What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-12 compared with 2022-11-10 · 296 added, 335 removed, 570 unchanged (53% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

September 30,

(In thousands, except share

6 unchanged sentences

Securities available-for-sale, at fair value

Securities held-to-maturity (fair value of $ 22,900 and $ 17,620 , respectively)

Securities held-to-maturity ( net of allowance for credit losses of $ 136 , fair value of $ 23,084 and $ 22,865 , respectively )

Loans receivable

Deferred loan costs, net

Allowance for loan losses

Allowance for credit losses

Premises and equipment, net

19 unchanged sentences

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (continued)

September 30,

(In thousands, except share

10 unchanged sentences

Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive income

Total stockholders’ equity

3 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except per share amounts)

Three Months Ended March 31,

INTEREST INCOME:

5 unchanged sentences

Net Interest Income

Provision for loan loss

Net Interest Income after Provision for Loan Losses

Provision for credit loss

Net Interest Income after Provision for Credit Loss

NON-INTEREST INCOME:

Other loan fees and service charges

Gain on disposition of equipment

Earnings on bank owned life insurance

Investment advisory fees

Unrealized loss on equity securities

Unrealized gain (loss) on equity securities

Total Non-Interest Income

7 unchanged sentences

PROVISION FOR INCOME TAXES

EARNINGS PER COMMON SHARE – BASIC AND DILUTED

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED

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 interim unaudited consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Three Months Ended March 31,

(In thousands)

Other comprehensive income (loss):

Other comprehensive income:

Defined benefit pension:

Reclassification adjustments out of accumulated other comprehensive income:

Amortization of actuarial loss ¹

Actuarial loss (gain) arising during period

Amortization of actuarial loss (gain) ¹

Actuarial loss arising during period

Income tax effect ²

Total other comprehensive income (loss)

Total other comprehensive income

Total Comprehensive Income

5 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2022 and 2021

Three Months Ended March 31, 2023 and 2022

Comprehensive

3 unchanged sentences

Cash dividend declared ($ 0.06 per share)

ESOP shares earned

Balance – March 31, 2022

Other comprehensive income

Cash dividend declared ($ 0.24 per share)

ESOP shares earned

Balance – June 30, 2022

Other comprehensive income

Cash dividend declared ($ 0.06 per share)

Stock repurchases

Restricted Stock Award

Compensation expense related to restricted stock awards

Compensation expense related to stock options

Cumulative effect of adoption of ASU 2016-13

ESOP shares earned

Balance – September 30, 2022

Balance – March 31, 2023

Comprehensive

Shares, net ¹

(In thousands, except share and per share amounts)

4 unchanged sentences

Balance - March 31, 2022

Other comprehensive income (loss)

ESOP shares earned

Balance - June 30, 2021

Other comprehensive loss

Cash dividend declared ($ 0.06 per share)

ESOP shares earned

Purchase of unearned common stock held by employee stock ownership plan

Second-step conversion and stock offering:

Conversion of existing shares

MHC shares sold in public offering, net of cost

Retirement of NECB, MHC shares

( 17,721,500 )

Fractional shares resulting from conversion of existing shares

Treasury stock retired

Balance - September 30, 2021

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

See notes to interim unaudited consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

1 unchanged sentence

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

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

Provision for loan losses

Net amortization of securities premiums and discounts, net

Provision for credit losses

Net amortization of deferred loan fees and costs

Deferred income tax benefit

Unrealized loss recognized on equity securities

Impairment of real estate owned

Unrealized (gain) loss recognized on equity securities

Earnings on bank owned life insurance

Gain on dispositions of premises and equipment

ESOP compensation expense

Compensation expense related to stock options

Compensation expense related to restricted stock

Increase in accrued interest receivable

1 unchanged sentence

Decrease in accounts payable - loan closing

Increase in accounts payable and accrued expenses

Decrease in accounts payable and accrued expenses

Net Cash Provided by Operating Activities

2 unchanged sentences

Proceeds from sale of loans

Principal repayments on securities available-for-sale

Principal repayments on securities held-to-maturity

Purchase of marketable equity securities

Purchase of securities held-to-maturity

Net redemptions of restricted stock

Redemptions of restricted stock

Purchases of premises and equipment

3 unchanged sentences

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

Increase in advance payments by borrowers for taxes and insurance

Cash dividends paid

6 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

20 unchanged sentences

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 eleven branch offices located in Bronx, New York, Orange, Rockland, Sullivan, and Westchester Counties in New York and Essex, Middlesex and Norfolk Counties in Massachusetts and two loan production offices located in White Plains, New York, and New City, New York.

