What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-13 · 257 added, 368 removed, 615 unchanged (50% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

September 30,

(In thousands, except share

5 unchanged sentences

Equity securities

Securities available-for-sale, at fair value

Securities held-to-maturity (net of allowance for credit losses of $ 131 , fair value of $ 11,909 and $ 22,865 , respectively)

Securities held-to-maturity ( net of allowance for credit losses of $ 133 and $ 136 , fair value of $ 12,937 and $ 13,126 , respectively )

Loans receivable

Deferred loan costs, net

Deferred loan (fees) costs, net

Allowance for credit losses

19 unchanged sentences

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (continued)

September 30,

(In thousands, except share

16 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except per share amounts)

Three Months Ended March 31,

(In thousands, except

per share amounts)

INTEREST INCOME:

5 unchanged sentences

Net Interest Income

Provision for credit loss

Net Interest Income after Provision for Credit Loss

Provision for (reversal of) credit loss

Net Interest Income after Provision for (Reversal of) Credit Loss

NON-INTEREST INCOME:

Other loan fees and service charges

Gain on disposition of equipment

Earnings on bank owned life insurance

Investment advisory fees

Unrealized loss on equity securities

Unrealized (loss) gain on equity securities

Total Non-Interest Income

14 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Three Months Ended March 31,

(In thousands)

2 unchanged sentences

Reclassification adjustments out of accumulated other comprehensive income:

Amortization of actuarial (gain) loss

Amortization of actuarial gain

Actuarial loss arising during period

6 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2023 and 2022

Three Months Ended March 31, 2024 and 2023

Comprehensive

6 unchanged sentences

Compensation expense related to stock options

Cumulative effect of adoption of ASU 2016-13

Stock option exercise

ESOP shares earned

Balance – March 31, 2024

Other comprehensive income

Cash dividend declared ($ 0.06 per share)

Stock repurchases

Compensation expense related to restricted stock awards

Compensation expense related to stock options

ESOP shares earned

Balance - June 30, 2023

Other comprehensive income

Cash dividend declared ($ 0.06 per share)

Stock repurchases

Compensation expense related to restricted stock awards

Compensation expense related to stock options

ESOP shares earned

Balance – September 30, 2023

Comprehensive

3 unchanged sentences

Cash dividend declared ($ 0.06 per share)

ESOP shares earned

Balance - March 31, 2022

Other comprehensive income

Cash dividend declared ($ 0.06 per share)

ESOP shares earned

Balance - June 30, 2022

Other comprehensive income

Cash dividend declared ($ 0.06 per share)

Stock repurchases

Restricted stock award

Compensation expense related to restricted stock awards

Compensation expense related to stock options

Cumulative effect of adoption of ASU 2016-13

ESOP shares earned

Balance - September 30, 2022

Balance - March 31, 2023

See notes to interim unaudited consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

2 unchanged sentences

Net amortization of securities premiums and discounts, net

Provision for credit losses

(Decrease) increase in provision for (reversal of) credit losses

Net amortization of deferred loan fees and costs

Deferred income tax benefit

Unrealized loss recognized on equity securities

Impairment of real estate owned

Unrealized loss (gain) recognized on equity securities

Earnings on bank owned life insurance

Gain on dispositions of premises and equipment

ESOP compensation expense

2 unchanged sentences

Increase in accrued interest receivable

(Increase) decrease in other assets

Decrease in other assets

Decrease in accounts payable - loan closing

Increase in accounts payable and accrued expenses

Decrease in accounts payable and accrued expenses

Net Cash Provided by Operating Activities

2 unchanged sentences

Proceeds from sale of loans

Proceeds from bank owned life insurance

Principal repayments on securities available-for-sale

Principal repayments on securities held-to-maturity

Purchase of securities held-to-maturity

Purchase of restricted stock

Redemptions of restricted stock

3 unchanged sentences

Net increase in deposits

Proceeds from FRB borrowing

Repayment of FRB borrowings

Repayment of FHLB of NY advances

Stock repurchases

Stock option exercised

Increase in advance payments by borrowers for taxes and insurance

7 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

17 unchanged sentences

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.

1 unchanged sentence

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

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

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

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

3 unchanged sentences

The Bank also generates revenues from other income including deposit fees, service charges and investment advisory fees.

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 Bank also previously offered 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 Bank entered into an agreement to sell all the Bank’s assets relating to Harbor West Wealth Management Group to a third party in December 2023, and the sale closed in January 2024.

The Bank no longer offers these services.

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.

1 unchanged sentence

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.

NECB Financial terminated its 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.

This subsidiary is currently inactive.

72 West Eckerson LLC (“72 West Eckerson”), a New York limited liability company and wholly owned subsidiary of the Bank, was formed in April 2015 to facilitate the purchase or lease of real property by the Bank and currently owns the Bank branch locations in Spring Valley, New York and Monroe, New York.

12 unchanged sentences

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

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

Accounting Pronouncements Adopted in 2023:

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

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

CECL measures the credit loss associated with financial assets carried at 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.

The methodology for determining the ACL has two main components:

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

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

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

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

The Company evaluates the pooling methodology at least annually.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Estimates that are particularly susceptible to change in the near term are used in connection with the determination of the allowance for credit losses.

Loan Receivable:

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.

An allowance for uncollected interest is established on loans where management has determined that the borrowers may be unable to meet contractual principal and/or interest obligations or where interest or principal is 90 days or more past due, unless the loans are well secured with a reasonable expectation of collection.

When a loan is placed on nonaccrual, an allowance for uncollected interest is established and charged against current income.

Thereafter, interest income is not recognized unless the financial condition and payment record of the borrower warrant the recognition of interest income.

Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Interest on loans that have been restructured is accrued according to the renegotiated terms.

Net loan origination fees and costs are deferred and amortized into interest income over the contractual lives of the related loans by use of the level yield method.

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

Loan Concentration Risk:

The Company’s lending activity is concentrated in construction loans secured by the construction of multi-family properties in Massachusetts and by the construction primarily of multi-family, residential condominium properties, and occasionally non-residential properties located in New York State.

As of March 31, 2024 and December 31, 2023, the Company had a majority of construction loans located in New York State, including $ 680.8 million and $ 626.0 million in the Bronx, $ 202.3 million and $ 198.5 million in the Town of Monroe, $ 134.6 million and $ 133.7 million in the Hamlet of Monsey, and $ 103.8 million and $ 105.9 million in the Village of Spring Valley.

At March 31, 2024, the Company had $ 78.1 million, or 6.0 %, of construction loans located in Rockland County, New York, related to office space or commercial use.

Note 2 — Regulatory Capital

1 unchanged sentence

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

The Bank met all capital adequacy requirements to which it was subject as of September 30, 2023 and December 31, 2022.

The Bank met all capital adequacy requirements to which it was subject as of March 31, 2024 and December 31, 2023.

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

4 unchanged sentences

(Dollars in Thousands)

As of September 30, 2023:

As of March 31, 2024:

Total capital (to risk-weighted assets)

10 unchanged sentences

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

Note 3 — Earnings Per Share

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

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

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

from the assumed issuance.

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

The following table sets forth the weighted average shares outstanding used in the computations of basic and diluted earnings per share.

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

Three Months Ended March 31,

(In Thousands, except per share data)

Net income (basic and diluted)

Weighted average shares issued

Weighted average unearned ESOP shares

Weighted average unvested restricted shares

Basic weighted average shares outstanding

Dilutive effect of restricted stock

Dilutive effect of stock options

Diluted weighted average shares outstanding

Net income per share

Note 4 — Equity Securities

The following table is the schedule of equity securities at September 30, 2023 and December 31, 2022.

The following table is the schedule of equity securities at March 31, 2024 and December 31, 2023.

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

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

September 30,

(In Thousands)

Equity Securities, at Fair Value

The following is a summary of unrealized gain or loss recognized in net income on equity securities during the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

The following is a summary of unrealized loss or gain recognized in net income on equity securities during the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(In Thousands)

Net loss recognized on equity securities during the period

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

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

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

Note 4 — Securities Available-for-Sale

The Company’s portfolio of securities available-for-sale totaled zero and $ 1,000 at September 30, 2023 and December 31, 2022, respectively.

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

December 31, 2022

(In Thousands)

Mortgage-backed securities – residential:

Federal Home Loan Mortgage Corporation

There were no sales of securities available-for-sale as of September 30, 2023 and December 31, 2022.

At September 30, 2023 and December 31, 2022, the Company had no unrealized loss.

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

Note 5 — Securities Held-to-Maturity

The following table summarizes the Company’s portfolio of securities held-to-maturity at September 30, 2023 and December 31, 2022.

September 30, 2023

The following table summarizes the Company’s portfolio of securities held-to-maturity at March 31, 2024 and December 31, 2023.

March 31, 2024

(In Thousands)

15 unchanged sentences

Municipal Bonds

Treasury securities

Contractual final maturities of mortgage-backed securities and municipal bonds were as follows at September 30, 2023:

September 30, 2023

Contractual final maturities of mortgage-backed securities and municipal bonds were as follows at March 31, 2024:

March 31, 2024

(In Thousands)

5 unchanged sentences

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

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

The activity in the allowance for credit losses for debt securities held-to-maturity for the three months ended March 31, 2024 and 2023 was as follows:

Municipal Bonds

Balance – December 31, 2023

Provision for (reversal of) credit loss

Balance – March 31, 2024

Municipal Bonds

Balance – December 31, 2022

Impact of adopting ASC 326

1 unchanged sentence

Balance – March 31, 2023

Provision for credit loss

Balance – June 30, 2023

Provision for credit loss

Balance – September 30, 2023

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

2 unchanged sentences

(In Thousands)

September 30, 2023:

March 31, 2024:

Mortgage-backed securities - residential:

4 unchanged sentences

Total mortgage-backed securities

Municipal Bonds

Less than 12 Months

8 unchanged sentences

Total mortgage-backed securities

Municipal Bonds

Treasury securities

At September 30, 2023, thirty-two mortgage-backed securities and seven municipal bonds 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 rate volatility, and not related to the underlying credit quality of the issuers of the securities.

At March 31, 2024, twenty-six mortgage-backed securities had unrealized losses 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 rate volatility, and was 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, 2022, there were thirty-five mortgage-backed securities, six municipal bonds and two U.S.

Treasury notes had unrealized loss due to interest rate volatility.

At December 31, 2023, there were thirty-two mortgage-backed securities that had unrealized losses due to interest rate volatility.

Credit Quality Indicators

4 unchanged sentences

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

The seven municipal bonds in the portfolio carry no lower than A ratings from the rating agencies at September 30, 2023 and have a long history of no credit losses.

The seven municipal bonds in the portfolio carry no lower than A ratings from the rating agencies at March 31, 2024 and have no realized losses since they were issued.

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

Note 6 — Loans Receivable and the Allowance for Credit Losses

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

Interest on loans receivable is recorded on the accrual basis.

An allowance for uncollected interest is

established on loans where management has determined that the borrowers may be unable to meet contractual principal and/or interest obligations or where interest or principal is 90 days or more past due, unless the loans are well secured with a reasonable expectation of collection.

When a loan is placed on nonaccrual, an allowance for uncollected interest is established and charged against current income.

Thereafter, interest income is not recognized unless the financial condition and payment record of the borrower warrant the recognition of interest income.

Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Interest on loans that have been restructured is accrued according to the renegotiated terms.

Net loan origination fees and costs are deferred and amortized into interest income over the contractual lives of the related loans by use of the level yield method.

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.

The composition of loans were as follows at September 30, 2023 and December 31, 2022:

September 30,

The composition of loans was as follows at March 31, 2024 and December 31, 2023:

(In Thousands)

6 unchanged sentences

Allowance for credit losses

Loans serviced for the benefit of others totaled approximately $ 37.5 million and $ 22.4 million at September 30, 2023 and December 31, 2022, respectively.

The value of mortgage servicing rights was not material at September 30, 2023 and December 31, 2022.

Loans serviced for the benefit of others totaled approximately $ 44.2 million and $ 40.7 million at March 31, 2024 and December 31, 2023, respectively.

The value of mortgage servicing rights was not material at March 31, 2024 and December 31, 2023.

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

6 unchanged sentences

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

The following tables summarize the allocation of the allowance for credit losses based upon the calculation methodology described in Note 1, and loans receivable by loan class and credit loss method at September 30, 2023 and December 31, 2022:

At September 30, 2023:

The following tables summarize the allocation of the allowance for credit losses and loans receivable by loan class and credit loss method at March 31, 2024 and December 31, 2023:

At March 31, 2024:

(In Thousands)

13 unchanged sentences

(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

The activity in the allowance for credit loss by loan class for the three and nine months ended September 30, 2023 and 2022 was as follows:

collectively evaluated for credit loss

The activity in the allowance for credit loss by loan class for the three months ended March 31, 2024 and 2023 was as follows:

(In Thousands)

Allowance for credit losses:

Balance -June 30, 2023

Provision (Benefit)

Balance -September 30, 2023

(In Thousands)

Allowance for loan losses:

Balance - June 30, 2022

Provision (Benefit)

Balance - September 30, 2022

Balance - December 31, 2023

Provision (reversal of)

Balance -March 31, 2024

(In Thousands)

2 unchanged sentences

Impact of adopting ASC 326

Provision (Benefit)

Balance - September 30, 2023

(In Thousands)

Allowance for loan losses:

Balance - December 31, 2021

Provision (Benefit)

Balance - September 30, 2022

During the three and nine months ended September 30, 2023, the provision expenses recorded for residential real estate loans were primarily attributed to the increased loan balances.

During the three months ended September 30, 2023, the credit provision recorded for construction loans was due to decreased loan balances.

During the nine months ended September 30, 2023, the provision expenses recorded for construction loans were primarily attributed to the increased loan balances.

The Company has two individually evaluated loans, totaling $ 4.4 million, which were collateral-dependent construction loans, secured by multi-family real estate, at September 30, 2023.

Provision (reversal of)

Balance - March 31, 2023

During the three months ended March 31, 2024, the reversal of provision recorded for residential real estate loans was primarily attributed to the decreased loan balances and reduced credit risk.

The reversal of provision recorded for non-residential real estate loans and commercial and industrial loans was primarily attributed to the decreased loan balances.

The provision expenses recorded for consumer loans were primarily attributed to the increased deposit account overdraft balances.

The provision expenses recorded for constructions loans were primarily attributed to the increased construction loan balances, offset by improving economic conditions during the first quarter of 2024.

During the three months ended March 31, 2023, the provision expenses recorded for construction loans and residential real estate loans were primarily attributed to the increased loan balances.

The provision expenses recorded for consumer loans were primarily attributed to the increased deposit account overdraft balances.

The Company has two individually evaluated loans, totaling $ 4.4 million, which were collateral-dependent construction loans, secured by multi-family real estate, at March 31, 2024 and December 31, 2023, respectively.

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 September 30, 2023.

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

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 Three and Nine Months Ended September 30, 2023 and September 30, 2022:

Three Months Ended September 30, 2023

Nine Months Ended September 30, 2023

Unpaid Principal

Average Recorded

Interest Income

Average Recorded

Interest Income

2023 - Nonperforming

(In Thousands)

With no related allowance recorded:

Residential real estate-Multi-family

Non-residential real estate

Commercial and industrial

With an allowance recorded

Residential real estate-Multi-family

Non-residential real estate

Commercial and industrial

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

There was no interest income recognized from non-accrual loans as of March 31, 2024.

The Company had no individually evaluated loans at March 31, 2023, and there was no interest income recognized

from individually evaluated loans as of March 31, 2023.

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

As of and for the Three Months Ended March 31, 2024:

Three Months Ended March 31, 2024

Unpaid Principal

1 unchanged sentence

Interest Income

Average Recorded

Interest Income

2022 - Impaired

2024 - Individually evaluated

(In Thousands)

With no related allowance recorded:

Residential real estate-Multi-family

Residential real estate

Non-residential real estate

1 unchanged sentence

With an allowance recorded

Residential real estate-Multi-family

Residential real estate

Non-residential real estate

4 unchanged sentences

Interest Income

2023 - Individually evaluated

(In Thousands)

With no related allowance recorded:

Residential real estate-Multi-family

Residential real estate

Non-residential real estate

1 unchanged sentence

With an allowance recorded

Residential real estate-Multi-family

Residential real estate

Non-residential real estate

1 unchanged sentence

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

Age Analysis of Past Due Loans as of September 30, 2023:

Age Analysis of Past Due Loans as of March 31, 2024:

(In Thousands)

4 unchanged sentences

Commercial and industrial loans

At March 31, 2024, the $ 4.1 million construction loans past due over 60 days consisted of two loans that were secured by the same project located in the Bronx, New York.

The two loans were brought current subsequently in April 2024.

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

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

The following table presents the risk category of loans at September 30, 2023 by loan segment and vintage year:

The following table presents the risk category of loans at March 31, 2024 by loan segment and vintage year:

Term Loans Amortized Costs Basis by Origination Year

September 30, 2023

March 31, 2024

Residential real estate

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Special Mention

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:

Non-residential

and Industrial

(In Thousands)

Current period gross charge-offs

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

Modifications to Borrowers Experiencing Financial Difficulty:

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

There were no loans modified to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023 or the year ended December 31, 2022.

There were no loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2024 or the year ended December 31, 2023.

Allowance for Credit Losses on Off-Balance Sheet Commitments:

The following table presents the activity in the allowance for credit losses related to off-balance sheet commitments, that is included in Accounts Payable and Accrued Expenses on the consolidated statement of financial condition, for the three and nine months ended September 30, 2023:

Allowance for

Allowance for Credit Loss

Balance – December 31, 2023

Provision for (reversal of) credit loss

Balance – March 31, 2024

Allowance for Credit Loss

Balance – December 31, 2022

Impact of adopting ASC 326

Provision for credit loss

Provision for (reversal of) credit loss

Balance – March 31, 2023

Provision for credit loss

Balance – June 30, 2023

Provision for credit loss

Balance – September 30, 2023

Note 7 — Real Estate Owned (“REO”)

The Company owned one foreclosed property valued at approximately $ 1,456,000 at September 30, 2023 and $ 1,456,000 at December 31, 2022, consisting of an office building located in Pennsylvania.

The Company owned one foreclosed property valued at approximately $ 1,456,000 at March 31, 2024 and December 31, 2023, respectively, consisting of an office building located in Pennsylvania.

The property was acquired through foreclosure in December 2014.

1 unchanged sentence

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

REO expense recorded in the consolidated statements of income amounted to $ 11,000 and $ 200,000 for the three months, and $ 52,000 and $ 252,000 for the nine months ended September 30, 2023 and 2022, respectively.

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

REO expense recorded in the consolidated statements of income amounted to $ 11,000 and $ 21,000 for the three months ended March 31, 2024 and 2023, respectively.

Note 8 — 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 September 30, 2023 and December 31, 2022:

September 30,

FHLB advances are summarized as follows at March 31, 2024 and December 31, 2023:

Weighted Average

6 unchanged sentences

After one to three years

After three to four years

After five years (due 2030)

At September 30, 2023, none of the above advances were subject to early call or redemption features.

All advances had fixed interest rates, with the remaining term of nine months for one advance and seven years for the other advance.

At September 30, 2023, the advances were secured by a pledge of the Company’s investment in the capital stock of the FHLB and a blanket assignment of the Company’s otherwise unpledged qualifying mortgage loans.

At September 30, 2023, these unpledged qualifying mortgage loans were not pledged to any company other than the FHLB.

At September 30, 2023, the Company had the ability to borrow $ 31.3 million, net of $ 14.0 million in outstanding advances, from the FHLB and $ 8.0 million from Atlantic Community Bankers Bank (“ACBB”).

At March 31, 2024, none of the above advances were subject to early call or redemption features.

All advances had fixed interest rates, with the remaining term of six years for the advance.

At March 31, 2024, the advances were secured by a pledge of the Company’s investment in the capital stock of the FHLB and a blanket assignment of the Company’s otherwise unpledged qualifying mortgage loans.

At March 31, 2024, these unpledged qualifying mortgage loans were not pledged to any company other than the FHLB.

At March 31, 2024, the Company had the ability to borrow $ 32.1 million, net of $ 7.0 million in outstanding advances, from the FHLB and $ 8.0 million from Atlantic Community Bankers Bank (“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 September 30, 2023, the borrowing from FRBNY was $ 50.0 million, bearing an interest rate of 5.5 % and matures on December 22, 2023.

The Company had an available borrowing limit of $ 739.4 million from the FRBNY as of September 30, 2023.

As of March 31, 2024, the borrowing from FRBNY was $ 40.0 million and bears an interest rate of 5.5 % .

This borrowing matures in June 2024.

The Company had an available borrowing limit of $ 928.8 million from the FRBNY as of March 31, 2024.

Note 9 — Benefits Plans

1 unchanged sentence

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

The following table sets forth information regarding the components of net pension periodic expense measured as of September 30, 2023 and 2022:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars In Thousands)

The following table sets forth information regarding the components of net pension periodic expense measured as of March 31, 2024 and 2023:

Three Months Ended March 31,

(Dollars In Thousands)

1 unchanged sentence

Interest cost

Actuarial (gain) loss recognized

Actuarial gain recognized

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

Unrecognized net loss of $ 18,000 and $ 23,000 for the three months, and $ 54,000 and $ 64,000 for the nine months ended September 30, 2023 and 2022, respectively, were included in accumulated other comprehensive income.

Unrecognized net loss of $ 18,000 for the three months ended March 31, 2024 and 2023, respectively, were included in accumulated other comprehensive income.

Supplemental Executive Retirement Plan (“SERP”)

3 unchanged sentences

Additional terms related to death while employed, death after retirement, disability before retirement and termination of employment are fully described within the plan document.

The benefit payment term is the greater of 15 years or the executives remaining life.

The benefit payment term is the greater of 15 years or the executive’s remaining life.

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

Expenses of $ 51,000 and $ 121,000 for the three months, and $ 162,000 and $ 361,000 for the nine months ended September 30, 2023 and 2022, respectively, were recorded for this plan and are reflected in the Consolidated Statements of Income under Salaries and Employee Benefits.

Expenses of $ 130,000 and $ 60,000 for the three months ended March 31, 2024 and 2023, respectively, were recorded for this plan and are reflected in the Consolidated Statements of Income under Salaries and Employee Benefits.

Stock-Based Deferral Plan

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

At September 30, 2023, the Company did not have any obligations under the plan.

At March 31, 2024, the Company did not have any obligations under the plan.

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

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

The Company provided no matching contribution during the three and nine months ended September 30, 2023 and 2022.

The Company provided no matching contribution during the three months ended March 31, 2024 and 2023.

Employee Stock Ownership Plan (“ESOP”)

6 unchanged sentences

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

The balance remaining on the first ESOP loan was $ 1,327,000 at September 30, 2023 and December 31, 2022.

The balance remaining on the second ESOP loan was $ 6,850,000 at September 30, 2023 and December 31, 2022.

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

The balance remaining on the first ESOP loan was $ 919,000 at March 31, 2024 and December 31, 2023.

The balance remaining on the second ESOP loan was $ 6,417,000 at March 31, 2024 and December 31, 2023.

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

As the loan principal is repaid, shares will be released from the suspense account and become eligible for allocation.

3 unchanged sentences

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

expense totaled approximately $ 340,000 and $ 271,000 for the three months, and $ 960,000 and $ 775,000 for the nine months ended September 30, 2023 and 2022, respectively.

Dividends on unallocated shares, which totaled approximately $ 47,000 and $ 52,000 for the three months, and $ 141,000 and $ 313,000 for the nine months ended September 30, 2023 and 2022, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 42,000 and $ 36,000 for the three months, and $ 125,000 and $ 219,000 for the nine months ended September 30, 2023 and 2022, respectively, are charged to retained earnings.

ESOP expense totaled approximately $ 352,000 and $ 326,000 for the three months ended March 31, 2024 and 2023,

respectively.

Dividends on unallocated shares, which totaled approximately $ 70,000 and $ 47,000 for the three months ended March 31, 2024 and 2023, are recorded as a reduction of the ESOP loan.

Dividends on allocated shares, which totaled approximately $ 78,000 and $ 42,000 for the three months ended March 31, 2024 and 2023, respectively, are charged to retained earnings.

ESOP shares are summarized as follows:

September 30,

Allocated shares

6 unchanged sentences

Note 10 — Leases

The Company has operating leases and finance leases all comprised of real estate property.

The Company has operating leases and finance leases all of which are comprised of real estate property.

The operating leases comprise substantially all of the Company’s obligations in which the Company is the lessee, with remaining lease terms ranging between 1 and 10 years .

7 unchanged sentences

Our leases do not provide an implicit interest rate.

The company used its incremental borrowing rate, the rate of interest to borrow in a collateralized basis for a similar term, at the lease commencement date.

The Company used its incremental borrowing rate, the rate of interest to borrow on a collateralized basis for a similar term, at the lease commencement date.

All of the leases are net leases and, therefore, do not contain non-lease components.

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

At September 30, 2023 and December 31, 2022, the quantitative data relating to the Company’s leases are as follows (in thousands):

September 30,

At March 31, 2024 and December 31, 2023, the quantitative data relating to the Company’s leases are as follows (in thousands):

Finance Lease Amounts:

9 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars In Thousands)

Three Months Ended March 31,

(Dollars In Thousands)

6 unchanged sentences

Operating leases

Maturities of lease liabilities at September 30, 2023 are as follows (in thousands):

Maturities of lease liabilities at March 31, 2024 are as follows (in thousands):

Years ended December 31:

3 unchanged sentences

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

The Company’s securities available for sale are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company has to record at fair value other assets and liabilities on a non-recurring basis, such as securities held to maturity, impaired loans and other real estate owned.

established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The Company’s marketable equity securities are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company has to record at fair value other assets and liabilities on a non-recurring basis, such as securities held to maturity, individually evaluated loans and other real estate owned.

GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.

hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are as follows:

3 unchanged sentences

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

The following table sets forth the Company’s assets that are carried at fair value on a recurring basis and the level that was used to determine their fair value at September 30, 2023 and December 31, 2022:

The following table sets forth the Company’s assets that are carried at fair value on a recurring basis and the level that was used to determine their fair value at March 31, 2024 and December 31, 2023:

Quoted Prices in

4 unchanged sentences

Recurring Basis

September 30,

Marketable equity securities:

Mortgage-backed securities

There were no transfers between Level 1 and 2 during the three and nine months ended September 30, 2023 or the year ended December 31, 2022.

The Company did no t have any liabilities that were carried at fair value on a recurring basis at September 30, 2023 and December 31, 2022.

The following table sets forth the Company’s assets that are carried at fair value on a non-recurring basis and the level that was used to determine their fair value, at September 30, 2023 and December 31, 2022:

There were no transfers between Level 1 and 2 during the three months ended March 31, 2024 or the year ended December 31, 2023.

The Company did no t have any liabilities that were carried at fair value on a recurring basis at March 31, 2024 and December 31, 2023.

The following table sets forth the Company’s assets that are carried at fair value on a non-recurring basis and the level that was used to determine their fair value, at March 31, 2024 and December 31, 2023:

Quoted Prices in

4 unchanged sentences

Non-Recurring Basis

September 30,

(In Thousands)

1 unchanged sentence

Real estate owned

The following tables present the qualitative information about non-recurring Level 3 fair value measurements of financial instruments at September 30, 2023 and December 31, 2022:

At September 30, 2023

The following tables present the qualitative information about non-recurring Level 3 fair value measurements of financial instruments at March 31, 2024 and December 31, 2023:

At March 31, 2024

(In Thousands)

7 unchanged sentences

(In Thousands)

Impaired loans

Loans individually evaluated

Income approach

3 unchanged sentences

Capitalization rate

The Company did no t have any liabilities that were carried at fair value on a non-recurring basis at September 30, 2023 and December 31, 2022.

The methods and assumptions used to estimate fair value at September 30, 2023 and December 31, 2022 are as follows:

The Company did no t have any liabilities that were carried at fair value on a non-recurring basis at March 31, 2024 and December 31, 2023.

The methods and assumptions used to estimate fair value at March 31, 2024 and December 31, 2023 are as follows:

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

11 unchanged sentences

Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated.

The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective

As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.

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

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2023 and December 31, 2022:

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

Fair values for securities available for sale and held to maturity are determined utilizing Level 2 inputs.

Fair values for equity securities and securities held to maturity are determined utilizing Level 2 inputs.

For these securities, the Company obtains fair value measurements from an independent pricing service.

1 unchanged sentence

Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the security’s terms and conditions, among other things

The carrying amounts and estimated fair value of our financial instruments are as follows:

Fair Value at

September 30, 2023

March 31, 2024

(In thousands)

3 unchanged sentences

Marketable equity securities

Securities available for sale

Securities held to maturity

10 unchanged sentences

Marketable equity securities

Securities available for sale

Securities held to maturity

Loans receivable, net

Loans receivable

Investments in restricted stock

1 unchanged sentence

Financial Liabilities

FHLB of New York advances

Note 12 — Revenue Recognition

7 unchanged sentences

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

As of September 30, 2023, the Company did not have any significant contract balances.

As of March 31, 2024, the Company did not have any significant contract balances.

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

The following table presents the Company’s sources of noninterest income for the three and nine months ended September 30, 2023 and 2022.

The following table presents the Company’s sources of noninterest income for the three months ended March 31, 2024 and 2023.

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Three Months Ended March 31,

(In Thousands)

3 unchanged sentences

Electronic banking fees and charges

Gain on disposition of equipment (1)

Income from bank owned life insurance (1)

Investment advisory fees

Unrealized loss on equity securities (1)

Unrealized (loss) gain on equity securities (1)

Miscellaneous (1)

13 unchanged sentences

Investment Advisory Fees

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

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

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

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

As previously noted, in January 2024, the Bank sold all of the Bank’s assets relating to Harbor West Wealth Management Group to a third party.

As such, the Bank no longer generates investment advisory fees following the completion of the sale transaction.

Note 13 — Other Non-Interest Expenses

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Three Months Ended March 31,

(In Thousands)

6 unchanged sentences

Recruiting expense

Note 14 — Earnings Per Share

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

The following table sets forth the weighted average shares outstanding used in the computations of basic and diluted earnings per share.

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands, except per share data)

Net income (basic and diluted)

Weighted average shares issued

Weighted average unearned ESOP shares

Weighted average unvested restricted shares

Basic weighted average shares outstanding

Dilutive effect of restricted stock

Dilutive effect of stock option

Diluted weighted average shares outstanding

Net income per share

Note 14 — Stock Compensation Plans

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

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

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

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

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

As of September 30, 2023 and December 31, 2022, there were 137,637 shares available for future awards under this plan, which includes 98,311 shares available for stock options and 39,326 shares available for restricted stock awards.

A summary of the Company’s restricted stock activity and related information for the three and nine months ended September 30, 2023 follows:

Weighted Average

As of March 31, 2024 and 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 three months ended March 31 follows:

Outstanding at December 31, 2023

Outstanding at March 31, 2024

Outstanding at June 30, 2023

Outstanding at September 30, 2023

Compensation expense related to restricted stock was $ 241,000 and $ 723,000 for the three and nine months ended September 30, 2023.

At September 30, 2023 and December 31, 2022, the total compensation cost related to non-vested awards that has not yet been recognized was $ 4.0 million and $ 4.7 million, respectively, which is expected to be recognized over the next 5 years.

A summary of the Company’s stock option activity and related information for the three and nine months ended September 30, 2023 follows:

Weighted Average

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Compensation expense related to restricted stock was $ 252,000 and $ 241,000 for the three months ended March 31, 2024 and 2023.

At March 31, 2024 and December 31, 2023, the total compensation cost related to non-vested awards that has not yet been recognized was $ 3.6 million and $ 3.8 million, respectively, which is expected to be recognized over the next 4 years.

A summary of the Company’s stock option activity and related information for the three months ended March 31 follows:

Exercise Price

Outstanding at December 31, 2023

Outstanding at March 31, 2024

Exercisable at March 31, 2024

Outstanding at June 30, 2023

Exercisable at June 30, 2023

Outstanding at September 30, 2023

Exercisable at September 30, 2023

Exercise Price

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Exercisable at March 31, 2023

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

Compensation expense related to stock options was $ 192,000 and $ 576,000 for the three and nine months ended September 30, 2023.

At September 30, 2023 and December 31, 2022, unrecognized compensation cost related to stock option awards was $ 3.2 million and $ 3.7 million, respectively, which is expected to be recognized over the next 5 years.

Compensation expense related to stock options was $ 192,000 and $ 192,000 for the three months ended March 31, 2024 and 2023.

At March 31, 2024 and December 31, 2023, unrecognized compensation cost related to stock option awards was $ 2.8 million and $ 3.0 million, respectively, which is expected to be recognized over the next 4 years.

Note 15 — Recent Accounting Pronouncements

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.

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.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718), amended the guidance in ASC 718 to add an example showing how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements.

For public business entities, the guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years.

For all other entities, it is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years.

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

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements.

This ASU removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification.

The FASB does not expect these updates to have a significant effect on current accounting practice.

That is because in most cases the amendments to the Codification remove references to Concept Statements that are extraneous and not required to understand or apply the guidance.

However, the FASB has provided transition guidance if applying the updated guidance results in accounting changes for some entities.

The amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025.

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

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

What changed 10-Q

Item 1. Financial Statements