What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-12 compared with 2022-11-10 · 107 added, 242 removed, 145 unchanged (71% of the section changed)

25 unchanged sentences

and (xv) changes in accounting policies and practices, as may be adopted by bank regulatory agencies or the Financial Accounting Standards Board.

COVID-19 Pandemic

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

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

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

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

Critical Accounting Policies

1 unchanged sentence

We consider these accounting policies to be our crucial accounting policies.

The judgements and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances.

The judgements and assumptions we use are

based on historical experience and other factors, which we believe to be reasonable under the circumstances.

Actual results could differ from these judgements and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Allowance for Loan Losses

We consider the allowance for loan losses to be a critical accounting policy.

The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet 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.

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.

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

The allowance is based on our 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.

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

The allowance consists of specific and general reserves.

The specific component relates to loans that are classified as impaired.

For loans that are classified as impaired, a specific allowance is established or a partial charge-off is taken when the fair market value of the collateral is lower than the carrying value of that loan.

Beginning in the fourth quarter of 2012, we discontinued the use of specific allowances.

If an impairment is identified, we now charge off the impaired portion immediately.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment records, and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan-by-loan basis.

The general component of the allowance calculation is also based on the loss factors that reflect our historical charge-off experience adjusted for current economic conditions applied to loan groups with similar characteristics or classifications in the current portfolio.

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

Such system takes into

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

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

Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date at a below market rate.

Adversely classified, non-accrual troubled debt restructurings may be returned to accrued status if principal and interest payments, under the modified terms, are current for six consecutive months after modification.

All troubled debt restructured loans are classified as impaired.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss model, or CECL, ASU 2016-13.

We previously elected to defer the adoption of ASU 2016-13 until December 31, 2021.

As permitted by the CARES Act, and based on legislation enacted in December 2020 which extended certain provision of the CARES Act, we elected to extend the adoption of CECL until January 1, 2023 in accordance with the recent legislation.

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

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

We consider the allowance for credit losses (“ACL”) to be a critical accounting policy.

In connection with the Company’s adoption of Topic 326 effective January 1, 2023, the Company adopted the three applicable components of the ACL:

an ACL related to loans, an ACL related to held-to-maturity (“HTM”) securities, and an ACL related to off-balance sheet credit exposures.

See Note 1, Summary of Significant Accounting Policies, for additional information on the adoption of ASC 326.

Balance Sheet Analysis

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Total assets increased by $77.8 million, or 5.5%, to $1.5 billion at March 31, 2023, from $1.4 billion at December 31, 2022.

The increase in assets was primarily due to increases in net loans of $98.6 million, partially offset by decreases in cash and cash equivalents of $18.3 million and other assets of $3.3 million.

Cash and cash equivalents decreased by $18.3 million, or 19.2%, to $77.0 million at March 31, 2023 from $95.3 million at December 31, 2022.

The decrease in cash and cash equivalents was a result of cash being deployed to fund an increase in net loans of $98.6 million, a reduction in FHLB advances of $7.0 million, and stock repurchases of $10.5 million.

Equity securities increased by $225,000, or 1.2%, to $18.3 million at March 31, 2023 from $18.0 million at December 31, 2022.

The increase in equity securities was attributable to market depreciation of $225,000 due to market interest rate volatility during the three months ended March 31, 2023.

Securities held-to-maturity decreased by $287,000, or 1.1%, to $26.1 million at March 31, 2023 from $26.4 million at December 31, 2022 due partially to the establishment of $136,000 in an allowance for held-to-maturity securities pursuant to the adoption of the current expected credit losses model (“CECL”) on held-to-maturity investment securities loss exposures and to maturities and pay-downs.

Loans, net of the allowance for credit losses, increased by $98.6 million, or 8.1%, to $1.3 billion at March 31, 2023 from $1.2 million at December 31, 2022.

The increase in loans, net of the allowance for credit losses, was primarily due to loan originations of $214.7 million during the three months ended March 31, 2023, consisting primarily of $176.4 million in construction loans with respect to which approximately 31.5% of the funds were disbursed at loan closings, with the remaining funds to be disbursed over the terms of the construction loans.

In addition, we originated $17.0 million in commercial and industrial loans, $13.1 million in multi-family loans, and $8.2 million in mixed-use loans.

Loan originations resulted in a net increase of $78.2 million in construction loans, $13.5 million in commercial and industrial loans, $7.2 million in mixed-use loans, $1.6 million in multi-family loans, and $490,000 in consumer loans.

The increase in our loan portfolio was partially offset by decreases in non-residential loans of $3.7 million and residential loans of $67,000, coupled with normal pay-downs and principal reductions.

Premises and equipment decreased by $220,000, or 0.8%, to $25.8 million at March 31, 2023 from $26.1 million at December 31, 2022 primarily due to depreciation of fixed assets.

Investments in Federal Home Loan Bank stock decreased by $315,000, or 25.4%, to $923,000 at March 31, 2023 from $1.2 million at December 31, 2022 due to a reduction in mandatory Federal Home Loan Bank stock in connection with the maturity/pay-off of $7.0 million in advances during the quarter ended March 31, 2023.

Accrued interest receivable increased by $1.3 million, or 15.4%, to $9.9 million at March 31, 2023 from $8.6 million at December 31, 2022 due to an increase in the loan portfolio and two interest rate increases in 2023 that caused an increase in the interest rates in our construction loan portfolio.

Foreclosed real estate was $1.5 million at March 31, 2023 and at December 31, 2022.

Right of use assets — operating decreased by $130,000, or 5.6%, to $2.2 million at March 31, 2023 from $2.3 million at December 31, 2022, primarily due to amortization.

Other assets decreased by $3.3 million, or 61.5%, to $2.1 million at March 31, 2023 from $5.3 million at December 31, 2022 due to a decrease in tax assets of $4.1 million coupled with a reclassification of tax assets totaling $1.0 million from other assets to other liabilities and a decrease in suspense accounts of $268,000, partially offset by increases in prepaid expenses of $47,000 and miscellaneous assets of $5,000.

Total deposits increased by $86.4 million, or 7.7%, to $1.2 billion at March 31, 2023 from $1.1 billion at December 31, 2022.

The increase was primarily due to an increase in certificates of deposit of $122.3 million, or 31.9%, savings account balances of $5.1 million, or 1.9% and NOW/money market accounts of $4.7 million, or 5.3%.

These increases were partially offset by a decrease in non-interest bearing demand deposits of $45.7 million, or 12.2%, from December 31, 2022 to March 31, 2023.

Federal Home Loan Bank advances decreased by $7.0 million, or 33.3%, to $14.0 million at March 31, 2023 from $21.0 million at December 31, 2022 due to maturity of borrowings.

Advance payments by borrowers for taxes and insurance increased by $1.4 million, or 58.4%, to $3.8 million at March 31, 2023 from $2.4 million at December 31, 2022 due primarily to the accumulation of tax payments from borrowers.

Lease liability – operating decreased by $129,000, or 5.5%, to $2.2 million at March 31, 2023 from $2.4 million at December 31, 2022, primarily due to amortization.

Accounts payable and accrued expenses decreased by $3.4 million, or 23.3%, to $11.3 million at March 31, 2023 from $14.8 million at December 31, 2022 due primarily to a decrease in accrued bonus expense of $3.2 million for employees and a decrease in suspense accounts for loan closings of $2.7 million, partially offset by the addition of an allowance for off-balance sheet commitments of $1.4 million due to the adoption of CECL on off-balance sheet exposures and a reclassification of tax assets totaling $1.0 million from other assets to other liabilities.

Stockholders’ equity increased by $514,000, or 0.2% to $262.5 million at March 31, 2023, from $262.0 million at December 31, 2022.

The increase in stockholders’ equity was due to net income of $11.2 million for the three months ended March 31, 2023, $433,000 in the amortization of restricted stocks and stock options granted in connection with the 2022 Equity Incentive Plan, a reduction of $145,000 in unearned employee stock ownership plan shares coupled with an increase of $109,000 in earned employee stock ownership plan shares, and $7,000 in other comprehensive income, partially offset by stock repurchases totaling $10.5 million, dividends paid and declared of $875,000, and a one-time adjustment to retained earnings of $99,000 due to the adoption of CECL.

Results of Operations for the Three Months Ended March 31, 2023 and 2022

Financial Highlights

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

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

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

Net income for the three months ended March 31, 2023 was $11.2 million compared to net income of $3.6 million for the three months ended March 31, 2022.

The increase in net income of $7.6 million, or 208.5% for the three months ended March 31, 2023 compared to the same period in the prior year was due to increases in net interest income and non-interest income, partially offset by increases in provisions for credit loss expense, non-interest expense, and income tax expense.

Net Interest Income

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

Net interest income totaled $22.8 million for the three months ended March 31, 2023, as compared to $11.9 million for the three months ended March 31, 2022.

The increase in net interest income of $10.9 million, or 91.5%, was primarily due to an increase in interest income offset by an increase in interest expense.

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

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

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

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

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

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

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

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

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

Provision for Loan Losses.

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

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

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

The loan is secured by commercial real estate located

in Greenwich, Connecticut and guaranteed by the two borrowers.

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

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

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

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

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

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

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

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

Future additions or reductions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors.

As a result, our allowance for loan losses may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially adversely affect our operating results.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses.

Such agencies may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

Non-Interest Income

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

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

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

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

The increase in other loan fees and service charges was due to an increase of $115,000 in other loan fees and loan servicing fees and an increase of $47,000 in ATM and debit card usage fees.

Non-Interest Expense

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Income Taxes.

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

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

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

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

Financial Highlights

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

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

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

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

Net Interest Income

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

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

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

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

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

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

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

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

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

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

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

Provision for Loan Losses.

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

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

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

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

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

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

Future additions or reductions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors.

As a result, our allowance for loan losses may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially adversely affect our operating results.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses.

Such agencies may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

The increase in interest income is also attributed to a rising interest rate environment and the Federal Reserve’s interest rate increases in the past year.

In this regard, total interest income increased by $15.2 million, or 114.8%, to $28.5 million for the three months ended March 31, 2023 from $13.3 million for the three months ended March 31, 2022.

The increase was due to an increase in the average balance of interest earning assets of $207.0 million, or 17.7%, to $1.4 billion for the three months ended March 31, 2023 from $1.2 billion for the three months ended March 31, 2022 and an increase in the yield on interest earning assets by 374 basis points from 4.54% for the three months ended March 31, 2022 to 8.28% for the three months ended March 31, 2023.

The increase in market interest rates in the past year also caused an increase in our interest expense.

As a result, the increase in interest expense for the three months ended March 31, 2023 was due to an increase in the cost of funds on our deposits and borrowed money and increases in the balances on our certificates of deposits and savings and club balances, partially offset by decreases in the balances on interest-bearing demand deposits and balances on our borrowed money.

Interest expense increased by $4.3 million, or 320.8%, to $5.7 million for the three months ended March 31, 2023 from $1.3 million for the three months ended March 31, 2022.

The increase was due to an increase in the cost of interest bearing liabilities by 189 basis points from 0.85% for the three months ended March 31, 2022 to 2.74% for the three months ended March 31, 2023 and an increase in average interest bearing liabilities of $191.7 million, or 30.2%, to $827.0 million for the three months ended March 31, 2023 from $635.3 million for the three months ended March 31, 2022.

Net interest margin increased by 255 basis points, or 62.5%, during the three months ended March 31, 2023 to 6.63% compared to 4.08% during the three months ended March 31, 2022.

Provision for Credit Losses

The Company recorded credit loss expense of $1,000 for the three months ended March 31, 2023 compared to no credit loss expense for the three months ended March 31, 2022.

The credit loss expense of $1,000 for the three months ended March 31, 2023 was due to the implementation of CECL and was comprised of credit loss expense for loans of $197,000 and credit loss expense for HTM investment securities of $4,000, which expenses were mostly offset by a credit loss expense reduction for off-balance sheet commitments of $200,000.