The Bank 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.

22 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period.

Estimates that are particularly susceptible to change in the near term, including novel coronavirus (“COVID-19”) related changes, are used in connection with the determination of the allowance for loan losses, the review of the need for a valuation allowance of the Company’s deferred tax assets and the fair value of financial instruments.

The Company continues to monitor the impact of COVID-19 and 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 could strain the Company’s regulatory capital ratios.

Estimates that are particularly susceptible to change in the near term are used in connection with the determination of the allowance for credit losses, the review of the need for a valuation allowance of the Company’s deferred tax assets and the fair value of financial instruments.

Accounting Pronouncements Adopted in 2023:

Effective January 1, 2023, the Company adopted Accounting Standards Topic 326, “Financial Instruments – Credit Losses” which replaced the previously existing U.S.

GAAP “incurred loss” approach to “expected credit losses” approach, which is referred as Current Expected Credit Losses (“CECL”).

CECL measures the credit loss associated with financial assets carried at amortize cost, including loan receivables, held-to-maturity debt securities, off balance sheet credit exposures.

The company adopted Topic 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balances sheet exposures.

Results for reporting periods beginning after January 1, 2023 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

Upon adoption, we recorded a cumulative-effect adjustment totaling $ 134,000 , or $ 99,000 , net of tax, to reduce

retained earnings.

The transition adjustment includes the adoption and changes to the three applicable components of the allowance for credit losses (“ACL”):

a decrease of $ 1.6 million in the allowance for credit losses related to loans, an increase of $ 132,000 in the allowance for credit losses related to held-to-maturity debt securities, and an increase of $ 1.6 million in the allowance for credit losses related to off-balance sheet items.

The following table illustrates the impact of adopting ASC 326:

January 1, 2023

Adoption Impact

(In Thousands)

ACL on debt securities held-to-maturity

Municipal Bonds

ACL on loan receivables

Residential real estate

Non-residential real estate

Commercial and industrial

ACL for off-balance sheet exposure

Allowance for Credit Losses - Loans

The allowance for credit losses related to loans is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.

Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss experience, current conditions and forecasts of future economic conditions.

Determination of an appropriate ACL is inherently subjective and may have significant changes from period to period.

The methodology for determining the ACL has two main components:

evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The allowance for credit losses related to loans is measured on a collective (pool) basis when similar risk characteristics exist.

If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics.

If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis.

The Company evaluates the pooling methodology at least annually.

Loans are charged off against the allowance for credit losses related to loans when the Company believes the balances to be uncollectible.

Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.

The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk.

Such segments include residential real estate, non-residential real estate, construction, commercial and industrial business, and consumer.

For most segments the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to each individual loan within the segment.

The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount.

The Company estimates the allowance for credit losses related to loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts.

The Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:

management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the renewal option is included in the original or modified contract at the reporting date and are not unconditionally cancelable by the Company.

Also included in the allowance for credit losses related to loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, might not be adequately represented in the quantitative analysis or the forecasts described above.

Factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and non-accrual loans, the effect of external factors such as competition, legal and regulatory requirements, among others.

Qualitative loss factors are applied to each portfolio segment with the amounts judgmentally determined by the relative risk to the most severe loss periods identified in the historical loan charge-offs of the Company.

The Company has elected to exclude accrued interest receivable from the measurement of its ACL.

When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on the loan’s disparate risk characteristics.

When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, the loan’s observable market price or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable.

If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.

Allowance for Credit Losses – Held-to-Maturity Debt Securities

The allowance for credit losses related to held-to-maturity debt securities is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of held-to-maturity debt securities to present the net amount expected to be collected on the held-to-maturity debt securities.

Losses, or portions thereof, are charged off against the ACL when they are deemed uncollectible.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The Company has elected to exclude accrued interest receivable from the measurement of its ACL.

