What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-03 · 160 added, 146 removed, 998 unchanged (23% of the section changed)

3 unchanged sentences

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

June 30, 2021

September 30, 2021

December 31, 2020

23 unchanged sentences

Preferred stock (par value $ 0.01 per share)

Authorized - 50,000,000 shares at June 30, 2021 and at December 31, 2020 , no shares issued

Authorized - 50,000,000 shares at September 30, 2021 and at December 31, 2020 , no shares issued

Common stock (par value $ 0.01 per share)

Authorized - 100,000,000 shares at June 30, 2021 and at December 31, 2020

Issued - 25,213,161 at June 30, 2021 and 25,087,976 at December 31, 2020

Outstanding - 25,213,161 at June 30, 2021 and 25,087,976 at December 31, 2020

Authorized - 100,000,000 shares at September 30, 2021 and at December 31, 2020

Issued - 25,038,054 at September 30, 2021 and 25,087,976 at December 31, 2020

Outstanding - 25,038,054 at September 30, 2021 and 25,087,976 at December 31, 2020

Additional paid-in capital

8 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(In Thousands, except per share amounts)

30 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(In Thousands)

10 unchanged sentences

Shareholders'

For the six months ended June 30, 2020

For the nine months ended September 30, 2020

(In Thousands, except per share amounts)

8 unchanged sentences

Purchase of common stock returned to authorized but unissued

Balances at June 30, 2020

For the six months ended June 30, 2021

Balances at September 30, 2020

For the nine months ended September 30, 2021

(In Thousands, except per share amounts)

8 unchanged sentences

Purchase of common stock returned to authorized but unissued

Balances at June 30, 2021

Balances at September 30, 2021

Comprehensive Income (Loss)

Shareholders'

For the three months ended June 30, 2020

For the three months ended September 30, 2020

(In Thousands, except per share amounts)

Balances at March 31, 2020

Balances at June 30, 2020

Comprehensive income:

Other comprehensive income

Other comprehensive loss

Total comprehensive income

4 unchanged sentences

Purchase of common stock returned to authorized but unissued

Balances at June 30, 2020

For the three months ended June 30, 2021

Balances at September 30, 2020

For the three months ended September 30, 2021

(In Thousands, except per share amounts)

Balances at March 31, 2021

Balances at June 30, 2021

Comprehensive income:

6 unchanged sentences

Purchase of common stock returned to authorized but unissued

Balances at June 30, 2021

Balances at September 30, 2021

See accompanying notes to unaudited consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended June 30,

Nine months ended September 30,

(In Thousands)

6 unchanged sentences

Origination of mortgage servicing rights

Proceeds on sales of mortgage servicing rights

Gain on sale of loans held for sale

1 unchanged sentence

Proceeds on sales of loans originated for sale

Gain on death benefit on bank owned life insurance

Decrease in accrued interest receivable

Increase in cash surrender value of life insurance

Decrease (increase) in derviative assets

Decrease (increase) in derivative assets

Decrease in accrued interest on deposits and borrowings

1 unchanged sentence

Legal settlement

(Decrease) increase in derviative liabilities

(Decrease) increase in derivative liabilities

Net gain related to real estate owned

Gain on sale of mortgage servicing rights

Change in other assets and other liabilities, net

12 unchanged sentences

Sales of real estate owned

Proceeds from death benefit

Net cash provided by (used in) investing activities

6 unchanged sentences

Proceeds from stock option exercises

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Increase in cash and cash equivalents

2 unchanged sentences

Supplemental information:

Cash paid or credited during the period for:

Cash paid during the period for:

Income tax payments

23 unchanged sentences

The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s December 31, 2020 Annual Report on Form 10-K.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other period.

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other period.

The preparation of the unaudited consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period.

7 unchanged sentences

Most businesses have reopened at full capacity, which has improved commercial and consumer activity but still has not returned to pre-pandemic levels.

While the overall outlook has improved based on the availability of the vaccine to all adults and older children, there has been a recent rise in hospitalization and infection rates caused by the Delta variant, a rapidly spreading strain of coronavirus.

Therefore, the risk of further resurgence and possible reimplementation of restrictions remains.

While the overall outlook has improved based on the availability of the vaccine to all adults and older children, further government action in response to the COVID-19 pandemic, including any vaccination mandates, may affect our business and operations, including our workforce, human capital resources and infrastructure.

the risk of further resurgence and possible reimplementation of restrictions remains.

The Company has reopened all financial centers at normal business hours and all employees have returned to work during 2021.

1 unchanged sentence

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q were issued.

There were no significant subsequent events for the three and six months ended June 30, 2021 through the issuance date of these unaudited consolidated financial statements that warranted adjustment to or disclosure in the unaudited consolidated financial statements .

There were no significant subsequent events for the three and nine months ended September 30, 2021 through the issuance date of these unaudited consolidated financial statements that warranted adjustment to or disclosure in the unaudited consolidated financial statements .

Reclassifications

6 unchanged sentences

The authoritative guidance also requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected (net of the allowance for credit losses).

In addition, the credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses rather than a write-down.

In addition, the credit losses relating to available-for-sale (AFS) debt securities should be recorded through an allowance for credit losses rather than a write-down.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law.

7 unchanged sentences

Adjustments to historical loss information are considered for differences in current loan-specific risk characteristics such as changes in underwriting standards, portfolio mix, portfolio volume, delinquency rates, interest rates, or other relevant factors.

Management will continue to review and adjust these and other factors.

Ongoing evaluations have been performed by vintage adjusted for prepayments.

For two portfolio segments, management expects to use a weighted average remaining maturity methodology, which contemplates loss expectations on a pool basis, relying on historic loss rates.

The Company is currently finalizing controls, processes, policies and disclosures in preparation for final adoption.

The Company is continuing to evaluate the extent of the potential impact and expects that portfolio composition and economic conditions at the time of adoption will be a factor.

During the third quarter, we ran a parallel run including additional analytics, controls, and a parallel governance process.

A set of controls, including management review controls, implementation controls, data, model, and forecasting controls has been established.

Next steps include further testing and finalization of controls and developing disclosures.

We will continue to evaluate and refine our loss estimates throughout 2021.

Based on our most recent parallel run, we estimate that the impact of the standard on the allowance for credit losses ("ACL") as of September 30, 2021, would have been within a range of no change to a 10% increase.

Within the ACL calculation, we generally expect the ACL to be lower for commercial loans as they are shorter duration loans compared to the longer duration residential and real estate loans.

We expect that the ACL related to AFS securities will be immaterial as the portfolio consists entirely of municipal securities with low expected losses.

This estimate is subject to change based on continuing review of the models, assumptions, methodologies and judgments.

The impact of the ASU at adoption will be influenced by the portfolio composition and credit quality, macroeconomic conditions and forecasts at that time, as well as other management judgments.

We expect more volatility in the credit loss estimate under CECL than under the current accounting requirements.

The Bank will adopt this guidance beginning January 1, 2022.

Transition to the new ASU will be through a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of January 1, 2022.

Financial statement users should be aware that the allowance for credit loss is, by design, inherently sensitive to changes in economic outlook, loan and lease portfolio composition, portfolio duration, and other factors.

As we continue to evaluate the provisions of ASC Topic 326 as of and for the six months ended June 30, 2021, we are considering the following in developing our forecast and its effect on our CECL calculations:

As we continue to evaluate the provisions of ASC Topic 326 as of and for the nine months ended September 30, 2021, we are considering the following in developing our forecast and its effect on our CECL calculations:

Duration, extent and severity of COVID-19;

1 unchanged sentence

Unemployment and effect on economies and markets.

The Company is evaluating the guidance and its impact on the Company's statements of income and financial condition.

The Company is evaluating the authoritative guidance related to credit losses relating to available-for-sale debt securities and is not expecting it to have a material impact on the Company's statements of operations or financial condition.

Note 2— Securities Available for Sale

The amortized cost and fair values of the Company’s investment in securities available for sale follow:

June 30, 2021

September 30, 2021

Amortized cost

26 unchanged sentences

The Company’s mortgage-backed securities and collateralized mortgage obligations issued by government sponsored enterprises are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

At June 30, 2021, $ 590,000 of the Company’s mortgage related securities were pledged as collateral to secure mortgage banking related activities.

At September 30, 2021, $ 505,000 of the Company’s mortgage related securities were pledged as collateral to secure mortgage banking related activities.

At December 31, 2020 , $ 785,000 of the Company's mortgage related securities were pledged as collateral to secure mortgage banking related activities and $ 7.2 million were pledged as collateral to secure back-to-back swaps.

The amortized cost and fair values of investment securities by contractual maturity at June 30, 2021 are shown below.

The amortized cost and fair values of investment securities by contractual maturity at September 30, 2021 are shown below.

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

7 unchanged sentences

Gross unrealized losses on securities available for sale and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows:

June 30, 2021

September 30, 2021

Less than 12 months

25 unchanged sentences

In addition, the Company may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral.

As of June 30, 2021, the Company held one municipal security that had previously been deemed to be other-than-temporarily impaired.

As of September 30, 2021, the Company held one municipal security that had previously been deemed to be other-than-temporarily impaired.

The security was issued by a tax incremental district in a municipality located in Wisconsin.

3 unchanged sentences

There have been no additional credit losses related to the security.

As of June 30, 2021, this security had an amortized cost of $ 116,000 and total life-to-date impairment of $ 94,000 .

As of June 30, 2021, the Company had one corporate debt security, included in other debt securities, which had been in an unrealized loss position for twelve months or longer.

The security was determined not to be other-than-temporarily impaired as of June 30, 2021.

The Company has determined that the decline in fair value of these securities is not attributable to credit deterioration, and as the Company does not intend to sell nor is it more likely than not that it will be required to sell these securities before recovery of the amortized cost basis, this security is not considered other-than-temporarily impaired.

During the three or six months ended June 30, 2021 and June 30, 2020, there were no sales of securities.

As of September 30, 2021, this security had an amortized cost of $ 116,000 and total life-to-date impairment of $ 94,000 .

As of September 30, 2021, the Company had one corporate debt security, included in other debt securities, and one government sponsored enterprise issued security which have been in an unrealized loss position for twelve months or longer.

The securities were determined not to be other-than-temporarily impaired as of September 30, 2021.

The Company has determined that the decline in fair value of these securities are not attributable to credit deterioration, and as the Company does not intend to sell nor is it more likely than not that it will be required to sell these securities before recovery of the amortized cost basis, these securities are not considered other-than-temporarily impaired.

During the three or nine months ended September 30, 2021 and September 30, 2020, there were no sales of securities.

Note 3 - Loans Receivable

Loans receivable at June 30, 2021 and December 31, 2020 are summarized as follows:

June 30, 2021

Loans receivable at September 30, 2021 and December 31, 2020 are summarized as follows:

September 30, 2021

December 31, 2020

10 unchanged sentences

While the real estate collateralizing these loans is primarily residential in nature, it ranges from owner-occupied single family homes to large apartment complexes.

Qualifying loans receivable totaling $ 983.9 million and $ 1.07 billion at June 30, 2021 and December 31, 2020, respectively, were pledged as collateral against $ 475.0 million and $ 499.0 million in outstanding Federal Home Loan Bank of Chicago ("FHLB") advances under a blanket security agreement at June 30, 2021 and December 31, 2020.

Qualifying loans receivable totaling $ 948.7 million and $ 1.07 billion at September 30, 2021 and December 31, 2020, respectively, were pledged as collateral against $ 475.0 million and $ 499.0 million in outstanding Federal Home Loan Bank of Chicago ("FHLB") advances under a blanket security agreement at September 30, 2021 and December 31, 2020.

Certain of the Company's executive officers, directors, employees, and their related interests have loans with the Bank.

Loans outstanding to such parties were approximately $ 6.5 million as of June 30, 2021 and $ 7.2 million as of December 31, 2020.

None of these loans were past due or considered impaired as of June 30, 2021 or December 31, 2020.

As of June 30, 2021, there were no loans 90 or more days past due and still accruing interest.

Loans outstanding to such parties were approximately $ 3.3 million as of September 30, 2021 and $ 7.2 million as of December 31, 2020.

None of these loans were past due or considered impaired as of September 30, 2021 or December 31, 2020, respectively.

As of September 30, 2021, there were no loans 90 or more days past due and still accruing interest.

As of December 31, 2020, there was a $ 586,000 loan that was 90 or more days past due and still accruing interest.

The Bank received full payoff of the loan subsequent to December 31, 2020.

An analysis of past due loans receivable as of June 30, 2021 and December 31, 2020 follows:

As of June 30, 2021

An analysis of past due loans receivable as of September 30, 2021 and December 31, 2020 follows:

As of September 30, 2021

1-59 Days Past Due (1)

21 unchanged sentences

Commercial loans

(1) Includes $ - and $ 611,000 at June 30, 2021 and December 31, 2020 , respectively, which are on non-accrual status.

(2) Includes $ 67,000 and $ - at June 30, 2021 and December 31, 2020 , respectively, which are on non-accrual status.

(3) Includes $ 1.1 million and $ 1.6 million at June 30, 2021 and December 31, 2020 , respectively, which are on non-accrual status.

A summary of the activity for the six months ended June 30, 2021 and 2020 in the allowance for loan losses follows:

(1) Includes $ - and $ 611,000 at September 30, 2021 and December 31, 2020 , respectively, which are on non-accrual status.

(2) Includes $ - and $ - at September 30, 2021 and December 31, 2020 , respectively, which are on non-accrual status.

(3) Includes $ 594,000 and $ 1.6 million at September 30, 2021 and December 31, 2020 , respectively, which are on non-accrual status.

A summary of the activity for the nine months ended September 30, 2021 and 2020 in the allowance for loan losses follows:

Construction and Land

1 unchanged sentence

(In Thousands)

Six months ended June 30, 2021

Nine months ended September 30, 2021

Balance at beginning of period

1 unchanged sentence

Balance at end of period

Six months ended June 30, 2020

Nine months ended September 30, 2020

Balance at beginning of period

1 unchanged sentence

Balance at end of period

A summary of the activity for the three months ended June 30, 2021 and 2020 in the allowance for loan losses follows:

A summary of the activity for the three months ended September 30, 2021 and 2020 in the allowance for loan losses follows:

Construction and Land

1 unchanged sentence

(In Thousands)

Three months ended June 30, 2021

Three months ended September 30, 2021

Balance at beginning of period

1 unchanged sentence

Balance at end of period

Three months ended June 30, 2020

Three months ended September 30, 2020

Balance at beginning of period

1 unchanged sentence

Balance at end of period

A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of June 30, 2021 follows:

A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of September 30, 2021 follows:

(In Thousands)

13 unchanged sentences

Total gross loans

The following table presents information relating to the Company’s internal risk ratings of its loans receivable as of June 30, 2021 and December 31, 2020:

The following table presents information relating to the Company’s internal risk ratings of its loans receivable as of September 30, 2021 and December 31, 2020:

to Four- Family

(In Thousands)

At June 30, 2021

At September 30, 2021

At December 31, 2020

20 unchanged sentences

These adjusted assumptions are based upon recent appraisals received on similar properties as well as on actual experience related to real estate owned and currently under Company management.

The following tables present data on impaired loans at June 30, 2021 and December 31, 2020.

As of June 30, 2021

The following tables present data on impaired loans at September 30, 2021 and December 31, 2020.

As of September 30, 2021

(In Thousands)

26 unchanged sentences

The difference between a loan’s recorded investment and the unpaid principal balance represents a partial charge-off resulting from a confirmed loss when the value of the collateral securing the loan is below the loan balance and management’s assessment that the full collection of the loan balance is not likely.

The following tables present data on impaired loans for the six months ended June 30, 2021 and 2020.

Six months ended June 30,

The following tables present data on impaired loans for the nine months ended September 30, 2021 and 2020.

Nine months ended September 30,

(In Thousands)

18 unchanged sentences

In those cases in which no allowance has been provided for an impaired loan, the Company has determined that the estimated value of the underlying collateral exceeds the remaining outstanding balance of the loan.

Of the total $ 7.8 million of impaired loans as of June 30, 2021 for which no allowance has been provided, $ 451,000 in net charge-offs have been recorded to reduce the unpaid principal balance to an amount that is commensurate with the loans’ net realizable value, using the estimated fair value of the underlying collateral.

Of the total $ 7.4 million of impaired loans as of September 30, 2021 for which no allowance has been provided, $ 442,000 in net charge-offs have been recorded to reduce the unpaid principal balance to an amount that is commensurate with the loans’ net realizable value, using the estimated fair value of the underlying collateral.

To the extent that further deterioration in property values continues, the Company may have to reevaluate the sufficiency of the collateral servicing these impaired loans which may result in additional provisions to the allowance for loans losses or charge-offs.

At June 30, 2021, total impaired loans included $ 4.4 million of troubled debt restructurings.

At September 30, 2021, total impaired loans included $ 5.2 million of troubled debt restructurings.

Troubled debt restructurings involve granting concessions to a borrower experiencing financial difficulty by modifying the terms of the loan in an effort to avoid foreclosure.

3 unchanged sentences

The following presents data on troubled debt restructurings:

As of June 30, 2021

As of September 30, 2021

(Dollars in Thousands)

5 unchanged sentences

Commercial real estate

At June 30, 2021, $ 4.4 million in loans had been modified in troubled debt restructurings and $ 942,000 of these loans were included in the non-accrual loan total.

At September 30, 2021, $ 5.2 million in loans had been modified in troubled debt restructurings and $ 1.7 million of these loans were included in the non-accrual loan total.

The remaining $ 3.5 million, while meeting the internal requirements for modification in a troubled debt restructuring, were current with respect to payments under their original loan terms at the time of the restructuring and, therefore, continued to be included with accruing loans.

4 unchanged sentences

When there is doubt as to the borrower’s ability to perform under the restructured terms or ultimately return to and perform under market terms, a valuation allowance is established equal to the impairment when the carrying amount exceeds fair value of the underlying collateral.

As a result of the impairment analysis, no valuation allowance was recorded as of June 30, 2021 with respect to the $ 4.4 million in troubled debt restructurings.

As a result of the impairment analysis, no valuation allowance was recorded as of September 30, 2021 with respect to the $ 5.2 million in troubled debt restructurings.

As of December 31, 2020, no valuation allowance had been established with respect to the $ 11.6 million in troubled debt restructurings.

2 unchanged sentences

The following presents troubled debt restructurings by concession type:

As of June 30, 2021

As of September 30, 2021

Performing in

13 unchanged sentences

Principal forebearance

There was one one- to four-family loan modified as a troubled debt restructuring with a balance of $ 575,000 during the six months ended June 30, 2021.

There were no loans modified as troubled debt restructurings during the three months ended June 30, 2021.

There were no loans modified as troubled debt restructurings during the three or six months ended June 30, 2020.

There were no troubled debt restructurings within the past twelve months for which there was a default during the three or six months ended June 30, 2021 or June 30, 2020.

There were three one- to four-family loans modified as troubled debt restructurings with a total balance of $ 1.3 million during the nine months ended September 30, 2021.

There were two loans modified as troubled debt restructurings with a total loan balance of $ 754,000 during the three months ended September 30, 2021.

There was one loan modified as troubled debt restructurings with a total balance of $ 5.7 million during the three and nine months ended September 30, 2020.

There were no troubled debt restructurings within the past twelve months for which there was a default during the three or nine months ended September 30, 2021 or September 30, 2020.

The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency.

1 unchanged sentence

The Company elected to adopt these provisions of the CARES Act.

At June 30, 2021, the Company had approximately $ 559,000 in outstanding loans subject to principal deferral agreements.

The following table presents data on non-accrual loans as of June 30, 2021 and December 31, 2020:

June 30, 2021

At September 30, 2021, the Company had approximately $ 559,000 in outstanding loans subject to principal deferral agreements which were not classified as troubled debt restructurings.

The following table presents data on non-accrual loans as of September 30, 2021 and December 31, 2020:

September 30, 2021

December 31, 2020

10 unchanged sentences

Real estate owned is summarized as follows:

June 30, 2021

September 30, 2021

December 31, 2020

5 unchanged sentences

The following table presents the activity in the Company’s real estate owned:

Six months ended June 30,

Nine months ended September 30,

(In Thousands)

3 unchanged sentences

Real estate owned at the end of the period

Residential one- to four-family mortgage loans that were in the process of foreclosure were $ 654 ,000 at June 30, 2021 and $ 1.7 million at December 31, 2020.

Residential one- to four-family mortgage loans that were in the process of foreclosure were $ 1.5 million at September 30, 2021 and $ 1.7 million at December 31, 2020.

Note 5— Mortgage Servicing Rights

The following table presents the activity in the Company’s mortgage servicing rights:

Six months ended June 30,

Nine months ended September 30,

(In Thousands)

Mortgage servicing rights at beginning of the period

Sales (net of gains/losses)

Mortgage servicing rights at end of the period

1 unchanged sentence

Mortgage servicing rights at end of the period, net

During the six months ended June 30, 2021, $ 2.16 billion in residential loans were originated for sale on a consolidated basis.

During the nine months ended September 30, 2021, $ 3.21 billion in residential loans were originated for sale on a consolidated basis.

During the same period, sales of loans held for sale totaled $ 3.44 billion, generating mortgage banking income of $ 150.6 million.

The unpaid principal balance of loans serviced for others was $ 1.37 billion and $ 871.8 million at June 30, 2021 and December 31, 2020, respectively.

The unpaid principal balance of loans serviced for others was $ 160.8 million and $ 871.8 million at September 30, 2021 and December 31, 2020, respectively.

These loans are not reflected in the consolidated statements of financial condition.

The fair value of mortgage servicing rights were $ 13.2 million at June 30, 2021 and $ 6.4 millions at June 30, 2020.

During the six months ended June 30, 2021 and June 30, 2020, the Company did not sell any mortgage servicing rights.

The fair value of mortgage servicing rights were $ 1.3 million at September 30, 2021 and $ 9.9 million at September 30, 2020.

During the three and nine months ended September 30, 2021, the Company sold mortgage servicing rights related to $ 1.24 billion in loans receivable and with a book value of $ 9.3 million for $ 12.4 million resulting in a gain on sale of $ 4.0 million.

During the three and nine months ended September 30, 2020, the Company did not sell any mortgage servicing rights.

The following table shows the estimated future amortization expense for mortgage servicing rights for the periods indicated:

2 unchanged sentences

Note 6— Deposits

At June 30, 2021 and December 31, 2020, time deposits with aggregate balances greater than $250,000 amounted to $ 108.0 million and $ 102.6 million, respectively.

A summary of the contractual maturities of time deposits at June 30, 2021 is as follows:

At September 30, 2021 and December 31, 2020, time deposits with aggregate balances greater than $250,000 amounted to $ 108.0 million and $ 102.6 million, respectively.

A summary of the contractual maturities of time deposits at September 30, 2021 is as follows:

(In Thousands)

6 unchanged sentences

Borrowings consist of the following:

June 30, 2021

September 30, 2021

December 31, 2020

6 unchanged sentences

The short-term repurchase agreement is utilized by Waterstone Mortgage Corporation to finance loans originated for sale when necessary.

Waterstone Mortgage Corporation has no commitments outstanding as of June 30, 2021.

Waterstone Mortgage Corporation has no commitments outstanding as of September 30, 2021.

The short-term repurchase agreement had a $ 9.1 million balance at December 31, 2020.

15 unchanged sentences

The Company’s borrowings from the FHLB are limited to 80 % of the carrying value of unencumbered one- to four-family mortgage loans, 75 % of the carrying value of multi-family loans and 64 % of the carrying value of home equity loans.

In addition, these advances were collateralized by FHLB stock of $ 26.5 million at June 30, 2021 and $ 26.7 million at December 31, 2020, respectively.

In addition, these advances were collateralized by FHLB stock of $ 24.4 million at September 30, 2021 and $ 26.7 million at December 31, 2020, respectively.

In the event of prepayment, the Company is obligated to pay all remaining contractual interest on the advance.

18 unchanged sentences

The minimum captial conservation buffer is 2.5%.

As of June 30, 2021, the Bank was well-capitalized, with all capital ratios exceeding the well-capitalized requirement.

As of September 30, 2021, the Bank was well-capitalized, with all capital ratios exceeding the well-capitalized requirement.

There are no conditions or events that management believes have changed the Bank’s prompt corrective action capitalization category.

The Bank is subject to regulatory restrictions on the amount of dividends it may declare and pay to the Company without prior regulatory approval, and to regulatory notification requirements for dividends that do not require prior regulatory approval.

The actual and required capital amounts and ratios for the Bank as of June 30, 2021 and December 31, 2020 are presented in the table below:

June 30, 2021

The actual and required capital amounts and ratios for the Bank as of September 30, 2021 and December 31, 2020 are presented in the table below:

September 30, 2021

Minimum Capital

42 unchanged sentences

Note 9 – Income Taxes

Income tax expense totaled $ 12.8 million for the six months ended June 30, 2021 compared to $ 8.9 million during the six months ended June 30, 2020.

Income tax expense was recognized on the statement of income during the six months ended June 30, 2021 at an effective rate of 24.5 % of pretax income compared to 24.9 % during the six months ended June 30, 2020.

Income tax expense totaled $ 18.2 million for the nine months ended September 30, 2021 compared to $ 17.8 million during the nine months ended September 30, 2020.

Income tax expense was recognized on the statement of income during the nine months ended September 30, 2021 at an effective rate of 23.8 % of pretax income compared to 25.0 % during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, the Company recorded a $ 949,000 return to provision income tax adjustment as state tax apportionment shifted states based on the final 2020 tax returns.

Note 10– Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities

3 unchanged sentences

The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

June 30, 2021

September 30, 2021

December 31, 2020

18 unchanged sentences

The Company holds mortgages on the underlying real estate as collateral supporting those commitments for which collateral is deemed necessary.

The Company has determined that there are no probable losses related to commitments to extend credit or the standby letters of credit as of June 30, 2021 and December 31, 2020.

The Company has determined that there are no probable losses related to commitments to extend credit or the standby letters of credit as of September 30, 2021 and December 31, 2020.

Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages.

5 unchanged sentences

Given that the underlying loans delivered to buyers are predominantly conventional first lien mortgages, historical experience has resulted in insignificant losses and repurchase activity.

The Company's reserve for losses related to these recourse provisions totaled $ 2.7 million and $ 2.9 million as of June 30, 2021 and December 31, 2020, respectively.

The Company's reserve for losses related to these recourse provisions totaled $ 2.8 million and $ 2.9 million as of September 30, 2021 and December 31, 2020, respectively.

In the normal course of business, the Company, or its subsidiaries, are involved in various legal proceedings.

11 unchanged sentences

Commitments to sell loans are made to mitigate interest rate risk on interest rate lock commitments to originate loans and loans held for sale.

At June 30, 2021, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately $ 740.8 million and interest rate lock commitments with an aggregate notional amount of approximately $ 487.0 million.

The fair value of the forward commitments to sell mortgage loans at June 30, 2021 included a gain of $ 1.4 million that is reported as a component of other assets on the Company's consolidated statement of financial condition.

The fair value of the interest rate locks at June 30, 2021 included a gain of $ 6.1 million that is reported as a component of other assets on the Company's consolidated statements of financial condition.

At September 30, 2021, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately $ 724.0 million and interest rate lock commitments with an aggregate notional amount of approximately $ 482.0 million.

The fair value of the forward commitments to sell mortgage loans at September 30, 2021 included a gain of $ 3.7 million that is reported as a component of other assets on the Company's consolidated statement of financial condition.

The fair value of the interest rate locks at September 30, 2021 included a gain of $ 3.1 million that is reported as a component of other assets on the Company's consolidated statements of financial condition.

At December 31, 2020, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of $ 779.9 million and interest rate lock commitments with an aggregate notional amount of approximately $ 486.2 million.

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The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities on the Company's consolidated statement of financial condition, respectively, in equal amounts for these transactions.

The aggregate amortizing notional value of back-to-back swaps with various commercial borrowers was $ 106.4 million at June 30, 2021 and $ 107.5 million at December 31, 2020.

The aggregate amortizing notional value of back-to-back swaps with various commercial borrowers was $ 105.8 million at September 30, 2021 and $ 107.5 million at December 31, 2020.

The Company receives fixed rates and pays floating rates based upon LIBOR on the swaps with commercial borrowers.

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Commercial borrower swaps are completed independently with each borrower and are not subject to master netting arrangements.

These commercial borrower swaps were reported as a component of other assets on the Company's consolidated statement of financial condition of $ 1.6 million as of June 30, 2021 and $ 3.9 million as of December 31, 2020.

As of June 30, 2021 and December 31, 2020, no back-to-back swaps were in default.

The aggregate amortizing notional value of back-to-back swaps with dealer counterparties was $ 106.4 million as of June 30, 2021 and $ 107.5 million as of December 31, 2020.

These commercial borrower swaps were reported as a component of other assets on the Company's consolidated statement of financial condition of $ 1.6 million as of September 30, 2021 and $ 3.9 million as of December 31, 2020.

As of September 30, 2021 and December 31, 2020, no back-to-back swaps were in default.

The aggregate amortizing notional value of back-to-back swaps with dealer counterparties was $ 105.8 million as of September 30, 2021 and $ 107.5 million as of December 31, 2020.

The Company pays fixed rates and receives floating rates based upon LIBOR on the swaps with dealer counterparties.

These swaps maturity dates range from December 2029 to June 2037 .

Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and are reported as a component of other liabilities on the Company's consolidated statement of financial condition of $ 1.6 million as of June 30, 2021 and $ 3.9 million as of December 31, 2020.

No right of offset existed with dealer counterparty swaps as of June 30, 2021 and December 31, 2020.

Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and are reported as a component of other liabilities on the Company's consolidated statement of financial condition of $ 1.6 million as of September 30, 2021 and $ 3.9 million as of December 31, 2020.

No right of offset existed with dealer counterparty swaps as of September 30, 2021 and December 31, 2020.

All changes in the fair value of these instruments are recorded in other non-interest income.

The Company pledged no mortgage backed securities to secure its obligation under these contracts at June 30, 2021 and $ 7.2 million in mortgage backed securities at December 31, 2020.

The Company pledged $ 1.9 million in cash and cash equivalents to secure its obligation under these contracts at September 30, 2021 and $ 7.2 million in mortgage backed securities at December 31, 2020.

Note 12 – Earnings Per Share

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Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding adjusted for the dilutive effect of all potential common shares.

There were 36,100 and 130,400 antidilutive shares of common stock for the three months ended June 30, 2021 and 2020 , respectively.

There were 40,100 and 123,000 antidilutive shares of common stock for the six months ended June 30, 2021 and 2020, respectively.

There were 45,000 and 124,000 antidilutive shares of common stock for the three months ended September 30, 2021 and 2020 , respectively.

There were 50,000 and 123,000 antidilutive shares of common stock for the nine months ended September 30, 2021 and 2020, respectively.

Presented below are the calculations for basic and diluted earnings per share:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(In Thousands, except per share amounts)

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The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following table presents information about our assets recorded in our consolidated statements of financial condition at their fair value on a recurring basis as of June 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

The following table presents information about our assets recorded in our consolidated statements of financial condition at their fair value on a recurring basis as of September 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

Fair Value Measurements Using

June 30, 2021

September 30, 2021

(In Thousands)

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The table below presents reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2021 and 2020.

Six months ended June 30,

Nine months ended September 30,

(In Thousands)

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Assets Recorded at Fair Value on a Non-recurring Basis

The following tables present information about our assets recorded in our consolidated statements of financial condition at their fair value on a non-recurring basis as of June 30, 2021 and December 31, 2020, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.

The following tables present information about our assets recorded in our consolidated statements of financial condition at their fair value on a non-recurring basis as of September 30, 2021 and December 31, 2020, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.

Fair Value Measurements Using

June 30, 2021

September 30, 2021

(In Thousands)

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Given the significance of the adjustments made to appraised values necessary to estimate the fair value of impaired loans, loans that have been deemed to be impaired are considered to be Level 3 in the fair value hierarchy of valuation techniques.

At June 30, 2021, there were no impaired loans.

At September 30, 2021, there were no impaired loans.

At December 31, 2020, loans determined to be impaired with an outstanding balance of $ 208,000 were carried net of specific reserves of $ 23,000 for a fair value of $ 185,000 .

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Given the significance of the adjustments made to appraised values necessary to estimate the fair value of the properties, real estate owned is considered to be Level 3 in the fair value hierarchy of valuation techniques.

There were no writedowns during the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021 and December 31, 2020, real estate owned totaled $ 150,000 and $ 322,000 , respectively.

There were no writedowns during the nine months ended September 30, 2021 and 2020, respectively.

At September 30, 2021 and December 31, 2020, real estate owned totaled $ 148,000 and $ 322,000 , respectively.

Mortgage servicing rights – The Company utilizes an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of mortgage servicing rights.

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The Company records the mortgage servicing rights at the lower of amortized cost or fair value.

At June 30, 2021 and December 31, 2020 , there were $ 27,000 and $ 77,000 , respectively, of impairment on mortgage servicing rights.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

At September 30, 2021 , there was no impairment on mortgage servicing rights at and December 31, 2020 , there was $ 77,000 of impairment on mortgage servicing rights.

For Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

Significant Unobservable

Fair Value at

June 30, 2021

September 30, 2021

Weighted Average

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Discount rates applied to appraisals

Impaired mortgage servicing rights

Pricing models

Prepayment rate

Discount rate

Cost to service

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

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The carrying amounts and fair values of the Company’s financial instruments consist of the following:

June 30, 2021

September 30, 2021

December 31, 2020

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Fair values for the Company’s commitments to extend credit and standby letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the counterparty’s credit standing, and discounted cash flow analyses.

The fair value of the Company’s commitments to extend credit was not material at June 30, 2021 and December 31, 2020.

The fair value of the Company’s commitments to extend credit was not material at September 30, 2021 and December 31, 2020.

Mortgage Banking Derivative Assets and Liabilities

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Presented below is the segment information:

As of or for the three months ended June 30, 2021

As of or for the three months ended September 30, 2021

Holding Company and

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Income tax expense

As of or for the three months ended June 30, 2020

As of or for the three months ended September 30, 2020

Holding Company and

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Income tax expense

As of or for the six months ended June 30, 2021

As of or for the nine months ended September 30, 2021

Holding Company and

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Income tax expense

As of or for the six months ended June 30, 2020

As of or for the nine months ended September 30, 2020

Holding Company and

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therefore, the Company used the incremental borrowing rates for the discount rate.

There were no sale and leaseback transactions, leveraged leases, or lease transactions with related parties during the six months ended June 30, 2021 and 2020.

At June 30, 2021, the Company had lease liabilities totaling $ 6.7 million and right-of-use assets totaling $ 6.3 million related to these leases.

There were no sale and leaseback transactions, leveraged leases, or lease transactions with related parties during the three or nine months ended September 30, 2021 and 2020.

At September 30, 2021, the Company had lease liabilities totaling $ 6.3 million and right-of-use assets totaling $ 5.8 million related to these leases.

Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively, on the consolidated statements of financial condition.

The cost components of our operating leases were as follows for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30,

Six months ended June 30,

The cost components of our operating leases were as follows for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30,

Nine months ended September 30,

(In Thousands)

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Short-term lease cost

At September 30, 2021, the Company had leases that had not yet commenced, but will create approximately $ 31,000 of additional lease liabilities and right-of-use assets for the Company in the fourth quarter of 2021.

The table below summarizes other information related to our operating leases:

Six months ended June 30, 2021

Nine months ended September 30, 2021

(Dollars in Thousands)

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Weighted average discount rate - operating leases

As of June 30, 2021, lease liability information for the Company is summarized in the following table.

As of September 30, 2021, lease liability information for the Company is summarized in the following table.

Maturity analysis

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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