We charged-off $21,000 during the three months ended March 31, 2023 as compared to charged-off of $10,000 during the three months ended March 31, 2022 against various unpaid overdrafts in our demand deposit accounts.

We recorded no recoveries from previously charged-off loans during the three months ended March 31, 2023 compared to recoveries of $96,000 during the three months ended March 31, 2022 which comprised of $53,000 from a previously charged-off loan secured by a non-residential property and $43,000 regarding a previously charged-off loan secured by a mixed-use property.

Based on a review at March 31, 2023 of the loans that were in the loan portfolio, our off-balance sheet credit exposures, and our HTM investment securities, management believes that the allowances for these three components are maintained at a level that represents our best estimate of inherent losses in the loan portfolio, off-balance sheet credit exposures, and HTM investment securities that were both probable and reasonably estimable.

Management uses available information to establish the appropriate level of the three ACLs.

Future additions or reductions to the three ACLs might be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors.

As a result, our three ACLs might not be sufficient to cover actual credit losses, and future provisions for credit losses could materially adversely affect our operating results.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review our three ACLs.

Such agencies may require us to recognize adjustments to the three ACLs based on their judgments about information available to them at the time of their examination.

Non-Interest Income

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

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

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

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

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

Non-interest income for the three months ended March 31, 2023 was $1.1 million compared to non-interest income of $58,000 for the three months ended March 31, 2022.

The increase in total non-interest income was primarily due to an unrealized gain on equity securities of $225,000 during the three months ended March 31, 2023 compared to an unrealized loss of $634,000 on equity securities during the three months ended March 31, 2022.

The unrealized gain of $225,000 on equity securities during the 2023 period was due to market interest rate volatility during the quarter ended March 31, 2023.

The increase in total non-interest income was also due to increases of $216,000 in other loan fees and service charges and $2,000 in bank-owned life insurance income, partially offset by a decrease of $20,000 in investment advisory fees.

The increase in other loan fees and service charges was due to an increase of $179,000 in other loan fees and loan servicing fees and an increase of $41,000 in ATM and debit card usage fees, partially offset by a decrease of $4,000 in savings account fees.

Non-Interest Expense

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Non-interest expense increased by $971,000, or 13.4%, to $8.2 million for the three months ended March 31, 2023 from $7.2 million for the three months ended March 31, 2022.

The increase resulted primarily from increases of $714,000 in salaries and employee benefits, $113,000 in other operating expense, $79,000 in outside data processing expense, $66,000 in occupancy expense, and $14,000 in equipment expense, partially offset by a decrease of $10,000 in real estate owned expense and $5,000 in advertising expense,.

Salaries and employee benefits increased by $714,000, or 18.7%, to $4.5 million for the three months ended March 31, 2023 from $3.8 million for the three months ended March 31, 2022 primarily due to the amortized expense in 2023 but none in 2022 regarding the restricted stocks and stocks options granted to employees in connection with the 2022 Equity Incentive Plan, an increase in the number of full time equivalent personnel due to the opening of one additional branch office and the expansion of headquarters staff to support the Company’s growth, an increase in bonus accruals, an increase in the employee stock ownership plan (“ESOP”) compensation cost, and a decrease in loan origination offset expenses related to loan origination fees.

These increases were partially offset by a decrease in the Supplemental Executive Retirement Plan (“SERP”) compensation due to an increase in the discount rate used to calculate accrued benefits/expense.

Other non-interest expense increased by $113,000, or 5.7%, to $2.1 million for the three months ended March 31, 2023 from $2.0 million for the three months ended March 31, 2022 due mainly to increases of $151,000 in miscellaneous other non-interest expense, $85,000 in directors compensation, $62,000 in service contracts expense, $15,000 in telephone expense, $13,000 in insurance expense, $10,000 in office supplies, and $4,000 in directors, officers and employee expense.

These increases were partially offset by decreases of $94,000 in audit and accounting fees, $69,000 in consulting fees, $34,000 in legal fees, and $26,000 in expenses related to the hiring of personnel.

The increase of $151,000 in miscellaneous other non-interest expense was mainly due to an increase of $102,000 in dues and subscriptions, an increase of $56,000 in regulatory insurance premiums and assessments due to an increase in our total assets, and an increase of $17,000 in check and correspondence bank charges, partially offset by a decrease of $26,000 in miscellaneous charge-offs.

The increase of $85,000 in directors compensation was due to the amortized expense in 2023 but none in 2022 regarding the restricted stocks and stocks options granted to directors in connection with the 2022 Equity Incentive Plan.

Outside data processing expense increased by $79,000, or 18.1%, to $515,000 for the three months ended March 31, 2023 from $436,000 for the three months ended March 31, 2022 due to the cost of operating an additional branch office and additional data processing services.

Occupancy expense increased by $66,000, or 10.9%, to $669,000 for the three months ended March 31, 2023 from $603,000 for the three months ended March 31, 2022 primarily as a result of the cost of operating an additional branch office.

Equipment expense increased by $14,000, or 4.8%, to $304,000 for the three months ended March 31, 2023 from $290,000 for the three months ended March 31, 2022 due to the purchases of additional equipment to support the Company’s expansion.

Real estate owned expense decreased by $10,000, or 32.3%, to $21,000 for the three months ended March 31, 2023 from $31,000 for the three months ended March 31, 2022 due to reduction in operating expenses to maintain the one real estate owned property.

Advertising expense decreased by $5,000, or 9.3%, to $49,000 for the three months ended March 31, 2023 from $54,000 for the three months ended March 31, 2022 due to normal fluctuations in advertising campaign expenses to promote deposit products.

Income Taxes.

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

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

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

We recorded income tax expense of $4.5 million and $1.1 million for the three months ended March 31, 2023 and 2022, respectively.

For the three months ended March 31, 2023 and March 31, 2022, we had approximately $182,000 and $184,000, respectively, in tax exempt income.

Our effective income tax rates were 28.7% and 23.5% for the three months ended March 31, 2023 and 2022, respectively.

Average Balances and Yields

5 unchanged sentences

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

Three Months Ended September 30,

Loans receivable

Securities (1)

Other interest-earning assets

Total interest-earning assets

Allowance for loan losses

Non-interest-earning assets

Interest bearing demand

Savings and club accounts

Certificates of deposit

Interest-bearing deposits

Borrowed money

Interest-bearing liabilities

Non-interest-bearing demand

Other non-interest-bearing liabilities

Total liabilities

Total liabilities and equity

Net interest income/interest spread

Net interest margin

Net interest-earning assets

Average interest-earning assets to interest-bearing liabilities

Nine Months Ended September 30,

Three Months Ended March 31,

Loans receivable

Securities (1)

Federal Home Loan Bank stock

Other interest-earning assets

Total interest-earning assets

Allowance for loan losses

Allowance for credit losses

Non-interest-earning assets

13 unchanged sentences

Average interest-earning assets to interest-bearing liabilities

(1) Cash on deposit at Federal Home Loan Bank or Federal Reserve Board.

Rate/Volume Analysis

9 unchanged sentences

Loans receivable

Other interest-earning assets

Interest expense:

Interest bearing demand deposit

Savings accounts

Certificates of deposits

Borrowed money

Net change in net interest income

Nine Months Ended 9/30/2022

Nine Months Ended 9/30/2021

Increase (Decrease)

(Dollars in thousands)

Interest income:

Loans receivable

Federal Home Loan Bank stock

Other interest-earning assets

7 unchanged sentences

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

September 30,

(Dollars in thousands)

6 unchanged sentences

Total non-performing assets to total assets

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

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

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

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

Non-performing assets totaled $1.5 million at March 31, 2023 and December 31, 2022.

There were no nonaccrual loans at March 31, 2023 and December 31, 2022.

During the three months ended March 31, 2023, we did not collect any interest income from the loans that were in non-accrual status in 2022.

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

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

There were no new loan modifications during the three months ended March 31, 2023 or 2022 or during the year ended December 31, 2022.

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

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

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

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

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

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

September 30,

The two TDRs with an aggregate balance of $855,000 at December 31, 2022 were performing in accordance with their restructured terms (generally at least six consecutive months) and were sold to a third party on January 5, 2023 at a loss of $86,000.