When an investment is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

Allowance for Credit Losses Related to Off-Balance Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The allowance for credit losses related to off-balance sheet credit exposures is adjusted through credit loss expense.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Note 2 — Regulatory Capital

1 unchanged sentence

The Federal Reserve establishes capital requirements, including well capitalized standards, for the consolidated bank 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, 2021, the implementation of the new rule had no material impact on our regulatory capital level or ratios at the Bank level.

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

established a new common equity Tier 1 capital;

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

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

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

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

The Bank met all capital adequacy requirements to which it was subject as of September 30, 2022 and December 31, 2021.

The Bank met all capital adequacy requirements to which it was subject as of March 31, 2023 and December 31, 2022.

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

4 unchanged sentences

(Dollars in Thousands)

As of September 30, 2022:

As of March 31, 2023:

Total capital (to risk-weighted assets)

11 unchanged sentences

Note 3 — Equity Securities

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

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

throughout the United States.

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

September 30,

The following table is the schedule of equity securities at March 31, 2023 and December 31, 2022.

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

(In Thousands)

Equity Securities, at Fair Value

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

The following is a summary of unrealized gain or loss recognized in net income on equity securities during the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(In Thousands)

Net loss recognized on equity securities during the period

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

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

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

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

Note 4 — Securities Available-for-Sale

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

September 30, 2022

(In Thousands)

Mortgage-backed securities – residential:

Federal Home Loan Mortgage Corporation

The Company’s portfolio of securities available-for-sale totaled zero and $ 1,000 at March 31, 2023 and December 31, 2022, respectively.

The following table is the schedule of securities available-for-sale at December 31, 2022:

December 31, 2022

2 unchanged sentences

Federal Home Loan Mortgage Corporation

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

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

September 30, 2022

Amortized Cost

(In Thousands)

Due after one year but within five years

The maturities shown above are based upon contractual final maturity.

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

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

There were no sales of securities available-for-sale as of March 31, 2023 and December 31, 2022.

At March 31, 2023 and December 31, 2022, the Company had no unrealized loss.

Note 5 — Securities Held-to-Maturity

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

September 30, 2022

The following table summarizes the Company’s portfolio of securities held-to-maturity at March 31, 2023 and December 31, 2022.

March 31, 2023

(In Thousands)

16 unchanged sentences

Municipal Bonds

Treasury securities

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

Treasury securities were as follows at September 30, 2022:

September 30, 2022

Treasury securities were as follows at March 31, 2023:

March 31, 2023

(In Thousands)

5 unchanged sentences

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

The age of unrealized losses and the fair value of related securities held-to-maturity were as follows:

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity:

Balance – December 31, 2022

Impact of adopting ASC 326

Provision for credit loss

Balance – March 31, 2023

The age of unrealized losses and the fair value of related securities held-to-maturity, for which an allowance for credit losses was not deemed necessary, were as follows:

Less than 12 Months

1 unchanged sentence

(In Thousands)

September 30, 2022:

March 31, 2023:

Mortgage-backed securities - residential:

4 unchanged sentences

Total mortgage-backed securities

Municipal Bonds

Treasury securities

3 unchanged sentences

December 31, 2022:

Municipal Bonds

Mortgage-backed securities - residential:

Government National Mortgage Association

Federal Home Loan Mortgage Corporation

2 unchanged sentences

Total mortgage-backed securities

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

Municipal Bonds

Treasury securities

At March 31, 2023, thirty-four mortgage-backed securities and two U.S.

Treasury notes had unrealized loss due to interest rate volatility.

1 unchanged sentence

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 mortgage-backed securities and three municipal bonds with unrealized loss.

Note 6 — Loans Receivable and the Allowance for Loan Losses

Loans are stated at unpaid principal balances plus net deferred loan origination fees and costs less an allowance for loan losses.

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

Treasury notes had unrealized loss due to interest rate volatility.

Credit Quality Indicators

The held to maturity securities portfolio consists of agency mortgage-backed securities, U.S.

Treasuries and municipal bonds.

All agency mortgage-backed securities and U.S.

Treasuries are issued by U.S.

government entities and agencies.

These securities are either explicitly or implicitly guaranteed by the U.S.

government, are highly rated by major rating agencies and have a long history of no credit losses.

The six municipal bonds in the portfolio carry no lower than A ratings from the rating agencies at March 31, 2023 and have a long history of no credit losses.

