What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-08-13 · 245 added, 150 removed, 663 unchanged (37% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

September 30,

(In thousands, except share

8 unchanged sentences

Loans receivable

Deferred loan (fees) costs, net

Deferred loan costs, net

Allowance for loan losses

15 unchanged sentences

Lease Liability – Financing

Stock Subscription

Accounts payable and accrued expenses

Total liabilities

See notes to consolidated financial statements.

See notes to interim unaudited consolidated financial statements.

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (continued)

September 30,

(In thousands, except share

1 unchanged sentence

Stockholders’ equity:

Preferred stock, $ 0.01 par value;

1,000,000 shares authorized, none issued

Common stock, $ 0.01 par value;

19,000,000 shares authorized;

13,225,000 shares issued;

and 12,194,611 shares outstanding at June 30, 2021 and December 31, 2020, respectively

Preferred stock, $ 0.01 and $ 0.01 par value;

25,000,000 shares and 1,340,000 shares authorized;

none issued or outstanding, respectively ¹

Common stock, $ 0.01 and $ 0.01 par value;

75,000,000 shares and 25,460,000 shares authorized;

16,377,936 shares and 17,721,500 shares issued;

and 16,377,936 shares and 16,340,779 shares outstanding, respectively¹

Additional paid-in capital

Unearned Employee Stock Ownership Plan (“ESOP”) shares

Treasury stock – at cost, 1,030,389 shares at June 30, 2021 and December 31, 2020, respectively

Treasury stock – at cost, 0 and 1,380,721 shares, respectively¹

Retained earnings

2 unchanged sentences

Total liabilities and stockholders’ equity

See notes to consolidated financial statements.

¹Shares amounts related to periods prior to the July 12, 2021 closing of the Company’s second-step conversion offering have been restated to give retroactive recognition to the 1.3400 exchange ratio applied in the conversion offering.

See notes to interim unaudited consolidated financial statements.

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except per share amounts)

1 unchanged sentence

Interest-earning deposits

Securities – taxable

Total Interest Income

7 unchanged sentences

Other loan fees and service charges

Gain on disposition of equipment

Gain (loss) on disposition of equipment

Earnings on bank owned life insurance

6 unchanged sentences

Outside data processing

Impairment loss on goodwill

Real estate owned expense

3 unchanged sentences

EARNINGS PER COMMON SHARE – BASIC AND DILUTED ¹

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED

DIVIDENDS DECLARED PER COMMON SHARE

See notes to consolidated financial statements.

See notes to interim unaudited consolidated financial statements.

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

8 unchanged sentences

Total Comprehensive Income

(1) Amounts are included in salaries and employees benefits in the audited consolidated statements of operations as part of net periodic pension cost.

¹ Amounts are included in salaries and employees benefits in the audited consolidated statements of income as part of net periodic pension cost.

See Note 9 for further information.

(2) Amounts are included in provision for income taxes in the audited consolidated statements of operations.

See notes to consolidated financial statements.

²Amounts are included in provision for income taxes in the audited consolidated statements of income.

See notes to interim unaudited consolidated financial statements.

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Six Months Ended June 30, 2021 and 2020

Three and Nine Months Ended September 30, 2021 and 2020

Comprehensive

Shares, net ¹

(In thousands, except share and per share amounts)

Balance - April 1, 2020

Balance – December 31, 2019

Other comprehensive income

1 unchanged sentence

ESOP shares earned

Balance – June 30, 2020

Balance - April 1, 2021

Other comprehensive loss

Balance - March 31, 2020

Other comprehensive income

Cash dividend declared ($ 0.02 per share)

ESOP shares earned

Balance - June 30, 2020

Other comprehensive income

Cash dividend declared ($ 0.02 per share)

ESOP shares earned

Balance – September 30, 2020

Comprehensive

Shares, net ¹

(In thousands, except share and per share amounts)

3 unchanged sentences

ESOP shares earned

Balance - March 31, 2021

Other comprehensive income

ESOP shares earned

Balance - June 30, 2021

Balance – December 31, 2020

Other comprehensive loss

1 unchanged sentence

ESOP shares earned

Balance – June 30, 2021

See notes to consolidated financial statements.

Purchase of unearned common stock held by employee stock ownership plan

Second-step conversion and stock offering:

Conversion of existing shares

MHC shares sold in public offering, net of cost

Retirement of NECB, MHC shares

( 17,721,500 )

Fractional shares resulting from conversion of existing shares

Treasury stock retired

Balance – September 30, 2021

See notes to interim unaudited consolidated financial statements.

