What changed in this filing

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Item 1. Financial Statements

2022-08-12 compared with 2022-05-10 · 218 added, 116 removed, 766 unchanged (30% of the section changed)

24 unchanged sentences

Total deposits 785,986 798,320

Borrowings 30,000 —

Accrued interest payable 194 200

7 unchanged sentences

Preferred stock, $ 0.01 par value, 10,000,000 shares authorized, none issued or outstanding

Common stock, $ 0.01 par value, 40,000,000 shares authorized, 2,621,531 and 2,613,768 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Common stock, $ 0.01 par value, 40,000,000 shares authorized, 2,578,595 and 2,613,768 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 27,777 27,956

Retained earnings 66,203 65,237

Accumulated other comprehensive income, net of tax ( 469 ) 139

Accumulated other comprehensive (loss) income, net of tax ( 949 ) 139

Total stockholders’ equity 93,057 93,358

5 unchanged sentences

(In thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

INTEREST INCOME

4 unchanged sentences

Deposits 414 896 841 2,190

Borrowings 12 — 12 —

Subordinated notes 168 168 336 336

5 unchanged sentences

Service charges and fee income 596 526 1,146 1,059

Earnings on cash surrender value of bank-owned life insurance 21 82

(Loss) earnings on cash surrender value of bank-owned life insurance ( 35 ) 96 ( 14 ) 178

Mortgage servicing income 313 321 633 633

24 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net income $ 1,614 $ 2,251 $ 3,336 $ 4,702

Available for sale securities:

Unrealized losses arising during the period ( 770 ) ( 59 )

Income tax benefit related to unrealized losses 162 12

Other comprehensive loss, net of tax ( 608 ) ( 47 )

Unrealized (losses) gains arising during the period ( 607 ) 3 ( 1,377 ) ( 57 )

Income tax benefit (expense) related to unrealized (losses)/gains 127 ( 1 ) 289 12

Other comprehensive (loss) gain, net of tax ( 480 ) 2 ( 1,088 ) ( 45 )

Comprehensive income $ 1,134 $ 2,253 $ 2,248 $ 4,657

3 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2022 and 2021 (unaudited)

For the Three and Six Months Ended June 30, 2022 and 2021 (unaudited)

(In thousands, except share and per share amounts)

6 unchanged sentences

Stockholders’

Balance, at March 31, 2022

2,621,531 $ 26 $ 28,154 $ 66,139 $ ( 469 ) $ 93,850

Net income — — — 1,614 — 1,614

Other comprehensive loss, net of tax — — — — ( 480 ) ( 480 )

Share-based compensation — — 91 — — 91

Cash dividends paid on common stock ($ 0.17 per share)

— — — ( 444 ) — ( 444 )

Common stock repurchased ( 42,791 ) — ( 468 ) ( 1,106 ) — ( 1,574 )

Common stock surrendered ( 1,010 ) — ( 38 ) — — ( 38 )

Restricted shares forfeited ( 585 ) — — — — —

Common stock options exercised 1,450 — 38 — — 38

Balance, at June 30, 2022

2,578,595 $ 26 $ 27,777 $ 66,203 $ ( 949 ) $ 93,057

Balance, at December 31, 2021

10 unchanged sentences

Common stock options exercised 3,871 — 81 — — 81

Balance, at March 31, 2022

Balance, at June 30, 2022

2,578,595 $ 26 $ 27,777 $ 66,203 $ ( 949 ) $ 93,057

11 unchanged sentences

Stockholders’

Balance, at March 31, 2021

2,609,806 $ 26 $ 27,447 $ ( 85 ) $ 59,975 $ 193 $ 87,556

Net income — — — — 2,251 — 2,251

Other comprehensive gain, net of tax — — — — — 2 2

Share-based compensation — — 65 — — — 65

Common stock surrendered ( 962 ) — ( 9 ) — ( 21 ) — ( 30 )

Cash dividends paid on common stock ($ 0.17 per share)

— — — — ( 447 ) — ( 447 )

Common stock options exercised 5,485 — 18 — — — 18

Allocation of ESOP shares — — 92 28 — — 120

Balance, at June 30, 2021

2,614,329 $ 26 $ 27,613 $ ( 57 ) $ 61,758 $ 195 $ 89,535

Balance, at December 31, 2020

10 unchanged sentences

Allocation of ESOP shares — — 164 56 — — 220

Balance, at March 31, 2021

Balance, at June 30, 2021

2,614,329 $ 26 $ 27,613 $ ( 57 ) $ 61,758 $ 195 $ 89,535

4 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

8 unchanged sentences

Change in lease liabilities ( 262 ) ( 453 )

Increase in cash surrender value of BOLI ( 21 ) ( 74 )

Change in cash surrender value of BOLI 14 ( 178 )

Net change in advances from borrowers for taxes and insurance ( 444 ) ( 230 )

20 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase in deposits 37,771 68,712

Net (decrease) increase in deposits ( 12,334 ) 56,739

Proceeds from borrowings 30,000 —

FHLB stock purchased ( 1,271 ) ( 175 )

Common stock repurchases ( 1,734 ) ( 30 )

Purchase of stock surrendered to pay tax liability ( 38 ) —

Allocation of ESOP shares — 220

56 unchanged sentences

The ASU eliminates the accounting guidance for troubled debt restructured loans (“TDRs”) by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Additionally, the ASU requires public business entities to disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases.

Additionally, the ASU requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.

This ASU will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, upon the Company’s adoption of the amendments in ASU 2016-13, which is commonly referred to as the current expected credit loss methodology.

2 unchanged sentences

held-to-maturity (“HTM”) or available-for-sale (“AFS”).

Unrealized holding gains or losses, net of the related tax effect, on AFS securities are excluded from income and are reported as a separate component of shareholders’ equity as accumulated other comprehensive income net of applicable taxes until realized.

Recognized gains and losses from the sale of AFS securities are determined on a specific-identification basis.

1 unchanged sentence

Securities classified as HTM are those that the Company has the positive intent and ability to hold until maturity.

These securities are carried at amortized cost, adjusted for the amortization or accretion of premiums or discounts.The Company does not own any debt securities classified as trading or equity securities.

These securities are carried at amortized cost, adjusted for the amortization or accretion of premiums or discounts.

The Company does not own any debt securities classified as trading or equity securities.

The amortized cost and fair value of our AFS securities and the corresponding amounts of gross unrealized gains and losses at the dates indicated were as follows (in thousands):

Losses Estimated

March 31, 2022

June 30, 2022

Municipal bonds $ 6,715 $ 42 $ ( 991 ) $ 5,766

7 unchanged sentences

Losses Estimated

March 31, 2022

June 30, 2022

Municipal bonds $ 705 $ — $ ( 164 ) $ 541

5 unchanged sentences

Total $ — $ — $ — $ —

The amortized cost and fair value of AFS and HTM securities at March 31, 2022, by contractual maturity, are shown below (in thousands).

The amortized cost and fair value of AFS and HTM securities at June 30, 2022, by contractual maturity, are shown below (in thousands).

Expected maturities of AFS securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Investments not due at a single maturity date, primarily mortgage-backed investments, are shown separately.

March 31, 2022

June 30, 2022

Available-for-sale Held-to-maturity

6 unchanged sentences

Total $ 10,584 $ 9,382 $ 2,215 $ 1,890

There were no pledged securities at March 31, 2022 or December 31, 2021.

There were no sales of AFS securities during the three months ended March 31, 2022 or 2021.

There were no sales of HTM securities during the three months ended March 31, 2022.

There were no pledged securities at June 30, 2022 or December 31, 2021.

There were no sales of AFS securities during the three and six months ended June 30, 2022 or 2021.

There were no sales of HTM securities during the three and six months ended June 30, 2022.

The following table summarizes the aggregate fair value and gross unrealized loss by length of time of those investments that have been in a continuous unrealized loss position at the dates indicated (in thousands):

March 31, 2022

June 30, 2022

Less Than 12 Months 12 Months or Longer Total

15 unchanged sentences

Value Unrealized

Available-for-sale securities

Municipal bonds $ 1,632 $ ( 13 ) $ — $ — $ 1,632 $ ( 13 )

1 unchanged sentence

Total $ 1,632 $ ( 13 ) $ 402 $ ( 12 ) $ 2,034 $ ( 25 )

There were no credit losses recognized in earnings related to other than temporary impairments during the three months ended March 31, 2022 or 2021.

At March 31, 2022, the total securities portfolio consisted of 12 agency mortgage-backed securities and twelve municipal bonds with a total portfolio fair value of $ 12.3 million.

At December 31, 2021, the securities portfolio consisted of 10 agency mortgage-backed securities and ten municipal bonds with a fair value of $ 8.4 million.

At March 31, 2022, there were 13 securities in an unrealized loss position for less than 12 months, and one security in an unrealized loss position for more than 12 months.

There were no credit losses recognized in earnings related to other than temporary impairments during the three and six months ended June 30, 2022 or 2021.

At June 30, 2022, the total securities portfolio consisted of 12 agency mortgage-backed securities and 12 municipal bonds with a total portfolio fair value of $ 11.3 million.

At December 31, 2021, the securities portfolio consisted of 10 agency mortgage-backed securities and 10 municipal bonds with a fair value of $ 8.4 million.

At June 30, 2022, there were 15 securities in an unrealized loss position for less than 12 months, and one security in an unrealized loss position for more than 12 months.

Of the 15 securities in an unrealized loss position for less than 12 months, two securities were classified as HTM.

2 unchanged sentences

It is expected that these securities will not be settled at a price less than the amortized cost of each investment.

The unrealized losses on these investments are not considered other-than-temporary impairment ("OTTI") as of March 31, 2022, because the decline in fair value is not attributable to credit quality and because we do not intend, and it is not likely that we will be required, to sell these securities before recovery of their amortized cost basis .

The unrealized losses on these investments are not considered other-than-temporary impairment ("OTTI") as of June 30, 2022, because the decline in fair value is not attributable to credit quality and because we do not intend, and it is not likely that we will be required, to sell these securities before recovery of their amortized cost basis .

Note 4 – Loans

19 unchanged sentences

Total loans held-for-portfolio, net $ 798,961 $ 680,092

(1) Includes premiums resulting from purchased loans of $ 548 thousand related to one-to-four family loans, $ 65 thousand related to commercial and multifamily loans, and $ 175 thousand related to commercial business loans as of March 31, 2022.

(1) Includes premiums resulting from purchased loans of $ 521 thousand related to one-to-four family loans, $ 324 thousand related to commercial and multifamily loans, and $ 165 thousand related to commercial business loans as of June 30, 2022.

Includes premiums resulting from purchased loans of $ 556 thousand related to one-to-four family loans, $ 181 thousand related to commercial and multifamily loans, and $ 160 thousand related to commercial business loans as of December 31, 2021.

1 unchanged sentence

Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), as a qualified lender since the inception of the program.

As of March 31, 2022, the Bank had funded PPP loans totaling $ 119.2 million, $ 2.1 million of which remained outstanding and are included in commercial business loans above.

As of June 30, 2022, the Bank had funded PPP loans totaling $ 119.2 million, $ 429 thousand of which remained outstanding and are included in commercial business loans above.

PPP loans are 100% guaranteed by the SBA.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of the dates indicated (in thousands):

March 31, 2022

June 30, 2022

Individually evaluated for impairment Allowance:

Collectively evaluated for impairment Allowance:

Ending balance Loans held for investment:

Individually evaluated for impairment Loans held for investment:

Collectively evaluated for impairment Loans held for investment:

Ending balance Loans held for portfolio:

Individually evaluated for impairment Loans held for portfolio:

Collectively evaluated for impairment Loans held for portfolio:

Ending balance

12 unchanged sentences

Collectively evaluated for impairment Allowance:

Ending balance Loans held for investment:

Individually evaluated for impairment Loans held for investment:

Collectively evaluated for impairment Loans held for investment:

Ending balance Loans held for portfolio:

Individually evaluated for impairment Loans held for portfolio:

Collectively evaluated for impairment Loans held for portfolio:

Ending balance

10 unchanged sentences

The following tables summarize the activity in the allowance for loan losses for the periods indicated (in thousands):

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Allowance Charge-offs Recoveries Provision (Recapture) Ending

9 unchanged sentences

Total $ 6,407 $ ( 11 ) $ 121 $ 600 $ 7,117

Three Months Ended March 31, 2021

Allowance Charge-offs Recoveries (Recapture) Provision Ending

Six Months Ended June 30, 2022

Allowance Charge-offs Recoveries Provision (Recapture) Ending

One-to-four family $ 1,402 $ — $ 45 $ 191 $ 1,638

8 unchanged sentences

Total $ 6,306 $ ( 41 ) $ 127 $ 725 $ 7,117

Three Months Ended June 30, 2021

Allowance Charge-offs Recoveries Provision

(Recapture) Ending

One-to-four family $ 980 $ ( 15 ) $ — $ 327 $ 1,292

Home equity 111 ( 8 ) 2 6 111

Commercial and multifamily 2,109 — — ( 122 ) 1,987

Construction and land 595 — — 105 700

Manufactured homes 371 — 1 ( 5 ) 367

Floating homes 291 — — 27 318

Other consumer 187 ( 10 ) 1 23 201

Commercial business 720 — 1 ( 28 ) 693

Unallocated 571 — — ( 83 ) 488

Total $ 5,935 $ ( 33 ) $ 5 $ 250 $ 6,157

Six Months Ended June 30, 2021

Allowance Charge-offs Recoveries Provision

(Recapture) Ending

One-to-four family $ 1,063 $ ( 76 ) $ — $ 305 $ 1,292

Home equity 147 ( 8 ) 2 ( 30 ) 111

Commercial and multifamily 2,370 — — ( 383 ) 1,987

Construction and land 578 — — 122 700

Manufactured homes 529 ( 2 ) 2 ( 162 ) 367

Floating homes 328 — — ( 10 ) 318

Other consumer 288 ( 19 ) 6 ( 74 ) 201

Commercial business 291 — 2 400 693

Unallocated 406 — — 82 488

Total $ 6,000 $ ( 105 ) $ 12 $ 250 $ 6,157

Credit Quality Indicators.

8 unchanged sentences

The following tables present the internally assigned grades as of the dates indicated, by type of loan (in thousands):

March 31, 2022

June 30, 2022

four family Home

27 unchanged sentences

The following table presents the recorded investment in nonaccrual loans as of the dates indicated, by type of loan (in thousands):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

One-to-four family $ 1,669 $ 2,207

8 unchanged sentences

The following tables present the aging of the recorded investment in past due loans as of the dates indicated, by type of loan (in thousands):

March 31, 2022

June 30, 2022

Past Due 60-89 Days

26 unchanged sentences

The following tables present the credit risk profile of our loan portfolio based on payment activity as of the dates indicated, by type of loan (in thousands):

March 31, 2022

June 30, 2022

equity Commercial

25 unchanged sentences

Impaired loans at the dates indicated, by type of loan were as follows (in thousands):

March 31, 2022

June 30, 2022

Recorded Investment

29 unchanged sentences

Total $ 7,836 $ 6,375 $ 1,350 $ 7,725 $ 293

The following table presents the average recorded investment and interest income recognized on impaired loans for the periods indicated, by loan types (in thousands):

Three Months Ended March 31,

The following tables present the average recorded investment and interest income recognized on impaired loans for the periods indicated, by loan types (in thousands):

Three Months Ended June 30,

Investment Interest Income

10 unchanged sentences

Total $ 6,620 $ 54 $ 4,671 $ 37

Forgone interest on nonaccrual loans was $ 64 thousand and $ 40 thousand for the three months ended March 31, 2022 and 2021, respectively.

There were no commitments to lend additional funds to borrowers whose loans were classified as nonaccrual or impaired at March 31, 2022 and December 31, 2021.

Six Months Ended June 30,

Investment Interest Income

Recognized Average

Investment Interest Income

One-to-four family $ 3,607 $ 44 $ 3,166 $ 58

Home equity 222 7 271 8

Commercial and multifamily 2,341 51 235 —

Construction and land 67 2 76 1

Manufactured homes 210 8 258 8

Floating homes 164 — 514 7

Other consumer 263 10 112 2

Commercial business 115 — 471 —

Total $ 6,989 $ 122 $ 5,103 $ 84

Forgone interest on nonaccrual loans was $ 60 thousand and $ 8 thousand for the three months ended June 30, 2022 and 2021, respectively.

Forgone interest on nonaccrual loans was $ 123 thousand and $ 49 thousand for the six months ended June 30, 2022 and 2021, respectively.

There were no commitments to lend additional funds to borrowers whose loans were classified as nonaccrual or impaired at June 30, 2022.

Troubled debt restructurings.

TDRs are loans accounted for under ASC 310-40, which have renegotiated loan terms to assist borrowers who are unable to meet the original terms of their loans.

Such modifications to loan terms may include a lower interest rate, a reduction in principal, or a longer term to maturity.

Once a TDR has performed according to its modified terms for six months and the collection of principal and interest under the revised terms is deemed probable, we remove the TDR from nonperforming status.

Loans classified as TDRs totaled $ 2.3 million and $ 2.6 million at March 31, 2022 and December 31, 2021, respectively, and are included in impaired loans.

Loans classified as TDRs totaled $ 2.0 million and $ 2.6 million at June 30, 2022 and December 31, 2021, respectively, and are included in impaired loans.

The Company has granted, in its TDRs, a variety of concessions to borrowers in the form of loan modifications.

9 unchanged sentences

Any other type of modification, including the use of multiple categories above.

There were no loans modified as a TDR during the three months ended March 31, 2022 and March 31, 2021.

There were no TDRs that were paid off during the three months ended March 31, 2022 and March 31, 2021.

There were no post-modification changes for the unpaid principal balance in loans, net of partial charge-offs, that were recorded as a result of the TDRs for the three months ended March 31, 2022 and March 31, 2021.

There were no loans modified as a TDR for which there was a payment default within the first 12 months of modification during the three months ended March 31, 2022 and March 31, 2021.

The Company had no commitments to extend additional credit to borrowers owing receivables whose terms have been modified into TDRs.

As of March 31, 2022, there was one one-to-four family loans totaling $ 39 thousand that was in process of foreclosure.

There were no loans modified as a TDR during the three and six months ended June 30, 2022 and June 30, 2021.

There were three and two TDRs that were paid off during the six months ended June 30, 2022 and June 30, 2021, respectively.

There were no post-modification changes for the unpaid principal balance in loans, net of partial charge-offs, that were recorded as a result of the TDRs for the three and six months ended June 30, 2022 and June 30, 2021.

There were no loans modified as a TDR for which there was a payment default within the first 12 months of modification during the six months ended June 30, 2022 and June 30, 2021.

The Company had no commitments to extend additional credit to borrowers owing receivables whose terms have been modified into TDRs at June 30, 2022.

As of June 30, 2022, there was one one-to-four family loan totaling $ 38 thousand that was in process of foreclosure.

Note 5 – Fair Value Measurements

2 unchanged sentences

ASC 820 defines fair values for financial instruments as the exit price, the price that would be received for an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date under current market conditions.

The Company’s fair values for financial instruments at March 31, 2022 were determined based on these requirements.

The Company’s fair values for financial instruments at June 30, 2022 and December 31, 2021 were determined based on these requirements.

The following methods and assumptions were used to estimate the fair value of other financial instruments:

11 unchanged sentences

The fair value of fixed-rate one-to-four family loans is based on whole loan forward prices obtained from government sponsored enterprises.

At March 31, 2022 and December 31, 2021, loans held-for-sale were carried at cost, as no impairment was required.

estimated adjustment to the carrying value of the loans due to a differential in yield between the portfolio loan yields and estimated current market rate yields on loans with similar characteristics.

At June 30, 2022 and December 31, 2021, loans held-for-sale were carried at cost, as no impairment was required.

Loans held-for-portfolio - The estimated fair value of loans-held-for portfolio consists of a credit adjustment to reflect the estimated adjustment to the carrying value of the loans due to credit-related factors and a yield adjustment, to reflect the estimated adjustment to the carrying value of the loans due to a differential in yield between the portfolio loan yields and estimated current market rate yields on loans with similar characteristics.

The estimated fair values of loans held for portfolio reflect exit price assumptions.

14 unchanged sentences

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s quarterly valuation process.

There were no transfers between levels during the three months ended March 31, 2022 and 2021.

There were no transfers between levels during the three and six months ended June 30, 2022 and 2021.

The following tables present information about the level in the fair value hierarchy for the Company’s financial assets and liabilities, whether or not recognized or recorded at fair value as of the dates indicated (in thousands):

March 31, 2022 Fair Value Measurements Using:

June 30, 2022 Fair Value Measurements Using:

Value Estimated

11 unchanged sentences

Time deposits 95,955 96,441 — 96,441 —

Borrowings 30,000 — — — —

Subordinated notes 11,655 11,655 — 11,655 —

14 unchanged sentences

The following tables present the balance of assets measured at fair value on a recurring basis as of the dates indicated (in thousands):

Fair Value at March 31, 2022

Fair Value at June 30, 2022

Description Total Level 1 Level 2 Level 3

8 unchanged sentences

The following tables provide a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring basis as of the dates indicated:

March 31, 2022

June 30, 2022

Financial Instrument Valuation Technique Unobservable Input(s) Range

9 unchanged sentences

Conversely, a decrease in the constant prepayment rate and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement).

An increase in the weighted-average life assumptions will result in a decrease in the constant prepayment rate and conversely, a decrease in the weighted-average life will result in an increase of the constant prepayment rate.

There were no assets or liabilities (excluding mortgage servicing rights) measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three months ended March 31, 2022 and 2021.

An increase in the weighted-average life will result in a decrease in the constant prepayment rate and conversely, a decrease in the weighted-average life will result in an increase of the constant prepayment rate.

Mortgage servicing rights are measured at fair value using a significant unobservable input (Level 3) on a recurring basis - additional information is included in “Note 6—Mortgage Servicing Rights.”

The following tables present the balance of assets measured at fair value on a nonrecurring basis at the dates indicated (in thousands):

Fair Value at March 31, 2022

Fair Value at June 30, 2022

Total Level 1 Level 2 Level 3

5 unchanged sentences

Impaired loans 7,725 — — 7,725

There were no liabilities carried at fair value, measured on a recurring or nonrecurring basis, at March 31, 2022 and December 31, 2021.

There were no liabilities carried at fair value, measured on a recurring or nonrecurring basis, at both June 30, 2022 and December 31, 2021.

The following tables provide a description of the valuation technique, observable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a nonrecurring basis at the dates indicated:

March 31, 2022

June 30, 2022

Instrument Valuation Technique(s) Unobservable Input(s) Range (Weighted Average)

17 unchanged sentences

Note 6 – Mortgage Servicing Rights

The Company’s mortgage servicing rights portfolio totaled $ 502.5 million at March 31, 2022 compared to $ 508.1 million at December 31, 2021.

Of this total balance, the unpaid principal balance of loans serviced for Federal National Mortgage Association (“Fannie Mae”) at March 31, 2022 and December 31, 2021 were $ 499.4 million and $ 504.1 million, respectively.

The unpaid principal balance of loans serviced for other financial institutions at March 31, 2022 and December 31, 2021, totaled $ 3.1 million and $ 4.0 million, respectively.

The Company’s mortgage servicing rights portfolio totaled $ 489.9 million at June 30, 2022 compared to $ 508.1 million at December 31, 2021.

Of this total balance, the unpaid principal balance of loans serviced for Federal National Mortgage Association (“Fannie Mae”) at June 30, 2022 and December 31, 2021 were $ 487.5 million and $ 504.1 million, respectively.

The unpaid principal balance of loans serviced for other financial institutions at June 30, 2022 and December 31, 2021, totaled $ 2.4 million and $ 4.0 million, respectively.

Loans serviced for others are not included in the Company’s financial statements as they are not assets of the Company.

A summary of the change in the balance of mortgage servicing assets during the periods indicated were as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Beginning balance, at fair value $ 4,668 $ 4,109 $ 4,273 $ 3,780

2 unchanged sentences

Due to changes in model inputs or assumptions and other (1)

57 ( 294 ) 325 ( 569 )

Ending balance, at fair value $ 4,754 $ 4,151 $ 4,754 $ 4,151

1 unchanged sentence

The key economic assumptions used in determining the fair value of mortgage servicing rights at the dates indicated are as follows:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Prepayment speed (Public Securities Association “PSA” model) 144 % 205 %

2 unchanged sentences

The amount of contractually specified servicing, late and ancillary fees earned on the mortgage servicing rights are included in

mortgage servicing income on the Condensed Consolidated Statements of Income and totaled $ 320 thousand for the three months ended March 31, 2022 and $ 312 thousand for the three months ended March 31, 2021.

mortgage servicing income on the Condensed Consolidated Statements of Income and totaled $ 313 thousand and $ 633 thousand for the three and six months ended June 30, 2022 and $ 321 thousand and $ 633 thousand for the three and six months ended June 30, 2021, respectively.

Note 7 – Commitments and Contingencies

5 unchanged sentences

The terms of the agreement call for a blanket pledge of a portion of the Company’s mortgage and commercial and multifamily loan portfolio based on the outstanding balance.

At March 31, 2022 and December 31, 2021, the amount available to borrow under this credit facility was $ 413.9 million and $ 417.7 million, respectively, subject to eligible pledged collateral.

At March 31, 2022, the credit facility was collateralized as follows:

At June 30, 2022 and December 31, 2021, the amount available to borrow under this credit facility was $ 431.5 million and $ 417.7 million, respectively, subject to eligible pledged collateral.

At June 30, 2022, the credit facility was collateralized as follows:

one-to-four family mortgage loans with an advance equivalent of $ 170.0 million, commercial and multifamily mortgage loans with an advance equivalent of $ 51.0 million and home equity loans with an advance equivalent of $ 525 thousand.

1 unchanged sentence

one-to-four family mortgage loans with an advance equivalent of $ 59.7 million, commercial and multifamily mortgage loans with an advance equivalent of $ 52.9 million and home equity loans with an advance equivalent of $ 482 thousand.

The Company had no outstanding borrowings under this arrangement at both March 31, 2022 and December 31, 2021.

Additionally, the Company had outstanding letters of credit from the FHLB of Des Moines with a notional amount of $ 13.0 million and $ 11.5 million at March 31, 2022 and December 31, 2021, respectively, to secure public deposits.

The remaining amount available to borrow as of March 31, 2022 and December 31, 2021, was $ 95.8 million and $ 101.5 million, respectively.

The Company had $ 30.0 million outstanding borrowings under this arrangement at June 30, 2022 and no borrowings as of December 31, 2021.

Additionally, the Company had outstanding letters of credit from the FHLB of Des Moines with a notional amount of $ 13.0 million and $ 11.5 million at June 30, 2022 and December 31, 2021, respectively, to secure public deposits.

The remaining amount available to borrow as of June 30, 2022 and December 31, 2021, was $ 178.5 million and $ 101.5 million, respectively.

As a member of the FHLB, the Company is required to maintain a minimum level of investment in FHLB of Des Moines stock based on specific percentages of its outstanding FHLB advances.

At March 31, 2022 and December 31, 2021, the Company had an investment of $ 1.1 million and $ 1.0 million, respectively in FHLB of Des Moines stock.

At June 30, 2022 and December 31, 2021, the Company had an investment of $ 2.3 million and $ 1.0 million, respectively in FHLB of Des Moines stock.

The Company has a borrowing agreement with the Federal Reserve Bank of San Francisco.

The terms of the agreement call for a blanket pledge of a portion of the Company’s consumer and commercial business loans based on the outstanding balance.

June 30, 2022 and December 31, 2021, the amount available to borrow under this credit facility was $ 21.9 million and $ 22.4 million, respectively, subject to eligible pledged collateral.

The Company had no outstanding borrowings under this arrangement at June 30, 2022 and December 31, 2021.

The Company has access to an unsecured Fed Funds line of credit from Pacific Coast Banker’s Bank (“PCBB”).

The line has a one year term maturing on June 30, 2023 and is renewable annually.

As of March 31, 2022, the amount available under this line of credit was $ 20.0 million.

There was no balance on this line of credit as of March 31, 2022 and December 31, 2021, respectively.

As of June 30, 2022, the amount available under this line of credit was $ 20.0 million.

There was no balance on this line of credit as of June 30, 2022 and December 31, 2021, respectively.

In September 2020, the Company issued $ 12.0 million of fixed to floating rate subordinated notes that mature in 2030.

3 unchanged sentences

Prior to October 1, 2025, the Company may redeem these notes, in whole but not in part, only under certain limited circumstances set forth in the subordinated notes and are redeemable by the Company in whole or in part beginning with the interest payment date of October 1, 2025.

As of both March 31, 2022 and December 31, 2021, the balance of the subordinated notes was $ 11.6 million.

As of June 30, 2022 and December 31, 2021, the balance of the subordinated notes was $ 11.7 million and $ 11.6 million, respectively.

Note 9 – Earnings Per Common Share

5 unchanged sentences

The following table summarizes the calculation of earnings per share for the periods indicated (in thousands, except per share data):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net income $ 1,614 $ 2,251 $ 3,336 $ 4,702

6 unchanged sentences

$ 0.61 $ 0.85 $ 1.26 $ 1.78

(1) The basic and diluted earnings per share amounts for the three months ended March 31, 2022 and 2021 include the impact of income allocated to participating securities of $ 12 thousand and $ 12 thousand, respectively.

(2) The difference between the basic and diluted earnings per share amounts for the three months ended March 31, 2022 and 2021 under the Treasury Stock Method and the Two-Class Method, as prescribed in FASB ASC 260-10, Earnings Per Share, is immaterial.

There were 2,656 anti-dilutive securities at March 31, 2022 and 2,793 anti-dilutive securities at March 31, 2021.

(1) The basic and diluted earnings per share amounts include the impact of income allocated to participating securities of $ 11 thousand and $ 23 thousand, for the three and six months ended June 30, 2022, and $ 15 thousand and $ 33 thousand for the three and six months ended June 30, 2021, respectively.

(2) The difference between the basic and diluted earnings per share amounts for the three and six months ended June 30, 2022 and 2021 under the Treasury Stock Method and the Two-Class Method, as prescribed in FASB ASC 260-10, Earnings Per Share, is immaterial.

There were 2,656 anti-dilutive securities at June 30, 2022 and zero anti-dilutive securities at June 30, 2021.

Note 10 – Stock-based Compensation

5 unchanged sentences

Under the 2013 Plan, 181,750 shares of common stock were approved for awards for stock options and stock appreciation rights and 116,700 shares of common stock were approved for awards for restricted stock and restricted stock units.

As of March 31, 2022, on an adjusted basis, awards for stock options totaling 284,202 shares and awards for restricted stock totaling 151,651 shares of Company common stock have been granted, net of any forfeitures, to participants in the 2013 Plan

and the 2008 Plan.

Share-based compensation expense was $ 203 thousand and $ 166 thousand for the three months ended March 31, 2022 and March 31, 2021, respectively.

As of June 30, 2022, on an adjusted basis, awards for stock options totaling 283,628 shares and awards for restricted stock totaling 151,066 shares of Company common stock have been granted, net of any forfeitures, to participants in the 2013 Plan and the 2008 Plan.

Share-based compensation expense was $ 91 thousand and $ 294 thousand for the three and six months ended June 30, 2022, and $ 65 thousand and $ 231 thousand for the three and six months ended June 30, 2021, respectively.

Stock Option Awards

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All of the options granted under the 2008 Plan and the 2013 Plan are exercisable for a period of 10 years from the date of grant, subject to vesting.

The following is a summary of the Company’s stock option award activity during the three months ended March 31, 2022 (dollars in thousands, except per share amounts):

The following is a summary of the Company’s stock option award activity during the three months ended June 30, 2022 (dollars in thousands, except per share amounts):

Shares Weighted-

2 unchanged sentences

Term in Years Aggregate

Outstanding at April 1, 2022 101,243 $ 26.98 5.21 $ 1,186

Exercised ( 1,450 ) 25.98

Forfeited ( 446 ) 37.40

Expired ( 128 ) 33.50

Outstanding at June 30, 2022 99,219 26.94 4.93 1,154

Exercisable 77,753 23.91 3.89 1,105

Expected to vest, assuming a 0 % forfeiture rate over the vesting term

99,219 $ 26.94 4.93 $ 1,154

The following is a summary of the Company’s stock option award activity during the six months ended June 30, 2022 (dollars in thousands, except per share amounts):

Shares Weighted-

Exercise Price Weighted-Average

Remaining Contractual

Term in Years Aggregate

Outstanding at January 1, 2022 91,316 $ 24.59 4.77 $ 1,773

2 unchanged sentences

Forfeited ( 898 ) 34.95

Outstanding at March 31, 2022 101,243 26.98 5.21 1,186

Expired ( 128 ) 33.50

Outstanding at June 30, 2022 99,219 26.94 4.93 1,154

Exercisable 77,753 23.91 3.89 1,105

1 unchanged sentence

99,219 $ 26.94 4.93 $ 1,154

As of March 31, 2022, there was $ 164 thousand of total unrecognized compensation cost related to non-vested stock options granted under the Plans.

As of June 30, 2022, there was $ 145 thousand of total unrecognized compensation cost related to non-vested stock options granted under the Plans.

The cost is expected to be recognized over the remaining weighted-average vesting period of approximately 2.8 years.

The fair value of each option grant is estimated as of the grant date using the Black-Scholes option-pricing model.

The fair value of options granted for the three months ended March 31, 2022 and 2021 were determined using the following weighted-average assumptions as of the grant date.

Three Months Ended March 31,

The fair value of options granted for the six months ended June 30, 2022 and 2021 were determined using the following weighted-average assumptions as of the grant date.

Six Months Ended June 30,

Annual dividend yield 1.59 % 1.60 %

3 unchanged sentences

Weighted-average grant date fair value per option granted $ 9.95 $ 5.64

There were 12,800 and 12,248 options granted during the three months ended March 31, 2022 and 2021, respectively.

There were zero and 12,800 options granted during the three and six months ended June 30, 2022, and zero and 12,250 options granted during the three and six months ended June 30, 2021, respectively.

Restricted Stock Awards

3 unchanged sentences

The restricted stock awards granted to date under the 2013 Plan provide for immediate vesting of a portion of the award with the balance of the award vesting on the anniversary date of each of the grant date in equal annual installments over periods of one -to- four years subject to the continued service of the participant with the Company.

The following is a summary of the Company’s non-vested restricted stock award activity during the three months ended March 31, 2022:

The following is a summary of the Company’s non-vested restricted stock award activity during the three months ended June 30, 2022:

Shares Weighted-Average

1 unchanged sentence

Value Per Share Aggregate Intrinsic Value Per Share

Non-Vested at April 1, 2022 18,604 $ 37.59

Forfeited ( 585 ) 37.32

Non-Vested at June 30, 2022 18,019 37.60 37.95

Expected to vest assuming a 0 % forfeiture rate over the vesting term

18,019 $ 37.60 $ 37.95

The following is a summary of the Company’s non-vested restricted stock award activity during the six months ended June 30, 2022:

Shares Weighted-Average

Grant-Date Fair

Value Per Share Aggregate Intrinsic Value Per Share

Non-Vested at January 1, 2022 17,586 $ 34.02

2 unchanged sentences

Forfeited ( 835 ) 35.91

Non-Vested at March 31, 2022 18,604 $ 37.59 $ 38.10

Non-Vested at June 30, 2022 18,019 37.60 37.95

Expected to vest assuming a 0 % forfeiture rate over the vesting term

18,019 $ 37.60 $ 37.95

As of March 31, 2022, there was $ 647 thousand of unrecognized compensation cost related to non-vested restricted stock granted under the Plans.

As of June 30, 2022, there was $ 553 thousand of unrecognized compensation cost related to non-vested restricted stock granted under the Plans.

The cost is expected to be recognized over the weighted-average vesting period of 2.6 years.

The total fair value of shares vested for the three months ended March 31, 2022 and 2021 was $ 306 thousand and $ 264 thousand, respectively.

The total fair value of shares vested for the six months ended June 30, 2022 and 2021 was $ 306 thousand and $ 264 thousand, respectively.

Employee Stock Ownership Plan

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The interest rate on the loan was fixed at 2.25 % per annum.

As of March 31, 2022, the ESOP loan was repaid in full.

As of June 30, 2022, the ESOP loan was repaid in full.

Neither the loan balance nor the related interest expense was reflected on the condensed consolidated financial statements.

The fair value of the 144,740 shares held by the ESOP trust was $ 5.5 million at March 31, 2022.

ESOP compensation expense included in salaries and benefits was $ 205 thousand and $ 170 thousand for the three months ended March 31, 2022 and March 31, 2021, respectively.

The fair value of the 140,713 shares held by the ESOP trust was $ 5.3 million at June 30, 2022.

ESOP compensation expense included in salaries and benefits was $ 170 thousand and $ 375 thousand for the three and six months ended June 30, 2022 and $ 180 thousand and $ 350 thousand for the three and six months ended June 30, 2021, respectively.

Note 11 – Leases

5 unchanged sentences

The following table presents the lease right-of-use assets and lease liabilities recorded on the condensed consolidated balance sheet at the dates indicated (in thousands):

March 31, 2022 December 31,

2022 December 31,

Operating lease right-of-use assets $ 5,548 $ 5,811

1 unchanged sentence

The following table presents the components of lease expense for the periods indicated (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Operating lease expense

3 unchanged sentences

The following table presents the maturity of lease liabilities at the date indicated (in thousands):

March 31, 2022

June 30, 2022

Remainder of 2022

10 unchanged sentences

Supplemental cash flow information related to leases was as follows for the periods indicated (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Cash paid for amounts included in the measurement of lease liabilities for operating leases:

2 unchanged sentences

Note 12 – Subsequent Events

On April 26, 2022, the Board of Directors of the Company declared a quarterly cash dividend of $ 0.17 per common share, payable on May 24, 2022 to stockholders of record at the close of business on May 10, 2022.

On April 26, 2022, the Company’s Board of Directors authorized an extension of the previously announced stock repurchase program authorizing the Company to repurchase up to $ 2.0 million of its outstanding shares of common stock during the period ending October 29, 2022.

Repurchases may be made by the Company from time to time in the open market, based on prevailing market prices, or in privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission.

On July 26, 2022, the Company announced that its Board of Directors declared a quarterly cash dividend of $ 0.17 per common share, payable on August 23, 2022 to stockholders of record at the close of business on August 09, 2022.

On July 26, 2022, the Company announced that its Board of Directors amended its existing stock repurchase program to increase the authorized repurchase amount to $ 4.0 million from $ 2.0 million effective immediately and to extend the stock repurchase program’s expiration date to January 31, 2023.

The actual timing, number and value of shares repurchased under the stock repurchase program will depend on a number of factors, including constraints specified in the Rule 10b5-1 plan, price, general business and market conditions, and alternative investment opportunities.

The share repurchase program does not obligate the Company to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time.

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