The Company regularly monitors the municipal bonds sector of the market and reviews collectability including such factors as the financial condition of the issuers as well as credit ratings in effect as of the reporting period.

Note 6 — Loans Receivable and the Allowance for Credit Losses

Loans are stated at unpaid principal balances plus net deferred loan origination fees and costs less an allowance for credit losses.

Interest on loans receivable is recorded on the accrual basis.

7 unchanged sentences

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

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

September 30,

The composition of loans were as follows at March 31, 2023 and December 31, 2022:

(In Thousands)

5 unchanged sentences

Deferred loan costs, net

Allowance for loan losses

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

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

The Company did not originate Payroll Protection Program (“PPP”) loans associated with the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (the “CARES Act”) in 2022 or 2021.

The Company had no loans to related parties at September 30, 2022 and December 31, 2021.

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

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

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

Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

Allowance for credit losses

Loans serviced for the benefit of others totaled approximately $ 26,112,000 and $ 22,350,000 at March 31, 2023 and December 31, 2022, respectively.

The value of mortgage servicing rights was not material at March 31, 2023 and December 31, 2022.

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

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

Loans deemed to be uncollectible are charged against the allowance for credit losses, and subsequent recoveries, if any, are credited to the allowance.

All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated.

The allowance for credit losses on loans is maintained at a level considered adequate to provide for losses that can be reasonably anticipated.

Management performs a quarterly evaluation of the adequacy of the allowance.

The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors.

The allowance is based on the relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts.

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

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

At September 30, 2022:

The following tables summarize the allocation of the allowance for credit losses based upon the calculation methodology described in Note 1, and loans receivable by loan class and credit loss method at March 31, 2023 and December 31, 2022:

At March 31, 2023:

(In Thousands)

Allowance for loan losses:

Allowance for credit losses:

Ending balance

Ending balance:

individually evaluated for impairment

individually evaluated for credit loss

Ending balance:

collectively evaluated for impairment

collectively evaluated for credit loss

Loans receivable:

1 unchanged sentence

Ending balance:

individually evaluated for impairment

individually evaluated for credit loss

Ending balance:

collectively evaluated for impairment

collectively evaluated for credit loss

At December 31, 2022:

12 unchanged sentences

collectively evaluated for impairment

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

(In Thousands)

Allowance for loan losses:

Balance - June 30, 2022

Provision (Benefit)

Balance -September 30, 2022

(In Thousands)

Allowance for loan losses:

Balance - June 30, 2021

Provision (Benefit)

Balance - September 30, 2021

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

The activity in the allowance for credit loss by loan class for the three months ended March 31, 2023 and 2022 was as follows:

(In Thousands)

Allowance for loan losses:

Allowance for credit losses:

Balance - December 31, 2022

Impact of adopting ASC 326

Provision (Benefit)

Balance - September 30, 2022

Balance -March 31, 2023

(In Thousands)

2 unchanged sentences

Provision (Benefit)

Balance - September 30, 2021

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

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

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

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

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

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

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

The credit provision recorded for non-residential loans

was attributed to loan recoveries and decreased loan balances.

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

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

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

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

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

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

Unpaid Principal

Average Recorded

Interest Income

Average Recorded

Interest Income

(In Thousands)

With no related allowance recorded:

Residential real estate-Multi-family

Non-residential real estate

Commercial and industrial

With an allowance recorded

Residential real estate-Multi-family

Non-residential real estate

Commercial and industrial

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Balance - March 31, 2022

The Company has no individually evaluated loans at March 31, 2023, and there was no interest income recognized from individually evaluated loans as of March 31, 2023.

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

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

Three Months Ended March 31, 2022

Unpaid Principal

1 unchanged sentence

Interest Income

Average Recorded

Interest Income

(In Thousands)

20 unchanged sentences

Commercial and industrial

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

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

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

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

There were no non-accrual loans at December 31, 2021.

There were no non-accrual loans at March 31, 2023 and December 31, 2022, respectively.

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

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

Age Analysis of Past Due Loans as of March 31, 2023:

(In Thousands)

12 unchanged sentences

Commercial and industrial loans

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

Credit Risk Profile by Internally Assigned Grade as of September 30, 2022:

Non-residential

and Industrial

(In Thousands)

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as:

current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.

The Company analyzes loans individually to classify the loans as to credit risk.

The Company uses the following definitions for risk ratings:

Pass – Loans that are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner.

Special Mention – Loans which do not currently expose the Company to a sufficient degree of risk to warrant an adverse classification but have some credit deficiencies or other potential weaknesses.

Substandard – Loans which are inadequately protected by the paying capacity and net worth of the obligor or the collateral pledged, if any.

Substandard assets include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans which have all of the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values.

The following table presents the risk category of loans at March 31, 2023 by loan segment and vintage year:

Term Loans Amortized Costs Basis by Origination Year

March 31, 2023

Residential real estate

Special Mention

Residential real estate

Current period gross charge-offs

Non-residential real estate

Special Mention

Non-residential real estate

Current period gross charge-offs

Special Mention

Current period gross charge-offs

Commercial and industrial

Special Mention

Commercial and industrial

Current period gross charge-offs

Special Mention

Current period gross charge-offs

Special Mention

There were no non-performing loans at March 31, 2023.

The following table provides certain information related to the credit quality of our loan portfolio.

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

3 unchanged sentences

Special Mention

Troubled Debt Restructuring:

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

September 30,

(Dollars in Thousands)

Residential Real Estate - Mixed-use

Non-residential real estate

Total performing

The following is a summary of interest foregone on loans classified as a TDR for the three and nine month periods ended September 30, 2022 and 2021:

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Interest income that would have been recognized had the loans performed in accordance with their original terms

Interest income included in the results of operations

Total foregone interest

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

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

Modifications to Borrowers Experiencing Financial Difficulty:

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reduction.

When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Company provides multiple types of concessions on one loan.

Typically, one type of concession, such as a term extension, is granted initially.

If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

There were no loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2023 or the year ended December 31, 2022.

Allowance for Credit Losses on Off-Balance Sheet Commitments:

The following table presents the activity in the allowance for credit losses related to off-balance sheet commitments, that is included in Accounts Payable and Accrued Expenses on the consolidated statement of financial condition, for the three months ended March 31, 2023:

Allowance for

Balance – December 31, 2022

Impact of adopting ASC 326

Provision for credit loss

Balance – March 31, 2023

Note 7 — Real Estate Owned (“REO”)

The Company owned one foreclosed property valued at approximately $ 1,807,000 at September 30, 2022 and $ 1,996,000 at December 31, 2021, consisting of an office building located in Pennsylvania.

The Company owned one foreclosed property valued at approximately $ 1,456,000 at March 31, 2023 and $ 1,456,000 at December 31, 2022, consisting of an office building located in Pennsylvania.

The property was acquired through foreclosure in December 2014.

1 unchanged sentence

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

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

REO expense recorded in the consolidated statements of income amounted to $ 21,000 and $ 31,000 for the three months ended March 31, 2023 and 2022, respectively.

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

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

September 30,

FHLB advances are summarized as follows at March 31, 2023 and December 31, 2022:

Weighted Average

7 unchanged sentences

After five years (due 2030)

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

At March 31, 2023, none of the above advances were subject to early call or redemption features.

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

At September 30, 2022, the advances were secured by a pledge of the Company’s investment in the capital stock of the FHLB and a blanket assignment of the Company’s otherwise unpledged qualifying mortgage loans.

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

At September 30, 2022, the Company had the ability to borrow $ 18.1 million, net of $ 21.0 million in outstanding advances, from the FHLB and $ 8.0 million from Atlantic Community Bankers Bank (“ACBB”).

At March 31, 2023, the advances were secured by a pledge of the Company’s investment in the capital stock of the FHLB and a blanket assignment of the Company’s otherwise unpledged qualifying mortgage loans.

At March 31, 2023, these unpledged qualifying mortgage loans were not pledged to any company other than the FHLB.

At March 31, 2023, the Company had the ability to borrow $ 35.5 million, net of $ 14.0 million in outstanding advances, from the FHLB and $ 8.0 million from Atlantic Community Bankers Bank (“ACBB”).

Note 9 — Benefits Plans

1 unchanged sentence

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

The following table sets forth information regarding the components of net pension periodic expense measured as of September 30, 2022 and 2021:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars In Thousands)

The following table sets forth information regarding the components of net pension periodic expense measured as of March 31, 2023 and 2022:

Three Months Ended March 31,

(Dollars In Thousands)

1 unchanged sentence

Interest cost

Actuarial loss recognized

Actuarial (gain) loss recognized

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

Unrecognized net loss of $ 23,000 and unrealized net gain of $ 14,000 for the three months, and unrecognized net loss of $ 63,000 and unrecognized net gain of $ 35,000 for the nine months ended September 30, 2022 and 2021, respectively, were included in accumulated other comprehensive income.

Unrecognized net loss of $ 18,000 and $ 17,000 for the three months ended March 31, 2023 and 2022, respectively, were included in accumulated other comprehensive income.

Supplemental Executive Retirement Plan (“SERP”)

5 unchanged sentences

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

Expenses of $ 121,000 and $ 132,000 for the three months, and $ 361,000 and $ 359,000 for the nine months ended September 30, 2022 and 2021, respectively, were recorded for this plan and are reflected in the Consolidated Statements of Income under Salaries and Employee Benefits.

Expenses of $ 60,000 and $ 119,000 for the three months, respectively, were recorded for this plan and are reflected in the Consolidated Statements of Income under Salaries and Employee Benefits.

Stock-Based Deferral Plan

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

At September 30, 2022, the Company did not have any obligations under the plan.

At March 31, 2023, the Company did not have any obligations under the plan.

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

Participants are permitted to contribute from 1 % to 15 % or 60 % of their annual compensation up to the maximum permitted under the Internal Revenue Code.

The Company provided no matching contribution during the three and nine months ended September 30, 2022 and 2021.

The Company provided no matching contribution during the three months ended March 31, 2023 and 2022.

Employee Stock Ownership Plan (“ESOP”)

6 unchanged sentences

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

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

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

The balance remaining on the first ESOP loan was $ 1,327,000 at March 31, 2023 and December 31, 2022.

The balance remaining on the second ESOP loan was $ 6,850,000 at March 31, 2023 and December 31, 2022.

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

4 unchanged sentences

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

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

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

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

ESOP expense totaled approximately $ 326,000 and $ 258,000 for the three months ended March 31, 2023 and 2022, respectively.

Dividends on unallocated shares, which totaled approximately $ 47,000 and $ 52,000 for the three months ended March 31, 2023 and 2022, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 42,000 and $ 36,000 for the three months ended March 31, 2023 and 2022, respectively, are charged to retained earnings.

ESOP shares are summarized as follows:

September 30,

Allocated shares

19 unchanged sentences

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

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

September 30,

At March 31, 2023 and December 31, 2022, the quantitative data relating to the Company’s leases are as follows (in thousands):

Finance Lease Amounts:

9 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars In Thousands)

Three Months Ended March 31,

(Dollars In Thousands)

6 unchanged sentences

Operating leases

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

Maturities of lease liabilities at March 31, 2023 are as follows (in thousands):

Years ended December 31:

12 unchanged sentences

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

The following table sets forth the Company’s assets that are carried at fair value on a recurring basis and the level that was used to determine their fair value at September 30, 2022 and December 31, 2021:

The following table sets forth the Company’s assets that are carried at fair value on a recurring basis and the level that was used to determine their fair value at March 31, 2023 and December 31, 2022:

Quoted Prices in

4 unchanged sentences

Recurring Basis

September 30,

Marketable equity securities:

Mortgage-backed securities

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

The Company did no t have any liabilities that were carried at fair value on a recurring basis at September 30, 2022 and December 31, 2021.

The following table sets forth the Company’s assets that are carried at fair value on a non-recurring basis and the level that was used to determine their fair value, at September 30, 2022 and December 31:

There were no transfers between Level 1 and 2 during the three months ended March 31, 2023 or the year ended December 31, 2022.

The Company did no t have any liabilities that were carried at fair value on a recurring basis at March 31, 2023 and December 31, 2022.

The following table sets forth the Company’s assets that are carried at fair value on a non-recurring basis and the level that was used to determine their fair value, at March 31, 2023 and December 31:

Quoted Prices in

4 unchanged sentences

Non-Recurring Basis

September 30,

(In Thousands)

Loans individually evaluated

Real estate owned

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

At September 30, 2022

The Company did not have any assets that were carried at fair value on a non-recurring basis at March 31, 2023.

The following tables present the qualitative information about non-recurring Level 3 fair value measurements of financial instruments at December 31, 2022:

At December 31, 2022

(In Thousands)

Impaired loans

Income approach

Capitalization rate

Real estate owned

1 unchanged sentence

Capitalization rate

The Company did no t have any liabilities that were carried at fair value on a non-recurring basis at September 30, 2022 and December 31, 2021.

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

The Company did no t have any liabilities that were carried at fair value on a non-recurring basis at March 31, 2023 and December 31, 2022.

The methods and assumptions used to estimate fair value at March 31, 2023 and December 31, 2022 are as follows:

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

2 unchanged sentences

Subsequently, as these properties are actively marketed, the estimated fair values may be periodically adjusted through incremental subsequent write-downs to reflect decreases in estimated values resulting from sales price observations and the impact of changing economic and market conditions.

A loan is considered impaired when, based upon current information and events;

it is probable that the Company will be unable to collect all scheduled payments in accordance with the contractual terms of the loan.

Impaired loans that are collateral dependent are written down to fair value through the establishment of specific reserves, a component of the allowance for loan losses or through partial charge-offs, and as such are carried at the lower of cost or the fair value.

A loan is considered individually evaluated for credit loss when, based upon current information and events, it is probable that the Company will be unable to collect all scheduled payments in accordance with the contractual terms of the loan.

Individually evaluated loans that are collateral dependent are written down to fair value through the establishment of specific reserves, a component of the allowance for credit losses or through partial charge-offs, and as such are carried at the lower of cost or the fair value.

Estimates of fair value of the collateral are determined based on a variety of information, including available valuations from certified appraisers for similar assets, present value of discounted cash flows and inputs that are estimated based on commonly used and generally accepted industry liquidation advance rates and estimates and assumptions developed by management.

9 unchanged sentences

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

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2022 and December 31, 2021:

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at March 31, 2023 and December 31, 2022:

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

5 unchanged sentences

Fair Value at

September 30, 2022

March 31, 2023

(In thousands)

33 unchanged sentences

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

As of September 30, 2022, the Company did not have any significant contract balances.

As of March 31, 2023, the Company did not have any significant contract balances.

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

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

The following table presents the Company’s sources of noninterest income for the three months ended March 31, 2023 and 2022.

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Three Months Ended March 31,

(In Thousands)

3 unchanged sentences

Electronic banking fees and charges

Gain on disposition of equipment (1)

Income from bank owned life insurance (1)

17 unchanged sentences

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

The registered broker-dealer deducts investment advisory fees and financial

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

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

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

1 unchanged sentence

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Three Months Ended March 31,

(In Thousands)

6 unchanged sentences

Recruiting expense

Note 14 — Recent Accounting Pronouncements

Accounting Standards Pending Adoption:

ASU 2016-13 - 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.

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, 2020-03, and 2022-02 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 is actively working on preliminary test calculations, and data validation, as well as process and procedural documentation.

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

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

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

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

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

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

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

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

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

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

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

Note 14 — 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.

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 weighted average shares outstanding used in the computations of basic and diluted earnings per share.

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

Three Months Ended March 31,

(In Thousands, except per share data)

Net income (basic and diluted)

Weighted average shares issued

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

Note 15 — Stock Compensation Plans

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

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

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

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

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

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

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

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

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

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

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 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 March 31, 2023 and 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 three months ended March 31, 2023 follows:

Weighted Average

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Compensation expense related to restricted stock was $ 241,000 for the three months ended March 31, 2023.

At March 31, 2023 and December 31, 2022, the total compensation cost related to non-vested awards that has not yet been recognized was $ 4.5 million and $ 4.7 million, respectively, 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 three months ended March 31, 2023 follows:

Weighted Average

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Exercisable at March 31, 2023

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 $ 192,000 for the three months ended March 31, 2023.

At March 31, 2023 and December 31, 2022, unrecognized compensation cost related to stock option awards was $ 3.6 million and $ 3.7 million, respectively, which is expected to be recognized over the next 5 years .

Note 16 — Recent Accounting Pronouncements

There is no Accounting Standards pending adoption at March 31, 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-Q

Item 1. Financial Statements