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

1 unchanged sentence

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

Net amortization of securities premiums and discounts, net

Net accretion of securities premiums and discounts, net

Provision for loan losses

2 unchanged sentences

Unrealized (gain) loss recognized on equity securities

Impairment of goodwill

Impairment of real estate owned

Earnings on bank owned life insurance

Gain on dispositions of premises and equipment

(Gain) loss on dispositions of premises and equipment

ESOP compensation expense

Decrease (Increase) in accrued interest receivable

(Increase) Decrease in other assets

Decrease in accounts payable and accrued expenses

(Increase) decrease in accrued interest receivable

Decrease in other assets

Increase in accounts payable and accrued expenses

Net Cash Provided by Operating Activities

4 unchanged sentences

Principal repayments on securities held-to-maturity

Purchase of marketable equity securities

Purchase of securities held-to-maturity

5 unchanged sentences

Proceeds from FHLB of NY advances

Proceeds from stock subscription

Issuance of common stock funded by stock subscriptions

Decrease in advance payments by borrowers for taxes and insurance

1 unchanged sentence

Net Cash Provided (Used in) by Financing Activities

Net Decrease in Cash and Cash Equivalents

Net Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents – Beginning

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

3 unchanged sentences

Supplementary Disclosure of Non-Cash Investing and Financing Activities:

Recognition of right of use asset – operating

Recognition of lease liability – operating

Dividends declared and not paid

See notes to consolidated financial statements.

See notes to interim unaudited consolidated financial statements.

NORTHEAST COMMUNITY BANCORP, INC.

Notes to Condensed Consolidated Financial Statements

(Dollars in thousands/millions, unless otherwise stated)

(Dollars in thousands, unless otherwise stated)

NORTHEAST COMMUNITY BANCORP, INC.

5 unchanged sentences

(the “Company”) is a Maryland corporation that was incorporated in May 2021 to be the successor to NorthEast Community Bancorp, Inc., a federally chartered corporation (the “Mid-Tier Holding Company”), upon completion of the second-step conversion of NorthEast Community Bank (the “Bank”) from the two-tier mutual holding company structure to the stock holding company structure.

NorthEast Community Bancorp, MHC was the former mutual holding company for the Mid-Tier Holding Company prior to completion of the second-step conversion.

NorthEast Community Bancorp, MHC was the former mutual holding company for the Mid-Tier Holding Company prior to the completion of the second-step conversion.

In conjunction with the second-step conversion, each of NorthEast Community Bancorp, MHC and the Mid-Tier Holding Company merged out of existence and now cease to exist.

17 unchanged sentences

NECB Financial is licensed in the States of New York and Connecticut.

72 West Eckerson LLC (“72 West Eckerson”), a New York limited liability company and wholly owned subsidiary of the Bank, was formed in April 2015 to facilitate the purchase or lease of real property by the Bank and currently owns the branch locations in Spring Valley, New York and Monroe, New York.

166 Route 59 Realty LLC (“166 Route 59 Realty”), a New York limited liability company and wholly owned subsidiary of the Bank, was formed in April 2021 to facilitate the purchase or lease of real property by the Bank and currently owns the property for a proposed branch located in Airmont, New York.

72 West Eckerson LLC (“72 West Eckerson”), a New York limited liability company and wholly owned subsidiary of the Bank, was formed in April 2015 to facilitate the purchase or lease of real property by the Bank and currently owns the Bank branch locations in Spring Valley, New York and Monroe, New York.

Principal of Consolidations:

13 unchanged sentences

Further, a decrease in the results of future operations might place a strain on the Company’s regulatory capital ratios.

Note 2 — Mutual Holding Company Reorganization and Regulatory Capital

Note 2 — Regulatory Capital

The Company and the Bank are subject to regulatory capital requirements promulgated by the federal banking agencies.

7 unchanged sentences

The new rule has a capital conservation buffer requirement that was phased in at a rate of 0.625 % annually beginning January 1, 2016 through January 1, 2020, when full capital conservation buffer requirement of 2.50 % became effective.

The Bank met all capital adequacy requirements to which it was subject as of June 30, 2021 and December 31, 2020.

The Bank met all capital adequacy requirements to which it was subject as of September 30, 2021 and December 31, 2020.

The following table presents information about the Bank’s capital levels at the dates presented:

4 unchanged sentences

(Dollars in Thousands)

As of June 30, 2021:

As of September 30, 2021:

Total capital (to risk-weighted assets)

11 unchanged sentences

Note 3 — Equity Securities

The following table is the schedule of Equity Securities at June 30, 2021 and December 31, 2020.

The following table is the schedule of equity securities at September 30, 2021 and December 31, 2020.

The equity securities consists of our investment in a market-rate bond mutual fund that invests in high quality fixed income bonds, mainly government agency securities whose proceeds are designed to positively impact community development throughout the United States.

