What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-12 · 200 added, 137 removed, 705 unchanged (32% 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

6 unchanged sentences

75,000,000 shares authorized;

16,377,936 shares issued;

and 16,377,936 shares outstanding

16,214,528 shares and 16,377,936 shares issued and outstanding , respectively

Additional paid-in capital

7 unchanged sentences

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)

13 unchanged sentences

Investment advisory fees

Unrealized (loss) gain on equity securities

Unrealized loss on equity securities

Total Non-Interest Income

9 unchanged sentences

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED

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 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

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

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

See Note 9 for further information.

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

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

See notes to interim unaudited consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Six months Ended June 30, 2022 and 2021

Three and Nine Months Ended September 30, 2022 and 2021

Comprehensive

Shares, net ¹

(In thousands, except share and per share amounts)

4 unchanged sentences

Balance – March 31, 2022

Other comprehensive income (loss)

Other comprehensive income

Cash dividend declared ($ 0.24 per share)

ESOP shares earned

Balance – June 30, 2022

Other comprehensive income

Cash dividend declared ($ 0.06 per share)

Stock Repurchases

Restricted Stock Award

ESOP shares earned

Balance – September 30, 2022

Comprehensive

Shares, net ¹

(In thousands, except share and per share amounts)

4 unchanged sentences

Balance - March 31, 2021

Other comprehensive income

Cash dividend declared ($ 0.24 per share)

Other comprehensive income (loss)

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

¹ Shares 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.

2 unchanged sentences

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 accretion of securities premiums and discounts, net

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

Provision for loan losses

Net amortization of deferred loan fees and costs

Deferred income tax (benefit) expense

Deferred income tax benefit

Unrealized loss recognized on equity securities

Impairment of real estate owned

Earnings on bank owned life insurance

1 unchanged sentence

ESOP compensation expense

(Increase) decrease in accrued interest receivable

Decrease (increase) in other assets

(Decrease) increase in accounts payable - loan closing

Decrease in accounts payable and accrued expenses

Increase in accrued interest receivable

Decrease in other assets

Decrease in accounts payable - loan closing

Increase in accounts payable and accrued expenses

Net Cash Provided by Operating Activities

1 unchanged sentence

Net increase in loans

Proceeds from sale of loan

Proceeds from sale of loans

Principal repayments on securities held-to-maturity

Purchase of marketable equity securities

Purchase of securities held-to-maturity

6 unchanged sentences

Issuance of common stock funded by stock subscriptions

Decrease in advance payments by borrowers for taxes and insurance

Stock repurchases

Increase (decrease) in advance payments by borrowers for taxes and insurance

Cash dividends paid

Net Cash (Used in) Provided by Financing Activities

Net Cash Provided by Financing Activities

Net (Decrease) Increase in Cash and Cash Equivalents

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

66 unchanged sentences

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 June 30, 2022 and December 31, 2021.

The Bank met all capital adequacy requirements to which it was subject as of September 30, 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 June 30, 2022:

As of September 30, 2022:

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, 2022 and December 31, 2021.

The following table is the schedule of equity securities at September 30, 2022 and December 31, 2021.

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

1 unchanged sentence

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 gain or loss recognized in net income on equity securities during the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Six Months Ended June 30,

The following is a summary of unrealized gain or loss recognized in net income on equity securities during the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Net (loss) gain 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 (loss) gain 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 June 30, 2022 and December 31, 2021.

June 30, 2022

The following table summarizes the Company’s portfolio of securities available-for-sale at September 30, 2022 and December 31, 2021.

September 30, 2022

(In Thousands)

5 unchanged sentences

Federal Home Loan Mortgage Corporation

There were no sales of securities available-for-sale as of June 30, 2022 and December 31, 2021.

There were no sales of securities available-for-sale as of September 30, 2022 and December 31, 2021.

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

June 30, 2022

September 30, 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 June 30, 2022 and December 31, 2021, the Company had no unrealized loss.

At September 30, 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 June 30, 2022 and December 31, 2021.

June 30, 2022

The following table summarizes the Company’s portfolio of securities held-to-maturity at September 30, 2022 and December 31, 2021.

September 30, 2022

(In Thousands)

17 unchanged sentences

Contractual final maturities of mortgage-backed securities, municipal bonds, U.S.

Treasury securities were as follows at June 30, 2022:

June 30, 2022

Treasury securities were as follows at September 30, 2022:

September 30, 2022

(In Thousands)

9 unchanged sentences

(In Thousands)

June 30, 2022:

September 30, 2022:

Mortgage-backed securities - residential:

16 unchanged sentences

Total mortgage-backed securities

At June 30, 2022, twelve mortgage-backed securities, five municipal bonds and two U.S.

At September 30, 2022, thirty five mortgage-backed securities, five municipal bonds and two U.S.

Treasury notes had unrealized loss due to interest rate volatility.

13 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, 2022 and December 31, 2021:

The composition of loans were as follows at September 30, 2022 and December 31, 2021:

September 30,

(In Thousands)

4 unchanged sentences

Commercial and industrial

Allowance for loan losses

Deferred loan costs, net

Loans serviced for the benefit of others totaled approximately $ 14,368,000 and $ 14,610,000 at June 30, 2022 and December 31, 2021, respectively.

The value of mortgage servicing rights was not material at June 30, 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 June 30, 2022 and December 31, 2021.

Allowance for loan losses

Loans serviced for the benefit of others totaled approximately $ 16,585,000 and $ 14,610,000 at September 30, 2022 and December 31, 2021, respectively.

The value of mortgage servicing rights was not material at September 30, 2022 and December 31, 2021.

The Company did not originate 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, 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 June 30, 2022 and December 31, 2021:

At June 30, 2022:

The following tables summarize the allocation of the allowance for loan losses and loans receivable by loan class and impairment method at September 30, 2022 and December 31, 2021:

At September 30, 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 June 30, 2022 and 2021 was as follows:

The activity in the allowance for loan loss by loan class for the three months ended September 30, 2022 and 2021 was as follows:

(In Thousands)

Allowance for loan losses:

Balance - March 31, 2022

Provision (Benefit)

Balance - June 30, 2022

Provision (Benefit)

Balance -September 30, 2022

(In Thousands)

Allowance for loan losses:

Balance - March 31, 2021

Provision (Benefit)

Balance - June 30, 2021

The activity in the allowance for loan loss by loan class for the six months ended June 30, 2022 and 2021 was as follows:

Provision (Benefit)

Balance - September 30, 2021

The activity in the allowance for loan loss by loan class for the nine months ended September 30, 2022 and 2021 was as follows:

(In Thousands)

2 unchanged sentences

Provision (Benefit)

Balance - June 30, 2022

Balance - September 30, 2022

(In Thousands)

2 unchanged sentences

Provision (Benefit)

Balance - June 30, 2021

During the three months ended June 30, 2022, the provision expenses recorded for construction loans were primarily attributed to the increased loan balances.

The credit provision recorded for residential loans was due to loan recoveries during the three-month period.

The credit provision recorded for non-residential loans and commercial and industrial loans was due to decreased loan balances.

During the three months ended June 30, 2021, the provision expenses recorded for construction loans were primarily attributed to the increased loan balances.

The credit provision recorded for other loan segments was primarily due to decreased loan balances.

During the six months ended June 30, 2022, the provision expenses recorded for construction loans were attributed to the increased loan balances.

The credit provition recorded for residential loans was primarily due to loan recoveries during the six-month period.

The credit provision recorded for non-residential loans was attributed to loan recoveries and

decreased loan balances.

The credit provision recorded for commercial and industrial loans was primarily due to decreased loan balances.

During the six months ended June 30, 2021, the provision expenses recorded for construction loans were primarily attributed to the increased loan balances.

The credit provision recorded for other loan segments was primarily due to decreased loan balances.

Balance - September 30, 2021

During the three months ended September 30, 2022, the provision expenses recorded for construction loans and commercial and industrial loans were primarily attributed to the increased loan balances.

The credit provision recorded for residential loans was due to reduced credit risk assessed during the three-month period.

The credit provision recorded for non-residential loans was due to decreased loan balances.

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

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 nine months ended September 30, 2022, the provision expenses recorded for construction loans were attributed to the increased loan balances.

The credit provision recorded for residential loans was primarily due to loan recoveries and reduced credit risk during the nine-month period.

The credit provision recorded for non-residential loans

was attributed to loan recoveries and decreased loan balances.

The credit provision recorded for commercial and industrial loans was primarily due to decreased loan balances during the nine-month period.

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 nonresidential 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 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 and Six months Ended June 30, 2022 and 2021:

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

As of and for the Three and Nine months Ended September 30, 2022 and 2021:

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

Unpaid Principal

12 unchanged sentences

Commercial and industrial

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Unpaid Principal

25 unchanged sentences

Commercial and industrial

There were two non-accrual loans totaling $ 769,000 as of June 30, 2022.

The two non-accrual loans are non-residential loans from one borrower and are secured by the same property that is in foreclosure due to a maturity default at June 30, 2022.

The Company did no t recognize any interest income on non-accrual loans during the six months ended June 30, 2022 and 2021.

Interest income that would have been recorded had the loans been on accrual status would have amounted to approximately $ 7,000 for the three and six months ended June 30, 2022.

There were no non-accrual loans at September 30, 2022.

The Company did no t recognize any interest income on non-accrual loans during the nine months ended September 30, 2022 and 2021.

During the three months ended September 30, 2022, the Company collected $ 23,000 interest income from a non-accrual loan that was satisfied in July 2022.

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

1 unchanged sentence

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, 2022:

Age Analysis of Past Due Loans as of September 30, 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 June 30, 2022:

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

2 unchanged sentences

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, 2022 and 2021:

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, 2022 and 2021:

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, 2022 and 2021.

During the three and six months ended June 30, 2022, two TDR loans were placed on non-accrual status due to maturity default.

During the three and six months ended June 30, 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 were 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, 2022, we had no loans in deferral status under the CARES Act.

There were no loans modified that were deemed to be a TDR during the nine months ended September 30, 2022 and 2021.

During the three and nine months ended September 30, 2022 and 2021, none of the loans that were modified during the previous twelve months had defaulted.

Note 7 — Real Estate Owned (“REO”)

The Company owned one foreclosed property valued at approximately $ 1,996,000 at June 30, 2022 and December 31, 2021, consisting of an office building located in Pennsylvania.

The Company owned one foreclosed property valued at approximately $ 1,807,000 at September 30, 2022 and $ 1,996,000 at 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 $ 21,000 and $ 26,000 for the three months, and $ 52,000 and $ 68,000 for the six months ended June 30, 2022 and 2021, respectively.

REO expense recorded in the consolidated statements of income amounted to $ 200,000 and $ 17,000 for the three months, and $ 252,000 and $ 85,000 for the nine months ended September 30, 2022 and 2021, respectively.

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

FHLB advances are summarized as follows at June 30, 2022 and December 31, 2021:

FHLB advances are summarized as follows at September 30, 2022 and December 31, 2021:

September 30,

Weighted Average

7 unchanged sentences

After five years (due 2030)

At June 30, 2022, none of the above advances were subject to early call or redemption features.

At September 30, 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 June 30, 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 June 30, 2022, these unpledged qualifying mortgage loans were not pledged to any company other than the FHLB.

At June 30, 2022, the Company had the ability to borrow $ 24.1 million, net of $ 21.0 million in outstanding advances, from the FHLB and $ 8.0 million from Atlantic Community Bankers Bank (“ACBB”).

At September 30, 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 September 30, 2022, these unpledged qualifying mortgage loans were not pledged to any company other than the FHLB.

At September 30, 2022, the Company had the ability to borrow $ 18.1 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 June 30, 2022 and 2021:

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, 2022 and 2021:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars In Thousands)

4 unchanged sentences

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

Unrecognized net loss of $ 7,000 and $ 8,000 for the three months, and $ 14,000 and $ 16,000 for the six months ended June 30, 2022 and 2021, respectively, were included in accumulated other comprehensive income.

Unrecognized net loss of $ 23,000 and unrealized net gain of $ 14,000 for the three months, and unrecognized net loss of $ 63,000 and unrecognized net gain of $ 35,000 for the nine months ended September 30, 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 $ 121,000 and $ 132,000 for the three months, and $ 240,000 and $ 227,000 for the six months ended June 30, 2022 and 2021, respectively, were recorded for this plan and are reflected in the Consolidated Statements of Income under Salaries and Employee Benefits.

Expenses of $ 121,000 and $ 132,000 for the three months, and $ 361,000 and $ 359,000 for the nine months ended September 30, 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 June 30, 2022, the Company did not have any obligations under the plan.

At September 30, 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 % or 60 % 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, 2022 and 2021.

The Company provided no matching contribution during the three and nine months ended September 30, 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 $ 1,703,000 at June 30, 2022 and December 31, 2021.

The balance remaining on the second ESOP loan was $ 7,270,000 at June 30, 2022 and December 31, 2021.

The balance remaining on the first ESOP loan was $ 1,703,000 at September 30, 2022 and December 31, 2021.

The balance remaining on the second ESOP loan was $ 7,270,000 at September 30, 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.

4 unchanged sentences

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 $ 246,000 and $ 106,000 for the three months, and $ 504,000 and $ 203,000 for the six months ended June 30, 2022 and 2021, respectively.

Dividends on unallocated shares, which totaled approximately $ 209,000 and $ 4,000 for the three months, and $ 261,000 and $ 9,000 for the six months ended June 30, 2022 and 2021, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 146,000 and $ 11,000 for the three months, and $ 182,000 and $ 23,000 for the six months ended June 30, 2022 and 2021, respectively, are charged to retained earnings.

ESOP expense totaled approximately $ 271,000 and $ 491,000 for the three months, and $ 775,000 and $ 694,000 for the nine months ended September 30, 2022 and 2021, respectively.

Dividends on unallocated shares, which totaled approximately $ 52,000 and $ 57,000 for the three months, and $ 313,000 and $ 61,000 for the nine months ended September 30, 2022 and 2021, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 36,000 and $ 31,000 for the three months, and $ 219,000 and $ 43,000 for the nine months ended September 30, 2022 and 2021, respectively, are charged to retained earnings.

ESOP shares are summarized as follows:

September 30,

Allocated shares

19 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 June 30, 2022 and December 31, 2021, the quantitative data relating to the Company’s leases are as follows (in thousands):

At September 30, 2022 and December 31, 2021, 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, 2022 are as follows (in thousands):

Maturities of lease liabilities at September 30, 2022 are as follows (in thousands):

Years ended December 31:

12 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 June 30, 2022 and December 31, 2021:

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, 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 three and six months ended June 30, 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 June 30, 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 June 30, 2022 and December 31, 2021.

The methods and assumptions used to estimate fair value at June 30, 2022 and December 31, 2021 are as follows:

There were no transfers between Level 1 and 2 during the three and nine months ended September 30, 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 September 30, 2022 and December 31, 2021.

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, 2022 and December 31:

Quoted Prices in

Significant Other

Total Carried

Active Markets for

Identical Assets

Non-Recurring Basis

September 30,

(In Thousands)

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 September 30, 2022

(In Thousands)

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, 2022 and December 31, 2021.

The methods and assumptions used to estimate fair value at September 30, 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 June 30, 2022 and December 31, 2021:

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 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

June 30, 2022

September 30, 2022

(In thousands)

29 unchanged sentences

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).

A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer.

liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer.

The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as referral fees based month end reports.

1 unchanged sentence

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, 2022, the Company did not have any significant contract balances.

As of September 30, 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 six months ended June 30, 2022 and 2021.

The following table presents the Company’s sources of noninterest income for the three and nine months ended September 30, 2022 and 2021.

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)

7 unchanged sentences

Investment advisory fees

Unrealized (loss) gain on equity securities (1)

Unrealized loss on equity securities (1)

Miscellaneous (1)

5 unchanged sentences

Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed at the point in the time the Company fulfills the customer’s request.

The Company discontinued the imposition of overdraft fees on all consumer and business accounts in August 2022.

Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation.

6 unchanged sentences

The Company earns fees from investment advisory and financial planning services under the name of Harbor West Financial Planning Wealth Management, a division of the Company through a networking arrangement with a registered broker-dealer and investment advisor.

The registered broker-dealer deducts investment advisory fees and financial planning services fees from the client’s assets under management and remits the fees, net of administrative fees, to the Company on a monthly basis.

The registered broker-dealer deducts investment advisory fees and financial

planning services fees from the client’s assets under management and remits the fees, net of administrative fees, to the Company on a monthly basis.

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

1 unchanged sentence

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

26 unchanged sentences

Early adoption is permitted for all entities as of the fiscal year beginning after December 15, 2018, including interim periods within those fiscal years.

The Company has begun collecting and evaluating data and system requirements to implement this standard.

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.

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

The Company is actively working on preliminary test calculations, and data validation, as well as process and procedural documentation.

Management is in the process of evaluating the impact adoption of ASU 2016-13 will have on the Company’s Consolidated Financial Statements.

This process has engaged multiple areas of the Company in evaluating loss estimation methods and application of these methods to specific segments of the loan portfolio.

Management has been actively monitoring FASB developments and evaluating the use of different methods allowed.

Due to continuing development of our methodology, additional time is required to quantify the effect this ASU will have on the Company’s Consolidated Financial Statements.

Management plans on running parallel calculations and finalizing a method or methods of adoption in time for the effective date.

The Company will utilize a lifetime loss rate calculation for all its loan portfolio, as well as supplement the loss estimate by including reasonable and supportable forecasts of macroeconomic conditions.

The Company began to perform parallel runs of the new model in comparison to its current ALLL model during the third quarter of 2022 and continues to evaluate the results and assumptions.

Implementation efforts are continuing to focus on model validation, model calibration, qualitative factors, finalizing procedures and other governance, and control documentation.

The Company will adopt this new guidance on January 1, 2023, and is currently evaluating the impact of this new guidance on its consolidated financial statements.

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.

Note 15 — Stock Compensation Plans

At a special shareholders meeting held on September 29, 2022, our shareholders approved the Company’s 2022 Equity Incentive Plan whereby 1,369,771 shares of the Company’s common stock have been reserved from authorized but unissued shares for purposes of grants of incentive stock options, nonqualified stock options, restricted stock,

restricted stock units, performance shares and performance units to selected employees and non-employee directors of the Company.

At September 30, 2022, 86,880 shares of restricted stock and 217,206 nonqualified stock options in the aggregate were awarded to six non-employee directors of the Company as set forth in the 2022 Equity Incentive Plan.

The fair value of restricted stock is determined by the product of the number of shares granted and the final market price of the Company’s common stock at the grant date.

The fair value of the share-based payments for the nonqualified stock options is estimated using the Black-Scholes option-pricing model.

The aggregate fair value of the restricted stock and nonqualified stock options totaled $ 1.1 million and $ 843,000 , respectively, at the date of the grants to our non-employee directors on September 30, 2022.

The assumptions used to estimate the fair value of the nonqualified stock options includes 7.5 expected life, 3.97 % risk free interest rate, 1.94 % projected dividend yield, and 28.94 % volatility rate.

The restricted stock and nonqualified stock options granted to the non-employee directors vest at a rate of 20 % per year from the date of the grant.

The Company recognizes compensation costs for the fair value of the restricted stock and stock options on a straight-line basis over the requisite service period of five years .

During the three and nine months ended at September 30, 2022, there were no compensation costs recognized.

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