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Item 9A. Controls and Procedures

2023-03-30 compared with 2022-03-30 · 255 added, 261 removed, 1265 unchanged (29% of the section changed)

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report.

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and (2) that they are alerted in a timely manner about material information relating to the Company required to be filed in its periodic Securities and Exchange Commission filings.

Management Report on Internal Control over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rule 13a-15(f).

The Company’s system of internal control over financial reporting has been designed to provide reasonable assurance to the Company’s management and board of directors regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with U.S.

generally accepted accounting principles.

Any system of internal control over financial reporting, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected.

Also, because of changes in conditions, internal control effectiveness may vary over time.

Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management has, including the Company’s principal executive officer and principal financial officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.

To make this assessment, we used the criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our assessment and based on such criteria, we believe that, as of December 31, 2022, the Company’s internal control over financial reporting was effective.

Internal Control Over Financial Reporting.

During the quarter and year ended December 31, 2022, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

OTHER INFORMATION

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333-253982), initially filed on March 8, 2021

NorthEast Community Bancorp, Inc.

2022 Equity Incentive Plan+

Incorporated by reference to Appendix A to the Company’s Definitive Proxy Materials on Schedule 14A (File No.

001-40589), filed on August 19, 2022

Agreement by and between NorthEast Community Bancorp, MHC, NorthEast Community Bancorp, Inc.

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Filed herewith

Consent of BDO USA, LLP

Filed herewith

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

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Opinion on the Financial Statements

We have audited the accompanying consolidated statement of financial condition of NorthEast Community Bancorp, Inc., and subsidiaries (the “Company”) as of December 31, 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated statement of financial condition of NorthEast Community Bancorp, Inc., and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provides a reasonable basis for our opinion.

Snodgrass, P.C.

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March 30, 2023

Report of Independent Registered Public Accounting Firm

Northeast Community Bancorp, Inc.

White Plains, New York

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of financial condition of Northeast Community Bancorp, Inc.

(the “Company”) as of December 31, 2020 and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and the results of its operations and its cash flows for the year ended December 31, 2020 , in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provide a reasonable basis for our opinion.

/s/ BDO USA, LLP (PCAOB ID 243 )

We have served as the Company’s auditor from 2013 to 2021.

New York, New York

March 8, 2021

Northeast Community Bancorp, Inc.

Consolidated Statements of Financial Condition

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Stockholders’ equity:

Preferred stock, $ 0.01 and $ 0.01 par value;

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

none issued or outstanding, respectively ¹

Common stock, $ 0.01 and $ 0.01 par value;

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

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

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

Preferred stock, $ 0.01 par value;

25,000,000 shares authorized;

none issued or outstanding

Common stock, $ 0.01 par value;

75,000,000 shares authorized;

16,049,454 shares and 16,377,936 shares issued and outstanding , respectively

Additional paid-in capital

Unearned Employee Stock Ownership Plan (“ESOP”) shares

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

Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

See notes to consolidated financial statements.

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Other loan fees and service charges

Gain (loss) on disposition of equipment

Gain on disposition of equipment

Earnings on bank owned life insurance

Investment advisory fees

Unrealized (loss) gain on equity securities

Realized and unrealized loss on equity securities

Total Non-Interest Income

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PROVISION FOR INCOME TAXES

EARNINGS PER COMMON SHARE – BASIC AND DILUTED ¹

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED ¹

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.

EARNINGS PER COMMON SHARE – BASIC

EARNINGS PER COMMON SHARE – DILUTED

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – DILUTED

See notes to consolidated financial statements.

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(In thousands)

Other comprehensive income (loss):

Other comprehensive income:

Defined benefit pension:

Reclassification adjustments out of accumulated other comprehensive income:

Amortization of prior service cost ¹

Amortization of actuarial loss ¹

Actuarial gain (loss) arising during period

Actuarial gain arising during period

Income tax effect ²

Total other comprehensive (loss) income

Total other comprehensive income

Total Comprehensive Income

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See Note 17 for further information.

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

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

See notes to consolidated financial statements.