The mutual fund focuses exclusively on providing affordable housing for low- and moderate-income borrowers and renters, including those in majority minority census tracts.

September 30,

(In Thousands)

Equity Securities, at Fair Value

The following is a summary of unrealized gains recognized in net income on equity securities during the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30,

Six Months Ended June 30,

The following is a summary of unrealized gains recognized in net income on equity securities during the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Unrealized net gain (loss) recognized during the reporting period

on equity securities still held at the reporting date

Net gain (loss) recognized on equity securities during the period

Net losses realized on the sale of equity securities during the period

Unrealized net gain (loss) recognized on equity securities held at the reporting date

Note 4 — Securities Available-for-Sale

The following table summarizes the Company’s portfolio of securities available-for-sale at June 30, 2021 and December 31, 2020.

June 30, 2021

The following table summarizes the Company’s portfolio of securities available-for-sale at September 30, 2021 and December 31, 2020.

September 30, 2021

(In Thousands)

5 unchanged sentences

Federal Home Loan Mortgage Corporation

There were no sales of securities available-for-sale as of June 30, 2021 and December 31, 2020.

There were no sales of securities available-for-sale as of September 30, 2021 and December 31, 2020.

Contractual final maturities of mortgage-backed securities were as follows:

June 30, 2021

September 30, 2021

Amortized Cost

3 unchanged sentences

Actual maturities will differ from contractual maturities due to scheduled monthly repayments and due to the underlying borrowers having the right to prepay their obligations.

At June 30, 2021 and December 31, 2020, the Company had no unrealized loss.

At September 30, 2021 and December 31, 2020, the Company had no unrealized loss.

Note 5 — Securities Held-to-Maturity

The following table summarizes the Company’s portfolio of securities held-to-maturity at June 30, 2021 and December 31, 2020.

June 30, 2021

The following table summarizes the Company’s portfolio of securities held-to-maturity at September 30, 2021 and December 31, 2020.

September 30, 2021

(In Thousands)

13 unchanged sentences

Collateralized mortgage obligations – GSE

Contractual final maturities of mortgage-backed securities and municipal bonds were as follows at June 30, 2021:

June 30, 2021

Contractual final maturities of mortgage-backed securities and municipal bonds were as follows at September 30, 2021:

September 30, 2021

(In Thousands)

9 unchanged sentences

(In Thousands)

June 30, 2021:

September 30, 2021:

Federal Home Loan Mortgage Corporation

Municipal Bonds

Less than 12 Months

3 unchanged sentences

Federal Home Loan Mortgage Corporation

At June 30, 2021, one mortgage-backed security had unrealized loss.

Management concluded that the unrealized loss reflected above for the mortgage-backed security was temporary in nature since the loss was related primarily to market interest rates and not related to the underlying credit quality of the issuer of the security.

Additionally, the Company has the ability and intent to hold the security for the time necessary to recover the amortized cost.

At September 30, 2021, one mortgage-backed security and three municipal bonds had unrealized loss.

Management concluded that the unrealized loss reflected above was temporary in nature since the unrealized loss was related primarily to market interest rates for the mortgage-backed security and discounted yields for the municipal bonds, and not related to the underlying credit quality of the issuers of the securities.

Additionally, the Company has the ability and intent to hold the securities for the time necessary to recover the amortized cost.

At December 31, 2020, there was one mortgage-backed security with unrealized loss.

5 unchanged sentences

Thereafter, interest income is not recognized unless the financial condition and payment record of the borrower warrant the recognition of interest income.

Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Interest on loans that have been restructured is accrued according to the renegotiated terms.

2 unchanged sentences

Prepayment penalties received on loans which pay in full prior to the scheduled maturity are included in interest income in the period the prepayment penalties are collected.

The composition of loans were as follows at June 30, 2021 and December 31, 2020:

The composition of loans were as follows at September 30, 2021 and December 31, 2020:

September 30,

(In Thousands)

6 unchanged sentences

Deferred loan (fees) costs, net

Loans serviced for the benefit of others totaled approximately $ 6,600,000 and $ 11,876,000 at June 30, 2021 and December 31, 2020, respectively.

The value of mortgage servicing rights was not material at June 30, 2021 and December 31, 2020.

Two loans were sold at par totaling $ 3,148,000 , net of interest reserve of $ 242,000 , with no gain or loss recognized on the sale during the three and six months ended June 30, 2021.

There was no loan sale during the six months ended at June 30, 2020.

Loans serviced for the benefit of others totaled approximately $ 5,760,000 and $ 11,876,000 at September 30, 2021 and December 31, 2020, respectively.

The value of mortgage servicing rights was not material at September 30, 2021 and December 31, 2020.

There was no loan sales during the three months ended at September 30, 2021 or 2020.

