What changed in this filing

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Item 1. Financial Statements

2022-05-13 compared with 2021-11-12 · 128 added, 264 removed, 644 unchanged (38% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

September 30,

(In thousands, except share

31 unchanged sentences

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (continued)

September 30,

(In thousands, except share

1 unchanged sentence

Stockholders’ equity:

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

Preferred stock, $ 0.01 par value;

25,000,000 shares authorized;

none issued or outstanding

Common stock, $ 0.01 par value;

75,000,000 shares authorized;

16,377,936 shares issued;

and 16,377,936 shares outstanding

Additional paid-in capital

Unearned Employee Stock Ownership Plan (“ESOP”) shares

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

Retained earnings

2 unchanged sentences

Total liabilities and stockholders’ equity

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.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except per share amounts)

Three Months Ended March 31,

INTEREST INCOME:

9 unchanged sentences

Other loan fees and service charges

Gain (loss) on disposition of equipment

Earnings on bank owned life insurance

Investment advisory fees

Unrealized gain (loss) on equity securities

Unrealized loss on equity securities

Total Non-Interest Income

3 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 ¹

2 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Other comprehensive income (loss):

Other comprehensive income:

Defined benefit pension:

Reclassification adjustments out of accumulated other comprehensive income:

Amortization of prior service cost ¹

Amortization of actuarial loss ¹

1 unchanged sentence

Income tax effect ²

Total other comprehensive (loss) income

Total other comprehensive income

Total Comprehensive Income

5 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2021 and 2020

Three Months Ended March 31, 2022 and 2021

Comprehensive

6 unchanged sentences

Balance – March 31, 2021

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)

4 unchanged sentences

Balance – March 31, 2022

Other comprehensive income

ESOP shares earned

Balance - June 30, 2021

Other comprehensive loss

Cash dividend declared ($ 0.06 per share)

ESOP shares earned

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

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

1 unchanged sentence

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

Net accretion of securities premiums and discounts, net

Net amortization (accretion) of securities premiums and discounts, net

Provision for loan losses

Net accretion of deferred loan fees and costs

Net amortization (accretion) of deferred loan fees and costs

Deferred income tax expense

Unrealized (gain) loss recognized on equity securities

Impairment of goodwill

Impairment of real estate owned

Unrealized loss recognized on equity securities

Earnings on bank owned life insurance

(Gain) loss on dispositions of premises and equipment

ESOP compensation expense

(Increase) decrease in accrued interest receivable

Increase in accrued interest receivable

Decrease in other assets

Increase in accounts payable and accrued expenses

Increase (decrease) in accounts payable - loan closing

Increase (decrease) in accounts payable and accrued expenses

Net Cash Provided by Operating Activities

2 unchanged sentences

Proceeds from sale of loan

Principal repayments on securities available-for-sale

Principal repayments on securities held-to-maturity

Purchase of marketable equity securities

Purchase of securities held-to-maturity

Net redemptions (purchase) of restricted stock

Net redemptions of restricted stock

Purchases of premises and equipment

2 unchanged sentences

Net increase (decrease) in deposits

Proceeds from FHLB of NY advances

Issuance of common stock funded by stock subscriptions

Decrease in advance payments by borrowers for taxes and insurance

Repayment of FHLB of NY advances

Increase in advance payments by borrowers for taxes and insurance

Cash dividends paid

Net Cash Provided (Used in) by Financing Activities

Net Cash Provided by (Used in) Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents

1 unchanged sentence

Cash and Cash Equivalents – Ending

See notes to interim unaudited consolidated financial statements.

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Nine Months Ended September 30,

Three Months Ended March 31,

(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

19 unchanged sentences

The Bank was founded in 1934 and is a community oriented financial institution dedicated to serving the financial services needs of individuals and businesses within its market area.

The Bank currently conducts business through its nine branch offices located in Bronx, New York, Orange, Rockland and Westchester Counties in New York and Essex, Middlesex and Norfolk Counties in Massachusetts and three loan production offices located in White Plains, New York, New City, New York and Danvers, Massachusetts.

The Bank currently conducts business through its ten branch offices located in Bronx, New York, Orange, Rockland and Westchester Counties in New York and Essex, Middlesex and Norfolk Counties in Massachusetts and two loan production offices located in White Plains, New York, and New City, New York.

The Bank’s principal business consists of originating primarily construction loans and, to a lesser extent, commercial and industrial loans and multifamily and mixed-use residential real estate loans and non-residential real estate loans.

9 unchanged sentences

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.

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 Bank branch located in Airmont, New York.

