quarterly Report

Part I. - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32 ex32.htm

Sunnyside Bancorp Earnings 2020-09-30

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X]Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2020

 

OR

 

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

 

For the transition period from _______________ to _______________

 

Commission File No. 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)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

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, a 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 [X]   Smaller reporting company [X]
    Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

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

YES [  ] NO [X]

 

As of November 10, 2020, 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, 2020 (unaudited) and December 31, 2019 (audited) 1
     
  Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited) 2 – 3
     
  Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited) 4 – 5
     
  Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited) 6 - 7
     
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (unaudited) 8
     
  Notes to Condensed Consolidated Financial Statements (unaudited) 9 – 31
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 – 36
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 37
     
Item 4. Controls and Procedures 37
     
  Part II. Other Information  
     
Item 1. Legal Proceedings 38
     
Item 1A. Risk Factors 38
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 38
     
Item 3. Defaults upon Senior Securities 38
     
Item 4. Mine Safety Disclosures 38
     
Item 5. Other Information 38
     
Item 6. Exhibits 38
     
  Signature Page 39

 

 

 

 

Part I. – Financial Information

 

Item 1. Financial Statements

 

SUNNYSIDE BANCORP, INC AND SUBSIDIARY

Condensed CONSOLIDATED Statements of Financial Condition

 

   September 30,   December 31, 
   2020   2019 
   (Unaudited)     
Assets          
           
Cash and cash equivalents  $1,677,338   $1,820,482 
Certificate of deposits   500,000    999,262 
Securities held to maturity, net; approximate fair value          
of $442,000 (September 30, 2020) and $441,000 (December 31, 2019)   421,747    424,294 
Securities available for sale   47,439,983    37,978,622 
Loans receivable, net   41,554,502    39,839,882 
Premises and equipment, net   1,025,829    1,052,512 
Federal Home Loan Bank of New York and other stock, at cost   230,000    235,800 
Accrued interest receivable   489,275    503,280 
Cash surrender value of life insurance   2,425,068    2,381,554 
Deferred income taxes   527,475    714,120 
Other assets   348,723    292,709 
           
Total assets  $96,639,940   $86,242,517 
           
Liabilities and Stockholders’ Equity          
           
Liabilities:          
Deposits  $76,422,459   $71,899,432 
Borrowings   7,474,329    1,749,520 
Advances from borrowers for taxes and insurance   298,892    548,621 
Other liabilities   550,805    640,613 
           
Total liabilities   84,746,485    74,838,186 
           
Commitments and contingencies   -    - 
           
Stockholders’ equity:          
Serial preferred stock; par value $.01, 1,000,000 shares authorized, no shares issued   -    - 
Common stock; par value $.01, 30,000,000 shares authorized and 793,500 shares issued   7,935    7,935 
Additional paid-in capital   7,103,393    7,092,368 
Unallocated common stock held by the Employee Stock Ownership Plan   (383,137)   (399,974)
Retained earnings   5,637,695    5,866,598 
Accumulated other comprehensive (loss)   (472,431)   (1,162,596)
           
Total stockholders’ equity   11,893,455    11,404,331 
           
Total liabilities and stockholders’ equity  $96,639,940   $86,242,517 

 

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

 

1

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Condensed CONSOLIDATED Statements of Operations

(Unaudited)

 

   Three Months Ended 
   September 30, 
   2020   2019 
         
Interest and dividend income:          
Loans  $420,899   $475,311 
Investment securities   57,061    42,514 
Mortgage-backed securities   124,285    159,940 
Federal funds sold and other earning assets   6,367    12,422 
           
Total interest and dividend income   608,612    690,187 
           
Interest expense:          
Deposits   148,351    168,590 
Borrowings   13,575    10,939 
           
Total interest expense   161,926    179,529 
           
Net interest income   446,686    510,658 
           
Provision for loan losses   9,835    - 
           
Net interest income after provision for loan losses   436,851    510,658 
           
Non-interest income:          
Fees and service charges   20,426    24,913 
Income on bank owned life insurance   14,001    15,612 
           
