What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-10 compared with 2022-08-08 · 122 added, 170 removed, 767 unchanged (28% of the section changed)

4 unchanged sentences

(Dollars in thousands except per share data)

September 30,

2022 December 31,

4 unchanged sentences

Investment securities available for sale, at fair value 9,790 13,351

Investment securities held to maturity (fair value of $ 8,408 at June 30,

Investment securities held to maturity (fair value of $ 7,720 at September 30,

2022 and $ 10,025 at December 31, 2021)

27 unchanged sentences

Preferred stock, 1,000,000 shares authorized, $ 1,000 liquidation value Series B non-cumulative convertible;

445 shares and 445 shares outstanding at June 30, 2022 and December 31, 2021, respectively

445 shares and 445 shares outstanding at September 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.10 par value;

authorized 15,000,000 shares;

12,199,483 shares and 12,182,081 shares at June 30, 2022 and December 31, 2021, respectively

12,207,097 shares and 12,182,081 shares at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 135,885 135,451

1 unchanged sentence

Accumulated other comprehensive (loss) income ( 617 ) 245

Treasury stock, 284,522 shares at June 30, 2022 and Dec.

Treasury stock, 284,522 shares at Sept.

30, 2022 and Dec.

31, 2021, at cost

8 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2022 2021 2022 2021

47 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2022 2021 2022 2021

17 unchanged sentences

Stock Total Shareholders' Equity Non-Controlling Interest Total Equity

Balance, March 31, 2022 $ 445 12,198,019 $ 1,220 $ 135,623 $ 106,194 $ ( 188 ) $ ( 3,015 ) $ 240,279 $ — $ 240,279

3 Months Ended

Balance, June 30, 2022 $ 445 12,199,483 $ 1,220 $ 135,709 $ 115,020 $ ( 262 ) $ ( 3,015 ) $ 249,117 $ — $ 249,117

Net income — — — — 10,540 — — 10,540 — 10,540

3 unchanged sentences

Dividend on preferred stock (1)

— — — — ( 7 ) — — ( 7 ) — ( 7 )

Dividend on common stock (2)

Balance, June 30, 2022 $ 445 12,199,483 $ 1,220 $ 135,709 $ 115,020 $ ( 262 ) $ ( 3,015 ) $ 249,117 $ — $ 249,117

— — — — ( 2,144 ) — — ( 2,144 ) — ( 2,144 )

Balance, September 30, 2022 $ 445 12,207,097 $ 1,221 $ 135,885 $ 123,409 $ ( 617 ) $ ( 3,015 ) $ 257,328 $ — $ 257,328

9 Months Ended

Balance, December 31, 2021 $ 445 12,182,081 $ 1,218 $ 135,451 $ 98,017 $ 245 $ ( 3,015 ) $ 232,361 $ — $ 232,361

4 unchanged sentences

Dividend on preferred stock (1)

— — — — ( 20 ) — — ( 20 ) — ( 20 )

Dividend on common stock (2)

Balance, June 30, 2022 $ 445 12,199,483 $ 1,220 $ 135,709 $ 115,020 $ ( 262 ) $ ( 3,015 ) $ 249,117 $ — $ 249,117

— — — — ( 5,957 ) — — ( 5,957 ) — ( 5,957 )

Balance, September 30, 2022 $ 445 12,207,097 $ 1,221 $ 135,885 $ 123,409 $ ( 617 ) $ ( 3,015 ) $ 257,328 $ — $ 257,328

(1) Dividends per share of $ 15.0 and $ 45.0 , respectively, were declared on series B preferred stock for the three and nine months ended September 30, 2022.

(2) Dividends per share of $ 0.18 and $ 0.50 , respectively, were declared on common stock outstanding for the three and nine months ended September 30, 2022.

See accompanying notes to consolidated financial statements

8 unchanged sentences

Stock Total Shareholders' Equity Non-Controlling Interest Total Equity

Balance, March 31, 2021 $ 470 12,167,887 $ 1,217 $ 135,246 $ 74,324 $ 380 $ ( 3,015 ) $ 208,622 $ 1,322 $ 209,944

3 Months Ended

Balance, June 30, 2021 $ 470 12,177,765 $ 1,218 $ 135,318 $ 81,262 $ 369 $ ( 3,015 ) $ 215,622 $ 1,389 $ 217,011

Net income — — — — 10,501 — — 10,501 42 10,543

3 unchanged sentences

Dividend on preferred stock ( 1)

— — — — ( 7 ) — — ( 7 ) — ( 7 )

Dividend on common stock (2)

Balance, June 30, 2021 $ 470 12,177,765 $ 1,218 $ 135,318 $ 81,262 $ 369 $ ( 3,015 ) $ 215,622 $ 1,389 $ 217,011

— — — — ( 1,903 ) — — ( 1,903 ) — ( 1,903 )

Balance, September 30, 2021 $ 470 12,178,497 $ 1,218 $ 135,383 $ 89,853 $ 347 $ ( 3,015 ) $ 224,256 $ 1,431 $ 225,687

9 Months Ended

Balance, December 31, 2020 $ 480 12,136,567 $ 1,214 $ 134,989 $ 66,794 $ 463 $ ( 3,015 ) $ 200,925 $ 1,672 $ 202,597

6 unchanged sentences

Dividend on preferred stock (1)

— — — — ( 21 ) — — ( 21 ) — ( 21 )

Dividend on common stock (2)

Balance, June 30, 2021 $ 470 12,177,765 $ 1,218 $ 135,318 $ 81,262 $ 369 $ ( 3,015 ) $ 215,622 $ 1,389 $ 217,011

— — — — ( 7,607 ) — — ( 7,607 ) — ( 7,607 )

Balance, September 30, 2021 $ 470 12,178,497 $ 1,218 $ 135,383 $ 89,853 $ 347 $ ( 3,015 ) $ 224,256 $ 1,431 $ 225,687

(1) Dividends per share of $ 15.0 and $ 45.0 , respectively, were declared on series B preferred stock for the three and nine months ended September 30, 2021.

(2) Dividends per share of $ 0.16 and $ 0.48 , respectively, were declared on common stock outstanding for the three and nine months ended September 30, 2021.

See accompanying notes to consolidated financial statements

3 unchanged sentences

(Dollars in thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash Flows from Operating Activities:

12 unchanged sentences

Decrease (increase) in accrued interest receivable and other assets 226 ( 960 )

Decrease in accrued interest payable and other accrued liabilities ( 808 ) ( 396 )

Increase (decrease) in accrued interest payable and other accrued liabilities 1,769 ( 1,177 )

Net cash provided by operating activities 34,297 29,498

2 unchanged sentences

Repayments and maturities of investment securities held to maturity 380 —

Purchases of investment securities — ( 8,693 )

Net (increase) decrease in loans ( 196,324 ) 90,020

1 unchanged sentence

Proceeds from sale of OREO, net 1,887 245

(Purchase) redemptions of restricted stock ( 82 ) 1,340

Redemptions of restricted stock 155 1,813

Net cash (used in) provided by investing activities ( 191,623 ) 88,310

37 unchanged sentences

The accompanying interim financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The accompanying interim financial statements for the three and six months ended June 30, 2022 and 2021 are unaudited.

The accompanying interim financial statements for the three and nine months ended September 30, 2022 and 2021 are unaudited.

The balance sheet as of December 31, 2021, was derived from the audited financial statements.

In the opinion of management, these financial statements include all normal and recurring adjustments necessary for a fair statement of the results for such interim periods.

Results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results for the full year or any other period.

Results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results for the full year or any other period.

Use of Estimates:

6 unchanged sentences

The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty.

Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan.

Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of the existing loan.

These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

20 unchanged sentences

The ASU is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.

The Company intends to adopt this guidance on its effective date and does not expect the adoption of this guidance to materially impact its financial condition, results of operations and consolidated financial statements.

INVESTMENT SECURITIES

The following is a summary of the Company's investments in available for sale and held to maturity securities as of June 30, 2022 and December 31, 2021:

As of June 30, 2022 Amortized

The following is a summary of the Company's investments in available for sale and held to maturity securities as of September 30, 2022 and December 31, 2021:

As of September 30, 2022 Amortized

losses Fair value

18 unchanged sentences

Held to maturity:

States and political subdivisions $ 3,761 $ 241 $ 16 $ 3,986

Residential mortgage-backed securities 6,157 — 118 6,039

States and political subdivisions $ 3,761 $ 241 $ 16 $ 3,986

Total held to maturity $ 9,918 $ 241 $ 134 $ 10,025

The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of June 30, 2022 are as follows:

The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of September 30, 2022 are as follows:

(Dollars in thousands)

12 unchanged sentences

Expected maturities may differ from contractual maturities because the issuers of certain debt securities do have the right to call or prepay their obligations without any penalty.

The Company did not sell any securities during the three and six months ended June 30, 2022.

The following tables show the gross unrealized losses and fair value of the Company's investments which are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021:

As of June 30, 2022 Less Than 12 Months 12 Months or Greater Total

The Company did not sell any securities during the three and nine months ended September 30, 2022.

As of September 30, 2022 Less Than 12 Months 12 Months or Greater Total

Description of Securities Fair

41 unchanged sentences

(3) the financial position and access to capital of the issuer, including the current and future impact of any specific events;

(4) any change in rating agencies’ credit ratings at evaluation date from acquisition date and any likely imminent action;

(5) for asset-backed securities, the credit performance of the underlying collateral, including delinquency rates, level of

non-performing assets, cumulative losses to date, collateral value and the remaining credit enhancement compared with expected credit losses.

The Company’s unrealized loss for the debt securities is comprised of 17 securities in the less than 12 months loss position and 2 securities in the 12 months or greater loss position at June 30, 2022, and 5 securities in the less than 12 months loss position and 3 securities in the 12 months or greater loss position at December 31, 2021.

(4) any change in rating agencies’ credit ratings at evaluation date from acquisition date and any likely imminent

(5) for asset-backed securities, the credit performance of the underlying collateral, including delinquency rates, level of non-performing assets, cumulative losses to date, collateral value and the remaining credit enhancement compared with expected credit losses.

The Company’s unrealized loss for the debt securities is comprised of 20 securities in the less than 12 months loss position and 7 securities in the 12 months or greater loss position at September 30, 2022.

The mortgage-backed securities that had unrealized losses were issued or guaranteed by the US government or US government sponsored entities.

1 unchanged sentence

The states and political subdivisions securities that had unrealized losses were issued by a school district, and the loss is attributed to changes in interest rates and not due to credit losses.

Because the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, the Company does not consider the unrealized loss in these securities to be OTTI at June 30, 2022.

LOANS AND ALLOWANCE FOR LOAN LOSSES

At June 30, 2022 and December 31, 2021, the Company had $ 1.55 billion and $ 1.48 billion, respectively, in loans receivable outstanding.

Outstanding balances include a total net increase of $ 2.0 million and $ 1.7 million at June 30, 2022 and December 31, 2021, respectively, for unearned income, net deferred loan fees, and unamortized discounts and premiums.

We had no loans held for sale at June 30, 2022 and December 31, 2021, respectively.

Also, at June 30, 2022 and December 31, 2021, our commercial and industrial loan portfolio includes $ 4.4 million and $ 27.8 million, respectively, of loans to small businesses through the Paycheck Protection Program ("SBA PPP" loans), which is a loan designed by the Federal government to provide a direct incentive for small businesses to keep their workers on the payroll.

The portfolios of loans receivable at June 30, 2022 and December 31, 2021, consist of the following:

June 30, 2022 December 31, 2021

At September 30, 2022 and December 31, 2021, the Company had $ 1.68 billion and $ 1.48 billion, respectively, in loans receivable outstanding.

Outstanding balances include a total net increase of $ 1.8 million and $ 1.7 million at September 30, 2022 and December 31, 2021, respectively, for net deferred loan costs, and unamortized discounts.

We had no loans held for sale at September 30, 2022 and December 31, 2021, respectively.

Also, at September 30, 2022 and December 31, 2021, our commercial and industrial loan portfolio includes $ 2.9 million and $ 27.8 million, respectively, of loans to small businesses through the Paycheck Protection Program ("SBA PPP" loans), which is a loan designed by the Federal government to provide a direct incentive for small businesses to keep their workers on the payroll.

The portfolio segments of loans receivable at September 30, 2022 and December 31, 2021, consist of the following:

September 30, 2022 December 31, 2021

Amount Amount

9 unchanged sentences

Total Loans $ 1,679,357 $ 1,484,847

An age analysis of past due loans by class at June 30, 2022 and December 31, 2021 is as follows:

June 30, 2022 30-59

An age analysis of past due loans by class at September 30, 2022 and December 31, 2021 is as follows:

September 30, 2022 30-59

Accruing Total Past

56 unchanged sentences

It is reasonably possible that actual outcomes may differ from our estimates.

The following tables present the information regarding the allowance for loan and lease losses and associated loan data:

The following tables present the information regarding the allowance for loan and lease losses and associated loan data by portfolio segment:

Real Estate Mortgage

1 unchanged sentence

Allowance for loan losses (Dollars in thousands)

Three months ended June 30, 2022

March 31, 2022 $ 509 $ 2,197 $ 3,012 $ 7,253 $ 15,482 $ 1,415 $ 113 $ 29,981

Three months ended September 30, 2022

June 30, 2022 $ 551 $ 2,202 $ 2,742 $ 7,549 $ 16,211 $ 1,098 $ 95 $ 30,448

Charge-offs — — — — ( 66 ) — — ( 66 )

1 unchanged sentence

Provisions (benefits) ( 137 ) 653 ( 140 ) 368 ( 221 ) 92 ( 15 ) 600

Ending Balance at June 30, 2022

Ending Balance at September 30, 2022

$ 417 $ 2,855 $ 2,606 $ 7,917 $ 15,924 $ 1,190 $ 80 $ 30,989

Allowance for loan losses

Six months ended June 30, 2022

Nine months ended September 30, 2022

December 31, 2021 $ 417 $ 2,662 $ 2,997 $ 7,476 $ 14,970 $ 1,215 $ 108 $ 29,845

2 unchanged sentences

Provisions (benefits) ( 12 ) 93 ( 406 ) 441 887 ( 25 ) ( 28 ) 950

Ending Balance at June 30, 2022

Ending Balance at September 30, 2022

$ 417 $ 2,855 $ 2,606 $ 7,917 $ 15,924 $ 1,190 $ 80 $ 30,989

2 unchanged sentences

Collectively evaluated for impairment 417 2,855 2,602 7,792 15,904 1,190 80 30,840

Ending Balance at June 30, 2022

Ending Balance at September 30, 2022

$ 417 $ 2,855 $ 2,606 $ 7,917 $ 15,924 $ 1,190 $ 80 $ 30,989

1 unchanged sentence

Collectively evaluated for impairment 29,407 192,972 128,929 327,888 892,568 78,162 6,970 1,656,896

Ending Balance at June 30, 2022

Ending Balance at September 30, 2022

$ 29,407 $ 194,111 $ 130,106 $ 347,543 $ 892,988 $ 78,162 $ 7,040 $ 1,679,357

The increase in the allowance for loan loss balance for the nine months ended September 30, 2022 in the residential 1 to 4 family and commercial non-owner occupied portfolio segments was primarily attributable to loan growth.

The decrease in the allowance for loan loss balance in the commercial owner occupied portfolio segment for the nine months ended September 30, 2022 was due to decreases in non-performing balances.

Real Estate Mortgage

1 unchanged sentence

Allowance for loan losses (Dollars in thousands)

Three months ended June 30, 2021

March 31, 2021 $ 474 $ 3,744 $ 3,335 $ 9,160 $ 11,825 $ 1,538 $ 134 $ 30,210

Three months ended September 30, 2021

June 30, 2021 $ 312 $ 3,483 $ 3,502 $ 8,514 $ 12,883 $ 1,250 $ 125 $ 30,069

Charge-offs — ( 226 ) — — ( 49 ) — — ( 275 )

1 unchanged sentence

Provisions (benefits) 95 ( 350 ) ( 105 ) ( 350 ) 878 ( 166 ) ( 2 ) —

Ending Balance at June 30, 2021 $ 312 $ 3,482 $ 3,502 $ 8,514 $ 12,883 $ 1,250 $ 125 $ 30,068

Ending Balance at September 30, 2021 $ 409 $ 2,907 $ 3,435 $ 8,168 $ 13,712 $ 1,084 $ 123 $ 29,838

Allowance for loan losses

Six months ended June 30, 2021

Nine months ended September 30, 2021

December 31, 2020 $ 492 $ 3,359 $ 3,078 $ 8,398 $ 12,595 $ 1,639 $ 137 $ 29,698

2 unchanged sentences

Provisions (benefits) ( 98 ) ( 226 ) 461 ( 234 ) 1,166 ( 555 ) ( 14 ) 500

Ending Balance at June 30, 2021 $ 312 $ 3,482 $ 3,502 $ 8,514 $ 12,883 $ 1,250 $ 125 $ 30,068

Ending Balance at September 30, 2021 $ 409 $ 2,907 $ 3,435 $ 8,168 $ 13,712 $ 1,084 $ 123 $ 29,838

Allowance for loan losses

1 unchanged sentence

Collectively evaluated for impairment 400 2,607 3,429 7,933 13,649 1,084 123 29,225

Ending Balance at June 30, 2021 $ 312 $ 3,482 $ 3,502 $ 8,514 $ 12,883 $ 1,250 $ 125 $ 30,068

Ending Balance at September 30, 2021 $ 409 $ 2,907 $ 3,435 $ 8,168 $ 13,712 $ 1,084 $ 123 $ 29,838

Individually evaluated for impairment $ 47 $ 1,139 $ 2,443 $ 5,625 $ 1,022 $ — $ 178 $ 10,454

Collectively evaluated for impairment 66,230 170,012 124,909 306,272 710,886 76,522 8,531 1,463,362

Ending Balance at June 30, 2021 $ 94,856 $ 200,232 $ 131,158 $ 318,513 $ 681,348 $ 83,806 $ 9,178 $ 1,519,091

Ending Balance at September 30, 2021 $ 66,277 $ 171,151 $ 127,352 $ 311,897 $ 711,908 $ 76,522 $ 8,709 $ 1,473,816

The increase in the allowance for loan loss balance for the residential 1 to 4 family portfolio segment for the nine months ended September 30, 2021 is mainly due to loan growth.

The increase in the allowance for loan loss balance for the commercial owner occupied portfolio segment is mainly due to increase in the non-performing loan balance.

The decrease in the allowance for loan loss balance for the residential multifamily portfolio segment for the nine months ended September 30, 2021 is due to the decrease in loan balance.

Impaired Loans

5 unchanged sentences

All our impaired loans are assessed for recoverability based on an independent third-party full appraisal to determine the net realizable value (“NRV”) based on the fair value of the underlying collateral, less cost to sell and other costs or the present value of discounted cash flows in the case of certain impaired loans that are not collateral dependent.

The following tables provide further detail on impaired loans and the associated ALLL at June 30, 2022 and December 31, 2021:

June 30, 2022 Recorded

The following tables provide further detail on impaired loans and the associated ALLL at September 30, 2022 and December 31, 2021:

September 30, 2022 Recorded

Investment Unpaid

4 unchanged sentences

1,139 5,856 —

Real Estate Mortgage:

Commercial – Owner Occupied

2,171 2,171 —

Commercial – Non-owner Occupied

14,553 14,553 —

Residential – 1 to 4 Family

54 unchanged sentences

$ 10,302 $ 15,161 $ 591

The following table presents by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

The following table presents by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30,

Investment Interest

14 unchanged sentences

Total $ 16,023 $ 77 $ 10,945 $ 136

Six Months Ended June 30,

Nine Months Ended September 30,

Investment Interest

15 unchanged sentences

Troubled debt restructuring (TDRs)

We reported performing TDR loans (not reported as non-accrual loans) of $ 5.6 million and $ 6.0 million, respectively, at June 30, 2022 and December 31, 2021.

Nonperforming TDR loans were zero at June 30, 2022 and December 31, 2021, respectively.

There were no new loans modified as a TDR and no additional commitments to lend additional funds to debtors whose loans have been modified in TDRs for the three and six months ended June 30, 2022 and the year ended December 31, 2021, respectively.

We reported performing TDR loans (not reported as non-accrual loans) of $ 5.5 million and $ 6.0 million, respectively, at September 30, 2022 and December 31, 2021.

Nonperforming TDR loans were zero at September 30, 2022 and December 31, 2021, respectively.

There were no new loans modified as a TDR and no additional commitments to lend additional funds to debtors whose loans have been modified in TDRs for the three and nine months ended September 30, 2022 and the year ended December 31, 2021, respectively.

A TDR is a loan the terms of which have been restructured in a manner that grants a concession to a borrower experiencing financial difficulty.

16 unchanged sentences

The nature and extent of impairment of TDRs, including those that have experienced a subsequent default, is considered in the determination of an appropriate level of allowance for loan losses.

For TDR loans, we had specific reserves of $ 146,000 and $ 254,000 in the allowance at June 30, 2022 and December 31, 2021, respectively.

For TDR loans, we had specific reserves of $ 149,000 and $ 254,000 in the allowance at September 30, 2022 and December 31, 2021, respectively.

Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and result in potential incremental losses.

27 unchanged sentences

Borrowers in this category require constant monitoring, are considered work-out loans and present the potential for future loss to the Bank.

An analysis of the credit risk profile by internally assigned grades as of June 30, 2022 and December 31, 2021 is as follows:

At June 30, 2022 Pass OAEM Substandard Doubtful Total

An analysis of the credit risk profile by internally assigned grades as of September 30, 2022 and December 31, 2021 is as follows:

At September 30, 2022 Pass OAEM Substandard Doubtful Total

(Dollars in thousands)

19 unchanged sentences

Total $ 1,463,042 $ 17,409 $ 4,396 $ — $ 1,484,847

EQUITY AND CHANGES IN OTHER COMPREHENSIVE INCOME

The Company's total equity was $ 249.1 million and $ 232.4 million at June 30, 2022 and December 31, 2021, respectively.

Common stock dividend :

On June 21, 2022, the Company declared a cash dividend of $ 0.16 per share to common shareholders of record as of July 5, 2022, and paid the dividend July 19, 2022.

On March 22, 2022, the Company declared a cash dividend of $ 0.16 per share to common shareholders of record as of April 6, 2022, and paid the dividend April 20, 2022.

On June 22, 2021, the Company declared a quarterly cash dividend of $ 0.16 per share to the common shareholders of record as of July 6, 2021, and paid the dividend on July 20, 2021.

On April 23, 2021, the Company declared a quarterly cash dividend of $ 0.16 per share to the common shareholders of record as of May 4, 2021, and paid the dividend on May 18, 2021.

Preferred stock dividend :

The Company declared cash dividends of $ 6,675 and $ 14,100 to preferred stockholders during the three months ended June 30, 2022 and June 30, 2021, respectively.

The Company declared cash dividends of $ 13,350 and $ 14,100 for the six months ended June 30, 2022 and June 30, 2021, respectively.

Conversion of preferred stock :

During the six months ended June 30, 2022, there were no conversions from preferred stock to common shares.

During the six months ended June 30, 2021, preferred stockholders converted 10 shares of preferred shares into 1,375 shares of common stock.

Other comprehensive income

The changes in accumulated other comprehensive loss consisted of the following for the six months ended June 30, 2022 and 2021, and there were no reclassification adjustments during the period:

For the Three Months Ended

(Dollars in thousands)

Investment securities:

Net unrealized losses arising during the period $ ( 99 ) $ ( 15 )

Tax effect related to the unrealized loss during the periods 25 4

Change in other comprehensive loss $ ( 74 ) $ ( 11 )

For the Six Months Ended June 30,

(Dollars in thousands)

Investment securities:

Net unrealized losses arising during the period $ ( 683 ) $ ( 127 )

Tax effect related to the unrealized loss during the periods 176 33

Change in other comprehensive loss $ ( 507 ) $ ( 94 )

EARNINGS PER SHARE (“EPS”)

The following tables set forth the calculation of basic and diluted EPS for the three and six-month periods ended June 30, 2022 and 2021.

Three months ended June 30, Six months ended June 30,

The following tables set forth the calculation of basic and diluted EPS for the three and nine-month periods ended September 30, 2022 and 2021.

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

48 unchanged sentences

For loans held for sale, the fair value represents the value of the guaranteed portion of the SBA loans pending settlement.

There were no loans held for sale at June 30, 2022 and December 31, 2022.

There were no loans held for sale at September 30, 2022 and December 31, 2021.

Securities in Level 2 include mortgage-backed securities, corporate debt obligations, and collateralized mortgage-backed securities.

3 unchanged sentences

Available for Sale Securities

As of June 30, 2022

As of September 30, 2022

Corporate debt obligations $ — $ 500 $ — $ 500

7 unchanged sentences

Total $ — $ 13,351 $ — $ 13,351

For the six months ended June 30, 2022, there were no transfers between the levels within the fair value hierarchy.

There were no level 3 assets or liabilities held during the three and six months ended June 30, 2022 and 2021.

For the nine months ended September 30, 2022, there were no transfers between the levels within the fair value hierarchy.

There were no level 3 assets or liabilities held during the three and nine months ended September 30, 2022 and 2021.

Fair Value on a Non-recurring Basis:

2 unchanged sentences

(Dollars in thousands)

As of June 30, 2022

As of September 30, 2022

Collateral-dependent impaired loans $ — $ — $ 1,139 $ 1,139

OREO — — 1,922 1,922

As of December 31, 2021

9 unchanged sentences

The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above.

The methodologies for estimating the fair value of other financial assets and liabilities are discussed below.

For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument.

These instruments include cash and cash equivalents, accrued interest receivable, demand and other non-maturity deposits and accrued interest payable, and they are considered to be level 1 measurements.

The following table summarizes the carrying amounts and fair values for financial instruments at June 30, 2022 and December 31, 2021:

June 30, 2022 Carrying Amount Fair Value

These instruments include cash and cash equivalents, accrued interest receivable, bank owned life insurance, restricted stock, demand and other non-maturity deposits and accrued interest payable, and they are considered to be level 1 measurements.

The following table summarizes the carrying amounts and fair values for financial instruments that are not carried at fair value at September 30, 2022 and December 31, 2021:

September 30, 2022 Carrying Amount Fair Value

Total Level 1 Level 2 Level 3

1 unchanged sentence

Financial Assets:

Investment securities AFS 10,903 10,903 — 10,903 —

Investment securities HTM $ 9,575 $ 7,720 $ — $ 7,720 $ —

Restricted stock 5,226 5,226 — — 5,226

Loans, net 1,648,368 1,583,190 — 1,558,076 25,114

6 unchanged sentences

Financial Assets:

Investment securities AFS 13,351 13,351 — 13,351 —

Investment securities HTM 9,918 10,025 — 10,025 —

Restricted stock 5,144 5,144 — — 5,144

Loans, net 1,455,002 1,440,398 — 1,430,686 9,712

2 unchanged sentences

Borrowings $ 120,882 $ 117,636 $ — $ 117,636 $ —

We lease three retail branches and a parcel of land for a retail branch location.

These leases generally have remaining terms of 10 years or less except the land lease, which has a remaining lease term of eighty-three years .

Some of the leases may include options to renew the leases.

The exercise of lease renewals is at our sole discretion.

Our Right of Use ("ROU") assets and lease liabilities for operating leases are included in other assets and other liabilities on our consolidated balance sheets.

We use the interest rate implicit in the lease or incremental borrowing rate in determining the present value of lease payments.

At June 30, 2022, we had future minimum lease payments of $ 27.8 million and lease liability $ 1.9 million.

The weighted average remaining lease term was 43.6 years and weighted average discount rate was 7.1 % at June 30, 2022, respectively.

We also sublease some space for one of our leased facilities to a company.

Our operating lease expense is included in occupancy expenses within non-interest expense in our consolidated statements of income.

Total operating lease expense consists of operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is recognized based on actual amounts incurred.

The following table presents information about our operating leases at June 30, 2022:

June 30, 2022

(Dollars in thousands)

Lease right of use ("ROU") assets $ 1,941

Lease liabilities $ 1,941

The following table presents future undiscounted cash flows on our operating leases:

June 30, 2022

(Dollars in thousands)

Remainder of 2022 $ 165

Thereafter 26,301

Total undiscounted lease payments $ 27,781

COMMITMENTS AND CONTINGENCIES

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Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Commitments to fund fixed-rate loans were immaterial at June 30, 2022.

Commitments to fund fixed-rate loans were immaterial at September 30, 2022.

Variable-rate commitments are generally issued for less than one year and carry market rates of interest.

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Management believes that off-balance sheet risk is not material to the results of operations or financial condition.

As of June 30, 2022 and December 31, 2021, unused commitments to extend credit amounted to approximately $ 140.2 million and $ 117.7 million, respectively.

As of September 30, 2022 and December 31, 2021, unused commitments to extend credit amounted to approximately $ 176.5 million and $ 117.7 million, respectively.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

As of June 30, 2022 and December 31, 2021, standby letters of credit with customers were $ 1.5 million and $ 1.5 million, respectively.

On June 27, 2022, the Bank entered into an agreement with the FHLBNY for a Municipal Letter of Credit ("MLOC") of $ 10.0 million.

On June 30, 2022, the Bank entered into an agreement with the FHLBNY for a MLOC of $ 50.0 million.

The MLOC's are used to pledge against public deposits and expire on July 27, 2022, and September 29, 2022, respectively.

There were no outstanding borrowings on the letters of credit as of June 30, 2022.

The Company also has entered into an employment contract with the President of the Company, which provides for continued payment of certain employment salary and benefits prior to the expiration date of the agreement and in the event of a change in

control, as defined.

As of September 30, 2022 and December 31, 2021, standby letters of credit with customers were $ 1.5 million and $ 1.5 million, respectively.

On September 30, 2022, the Bank entered into an agreement with the FHLBNY for a Municipal Letter of Credit ("MLOC") of $ 50.0 million.

The MLOC is used to pledge against public deposits and expires on December 30, 2022.

There were no outstanding borrowings on the letter of credit as of September 30, 2022.

The Company has also entered in Change-in-Control Severance Agreements with certain officers which provide for the payment of severance in certain circumstances following a change in control.

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Cannabis businesses are legal under the laws of these States and now in New Jersey, although it is not legal under federal law.

Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published guidelines in 2014 for financial institutions servicing state legal cannabis businesses.

Department of the Treasury’s

Financial Crimes Enforcement Network (“FinCEN”) published guidelines in 2014 for financial institutions servicing state legal cannabis businesses.

A financial institution that provides services to cannabis-related businesses can comply with Bank Secrecy Act (“BSA”) disclosure standards by following the FinCEN guidelines.

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Any change in the Federal government’s enforcement position could cause us to immediately cease providing banking services to the cannabis industry.

At June 30, 2022 and December 31, 2021, deposit balances from cannabis customers were approximately $ 275.8 million and $ 375.2 million, or 17.1 % and 21.2 % of total deposits, respectively, with two customers accounting for 42.2 % and 19.3 % of the total at June 30, 2022 and December 31, 2021.

At June 30, 2022 and December 31, 2021, there were cannabis-related loans in the amounts of $ 4.0 million and $ 5.4 million, respectively.

We recorded approximately $ 59 thousand and $ 336 thousand of interest income in the six months ended June 30, 2022 and year ended December 31, 2021, respectively, related to these loans.

The fee income for the six months ended June 30, 2022 and year ended December 31, 2021, from the commercial deposit accounts of depositors who do business in the cannabis industry were $ 2.3 million and $ 5.1 million, respectively, and are included in service fees on deposit accounts, in the accompanying consolidated statements of income.

At September 30, 2022 and December 31, 2021, deposit balances from cannabis customers were approximately $ 208.1 million and $ 375.2 million, or 13.6 % and 21.2 % of total deposits, respectively, with two customers accounting for 42.7 % and 19.3 % of the total at September 30, 2022 and December 31, 2021.

At September 30, 2022 and December 31, 2021, there were cannabis-related loans in the amounts of $ 3.9 million and $ 5.4 million, respectively.

We recorded approximately $ 108 thousand and $ 336 thousand of interest income in the nine months ended September 30, 2022 and year ended December 31, 2021, respectively, related to these loans.

Management identified information during the quarter, which indicated that a loss contingency event may be reasonably possible, however, an analysis of the situation through the subsequent events date of these financial statements indicated that the loss is neither probable or reasonably estimable.

While the potential future liabilities could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known, we did not believe an accrual was appropriate at this time.

We accrue loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued.

If no amount within the range can be identified as a better estimate than any other amount, we accrue the minimum amount in the range.

REGULATORY MATTERS

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies.

Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices.

Capital amounts and classifications are also subject to qualitative judgments by regulators.

Failure to meet capital requirements can result in regulatory action.

The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S.

banks (Basel III rules) became effective for the Company on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019.

Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios.

The capital conservation buffer was being phased in from 0.0% for 2015 to 2.50% by 2019.

The Bank made a one-time election to opt-out of including the net unrealized gain or loss on available for sale securities in computing regulatory capital.

At June 30, 2022 and December 31, 2021, the Company and Bank were both considered “well capitalized".

Prompt corrective action regulations provide five classifications:

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

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

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

As of June 30, 2022 and December 31, 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

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

Under final regulations adopted by the federal banking agencies under the Economic Growth, Regulatory Relief and Consumer Protection Act ( "EGRRCPA"), a community banking organization may opt into the Community Bank Leverage Ratio ("CBLR") framework if it has a Tier 1 leverage ratio of at least 9%, less than $10 billion in total consolidated assets, and limited amounts of

off-balance-sheet exposures and trading assets and liabilities.

A qualifying community banking organization that opts into the CBLR framework will not be required to report or calculate compliance with risk-based capital requirements and will also be considered to have met the well-capitalized ratio requirements under the prompt corrective action regulations.

We have elected to use the CBLR framework and is presented as of June 30, 2022.

On April 6, 2020, federal banking regulatory agencies modified the original (CBLR) framework and provided that, as of the second quarter 2020, a banking organization with a leverage ratio of 8 percent or greater and that meets the other existing qualifying criteria may elect to use the CBLR framework.

The modified rule also states that the CBLR requirement will be greater than 8 percent for the second through fourth quarters of calendar year 2020, greater than 8.5 percent for calendar year 2021, and greater than 9 percent thereafter.

The transition rule also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 100 basis points below the applicable CBLR requirement.

The leverage ratios of the Company and the Bank at June 30, 2022 are as follows:

The leverage ratios of the Company and the Bank at September 30, 2022 are as follows:

Regulatory Capital Compliance

As of June 30, 2022 Actual For Capital Adequacy

As of September 30, 2022 Actual For Capital Adequacy

(Dollars in thousands except ratios) Amount Ratio Amount Ratio

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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