What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-10 compared with 2022-08-12 · 144 added, 148 removed, 243 unchanged (55% of the section changed)

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COVID-19 Pandemic

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID- 19”) originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin.

In March 2020 and based on the rapid increase in exposure globally, WHO classified COVID-19 as a global pandemic indicating that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections.

The outbreak of COVID- 19 has adversely impacted a broad range of industries in which customers of the Company operate and impair their ability to fulfill their financial obligations to the Company.

In addition, the spread of COVID- 19 has caused significant disruptions in the U.S.

economy and in banking and other financial activities in the areas in which the Company operates.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions and the ability of borrowers to repay their obligations to us on a timely basis or if at all.

If the global response to contain COVID-19 is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, results of operations, and cash flows.

Although the full magnitude of the pandemic is uncertain, management is actively monitoring the impact of the global situation on the banking industry and the Company’s financial condition, liquidity, future results of operations, and workforce.

Given the daily evolution of COVID-19 and the global responses to curb the spread of COVID-19, the

Company is currently unable to estimate and quantify the effects of this crisis on the Company’s results of operations, financial condition, or liquidity for 2022.

Nevertheless, the adverse economic effects of COVID- 19 might lead to an increase in credit risk on the Company’s construction loan, commercial and industrial loan, and multi-family, mixed-use, and non-residential real estate loan portfolios.

Likewise, the Company is also monitoring the fluctuations in the markets as it pertains to interest rates and the impact on deposits and fair value of our securities portfolio for other than temporary impairment.

To curtail the spread of COVID- 19, the Company temporarily closed one branch due to its location in an enclosed shopping mall and the lobby, except by appointment only, of the other eight branches.

Currently, all our eleven branches have resumed normal operations in servicing our customers.

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief and Economic Security (“CARES”) Act in response to the COVID- 19 pandemic.

This legislation aims at providing relief for individuals and businesses that have been negatively impacted by the COVID-19 pandemic.

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, 2021.

On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 was signed into law, which also contains provisions that could directly impact financial institutions, including extending the time that insured depository institutions and depository institution holding companies have to comply with the current expected credit losses (“CECL”) accounting standard and extending the authority granted to banks under the CARES Act to elect to temporarily suspend the requirements under U.S.

GAAP applicable to troubled debt restructurings for loan modifications related to the COVID-19 pandemic for any loan that was not more than 30 days past due as of December 31, 2021.

The act directs financial regulators to support community development financial institutions and minority depository institutions and directs Congress to re-appropriate $429 billion in unobligated CARES Act funds.

The Payroll Protection Program (PPP), which was originally established under the CARES Act, was also extended under the Coronavirus Response and Relief Supplemental Appropriations Act of 2021.

Due to the impact of COVID-19 on our borrowers, we granted eligible loan modifications under the CARES Act in the form of payment deferral of principal and interest to 196 loans totaling $190.9 million at the time payment deferral was requested.

As of June 30, 2022, we had no loans in deferral status.

As of September 30, 2022, we had no loans in deferral status.

The granting of the payment deferrals had no significant impact on our evaluation of the allowance for loan losses.

We did not grant any PPP loans pursuant to the CARES Act or the Coronavirus Response and Relief Supplemental Appropriations Act of 2021.

While the Company considers these disruptions to be temporary, if the disruptions continue, this might have an adverse effect on the Company’s results of operations, financial position, and liquidity in 2022.

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

Critical Accounting Policies

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To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, we have a structured loan rating process which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans.

Such system takes into consideration, among other things, delinquency status, size of loans, type of collateral and financial condition of the borrowers.

Such system takes into

consideration, among other things, delinquency status, size of loans, type of collateral and financial condition of the borrowers.

Loans whose terms are modified are classified as troubled debt restructurings if we grant such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty.

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This standard requires earlier recognition of expected credit losses on loans and certain other instruments, compared to the incurred loss model.

Based on management’s comprehensive analysis of the loan portfolio, management believes the allowance for loan losses is appropriate as of June 30, 2022.

Based on management’s comprehensive analysis of the loan portfolio, management believes the allowance for loan losses is appropriate as of September 30, 2022.

Balance Sheet Analysis

Total assets decreased by $3.5 million, or 0.3%, to $1.2 billion at June 30, 2022, from $1.2 billion at December 31, 2021.

The decrease in assets was primarily due to decreases in cash and cash equivalents of $66.0 million and equity securities of $1.1 million, partially offset by increases in net loans of $50.6 million, securities held-to-maturity of $9.3 million, and premises and equipment of $2.3 million.

Cash and cash equivalents decreased by $66.0 million, or 43.4%, to $86.2 million at June 30, 2022 from $152.3 million at December 31, 2021.

The decrease in cash and cash equivalents was a result of cash being deployed to fund an increase in net loans of $50.6 million, an increase in securities held-to-maturiy of $9.3 million, an increase in property and equipment of $2.3 million due primarily to the purchase of property and equipment for a new branch office, and a reduction in FHLB advances of $7.0 million.

Equity securities decreased by $1.1 million, or 5.3%, to $18.9 million at June 30, 2022 from $19.9 million at December 31, 2021.

The decrease in equity securities was primarily attributable to market depreciation of $1.1 million as market interest rates increased during the six months ended June 30, 2022.

Securities held-to-maturity increased by $9.3 million, or 52.1%, to $27.2 million at June 30, 2022 from $17.9 million at December 31, 2021 due primarily to the purchases of securities, partially offset by maturities and pay-downs.

Loans, net of the allowance for loan losses, increased by $50.6 million, or 5.2%, to $1.0 billion at June 30, 2022 from $968.1 million at December 31, 2021.

The increase in loans, net of the allowance for loan losses, was primarily due to loan originations of $307.4 million during the six months ended June 30, 2022, consisting primarily of $266.3 million in construction loans with respect to which approximately 32.1% of the funds were disbursed at loan closings, with the remaining funds to be disbursed over the terms of the construction loans.

Loan originations increased by $97.0 million due to increased originations of construction loans.

The increase in our loan portfolio was partially offset by decreases in non-residential loans of $23.4 million, commercial and industrial loans of $15.8 million, mixed-use loans of $5.2 million, residential loans of $1.4 million, and multi-family loans of $560,000, coupled with normal pay-downs and principal reductions.

Premises and equipment increased by $2.3 million, or 9.7, to $26.2 million at June 30, 2022 from $23.9 million at December 31, 2021 due to the acquisition of property and equipment for a new branch site located in Bloomingburg, New York.

Investments in restricted stock decreased by $331,000, or 21.1%, to $1.2 million at June 30, 2022 from $1.6 million at December 31, 2021 due to a reduction in mandatory Federal Home Loan Bank stock in connection with the maturity/pay-off of $7.0 million in advances during the quarter ended June 30, 2022.

Accrued interest receivable increased by $949,000, or 22.2%, to $5.2 million at June 30, 2022 from $4.3 million at December 31, 2021 due to an increase in the loan portfolio.

Foreclosed real estate was $2.0 million at June 30, 2022 and December 31, 2021.

Right of use assets — operating decreased by $268,000, or 10.5%, to $2.3 million at June 30, 2022 from $2.6 million at December 31, 2021, primarily due to amortization.

Other assets increased by $793,000, or 16.9%, to $5.5 million at June 30, 2022 from $4.7 million at December 31, 2021 due to increases in suspense accounts of $406,000, tax assets of $326,000, and prepaid expenses of $84,000.

Total deposits increased by $1.4 million, or 0.2%, to $928.6 million at June 30, 2022 from $927.2 million at December 31, 2021.

The increase was primarily due to an increase in non-interest bearing demand deposits of $31.6 million, or 9.6%, and an increase in savings account balances of $24.5 million, or 13.3%.

These increases were partially offset by a decrease in certificates of deposit of $48.7 million, or 16.6%, and a decrease in NOW/money market accounts of $6.1 million, or 5.1%, from December 31, 2021 to June 30, 2022.

Federal Home Loan Bank advances decreased by $7.0 million, or 25.0%, to $21.0 million at June 30, 2022 from $28.0 million at December 31, 2021.

Advance payments by borrowers for taxes and insurance decreased by $147,000, or 7.8%, to $1.7 million at June 30, 2022 from $1.9 million at December 31, 2021 due primarily to payment of taxes for borrowers, partially offset by the accumulation of tax payments from borrowers.

Lease liability – operating decreased by $260,000, or 10.0%, to $2.3 million at June 30, 2022 from $2.6 million at December 31, 2021, primarily due to amortization.

Accounts payable and accrued expenses decreased by $2.5 million, or 18.1%, to $11.1 million at June 30, 2022 from $13.5 million at December 31, 2021 due primarily to a decrease in suspense accounts for loan closings of $1.6 million and a decrease in accrued expenses of $1.2 million.

Stockholders’ equity increased by $4.9 million, or 2.0% to $256.3 million at June 30, 2022, from $251.4 million at December 31, 2021.

The increase in stockholders’ equity was due to net income of $9.0 million for the six months ended June 30, 2022, a reduction of $504,000 in unearned employee stock ownership plan shares, and $41,000 in other comprehensive income, partially offset by dividends paid and declared of $4.7 million.

Results of Operations for the Three Months Ended June 30, 2022 and 2021

Total assets increased by $59.8 million, or 4.9%, to $1.3 billion at September 30, 2022, from $1.2 billion at December 31, 2021.

The increase in assets was primarily due to increases in net loans of $144.4 million, securities held-to-maturity of $8.9 million, premises and equipment of $2.4 million, and accrued interest receivable of $2.4 million, partially offset by decreases in cash and cash equivalents of $97.3 million and equity securities of $1.6 million.

Cash and cash equivalents decreased by $97.3 million, or 63.9%, to $54.9 million at September 30, 2022 from $152.3 million at December 31, 2021.

The decrease in cash and cash equivalents was a result of cash being deployed to fund an increase in net loans of $144.4 million, an increase in securities held-to-maturity of $8.9 million, an increase in property and equipment of $2.4 million due primarily to the purchase of property and equipment for a new branch office, and a reduction in FHLB advances of $7.0 million.

Equity securities decreased by $1.6 million, or 8.2%, to $18.3 million at September 30, 2022 from $19.9 million at December 31, 2021.

The decrease in equity securities was attributable to market depreciation of $1.6 million as market interest rates increased during the nine months ended September 30, 2022.

Securities held-to-maturity increased by $8.9 million, or 49.5%, to $26.7 million at September 30, 2022 from $17.9 million at December 31, 2021 due primarily to the purchases of securities, partially offset by maturities and pay-downs.

Loans, net of the allowance for loan losses, increased by $144.4 million, or 14.9%, to $1.1 billion at September 30, 2022 from $968.1 million at December 31, 2021.

The increase in loans, net of the allowance for loan losses, was primarily due to loan originations of $499.2 million during the nine months ended September 30, 2022, consisting primarily of $425.1 million in construction loans with respect to which approximately 45.6% of the funds were disbursed at loan closings, with the remaining funds to be disbursed over the terms of the construction loans.

Loan originations resulted in a net increase of $178.6 million in construction loans, $4,0 million in multi-family loans, and $754,000 in consumer loans.

The increase in our loan portfolio was partially offset by decreases in non-residential loans of $23.4 million, commercial and industrial loans of $7.0 million, mixed-use loans of $5.9 million, and residential loans of $1.5 million, coupled with normal pay-downs and principal reductions.

Premises and equipment increased by $2.4 million, or 10.2, to $26.3 million at September 30, 2022 from $23.9 million at December 31, 2021 due to the acquisition of property and equipment for a new branch site located in Bloomingburg, New York.

Investments in restricted stock decreased by $331,000, or 21.1%, to $1.2 million at September 30, 2022 from $1.6 million at December 31, 2021 due to a reduction in mandatory Federal Home Loan Bank stock in connection with the maturity/pay-off of $7.0 million in advances during the quarter ended March 31, 2022.

Accrued interest receivable increased by $2.4 million, or 54.9%, to $6.6 million at September 30, 2022 from $4.3 million at December 31, 2021 due to an increase in the loan portfolio and five interest rate increases in 2022 that caused an increase in the interest rates in our construction loan portfolio.

Foreclosed real estate decreased by $189,000, or 9.5%, to $1.8 million at September 30, 2022 from $2.0 million at December 31, 2021 due to a write down on the fair market value of the property because the increase in interest rates caused an increase in the capitalization rate thereby resulting in a reduction in the calculated fair market value of the property.

Right of use assets — operating decreased by $403,000, or 15.7%, to $2.2 million at September 30, 2022 from $2.6 million at December 31, 2021, primarily due to amortization.

Other assets increased by $1.3 million, or 26.7%, to $5.9 million at September 30, 2022 from $4.7 million at December 31, 2021 due to increases in tax assets of $765,000 and suspense accounts of $544,000, partially offset by decreases in prepaid expenses of $32,000 securities principal receivable of $19,000.

Total deposits increased by $60.5 million, or 6.5%, to $987.6 million at September 30, 2022 from $927.2 million at December 31, 2021.

The increase was primarily due to an increase in savings account balances of $71.2 million, or 38.5% and an increase in non-interest bearing demand deposits of $23.5 million, or 7.1%.

These increases were partially offset by a decrease in NOW/money market accounts of $21.0 million, or 17.8%, and a decrease in certificates of deposit of $13.2 million, or 4.5%, and from December 31, 2021 to September 30, 2022.

Federal Home Loan Bank advances decreased by $7.0 million, or 25.0%, to $21.0 million at September 30, 2022 from $28.0 million at December 31, 2021.

Advance payments by borrowers for taxes and insurance increased by $413,000, or 21.9%, to $2.3 million at September 30, 2022 from $1.9 million at December 31, 2021 due primarily to the accumulation of tax payments from borrowers.

Lease liability – operating decreased by $394,000, or 15.1%, to $2.2 million at September 30, 2022 from $2.6 million at December 31, 2021, primarily due to amortization.

Accounts payable and accrued expenses decreased by $2.4 million, or 17.2%, to $11.2 million at September 30, 2022 from $13.5 million at December 31, 2021 due primarily to a decrease in suspense accounts for loan closings of $2.5 million.

Stockholders’ equity increased by $8.7 million, or 3.4% to $260.0 million at September 30, 2022, from $251.4 million at December 31, 2021.

The increase in stockholders’ equity was due to net income of $16.6 million for the nine months ended September 30, 2022, a reduction of $652,000 in unearned employee stock ownership plan shares coupled with an increase of $124,000 in earned employee stock ownership plan shares, and $64,000 in other comprehensive income, partially offset by dividends paid and declared of $5.6 million and stock repurchases totaling $3.2 million.

Results of Operations for the Three Months Ended September 30, 2022 and 2021

Financial Highlights

Net income for the three months ended June 30, 2022 was $5.4 million compared to net income of $3.7 million for the three months ended June 30, 2021.

Net income for the three months ended June 30, 2022 increased from net income for the three months ended June 30, 2021 primarily due to an increase in net interest income, partially offset by a decrease in non-interest income, an increase in non-interest expense, and an increase in income tax expense.

Net income for the three months ended September 30, 2022 was $7.5 million compared to net income of $730,000 for the three months ended September 30, 2021.

Net income for the three months ended September 30, 2022 increased from net income for the three months ended September 30, 2021 primarily due to an increase in net interest income and a decrease in the provision for loan losses, partially offset by a decrease in non-interest income, an increase in non-interest expense, and an increase in income tax expense.

The decrease in the provision for loan losses was because the Company recorded $3.6 million in provision for loan losses during the three months ended September 30, 2021 due to the previously disclosed charge-off of a non-residential bridge loan with a balance of $3.6 million compared to no provision for loan losses during the three months ended September 30, 2022.

Net Interest Income

Net interest income totaled $13.5 million for the three months ended June 30, 2022, as compared to $10.4 million for the three months ended June 30, 2021.

The increase in net interest income of $3.2 million, or 30.5%, was primarily due to an increase in interest income combined with a decrease in interest expense.

The increase in interest income is attributable to increases in loans, investment securities, equity securities, and interest-bearing deposits as we continued to deploy the proceeds raised in our July 2021 second-step conversion.

The increase in interest income is also attributed to an increase in interest rates during the three months ended June 30, 2022.

The decrease in interest expense is attributable to a decrease in the balances and cost of funds on our certificates of deposits and our borrowed money, partially offset by increases in the balances and cost of funds in our interest-bearing demand deposits and our savings and club accounts.

In this regard, total interest income increased by $3.2 million, or 27.1%, to $14.8 million for the thre months ended June 30, 2022 from $11.7 million for the three months ended June 30, 2021 due to an increase in the average balance of interest earning assets of $257.0 million, or 27.8%, to $1.2 billion for the three months ended June 30, 2022 from $924.9 million for the three months ended June 30, 2021, partially offset by a decrease in the yield on interest earning assets by 3 basis points from 5.05% for the three months ended June 30, 2021 to 5.02% for the three months ended June 30, 2022.

Interest expense decreased by $2,000, or 0.2%, to $1.3 million for the three months ended June 30, 2022 from $1.3 million for the three months ended June 30, 2021 due to a decrease in the cost of interest bearing liabilities by 7 basis

points from 0.91% for the three months ended June 30, 2021 to 0.84% for the three months ended June 30, 2022, partially offset by an increase in average interest bearing liabilities of $45.4 million, or 8.0%, to $613.6 million for the three months ended June 30, 2022 from $568.3 million for the three months ended June 30, 2021.

Net interest margin increased by 9 basis points, or 2.1%, during the three months ended June 30, 2022 to 4.58% compared to 4.49% during the three months ended June 30, 2021.

Net interest income totaled $17.5 million for the three months ended September 30, 2022, as compared to $10.9 million for the three months ended September 30, 2021.

The increase in net interest income of $6.6 million, or 60.0%, was primarily due to an increase in interest income offset by an increase in interest expense.

The increase in interest income is attributable to increases in loans and investment securities, offset by a decrease in interest-bearing deposits.

The increase in interest income is also attributed to a rising interest rate environment and the Federal Reserve’s interest rate increases during the nine months ended September 30, 2022.

In this regard, total interest income increased by $7.3 million, or 60.3%, to $19.4 million for the three months ended September 30, 2022 from $12.1 million for the three months ended September 30, 2021.

The increase was due to an increase in the average balance of interest earning assets of $163.8 million, or 16.0%, to $1.2 billion for the three months ended September 30, 2022 from $1.0 billion for the three months ended September 30, 2021 and an increase in the yield on interest earning assets by 180 basis points from 4.72% for the three months ended September 30, 2021 to 6.52% for the three months ended September 30, 2022.

The increase in market interest rates during the twelve months subsequent to September 30, 2021 also caused an increase in our interest expense.

As a result, the increase in interest expense for the three months ended September 30, 2022 was due to an increase in the cost of funds on our deposits and an increase in the balances on our savings and club balances, partially offset by decreases in the balances on our certificates of deposits and interest-bearing demand deposits and decreases in the cost of funds and balances on our borrowed money.

Interest expense increased by $742,000, or 62.8%, to $1.9 million for the three months ended September 30, 2022 from $1.2 million for the three months ended September 30, 2021.

The increase was due to an increase in the cost of interest bearing liabilities by 37 basis points from 0.86% for the three months ended September 30, 2021 to 1.23% for the three months ended September 30, 2022 and an increase in average interest bearing liabilities of $76.0 million, or 13.9%, to $624.0 million for the three months ended September 30, 2022 from $547.9 million for the three months ended September 30, 2021.

Net interest margin increased by 162 basis points, or 38.0%, during the three months ended September 30, 2022 to 5.88% compared to 4.26% during the three months ended September 30, 2021.

Provision for Loan Losses.

The Company recorded no loan loss provision for the three months ended June 30, 2022 and June 30, 2021.

We charged-off $7,000 and $9,000 during the three months ended June 30, 2022 and June 30, 2021, respectively, against various unpaid overdrafts in our demand deposit accounts.

We recorded recoveries of $146,000 and $1,000 during the three months ended June 30, 2022 and June 30, 2021, respectively.

The recovery of $146,000 during the three months ended June 30, 2022 was due to a recovery on a previously charged-off multi-family property.

Based on a review of the loans that were in the loan portfolio at June 30, 2022, management believes that the allowance is maintained at a level that represents its best estimate of inherent losses in the loan portfolio that were both probable and reasonably estimable.

The Company recorded no loan loss provision for the three months ended September 30, 2022 compared to a loan loss provision of $3.6 million for the three months ended September 30, 2021.

We charged-off $6,000 during the three months ended September 30, 2022 against various unpaid overdrafts in our demand deposit accounts compared to charge-offs of $3.6 million during the three months ended September 30, 2021 related to a non-residential bridge loan.

The provision recorded for the three months ended September 30, 2021 was primarily attributed to the previously disclosed charge-off of $3.6 million during the three months ended September 30, 2021 with respect to 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 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.

Although the loan was fully charged-off, the loan remains in foreclosure and management and the borrower are negotiating a standstill agreement which will allow the borrowers to retain, at their own expense, the zoning and planning consultants necessary to obtain re-approvals from the town to proceed with the original planned residential condominium development.

Should the standstill agreement not materialize, the Company intends to aggressively seek recovery of all amounts due from the personal guarantors of the loan.

If 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 the recovery into income.

We also charged-off $3,000 during the three months ended September 30, 2021 against various unpaid overdrafts in our demand deposit accounts.

We recorded no recoveries during the three months ended September 30, 2022 compared to recoveries of $151,000 during the three months ended September 30, 2021.

Based on a review of the loans that were in the loan portfolio at September 30, 2022, management believes that the allowance is maintained at a level that represents its best estimate of inherent losses in the loan portfolio that were both probable and reasonably estimable.

Management uses available information to establish the appropriate level of the allowance for loan losses.

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Non-Interest Income

Non-interest income for the three months ended June 30, 2022 was $536,000 compared to non-interest income of $778,000 for the three months ended June 30, 2021.

The decrease in total non-interest income was primarily due to an unrealized loss of $430,000 on equity securities during the three months ended June 30, 2022 compared to an unrealized loss of $93,000 on equity securities during the three months ended June 30, 2021.

The unrealized loss of $430,000 on equity securities was primarily due to a rising interest rate environment due to the Federal Reserve’s interest rate increase, which impacted the value of the equity securities during the June 30, 2022 quarter.

Non-interest income for the three months ended September 30, 2022 was $309,000 compared to non-interest income of $532,000 for the three months ended September 30, 2021.

The decrease in total non-interest income was primarily due to an unrealized loss of $573,000 on equity securities during the three months ended September 30, 2022 compared to an unrealized loss of $154,000 on equity securities during the three months ended September 30, 2021.

The unrealized loss of $573,000 on equity securities during the 2022 period was due to a rising interest rate environment and the Federal Reserve’s interest rate increases, which impacted the value of the equity securities during the September 30, 2022 quarter.

The decrease in total non-interest income was partially offset by an increase of $163,000 in other loan fees and service charges, an increase of $52,000 on gain from the sale of fixed assets, an increase of $12,000 in other non-interest income, an increase of $1,000 in bank-owned life insurance income, and a decrease of $32,000 in investment advisory fees.

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Non-Interest Expense

Non-interest expense increased by $698,000, or 11.0%, to $7.0 million for the three months ended June 30, 2022 from $6.3 million for the three months ended June 30, 2021.

The increase resulted primarily from increases of $305,000 in other operating expense, $142,000 in outside data processing expense, $101,000 in salaries and employee benefits, $90,000 in occupancy expense, $38,000 in equipment expense, and $27,000 in advertising expense, partially offset by a decrease of $5,000 in real estate owned expense.

Other non-interest expense increased by $305,000, or 17.9%, to $2.0 million for the three months ended June 30, 2022 from $1.7 million for the three months ended June 30, 2021 due mainly to increases of $245,000 in miscellaneous other non-interest expense, $116,000 in legal fees, $76,000 in service contracts expense, $20,000 in insurance expense, $17,000 in expenses related to the hiring of personnel, $16,000 in directors compensation, $9,000 in office supplies,

$7,000 in directors, officers and employee expense, and $3,000 in telephone expense.

These increases were partially offset by a decrease of $167,000 in consulting fees and a decrease of $38,000 in audit and accounting fees.

The increase of $245,000 in miscellaneous other non-interest expense was mainly due to an increase of $136,000 in regulatory insurance premiums and assessments due to an increase in our total assets, and increases of $49,000 in public company expenses, $23,000 in dues and subscriptions, $16,000 in check and correspondence bank charges, and $15,000 in miscellaneous charge-offs.

Non-interest expense increased by $969,000, or 14.1%, to $7.8 million for the three months ended September 30, 2022 from $6.9 million for the three months ended September 30, 2021.

The increase resulted primarily from increases of $604,000 in other operating expense, $181,000 in real estate owned expense, $109,000 in occupancy expense, $78,000 in outside data processing expense, $42,000 in advertising expense, and $30,000 in equipment expense, partially offset by a decrease of $75,000 in salaries and employee benefits.

Other non-interest expense increased by $604,000, or 37.0%, to $2.2 million for the three months ended September 30, 2022 from $1.6 million for the three months ended September 30, 2021 due mainly to increases of $231,000 in

miscellaneous other non-interest expense, $221,000 in legal fees, $55,000 in service contracts expense, $48,000 in audit and accounting fees, $22,000 in insurance expense, $22,000 in expenses related to the hiring of personnel, $14,000 in directors, officers and employee expense, $11,000 in directors compensation, and $2,000 in telephone expense.

These increases were partially offset by decreases of $15,000 in consulting fees and $7,000 in office supplies,.

The increase of $231,000 in miscellaneous other non-interest expense was mainly due to an increase of $82,000 in regulatory insurance premiums and assessments due to an increase in our total assets, and increases of $73,000 in public company expenses, $52,000 in dues and subscriptions, $36,000 in miscellaneous charge-offs, and $8,000 in check and correspondence bank charges, partially offset by a decrease of $23,000 in miscellaneous other expenses.

The increase of $221,000 in legal fees was due to the increased expenses associated with being a fully public company.

Outside data processing expense increased by $142,000, or 42.1%, to $479,000 for the three months ended June 30, 2022 from $337,000 for the three months ended June 30, 2021 due to the cost of operating additional two branches and additional data processing services.

Salaries and employee benefits increased by $101,000, or 2.9%, to $3.6 million for the three months ended June 30, 2022 from $3.5 million for the three months ended June 30, 2021 primarily due to an increase in number of full time equivalent personnel due to the opening of two additional branch offices, an increase in bonus accruals for loan production personnel as loan originations increased, and an increase in employee stock ownership plan (“ESOP”) compensation cost as the ESOP purchased additional shares of Company common stock using funds loaned from the Company as part of the second-step conversion offering.

These increases were partially offset by an increase in loan origination expenses related to loan origination fees due to an increase in loan originations.

Occupancy expense increased by $90,000, or 19.1%, to $562,000 for the three months ended June 30, 2022 from $472,000 for the three months ended June 30, 2021 primarily as a result of the cost of operating additional branch office space.

Equipment expense increased by $37,000, or 15.5%, to $276,000 for the three months ended June 30, 2022 from $239,000 for the three months ended June 30, 2021 due to the purchases of additional equipment to support the Company’s branch expansion.

Advertising expense increased by $27,000, or 112.5%, to $51,000 for the three months ended June 30, 2022 from $24,000 for the six months ended June 30, 2021 due mainly to the resumption of advertising and promotional products to promote the opening of additional branch offices.

Real estate owned expense decreased by $5,000, or 19.2%, to $21,000 for the three months ended June 30, 2022 from $26,000 for the three months ended June 30, 2021 due to a reduction in operating expenses to maintain the one real estate owned property.

Real estate owned expense increased by $181,000, or 1,005.6%, to $199,000 for the three months ended September 30, 2022 from $18,000 for the three months ended September 30, 2021 due to a write down of $189,000 on the fair market value of a foreclosed property because the increase in interest rates caused an increase in the capitalization rate thereby resulting in a reduction in the calculated fair market value of the property.

Occupancy expense increased by $109,000, or 22.3%, to $598,000 for the three months ended September 30, 2022 from $489,000 for the three months ended September 30, 2021 primarily as a result of the cost of operating additional branch offices.

Outside data processing expense increased by $78,000, or 19.7%, to $473,000 for the three months ended September 30, 2022 from $395,000 for the three months ended September 30, 2021 due to the cost of operating additional two branches and additional data processing services.

Advertising expense increased by $42,000, or 116.7%, to $78,000 for the three months ended September 30, 2022 from $36,000 for the nine months ended September 30, 2021 due mainly to the resumption of advertising and promotional products to promote the opening of additional branch offices.

Equipment expense increased by $30,000, or 13.1%, to $259,000 for the three months ended September 30, 2022 from $229,000 for the three months ended September 30, 2021 due to the purchases of additional equipment to support the Company’s branch expansion.

Salaries and employee benefits decreased by $75,000, or 1.9%, to $4.0 million for the three months ended September 30, 2022 from $4.1 million for the three months ended September 30, 2021 primarily due to an increase in loan origination offset expenses related to loan origination fees due to an increase in loan originations and a decrease in employee stock ownership plan (“ESOP”) compensation cost.

These decreases were partially offset by an increase in compensation expense due to an increase in the number of full time equivalent personnel due to the opening of two additional branch offices and an increase in bonus accruals for loan production personnel as loan originations increased.

Income Taxes.

We recorded income tax expense of $1.7 million and $1.1 million for the three months ended June 30, 2022 and 2021, respectively.

For the three months ended June 30, 2022, we had approximately $185,000 in tax exempt income, compared to approximately $174,000 in tax exempt income for the three months ended June 30, 2021.

Our effective income tax rates were 23.7% and 23.2% for the three months ended June 30, 2022 and 2021, respectively.

Results of Operations for the Six Months Ended June 30, 2022 and 2021

We recorded income tax expense of $2.4 million and $265,000 for the three months ended September 30, 2022 and 2021, respectively.

For the three months ended September 30, 2022 and September 30, 2021, we had approximately $185,000 in tax exempt income.

Our effective income tax rates were 24.2% and 26.6% for the three months ended September 30, 2022 and 2021, respectively.

Results of Operations for the Nine months Ended September 30, 2022 and 2021

Financial Highlights

Net income for the six months ended June 30, 2022 was $9.0 million compared to net income of $7.0 million for the six months ended June 30, 2021.

Net income for the six months ended June 30, 2022 was greater than net income for the six months ended June 30, 2021 primarily due to an increase in net interest income, partially offset by a decrease in non-interest income, an increase in non-interest expense, and an increase in income tax expense.

Net income for the nine months ended September 30, 2022 was $16.6 million compared to net income of $7.7 million for the nine months ended September 30, 2021.

Net income for the nine months ended September 30, 2022 was greater than net income for the nine months ended September 30, 2021 primarily due to an increase in net interest income and a decrease in the provision for loan losses, partially offset by a decrease in non-interest income, an increase in non-interest expense, and an increase in income tax expense.

The decrease in the provision for loan losses was because the Company recorded $3.6 million in provision for loan losses during the nine months ended September 30,

2021 due to the previously disclosed charge-off of a non-residential bridge loan with a balance of $3.6 million compared to no provision for loan losses during the nine months ended September 30, 2022.

Net Interest Income

Net interest income totaled $25.5 million for the six months ended June 30, 2022, as compared to $20.7 million for the six months ended June 30, 2021.

The increase in net interest income of $4.7 million, or 22.8%, was primarily due to an increase in interest income combined with a decrease in interest expense.

The increase in interest income is also attributed to an increase in interest rates during the six months ended June 30, 2022.

The decrease in interest expense is attributable to a decrease in the balances and cost of funds on our certificates of deposits and borrowed money, partially offset by increases in the balances and cost of funds in our interest-bearing demand deposits and our savings and club accounts.

In this regard, interest income increased by $4.6 million, or 19.6%, to $28.1 million for the six months ended June 30, 2022 from $23.5 million for the six months ended June 30, 2021 due to an increase in the average balance of interest earning assets of $262.5 million, or 28.7%, to $1.2 billion for the six months ended June 30, 2022 from $913.5 million for the six months ended June 30, 2021, partially offset by a decrease in the yield on interest earning assets by 36 basis points from 5.14% for the six months ended June 30, 2021 to 4.78% for the six months ended June 30, 2022.

Interest expense decreased by $119,000, or 4.3%, to $2.6 million for the six months ended June 30, 2022 from $2.8 million for the six months ended June 30, 2021 due to a decrease in the cost of interest bearing liabilities by 12 basis points from 0.97% for the six months ended June 30, 2021 to 0.85% for the six months ended June 30, 2022, partially offset by an increase in average interest bearing liabilities of $52.6 million, or 9.2%, to $624.4 million for the six months ended June 30, 2022 from $571.8 million for the six months ended June 30, 2021.

Net interest margin decreased by 21 basis points, or 4.6%, during the six months ended June 30, 2022 to 4.33% compared to 4.54% during the six months ended June 30, 2021.

Net interest income totaled $42.9 million for the nine months ended September 30, 2022, as compared to $31.6 million for the nine months ended September 30, 2021.

The increase in net interest income of $11.3 million, or 35.7%, was primarily due to an increase in interest income offset by an increase in interest expense.

The increase in interest income is attributable to increases in loans, investment securities, and interest-bearing deposits as we continued to deploy the proceeds raised in our July 2021 second-step conversion.

The increase in interest income is also due, in large part, to the increase in interest rates attributable to the Federal Reserve’s rate increases during the nine months ended September 30, 2022.

In this regard, interest income increased by $11.9 million, or 33.5%, to $47.5 million for the nine months ended September 30, 2022 from $35.6 million for the nine months ended September 30, 2021.

The increase in interest income was due to an increase in the average balance of interest earning assets of $229.2 million, or 24.1%, to $1.2 billion for the nine months ended September 30, 2022 from $951.0 million for the nine months ended September 30, 2021 and an increase in the yield on interest earning assets by 38 basis points from 4.99% for the nine months ended September 30, 2021 to 5.37% for the nine months ended September 30, 2022.

The increase in market interest rates during the nine months ended September 30, 2022 also caused an increase in our interest expense.

As a result, the increase in interest expense for the nine months ended September 30, 2022 is attributable to an increase in the cost of funds on our deposits and an increase in the balances on our savings and club balances, partially offset by decreases in the balances on our certificates of deposits and interest-bearing demand deposits and decreases in the cost of funds and balances on our borrowed money.

Interest expense increased by $623,000, or 15.8%, to $4.6 million for the nine months ended September 30, 2022 from $3.9 million for the nine months ended September 30, 2021.

The increase in interest expense was due to an increase in the cost of interest bearing liabilities by 5 basis points from 0.93% for the nine months ended September 30, 2021 to 0.98% for the nine months ended September 30, 2022 and an increase in average interest bearing liabilities of $60.5 million, or 10.7%, to $624.3 million for the nine months ended September 30, 2022 from $563.8 million for the nine months ended September 30, 2021.

Net interest margin decreased by 41 basis points, or 9.2%, during the nine months ended September 30, 2022 to 4.85% compared to 4.44% during the nine months ended September 30, 2021.

Provision for Loan Losses.

The Company recorded no loan loss provision for the six months ended June 30, 2022 compared to a loan loss provision of $17,000 for the six months ended June 30, 2021.

We charged-off $17,000 and $20,000 during the six months ended June 30, 2022 and June 30, 2021, respectively, against various unpaid overdrafts in our demand deposit accounts.

We recorded recoveries of $242,000 and $9,000 during the six months ended June 30, 2022 and June 30, 2021, respectively.

The recoveries of $242,000 during the six months ended June 30, 2022 comprised of recoveries of $146,000 regarding a previously charged-off multi-family property, $53,000 regarding a previously charged-off non-residential property, and $43,000 regarding a previously charged-off mixed property.

The Company recorded no loan loss provision for the nine months ended September 30, 2022 compared to a loan loss provision of $3.6 million for the nine months ended September 30, 2021.

The provision recorded for the nine months ended September 30, 2021 was primarily attributed to the charge-off of the aforementioned non-residential bridge loan with a balance of $3.6 million secured by commercial real estate located in Greenwich, Connecticut.

We also charged-off $23,000 during both the nine months ended September 30, 2022 and September 30, 2021 against various unpaid overdrafts in our demand deposit accounts.

We recorded recoveries of $242,000 during the nine months ended September 30, 2022 comprised of recoveries of $146,000 regarding a previously charged-off multi-family property, $53,000 regarding a previously charged-off non-residential property, and $43,000 regarding a previously charged-off mixed-use property.

We recorded recoveries of $160,000 during the nine months ended September 30, 2021 comprised primarily of recoveries of $150,000 regarding a previously charged-off multi-family property.

Management uses available information to establish the appropriate level of the allowance for loan losses.

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Non-Interest Income

Non-interest income for the six months ended June 30, 2022 was $594,000 compared to non-interest income of $1.2 million for the six months ended ended June 30, 2021.

The decrease in total non-interest income was primarily due to unrealized loss of $1.1 million on equity securities during the six months ended June 30, 2022 compared to an unrealized

loss of $62,000 on equity securities during the six months ended June 30, 2021.

The unrealized loss of $1.1 million on equity securities was primarily due to a rising interest rate environment due to the Federal Reserve’s interest rate increase, which impacted the value of the equity securities during the six months ended June 30, 2022.

The decrease in total non-interest income was partially offset by increases of $303,000 in other loan fees and service charges, $39,000 on gain from the sale of fixed assets, $16,000 in other non-interest income, $15,000 in investment advisory fees, and $2,000 in bank-owned life insurance income.

Non-interest income for the nine months ended September 30, 2022 was $904,000 compared to non-interest income of $1.8 million for the nine months ended September 30, 2021.

The decrease in total non-interest income was primarily due to unrealized loss of $1.6 million on equity securities during the nine months ended September 30, 2022 compared to an unrealized loss of $215,000 on equity securities during the nine months ended September 30, 2021.

The unrealized loss of $1.6 million on equity securities during the 2022 period was due to a rising interest rate environment and the Federal Reserve’s interest rate increases.

The decrease in total non-interest income was partially offset by increases of $467,000 in other loan fees and service charges, $91,000 on gain from the sale of fixed assets, $28,000 in other non-interest income, and $3,000 in bank-owned life insurance income and a decrease of $17,000 in investment advisory fees,.

The increase in other loan fees and service charges was due to an increase of $301,000 in other loan fees and loan servicing fees and an increase of $163,000 in ATM and debit card usage fees.

Non-Interest Expense

Non-interest expense increased by $1.4 million, or 10.6%, to $14.2 million for the six months ended June 30, 2022 from $12.9 million for the six months ended June 30, 2021.

The increase resulted primarily from increases of $759,000 in other operating expense, $272,000 in salaries and employee benefits, $121,000 in occupancy expense, $91,000 in outside data processing expense, $78,000 in equipment expense, and $58,000 in advertising expense, partially offset by a decrease of $16,000 in real estate owned expense.

Other non-interest expense increased by $759,000, or 23.5%, to $4.0 million for the six months ended June 30, 2022 from $3.2 million for the six months ended June 30, 2021 due mainly to increases of $372,000 in miscellaneous other non-interest expense, $254,000 in legal fees, $104,000 in service contracts expense, $44,000 in expenses related to the hiring of personnel, $43,000 in audit and accounting fees, $30,000 in insurance expense, $12,000 in office supplies, $11,000 in directors compensation, $4,000 in telephone expense, and $3,000 in directors, officers and employee expense.

Non-interest expense increased by $2.3 million, or 11.8%, to $22.1 million for the nine months ended September 30, 2022 from $19.7 million for the nine months ended September 30, 2021.

The increase resulted primarily from increases of $1.4 million in other operating expense, $229,000 in occupancy expense, $197,000 in salaries and employee benefits, $170,000 in outside data processing expense, $167,000 in real estate owned expense, $107,000 in equipment expense, and $100,000 in advertising expense.

Other non-interest expense increased by $1.4 million, or 28.1%, to $6.2 million for the nine months ended September 30, 2022 from $4.9 million for the nine months ended September 30, 2021 due mainly to increases of $601,000 in miscellaneous other non-interest expense, $475,000 in legal fees, $159,000 in service contracts expense, $92,000 in audit and accounting fees, $66,000 in expenses related to the hiring of personnel, $52,000 in insurance expense, $23,000 in directors compensation, $16,000 in directors, officers and employee expense, $7,000 in telephone expense, and $6,000 in office supplies.

These increases were partially offset by a decrease of $134,000 in consulting fees.

The increase of $372,000 in miscellaneous other non-interest expense was mainly due to an increase of $217,000 in regulatory insurance premiums and assessments due to an increase in our total assets, an increase of $54,000 in miscellaneous charge-offs, an increase of $53,000 in public company expense, an increase of $25,000 in dues and subscriptions, and an increase of $19,000 in check and correspondence bank charges.

The increase of $601,000 in miscellaneous other non-interest expense was mainly due to an increase of $299,000 in regulatory insurance premiums and assessments due to an increase in our total assets, an increase of $125,000 in public company expense, an increase of $90,000 in miscellaneous charge-offs, an increase of $78,000 in dues and subscriptions, and an increase of $26,000 in check and correspondence bank charges, partially offset by a decrease of $17,000 in miscellaneous other expense.

The increase of $475,000 in legal fees was due to the increased expenses associated with being a fully public company.

Salaries and employee benefits increased by $272,000, or 3.8%, to $7.4 million for the six months ended June 30, 2022 from $7.2 million for the six months ended June 30, 2021 primarily due to an increase in number of full time equivalent personnel related to the opening of two additional branch offices, an increase in bonus accruals for loan production personnel as loan originations increased, and an increase in employee stock ownership plan (“ESOP”) compensation cost as the ESOP purchased additional shares of Company common stock using funds loaned to the ESOP from the Company as part of the second-step conversion offering.

These increases were partially offset by an increase in loan origination expenses and fees resulting from an increase in loan originations.

Occupancy expense increased by $121,000, or 11.6%, to $1.2 million for the six months ended June 30, 2022 from $1.0 million for the six months ended June 30, 2021 primarily as a result of the cost of operating additional branch office space.

Outside data processing expense increased by $91,000, or 11.0%, to $915,000 for the six months ended June 30, 2022 from $824,000 for the six months ended June 30, 2021 due to the cost of operating additional two branches and additional data processing services.

Equipment expense increased by $78,000, or 16.0%, to $566,000 for the six months ended June 30, 2022 from $488,000 for the six months ended June 30, 2021 due to the purchases of additional equipment to support the Company’s branch expansion.

Advertising expense increased by $58,000, or 123.4%, to $105,000 for the six months ended June 30, 2022 from $47,000 for the six months ended June 30, 2021 due mainly to the resumption of advertising and promotional products to promote the opening of our additional branch offices.

Real estate owned expense decreased by $16,000, or 23.5%, to $52,000 for the six months ended June 30, 2022 from $68,000 for the six months ended June 30, 2021 due to a reduction in operating expenses to maintain the one real estate owned property.

The increase of $159,000 in service contracts expense was due to the cost of operating two additional branch office space.

Occupancy expense increased by $229,000, or 14.9%, to $1.8 million for the nine months ended September 30, 2022 from $1.5 million for the nine months ended September 30, 2021 primarily as a result of the cost of operating two additional branch offices.

Salaries and employee benefits increased by $197,000, or 1.8%, to $11.4 million for the nine months ended September 30, 2022 from $11.2 million for the nine months ended September 30, 2021 primarily due to an increase in

compensation expense due to an increase in the number of full time equivalent personnel related to the opening of two additional branch offices, an increase in bonus accruals for loan production personnel as loan originations increased, and an increase in health insurance premiums.

These increases were partially offset by an increase in loan origination offset expenses and fees resulting from an increase in loan originations.

Outside data processing expense increased by $170,000, or 14.0%, to $1.4 million for the nine months ended September 30, 2022 from $1.2 million for the nine months ended September 30, 2021 due to the cost of operating additional two branches and additional data processing services.

Real estate owned expense increased by $167,000, or 196.5%, to $252,000 for the nine months ended September 30, 2022 from $85,000 for the nine months ended September 30, 2021 due to a write down of $189,000 on the fair market value of a foreclosed property because the increase in interest rates caused an increase in the capitalization rate thereby resulting in a reduction in the calculated fair market value of the property.

Equipment expense increased by $107,000, or 14.9%, to $825,000 for the nine months ended September 30, 2022 from $718,000 for the nine months ended September 30, 2021 due to the purchases of additional equipment to support the Company’s branch expansion.

Advertising expense increased by $100,000, or 120.5%, to $183,000 for the nine months ended September 30, 2022 from $83,000 for the nine months ended September 30, 2021 due mainly to the resumption of advertising and promotional products to promote the opening of our additional branch offices.

Income Taxes.

We recorded income tax expense of $2.8 million and $2.1 million for the six months ended June 30, 2022 and 2021, respectively.

For the six months ended June 30, 2022, we had approximately $370,000 in tax exempt income, compared to approximately $336,000 in tax exempt income for the six months ended June 30, 2021.

Our effective income tax rates were 23.6% and 23.2% for the six months ended June 30, 2022 and 2021, respectively.

We recorded income tax expense of $5.2 million and $2.4 million for the nine months ended September 30, 2022 and 2021, respectively.

For the nine months ended September 30, 2022, we had approximately $553,000 in tax exempt income, compared to approximately $522,000 in tax exempt income for the nine months ended September 30, 2021.

Our effective income tax rates were 23.9% and 23.6% for the nine months ended September 30, 2022 and 2021, respectively.

Average Balances and Yields

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Any adjustments necessary to present yields on a tax-equivalent basis are insignificant.

Three Months Ended June 30,

Three Months Ended September 30,

Loans receivable

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Average interest-earning assets to interest-bearing liabilities

Six Months Ended June 30,

Nine Months Ended September 30,

Loans receivable

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Net change in net interest income

Six Months Ended 6/30/2022

Six Months Ended 6/30/2021

Nine Months Ended 9/30/2022

Nine Months Ended 9/30/2021

Increase (Decrease)

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The following table sets forth information with respect to our non-performing assets at the dates indicated.

September 30,

(Dollars in thousands)

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Total non-performing assets to total assets

Non-performing assets totaled $2.8 million at June 30, 2022 and $2.0 million at December 31, 2021, respectively.

There were two nonaccrual non-residential loans totaling $769,000 as of June 30, 2022, which are secured by the same property to one borrower that is in foreclosure due to a maturity default at June 30, 2022.

There were no nonaccrual loans at December 31, 2021.

During the six months ended June 30, 2022, we did not collect any interest income on loans that were placed on non-accrual status.