Total non-interest income   34,427    40,525 
           
Non-interest expense:          
Compensation and benefits   272,423    320,365 
Occupancy and equipment, net   64,569    65,010 
Data processing service fees   73,394    72,666 
Professional fees   90,955    114,967 
Federal deposit insurance premiums   727    (4,791)
Advertising and promotion   14,076    18,371 
Other   47,477    44,148 
           
Total non-interest expense   563,621    630,736 
           
Income (loss) before income tax (benefit)   (92,343)   (79,553)
           
Income tax (benefit)   (22,567)   (25,510)
           
Net income (loss)  $(69,776)  $(54,043)
           
Basic and diluted income (loss) per share  $(0.09)  $(0.07)
           
Weighted average shares outstanding, basic and diluted   754,697    752,452 

 

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

 

2

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Condensed CONSOLIDATED Statements of Operations

(Unaudited)

 

   Nine Months Ended 
   September 30, 
   2020   2019 
         
Interest and dividend income:          
Loans  $1,275,624   $1,397,741 
Investment securities   174,299    96,604 
Mortgage-backed securities   451,258    485,465 
Federal funds sold and other earning assets   30,966    27,159 
           
Total interest and dividend income   1,932,147    2,006,969 
           
Interest expense:          
Deposits   519,699    394,149 
Borrowings   32,802    34,026 
           
Total interest expense   552,501    428,175 
           
Net interest income   1,379,646    1,578,794 
           
Provision for loan losses   30,613    26,231 
           
Net interest income after provision for loan losses   1,349,033    1,552,563 
           
Non-interest income:          
Fees and service charges   60,824    90,904 
Income on bank owned life insurance   43,514    46,164 
Gain on call of bank certificate of deposit   703    - 
           
Total non-interest income   105,041    137,068 
           
Non-interest expense:          
Compensation and benefits   865,337    963,760 
Occupancy and equipment, net   187,894    184,484 
Data processing service fees   219,097    219,101 
Professional fees   296,798    409,653 
Federal deposit insurance premiums   5,542    4,632 
Advertising and promotion   36,863    44,718 
Other   139,088    129,301 
           
Total non-interest expense   1,750,619    1,955,649 
           
Income (loss) before income tax (benefit)   (296,545)   (266,018)
           
Income tax (benefit)   (67,642)   (64,537)
           
Net income (loss)  $(228,903)  $(201,481)
           
Basic and diluted income (loss) per share  $(0.30)  $(0.27)
           
Weighted average shares outstanding, basic and diluted   754,140    751,897 

 

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

 

3

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

CONDENSED CONSOLIDATED Statements of Comprehensive Income (Loss)

(Unaudited)

 

   Three Months Ended 
   September 30, 
   2020   2019 
         
Net income (loss)  $(69,776)  $(54,043)
           
Other comprehensive income (loss), before tax:          
Defined benefit pension plans:          
Amortization of loss included in net periodic plan cost   14,367    16,851 
Unrealized gains (losses) on securities available for sale:          
Unrealized holding gains (losses) arising during the period   (76,917)   107,329 
           
Other comprehensive income (loss), before tax   (62,550)   124,180 
           
Income tax expense (benefit) related to items of other comprehensive income (loss)   (13,135)   26,078 
           
Other comprehensive income (loss), net of tax   (49,415)   98,102 
           
Comprehensive income (loss)  $(119,191)  $44,059 

 

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

 

4

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

CONDENSED CONSOLIDATED Statements of Comprehensive Income (Loss)

(Unaudited)

 

   Nine Months Ended 
   September 30, 
   2020   2019 
         
Net income (loss)  $(228,903)  $(201,481)
           
Other comprehensive income (loss), before tax:          
Defined benefit pension plans:          
Amortization of loss included in net periodic plan cost   43,101    50,553 
Unrealized gains (losses) on securities available for sale:          
Unrealized holding gains (losses) arising during the period   830,554    789,227 
           
Other comprehensive income (loss), before tax   873,655    839,780 
           
Income tax expense (benefit) related to items of other comprehensive income (loss)   183,490    176,357 
           
Other comprehensive income (loss), net of tax   690,165    663,423 
           
Comprehensive income (loss)  $461,262   $461,942 

 

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

 

5

 

 

SUNNYSIDE BANCORP, INC AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended September 30, 2020 and 2019

(Unaudited)

 

       Additional   Unallocated       Accumulated
Other
     
   Common   Paid-in   Common Stock   Retained   Comprehensive   Total 
   Stock   Capital   Held by ESOP   Earnings   Income (Loss)   Equity 
                         
Balance at June 30, 2019  $7,935   $7,078,344   $(411,079)  $6,057,316   $(1,424,371)  $11,308,145 
                               
Net loss for the three months                              
ended September 30, 2019   -    -    -    (54,043)   -    (54,043)
                               
ESOP shares allocated or committed to be                              
released   -    1,528    6,870    -    -    8,398 
                               
Restricted stock awards earned   -    5,513    -    -    -    5,513 
                               
Purchase of stock for ESOP   -    -    (1,318)   -    -    (1,318)
                               
Other comprehensive income, net of tax   -    -    -    -    98,102    98,102 
                               
Balance at September 30, 2019  $7,935   $7,085,385   $(405,527)  $6,003,273   $(1,326,269)  $11,364,797 
                               
Balance at June 30, 2020  $7,935   $7,103,641   $(388,749)  $5,707,471   $(423,016)  $12,007,282 
                               
Net loss for the three months ended September 30, 2020   -    -    -    (69,776)   -    (69,776)
                               
ESOP shares allocated or committed to be released   -    (248)   6,092    -    -    5,844 
                               
Restricted stock awards earned   -    -    -    -    -    - 
                               
Purchase of stock for ESOP   -    -    (480)   -    -    (480)
                               
Other comprehensive income, net of tax   -    -    -    -    (49,415)   (49,415)
                               
Balance at September 30, 2020  $7,935   $7,103,393   $(383,137)  $5,637,695   $(472,431)  $11,893,455 

 

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

 

6

 

 

SUNNYSIDE BANCORP, INC AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2020 and 2019

(Unaudited)

 

                   Accumulated     
       Additional   Unallocated       Other     
   Common   Paid-in   Common Stock   Retained   Comprehensive   Total 
   Stock   Capital   Held by ESOP   Earnings   Income (Loss)   Equity 
                         
Balance at December 31, 2018  $7,935   $7,064,299   $(422,184)  $6,204,754   $(1,989,692)  $10,865,112 
                               
Net loss for the nine months                              
ended September 30, 2019   -    -    -    (201,481)   -    (201,481)
                               
ESOP shares allocated or committed to be released   -    4,548    19,940    -    -    24,488 
                               
Restricted stock awards earned   -    16,538    -    -    -    16,538 
                               
Purchase of stock for ESOP   -    -    (3,283)   -    -    (3,283)
                               
Other comprehensive income, net of tax   -    -    -    -    663,423    663,423 
                               
Balance at September 30, 2019  $7,935   $7,085,385   $(405,527)  $6,003,273   $(1,326,269)  $11,364,797 
                               
                               
Balance at December 31, 2019  $7,935   $7,092,368   $(399,974)  $5,866,598   $(1,162,596)  $11,404,331 
                               
Net loss for the nine months ended September 30, 2020   -    -    -    (228,903)   -    (228,903)
                               
ESOP shares allocated or committed to be released   -    -    17,317    -    -    17,317 
                               
Restricted stock awards earned   -    11,025    -    -    -    11,025 
                               
Purchase of stock for ESOP   -    -    (480)   -    -    (480)
                               