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Comprehensive

Shares, net ¹

(In thousands, except share and per share amounts)

Balance – December 31, 2021

Other comprehensive loss

Other comprehensive income

Cash dividend declared ($ 0.42 per share)

Stock Repurchases

Restricted stock award

Compensation expense related to restricted stock awards

Compensation expense related to stock options

ESOP shares earned

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Comprehensive

Shares, net ¹

(In thousands, except share and per share amounts)

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

Net amortization of securities premiums and discounts

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

Provision for loan losses

Net amortization (accretion) of deferred loan fees and costs

Deferred income tax expense

Unrealized loss (gain) recognized on equity securities

Net amortization of deferred loan fees and costs

Deferred income tax (benefit) expense

Realized and Unrealized loss recognized on equity securities

Impairment of goodwill

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Earnings on bank owned life insurance

(Gain) loss on dispositions of premises and equipment

Gain on dispositions of premises and equipment

ESOP compensation expense

(Increase) decrease in accrued interest receivable

Compensation expense related to stock options

Compensation expense related to restricted stock

Increase in accrued interest receivable

Decrease in other assets

(Decrease) increase in accounts payable - loan closing

Increase in accounts payable and accrued expenses

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Proceeds from sale of fixed assets

Net redemptions (purchase) of restricted stock

Redemptions of restricted stock

Purchases of premises and equipment

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Cash Flows from Financing Activities:

Net increase (decrease) in deposits

Proceeds from FHLB of NY advances

Issuance of common stock

Decrease in advance payments by borrowers for taxes and insurance

Net increase in deposits

Repayment of FHLB of NY advances

Issuance of common stock funded by stock subscriptions

Stock repurchases

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

Cash dividends paid

Net Cash Provided (Used in) by Financing Activities

Net Cash Provided by Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents

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As a result of the second-step conversion, all share information has been subsequently revised to reflect the 1.3400 exchange ratio, unless otherwise noted.

The Bank is a New York State-chartered savings bank and completed its conversion from a federally-chartered savings bank effective as of the close of business on June 29, 2012.

The Company’s primary activity is the ownership and operation of the Bank.

The Bank is a New York State-chartered savings bank and the Company’s primary activity is the ownership and operation of the Bank.

The Bank is headquartered in White Plains, New York.

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

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

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

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

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The Company’s lending activity is concentrated in construction and permanent loans secured by multi-family and non-residential real estate located primarily in the Northeast and Mid-Atlantic regions of the United States.

As of December 31, 2021 and 2020, the Company had construction loans located in New York State totaling $ 279.1 million and $ 181.9 million in the Bronx, $ 85.5 million and $ 96.1 million in the Village of Spring Valley, $ 61.2 million and $ 69.5 million in the Town of Palm Tree, $ 87.5 million and $ 66.9 million in the Hamlet of Monsey, $ 51.5 million and $ 63.3 million in Brooklyn and $ 15.2 million and $ 18.6 million in the Town of Monroe.

As of December 31, 2022 and 2021, the Company had majority of construction loans located in New York state, including $ 440.6 million and $ 279.1 million in the Bronx, $ 104.3 million and $ 85.5 million in the Village of Spring Valley, $ 103.8 million and $ 87.5 million in the Hamlet of Monsey, $ 31.8 million and $ 51.5 million in Brooklyn, and $ 122.4 million and $ 76.4 million in the Town of Monroe.

The Company also had deposits in excess of the FDIC insurance limit at other financial institutions.

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Any excess of the value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.

Impairment charges of $ 451,000 were recorded in 2022 due to increased capitalization rate when evaluating the investment value of the goodwill.

No impairment charges were recorded in 2021.

Impairment charges of $ 98,000 were recorded in 2020 due to a decrease in the assets under management resulting in an expected decrease in fee revenue from this division.

Northeast Community Bancorp, Inc.

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Gains, to the extent allowable, and losses on the disposition of these properties are reflected in the real estate owned expense in the consolidated statement of income.

The Company wrote down $ 540,000 in 2022 due to increased capitalization rate in evaluating the fair value of the properties.

No write-downs were recorded in 2021.

Property Held for Investment:

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The Company’s policy is to recognize income tax related interest and penalties in income tax expense;

such amounts were not significant during the years ended December 31, 2021 and 2020.