3 Winterton Realty LLC, a New York limited liability company and wholly owned subsidiary of the Bank, was formed in October 2021 to facilitate the purchase or lease of real property by the Bank and currently owns the property for a Bank branch located in Bloomingburg, New York.

Principal of Consolidations:

The accompanying unaudited consolidated financial statements include the accounts of the Company, the Bank, NECP, NECB Financial, 72 West Eckerson, and 166 Route 59 Realty (collectively the “Company”) and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

The accompanying unaudited consolidated financial statements include the accounts of the Company, the Bank, NECP, NECB Financial, 72 West Eckerson, 166 Route 59 Realty, and 3 Winterton Realty LLC (collectively the “Company”) and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

All significant inter-company accounts and transactions have been eliminated in consolidation.

2 unchanged sentences

Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations.

The unaudited consolidated interim financial information should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the prospectus of the Company filed with the SEC pursuant to Rule 424(b)(3) on May 24, 2021.

The unaudited consolidated interim financial information should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021.

In the opinion of the Company, all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the operating results for the interim periods have been included.

9 unchanged sentences

The Federal Reserve establishes capital requirements, including well capitalized standards, for the consolidated financial holding company, and the FDIC has similar requirements for the Company’s subsidiary bank.

Prior to January 1, 2015, quantitative measures were established by regulation to ensure capital adequacy which required the Bank to maintain minimum amounts and ratios of Total, Tier 1 capital (as defined by regulations) to risk-weighted assets (as defined), and of Core tier 1 capital to adjusted total assets (as defined).

January 1, 2015, quantitative measures were established by regulation to ensure capital adequacy which required the Bank to maintain minimum amounts and ratios of Total, Tier 1 capital (as defined by regulations) to risk-weighted assets (as defined), and of Core tier 1 capital to adjusted total assets (as defined).

Effective January 1, 2015, the Company adopted the Basel III final rule.

Based on the Company’s capital levels and statement of condition composition at December 31, 2021, the implementation of the new rule had no material impact on our regulatory capital level or ratios at the Bank level.

The new rule established limits at the Company level and increased the minimum Tier 1 capital to risk based assets requirement from 4 % to 6 % of risk-weighted assets;

The rule established limits at the Company level and increased the minimum Tier 1 capital to risk based assets requirement from 4 % to 6 % of risk-weighted assets;

established a new common equity Tier 1 capital;

and assigned a higher risk weight ( 150 %) to exposures that are more than 90 days past due or are on nonaccrual and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.

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 September 30, 2021 and December 31, 2020.

The 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 Federal Reserve Board has provided a “small bank holding company” exception to its consolidated capital requirements, and legislation and the related issuance of regulations by the Federal Reserve Board has increased the threshold for the exception to $3.0 billion.

As a result, the Company is not subject to the capital requirements until such time as its consolidated assets exceed $3.0 billion.

The Bank met all capital adequacy requirements to which it was subject as of March 31, 2022 and December 31, 2021.

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

4 unchanged sentences

(Dollars in Thousands)

As of September 30, 2021:

As of March 31, 2022:

Total capital (to risk-weighted assets)

11 unchanged sentences

Note 3 — Equity Securities

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 following table is the schedule of equity securities at March 31, 2022 and December 31, 2021.

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 nine months ended September 30, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

The following is a summary of unrealized gains recognized in net income on equity securities during the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(In Thousands)

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

Net 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

Unrealized net 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 September 30, 2021 and December 31, 2020.

September 30, 2021

The following table summarizes the Company’s portfolio of securities available-for-sale at March 31, 2022 and December 31, 2021.

March 31, 2022

(In Thousands)

5 unchanged sentences

Federal Home Loan Mortgage Corporation

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

There were no sales of securities available-for-sale as of March 31, 2022 and December 31, 2021.

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

September 30, 2021

March 31, 2022

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

At March 31, 2022 and December 31, 2021, 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 September 30, 2021 and December 31, 2020.

September 30, 2021

The following table summarizes the Company’s portfolio of securities held-to-maturity at March 31, 2022 and December 31, 2021.

March 31, 2022

(In Thousands)

13 unchanged sentences

Collateralized mortgage obligations – GSE

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

September 30, 2021

Contractual final maturities of mortgage-backed securities and municipal bonds were as follows at March 31, 2022:

March 31, 2022

(In Thousands)

9 unchanged sentences

(In Thousands)

September 30, 2021:

Federal Home Loan Mortgage Corporation

March 31, 2022:

Municipal Bonds

Mortgage-backed securities - residential:

Federal Home Loan Mortgage Corporation

Federal National Mortgage Association

Collateralized mortgage obligations – GSE

Less than 12 Months

2 unchanged sentences

December 31, 2021:

Municipal Bonds

Mortgage-backed securities - residential:

Federal Home Loan Mortgage Corporation

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

Federal National Mortgage Association

Collateralized mortgage obligations – GSE

At March 31, 2022, eight mortgage-backed securities and four municipal bonds had unrealized loss due to interest rate volatility.