Other comprehensive income, net of tax   -    -    -    -    690,165    690,165 
                               
Balance at September 30, 2020  $7,935   $7,103,393   $(383,137)  $5,637,695   $(472,431)  $11,893,455 

 

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

 

7

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Condensed cONSOLIDATED StatementS of Cash Flows

(Unaudited)

 

   Nine Months Ended 
   September 30, 
   2020   2019 
         
Cash flows from operating activities:          
Net income (loss)  $(228,903)  $(201,481)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation expense   83,602    82,366 
Amortization of premiums and accretion of discounts, net   198,516    118,321 
Amortization of deferred loan fees and costs, net   8,676    63,905 
Provision for loan losses   30,613    26,231 
Gain on call of certificates of deposit   (703)   - 
Decrease (increase) in accrued interest receivable   14,005    (23,976)
Increase in cash surrender value of life insurance   (43,514)   (46,164)
Amortization of stock compensation plans   28,342    41,026 
Net increase in other assets   (52,859)   (145,959)
Net (decrease) increase in other liabilities   (46,707)   16,940 
           
Net cash used in operating activities   (8,932)   (68,791)
           
Cash flows from investing activities:          
Repayment and maturities of certificates of deposit   500,000    - 
Purchases of securities available for sale   (51,931,558)   (15,705,412)
Repayments and maturities of securities held to maturity   2,744    2,456 
Repayments and maturities of securities available for sale   43,102,003    7,446,886 
Loans purchased   -    (1,916,072)
Loan principal repayments, net of originations   (1,753,909)   2,989,756 
Purchases of bank premises and equipment   (56,919)   (7,056)
Redemption of FHLB stock   5,800    91,000 
           
Net cash used in investing activities   (10,131,839)   (7,098,442)
           
Cash flows from financing activities:          
Net increase in deposits   4,523,027    9,286,661 
Net decrease in advances from borrowers for taxes and insurance   (249,729)   (230,568)
Net decrease in short-term borrowings   -    (3,750,000)
Proceeds from long term borrowings   5,999,171    1,900,000 
Repayment of long term borrowings   (274,362)   (60,027)
Purchase of stock for ESOP   (480)   (3,283)
           
Net cash provided by financing activities   9,997,627    7,142,783 
           
Net decrease in cash and cash equivalents   (143,144)   (24,450)
           
Cash and cash equivalents at beginning of year   1,820,482    1,217,621 
           
Cash and cash equivalents at end of period  $1,677,338   $1,193,171 
           
Supplemental Information:          
           
Cash paid for:          
Interest  $546,562   $426,628 
Income taxes  $12,359   $3,369 

 

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

 

8

 

 

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, 2020, are not necessarily indicative of the results to be expected for the year ended December 31, 2020, or any other future interim period. The unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2019 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 retained earnings. As of September 30, 2020 and December 31, 2019, 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.

 

9

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

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

 

Investment and Mortgage-Backed Securities (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.

 

10

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

 

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

 

Operating, Accounting and Reporting Considerations related to COVID-19

 

The COVID-19 pandemic has caused significant disruption to the national economy including New York and the tri-state area, resulting in many business sectors operating below capacity, increased unemployment levels and volatility in the financial markets. In response to the negative effects of COVID-19 on the U.S. economy, Congress enacted the Coronavirus Aide, Relief, and Economic Security Act (“CARES Act”), among other actions, in addition to monetary actions taken by the Federal Reserve, which provide for financial stimulus and government lending programs at unprecedented levels. The effects of these programs, as well as any potential additional stimulus, to support businesses and consumers remain uncertain. Some of the provisions of the CARES Act applicable to the Company include, but are not limited to:

 

Accounting for Loan Modifications - The CARES Act provides that a financial institution may elect to suspend (1) the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and (2) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes. See Note 5 Loans Receivable, Net for more information.
   
Paycheck Protection Program - The CARES Act established the Paycheck Protection Program (“PPP”), an expansion of the Small Business Administration’s (“SBA”) 7(a) loan program and the Economic Injury Disaster Loan Program (“EIDL”), administered directly by the SBA. The Company is a participant in the PPP. See Note 5 Loans Receivable, Net for more information.

 

Also in response to the COVID-19 pandemic, the Board of Governors of the Federal Reserve System (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration (“NCUA”), the Office of the Comptroller of the Currency (“OCC”), and the Consumer Financial Protection Bureau (“CFPB”), in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to:

 

Accounting for Loan Modifications - Loan modifications that do not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with FASB staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment. See Note 5 Loans Receivable, Net for more information.
   
Past Due Reporting - With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral.
   
Nonaccrual Status and Charge-offs - During short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or as classified.

 

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.

 

11

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

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

 

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

 

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 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 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.

 

12

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

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

 

Employee Benefits (Cont’d)

 

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 Sunnyside Bancorp, Inc. 2014 Equity Incentive Plan (the “Stock Incentive Plan”) which was approved 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 Stock Incentive 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.

 

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 Stock 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).

 

On June 16, 2015, the Company granted 10,500 shares of restricted stock to certain executive officers, with a grant date fair value of $10.50 per share. Twenty percent of the shares awarded vest annually. Management recognizes expense for the fair value of those awards on a straight line basis over the requisite service period. For the three month period ended September 30, 2020 and 2019, the Company recognized approximately $0 and $5,500, respectively, in expense. For the nine month period ended September 30, 2020 and 2019, the Company recognized approximately $11,000 and $16,500, respectively, in expense. These awards were fully expensed as of June 30, 2020. There were no stock options outstanding as of September 30, 2020.

 

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.

 

13

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

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

 

Concentration of Credit Risk and Interest-Rate Risk (Cont’d)

 

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 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 earnings (loss) per share is computed by dividing net income (loss) 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”). Diluted earnings (loss) per share is computed by adjusting the weighted average number of shares of common stock outstanding to include the effect of outstanding stock options and compensation grants, if dilutive, using the treasury stock method.

 

Recent Accounting Pronouncements

 

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-14, “Compensation - Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20).” This update amends and modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The amendments in this update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. This update will be effective on January 1, 2021, with early adoption permitted, and is not expected to have a material effect on the Company’s consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” This update modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. This update was effective on January 1, 2020 and did not have a material effect on the Company’s consolidated financial statements.

 

In June, 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. In April, 2019, FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”. ASU 2019-04 made amendments to the following categories in ASU 2016-13 which include accrued interest, transfers between classifications or categories for loans and debt securities, recoveries, reinsurance recoverables, projections of interest rate environments for variable-rate financial instruments, costs to sell when foreclosure is probable, consideration of expected prepayments when determining the effective interest rate, vintage disclosures and extension and renewal options. In May, 2019, FASB issued ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326); Targeted Transition Relief”, ASU 2019-05 allows the Company to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of Topic 326 if the instruments are eligible for the fair value option

 

14

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

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

 

Recent Accounting Pronouncements (Cont’d)

 

under authoritative guidance for fair value. The fair value option election does not apply to held-to-maturity debt securities. We are required to make this election on an instrument-by-instrument basis. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) – Effective Dates”. The amendments in this update defer the effective date for small reporting companies, such as the Company, for ASU 2016-13 to years beginning after December 15, 2022. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). While early adoption is permitted, the Company does not expect to elect that option. The Company has begun its evaluation of the amended guidance including the potential impact on its consolidated financial statements. The extent of the change is indeterminable at this time as it will be dependent upon portfolio composition and credit quality at the adoption date, as well as economic conditions and forecasts at that time. Upon adoption, any impact to the allowance for credit losses - currently allowance for loan and lease losses - will have an offsetting impact on retained earnings.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In June 2020, the FASB issued ASU 2020-05, “Effective Dates for Certain Entities”. The amendments in this update defer the effective date for one year for small reporting companies that have not yet issued financial statements reflecting the adoption of “Leases”. Therefore, “Leases” is effective, for the Company, for fiscal years beginning after December 15, 2021. Early application is permitted. The adoption of this guidance on January 1, 2022 is not expected to have a material effect on the Company’s consolidated financial statements.

 

Subsequent Events

 

The Company has evaluated all events subsequent to the balance sheet date of September 30, 2020 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.

 

15

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

3. CERTIFICATES OF DEPOSIT

 

   September 31,   December 31, 
   2020   2019 
         
Maturing in:          
After five to ten years  $500,000   $999,262 

 

4. SECURITIES

 

   September 30, 2020 
   Amortized   Gross Unrealized   Fair 
   Cost   Gains   Losses   Value 
                 
Securities held to maturity:                    
State, county, and municipal obligations  $346,976   $20,038   $-   $367,014 
Mortgage-backed securities   74,771    568    -    75,339 
                     
   $421,747   $20,606   $-   $442,353 
                     
Securities available for sale:                    
U.S. government and agency obligations  $17,789,235   $77,323   $2,049   $17,864,509 
Mortgage-backed securities   28,757,666    825,483    7,675    29,575,474 
                     
   $46,546,901   $902,806   $9,724   $47,439,983 

 

   December 31, 2019 
   Amortized   Gross Unrealized   Fair 
   Cost   Gains   Losses   Value 
                 
Securities held to maturity:                    
State, county, and municipal obligations  $346,806   $15,635   $-   $362,441 
Mortgage-backed securities   77,488    1,491    -    78,979 
                     
   $424,294   $17,126   $-   $441,420 
                     
Securities available for sale:                    
U.S. government and agency obligations  $7,832,355   $6,943   $58,764    7,780,534 
Mortgage-backed securities   30,083,739    190,318    75,969    30,198,088 
                     
   $37,916,094   $197,261   $134,733   $37,978,622 

 

Mortgage-backed securities consist of securities guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac with amortized costs of $1.1 million, $16.0 million and $11.7, respectively, at September 30, 2020. ($1.7 million, $19.5 million and $9.0 million, respectively, at December 31, 2019).

 

There were no sales of securities held to maturity or available for sale for the three and nine months ended September 30, 2020 and 2019, respectively.

 

16

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

4. SECURITIES (Cont’d)

 

The following is a summary of the amortized cost and fair value of securities at September 30, 2020 and December 31, 2019, 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, 2020 
   Held to Maturity   Available for Sale 
   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value 
                 
Within one year  $-   $-   $7,499,911   $7,499,892 
After one to five years   -    -    1,003,757    1,032,766 
After five to ten years   -    -    1,928,627    1,981,801 
After ten years   421,747    442,353    36,114,606    36,925,524 
                     
   $421,747   $442,353   $46,546,901   $47,439,983 

 

   December 31, 2019 
   Held to Maturity   Available for Sale 
   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value 
                 
Within one year  $-   $-   $499,851   $499,866 
After one to five years   -    -    1,297,811    1,301,605 
After five to ten years   -    -    1,484,831    1,482,981 
After ten years   424,294    441,420    34,633,601    34,694,170 
                     
   $424,294   $441,420   $37,916,094   $37,978,622 

 

The following tables summarize the fair values and unrealized losses of securities with an unrealized loss at September 30, 2020 and December 31, 2019, 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, 2020 
    Under One Year    One Year or More    
         Gross         Gross 
   Fair    Unrealized    Fair    Unrealized 
    Value    Loss    Value    Loss 
                     
Securities held to maturity:                    
State, county, and municipal obligations  $-   $-   $-   $- 
                     
Securities available for sale:                    
U.S. government and agency obligations   7,997,893    2,049    -    - 
Mortgage-backed securities   1,293,113    5,277    89,715    2,398 
                     