The following table sets forth an analysis of the activity in the allowance for credit losses related to loans for the periods indicated:

(Dollars In Thousands)

Allowance at beginning of period

Provision for loan losses

Impact of adopting ASC 326

Provision for credit losses

Net Charge-offs:

14 unchanged sentences

Non-performing loans

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

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

In connection with the adoption of CECL, the Company’s allowance for credit losses related to loans totaled $4.1 million, or 0.31% of total loans as of March 31, 2023 compared to $5.5 million, or 0.45% of total loans as of December 31, 2022.

In addition, the Company established an allowance for credit losses related to off-balance sheet commitments totaling $1.4 million and an allowance for credit losses related to held-to-maturity debt securities totaling $136,000 as of March 31, 2023.

The allowance for credit losses related to loans decreased by $1.4 million to $4.1 million at March 31, 2023 from $5.5 million at December 31, 2022.

The decrease in the allowances for credit losses was due primarily to the adoption of CECL which reduced the allowance by $1.6 million and charge-offs totaling $21,000 against various unpaid overdrafts in our demand deposit accounts, partially offset by provision for credit losses related to loans totaling $197,000 at March 31, 2023.

The allowance for credit losses related to off-balance sheet commitments of $1.4 million comprised of the adoption of CECL totaling $1.6 million, partially offset by a credit loss expense reduction of $200,000 at March 31, 2023.

The allowance for credit losses related to held-to-maturity of debt securities of $136,000 comprised of the adoption of CECL totaling $132,000 and credit loss expense of $4,000 at March 31, 2023.

Liquidity and Capital Resources

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

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

Our Cash Liquidity ratio, On Balance Sheet Liquidity ratio, and On Balance Sheet Liquidity & Borrowing Capacity ratio averaged 6.3%, 10.1%, and 13.2%, respectively, for the three months ended March 31, 2023 compared to 11.2%, 15.5%, and 19.0%, respectively, for the year ended December 31, 2022.

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

5 unchanged sentences

A daily liquidity ratio is calculated using the liquidity for the day divided by the prior month’s average liquidity base.

At the end of each month, a monthly liquidity position is calculated using the average liquidity position for the month divided by the prior month’s

average liquidity base.

At the end of each month, a monthly liquidity position is calculated using the average liquidity position for the month divided by the prior month’s average liquidity base.

To calculate quarterly and annual liquidity ratios, we take the average liquidity for the three- or twelve-month period, respectively, and average it.

5 unchanged sentences

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

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

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

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

For the three months ended March 31, 2023 and 2022, our loan originations totaled $214.7 million and $121.8 million, respectively.

Cash received from the maturities and pay-downs on securities totaled $142,000 and $240,000 for the three months ended March 31, 2023 and 2022, respectively.

We did not purchase any securities during the three months ended March 31, 2023 and March 31, 2022.

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

1 unchanged sentence

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

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

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

We had an available borrowing limit of $35.5 million and $31.5 million from the Federal Home Loan Bank of New York as of March 31, 2023 and December 31, 2022, respectively.

There were $14.0 million and $21.0 million in Federal Home Loan Bank advances at March 31, 2023 and December 31, 2022, respectively.

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

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

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

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

There were no outstanding borrowings with ACBB at March 31, 2023 and December 31, 2022.

At March 31, 2023, we had unfunded commitments on construction loans of $578.5 million, unfunded commitments under lines of credit of $132.1 million, outstanding commitments to originate loans of $115.2 million, and unfunded standby letters of credit of $10.6 million.

At March 31, 2023, certificates of deposit scheduled to mature in less than one year totaled $376.3 million.

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

4 unchanged sentences

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

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

At March 31, 2023, the Company had liquid assets of $8.5 million and $14.5 million in loan participations originated by the Bank which are held by the Company.

Off-Balance Sheet Arrangements

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

For the three months ended March 31, 2023, we did not engage in any off-balance sheet transactions reasonably likely to have a material adverse effect on our financial condition, results of operations or cash-flows.

Impact of Inflation and Changing Prices

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis