What changed in this filing

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Item 9A. Controls and Procedures

2024-03-28 compared with 2023-03-30 · 332 added, 325 removed, 1195 unchanged (35% of the section changed)

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OTHER INFORMATION

During the fiscal quarter ended December 31, 2023, none of our directors or officers informed us of the adoption or termination of a “ Rule 10b5 -1 trading arrangement” or “ non-Rule 10b5 -1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTIONS

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Description of NorthEast Community Bancorp, Inc.’s Common Stock Registered Under Section 12 of the Securities Exchange Act of 1934

Filed herewith

Incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2022 (File No.

001-40589), filed on March 30, 2023

Employment Agreement by and between NorthEast Community Bancorp, Inc., NorthEast Community Bank and Kenneth A.

Incorporated herein by reference to

Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File No.

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

Filed herewith

Employment Agreement by and between NorthEast Community Bancorp, Inc., NorthEast Community Bank and Jose M.

Incorporated herein by reference to

Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No.

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

Filed herewith

Employment Agreement by and between NorthEast Community Bancorp, Inc., NorthEast Community Bank and Donald S.

Incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2023 (File No.

001-40589), filed on august 10, 2023

NorthEast Community Bank Supplemental Executive Retirement Plan+

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Filed herewith

NorthEast Community Bancorp, Inc.

Incentive-Compensation Recoupment Policy

Filed herewith

The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in inline XBRL (Extensible Business Reporting Language):

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for credit losses effective January 1, 2023, due to the adoption of Accounting Standards Codification (ASC) Topic 326, Financial Instruments – Credit Losses.

Basis for Opinion

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Securities available-for-sale, at fair value

Securities held-to-maturity (fair value of $ 22,865 and $ 17,620 , respectively)

Securities held-to-maturity (net of allowance for credit losses of $ 136 , fair value of $ 13,126 and $ 22,865 , respectively)

Loans receivable

Deferred loan costs, net

Allowance for loan losses

Allowance for credit losses

Premises and equipment, net

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Advance payments by borrowers for taxes and insurance

Federal Home Loan Bank advances

Lease Liability – Operating

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Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total stockholders’ equity

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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 Losses

NON-INTEREST INCOME:

Other loan fees and service charges

Gain on disposition of equipment

(Loss) gain on disposition of equipment

Earnings on bank owned life insurance

Investment advisory fees

Realized and unrealized loss on equity securities

Realized and unrealized gain (loss) on equity securities

Total Non-Interest Income

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Impairment loss on goodwill

Loss on disposition of business

Real estate owned expense

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Reclassification adjustments out of accumulated other comprehensive income:

Amortization of actuarial loss ¹

Amortization of actuarial (gain) loss ¹

Actuarial gain arising during period

Income tax effect ²

Tax adjustment - pension liability

Total other comprehensive income

Total Comprehensive Income

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

(1) Amounts are included in other expenses in the audited consolidated statements of income as part of net periodic pension cost.

See Note 17 for further information.

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Stock Repurchases

( 1,909,476 )

Restricted stock award

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Compensation expense related to stock options

Cumulative effect of adoption of ASU 2016-13

ESOP shares earned

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Comprehensive

Income (Loss)

(In thousands, except share and per share amounts)

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Cash dividend declared ($ 0.42 per share)

Stock Repurchases

Restricted stock award

Compensation expense related to restricted stock awards

Compensation expense related to stock options

ESOP shares earned

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 – December 31, 2022

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

See notes to consolidated financial statements.

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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) expense

Realized and Unrealized loss recognized on equity securities

Deferred income tax benefit

Realized and unrealized (gain) loss recognized on equity securities

Impairment of goodwill

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Earnings on bank owned life insurance

Gain on dispositions of premises and equipment

Loss on disposition of business

Loss (gain) on dispositions of premises and equipment

ESOP compensation expense

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Decrease in other assets

(Decrease) increase in accounts payable - loan closing

Increase in accounts payable and accrued expenses

Decrease in accounts payable - loan closing

(Decrease) increase in accounts payable and accrued expenses

Net Cash Provided by Operating Activities

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Proceeds from sale of loans

Purchase 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

Proceeds from sale of fixed assets

Redemptions of restricted stock

Proceeds from bank owned life insurance

Purchase of FHLB stock

Redemption of FHLB stock

Purchases of premises and equipment

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Net increase in deposits

Proceeds from FRB borrowing

Repayment of FHLB of NY advances

Issuance of common stock funded by stock subscriptions

Stock repurchases

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Net Cash Provided by Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents

Net Decrease in Cash and Cash Equivalents

Cash and Cash Equivalents – Beginning

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Dividends declared and not paid

Adoption of ASC 326

See notes to consolidated financial statements.

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In conjunction with the second-step conversion, each of NorthEast Community Bancorp, MHC and the Mid-Tier Holding Company merged out of existence and now cease to exist.

The second-step conversion was completed on July 12, 2021, at which time the Company sold, for gross proceeds of $ 97.8 million, a total of 9,784,077 shares of common stock at $ 10.00 per share.

As part of the second-step conversion, each of the existing outstanding shares of Mid-Tier Holding Company common stock owned by persons other than NorthEast Community Bancorp, MHC was converted into 1.3400 shares of Company common stock.

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

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The Bank also offers investment advisory and financial planning services under the name Harbor West Wealth Management Group, a division of the Bank, through a networking arrangement with a registered broker-dealer and investment advisor.

The agreement to sell all the Bank’s assets relating to Harbor West Wealth Management Group to a third party was executed in December 2023, with the transaction closing in January 2024.

New England Commercial Properties LLC (“NECP”), a New York limited liability company and wholly owned subsidiary of the Bank, was formed in October 2007 to facilitate the purchase or lease of real property by the Bank.

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NECB Financial Services Group, LLC (“NECB Financial”), a New York limited liability company and wholly owned subsidiary of the Bank, was formed in the third quarter of 2012 as a complement to Harbor West Wealth Management Group to sell life insurance and fixed rate annuities.

NECB Financial is licensed in the States of New York and Connecticut.

NECB Financial is licensed in New York State.

We terminated our license in Connecticut on February 22, 2024 due to the sale of all the Bank’s assets relating to Harbor West Wealth Management Group to a third party in January 2024.

Northeast Community Bancorp, Inc.

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Accordingly, actual results could differ from those estimates.

The most significant estimate pertains to the allowance for loan losses.

The most significant estimate pertains to the allowance for credit losses.

The borrowers’ abilities to meet contractual obligations and collateral value are the most significant assumptions used to arrive at the estimate.

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Such unforeseen changes may have an adverse effect on the consolidated results of operations and financial position of the Company.

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

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses.

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

Additionally, the Company is exposed to significant changes in market interest rates.

Such changes could have an adverse effect on consolidated earnings and consolidated financial position, particularly in those situations in which the maturities or re-pricing of assets are different than the maturities or re-pricing of the supporting liabilities.

Cash and Cash Equivalents:

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The Company classifies its debt securities as held to maturity or available for sale at the time of purchase.

Held to maturity securities are those debt securities which management has the intent and the Company has the ability to hold to maturity and are reported at amortized cost (unless there is other than temporary impairment).

Held to maturity securities are those debt securities which management has the intent and the Company has the ability to hold to maturity and are reported at amortized cost.

Available-for-sale securities are those debt securities which are neither held to maturity securities nor trading securities and are reported at fair value, with unrealized gains and losses, net of the related income tax effect, excluded from earnings and reported in a separate component of stockholders’ equity.

If the fair value of a security is less than its amortized cost, the security is deemed to be impaired.

Management evaluates all securities with unrealized losses quarterly to determine if such impairments are temporary or other-than-temporary.

Temporary impairments on available for sale securities are recognized, on a tax-effected basis, through other comprehensive income (loss) (“OCI”) with offsetting adjustments to the carrying value of the security and the balance of related deferred taxes.

Temporary impairments on held to maturity securities are not recorded in the consolidated financial statements;

however, information concerning the amount and duration of unrealized losses on held to maturity securities is disclosed.

Other-than-temporary impairments on debt securities that the Company has decided to sell, or will, more likely than not, be required to sell prior to the full recovery of fair value to a level equal to or exceeding amortized cost, are recognized in earnings.

If either of these conditions regarding the likelihood of sale apply for a debt security, the other-than-temporary impairment is bifurcated into credit-related and noncredit-related components.

Credit-related impairment generally represents the amount by which the present value of the cash flows that are expected to be collected on a debt security fall below its amortized cost.

The noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related.

The Company recognizes credit-related other-than-temporary impairments in earnings.

Noncredit-related other-than-temporary impairments on debt securities are recognized in OCI.

Premiums and discounts on all securities are amortized/accreted to maturity by use of the level-yield method.

Premiums and discounts on all securities are generally amortized or accreted to the maturity date utilizing the level-yield method taking into consideration the impact of principal amortization and prepayments, as applicable.

Gain or loss on sales of securities is based on the specific identification method.

Effective January 1, 2023, the Company adopted the provisions of ASC 326 and modified its accounting policy for the assessment of available for sale securities for impairment.

Under ASC 326, for available-for-sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more than likely than not that it will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.

For securities available-for-sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating by a rating agency, and adverse conditions related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost.

Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of tax.

The Company elected the practical expedient of zero loss estimates for securities 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 agencies and have a long history of no credit losses.

Under ASC 326, changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense.

Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Equity securities are carried at fair value with changes in fair value reported in income.

Loans Receivable:

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

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Past due status of loans is based upon the contractual due date.

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.

Northeast Community Bancorp, Inc.

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Note 1 - Summary of Significant Accounting Policies (continued)

Allowance for Loan Losses:

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.

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 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.

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

Risk characteristics associated with the types of loans we underwrite are as follows:

Multi-family, Mixed-use and Non-residential Real Estate Loans .

Loans secured by multi-family, mixed-use and non-residential real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans.

Of primary concern in multi-family, mixed-use and non-residential real estate lending is the current and potential cash flow of the property and the borrower’s demonstrated ability to operate that type of property.

Payments on loans secured by income properties often depend on successful operation and management of the properties.

As a result, repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in the real estate market or the economy.

Commercial and Industrial Loans .

Unlike residential mortgage loans, which are generally made on the basis of a borrower’s ability to make repayment from the operation and cash flow from the real property whose value tends to be more ascertainable, commercial and industrial loans are of higher risk and tend to be made on the basis of a borrower’s ability to make repayment from the cash flow of the borrower’s business.

As a result, the availability of funds for the repayment of commercial and industrial loans may depend substantially on the success of the business itself.

Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Construction Loans .

Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate due to (1) the increased difficulty and costs of monitoring the loan;

and (2) the increased difficulty of working out loan problems.

We minimize this risk by concentrating on multi-family and mixed-use projects and by limiting the Company’s activity to known borrowers in areas considered unique communities with very strong demand outpacing the supply of residential housing.

Consumer Loans.

We offer personal loans, loans secured by passbook savings accounts, certificates of deposit accounts or statement savings accounts, and overdraft protection for checking accounts.

We do not believe these loans represent a significant risk of loss to the Company.

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 discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

If an impairment is identified, the Company charges off the impaired portion immediately.

A loan is considered impaired when, based on current information and events, it is probable that the Company 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

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.

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 amortized 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.

Northeast Community Bancorp, Inc.

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Note 1 - Summary of Significant Accounting Policies (continued)

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 Company does not evaluate individual 1-4 family residential real estate and consumer loans for impairment, unless such loans are part of a larger relationship that is impaired, or are classified as a troubled debt restructuring.

The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral or discounted cash flows.

For loans secured by real estate, estimated fair values are determined primarily through in-house or third-party appraisals.

When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary.

This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal, the current value based on the current loan to value and debt coverage ratios as calculated by the troubled debt officer and the executive committee, and the condition of the property.

Appraised values might be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value.

The discounts also include estimated costs to sell the property, if any.

For loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices.

Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

The general component covers pools of loans by loan class including loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate and consumer loans.

These pools of loans are evaluated for loss exposure based upon historical loss rates, adjusted for qualitative factors.

These qualitative risk factors include:

Changes in policies and procedures in underwriting standards and collections.

Changes in economic conditions.

Changes in nature and volume of lending.

Experience of origination team.

Changes in past due loan volume and severity of classified assets.

Quality and scope of the loan review system.

Debt coverage ratios and loan-to-value averages in existing portfolio.

Concentrations of credit.

Legal and regulatory issues.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories.

The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial, residential and consumer loans.

Credit quality risk ratings include regulatory classifications of pass, special mention, substandard, doubtful and loss.

Loans classified as special mention have potential weaknesses that deserve management’s close attention.

If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects.

Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

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.

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.

Northeast Community Bancorp, Inc.

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Note 1 - Summary of Significant Accounting Policies (continued)

loans that may be inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.

Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable.

Loans classified as loss are considered uncollectible and are charged to the allowance for loan losses.

Loans not classified are rated pass.

The allowance calculation for each pool of loans is also based on the loss factors that reflect the Company’s 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, the Company has a proprietary structured loan rating process which allows for a periodic review of its loan portfolio and the early identification of potential impaired loans.

These proprietary systems, depending on the type of loan, take into consideration factors such as project location, loan duration, loan to value or loan to cost, property condition, borrower experience, guarantor strength, tenant concentration, projected debt-service coverage, absorption rate, sponsor’s experience, and as well as other factors.

Loans whose terms are modified are classified as troubled debt restructurings if the Company grants 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.

In measuring the impairment associated with restructured loans that qualify as troubled debt restructurings, the Company compares the present value of the cash flows that are expected to be received in accordance with the loan’s modified terms, discounted at the loan’s original contractual interest rate, with the pre-modification carrying value to measure impairment.

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.

Based on management’s comprehensive analysis of the loan portfolio, management believes the allowance for loan losses is appropriate as of December 31, 2022 and 2021, respectively.

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.

Based on management’s comprehensive analysis of the credit portfolio, management believes the allowance for credit losses is appropriate as of December 31, 2023 and 2022, respectively.

Concentration of Risk:

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

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

As of December 31, 2023 and 2022, the Company had majority of construction loans located in New York state, including $ 626.0 million and $ 440.6 million in the Bronx, $ 198.5 million and $ 122.4 million in the Town of Monroe, $ 133.7 million and $ 103.8 million in the Hamlet of Monsey, $ 105.9 million and $ 104.3 million in the Village of Spring Valley, and $ 18.8 million and $ 31.8 million in Brooklyn.

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

At December 31, 2022 and 2021, such deposits totaled $ 59.0 million and $ 125.0 million held by the Federal Reserve Bank of New York, $ 26.4 million and $ 21.9 million held by the Federal Home Loan Bank of New York, and $ 1.0 million and $ 1.0 million held by Atlantic Community Bankers Bank (“ACBB”).

At December 31, 2023 and 2022, such deposits totaled $ 43.2 million and $ 59.0 million held by the Federal Reserve Bank of New York, $ 13.7 million and $ 26.4 million held by the Federal Home Loan Bank of New York, and $ 430,000 and $ 1.0 million held by Atlantic Community Bankers Bank (“ACBB”).

Generally, deposits in excess of $250,000 are not insured by the FDIC.

2 unchanged sentences

Buildings and improvements, leasehold improvements and furnishings and equipment are stated at cost less accumulated depreciation and amortization computed on the straight-line method over the following useful lives:

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Building improvements

2 unchanged sentences

Maintenance and repairs are charged to operations in the years incurred.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Property and equipment are evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying amounts may not be recoverable.

12 unchanged sentences

These stocks are carried at cost.

At December 31, 2022 and 2021, the Company had $ 1.2 million and $ 1.5 million in FHLB stock, and $ 70,000 and $ 70,000 in ACBB stocks.

Goodwill at December 31, 2022 and 2021 totaled $ 200,000 and $ 651,000 , respectively, and consists of goodwill acquired in the business combination completed by the Company in November 2007.

At December 31, 2023 and 2022, the Company had $ 859,000 and $ 1.2 million in FHLB stock, and $ 70,000 and $ 70,000 in ACBB stocks.

Goodwill at December 31, 2023 and 2022 totaled zero and $ 200,000 , respectively, and consists of goodwill acquired in the business combination completed by the Company in November 2007.

The Company tests goodwill during the fourth quarter of each year for impairment, or more frequently if certain indicators are present or changes in circumstances suggest that impairment may exist.

8 unchanged sentences

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

No impairment charges were recorded in 2021.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

As of December 31, 2023, the goodwill was eliminated along with the sale of Harbor West Wealth Management Group to a third party in December 2023.

The sale resulted in a total of $ 138,000 loss recognized on the consolidated statement of income.

Real Estate Owned:

3 unchanged sentences

Costs of holding such properties are charged to non-interest expense in the current period.

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

Gains, to the extent allowable, and losses

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

on the disposition of these properties are reflected in the real estate owned expense in the consolidated statement of income.

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

21 unchanged sentences

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

there were no such amounts during the years ended December

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

31, 2022 and 2021.

there were no such amounts during the years ended December 31, 2023 and 2022.

The tax years subject to examination by federal, state, and city taxing authorities are 2020 through 2023.

1 unchanged sentence

The Company records in accumulated other comprehensive income (loss), net of related deferred income taxes, unrealized gains and losses on available for sale securities and the prior service cost and actuarial gains and losses related to the Outside Directors Retirement Plan (“DRP”) that have not yet been recognized in expense.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

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

At December 31, 2023, accumulated other comprehensive income totaled $ 317,000 and included $ 352,000 in prior service cost and actuarial gains of the DRP net of $ 35,000 of related deferred income benefits.

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

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

Earnings per Share:

7 unchanged sentences

Weighted average shares issued

Weighted average treasury shares

Weighted average unearned ESOP shares

5 unchanged sentences

Net income per share

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

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

There were 880,097 stock options outstanding at December 31, 2023 and 2022 respectively that were not included in the computation of diluted earnings per share as their effect would have been anti-dilutive.

Stockholders’ Equity:

3 unchanged sentences

The Company has not issued any preferred stock.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Employee Stock Ownership Plan (ESOP):

21 unchanged sentences

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

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 2 – Mutual Holding Company Reorganization and Regulatory Matters

2 unchanged sentences

As disclosed in note 1, in conjunction with the completion of the second-step conversion on July 12, 2021, each of NorthEast Community Bancorp, MHC and the Mid-Tier Holding Company merged out of existence and now cease to exist.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

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

The Federal Deposit Insurance Corporation (“FDIC”) and the New York State Department of Financial Services (“NYS”) are the Bank’s primary regulator.

20 unchanged sentences

Notes to Consolidated Financial Statements

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

Actual and required capital amounts and ratios as of December 31, 2023 and 2022, are presented below:

28 unchanged sentences

Commercial and industrial lines

Multi-family real estate equity lines

Consumer lines

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 3 - Financial Instruments with Off-Balance Sheet Risk (continued)

Commitments to extend credit are legally binding agreements to lend to a customer as long as there is no violation of any condition established in the contract.

1 unchanged sentence

The amount of collateral obtained, if deemed necessary by the Company, is based on management’s credit evaluation of the borrower.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 4 – Equity Securities

4 unchanged sentences

(In Thousands)

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

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

Capital gain realized on equity securities during the period

2 unchanged sentences

Note 5 – Securities Available-for-Sale

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

December 31, 2022

(In Thousands)

Mortgage-backed securities – residential:

Federal Home Loan Mortgage Corporation

The Company’s portfolio of securities available-for-sale was zero at December 31, 2023.

The following table summarized the portfolio at December 31, 2022:

December 31, 2022

3 unchanged sentences

There were no sales of securities available-for-sale during the years ended December 31, 2023 and 2022.

The Company had no unrealized loss on securities available-for-sale at December 31, 2023 and 2022.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 5 – Securities Available-for-Sale (continued)

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

December 31, 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 December 31, 2022 and 2021, the Company had no unrealized loss on securities available-for-sale.

Note 6 – Securities Held-to-Maturity

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

No securities held-to-maturity were pledged to secure borrowings.

December 31, 2023

7 unchanged sentences

Municipal Bonds

Treasury securities

December 31, 2022

7 unchanged sentences

Municipal Bonds

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

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

Treasury securities

Contractual final maturities of mortgage-backed securities and municipal bonds were as follows at December 31, 2023:

7 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.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

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

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 - December 31, 2023

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

9 unchanged sentences

Total mortgage-backed securities

Municipal Bonds

Treasury securities

Less than 12 Months

3 unchanged sentences

Mortgage-backed securities - residential:

Government National Mortgage Association

Federal Home Loan Mortgage Corporation

3 unchanged sentences

Municipal Bonds

Treasury securities

Northeast Community Bancorp, Inc.

1 unchanged sentence

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

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

Treasury notes had unrealized loss due to interest rate volatility.

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

At December 31, 2023, twenty-seven mortgage-backed securities and eight municipal bonds had unrealized loss due to interest rate volatility.

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

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

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

Note 7 - Loans Receivable and the Allowance for Loan Losses

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

Treasury notes with unrealized loss.

Note 7 - Loans Receivable and the Allowance for Credit Losses

The composition of loans were as follows at December 31:

6 unchanged sentences

Deferred loan costs, net

Allowance for loan losses

Allowance for credit losses

Loans serviced for the benefit of others totaled approximately $ 40,729,000 and $ 22,350,000 at December 31, 2023 and 2022, respectively.

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

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

The Company sold loan participations totaling $ 19.2 million and $ 11.5 million in 2023 and 2022.

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

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

During the year ended December 31, 2023, the Company sold three loans with the same borrower totaling $ 10.4 million with a charge-off of $ 159,000 recognized on the sale.

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

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

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

The following is an analysis of the activity in the allowance for loan losses and related information concerning loan balances:

As of and For the Year Ended December 31, 2022:

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

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 December 31, 2023 and 2022:

At December 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

As of and For the Year Ended December 31, 2021:

collectively evaluated for credit loss

At December 31, 2022:

(In Thousands)

13 unchanged sentences

Notes to Consolidated Financial Statements

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

The activity in the allowance for loan loss by loan class for the years ended December 31, 2022 and 2021 was as follows:

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

The activity in the allowance for credit loss by loan class for the years ended December 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)

5 unchanged sentences

Balance - December 31, 2022

During the year ended December 31, 2023, the provision expenses recorded for construction loans were primarily attributed to the increased loan balances.

The provision expenses recorded for residential loans was primarily due to increased loan balances and increased average contractual terms of the loans.

The provision expenses recorded for consumer loans was primarily due to increased deposit account overdraft balance and increased credit risk.

During the year ended December 31, 2022, the provision expenses recorded for construction loans were attributed to the increased loan balances.

1 unchanged sentence

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

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

During the year ended December 31, 2021, the provision expenses recorded were primarily attributed to the previously disclosed charge-off of $ 3.6 million in 2021 regarding a nonresidential bridge loan secured by real estate with a balance of $ 3.6 million, as well as increased loan balances in construction loan and commercial and industrial loan segments.

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

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

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

The following table shows our recorded investment, unpaid principal balance and allocated allowance for loan losses for loans that were considered impaired at:

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

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

As of and for the Year Ended December 31, 2023:

2 unchanged sentences

Interest Income

2023 - Individually evaluated

(In Thousands)

11 unchanged sentences

Interest Income

2022 - Impaired

(In Thousands)

9 unchanged sentences

Notes to Consolidated Financial Statements

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

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

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

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

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

The Company has two individually evaluated loans, totaling $ 4.4 million, which were collateral-dependent construction loans, secured by multi-family real estate, at December 31, 2023.

The two loans are secured by the same project located in the Bronx, New York, and are currently placed on non-accrual status.

There was no interest income recognized from non-accrual loans as of December 31, 2023 and 2022.

There were no non-accrual loans at December 31, 2022.

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

16 unchanged sentences

Notes to Consolidated Financial Statements

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

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

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

Non-residential

and Industrial

(In Thousands)

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

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.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

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

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

Term Loans Amortized Costs Basis by Origination Year

December 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

Current period gross charge-offs

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

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

The following table provides certain information related to the credit quality of our loan portfolio at December 31, 2022.

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

3 unchanged sentences

Special Mention

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 years ended December 31, 2023 and 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 year ended December 31, 2023:

Allowance for

Balance – December 31, 2022

Impact of adopting ASC 326

Provision for credit loss

Balance – December 31, 2023

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

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

Troubled Debt Restructuring:

The following table shows our recorded investment for loans classified as Trouble Debt Restructuring (TDR) that are performing according to their restructured terms at the periods indicated:

(Dollars in Thousands)

Residential Real Estate - Multi-family

Residential Real Estate - Mixed-use

Non-residential real estate

Total performing

The following is a summary of interest foregone on loans classified as TDR for the years ended December 31:

Year Ended December 31,

(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 troubled debt restructuring during the years ended December 31, 2022 and 2021.

During the years ended December 31, 2022 and 2021, none of the loans that were modified during the previous twelve months had defaulted.

Note 8 - Premises and Equipment, Net

5 unchanged sentences

Depreciation expense on premises and equipment for the fiscal years ended December 31, 2023 and 2022 totaled $ 1.2 million and $ 1.2 million, respectively.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 9 - Accrued Interest Receivable, Net

6 unchanged sentences

Goodwill, net of charge-off

As of December 31, 2023, the goodwill was eliminated along with the sale of Harbor West Wealth Management Group to a third party in December 2023.

The sale resulted in a total of $ 138,000 loss recognized on the consolidated statement of income.

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

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

Note 11 - Real Estate Owned (“REO”)

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

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

The property was acquired through foreclosure in December 2014.

2 unchanged sentences

REO expense recorded in the consolidated statements of income, including loss on sales and write-downs, amounted to $ 93,000 and $ 623,000 during the years ended December 31, 2023 and 2022.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 12– Property Held For Investment

5 unchanged sentences

The property is currently leased to a car rental company to generate current income for the Company.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 13 – Deposits

20 unchanged sentences

At December 31, 2023 and 2022, the Company also had $ 13.0 million and $ 10.9 million, respectively, in Insured Cash Sweep (“ICS”) reciprocal money market deposits, which are no longer considered fully-insured brokered deposits as defined in the FDIC call report instructions.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 13 – Deposits (continued)

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

6 unchanged sentences

Certificates of deposit

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 14 – Federal Home Loan Bank of New York (“FHLB”) Advances

Note 14 – Borrowings

Our borrowings include Federal Home Loan Bank of New York (“FHLB”) advances and short-term borrowings from the Discount Window at the Federal Reserve Bank of New York (“FRBNY”).

FHLB advances are summarized as follows at December 31:

14 unchanged sentences

At December 31, 2023, the Company had the ability to borrow $ 29.7 million, net of $ 14.0 million in outstanding advances, from the FHLB and $ 8.0 million from ACBB.

On August 30, 2023, the FRBNY approved the Company’s eligibility to pledge loans under the Borrower-in-Custody program of the FRBNY thereby allowing the Company to borrow from the Discount Window at the FRBNY.

As of December 31, 2023, the borrowing from FRBNY was $ 50.0 million, bearing an interest rate of 5.5 % and matures on March 20, 2024.

The Company had an available borrowing limit of $ 865.1 million from the FRBNY as of December 31, 2023.

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 15 - Income Taxes

15 unchanged sentences

Effective Income Tax Rate

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 15 – Income Taxes (continued)

The tax effects of significant items comprising the net deferred tax asset are as follows:

1 unchanged sentence

Deferred tax assets:

Allowance for loan losses

Allowance for credit losses

State net operating loss carryforwards

6 unchanged sentences

Net Deferred Tax Assets Included in Other Assets

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 15 - Income Taxes (continued)

The Company has state net operating loss (NOL) carryforwards totaling approximately $ 500,000 at December 31, 2023 that are available to be carried forward to future years.

33 unchanged sentences

Interest cost

Actuarial loss amortized

Actuarial (gain) loss amortized

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

57 unchanged sentences

At a special shareholders meeting held on September 29, 2022, the Company’s shareholders approved the Company’s 2022 Equity Incentive Plan whereby 1,369,771 shares of the Company’s common stock were reserved from authorized but unissued shares for purposes of grants of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, performance shares and performance units to selected employees and non-employee directors of the Company.

Under this plan, 86,880 shares of restricted stock and 217,206 nonqualified stock options in the aggregate were awarded to six non-employee directors of the Company on September 30, 2022, and 265,157 shares of restricted stock and 662,891 nonqualified stock options were in the aggregate were awarded to employees of the Company on November 17, 2022.

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

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

1 unchanged sentence

As of December 31, 2023, there were 132,759 shares available for future awards under this plan, which includes 98,311 shares available for stock options and 34,448 shares available for restricted stock awards.

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

Northeast Community Bancorp, Inc.

1 unchanged sentence

Note 18 – Stock Based Compensation (continued)

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

Outstanding, Beginning of year

Outstanding, end of year

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

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

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

Outstanding, Beginning of year

Outstanding, end of year

Compensation expense related to restricted stock was $ 968,000 and $ 116,000 for the years ended December 31, 2023 and 2022.

At December 31, 2023 and 2022, the total compensation cost related to non-vested awards that has not yet been recognized was $ 3.8 million and $ 4.7 million, which is expected to be recognized over the next 5 years .

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 18 – Stock Based Compensation (continued)

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

3 unchanged sentences

Exercisable at end of year

Exercise Price

Outstanding, Beginning of year

Outstanding, end of year

Exercisable at end of year

Weighted average fair value

7 unchanged sentences

Expected life

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

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

The 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 $ 768,000 and $ 92,000 for the years ended December 31, 2023 and 2022.

At December 31, 2023, unrecognized compensation cost related to stock option awards was $ 3.0 million, which is expected to be recognized over the next 5 years .

78 unchanged sentences

(In Thousands)

Impaired loans

Collateral dependent loans

Real estate owned

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(In Thousands)

Collateral dependent loans

Income approach

Capitalization rate

Real estate owned

Income approach

Capitalization rate

At December 31, 2022

(In Thousands)

Impaired loans

4 unchanged sentences

Capitalization rate

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

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

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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

Northeast Community Bancorp, Inc.

1 unchanged sentence

Note 21 – Fair Value Disclosures (continued)

estimated based on commonly used and generally accepted industry liquidation advance rates and estimates and assumptions developed by management.

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.

The appraisals may be adjusted by management for estimated liquidation expenses and qualitative factors such as economic conditions.

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Marketable equity securities

Securities available for sale

Securities held to maturity

3 unchanged sentences

Financial Liabilities

FHLB of New York advances

Fair Value at

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In addition, in fiscal year 2023 and 2022, the Company paid Mr.

O’Malley’s law firm $ 3,000 and $ 26,000 for legal services provided on a corporate related matter.

O’Malley’s law firm zero and $ 3,000 for legal services provided on a corporate related matter.

Note 23 – Revenue Recognition

16 unchanged sentences

Electronic banking fees and charges

Gain on disposition of equipment (1)

(Loss) gain on disposition of equipment (1)

Income from bank owned life insurance (1)

Investment advisory fees

Realized and unrealized loss on equity securities (1)

Realized and unrealized gain (loss) on equity securities (1)

Miscellaneous (1)

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Accounting Standards Pending Adoption:

Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

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

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

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

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

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

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

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

In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement-Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation-Stock Compensation (Topic 718), which amends or supersedes various SEC paragraphs within the Codification to conform to past SEC announcements and guidance issued by the SEC.

The ASU does not provide any new guidance so there is no transition or effective date associated with it.

This ASU did not have a significant impact on the Company’s financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvement:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which incorporates several SEC disclosure requirements into US GAAP and adds interim and annual disclosure requirements to a variety of topics in the Accounting Standards Codification, including those focusing on accounting changes, earnings per share, debt and repurchase agreements.

For entities subject to the SEC disclosure requirements and those “required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer,” the US GAAP requirements will be effective when the removal of the related SEC rule is effective.

Early adoption is not permitted for these entities.

For all other entities, the effective date will be two years later, and early adoption is permitted.

That is, financial statements issued after the effective date of each amendment are required to include on a prospective basis the related disclosure incorporated into US GAAP by this ASU.

However, if the SEC does not act to remove its related requirements by June 30, 2027, any related FASB amendments will be removed from the Codification and will not be effective for any entities.

Northeast Community Bancorp, Inc.

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Note 24 – Recent Accounting Pronouncements (continued)

Reference Rate Reform (Topic 848)

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

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

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

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

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

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

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

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

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

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

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

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

Fair Value Measurement (Topic 820)

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

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

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

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

Early adoption is permitted.

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

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

Presentation of Financial Statements (Topic 205)

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

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants (SEC Update), to amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Release No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants.

This ASU was effective upon issuance and did not have a significant impact on the Company’s financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, requires the amount of net income taxes paid for federal, state, and foreign taxes, as well as the amount paid to any jurisdiction that net taxes exceed a 5% quantitative threshold.

The amendments will require the disclosure of pre-tax income disaggregated between domestic and foreign, as well as income tax expense disaggregated by federal, state, and foreign.

The amendment also eliminates certain disclosures related to unrecognized tax benefits and certain temporary differences.

This ASU is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted in any annual period where financial statements have not yet been issued.

The amendments should be applied on a prospective basis but retrospective application is permitted.

The Company does not expect adoption of the standard to have a material impact on its Consolidated Financial Statements.

Note 25 - Subsequent Events

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

Northeast Community Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 26 – Parent Company Only Financial Information

5 unchanged sentences

Investment in subsidiary

Loans receivable, net of allowance for loan losses of $ 92 and $ 29 , respectively (1)

Loans receivable, net of allowance for credit losses of $ 45 and $ 92 , respectively (1)

ESOP loan receivable

14 unchanged sentences

Interest income – interest-earning deposits

Provision for loan losses

Dividend income from subsidiary

Operating expenses

Income before Income Tax Expense and Equity in Undistributed Earnings of Subsidiary

Income tax expense

Income tax (benefit) expense

Income before Equity in Undistributed Earnings of Subsidiary

7 unchanged sentences

Equity in undistributed earnings of subsidiary

Increase in other liabilities

Net Cash Provided by Operating Activities

2 unchanged sentences

Net increase in loans

Capital infusion to subsidiary

Net Cash (Used in) Provided by Investing Activities

Net Cash Provided (Used in) by Investing Activities

Cash Flows from Financing Activities

Cash dividends paid

Issuance of common stock

Stock repurchase

Net Cash Provided by (Used in) Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents

Net Cash Used in Financing Activities

Net Decrease in Cash and Cash Equivalents

Cash and Cash Equivalents – Beginning

30 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-K

Item 9A. Controls and Procedures