    9,291,006    7,326    89,715    2,398 
                     
   $9,291,006   $7,326   $89,715   $2,398 

 

17

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

4. SECURITIES (Cont’d)

 

   December 31, 2019 
    Under One Year    One Year or More 
         Gross         Gross 
    Fair    Unrealized    Fair    Unrealized 
    Value    Loss    Value    Loss 
                     
Securities held to maturity:                    
State, county, and municipal obligations  $-   $-   $-   $- 
                     
Securities available for sale:                    
U.S. government and agency obligations   6,239,181    46,887    534,559    11,877 
Mortgage-backed securities   7,382,886    45,749    8,082,496    30,220 
                     
    13,622,067    92,636    8,617,055    42,097 
                     
   $13,622,067   $92,636   $8,617,055   $42,097 

 

The unrealized losses are primarily due to changes in market interest rates subsequent to purchase. A total of six and 30 securities were in an unrealized loss position at September 30, 2020 and December 31, 2019, respectively. 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, 2020 and December 31, 2019 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.

 

Securities available for sale with a carrying value of approximately $3.1 million as of September 30, 2020 ($6.1 million at December 31, 2019), have been pledged to secure advances from the Federal Home Loan Bank of New York.

 

18

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

5. LOANS RECEIVABLE, NET

 

   September 30,   December 31, 
   2020   2019 
Mortgage loans:          
Residential 1-4 family  $15,068,105   $17,894,014 
Commercial and multi-family   15,020,375    14,917,754 
Home equity lines of credit   199,543    206,281 
           
    30,288,023    33,018,049 
           
Other loans:          
Student   4,452,027    5,888,955 
Commercial   7,347,704    1,190,944 
Passbook   24,430    - 
           
    11,824,161    7,079,899 
           
Total loans   42,112,184    40,097,948 
           
Less:          
Deferred loan fees (costs and premiums), net   98,161    (170,842)
Allowance for loan losses   459,521    428,908 
           
    557,682    258,066 
           
   $41,554,502   $39,839,882 

 

As previously mentioned in Note 1 Summary of Significant Accounting Policies, the CARES Act established the PPP, administered directly by the U.S. SBA. The PPP provides loans to small businesses which were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during the COVID-19 emergency. As of September 30, 2020, the Company had 90 PPP loans outstanding, with an outstanding principal balance of $6.1 million. The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. PPP loans are included in the Commercial Loan class. The entire balance of the PPP loans are pledged to secure advances from the Federal Reserve Bank of New York.

 

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 $124,000 and $132,000 at September 30, 2020 and December 31, 2019, respectively.

 

19

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

5. LOANS RECEIVABLE, NET (CONT’D)

 

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

 

   Three Months Ended 
   September 30, 
   2020   2019 
         
Balance at beginning of period  $449,686   $434,063 
Provision for loan losses   9,835    - 
           
Balance at end of period  $459,521   $434,063 

 

   Nine Months Ended 
   September 30, 
   2020   2019 
         
Balance at beginning of period  $428,908   $407,832 
Provision for loan losses   30,613    26,231 
           
Balance at end of period  $459,521   $434,063 

 

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, 2020 and December 31, 2019. 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.

 

20

 

 

Sunnyside BANCORP, INC AND SUBSIDIARY

Form 10-Q

 

5. LOANS RECEIVABLE, NET (CONT’D)

 

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.

 

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, 2020 
    Mortgage Loans                 
         Commercial               Commercial       
    Residential     Real Estate and     Home         and       
    1-4 Family     Multi-Family    Equity    Student    Other    Total 
    (In thousands) 
                               
Pass  $15,068   $13,624   $200   $4,237   $7,372   $40,501 
Special Mention   -    829    -    94    -    923 
Substandard   -    567    -    121    -    688 
                               
   $15,068   $15,020   $200   $4,452   $7,372   $42,112