The tax years subject to examination by federal, state, and city taxing authorities are 2018 through 2021.

there were no such amounts during the years ended December

Northeast Community Bancorp, Inc.

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Note 1 - Summary of Significant Accounting Policies (continued)

31, 2022 and 2021.

The tax years subject to examination by federal, state, and city taxing authorities are 2019 through 2022.

Other Comprehensive Income (Loss):

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Gains and losses on the sale of securities, if any, are reclassified to non-interest income upon the sale of the related securities or upon the recognition of a security impairment loss and a portion of the prior service cost and actuarial gains and losses of the DRP are reclassified to non-interest expense.

At December 31, 2021, accumulated other comprehensive loss totaled $ 139,000 and included $ 183,000 in prior service cost and actuarial losses of the DRP net of $ 44,000 of related deferred income taxes.

At December 31, 2022, accumulated other comprehensive income totaled $ 156,000 and included $ 197,000 in prior service cost and actuarial losses of the DRP net of $ 41,000 of related deferred income taxes.

Net Income Per Common Share:

Basic net income per common share is calculated by dividing the net income available to common stockholders by the weighted-average number of common shares outstanding during the period.

Earnings per Share:

Basic earnings per share is calculated by dividing the net income available to common stockholders by the weighted-average number of common shares outstanding during the period less any unvested restricted shares.

Unallocated common shares held by the Employee Stock Ownership Plan (“ESOP”) are not included in the weighted-average number of common shares outstanding for purposes of calculating basic net income per common share until they are committed to be released.

There were no dilutive common share equivalents at December 31, 2021 or 2020.

Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.

Potential common shares that may be issued by the Company relate to outstanding stock options and are determined using the treasury stock method.

The following table sets forth the computations of basic and diluted earnings per share:

(In Thousands, except per share data)

Net income (basic and diluted)

Weighted average shares issued

Weighted average treasury shares

Weighted average unearned ESOP shares

Weighted average unvested restricted shares

Basic weighted average shares outstanding

Dilutive effect of restricted stock

Dilutive effect of stock option

Diluted weighted average shares outstanding

Net income per share

There were 880,097 stock options outstanding at December 31, 2022 that were not included in the computation of diluted earnings per share as their effect would have been anti-dilutive.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Stockholders’ Equity:

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Each share of common stock has the same relative rights as, and is identical in all respects with, each other share of common stock.

At December 31, 2021 and 2020, the Company has issued 16,377,936 shares and 17,721,500 shares of common stock with 16,377,936 shares and 16,340,779 shares outstanding.

At December 31, 2022 and 2021, the Company has issued and outstanding 16,049,454 and 16,377,936 shares of common stock.

The Company has not issued any preferred stock.

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Dividends on unallocated ESOP shares are recorded as a reduction of the ESOP loan.

Treasury Stock:

The Company records treasury stock at cost.

Restricted Stock:

The Company recognizes compensation expense for the fair value of the restricted stock on a straight-line basis over the requisite service period for the entire award.

The product of the number of shares granted and the grant date market price of the Company’s common stock determines the fair value of restricted stock under the Company’s 2022 Equity Incentive Plan.

Stock Option Plan:

The Company recognizes the value of share-based payment transactions as compensation costs in the financial statements over the period that an employee provides service in exchange for the award.

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

The Company accounts for forfeitures as they occur.

Stock Repurchases:

The Company records common stock repurchases at cost and retires the common shares with a charge to common stock and additional paid-in capital.

Segment Information:

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The wealth management operation does not meet the quantitative threshold requirement to be disclosed separately.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Off-Balance-Sheet Financial Instruments:

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Such financial instruments are recorded in the consolidated statement of financial condition when funded.

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 full impact of COVID-19 continues to evolve as of the date of this report.

The outbreak of COVID-19 has, and is anticipated to continue to, adversely impact 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 and will likely continue to cause significant disruptions in the U.S.

economy and is highly likely to continue to disrupt 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 escalates or 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 2021.

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 nine 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, 2019.

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

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

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, 2019.

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 during the years ended December 31, 2020 and December 31, 2021 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.

Subsequently, 109 loans totaling $ 106.4 million were paid off and 86 loans totaling $ 84.5 million are no longer on deferral status.