Two loans were sold at par totaling $ 3,148,000 , net of interest reserve of $ 242,000 , with no gain or loss recognized on the sale during the nine months ended September 30, 2021.

There was no loan sales during the nine months ended at September 30, 2020.

The Company did not issue Payroll Protection Program (“PPP”) loans associated with the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (the “CARES Act”) in 2021 or 2020.

The Company had no loans to related parties at June 30, 2021 and December 31, 2020.

The Company had no loans to related parties at September 30, 2021 and December 31, 2020.

In addition, the Company did not originate any loans to related parties in 2021 or 2020.

The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans.

The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the statement of financial condition date and is recorded as a reduction to loans.

The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries.

5 unchanged sentences

This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The following tables summarize the distribution of the allowance for loan losses and loans receivable by loan class and impairment method at June 30, 2021 and December 31, 2020:

At June 30, 2021:

The following tables summarize the allocation of the allowance for loan losses and loans receivable by loan class and impairment method at September 30, 2021 and December 31, 2020:

At September 30, 2021:

(In Thousands)

25 unchanged sentences

collectively evaluated for impairment

The activity in the allowance for loan loss by loan class for the three months ended June 30, 2021 and 2020 was as follows:

The activity in the allowance for loan loss by loan class for the three months ended September 30, 2021 and 2020 was as follows:

(In Thousands)

Allowance for loan losses:

Balance - April 1, 2021

Provision (Benefit)

Balance - June 30, 2021

Provision (Benefit)

Balance - September 30, 2021

(In Thousands)

Allowance for loan losses:

Balance - April 1, 2020

Provision (Benefit)

Balance - June 30, 2020

The activity in the allowance for loan loss by loan class for the six months ended June 30, 2021 and 2020 was as follows:

Provision (Benefit)

Balance - September 30, 2020

The activity in the allowance for loan loss by loan class for the nine months ended September 30, 2021 and 2020 was as follows:

(In Thousands)

Allowance for loan losses:

Balance - January 1, 2021

Balance - December 31, 2020

Provision (Benefit)

Balance - June 30, 2021

Balance - September 30, 2021

(In Thousands)

Allowance for loan losses:

Balance - January 1, 2020

Balance - December 31, 2019

Provision (Benefit)

Balance - June 30, 2020

Balance - September 30, 2020

During the three months ended September 30, 2021, the provision expenses recorded were primarily attributed to the previously disclosed charge-off of $ 3.6 million during the three months ended September 30, 2021 regarding a non-residential bridge loan secured by real estate with a balance of $ 3.6 million.

The loan is secured by commercial real estate located in Greenwich, Connecticut and guaranteed by the two borrowers.

The loan was originated in 2016 as a two-year bridge loan and, upon the borrower’s failure to satisfy the loan at the maturity date, the loan was accelerated and a foreclosure action was instituted.

The loan remains in foreclosure but is subject to Connecticut’s continuing foreclosure backlog.

The property securing the loan is subject to a parking easement and based on a recently updated appraisal showing the property’s value with the parking easement to be zero , the Company has determined to write off the $ 3.6 million loan as a non-cash charge against the allowance for loan losses.

The Company intends to aggressively seek recovery of all amounts due from the personal guarantors of the loan.

However, the recovery process is uncertain and might take an extended period of time to resolve this matter.

In the event the Company is successful against the

guarantors, any recovery received would be added back to the allowance for loan losses and an analysis will be performed at that time to determine the appropriateness of recognizing the recovery into income.

Additionaly the provision expenses recorded for commercial and industrial loan and construction loan segments were primarily due to increased loan balances, and the credit provision recorded for residential real estate loan segment was due to decreased loan balance.

During the three months ended September 30, 2020, the provision expenses recorded were primarily attributed to the perceived potential credit risk associated with the COVID-19 pandemic, although no specific or probable losses were identified at that time, as well as increased loan balances in construction loan and commercial and industrial loan segments.

During the nine months ended September 30, 2021, the provision expenses recorded were primarily attributed to the previously disclosed charge-off of $ 3.6 million during the nine months ended September 30, 2021 regarding a non-residential bridge loan secured by real estate with a balance of $ 3.6 million, as well as increased loan balances in construction loan and commercial and industrial loan segments.

The credit provision recorded for residential real estate was due to decreased loan balance.

During the nine months ended September 30, 2020, the provision expenses recorded were primarily attributed to the perceived potential credit risk associated with the COVID-19 pandemic, although no specific or probable losses were identified at that time, as well as increased loan balances in construction loan and commercial and industrial loan segments.