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.

At December 31, 2021, there was one mortgage-backed security and three municipal bonds with unrealized loss.

Note 6 — Loans Receivable and the Allowance for Loan Losses

9 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 September 30, 2021 and December 31, 2020:

September 30,

The composition of loans were as follows at March 31, 2022 and December 31, 2021:

(In Thousands)

6 unchanged sentences

Deferred loan (fees) costs, net

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.

Loans serviced for the benefit of others totaled approximately $ 13,511,000 and $ 14,610,000 at March 31, 2022 and December 31, 2021, respectively.

The value of mortgage servicing rights was not material at March 31, 2022 and December 31, 2021.

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 2022 or 2021.

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

The Company had no loans to related parties at March 31, 2022 and December 31, 2021.

In addition, the Company did not originate any loans to related parties in 2022 or 2021.

7 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 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:

The following tables summarize the allocation of the allowance for loan losses and loans receivable by loan class and impairment method at March 31, 2022 and December 31, 2021:

At March 31, 2022:

(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 September 30, 2021 and 2020 was as follows:

(In Thousands)

Allowance for loan losses:

Balance - June 30, 2021

Provision (Benefit)

Balance - September 30, 2021

(In Thousands)

Allowance for loan losses:

Balance - June 30, 2020

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:

The activity in the allowance for loan loss by loan class for the three months ended March 31, 2022 and 2021 was as follows:

(In Thousands)

2 unchanged sentences

Provision (Benefit)

Balance - September 30, 2021

Balance - March 31, 2022

(In Thousands)

2 unchanged sentences

Provision (Benefit)

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 Nine months Ended September 30, 2021 and 2020:

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Balance - March 31, 2021

During both the three months ended March 31, 2022 and 2021, the provision expenses recorded for construction loans were primarily attributed to the increased loan balances.

The credit provision recorded during both three-month periods for other loan segments was due to decreased loan balances.

The following table shows our recorded investment, unpaid principal balance and allocated allowance for loan losses for loans that were considered impaired as of and for the periods presented:

As of and for the Three months Ended March 31, 2022 and 2021:

Three Months Ended March 31, 2022

Unpaid Principal

1 unchanged sentence

Interest Income

Average Recorded

Interest Income

(In Thousands)

7 unchanged sentences

Commercial and industrial

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Unpaid Principal

1 unchanged sentence

Interest Income

Average Recorded

Interest Income

(In Thousands)

20 unchanged sentences

Commercial and industrial

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

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 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.

There was no nonaccrual loans as of March 31, 2022 and December 31, 2021.

The Company did no t recognize any interest income on non-accrual loans during the three months ended March 31, 2022 and 2021.

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 September 30, 2021:

Age Analysis of Past Due Loans as of March 31, 2022:

(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 September 30, 2021:

Credit Risk Profile by Internally Assigned Grade as of March 31, 2022:

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

1 unchanged sentence

Total performing

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)

The following is a summary of interest foregone on loans classified as a TDR for the three month periods ended March 31, 2022 and 2021:

Three Months Ended March 31,

(In Thousands)

2 unchanged sentences

Total foregone interest

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.

There were no loans modified that were deemed to be a TDR during the three months ended March 31, 2022 and 2021.

During the three months ended March 31, 2022 and 2021, 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) 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.

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 were eligible for this relief if the related loans were not more than 30 days past due as of December 31, 2020.

As of March 31, 2022, we had no loans 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 September 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 March 31, 2022 and December 31, 2021, 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 $ 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.

REO expense recorded in the consolidated statements of income amounted to $ 31,000 and $ 41,000 for the three months ended March 31, 2022 and 2021, respectively.

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

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

September 30,

FHLB advances are summarized as follows at March 31, 2022 and December 31, 2021:

Weighted Average

6 unchanged sentences

After one to three years

After three to four years

After five years (due 2030)

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

At March 31, 2022, 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 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”).

At March 31, 2022, 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 March 31, 2022, these unpledged qualifying mortgage loans were not pledged to any company other than the FHLB.

At March 31, 2022, the Company had the ability to borrow $ 30.5 million, net of $ 21.0 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 September 30, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars In Thousands)

The following table sets forth information regarding the components of net pension periodic expense measured as of March 31, 2022 and 2021:

Three Months Ended March 31,

(Dollars In Thousands)

2 unchanged sentences

Actuarial loss recognized

Prior service cost recognized

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

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.

Unrecognized net loss of $ 7,000 and $ 8,000 for the three months ended March 31, 2022 and 2021, 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 $ 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.

Expenses of $ 119,000 and $ 95,000 for the three months ended March 31, 2022 and 2021, 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.

At March 31, 2022, 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 nine months ended September 30, 2021 and 2020.

The Company provided no matching contribution during the three and three months ended March 31, 2022 and 2021.

Employee Stock Ownership Plan (“ESOP”)

6 unchanged sentences

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 September 30, 2021 and December 31, 2020.

The balance remaining on the first ESOP loan was $ 1,703,000 at March 31, 2022 and December 31, 2021.

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 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.

Thereafter, on a monthly basis over the terms of the ESOP loans, approximately 2,894 shares for the ESOP loan made in 2006 and approximately 4,348 shares for the ESOP loan made 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 expense totaled approximately $ 258,000 and $ 97,000 for the three months ended March 31, 2022 and 2021, respectively.

Dividends on unallocated shares, which totaled approximately $ 52,000 and $ 5,000 for the three months ended March 31, 2022 and 2021, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 36,000 and $ 12,000 for the three months ended March 31, 2022 and 2021, respectively, are charged to retained earnings.

ESOP shares are summarized as follows:

September 30,

Allocated shares

5 unchanged sentences

Fair value of unearned shares

Note 10 — Leases

12 unchanged sentences

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

September 30,

At March 31, 2022 and December 31, 2021, the quantitative data relating to the Company’s leases are as follows (in thousands):

Finance Lease Amounts:

9 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars In Thousands)

Three Months Ended March 31,

(Dollars In Thousands)

6 unchanged sentences

Operating leases

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

Maturities of lease liabilities at March 31, 2022 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.

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 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:

3 unchanged sentences

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 September 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 March 31, 2022 and December 31, 2021:

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 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

Significant Other

Total Carried

Active Markets for

Identical Assets

Non-Recurring Basis

September 30,

(In Thousands)

Impaired loans

Real estate owned

The following tables present the qualitative information about non-recurring Level 3 fair value measurements of financial instruments at the periods indicated:

At December 31, 2020

(In Thousands)

Impaired loans

Income approach

Capitalization rate

Real estate owned

Income approach

Capitalization rate

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:

There were no transfers between Level 1 and 2 during the three months ended March 31, 2022 or the year ended December 31, 2021.

The Company did no t have any liabilities that were carried at fair value on a recurring basis at March 31, 2022 and December 31, 2021.

The Company did no t have any assets and liabilities that were carried at fair value on a non-recurring basis at March 31, 2022 and December 31, 2021.

The methods and assumptions used to estimate fair value at March 31, 2022 and December 31, 2021 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.

16 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 September 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 March 31, 2022 and December 31, 2021:

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

September 30, 2021

March 31, 2022

(In thousands)

5 unchanged sentences

Securities held to maturity

Loans receivable

Loans receivable, net

Investments in restricted stock

2 unchanged sentences

FHLB of New York advances

Accrued interest payable

Fair Value at

7 unchanged sentences

Securities held to maturity

Loans receivable

Loans receivable, net

Investments in restricted stock

2 unchanged sentences

FHLB of New York advances

Accrued interest payable

Note 12 — Revenue Recognition

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

As of March 31, 2022, 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 nine months ended September 30, 2021 and 2020.

The following table presents the Company’s sources of noninterest income for the three months ended March 31, 2022 and 2021.

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Three Months Ended March 31,

(In Thousands)

3 unchanged sentences

Electronic banking fees and charges

Gain on disposition of equipment (1)

Income from bank owned life insurance (1)

20 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Three Months Ended March 31,

(In Thousands)

27 unchanged sentences

The adoption of this update could have a material impact on the Company’s consolidated results of operations and financial condition.

The extent of the impact is still unknown and will depend on many factors, such as the composition of the Company’s loan portfolio and expected loss history at adoption.

The extent of the impact is still unknown and will depend on many factors, such as the composition of the

Company’s loan portfolio and expected loss history at adoption.

Management has engaged consultants to assess the preparedness of the Company for evaluating and implementing CECL.

ASU 2020-03 - Codification Improvements to Financial Instruments

In March 2020, the FASB issued ASU No.

2020-03, “Codification Improvements to Financial Instruments.” This ASU clarifies various financial instruments topics, including the CECL standard issued in 2016.

Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU 2016-13.

Early adoption is not permitted before an entity’s adoption of ASU 2016-13.

Other amendments are effective upon issuance of this ASU.

See the discussion regarding the adoption of ASU 2016-13 above.

ASU 2020-04 - Reference Rate Reform (Topic 848)

18 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.

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