As of December 31, 2021, we had one loan totaling $ 79,000 still in deferral status.

As of February 1, 2022, the loan was returned to normal payment 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.

Note 2 – Mutual Holding Company Reorganization and Regulatory Matters

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The FDIC also has authority to use its enforcement powers to prohibit a savings bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe and unsound practice.

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

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

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

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

Based on the Company’s capital levels and statement of condition composition at December 31, 2019, the implementation of the new rule had no material impact on our regulatory capital level or ratios at the Bank level.

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

established a new common equity Tier 1 capital;

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

The new rule has a capital conservation buffer requirement that was

The Bank is subject to risk-based capital standards by which banks are evaluated in terms of capital adequacy.

These regulatory capital requirements are administered by the federal banking agencies.

Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

The Bank’s capital and classification are also subject to qualitative judgments by the regulators.

Management believes that, as of December 31, 2022, the Bank meets all capital adequacy requirements to which it is subject.

Prompt corrective action regulations provide five classifications:

well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.

If adequately capitalized, regulatory approval is required to accept brokered deposits.

If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

At year-end 2022 and 2021, the most recent regulatory notifications categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action.

There are no conditions or events since that notification that management believes have changed the institution’s category.

In addition, a capital conservation buffer of 2.50 % is applicable to all capital ratios except for the Tier 1 Leverage ratio.

The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum (“adequately capitalized”) for each respective capital measurement.

Compliance with the capital conservation buffer is required to avoid limitations on certain capital distributions, especially dividends.

The Bank is required to maintain a capital conservation buffer of 2.50 % at December 31, 2022 and 2021.

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

Northeast Community Bancorp, Inc.

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Note 2 – Mutual Holding Company Reorganization and Regulatory Matters (continued)

phased in at a rate of 0.625 % annually beginning January 1, 2016 through January 1, 2019, when full capital conservation buffer requirement of 2.50 % became effective.

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

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

Actual and required capital amounts and ratios as of December 31, 2022 and 2021, are presented below:

Regulatory Capital Requirements

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(1) Ratios do not include the capital conservation buffer.

Based on the most recent notification by the FDIC, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.

There have been no conditions or events that have occurred since notification that management believes have changed the Bank’s category.

Note 3 - Financial Instruments with Off-Balance Sheet Risk

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Equity Securities, at Fair Value

The following is a summary of unrealized gains recognized in net income on equity securities during the year ended December 31, 2021 and 2020:

The following is a summary of realized and unrealized losses recognized in net income on equity securities during the year ended December 31, 2022 and 2021:

(In Thousands)

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

Capital gain realized on equity securities during the period

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

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

Realized and unrealized net gain (loss) recognized on equity securities held at the reporting date

Note 5 – Securities Available-for-Sale

24 unchanged sentences

(In Thousands)

Municipal Bonds

Mortgage-backed securities – residential:

3 unchanged sentences

Collateralized mortgage obligations – GSE

Total mortgage-backed securities

Municipal Bonds

Treasury securities

December 31, 2021

(In Thousands)

Municipal Bonds

Mortgage-backed securities – residential:

3 unchanged sentences

Collateralized mortgage obligations – GSE

Total mortgage-backed securities

Municipal Bonds

Northeast Community Bancorp, Inc.

15 unchanged sentences

December 31, 2022:

Municipal Bonds

Mortgage-backed securities - residential:

Government National Mortgage Association

Federal Home Loan Mortgage Corporation

1 unchanged sentence

Collateralized mortgage obligations – GSE

Total mortgage-backed securities

Municipal Bonds

Treasury securities

Less than 12 Months

2 unchanged sentences

December 31, 2021:

Mortgage-backed securities - residential:

Federal Home Loan Mortgage Corporation

At December 31, 2021, four mortgage-backed security and three municipal bonds had unrealized loss.

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

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

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

one mortgage-backed security had unrealized loss.

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

Federal National Mortgage Association

Collateralized mortgage obligations – GSE

Total mortgage-backed securities

Municipal Bonds

Northeast Community Bancorp, Inc.

1 unchanged sentence

Note 6 – Securities Held-to-Maturity (continued)

the issuer of the security.

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

At December 31, 2022, thirty-five mortgage-backed securities, six municipal bonds and two U.S.

Treasury notes had unrealized loss due to interest rate volatility.

Management concluded that the unrealized loss reflected above was temporary in nature since the unrealized loss was related primarily to market interest rates volatility, and not related to the underlying credit quality of the issuers of the securities.

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

At December 31, 2021, there were four m ortgage-backed securities and three municipal bonds with unrealized loss.

Note 7 - Loans Receivable and the Allowance for Loan Losses

6 unchanged sentences

Commercial and industrial

Deferred loan costs, net

Allowance for loan losses

Deferred loan (fees) costs, net

Loans serviced for the benefit of others totaled approximately $ 22,350,000 and $ 14,610,000 at December 31, 2022 and 2021, respectively.

1 unchanged sentence

The Company did not issue PPP loans associated with the CARES Act in 2022 and 2021.

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

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

The Company sold loan participations totaling $ 14.6 million in 2021 and sold no loan participations in 2020.

The Company sold loan participations totaling $ 11.5 million and $ 14.6 million in 2022 and 2021.

During the year ended December 31, 2022, the Company sold one delinquent loan totaling $ 1,578,000 , net of interest reserve of $ 63,000 , with a charge-off of $ 391,000 recognized on the sale.

During the year ended December 31, 2021, the Company sold two loans at par totaling $ 3,148,000 , net of interest reserve of $ 242,000 , with no gain or loss recognized on the sale.

Northeast Community Bancorp, Inc.

44 unchanged sentences

Balance - December 31, 2021

During the year ended December 31, 2021, the provision expenses recorded were primarily attributed to the previously disclosed charge-off of $ 3.6 million in 2021 regarding a non-residential bridge loan secured by real estate with a balance of $ 3.6 million.

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

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

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

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

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

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

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

Additionally 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 year ended December 31, 2020, the provision expenses recorded were primarily attributed to the perceived potential credit risk associated with the COVID-19 pandemic, although no specific or probable losses were identified at that time, as well as increased loan balances in construction loan and commercial and industrial loan segments.

During the year ended December 31, 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.

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 period.

During the year ended December 31, 2021, the provision expenses recorded were primarily attributed to the previously disclosed charge-off of $ 3.6 million in 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.

Northeast Community Bancorp, Inc.

31 unchanged sentences

Note 7 - Loans Receivable and the Allowance for Loan Losses (continued)

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

Loans Receivable on Nonaccrual Status as of December 31:

(In Thousands)

Non-residential real estate

On non-accrual loans, the Company did no t recognized any interest income during the year ended December 31, 2021 and 2020.

Interest income that would have been recorded had the loans been on accrual status would have amounted to approximately $ 173,000 and $ 236,000 for the years ended December 31, 2021 and 2020, respectively.

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

In 2021, the Company did no t collect any interest income from a loan that was in non-accrual status.

In 2020, the Company collected $ 85,000 in interest income from a loan that was in non-accrual status in 2019 and was satisfied in 2020.

There were no non-accrual loans at the years ended December 31, 2022 and 2021.

In 2022, the Company collected $ 23,000 interest income from a non-accrual loan that was satisfied in July 2022.

In 2021, the Company did not recognize any interest income from a loan that was in non-accrual status.

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

6 unchanged sentences

Commercial and industrial loans

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 7 - Loans Receivable and the Allowance for Loan Losses (continued)

Age Analysis of Past Due Loans as of December 31, 2021:

6 unchanged sentences

Commercial and industrial loans

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 7 - Loans Receivable and the Allowance for Loan Losses (continued)

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

39 unchanged sentences

Loans receivable

Allowance for uncollected interest

Note 10 - Goodwill and Intangible Assets

3 unchanged sentences

Goodwill, net of charge-off

The Company did not identify any impairment of goodwill during the year ended December 31, 2021.

The Company identified $ 451,000 in goodwill impairment during the year ended December 31, 2022.

The Company did no t identify any impairment of goodwill in 2021.

Note 11 - Real Estate Owned (“REO”)

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

The Company owned one foreclosed property valued at approximately $ 1,456,000 and $ 1,996,000 at December 31, 2022 and 2021, respectively, consisting of an office building located in Pennsylvania.

The property was acquired through foreclosure in December 2014.

30 unchanged sentences

At December 31, 2022 and 2021, the demand deposit overdrafts totaled $ 517,000 and $ 233,000 .

Overdraft deposits are reclassified as consumer loans and are included in the total loans on the Consolidated Statements of Financial Condition.

The aggregate amount of brokered deposits was $ 114.2 million and $ 44.6 million as of December 31, 2022 and 2021, respectively.

At December 31, 2022 and 2021, the Company also had $ 10.9 million and $ 22.3 million, respectively, in Insured Cash Sweep (“ICS”) reciprocal money market deposits, which are no longer considered fully-insured brokered deposits as defined in the FDIC call report instructions.

The ICS money market deposits were obtained from six retail depositors and then transferred into the ICS Network in order to obtain full FDIC insurance coverage for our customers.

The ICS money market deposits were obtained from seven retail depositors and then transferred into the ICS Network in order to obtain full FDIC insurance coverage for our customers.

These types of deposits are known in the ICS Network as reciprocal deposits, which the Company considers as core deposits and not brokered deposits.

49 unchanged sentences

State net operating loss carryforwards

Reserve for uncollected interest

Benefit plans

2 unchanged sentences

Deferred tax liability:

Accumulated other comprehensive gain – DRP

Total Deferred Tax Liabilities

24 unchanged sentences

Interest cost

Actuarial (gain) loss

Prior service cost

Actuarial gain

Benefits Paid

8 unchanged sentences

Interest cost

Actuarial loss recognized

Prior service cost recognized

Actuarial loss amortized

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

2 unchanged sentences

Benefit payments, which reflect expected future service as appropriate, are expected to be paid for the years ending December 31 as follows (in thousands):

At December 31, 2021 and 2020, unrecognized net gain of $ 27,000 and unrecognized net loss of $ 136,000 , respectively, were included in accumulated other comprehensive income.

At December 31, 2022 and 2021, unrecognized net gain of $ 353,000 and $ 27,000 , respectively, were included in accumulated other comprehensive income.

Supplemental Executive Retirement Plan (“SERP”)

13 unchanged sentences

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

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

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 in 2022 and 2021.

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 December 31, 2022 and 2021, the Company did not have any obligations under the plan.

Employee Stock Ownership Plan (“ESOP”)

7 unchanged sentences

The balance remaining on the first ESOP loan was $ 1,327,000 and $ 1,703,000 at December 31, 2022 and 2021.

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

The balance remaining on the second ESOP loan was $ 6,850,000 and $ 7,270,000 at December 31, 2022 and 2021.

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

2 unchanged sentences

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

Thereafter, on a monthly basis over the terms of the ESOP loans, approximately 2,894 shares for the ESOP established in 2006 and approximately 4,348 shares for the ESOP established in 2021 are committed to be released respectively.

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 during the years ended December 31, 2021 and 2020, totaled approximately $ 931,000 and $ 258,000 , respectively.

Dividends on unallocated shares, which totaled approximately $ 115,000 and $ 19,000 during 2021 and 2020, respectively, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 63,000 and $ 43,000 during 2021 and 2020, respectively, are charged to retained earnings.

Thereafter, on a monthly basis over the terms of the ESOP loans, approximately 2,894 shares for the ESOP established in 2006 and approximately 4,348 shares for the ESOP

Northeast Community Bancorp, Inc.

2 unchanged sentences

Employee Stock Ownership Plan (“ESOP”)(continued)

established in 2022 are committed to be released respectively.

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

ESOP expense during the years ended December 31, 2022 and 2021, totaled approximately $ 1,075,000 and $ 931,000 , respectively.

Dividends on unallocated shares, which totaled approximately $ 365,000 and $ 115,000 during 2022 and 2021, respectively, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 255,000 and $ 63,000 during 2022 and 2021, respectively, are charged to retained earnings.

ESOP shares are summarized as follows:

6 unchanged sentences

Fair value of unearned shares

Note 18 – Stock Based Compensation

At a special shareholders meeting held on September 29, 2022, the Company’s shareholders approved the Company’s 2022 Equity Incentive Plan whereby 1,369,771 shares of the Company’s common stock were 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.

Under this plan, 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 on September 30, 2022, and 265,157 shares of restricted stock and 662,891 nonqualified stock options were in the aggregate were awarded to employees of the Company on November 17, 2022.

The restricted shares and nonqualified stock options vest at a rate of 20 % per year from the date of the grants.

The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted stock under the Company’s 2022 Equity Incentive plan.

Management recognizes compensation expense for the fair value of restricted stock on a straight-line basis over the requisite service period for the entire award.

As of December 31, 2022, there were 137,637 shares available for future awards under this plan, which includes 98,311 shares available for stock options and 39,326 shares available for restricted stock awards.

A summary of the Company’s restricted stock activity and related information for the year ended December 31 follows:

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 18 – Stock Based Compensation (continued)

Outstanding, Beginning of year

Outstanding, end of year

Compensation expense related to restricted stock was $ 116,000 for the year ended December 31, 2022.

The per share weighted-average grant-date fair value of restricted shares granted during 2022 was $ 13.67 .

At December 31, 2022, the total compensation cost related to non-vested awards that has not yet been recognized was $ 4.7 million, which is expected to be recognized over the next 5 years .

A summary of the Company’s stock option activity and related information for the years ended December 31 follows:

Exercise Price

Outstanding, Beginning of year

Outstanding, end of year

Exercisable at end of year

Weighted average fair value

of options granted in current year

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

Pricing Model Assumption Ranges

Risk-free interest rate

Expected volatility

28.79 - 28.94

Expected dividend yield

Expected life

Compensation cost related to stock options is recognized based on the fair value of the stock options at the grant date on a straight line basis over the vesting period.

Compensation expense related to stock options was $ 92,000 for the year ended December 31, 2022.

At December 31, 2022, unrecognized compensation cost related to stock option awards was $ 3.7 million, which is expected to be recognized over the next 5 years .

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 19 - Leases

86 unchanged sentences

Capitalization rate

At December 31, 2020

(In Thousands)

Impaired loans

Income approach

Capitalization rate

Real estate owned

Income approach

Capitalization rate

The Company did not have any assets that were carried at fair value on a non-recurring basis at December 31, 2021.

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

47 unchanged sentences

FHLB of New York advances

Accrued interest payable

Fair Value at

12 unchanged sentences

FHLB of New York advances

Accrued interest payable

Northeast Community Bancorp, Inc.

1 unchanged sentence

Note 22 – Related Party Transactions

At December 31, 2021 and 2020, there were no outstanding loans to a related party.

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

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

Deposits of related parties at the Company totaled $ 2.4 million and $ 1.7 million at December 31, 2022 and 2021, respectively.

23 unchanged sentences

Electronic banking fees and charges

Gain (loss) on disposition of equipment (1)

Gain on disposition of equipment (1)

Income from bank owned life insurance (1)

Investment advisory fees

Unrealized gain (loss) on equity securities (1)

Realized and unrealized loss on equity securities (1)

Miscellaneous (1)

8 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.

10 unchanged sentences

Accounting Standards Pending Adoption:

ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326):

Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No.

2016-13 "Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,"

which requires credit losses on most financial assets to be measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model).

Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.

The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities.

The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination ("PCD assets") should be determined in a similar manner to other financial assets measured on an amortized cost basis.

Upon initial recognition, the allowance for credit losses is added to the purchase price ("gross up approach") to determine the initial amortized cost basis.

The subsequent accounting for PCD assets will use the CECL model described above.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 23 – Recent Accounting Pronouncements (continued)

The ASU made certain targeted amendments to the existing impairment model for available-for-sale (AFS) debt securities.

For an AFS debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis.

As amended, ASU No.

2016-13 and any related amending ASUs No.

2019-04, 2019-11, and 2020-03 are effective for entities qualifying as smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those years.

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.

ASU 2020-03 - Codification Improvements to Financial Instruments

In March 2020, the FASB issued ASU No.

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

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

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

Other amendments are effective upon issuance of this ASU.

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

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

In March 2020, the FASB issued ASU No.

2020-04, "Reference Rate Reform (Topic 848)"

which provides optional expedients and exceptions for applying U.S.

GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued, subject to meeting certain criteria.

Under the new guidance, an entity can elect by accounting topic or industry subtopic to account for the modification of a contract affected by reference rate reform as a continuation of the existing contract, if certain conditions are met.

In addition, the new guidance allows an entity to elect on a hedge-by-hedge basis to continue to apply hedge accounting for hedging relationships in which the critical terms change due to reference rate reform, if certain conditions are met.

A one-time election to sell and/or transfer held-to-maturity debt securities that reference a rate affected by reference rate reform is also allowed.

2020-04 became effective for all entities as of March 12, 2020 and will apply to all LIBOR reference rate modifications through December 31, 2022.

ASU 2021-01 - Reference Rate Reform (Topic 848)

In January 2021, the FASB issued ASU No.

2021-01, "Reference Rate Reform (Topic 848)".

The amendments in this update clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

Amendments in this update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition.

2021-01 became immediately effective for all entities, which may elect to apply the update retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively to new modifications from any date within an interim period that includes or is subsequent to the issuance date of ASU No.

2021-01 up to the date that financial statements are available to be issued.

In addition, ASU No.2021-01 applies to all contract modifications made through December 31, 2022.

We are evaluating the impacts of this ASU and have not yet determined whether LIBOR transition and this ASU will have material effects on our business operations and consolidated financial statements.

The amendments in this update apply to contract modifications that replace a

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets.

This standard, along with several other subsequent codification updates, replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses that are expected to occur over the remaining life of a financial asset and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The new current expected credit losses model (“CECL”) will apply to the allowance for loan losses, available-for-sale and held-to-maturity debt securities, purchased financial assets with credit deterioration and certain off-balance sheet credit exposures.

In adoption of ASU 2016-13 effective on January 1, 2023, the Company has finalized the methodology determination, software models, quantitative framework, and policies and procedures for how to determine expected credit losses under the new guidance.

Management is finalizing the qualitative component of the CECL calculation and is working with an independent third-party consultant to review internal procedures, policies, assumptions, and validate system models.

Northeast Community Bancorp, Inc.

1 unchanged sentence

Note 24 – Recent Accounting Pronouncements (continued)

reference rate reform and contemporaneous modifications of other terms related to the replacement of the reference rate.

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

Reference Rate Reform (Topic 848)

In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S.

GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate.

Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met.

An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination.

Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform.

The amendments in this ASU are effective for all entities upon issuance through December 31, 2022.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, which extends the sunset (or expiration) date of Accounting Standards Codification (ASC) Topic 848 to December 31, 2024.

This gives reporting entities two additional years to apply the accounting relief provided under ASC Topic 848 for matters related to reference rate reform.

ASU 2022-06 is effective for all reporting entities immediately upon issuance and must be applied on a prospective basis.

This Update is not expected to have a significant impact on the Company’s financial statements.

Fair Value Measurement (Topic 820)

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) – Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

This amendment clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security.

It also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

Early adoption is permitted.

The amendments will be applied prospectively, with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption.

This Update is not expected to have a significant impact on the Company’s financial statements.

Presentation of Financial Statements (Topic 205)

In August 2022, the FASB issued ASU 2022-06, Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946):

7 unchanged sentences

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

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 26 – Parent Company Only Financial Information

16 unchanged sentences

Note 26 – Parent Company Only Financial Information (continued)

Condensed Statements of Operations and Comprehensive Income

Condensed Statements of Income and Comprehensive Income

Years Ended December 31,

16 unchanged sentences

Equity in undistributed earnings of subsidiary

Provision for loan losses

(Increase) decrease in other liabilities

Increase in other liabilities

Net Cash Provided by Operating Activities

1 unchanged sentence

Repayment of ESOP loan

Net (increase) decrease in loans

Net increase in loans

Capital infusion to subsidiary

3 unchanged sentences

Issuance of common stock

Stock repurchase

Net Cash Provided by (Used in) Financing Activities

30 unchanged sentences

March 30, 2023

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-K

Item 9A. Controls and Procedures