The following table shows our recorded investment, unpaid principal balance and allocated allowance for loan losses for loans that were considered impaired at:

As of and for the Three and Six Months Ended June 30, 2021:

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

As of and for the Three and Nine months Ended September 30, 2021 and 2020:

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Unpaid Principal

12 unchanged sentences

Commercial and industrial

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Unpaid Principal

Average Recorded

Interest Income

Average Recorded

Interest Income

(In Thousands)

With no related allowance recorded:

Residential real estate-Multi-family

Non-residential real estate

Commercial and industrial

With an allowance recorded

Residential real estate-Multi-family

Non-residential real estate

Commercial and industrial

As of and for the Year Ended December 31, 2020:

12 unchanged sentences

The following table sets forth the composition of our nonaccrual loans at the dates indicated.

Loans Receivable on Nonaccrual Status as of June 30, 2021 and December 31, 2020:

Loans Receivable on Nonaccrual Status as of September 30, 2021 and December 31, 2020:

September 30,

(In Thousands)

Non-residential real estate

The Company did no t recognize any interest income on non-accrual loans during the six months ended June 30, 2021 and 2020.

Interest income that would have been recorded had the loans been on accrual status would have amounted to approximately $ 57,000 and $ 52,000 for the three months, and $ 114,000 and $ 122,000 for the six months ended June 30, 2021 and 2020, respectively.

The Company did no t recognize any interest income on non-accrual loans during the nine months ended September 30, 2021 and 2020.

The Company wrote off the $ 3.6 million non-accrual loan during the three months ended September 30, 2021.

As a result of the write down, the Company recorded an equal amount of provision for loan losses during the quarter ending September 30, 2021 to replenish the allowance for loan losses.

Interest income that would have been recorded had the loans been on accrual status would have amounted to approximately $ 52,000 for the three months and $ 122,000 for the nine months ended September 30, 2020.

The Company is not committed to lend additional funds to borrowers whose loans have been placed on non-accrual status.

The following tables provide information about delinquencies in our loan portfolio at the dates indicated.

Age Analysis of Past Due Loans as of June 30, 2021:

Age Analysis of Past Due Loans as of September 30, 2021:

(In Thousands)

13 unchanged sentences

The following tables provide certain information related to the credit quality of our loan portfolio.

Credit Risk Profile by Internally Assigned Grade as of June 30, 2021:

Credit Risk Profile by Internally Assigned Grade as of September 30, 2021:

Non-residential

9 unchanged sentences

The following table shows our recorded investment for loans classified as a troubled debt restructuring (a “TDR”) that are performing according to their restructured terms at the periods indicated:

September 30,

(Dollars in Thousands)

Residential Real Estate - Multi-family

Residential Real Estate - Mixed-use

Non-residential real estate

Total performing

The following is a summary of interest foregone on loans classified as a TDR for the three and six-month periods ended June 30, 2021 and June 30, 2020:

Three Months Ended June 30,

Six Months Ended June 30,

The following is a summary of interest foregone on loans classified as a TDR for the three and nine month periods ended September 30, 2021 and September 30, 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

3 unchanged sentences

Total foregone interest

There were no loans modified that were deemed to be a TDR during the six months ended June 30, 2021 and 2020.

During the six months ended June 30, 2021 and 2020, none of the loans that were modified during the previous twelve months had defaulted.

There were no loans modified that were deemed to be a TDR during the nine months ended September 30, 2021 and 2020.

During the nine months ended September 30, 2021 and 2020, none of the loans that were modified during the previous twelve months had defaulted.

The CARES Act includes a provision for the Company to opt out of applying the “troubled-debt restructuring” (“TDR”) accounting guidance in ASC 310- 40 for certain loan modifications.

Loan modifications made between March 1, 2020 and the earlier of (1) December 30, 2020 or (2) 60 days after the President declares a termination of the COVID-19 national emergency are eligible for this relief if the related loans were not more than 30 days past due as of December 31, 2020.

As of June 30, 2021, we had two loans totaling $ 9.5 million still in deferral status related to this Act.

Loan modifications made between March 1, 2020 and the earlier of (1) January 1, 2022 or (2) 60 days after the President declares a termination of the COVID-19 national emergency are eligible for this relief if the related loans were not more than 30 days past due as of December 31, 2020.

As of September 30, 2021, we had two loans totaling $ 8.9 million still in deferral status under the CARES Act.

Note 7 — Real Estate Owned (“REO”)

The Company owned one foreclosed property valued at approximately $ 1,996,000 at June 30, 2021 and December 31, 2020, consisting of an office building located in Pennsylvania.

The Company owned one foreclosed property valued at approximately $ 1,996,000 at September 30, 2021 and December 31, 2020, consisting of an office building located in Pennsylvania.

The property was acquired through foreclosure in December 2014.

1 unchanged sentence

Routine holding costs are charged to expense as incurred and improvements to real estate owned that enhance the value of the real estate are capitalized.

REO expense recorded in the consolidated statements of income amounted to $ 26,000 and $ 94,000 for the three months, and $ 68,000 and $ 141,000 for the six months ended June 30, 2021 and 2020, respectively.

REO expense recorded in the consolidated statements of income amounted to $ 17,000 and $ 34,000 for the three months, and $ 85,000 and $ 175,000 for the nine months ended September 30, 2021 and 2020, respectively.

Note 8 — Federal Home Loan Bank of New York (“FHLB”) Advances

FHLB advances are summarized as follows at June 30, 2021 and December 31, 2020:

FHLB advances are summarized as follows at September 30, 2021 and December 31, 2020:

September 30,

Weighted Average

8 unchanged sentences

After five years (due 2030)

At June 30, 2021, none of the above advances were subject to early call or redemption features.

At September 30, 2021, none of the above advances were subject to early call or redemption features.

All advances had fixed interest rates and the term of the advance ranges between 2 and 10 years .

At June 30, 2021, the advances were secured by a pledge of the Company’s investment in the capital stock of the FHLB and a blanket assignment of the Company’s otherwise unpledged qualifying mortgage loans.

At June 30, 2021, these unpledged qualifying mortgage loans were not pledged to any company other than the FHLB.

At June 30, 2021, the Company had the ability to borrow $ 41.2 million, net of $ 28.0 million in outstanding advances, from the FHLB and $ 8.0 million from Atlantic Community Bankers Bank (“ACBB”).

At September 30, 2021, the advances were secured by a pledge of the Company’s investment in the capital stock of the FHLB and a blanket assignment of the Company’s otherwise unpledged qualifying mortgage loans.

At September 30, 2021, these unpledged qualifying mortgage loans were not pledged to any company other than the FHLB.

At September 30, 2021, the Company had the ability to borrow $ 39.0 million, net of $ 28.0 million in outstanding advances, from the FHLB and $ 8.0 million from Atlantic Community Bankers Bank (“ACBB”).

Note 9 — Benefits Plans

1 unchanged sentence

The DRP is an unfunded non-contributory defined benefit pension plan covering all non-employee directors meeting eligibility requirements as specified in the plan document.

The following table sets forth information regarding the components of net pension periodic expense measured as of June 30, 2021 and 2020:

Three Months Ended June 30,

Six Months Ended June 30,

The following table sets forth information regarding the components of net pension periodic expense measured as of September 30, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars In Thousands)

5 unchanged sentences

Total net periodic pension expense included in other non-interest expenses

At June 30, 2021 and 2020, unrecognized net loss of $ 21,000 and $ 2,000 , respectively, was included in accumulated other comprehensive income.

Unrecognized net loss of $ 12,000 and $ 4,000 for the three months, and $ 35,000 and $ 11,000 for the nine months ended September 30, 2021 and 2020, respectively, were included in accumulated other comprehensive income.

Supplemental Executive Retirement Plan (“SERP”)

5 unchanged sentences

No benefits are expected to be paid during the next five years .

Expenses of $ 132,000 and $ 49,000 for the three months, and $ 227,000 and $ 99,000 for the six months ended June 30, 2021 and 2020, respectively, were recorded for this plan and are reflected in the Consolidated Statements of Operations under Salaries and Employee Benefits.

Expenses of $ 132,000 and $ 50,000 for the three months, and $ 359,000 and $ 149,000 for the nine months ended September 30, 2021 and 2020, respectively, were recorded for this plan and are reflected in the Consolidated Statements of Income under Salaries and Employee Benefits.

Stock-Based Deferral Plan

In June 2021, the Company established a stock-based deferral plan for eligible key executives and members of the Board of Directors of the Company to elect to defer compensation received from the Company for their services and make deemed investments of that deferred compensation in shares of the Company’s common stock.

At September 30, 2021, the Company did not have any obligations under the plan.

The Company maintains a 401(k) plan for all eligible employees.

Participants are permitted to contribute from 1 % to 15 % of their annual compensation up to the maximum permitted under the Internal Revenue Code.

The Company provided no matching contribution during the three and six months ended June 30, 2021 and 2020.

The Company provided no matching contribution during the three and nine months ended September 30, 2021 and 2020.

Employee Stock Ownership Plan (“ESOP”)

2 unchanged sentences

The loan from the Mid-Tier Holding Company, which has been assumed by the Company, carries an interest rate of 8.25 % and is repayable in twenty annual installments through 2025.

In conjunction with the Company’s second-step conversion offering, on July 12, 2021, the ESOP borrowed $ 7,827,260 from the Company and used those funds to acquire 782,726 shres of Company common stock at $ 10.00 per share.

In conjunction with the Company’s second-step conversion offering, on July 12, 2021, the ESOP borrowed $ 7,827,260 from the Company and used those funds to acquire 782,726 shares of Company common stock at $ 10.00 per share.

The loan from the Company carries an interest rate equal to 3.25 % and is repayable in fifteen annual installments through 2035.

1 unchanged sentence

The ESOP may further pay down the principal balance of the loans by using dividends paid, if any, on the shares of Company common stock it owns.

The balance remaining on the first ESOP loan was $ 2,051,000 at June 30, 2021 and December 31, 2020.

The balance remaining on the first ESOP loan was $ 2,051,000 at September 30, 2021 and December 31, 2020.

Shares purchased with the loan proceeds serve as collateral for the loan and are held in a suspense account for future allocation among ESOP participants.

2 unchanged sentences

ESOP shares initially pledged as collateral were recorded as unearned ESOP shares in the stockholders’ equity section of the consolidated statement of financial condition.

Thereafter, on a monthly basis over a 240 month period, approximately 2,160 shares are committed to be released and compensation expense is recorded equal to the shares committed to be released multiplied by the average closing price of the Company’s stock during that month.

ESOP expense totaled approximately $ 105,000 and $ 107,000 for the three months, and $ 202,000 and $ 179,000 for the six months ended June 30, 2021 and 2020, respectively.

Dividends on unallocated shares, which totaled approximately $ 4,000 and $ 5,000 for the three months, and $ 9,000 and $ 10,000 for the six months ended June 30, 2021 and 2020, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 11,000 and $ 11,000 for the three months, and $ 23,000 and $ 21,000 for the six months ended June 30, 2021 and 2020, respectively, are charged to retained earnings.

Thereafter, on a monthly basis over the terms of the ESOP

loans, approximately 2,894 shares for the ESOP established in 2006 and approximately 4,348 shares for the ESOP established in 2021 are committed to be released respectively.

Compensation expense is recorded equal to the shares committed to be released multiplied by the average closing price of the Company’s stock during that month.

ESOP expense totaled approximately $ 491,000 and $ 142,000 for the three months, and $ 694,000 and $ 321,000 for the nine months ended September 30, 2021 and 2020, respectively.

Dividends on unallocated shares, which totaled approximately $ 57,000 and $ 5,000 for the three months, and $ 61,000 and $ 14,000 for the nine months ended September 30, 2021 and 2020, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 31,000 and $ 11,000 for the three months, and $ 43,000 and $ 33,000 for the nine months ended September 30, 2021 and 2020, respectively, are charged to retained earnings.

ESOP shares are summarized as follows:

September 30,

Allocated shares ¹

5 unchanged sentences

Fair value of unearned shares ¹

Note 10 — Leases

4 unchanged sentences

The payment structure of all leases is fixed rental payments with lease payments increasing on pre-determined dates at either a predetermined amount or change in the consumer price index.

The Company adopted ASU 2016-02 on January 1.

As a result of the adoption, the Company recognized operating and financing lease assets and corresponding lease liabilities related to office facilities and retail branches.

In accordance with ASC 842, the Company recognized operating and financing lease assets and corresponding lease liabilities related to office facilities and retail branches.

The operating and financing lease assets represent the Company’s right to use an underlying asset for the lease term, and the lease liability represents the Company’s obligation to make lease payments over the lease term.

3 unchanged sentences

The company used its incremental borrowing rate, the rate of interest to borrow in a collateralized basis for a similar term, at the lease commencement date.

For leases in existence prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used.

All of the leases are net leases and, therefore, do not contain non-lease components.

The Company either pays directly or reimburses the lessor for property and casualty insurance cost and the property taxes assessed on the property, as well as a portion of the common area maintenance associated with the property which are categorized as non-components as outlined in the applicable guidance.

At June 30, 2021 and December 31, 2020, the quantitative data relating to the Company’s leases are as follows (in thousands):

At September 30, 2021 and December 31, 2020, the quantitative data relating to the Company’s leases are as follows (in thousands):

September 30,

Finance Lease Amounts:

9 unchanged sentences

The components of lease expense and cash flow information related to leases as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars In Thousands)

7 unchanged sentences

Operating leases

Maturities of lease liabilities at June 30, 2021 are as follows (in thousands):

Maturities of lease liabilities at September 30, 2021 are as follows (in thousands):

Years ended December 31:

6 unchanged sentences

GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are as follows:

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An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following table sets forth the Company’s assets that are carried at fair value on a recurring basis and the level that was used to determine their fair value at June 30, 2021 and December 31, 2020:

The following table sets forth the Company’s assets that are carried at fair value on a recurring basis and the level that was used to determine their fair value at September 30, 2021 and December 31, 2020:

Quoted Prices in

4 unchanged sentences

Recurring Basis

September 30,

Marketable equity securities:

Mortgage-backed securities

There were no transfers between Level 1 and 2 during the six months ended June 30, 2021 or the year ended December 31, 2020.

The Company did no t have any liabilities that were carried at fair value on a recurring basis at June 30, 2021 and December 31, 2020.

The following table sets forth the Company’s assets that are carried at fair value on a non-recurring basis and the level that was used to determine their fair value, at June 30, 2021 and December 31, 2020:

There were no transfers between Level 1 and 2 during the nine months ended September 30, 2021 or the year ended December 31, 2020.

The Company did no t have any liabilities that were carried at fair value on a recurring basis at September 30, 2021 and December 31, 2020.

The following table sets forth the Company’s assets that are carried at fair value on a non-recurring basis and the level that was used to determine their fair value, at September 30, 2021 and December 31, 2020:

Quoted Prices in

4 unchanged sentences

Non-Recurring Basis

September 30,

(In Thousands)

10 unchanged sentences

Capitalization rate

The Company did no t have any liabilities that were carried at fair value on a non-recurring basis at June 30, 2021 and December 31, 2020.

The methods and assumptions used to estimate fair value at June 30, 2021 and December 31, 2020 are as follows:

The Company did no t have any liabilities that were carried at fair value on a non-recurring basis at September 30, 2021 and December 31, 2020.

The methods and assumptions used to estimate fair value at September 30, 2021 and December 31, 2020 are as follows:

For real estate owned, fair value is generally determined through independent appraisals or fair value estimations of the underlying properties which generally include various Level 3 inputs which are not identifiable.

The appraisals or

fair value estimation may be adjusted by management for qualitative reasons and estimated liquidation expenses.

The appraisals or fair value estimation may be adjusted by management for qualitative reasons and estimated liquidation expenses.

Management’s assumptions may include consideration of location and occupancy of the property and current economic conditions.

14 unchanged sentences

Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2021 and December 31, 2020:

The following methods and assumptions

were used to estimate the fair values of the Company’s financial instruments at September 30, 2021 and December 31, 2020:

Fair values for marketable equity securities are determined by quoted market prices on nationally recognized and foreign securities exchanges (Level 1).

5 unchanged sentences

Fair Value at

June 30, 2021

September 30, 2021

(In thousands)

27 unchanged sentences

Note 12 — Revenue Recognition

Effective January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”), which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, such as REO.

The majority of the Company’s revenues come from interest income and other sources, including loans and securities that are outside the scope of ASC 606.

The Company’s services that fall within the scope of ASC 606 are presented within noninterest

income and are recognized as revenue as the Company satisfies its obligation to the customer.

The majority of the Company’s revenues come from interest income and other sources, including loans and securities that are outside the scope of ASC 606, Revenue from Contracts with Customers.

The Company’s services that fall within the scope of ASC 606 are presented within noninterest income and are recognized as revenue as the Company satisfies its obligation to the customer.

Services within the scope of ASC 606 include deposit service charges on deposits, electronic banking fees and charges income, and investment advisory fees.

The Company, using a modified retrospective transition approach, determined that there was no cumulative effect adjustment to retained earnings as a result of adopting the new standard, nor did the standard have a material impact on our consolidated financial statements including the timing or amounts of revenue recognized.

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset).

3 unchanged sentences

The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances.

As of June 30, 2021, the Company did not have any significant contract balances.

As of September 30, 2021, the Company did not have any significant contract balances.

All of the Company’s revenue from contracts with customers within the scope of ASC 606 is recognized within noninterest income.

The following table presents the Company’s sources of noninterest income for the three and six months ended June 30, 2021 and 2020.

The following table presents the Company’s sources of noninterest income for the three and nine months ended September 30, 2021 and 2020.

Sources of revenue outside the scope of ASC 606 are noted as such:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

25 unchanged sentences

The Company recognizes the fees into non-interest income upon receipt of the monthly remittances.

Note 13 — Other Non-Interest Expenses

The following is an analysis of other non-interest expenses:

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Service contracts

Consulting expense

Directors compensation

Audit and accounting

Director, officer, and employee expense

Office supplies and stationary

Recruiting expense

Note 14 — Recent Accounting Pronouncements

48 unchanged sentences

The amendments in this update apply to contract modifications that replace a reference rate reform and contemporaneous modifications of other terms related to the replacement of the reference rate.

Note 14 — Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

ASU 2021-06 - Presentation of Financial Statements (Topic 205)

In August 2021, the FASB issued ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946):

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants (SEC Update), to amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Release No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants.

This ASU was effective upon issuance and did not have a significant impact on the Company’s financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements