What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-12 · 120 added, 115 removed, 869 unchanged (21% of the section changed)

4 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

2022 December 31,

28 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, 2,578,595 and 2,613,768 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.01 par value, 40,000,000 shares authorized, 2,581,949 and 2,613,768 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 27,886 27,956

8 unchanged sentences

(In thousands, except share and per share amounts)

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

13 unchanged sentences

Service charges and fee income 604 556 1,749 1,615

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

Earnings on cash surrender value of bank-owned life insurance 59 104 45 281

Mortgage servicing income 306 328 939 961

24 unchanged sentences

(In thousands)

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

1 unchanged sentence

Available for sale securities:

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 )

Unrealized losses arising during the period ( 400 ) ( 34 ) ( 1,777 ) ( 91 )

Income tax benefit related to unrealized losses 84 7 373 19

Other comprehensive loss, net of tax ( 316 ) ( 27 ) ( 1,404 ) ( 72 )

Comprehensive income $ 2,230 $ 2,565 $ 4,477 $ 7,222

3 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

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

For the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

(In thousands, except share and per share amounts)

6 unchanged sentences

Stockholders’

Balance, at March 31, 2022

Balance, at June 30, 2022

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

4 unchanged sentences

— — — ( 440 ) — ( 440 )

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

Common stock surrendered ( 2,431 ) — ( 91 ) — — ( 91 )

1 unchanged sentence

Common stock options exercised 5,880 — 110 — — 110

Balance, at June 30, 2022

Balance, at September 30, 2022

2,581,949 $ 26 $ 27,886 $ 68,309 $ ( 1,265 ) $ 94,956

11 unchanged sentences

Common stock options exercised 9,751 — 195 — — 195

Balance, at June 30, 2022

Balance, at September 30, 2022

2,581,949 $ 26 $ 27,886 $ 68,309 $ ( 1,265 ) $ 94,956

11 unchanged sentences

Stockholders’

Balance, at March 31, 2021

Balance, at June 30, 2021

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

5 unchanged sentences

— — — — ( 445 ) — ( 445 )

Restricted shares forfeited ( 420 ) — — — — — —

Common stock options exercised 3,616 — 59 — — — 59

Allocation of ESOP shares — — 98 29 — — 127

Balance, at June 30, 2021

Balance, at September 30, 2021

2,617,425 $ 26 $ 27,835 $ ( 28 ) $ 63,905 $ 168 $ 91,906

11 unchanged sentences

Allocation of ESOP shares — — 262 85 — — 347

Balance, at June 30, 2021

Balance, at September 30, 2021

2,617,425 $ 26 $ 27,835 $ ( 28 ) $ 63,905 $ 168 $ 91,906

4 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

31 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

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

Net increase in deposits 17,077 59,672

Proceeds from borrowings 44,500 —

34 unchanged sentences

This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

The amendments in this update apply to contract modifications that replace a reference rate affected by reference rate reform (including rates referenced in fallback provisions) and contemporaneous modifications of other contract terms related to the replacement of the reference rate (including contract modifications to add or change fallback provisions).

The amendments in this update apply to modifications to eligible contracts (e.g., loans, debt securities, derivatives, borrowings) that replace a reference rate affected by reference rate reform (including rates referenced in fallback provisions) and contemporaneous modifications of other contract terms related to the replacement of the reference rate (including contract modifications to add or change fallback provisions).

The following optional expedients for applying the requirements of certain Topics or Industry Subtopics in the Codification are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance:

28 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 (loss) net of applicable taxes until realized.

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 stockholders’ equity as accumulated other comprehensive income (loss) net of applicable taxes until realized.

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

5 unchanged sentences

Losses Estimated

June 30, 2022

September 30, 2022

Treasury bills $ 1,584 $ — $ ( 4 ) $ 1,580

Municipal bonds 6,705 25 ( 1,243 ) 5,487

7 unchanged sentences

Losses Estimated

June 30, 2022

September 30, 2022

Municipal bonds $ 705 $ — $ ( 202 ) $ 503

5 unchanged sentences

Total $ — $ — $ — $ —

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

The amortized cost and fair value of AFS and HTM securities at September 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.

June 30, 2022

September 30, 2022

Available-for-sale Held-to-maturity

6 unchanged sentences

Total $ 11,998 $ 10,396 $ 2,207 $ 1,754

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.

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

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

There were no sales of HTM securities during the three and nine months ended September 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):

June 30, 2022

September 30, 2022

Less Than 12 Months 12 Months or Longer Total

3 unchanged sentences

Available-for-sale securities

Treasury bills $ 1,580 $ ( 4 ) $ — $ — $ 1,580 $ ( 4 )

Municipal bonds 3,303 ( 1,094 ) 505 ( 149 ) 3,808 ( 1,243 )

14 unchanged sentences

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 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.

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

At September 30, 2022, the total securities portfolio consisted of one treasury bill security, 12 agency mortgage-backed securities and 12 municipal bonds with a total portfolio fair value of $ 12.2 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.

At September 30, 2022, there were 18 securities in an unrealized loss position for less than 12 months, and two securities in an unrealized loss position for more than 12 months.

Of the 18 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 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 .

The unrealized losses on these investments are not considered other-than-temporary impairment ("OTTI") as of September 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

The composition of the loans-held-for portfolio at the dates indicated, excluding loans held-for-sale, was as follows (in thousands):

September 30,

2022 December 31,

17 unchanged sentences

Total loans held-for-portfolio, net $ 843,958 $ 680,092

(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.

(1) Includes premiums resulting from purchased loans of $ 514 thousand related to one-to-four family loans, $ 315 thousand related to commercial and multifamily loans, and $ 155 thousand related to commercial business loans as of September 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 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.

As of September 30, 2022, the Bank had funded PPP loans totaling $ 119.2 million, $ 18 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):

June 30, 2022

September 30, 2022

Individually evaluated for impairment Allowance:

32 unchanged sentences

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Allowance Charge-offs Recoveries Provision (Recapture) Ending

9 unchanged sentences

Total $ 7,117 $ ( 6 ) $ 3 $ 375 $ 7,489

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Allowance Charge-offs Recoveries Provision (Recapture) Ending

9 unchanged sentences

Total $ 6,306 $ ( 48 ) $ 130 $ 1,101 $ 7,489

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Allowance Charge-offs Recoveries Provision

10 unchanged sentences

Total $ 6,157 $ ( 8 ) $ 3 $ 175 $ 6,327

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Allowance Charge-offs Recoveries Provision

20 unchanged sentences

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

June 30, 2022

September 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):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

One-to-four family $ 1,960 $ 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):

June 30, 2022

September 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):

June 30, 2022

September 30, 2022

equity Commercial

25 unchanged sentences

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

June 30, 2022

September 30, 2022

Recorded Investment

30 unchanged sentences

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,

Three Months Ended September 30,

Investment Interest Income

10 unchanged sentences

Total $ 5,409 $ 176 $ 4,490 $ 84

Six Months Ended June 30,

Nine Months Ended September 30,

Investment Interest Income

10 unchanged sentences

Total $ 6,341 $ 298 $ 5,143 $ 170

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.

Forgone interest on nonaccrual loans was $ 32 thousand and $ 89 thousand for the three months ended September 30, 2022 and 2021, respectively.

Forgone interest on nonaccrual loans was $ 110 thousand and $ 138 thousand for the nine months ended September 30, 2022 and 2021, respectively.

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

Troubled debt restructurings.

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.

Loans classified as TDRs totaled $ 2.0 million and $ 2.6 million at September 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 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.

There was one manufactured home loan totaling $ 44 thousand modified as a TDR during the three months ended September 30, 2022 and two loans consisting of one manufactured home loan and one one-to-four family loan, totaling $ 153 thousand modified as TDRs during the nine months ended September 30, 2022.

There were no loans modified as a TDR during the three and nine months ended September 30, 2021.

There were four TDRs totaling $ 788 thousand and two TDRs totaling $ 484 thousand that were paid off during the nine months ended September 30, 2022 and September 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 nine months ended September 30, 2022 and September 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 nine months ended September 30, 2022 and September 30, 2021.

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

As of September 30, 2022, there were three one-to-four family loans totaling $ 1.5 million 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 June 30, 2022 and December 31, 2021 were determined based on these requirements.

The Company’s fair values for financial instruments at September 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 June 30, 2022 and December 31, 2021, loans held-for-sale were carried at cost, as no impairment was required.

At September 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.

15 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 and six months ended June 30, 2022 and 2021.

There were no transfers between levels during the three and nine months ended September 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):

June 30, 2022 Fair Value Measurements Using:

September 30, 2022 Fair Value Measurements Using:

Value Estimated

28 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 June 30, 2022

Fair Value at September 30, 2022

Description Total Level 1 Level 2 Level 3

Treasury bills $ 1,580 $ — $ 1,580 $ —

Municipal bonds 5,487 — 5,487 —

7 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:

June 30, 2022

September 30, 2022

Financial Instrument Valuation Technique Unobservable Input(s) Range

10 unchanged sentences

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.

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 and six months ended June 30, 2022 and 2021.

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 June 30, 2022

Fair Value at September 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 both June 30, 2022 and December 31, 2021.

There were no liabilities carried at fair value, measured on a recurring or nonrecurring basis, at both September 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:

June 30, 2022

September 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 $ 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.

The Company’s unpaid principal balance of the mortgage servicing rights portfolio totaled $ 479.5 million at September 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 September 30, 2022 and December 31, 2021 were $ 477.1 million and $ 504.1 million, respectively.

The unpaid principal balance of loans serviced for other financial institutions at September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

7 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Prepayment speed (Public Securities Association “PSA” model) 130 % 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 $ 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.

mortgage servicing income on the Condensed Consolidated Statements of Income and totaled $ 306 thousand and $ 939 thousand for the three and nine months ended September 30, 2022 and $ 328 thousand and $ 961 thousand for the three and nine months ended September 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 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:

At September 30, 2022 and December 31, 2021, the amount available to borrow under this credit facility was $ 421.8 million and $ 417.7 million, respectively, subject to eligible pledged collateral.

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

one-to-four family mortgage loans with an advance equivalent of $ 190.8 million, commercial and multifamily mortgage loans with an advance equivalent of $ 47.1 million and home equity loans with an advance equivalent of $ 516 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 $ 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.

The Company had $ 44.5 million outstanding borrowings under this arrangement at September 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 September 30, 2022 and December 31, 2021, respectively, to secure public deposits.

The remaining amount available to borrow as of September 30, 2022 and December 31, 2021, was $ 180.9 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 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.

At September 30, 2022 and December 31, 2021, the Company had an investment of $ 2.9 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.

At September 30, 2022 and December 31, 2021, the amount available to borrow under this credit facility was $ 21.2 million and $ 22.4 million, respectively, subject to eligible pledged collateral.

The Company had no outstanding borrowings under this arrangement at September 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 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.

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

As of September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

7 unchanged sentences

$ 0.97 $ 0.98 $ 2.23 $ 2.76

(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.

(1) The basic and diluted earnings per share amounts include the impact of income allocated to participating securities of $ 17 thousand and $ 41 thousand for the three and nine months ended September 30, 2022, and $ 17 thousand and $ 50 thousand for the three and nine months ended September 30, 2021, respectively.

(2) The difference between the basic and diluted earnings per share amounts for the three and nine months ended September 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 2,612 anti-dilutive securities at September 30, 2022 and zero anti-dilutive securities at September 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 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.

As of September 30, 2022, on an adjusted basis, awards for stock options totaling 283,484 shares and awards for restricted stock totaling 150,971 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 $ 90 thousand and $ 384 thousand for the three and nine months ended September 30, 2022, and $ 65 thousand and $ 295 thousand for the three and nine months ended September 30, 2021, respectively.

Stock Option Awards

2 unchanged sentences

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 June 30, 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 September 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

Outstanding at July 1, 2022 99,219 $ 26.94 5.21 $ 1,186

Exercised ( 5,880 ) 18.72

1 unchanged sentence

Expired ( 124 ) 36.82

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

Outstanding at September 30, 2022 93,195 27.45 4.84 1,248

Exercisable 71,749 24.32 3.77 1,169

1 unchanged sentence

93,195 $ 27.45 4.84 $ 1,248

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):

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

Shares Weighted-

7 unchanged sentences

Expired ( 252 ) 35.13

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

Outstanding at September 30, 2022 93,195 27.45 4.84 1,248

Exercisable 71,749 24.32 3.77 1,169

1 unchanged sentence

93,195 $ 27.45 4.84 $ 1,248

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

As of September 30, 2022, there was $ 128 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 2.7 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 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,

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

Nine Months Ended September 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 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.

There were zero and 12,800 options granted during the three and nine months ended September 30, 2022, and zero and 12,250 options granted during the three and nine months ended September 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 June 30, 2022:

The following is a summary of the Company’s non-vested restricted stock award activity during the three months ended September 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

Non-Vested at July 1, 2022 17,944 $ 37.62

Forfeited ( 20 ) 33.50

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

Non-Vested at September 30, 2022 17,924 37.62 40.52

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

17,924 $ 37.62 $ 40.52

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

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

Shares Weighted-Average

5 unchanged sentences

Forfeited ( 930 ) 35.58

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

Non-Vested at September 30, 2022 17,924 37.62 40.52

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

17,924 $ 37.62 $ 40.52

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

As of September 30, 2022, there was $ 477 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 2.5 years.

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

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

Employee Stock Ownership Plan

3 unchanged sentences

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

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

As of September 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 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.

The fair value of the 158,001 shares held by the ESOP trust was $ 6.4 million at September 30, 2022.

ESOP compensation expense included in salaries and benefits was $ 205 thousand and $ 580 thousand for the three and nine months ended September 30, 2022 and $ 180 thousand and $ 530 thousand for the three and nine months ended September 30, 2021, respectively.

Note 11 – Leases

2 unchanged sentences

Generally, our real estate leases have initial terms of three to ten years and typically include one renewal option.

Our leases have remaining lease terms of one year to seven years .

Our leases have remaining lease terms of under one year to seven years .

The operating leases generally contain renewal options and require us to pay property taxes and operating expenses for the properties.

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):

September 30,

2022 December 31,

2 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

4 unchanged sentences

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

June 30, 2022

September 30, 2022

Remainder of 2022

4 unchanged sentences

Lease term and discount rate by lease type consist of the following at the dates indicated:

September 30,

2022 December 31,

4 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

3 unchanged sentences

Note 12 – Subsequent Events

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.

On October 25, 2022, the Company announced that its Board of Directors declared a quarterly cash dividend of $ 0.17 per common share, payable on November 23, 2022 to stockholders of record at the close of business on November 09, 2022.

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