Non-performing assets totaled $1.8 million at September 30, 2022 and $2.0 million at December 31, 2021, respectively.

There were no nonaccrual loans at September 30, 2022 and December 31, 2021.

During the nine months ended September 30, 2022, we collected interest income of $23,000 upon the satisfaction of two TDR loans that became non-accrual in June 2022 but were satisfied in July 2022.

We did not recognize any interest income on non-accrual loans during the nine months ended September 30, 2021.

From time to time, as part of our loss mitigation strategy, we may renegotiate the loan terms based on the economic or legal reasons related to the borrower’s financial difficulties.

There were no new TDRs during the six months ended June 30, 2022 or June 30, 2021 or during the year ended December 31, 2021.

There were no new TDRs during the nine months ended September 30, 2022 or September 30, 2021 or during the year ended December 31, 2021.

TDRs may be considered to be non-performing and if so are placed on non-accrual, except for those that have established a sufficient performance history (generally a minimum of six consecutive months of performance) under the terms of the restructured loan.

During the three and six months ended June 30, 2022, two TDR loans were placed on nonaccrual status due to a 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.

At June 30, 2022, two loans with aggregate balances of $865,000 were considered TDRs but were performing in accordance with their restructured terms for the requisite period of time (generally at least six consecutive months) to be returned to accrual status.

The two TDR loans that were previously placed during the three months ended June 30, 2022 on nonaccrual status due to a maturity default paid-off during the three months ended September 30, 2022.

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

At September 30, 2022, two loans with aggregate balances of $861,000 were considered TDRs but were performing in accordance with their restructured terms for the requisite period of time (generally at least six consecutive months) to be returned to accrual status.

At December 31, 2021, four loans with aggregate balances of $1.6 million were considered TDRs but were performing.

The following table sets forth an analysis of the activity in the allowance for loan losses for the periods indicated:

September 30,

(Dollars In Thousands)

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Non-performing loans

The allowance for loan losses increased by $225,000 to $5.5 million at June 30, 2022 from $5.2 million at December 31, 2021.

The allowance for loan losses increased by $219,000 to $5.5 million at September 30, 2022 from $5.2 million at December 31, 2021.

The increase in the allowances for loan losses was due primarily to recoveries totaling $242,000, partially offset by charge-offs totaling $23,000.

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We also establish targets of 2.0% for the Cash Liquidity ratio, 8.0% for the On Balance Sheet Liquidity ratio, and 20.0% for the On Balance Sheet Liquidity & Borrowing Capacity ratio.

Our Cash Liquidity ratio, On Balance Sheet Liquidity ratio, and On Balance Sheet Liquidity & Borrowing Capacity ratio averaged 14.8%, 19.0%, and 22.7%, respectively, for the six months ended June 30, 2022 compared to 12.7%, 15.7%, and 21.7%, respectively, for the year ended December 31, 2021.

Our Cash Liquidity ratio, On Balance Sheet Liquidity ratio, and On Balance Sheet Liquidity & Borrowing Capacity ratio averaged 12.5%, 16.9%, and 20.2%, respectively, for the nine months ended September 30, 2022 compared to 12.7%, 15.7%, and 21.7%, respectively, for the year ended December 31, 2021.

We adjust our liquidity levels to fund deposit outflows, pay real estate taxes on real estate loans, repay our borrowings, and to fund loan commitments.

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Our primary investing activities are the origination of construction loans, commercial and industrial loans, multifamily loans, and to a lesser extent, mixed-use real estate loans and other loans.

For the six months ended June 30, 2022 and 2021, our loan originations totaled $307.4 million and $285.1 million, respectively.

Cash received from the maturities and pay-downs on securities totaled $737,000 and $793,000 for the six months ended June 30, 2022 and 2021, respectively.

We purchased securities totaling $10.0 million and $4.3 million during the six months ended June 30, 2022 and June 30, 2021, respectively.

For the nine months ended September 30, 2022 and 2021, our loan originations totaled $499.2 million and $486.0 million, respectively.

Cash received from the maturities and pay-downs on securities totaled $1.2 million and $4.3 million for the nine months ended September 30, 2022 and 2021, respectively.

We purchased securities totaling $10.0 million and $15.3 million during the nine months ended September 30, 2022 and September 30, 2021, respectively.

Liquidity management is both a daily and long-term function of business management.

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As a member of the Federal Home Loan Bank of New York, we are required to own capital stock in the Federal Home Loan Bank of New York and are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to credit-worthiness have been met.

We had an available borrowing limit of $24.1 million and $29.4 million from the Federal Home Loan Bank of New York as of June 30, 2022 and December 31, 2021, respectively.

There were $21.0 million and $28.0 million in Federal Home Loan Bank advances at June 30, 2022 and December 31, 2021, respectively.

We had an available borrowing limit of $18.1 million and $29.4 million from the Federal Home Loan Bank of New York as of September 30, 2022 and December 31, 2021, respectively.

There were $21.0 million and $28.0 million in Federal Home Loan Bank advances at September 30, 2022 and December 31, 2021, respectively.

In addition, we are party to a loan agreement with ACBB under which we can borrow up to $8.0 million in short-term borrowings.

There were no outstanding borrowings with ACBB at June 30, 2022 and December 31, 2021.

At June 30, 2022, we had unfunded commitments on construction loans of $491.1 million, outstanding commitments to originate loans of $258.2 million, unfunded commitments under lines of credit of $139.9 million, and unfunded standby letters of credit of $7.3 million.

At June 30, 2022, certificates of deposit scheduled to mature in less than one year totaled $158.1 million.

There were no outstanding borrowings with ACBB at September 30, 2022 and December 31, 2021.

At September 30, 2022, we had unfunded commitments on construction loans of $554.4 million, outstanding commitments to originate loans of $391.7 million, unfunded commitments under lines of credit of $130.0 million, and unfunded standby letters of credit of $9.1 million.

At September 30, 2022, certificates of deposit scheduled to mature in less than one year totaled $133.8 million.

Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case.

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In addition to its operating expenses, the Company is responsible for paying any dividends declared to its stockholders and for the repurchase, if any, of its shares of common stock.

At June 30, 2022, the Company had liquid assets of $40.1 million and $3.7 million in loan participations originated by the Bank which are held by the Company.

At September 30, 2022, the Company had liquid assets of $35.9 million and $3.7 million in loan participations originated by the Bank which are held by the Company.

Off-Balance Sheet Arrangements

For the six months ended June 30, 2022, we did not engage in any off-balance sheet transactions reasonably likely to have a material adverse effect on our financial condition, results of operations or cash-flows.

For the nine months ended September 30, 2022, we did not engage in any off-balance sheet transactions reasonably likely to have a material adverse effect on our financial condition, results of operations or cash-flows.

Impact of Inflation and Changing Prices

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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 2. Management’s Discussion and Analysis