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What changed in ECB Bancorp, Inc. /MD/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ECB Bancorp, Inc. /MD/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+307 added−321 removedSource: 10-K (2024-03-29) vs 10-K (2023-03-30)

Top changes in ECB Bancorp, Inc. /MD/'s 2023 10-K

307 paragraphs added · 321 removed · 259 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

152 edited+26 added−32 removed215 unchanged
Biggest changeHowever, regulatory agencies are not directly involved in the process for establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management. 17 The following table sets forth activity in our allowance for loan losses for the years indicated At December 31, 2022 2021 (In thousands) Allowance for loan losses at beginning of year $ 4,236 $ 3,876 Provision for loan losses 2,940 360 Charge-offs: Real estate loans: One- to four-family residential — — Multi-family — — Commercial — — Home equity lines of credit and loans — — Construction — — Commercial — — Consumer (2 ) (1 ) Total charge-offs $ (2 ) $ (1 ) Recoveries: Real estate loans: One- to four-family residential — — Multi-family — — Commercial 25 — Home equity lines of credit and loans — — Construction — — Commercial — — Consumer 1 1 Total recoveries 26 1 Net recoveries $ 24 $ — Allowance for loan losses at end of year $ 7,200 $ 4,236 Allowance for loan losses to non-performing loans 1097.56 % 431.5 % Allowance for loan losses to total loans outstanding at end of year 0.81 % 0.81 % Net recoveries to average loans outstanding during the year 0.00 % 0.00 % 18 Allocation of Allowance for Loan Losses.
Biggest changeThe following table sets forth activity in our allowance for credit losses for the years indicated: At December 31, 2023 2022 (in thousands) Allowance for credit losses at beginning of year $ 7,200 $ 4,236 Cumulative effect accounting adjustment 182 — Provision for credit losses 1,210 2,940 Charge-offs: Real estate loans: One-to-four family residential — — Multi-family — — Commercial — — Home equity lines of credit and loans — — Construction — — Commercial — — Consumer (2 ) (2 ) Total charge-offs $ (2 ) $ (2 ) Recoveries: Real estate loans: One-to-four family residential — — Multi-family — — Commercial — 25 Home equity lines of credit and loans — — Construction — — Commercial — — Consumer 1 1 Total recoveries 1 26 Net (charge-offs) recoveries $ (1 ) $ 24 Allowance for credit losses at end of year $ 8,591 $ 7,200 Allowance for credit losses to non-performing loans 708.24 % 1097.56 % Allowance for credit losses to total loans outstanding at end of year 0.82 % 0.81 % Net (charge offs) recoveries to average loans outstanding during the year 0.00 % 0.00 % 17 Allocation of Allowance for Credit Losses.
Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate loans, commercial real estate and multifamily real estate loans, construction and land loans and home equity lines of credit.
Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one-to-four family residential real estate loans, commercial real estate and multifamily real estate loans, construction and land loans and home equity lines of credit and loans.
Historically, given our size, capital position and lending team experience and capacity, we have originated for participation to other local banking institutions our larger commercial real estate and commercial loans.
Historically, given our size, capital position and lending team experience and capacity, we have originated for participation to other local banking institutions our larger commercial real estate and commercial loans.
As we continue to enhance our commercial real estate team and infrastructure and with the increase in capital resulting from the conversion, we are able to selectively retain larger loans that we historically would have originated for participation with other local institutions.
As we continue to enhance our commercial real estate team and infrastructure and with the increase in capital resulting from the conversion, we are able to selectively retain larger loans that we historically would have originated for participation with other local institutions.
We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various government-sponsored enterprises and municipal governments, deposits at the Federal Home Loan Bank of Boston (the “FHLB”), certificates of deposit of federally insured institutions, investment grade corporate bonds and investment grade marketable equity securities.
We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various government-sponsored enterprises and municipal governments, deposits at the Federal Home Loan Bank of Boston (the “FHLB”), certificates of deposit of federally insured institutions, investment grade corporate bonds and marketable equity securities.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: • general economic conditions, either nationally or in our market areas, that are worse than expected including as a result of employment levels and labor shortages, and the effects of inflation, a potential recession or slowed economic growth caused by supply chain disruptions or otherwise; • the extent, severity or duration of the COVID-19 pandemic on us and on our customers, employees and third-party service providers; • changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; • our ability to access cost-effective funding; • fluctuations in real estate values and both residential and commercial real estate market conditions; • demand for loans and deposits in our market area; • our ability to implement and change our business strategies; • competition among depository and other financial institutions; • inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; • adverse changes in the securities or secondary mortgage markets; • changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums; • changes in the quality or composition of our loan or investment portfolios; • technological changes that may be more difficult or expensive than expected; • the inability of third-party providers to perform as expected; 1 • a failure or breach of our operational or security systems or infrastructure, including cyberattacks; • our ability to manage market risk, credit risk and operational risk; • our ability to enter new markets successfully and capitalize on growth opportunities; • changes in consumer spending, borrowing and savings habits; • changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; • our ability to attract and retain key employees; and • changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: • general economic conditions, either nationally or in our market areas, that are worse than expected including as a result of employment levels and labor shortages, and the effects of inflation, a potential recession or slowed economic growth caused by supply chain disruptions or otherwise; • the extent, severity or duration of a pandemic on us and on our customers, employees and third-party service providers; • changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; • our ability to access cost-effective funding; • fluctuations in real estate values and both residential and commercial real estate market conditions; • demand for loans and deposits in our market area; • our ability to implement and change our business strategies; • competition among depository and other financial institutions; • inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; • adverse changes in the securities or secondary mortgage markets; • changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums; • changes in the quality or composition of our loan or investment portfolios; • technological changes that may be more difficult or expensive than expected; • the inability of third-party providers to perform as expected; 1 • a failure or breach of our operational or security systems or infrastructure, including cyberattacks; • our ability to manage market risk, credit risk and operational risk; • our ability to enter new markets successfully and capitalize on growth opportunities; • changes in consumer spending, borrowing and savings habits; • changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; • our ability to attract and retain key employees; and • changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Change in Control Regulations Under the Change in Bank Control Act, no person or group of persons may acquire “control” of a bank holding company, such as ECB Bancorp, unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.
Change in Control Regulations Under the Change in Bank Control Act, no person or group of persons may acquire “control” of a bank holding company, such as ECB Bancorp, unless the Federal Reserve Board has been given 60 days’ prior written notice and has 30 not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.
Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.
Assets classified as “doubtful” have all of the weaknesses inherent in those classified 15 “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.
See “ – Originations, Sales and Purchases of Loans.” Our one- to four-family residential real estate loans are generally underwritten according to Fannie Mae guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed- and adjustable-rate one- to four-family residential real estate loans in amounts up to the maximum conforming loan limits as 8 established by the Federal Housing Finance Agency (“FHFA”).
See “ – Originations, Sales and Purchases of Loans.” Our one-to-four family residential real estate loans are generally underwritten according to Fannie Mae guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed- and adjustable-rate one-to-four family residential real estate loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency (“FHFA”).
Consumer loans generally have shorter terms to maturity, which reduces our exposure to changes in interest rates. In addition, management believes that offering consumer loan products helps to expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities. Loan Underwriting Risks Adjustable-Rate Residential Real Estate Loans.
Consumer loans generally have shorter terms to maturity, which reduces our exposure to changes in interest rates. In addition, management believes that offering consumer loan products helps to expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities. 11 Loan Underwriting Risks Adjustable-Rate Residential Real Estate Loans.
Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months. Delinquent Loans . The following table sets forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated.
Interest income on restructured loans is accrued after the 14 borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months. Delinquent Loans . The following table sets forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated.
Control, as defined under federal 31 law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the regulator that the acquirer has the power, directly or indirectly, to exercise a controlling influence over the management or policies of the institution.
Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the regulator that the acquirer has the power, directly or indirectly, to exercise a controlling influence over the management or policies of the institution.
Home equity loans and lines of credit are generally secured by junior mortgages and have greater risk than one- to four-family residential real estate loans secured by first mortgages. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure, after repayment of the senior mortgages, if applicable.
Home equity loans and lines of credit are generally secured by junior mortgages and have greater risk than one-to-four family residential real estate loans secured by first mortgages. We face the risk that the collateral will be insufficient to compensate us for credit losses and costs of foreclosure, after repayment of the senior mortgages, if applicable.
Our commercial real estate and multifamily loans are appraised by outside independent and qualified appraisers that are duly approved in accordance with Everett Co-operative Bank policy. Personal guarantees are often obtained from commercial real estate borrowers if such individual has a greater than 20% ownership interest in the property.
Our commercial real estate and multifamily loans are appraised by outside independent and qualified appraisers that are duly approved in accordance with Everett Co-operative Bank Appraisal policy. Personal guarantees are often obtained from commercial real estate borrowers if such individual has a greater than 20% ownership interest in the property.
Loan Approval Procedures and Authority The maximum amount that we may lend to one borrower and the borrower’s related entities is generally limited, by statute, to 20% of the Bank's capital, which is defined under Massachusetts law as the sum of our surplus account, 13 undivided profits and, after the completion of the conversion, capital stock.
Loan Approval Procedures and Authority The maximum amount that we may lend to one borrower and the borrower’s related entities is generally limited, by statute, to 20% of the Bank's capital, which is defined under Massachusetts law as the sum of our surplus account, undivided profits and, after the completion of the conversion, capital stock.
We evaluate both the borrower’s ability to make principal, interest and escrow payments and the value of the property that will secure the loan. Our one- to four-family residential real estate loans do not currently include prepayment penalties, are non-assumable and do not produce negative amortization.
We evaluate both the borrower’s ability to make principal, interest and escrow payments and the value of the property that will secure the loan. Our one-to-four family residential real estate loans generally do not currently include prepayment penalties, are non-assumable and do not produce negative amortization.
Technological advances, for example, have lowered barriers to entry, which have allowed banks to expand their geographic reach by providing services over the internet and made it possible for non-depository institutions, including financial technology companies, to offer products 6 and services that traditionally have been provided by banks.
Technological advances, for example, have lowered barriers to entry, which have allowed banks to expand their geographic reach by providing services over the internet and made it possible for non-depository institutions, including financial technology companies, to offer products and services that traditionally have been provided by banks.
Information on the website is not incorporated into, and is not otherwise considered a part of, this Annual Report on Form 10-K. ITEM 1A. Risk Factors The presentation of Risk Factors is not required for smaller reporting companies like ECB Bancorp. ITEM 1B. Unresolved S taff Comments None. 34
Information on the website is not incorporated into, and is not otherwise considered a part of, this Annual Report on Form 10-K. ITEM 1A. Risk Factors The presentation of Risk Factors is not required for smaller reporting companies like ECB Bancorp. ITEM 1B. Unresolved S taff Comments None.
These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest.
These loans often involve the 12 disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest.
As a Maryland business corporation, ECB Bancorp is required to file an annual report with and pay franchise taxes to the state of Maryland. Availability of Annual Report on Form 10-K This Annual Report on Form 10-K is available on our website at www.everettbank.com .
As a Maryland corporation, ECB Bancorp is required to file an annual report with and pay franchise taxes to the state of Maryland. Availability of Annual Report on Form 10-K This Annual Report on Form 10-K is available on our website at www.everettbank.com .
Among other things, these provisions generally require that extensions of credit to insiders: • be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and 27 • not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Everett Co-operative Bank’s capital.
Among other things, these provisions generally require that extensions of credit to insiders: • be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and 26 • not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Everett Co-operative Bank’s capital.
As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. 12 Construction and Land Loans. Our construction loans are based upon estimates of costs and values associated with the completed project.
As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. Construction and Land Loans. Our construction loans are based upon estimates of costs and values associated with the completed project.
As such, ECB Bancorp is registered with the Federal Reserve Board and is subject to regulations, examinations, supervision and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve Board has enforcement authority over ECB Bancorp and its non-bank subsidiaries.
As such, ECB Bancorp is registered with the Federal Reserve Board and is subject to regulations, examinations, supervision 29 and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve Board has enforcement authority over ECB Bancorp and its non-bank subsidiaries.
We expect to lose our status as an emerging growth company effective December 31, 2027, which is the end of the fifth year after the completion date of the conversion and offering. 32 TAXATION Federal Taxation General.
We expect to lose our status as an emerging growth company effective December 31, 2027, which is the end of the fifth year after the completion date of the conversion and offering. 31 TAXATION Federal Taxation General.
Subsequent decreases in the value of the property are charged to operations. After acquisition, all costs incurred in maintaining the 14 property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.
Subsequent decreases in the value of the property are charged to operations. After acquisition, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.
The shares of the Company’s common stock sold in the offering began trading on the Nasdaq Capital Market on July 28, 2022 under the symbol “ECBK.” Since being incorporated, other than holding the common stock of Everett Co-operative Bank, retaining approximately 31% of the net cash proceeds of the stock conversion offering and making a loan to the Bank’s employee stock ownership plan, we have not engaged in any material business activities to date.
The shares of the Company’s common stock sold in the offering began trading on the Nasdaq Capital Market on July 28, 2022 under the symbol “ECBK.” Since being incorporated, other than holding the common stock of Everett Co-operative Bank, retaining approximately 22% of the net cash proceeds of the stock conversion offering and making a loan to the Bank’s employee stock ownership plan, we have not engaged in any material business activities to date.
Under this system of regulation, the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination activities and policies, including rules or policies that: establish minimum capital levels; restrict the timing and amount of dividend payments; govern the classification of assets; provide oversight for the adequacy of loan loss reserves for regulatory purposes and the adequacy of its risk management framework; and establish the timing and amounts of assessments and fees imposed by the regulatory agencies.
Under this system of regulation, the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination activities and policies, including rules or policies that: establish minimum capital levels; restrict the timing and amount of dividend payments; govern the classification of assets; provide oversight for the adequacy of credit loss reserves for regulatory purposes and the adequacy of its risk management framework; and establish the timing and amounts of assessments and fees imposed by the regulatory agencies.
Reflecting our focus on our community, in connection with our mutual to stock conversion and initial public offering which closed in July 2022, we established a charitable foundation called Everett Co-operative Bank Charitable Foundation and funded it with $600,000 in cash and 260,000 shares of our common stock, for a total contribution of $3,200,000 based on the $10.00 per share offering price.
Reflecting our focus on our community, in connection with our mutual to stock conversion and initial public offering which closed in July 2022, we established the Everett Co-operative Bank Charitable Foundation and funded it with $600,000 in cash and 260,000 shares of our common stock, for a total contribution of $3,200,000 based on the 5 $10.00 per share offering price.
At December 31, 2022, our construction loans included $3.0 million lines of credit secured by land. While we may originate loans to builders whether or not the collateral property underlying the loan is under contract for sale, we consider each project carefully in light of current residential real estate market conditions.
At December 31, 2023, our construction loans included $3.0 million in lines of credit secured by land. While we may originate loans to builders whether or not the collateral property underlying the loan is under contract for sale, we consider each project carefully in light of current residential real estate market conditions.
The following tables set forth the contractual maturities of our total loan portfolio at December 31, 2022. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Because the tables present contractual maturities and do not reflect repricing or the effect of prepayments, actual maturities may differ.
The following tables set forth the contractual maturities of our total loan portfolio at December 31, 2023. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Because the tables present contractual maturities and do not reflect repricing or the effect of prepayments, actual maturities may differ.
There were no other loans at December 31, 2022 that are not already disclosed where there is information about possible credit problems of borrowers that caused management to have serious doubts about the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure of such loans in the future. Allowance for Loan Losses.
There were no other loans at December 31, 2023 that are not already disclosed where there is information about possible credit problems of borrowers that caused management to have serious doubts about the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure of such loans in the future. Allowance for Credit Losses.
The following table sets forth the allowance for loan losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated.
The following table sets forth the allowance for credit losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated.
Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable regulatory capital requirements. At December 31, 2022, Everett Co-operative Bank had not opted into the community bank leverage ratio framework and its capital ratios exceeded all applicable requirements. Capital Distributions.
Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable regulatory capital requirements. At December 31, 2023, Everett Co-operative Bank had not opted into the community bank leverage ratio framework and its capital ratios exceeded all applicable requirements. Capital Distributions.
Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan losses limited to a maximum of 1.25% of risk-weighted assets.
Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets.
Members of a Federal Home Loan Bank are required to acquire and hold shares of capital stock in their Federal Home Loan Bank. Everett Co-operative Bank complied with this requirement at December 31, 2022. Based on redemption provisions of the Federal Home Loan Bank of Boston, the stock has no quoted market value and is carried at cost.
Members of a Federal Home Loan Bank are required to acquire and hold shares of capital stock in their Federal Home Loan Bank. Everett Co-operative Bank complied with this requirement at December 31, 2023. Based on redemption provisions of the Federal Home Loan Bank of Boston, the stock has no quoted market value and is carried at cost.
We believe that deposits are a stable source of funds, but our ability to attract and maintain deposits at favorable rates will be affected by market conditions, including competition and prevailing interest rates. 22 The following table sets forth the distribution of total deposits, by account type, at the dates indicated.
We believe that deposits are a stable source of funds, but our ability to attract and maintain deposits at favorable rates will be affected by market conditions, including competition and prevailing interest rates. 21 The following table sets forth the distribution of total deposits, by account type, at the dates indicated.
At December 31, 2022, Everett Co-operative Bank was in compliance with the loans-to-one borrower limitations. Loans to a Bank’s Insiders. Under Massachusetts law, a Massachusetts-chartered bank must comply with Regulation O of the Federal Reserve Board and the Commissioner retains examination and enforcement authority to ensure compliance. Investment Activities.
At December 31, 2023, Everett Co-operative Bank was in compliance with the loans-to-one borrower limitations. Loans to a Bank’s Insiders. Under Massachusetts law, a Massachusetts-chartered bank must comply with Regulation O of the Federal Reserve Board, and the Commissioner retains examination and enforcement authority to ensure compliance. Investment Activities.
We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Applicable regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for loan losses.
We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Applicable regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for credit losses.
At December 31, 2022, Everett Co-operative Bank met the criteria for being considered “well capitalized.” Insurance of Deposit Accounts. The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured financial institutions such as Everett Co-operative Bank, generally up to a maximum of $250,000 per separately insured depositor.
At December 31, 2023, Everett Co-operative Bank met the criteria for being considered “well capitalized.” Insurance of Deposit Accounts. The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured financial institutions such as Everett Co-operative Bank, generally up to a maximum of $250,000 per separately insured depositor.
Management believes that we have a good working relationship with our employees. 23 SUPERVISION AND REGULATION General Everett Co-operative Bank is a Massachusetts-chartered stock cooperative bank and is the wholly owned subsidiary of ECB Bancorp, a Maryland corporation, which is a registered bank holding company.
Management believes that we have a good working relationship with our employees. 22 SUPERVISION AND REGULATION General Everett Co-operative Bank is a Massachusetts-chartered stock cooperative bank and is the wholly owned subsidiary of ECB Bancorp, a Maryland corporation, which is a registered bank holding company.
We conduct business from our two full-service banking offices located in Everett, Massachusetts and Lynnfield, Massachusetts which are located in the greater Boston metropolitan area in Middlesex and Essex Counties. Everett is adjacent to Boston and is approximately three miles from Boston’s financial district, and Lynnfield is located approximately 10 miles to the north in Essex County.
We conduct business from our three full-service banking offices located in Everett, Massachusetts, Lynnfield, Massachusetts and Woburn, Massachusetts, which are located in the greater Boston metropolitan area in Middlesex and Essex Counties. Everett is adjacent to Boston and is approximately three miles from Boston’s financial district, and Lynnfield is located approximately 10 miles to the north in Essex County.
A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. An 26 institution that temporarily ceases to meet any qualifying criteria is provided with a two-quarter grace period to regain compliance.
A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. An 25 institution that temporarily ceases to meet any qualifying criteria is provided with a two-quarter grace period to regain compliance.
The Company reviews its investment in capital stock of the FHLB for impairment based on the ultimate recoverability of the cost basis in the FHLB stock. At December 31, 2022, no impairment had been recognized. Holding Company Regulation ECB Bancorp is a bank holding company within the meaning of Bank Holding Company of 1956, as amended.
The Company reviews its investment in capital stock of the FHLB for impairment based on the ultimate recoverability of the cost basis in the FHLB stock. At December 31, 2023, no impairment had been recognized. Holding Company Regulation ECB Bancorp is a bank holding company within the meaning of Bank Holding Company of 1956, as amended.
At December 31, 2022, Everett Co-operative Bank had no minimum tax credit carryovers. Net Operating Loss Carryovers. As a result of the Tax Cuts and Jobs Act generally, a financial institution may carry federal net operating losses forward indefinitely. At December 31, 2022, Everett Co-operative Bank had no federal net operating loss carryforwards. Charitable Contribution Carryovers.
At December 31, 2023, Everett Co-operative Bank had no minimum tax credit carryovers. Net Operating Loss Carryovers. As a result of the Tax Cuts and Jobs Act generally, a financial institution may carry federal net operating losses forward indefinitely. At December 31, 2023, Everett Co-operative Bank had no federal net operating loss carryforwards. Charitable Contribution Carryovers.
The real estate is recorded at estimated fair value at the date of acquisition less estimated costs to sell, and any write-down resulting from the acquisition is charged to the allowance for loan losses. Estimated fair value is based on an appraisal typically obtained before the foreclosure process is completed.
The real estate is recorded at estimated fair value at the date of acquisition less estimated costs to sell, and any write-down resulting from the acquisition is charged to the allowance for credit losses. Estimated fair value is based on an appraisal typically obtained before the foreclosure process is completed.
At December 31, 2022, Everett Co-operative Bank had no capital loss carryovers. Corporate Dividends. ECB Bancorp may generally exclude from its income 100% of dividends received from Everett Co-operative Bank as a member of the same affiliated group of corporations. Audit of Tax Returns.
At December 31, 2023, Everett Co-operative Bank had no capital loss carryovers. Corporate Dividends. ECB Bancorp may generally exclude from its income 100% of dividends received from Everett Co-operative Bank as a member of the same affiliated group of corporations. Audit of Tax Returns.
It is not practicable to determine the fair value of FHLB common stock due to restrictions placed on its transferability. Under current FHLB rules, we will be required to purchase additional FHLB common stock if we increase borrowings in the future. 20 Securities Portfolio.
It is not practicable to determine the fair value of FHLB common stock due to restrictions placed on its transferability. Under current FHLB rules, we will be required to purchase additional FHLB common stock if we increase borrowings in the future. 19 Securities Portfolio.
We also invest in securities, consisting primarily of U.S. government and federal agency obligations, mortgage-backed securities and corporate bonds. We offer a variety of deposit accounts, including certificate of deposit accounts, IRAs, money market accounts, savings accounts, demand deposit accounts and interest-bearing and noninterest-bearing checking accounts.
We also invest in securities, consisting primarily of U.S. government and federal agency obligations, mortgage-backed securities and corporate bonds. We offer a variety of deposit accounts, including certificate of deposit accounts, IRAs, money market accounts, savings accounts and both interest-bearing and noninterest-bearing checking accounts.
At December 31, 2022, our largest commercial real estate loan totaled $10.5 million and was secured by a warehouse distribution center located in our primary market area. At December 31, 2022, this loan was performing in accordance with its repayment terms.
At December 31, 2023, our largest commercial real estate loan totaled $10.5 million and was secured by a warehouse distribution center located in our primary market area. At December 31, 2023, this loan was performing in accordance with its repayment terms.
The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Everett Co-operative Bank and ECB Bancorp. 24 Massachusetts Banking Laws and Supervision General.
The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Everett Co-operative Bank and ECB Bancorp. 23 Massachusetts Banking Laws and Supervision General.
Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the 28 appropriate federal banking agency, and the holding company must guarantee the performance of that plan.
Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the 27 appropriate federal banking agency, and the holding company must guarantee the performance of that plan.
All Massachusetts-chartered cooperative banks are members of the Depositors Insurance Fund, a private industry-sponsored insurance fund in Massachusetts that insures all deposits at Everett Co-operative Bank above FDIC limits. 25 Protection of Personal Information.
All Massachusetts-chartered cooperative banks are members of the Depositors Insurance Fund, a private industry-sponsored insurance fund in Massachusetts that insures all deposits at Everett Co-operative Bank above FDIC limits. 24 Protection of Personal Information.
In order to further enhance our commercial real estate and multifamily lending infrastructure and continue to grow our portfolio, in January 2022, we hired a new Chief Lending Officer, John Migliozzi, who has over 35 years of lending experience in the greater Boston 4 metropolitan area. We also hired additional experienced lending and credit analyst personnel throughout 2022.
In order to further enhance our commercial real estate and multifamily lending infrastructure and continue to grow our portfolio, in January 2022, we hired a new Chief Lending Officer, John Migliozzi, who has over 36 years of lending experience in the greater Boston 4 metropolitan area. We also hired additional experienced lending and credit analyst personnel throughout 2022 and 2023.
We also are required to maintain an investment in FHLB stock. While we have the authority under applicable law to invest in derivative securities, we have not invested in derivative securities. At December 31, 2022, our investment portfolio consisted primarily of debt securities issued by U.S. government sponsored enterprises, mortgage-backed securities and corporate debt securities.
We also are required to maintain an investment in FHLB stock. While we have the authority under applicable law to invest in derivative securities, we have not invested in derivative securities. At December 31, 2023, our investment portfolio consisted primarily of debt securities issued by the U.S. Treasury, U.S. government sponsored enterprises, mortgage-backed securities and corporate debt securities.
These efforts, and especially the hiring of the executive officers, have and will continue to increase non-interest expense, including our compensation and benefits expense and technology and operational expenses, which affected our net income in 2022, but we believe our recent hires and operational measures will create the framework for us to execute on our strategy to grow the Bank through orderly and diligent loan growth, including competing for and underwriting larger individual loans and maintaining larger lending relationships.
These efforts, and especially the hiring of the executive officers, have and will continue to increase non-interest expense, including our compensation and benefits expense and technology and operational expenses, which affected our net income in both 2023 and 2022, but we believe our recent hires and operational measures will create the framework for us to execute on our strategy to grow the Company through orderly and diligent loan growth, including competing for and underwriting larger individual loans and maintaining larger lending relationships.
From time to time we will also originate fixed rate loans in these portfolios. We generally limit loan-to-value ratios to 75% of the appraised value or purchase price, whichever is higher. All of our commercial real estate and multifamily real estate loans are subject to our underwriting procedures and guidelines.
From time to time we will also originate fixed rate loans in these portfolios. We generally limit 9 loan-to-value ratios to 75% of the appraised value or purchase price, whichever is lower. All of our commercial real estate and multifamily real estate loans are subject to our underwriting procedures and guidelines.
Finally, in recognition of our expected growth through the above-mentioned efforts and in becoming a public company with the attendant accounting and financial reporting obligations, in 2021 we hired a Senior Vice President and Chief Accounting Officer who has 18 years of public company accounting and community banking experience, including having served in a chief accounting role at a publicly traded community bank in the greater Boston metropolitan area.
Finally, in recognition of our expected growth through the above-mentioned efforts and in becoming a public company with the attendant accounting and financial reporting obligations, in 2021 we hired Brandon Lavertu as our new Senior Vice President and Chief Accounting Officer who has 18 years of public company accounting and community banking experience, including having served in a chief accounting role at a publicly traded community bank in the greater Boston metropolitan area.
In addition, Everett Co-operative Bank and ECB Bancorp has entered into an agreement to establish a method for allocating and for reimbursing the payment of their consolidated tax liability. Personnel As of December 31, 2022, we had 66 full-time equivalent employees. Our employees are not represented by any collective bargaining group.
In addition, Everett Co-operative Bank and ECB Bancorp has entered into an agreement to establish a method for allocating and for reimbursing the payment of their consolidated tax liability. Personnel As of December 31, 2023, we had 68 full-time equivalent employees. Our employees are not represented by any collective bargaining group.
As of December 31, 2022, we maintained no “other real estate owned” as a result of foreclosures (or the acceptance of a deed in lieu of foreclosure). Commercial Loans.
As of December 31, 2023, we maintained no “other real estate owned” as a result of foreclosures (or the acceptance of a deed in lieu of foreclosure). Commercial Loans.
Originations, Sales and Purchases of Loans Our loan originations are generated by our loan personnel operating at our banking office. All loans we originate are underwritten pursuant to our policies and procedures.
Originations, Sales and Purchases of Loans Our loan originations are generated by our loan personnel operating at our banking offices. All loans we originate are underwritten pursuant to our policies and procedures.
Lynch has 36 years of community banking experience, including 30 years in the greater Boston metropolitan area, and he is overseeing our efforts to ensure that our products, services and accessibility will continue to make Everett Co-operative Bank a competitive community bank, and will continue to attract and retain retail customers by emphasizing personal service, accessibility and flexibility.
Lynch has 37 years of community banking experience, including 32 years in the greater Boston metropolitan area, and he is overseeing our efforts to ensure that our products, services and accessibility will continue to make Everett Co-operative Bank a competitive community bank, and will continue to attract and retain retail customers by emphasizing personal service, accessibility and flexibility.
To a much lesser extent, we offer a variety of consumer loans to individuals who reside or work in our market area, including new and used automobile loans, unsecured overdraft lines of credit and loans secured by savings accounts. At December 31, 2022, our consumer loan portfolio totaled $222,000, or 0.02%, of our total loan portfolio.
To a much lesser extent, we offer a variety of consumer loans to individuals who reside or work in our market area, including new and used automobile loans, unsecured overdraft lines of credit and loans secured by savings accounts. At December 31, 2023, our consumer loan portfolio totaled $173,000, or 0.02%, of our total loan portfolio.
As of December 31, 2022, our average outstanding one- to four-family residential real estate loan balance was $400,000 and our largest outstanding loan secured by one- to four-family residential restate had a principal balance of $5.0 million, which, as of December 31, 2022, was performing in accordance with its repayment terms.
As of December 31, 2023, our average outstanding one-to-four family residential real estate loan balance was $428,000 and our largest outstanding loan secured by one-to-four family residential restate had a principal balance of $5.0 million, which, as of December 31, 2023, was performing in accordance with its repayment terms.
On the basis of this review of our assets, our classified and special mention assets at the dates indicated were as follows: At December 31, 2022 2021 (In thousands) Substandard assets $ — $ — Doubtful assets — — Loss assets — — Total classified assets $ — $ — Special mention assets $ 467 $ 1,563 Foreclosed real estate and other assets $ — $ — Other Loans of Concern.
On the basis of this review of our assets, our classified and special mention assets at the dates indicated were as follows: At December 31, 2023 2022 (in thousands) Substandard assets $ — $ — Doubtful assets — — Loss assets — — Total classified assets $ — $ — Special mention assets $ 1,282 $ 467 Foreclosed real estate and other assets $ — $ — Other Loans of Concern.
At December 31, 2022, we had $14.1 million in bank-owned life insurance. Other Securities . We hold common stock of the FHLB in connection with our borrowing activities. The FHLB common stock is carried at cost and classified as restricted equity securities.
At December 31, 2023, we had $14.5 million in bank-owned life insurance. Other Securities . We hold common stock of the FHLB in connection with our borrowing activities. The FHLB common stock is carried at cost and classified as restricted equity securities.
We historically have utilized advances from the Federal Home Loan Bank of Boston (the “FHLB”) to fund our operations and we had $174.0 million of FHLB advances at December 31, 2022. Additionally, in recent years, we have also accepted brokered deposits as a non-retail funding source to fund our operations.
We historically have utilized advances from the Federal Home Loan Bank of Boston (the “FHLB”) to fund our operations and we had $234.0 million of FHLB advances outstanding at December 31, 2023. Additionally, in recent years, we have also accepted brokered deposits as a non-retail funding source to fund our operations.
The following tables set forth the stated maturities and weighted average yields of our investment securities which are classified as held-to-maturity and available-for-sale at December 31, 2022. Certain mortgage-backed securities have adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below.
The following tables set forth the stated maturities and weighted average yields of our investment securities which are classified as held-to-maturity and available-for-sale at December 31, 2023. Certain securities have adjustable interest rates and will reprice periodically within the various maturity ranges. These repricing schedules are not reflected in the table below.
We may participate out portions of a loan that exceeded our loans-to-one borrower legal lending limit and for risk diversification. In addition, during 2022, we purchased $16.8 million in whole one- to four- family residential real estate loans from correspondent loan originators. At December 31, 2022, we did not have any loans held for sale.
We may participate out portions of a loan that exceeded our loans-to-one borrower legal lending limit and for risk diversification. In addition, during 2023, we purchased $13.2 million in whole one- to four- family residential real estate loans from correspondent loan originators. At December 31, 2023, we did not have any loans held for sale.
At December 31, 2022, the Company had a charitable contribution carryover of $2,412,000 which expires on December 31, 2027. Capital Loss Carryovers. A corporation cannot recognize capital losses in excess of capital gains generated. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years.
At December 31, 2023, the Company had a charitable contribution carryover of $1,810,000 which expires on December 31, 2027. Capital Loss Carryovers. A corporation cannot recognize capital losses in excess of capital gains generated. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years.
At December 31, 2022, the additional unadvanced portions of these construction loans totaled $72.4 million. Construction and land loans are generally limited to 80% (75% for investment properties) loan-to-completed-appraised-value ratio upon completion of the project. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser.
At December 31, 2023, the additional unadvanced portions of these construction loans totaled $53.0 million. 10 Construction and land loans are generally limited to 80% (75% for investment properties) loan-to-completed-appraised-value ratio upon completion of the project. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser.
Consistent with our strategy to grow our commercial loan operations and the consequent commercial relationship opportunities that may be presented by our increased activity in the commercial real estate market, we are in the process of upgrading our suite of deposit products and related services and are upgrading our digital and mobile applications in order to accommodate business customers and thereby accelerate the growth in our core deposits.
Consistent with our strategy to grow our commercial loan operations and the consequent commercial relationship opportunities that may be presented by our increased activity in the commercial real estate market, we have and will continue to upgrade our suite of deposit products and related services and have and will continue to upgrade our digital and mobile applications in order to accommodate business customers and thereby accelerate the growth in our core deposits.
We also originate loans above the FHFA limit, which are referred to as “jumbo loans.” We generally underwrite jumbo loans in a manner similar to conforming loans. During the year ended December 31, 2022, we originated $27.9 million of jumbo loans. We originate both fixed-rate and adjustable-rate one- to four-family residential real estate loans.
We also originate loans above the FHFA limit, which are 8 referred to as “jumbo loans.” We generally underwrite jumbo loans in a manner similar to conforming loans. During the year ended December 31, 2023, we originated $14.4 million of jumbo loans. We originate both fixed-rate and adjustable-rate one-to-four family residential real estate loans.
We generally will limit the maximum number of speculative units (units that are not pre-sold) approved for each builder, typically starting with one speculative loan per builder until we develop a relationship with the builder. At December 31, 2022, speculative construction loans totaled $59.0 million.
We generally will limit the maximum number of speculative units (units that are not pre-sold) approved for each builder, typically starting with one speculative loan per builder until we develop a relationship with the builder. At December 31, 2023, speculative construction loans totaled $33.9 million.
In evaluating the property securing the loan, among other factors we consider the net operating income of the mortgaged property before debt service and depreciation, the debt service coverage ratio (the ratio of net operating income to debt service) to ensure that, subject to certain exceptions, it is at least 1.20x, and the ratio of the loan amount to the appraised value of the mortgaged property.
In evaluating the property securing the loan, among other factors, we consider the net operating income of the mortgaged property before debt service and depreciation, amortization and interest. The debt service coverage ratio (the ratio of net operating income to debt service) is calculated to ensure that, subject to certain exceptions, it is at least 1.20x.
Everett is a suburb which is adjacent to Boston and approximately three miles from Boston’s financial district, and Lynnfield where our additional branch office is located is approximately 10 miles north in Essex County.
Everett is a suburb which is adjacent to Boston and approximately three miles from Boston’s financial district, Woburn where our new branch opened in 2023 is located is approximately ten miles from Boston's financial district, and Lynnfield where our additional branch office is located is approximately 10 miles north in Essex County.
Particularly with respect to our home equity loans and lines of credit, decreases in real estate values could adversely affect our ability to fully recover the loan balance in the event of a default. Commercial Loans. At December 31, 2022, commercial loans were $4.3 million, or 0.5% of total loans.
Particularly with respect to our home equity loans and lines of credit, decreases in real estate values could adversely affect our ability to fully recover the loan balance in the event of a default. Commercial Loans. At December 31, 2023, commercial loans were $9.2 million, or 0.9% of total loans.
During the year ended December 31, 2022, we sold $5.7 million of one- to four-family owner-occupied residential real estate loans. Subject to market and economic conditions, management intends to continue this sales activity in future periods to generate gain on sale income.
During the year ended December 31, 2023, we sold $346,000 of one-to-four family owner-occupied residential real estate loans. Subject to market and economic conditions, management intends to continue this sales activity in future periods to generate gain on sale income.
From time to time, we may purchase loan participations secured by properties within and outside of our primary market area in which we are not the lead lender. In these circumstances, we follow our customary loan underwriting and approval policies. At December 31, 2022, we had two loans in which we were not the lead lender totaling $15.5 million.
From time to time, we may purchase loan participations secured by properties within and outside of our primary market area in which we are not the lead lender. In these circumstances, we follow our customary loan underwriting and approval policies. At December 31, 2023, we had four loans in which we were not the lead lender totaling $27.1 million.
Loans secured by a first mortgage on residential property occupied by the borrower are excluded from this limit. At December 31, 2022, our regulatory limit on loans-to-one borrower was $26.1 million.
Loans secured by a first mortgage on residential property occupied by the borrower are excluded from this limit. At December 31, 2023, our regulatory limit on loans-to-one borrower was $27.9 million.
In this regard, we have revised our lending policies and loans to one borrower limitations to increase our lending limits and the type and size of loans we choose to hold in our portfolio. Construction and Land Loans . At December 31, 2022, we had $107.3 million in construction and land loans, or 12.0% of total loans.
In this regard, we have revised our lending policies and loans to one borrower limitations to increase our lending limits and the type and size of loans we choose to hold in our portfolio. Construction and Land Loans . At December 31, 2023, we had $112.0 million in construction and land loans, or 10.7% of total loans.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2022 the total net book value of our land, buildings, leasehold improvements, furniture, fixtures and equipment was $3.7 million. The following table sets forth information regarding our offices at December 31, 2022.
Biggest changeAt December 31, 2023 the total net book value of our land, buildings, leasehold improvements, furniture, fixtures and equipment was $3.8 million.
ITEM 2. Prop erties We conduct our business through our main office located in Everett, Massachusetts and our branch office located in Lynnfield, Massachusetts, both of which we own. Additionally, we lease office space in Everett, Massachusetts which services back office and loan administration functions.
ITEM 2. Prop erties We conduct our business through our main office located in Everett, Massachusetts, and our branch offices located in Lynnfield, Massachusetts, both of which we own, and through our branch office in Woburn, Massachusetts, which we lease. Additionally, we lease office space in Everett, Massachusetts which services back office and loan administration functions.
Removed
Location Leased or Owner Year Acquired or Leased Approximate Square Footage Net Book Value of Real Property Main Office: (In Thousands) Everett Owned 1940 8,000 $ 2,930 Branch Office Lynnfield Owned 2016 2,000 $ 539 Other Properties Everett (1) Leased 2018 1,800 $ 143 Everett (1) Leased 2022 1,285 $ 86 (1) Back office and loan administration office.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. Legal Proceedings Legal Proceedings Among other things, the activities of Everett Co-operative Bank, including with respect to disclosures about and implementation of numerous consumer products, are subject to various laws and numerous regulations, including those related to unfair or deceptive acts or practices.
Biggest changeITEM 3. Legal Proceedings Among other things, the activities of Everett Co-operative Bank, including with respect to disclosures about and implementation of numerous consumer products, are subject to various laws and numerous regulations, including those related to unfair or deceptive acts or practices.
We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at December 31, 2022, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations. ITEM 4.
We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at December 31, 2023, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations. ITEM 4.
Mine Safet y Disclosures Not applicable. 35 PART II
Mine Safet y Disclosures Not applicable. 36 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSpecial cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the Commissioner, may be paid in addition to, or in lieu of, regular cash dividends. Other than its Employee Stock Ownership Plan, ECB Bancorp does not have any equity compensation plans that were not approved by shareholders.
Biggest changeSpecial cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the Commissioner, may be paid in addition to, or in lieu of, regular cash dividends. Stock-Based Compensation Plans.
ITEM 5. Market for Registrant’s Common E quity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market, Holder and Dividend Information. The Company’s common stock is listed on the NASDAQ Capital Market under the symbol “ECBK.” The approximate number of holders of record of ECB Bancorp common stock as of March 27, 2023, was 419.
ITEM 5. Market for Registrant’s Common E quity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market, Holder and Dividend Information. The Company’s common stock is listed on the NASDAQ Capital Market under the symbol “ECBK.” The approximate number of holders of record of ECB Bancorp common stock as of March 28, 2024 was 404.
Removed
ECB Bancorp currently has no other equity compensation plans. Report of Offering of Securities and Use of Proceeds Therefrom. Not applicable. Issuer Purchases of Equity Securities The Company did not purchase any shares of its common stock during the year ended December 31, 2022.
Added
Information regarding stock-based compensation awards outstanding and available for future grants as of December 31, 2023 is presented in the table below. Additional information regarding stock-based compensation plans is presented in Note 10-Stock-Based Compensation in Item 8.
Removed
Under current Federal Reserve Board regulations, the Company may not repurchase shares of its common stock during the first year following the Company’s initial public offering, except to fund shareholder-approved equity benefit plans or, with prior regulatory approval, when extraordinary circumstances exist. ITEM 6. [Res erved] 36
Added
Plan Category Number of Shares to be Issued Upon Exercise of Outstanding Awards Weighted-Average Exercise Price of Outstanding Awards Number of Shares Available for Future Grants Plans approved by shareholders 763,969 $ 10.50 178,207 Plans not approved by shareholders — — — Total 763,969 $ 10.50 178,207 Other than the stock-based compensation awards, ECB Bancorp has an Employee Stock Ownership Plan.
Added
Report of Offering of Securities and Use of Proceeds Therefrom. Not applicable. Issuer Purchases of Equity Securities. On August 10, 2023, the Company announced the commencement of a stock repurchase program to acquire up to 458,762 shares, or 5% of the Company’s then outstanding common stock.
Added
Repurchases will be made from time to time depending on market conditions and other factors, and will be conducted through open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission.
Added
There is no guarantee as to the exact number of shares to be repurchased by the Company.
Added
The following table sets forth the information regarding the Company's common stock repurchase activities during the three months ended December 31, 2023: 37 Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number of Shares That May Yet Be Purchased Under the Program From October 1, 2023 to October 31, 2023 30,868 $ 10.33 30,868 378,652 From November 1, 2023 to November 30, 2023 36,649 $ 10.99 36,649 342,003 From December 1, 2023 to December 31, 2023 72,635 $ 12.49 72,635 269,368 Total 140,152 $ 11.62 140,152 ITEM 6. [Res erved] 38

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the Year Ended December 31, 2022 2021 Average Outstanding Balance Interest Yield/ Rate (5) Average Outstanding Balance Interest Yield/ Rate (5) (Dollars in thousands) Interest-earning assets: Total loans $ 643,298 $ 26,946 4.19 % $ 496,915 $ 21,319 4.29 % Securities (1) 74,950 1,387 1.85 66,420 988 1.49 Short term investments 41,831 713 1.71 43,375 44 0.10 Interest bearing time deposits 238 2 0.71 — — — Total interest-earning assets 760,317 29,048 3.82 % 606,710 22,351 3.68 % Non-interest-earning assets 27,486 23,140 Total assets $ 787,803 $ 629,850 Interest-bearing liabilities: Regular savings accounts $ 70,106 $ 461 0.66 % $ 47,042 $ 30 0.06 % Checking accounts 35,900 29 0.08 25,837 59 0.23 Money market accounts 177,549 864 0.49 163,933 555 0.34 Certificates of deposit 254,543 3,212 1.26 223,366 2,902 1.30 Total interest-bearing deposits 538,098 4,566 0.85 460,178 3,546 0.77 Federal Home Loan Bank advances 39,859 948 2.38 12,359 135 1.09 Other borrowings 27 1 3.70 — — — Total interest-bearing liabilities 577,984 5,515 0.95 % 472,537 3,681 0.78 % Non-interest-bearing demand deposits 86,646 76,290 Non-interest-bearing liabilities 8,344 5,309 Total liabilities 672,974 554,136 Shareholders' Equity 114,829 75,714 Total liabilities and shareholders' equity $ 787,803 $ 629,850 Net interest income $ 23,533 $ 18,670 Net interest rate spread (2) 2.87 % 2.90 % Net interest-earning assets (3) $ 182,333 $ 134,173 Net interest margin (4) 3.10 % 3.08 % Average interest-earning assets to interest- bearing liabilities 131.55 % 128.39 % (1) Excludes FHLB stock dividends of $52,000 and $22,000 for the years ended December 31, 2022 and December 31, 2021, respectively, and $49,000 and $2,000 of interest and dividends on cost method investments recorded within other assets for the years ended December 31, 2022 and December 31, 2021, respectively.
Biggest changeFor the Year Ended December 31, 2023 2022 Average Outstanding Balance Interest Yield/ Rate Average Outstanding Balance Interest Yield/ Rate (Dollars in thousands) Interest-earning assets: Total loans $ 994,834 $ 48,330 4.86 % $ 643,298 $ 26,954 4.19 % Securities (1) 81,300 2,079 2.56 74,950 1,387 1.85 Short term investments 71,918 3,745 5.21 41,831 714 1.71 Interest bearing time deposits 62 - 0.70 238 1 0.60 Total interest-earning assets 1,148,114 54,154 4.72 % 760,317 29,056 3.82 % Non-interest-earning assets 32,755 27,486 Total assets $ 1,180,869 $ 787,803 Interest-bearing liabilities: Checking accounts $ 21,939 $ 18 0.08 % $ 35,900 $ 29 0.08 % Savings accounts 164,087 4,074 2.48 70,106 461 0.66 Money market accounts 105,793 2,412 2.28 177,549 864 0.49 Certificates of deposit 410,704 14,909 3.63 254,543 3,212 1.26 Total interest-bearing deposits 702,523 21,413 3.05 538,098 4,566 0.85 Federal Home Loan Bank advances 217,771 8,573 3.94 39,859 948 2.38 Other borrowings - - 0.00 27 1 3.70 Total interest-bearing liabilities 920,294 29,986 3.26 % 577,984 5,515 0.95 % Non-interest-bearing demand deposits 84,546 86,646 Non-interest-bearing liabilities 11,148 8,344 Total liabilities 1,015,988 672,974 Shareholders' equity 164,881 114,829 Total liabilities and shareholders' equity $ 1,180,869 $ 787,803 Net interest income $ 24,168 $ 23,541 Net interest rate spread (2) 1.46 % 2.87 % Net interest-earning assets (3) $ 227,820 $ 182,333 Net interest margin (4) 2.11 % 3.10 % Average interest-earning assets to interest- bearing liabilities 124.76 % 131.55 % (1) Excludes interest and dividends on cost method investments of $622,000 and $101,000 for the years ended December 31, 2023 and December 31, 2022, respectively.
Highlights of our current business strategy include: • Continuing to focus on enhancing our commercial real estate and multifamily lending.
Highlights of our current business strategy include: • Continuing to focus on enhancing our commercial real estate and multifamily real estate lending.
In order to increase the yield on our loan portfolio and reduce the term to maturity of our loan portfolio, we intend to continue our focus on growing the originations of commercial real estate loans and multifamily loans while maintaining what we believe are prudent underwriting standards and we expect that these loan categories will comprise a greater percentage of our total loan portfolio.
In order to increase the yield on our loan portfolio and reduce the term to maturity of our loan portfolio, we intend to continue our focus on growing the originations of commercial real estate loans and multifamily real estate loans while maintaining what we believe are prudent underwriting standards and we expect that these loan categories will comprise a greater percentage of our total loan portfolio.
We have been, and will continue to be, a one- to four-family residential real estate lender for borrowers in our market area and such lending will remain a core focus, but we expect that our lending strategy will result in a decrease to one-to-four family residential loans as a percentage of our total loan portfolio as we increase our focus on commercial real estate and multifamily lending.
We have been, and will continue to be, a one-to-four family residential real estate lender for borrowers in our market area and such lending will remain a core focus, but we expect that our lending strategy will result in a decrease to one-to-four family residential loans as a percentage of our total loan portfolio as we increase our focus on commercial real estate and multifamily real estate lending.
However, if a substantial portion of these time deposits is not retained, we may utilize advances from the Federal Home Loan Bank, brokered deposits or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations.
However, if a substantial portion of these time deposits is not retained, we may utilize advances from the Federal Home Loan Bank, brokered deposits or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. 50 Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations.
Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities. 48 Recent Accounting Pronouncements See Note 2 to the notes to the consolidated financial statements for a description of recent accounting pronouncements that may affect our financial condition and results of operations.
Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities. Recent Accounting Pronouncements See Note 2 to the notes to the consolidated financial statements for a description of recent accounting pronouncements that may affect our financial condition and results of operations.
Overview Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate loans, commercial real estate and multifamily loans, construction and land loans and home equity lines of credit.
Overview Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one-to-four family residential real estate loans, commercial real estate loans, multifamily real estate loans, construction loans and home equity lines of credit and loans.
Our strategy to enhance and grow our commercial real estate lending in a diligent and orderly manner is also designed to encourage relationship banking and increase our core deposits, including noninterest-bearing transaction accounts, and decrease our dependence on certificates of deposit.
Our strategy to enhance and grow our commercial real estate and multifamily real estate lending in a diligent and orderly manner is also designed to encourage relationship banking and increase our core deposits, including noninterest-bearing transaction accounts, and decrease our dependence on certificates of deposit.
Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio.
Because each of the criteria used is subject to change, the allocation of the allowance for credit losses is made for analytical purposes and is not necessarily indicative of the trend of future credit losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio.
Additionally, we believe the recent hire of our Senior Vice President of Retail Operations, who brings 35 years of banking experience to our retail sales and administrative team, will be invaluable to the implementation of the added product delivery channels and technological services such as additional electronic and mobile banking applications, which we believe will increase our core deposits. • Remaining a community-oriented institution and relying on high quality service to maintain and build a loyal local customer base .
Additionally, we believe the recent hire of our Senior Vice President of Retail Operations, who brings 36 years of banking experience to our retail sales and administrative team, will be invaluable to the implementation of the added product delivery channels and technological services such as additional electronic and mobile banking applications, which we believe will increase our core deposits. • Remaining a community-oriented institution and relying on high quality service to maintain and build a loyal local customer base .
Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations. 38 The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies.
Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations. 40 The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies.
As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon.
We believe, however, based on historical experience and current market interest rates that we will retain upon maturity a large portion of our certificates of deposit with maturities of one year or less as of December 31, 2022. Our primary investing activity is originating loans.
We believe, however, based on historical experience and current market interest rates that we will retain upon maturity a large portion of our certificates of deposit with maturities of one year or less as of December 31, 2023. Our primary investing activity is originating loans.
The methodology includes evaluation and consideration of several factors, such as, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses.
The methodology includes evaluation and consideration of several factors, such as, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, internal historical and industry loss experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses.
Because interpretation and analysis involves judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated loan losses and therefore the appropriateness of the allowance for loan losses could change significantly.
Because interpretation and analysis involves judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated credit losses and therefore the appropriateness of the allowance for credit losses could change significantly.
Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2023, or on our savings and money market accounts.
Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2024, or on our savings and money market accounts.
(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (4) Net interest margin represents net interest income divided by average total interest-earning assets. 44 Rate/Volume Analysis.
(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (4) Net interest margin represents net interest income divided by average total interest-earning assets. 46 Rate/Volume Analysis.
The table below sets forth, as of December 31, 2022, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.
The table below sets forth, as of December 31, 2023, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.
The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases instantaneously by 100, 200, 300 and 400 basis point increments or decreases instantaneously by 100 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. 46 The table below sets forth, as of December 31, 2022, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.
The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases and decreases instantaneously by 100, 200, 300 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. 48 The table below sets forth, as of December 31, 2023, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.
The information in this section has been derived from the audited financial statements, which appear beginning on page 50 of this Annual Report on Form 10-K.
The information in this section has been derived from the audited financial statements, which appear beginning on page 52 of this Annual Report on Form 10-K.
We also invest in securities, consisting primarily of U.S. government and federal agency obligations, mortgage-backed securities and corporate bonds. We offer a variety of deposit accounts, including certificate of deposit accounts, IRAs, money market accounts, savings accounts and interest-bearing and noninterest-bearing checking accounts.
We also invest in securities, consisting primarily of U.S. government and federal agency obligations, mortgage-backed securities and corporate bonds. We offer a variety of deposit accounts, including certificate of deposit accounts, individual retirement accounts, money market accounts, savings accounts and interest-bearing and noninterest-bearing checking accounts.
Management believes the allowance for loan losses was adequate at December 31, 2022. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the allowance for loan losses. As a result of such reviews, we may choose to adjust our allowance for loan losses.
Management believes the allowance for credit losses was adequate at December 31, 2023. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the allowance for credit losses. As a result of such reviews, we may choose to adjust our allowance for credit losses.
We historically have utilized advances from the Federal Home Loan Bank of Boston (the “FHLB”) to fund our operations and we had $174.0 million of FHLB advances outstanding at December 31, 2022. Additionally, in recent years, we have also accepted brokered deposits as a non-retail funding source to fund our operations.
We historically have utilized advances from the Federal Home Loan Bank of Boston (the “FHLB”) to fund our operations and we had $234.0 million of FHLB advances outstanding at December 31, 2023. Additionally, in recent years, we have also accepted brokered deposits as a non-retail funding source to fund our operations.
Management’s evaluation process used to determine the appropriateness of the allowance for loan losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect probable credit losses.
Management’s evaluation process used to determine the appropriateness of the allowance for credit losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect expected credit losses.
In order to execute on this strategy, in January 2022 we hired a new Chief Lending Officer as well as some additional commercial lending and credit analyst personnel throughout the year.
In order to execute on this strategy, in January 2022 we hired a new Chief Lending Officer as well as some additional commercial lending and credit analyst personnel throughout 2022 and 2023.
However, regulatory agencies are not directly involved in the process of establishing the allowance for loan losses as the process is the responsibility of ECB Bancorp, Inc. and any increase or decrease in the allowance is the responsibility of management.
However, regulatory agencies are not directly involved in the process of establishing the allowance for credit losses as the process is the responsibility of ECB Bancorp. and any increase or decrease in the allowance is the responsibility of management.
Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provision for loan losses, noninterest income and noninterest expense.
Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provision for credit losses, noninterest income and noninterest expense.
We have implemented the following strategies to manage our interest rate risk: • maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations; • maintaining a prudent level of liquidity; • growing our volume of core deposit accounts; • managing our investment securities portfolio to maintain a prudent balance between enhancing profitability and protecting the balance sheet against sensitivity to changes in interest rates; • managing our utilization of wholesale funding with borrowings from the Federal Home Loan Bank and brokered deposits in a prudent manner; and 45 • continuing to diversify our loan portfolio by adding more commercial-related loans, which typically have shorter maturities and/or balloon payments.
We have implemented the following strategies to manage our interest rate risk: • maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations; • maintaining a prudent level of liquidity; • growing our volume of core deposit accounts; • managing our investment securities portfolio to maintain a prudent balance between enhancing profitability and protecting the balance sheet against sensitivity to changes in interest rates; • managing our utilization of wholesale funding with borrowings from the Federal Home Loan Bank and brokered deposits in a prudent manner; and • continuing to diversify our loan portfolio by adding more commercial-related loans, which typically have shorter maturities and/or balloon payments. 47 By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates.
The tables above indicate that at December 31, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a decrease in net interest income of 9.7%, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 2.2% increase in net interest income.
The tables above indicate that at December 31, 2023, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a decrease in net interest income of 1.8%, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 7.9% decrease in net interest income.
Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2022, we had outstanding commitments to originate and purchase loans of $43.9 million. We anticipate that we will have sufficient funds available to meet our current lending commitments.
Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2023, we had outstanding commitments to originate and purchase loans of $23.1 million. We anticipate that we will have sufficient funds available to meet our current lending commitments.
A provision for loan losses, which is a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio.
A provision for credit losses, which is a charge against earnings, is recorded to bring the allowance for credit losses to a level that, in management’s judgment, is adequate to absorb expected lifetime credit losses in the loan portfolio.
At December 31, 2022 we had $100.8 million of brokered deposits. For the years ended December 31, 2022 and 2021, we had net income of $2.7 million and $4.0 million, respectively. Our 2022 net income was affected by an after-tax charge of $2.3 million related to a charitable contribution to the Everett Co-operative Bank Charitable Foundation.
At December 31, 2023, we had $115.5 million of brokered deposits. For the years ended December 31, 2023 and 2022, we had net income of $4.5 million and $2.7 million, respectively. Our 2022 net income was affected by an after-tax charge of $2.3 million related to a charitable contribution to the Everett Co-operative Bank Charitable Foundation.
We experienced net increases in deposits of $146.4 million and $80.3 million for the years ended December 31, 2022 and 2021, respectively. Deposit flows are affected primarily by the overall level of interest rates and the interest rates and products offered by us and our competitors.
We experienced net increases in deposits of $150.1 million and $146.4 million for the years ended December 31, 2023 and 2022, respectively. Deposit flows are affected primarily by the overall level of interest rates and the interest rates and products offered by us and our competitors.
As noted above, we consider a number of variables in our evaluation of the adequacy of the allowance for loan losses, with one of the more significant variables being delinquency levels in the various segments of our loan portfolio.
As noted above, we consider a number of variables in our evaluation of the adequacy of the allowance for credit losses, with one of the more significant variables being prepayment rates in the various segments of our loan portfolio.
At December 31, 2022 and 2021, non-performing assets totaled $656,000 and $982,000, respectively, which represented 0.06% and 0.15% of total assets at those dates, respectively. • Continuing to attract and retain customers in our market area and build our “core” deposits consisting of interest-bearing and noninterest-bearing checking, savings and money market accounts.
At December 31, 2023 and 2022, non-performing assets totaled $1.2 million and $656,000, respectively, which represented 0.09% and 0.06% of total assets at those dates, respectively. • Continuing to attract and retain customers in our market area and build our “core” deposits consisting of interest-bearing and noninterest-bearing checking, savings and money market accounts.
For additional information, see the consolidated statements of cash flows for the years ended December 31, 2022 and 2021 included as part of the consolidated financial statements appearing elsewhere in this 10-K. We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis.
For additional information, see the consolidated statements of cash flows for the years ended December 31, 2023 and 2022 included as part of the consolidated financial statements appearing elsewhere in this 10-K. We are committed to maintaining a strong liquidity position.
We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Time deposits that are scheduled to mature in less than one year from December 31, 2022 totaled $183.4 million. Management expects that a substantial portion of these time deposits will be retained.
Time deposits that are scheduled to mature in less than one year from December 31, 2023 totaled $232.7 million. Management expects that a substantial portion of these time deposits will be retained.
At December 31, 2022, we had outstanding advances of $174.0 million from the Federal Home Loan Bank. At December 31, 2022, we had unused borrowing capacity of $84.8 million with the Federal Home Loan Bank and $10.0 million with the Atlantic Community Bankers Bank.
At December 31, 2023, we had outstanding advances of $234.0 million from the Federal Home Loan Bank. At December 31, 2023, we had unused borrowing capacity of $200.8 million with the Federal Home Loan Bank and $10.0 million with the Atlantic Community Bankers Bank.
As of December 31, 2022, $355.4 million, or 39.8%, of our total loan portfolio, consisted of one- to four-family residential real estate loans and at that date an additional $27.8 million, or 3.1%, of our total loan portfolio, consisted of home equity lines of credit and loans.
As of December 31, 2023, $410.1 million, or 39.1%, of our total loan portfolio, consisted of one-to-four family residential real estate loans and at that date an additional $33.4 million, or 3.2%, of our total loan portfolio, consisted of home equity lines of credit and loans.
For any debt security with a fair value less than its amortized cost basis, we will determine whether we have the intent to sell the debt security or whether it is more likely than not we will be required to sell the debt security before the recovery of its amortized cost basis.
For available-for-sale debt securities with a fair value less than amortized cost basis, management will determine whether it has the intent to sell the debt security or whether it is more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis.
During the years ended December 31, 2022 and 2021, we originated and purchased $557.5 million and $254.6 million of loans, respectively. Financing activities consist primarily of activity in deposit accounts, as well as both FHLB advances and brokered deposits.
During the years ended December 31, 2023 and 2022, we originated and purchased $268.1 million and $557.7 million of loans, respectively. Financing activities consist primarily of activity in deposit accounts, as well as both FHLB advances and brokered deposits.
For the year ended December 31, 2022, the weighted average cost of Federal Home Loan Advances was 2.38%, as compared to 1.09% for the year ended December 31, 2021. Net Interest and Dividend Income.
For the year ended December 31, 2023, the weighted average cost of Federal Home Loan Bank Advances was 3.94%, as compared to 2.38% for the year ended December 31, 2022. Net Interest and Dividend Income.
Certificates of deposit due within one year of December 31, 2022 totaled $183.4 million, or 25.5%, of total deposits. If these deposits do not remain with us, we may be required to seek other sources of funds, including brokered deposits and FHLB advances.
Certificates of deposit due within one year of December 31, 2023 totaled $232.7 million, or 26.8%, of total deposits. If these deposits do not remain with us, we may be required to seek other sources of funds, including brokered deposits and FHLB advances.
Non-accrual loans are included in average balances only. Average yields include the effect of deferred costs and fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.
Average yields include the effect of deferred costs and fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.
This methodology reflects expected credit losses and requires consideration of historical experience, current conditions, and reasonable and supportable forecasts of future economic conditions. Financial institutions will now use forward-looking information to estimate the expected credit loss on a loan at the time of origination.
This methodology replaced the incurred loss and impairment methodology. The CECL methodology reflects expected credit losses and requires consideration of historical experience, current conditions, and reasonable and supportable forecasts of future economic conditions. Management uses forward-looking information to estimate the expected credit loss on a loan at the time of origination.
At December 31, 2022 and 2021, the level of brokered time deposits was $100.8 million and $19.9 million, respectively. At December 31, 2022 and 2021 the level of FHLB advances was $174.0 million and $9.0 million, respectively.
At December 31, 2023 and 2022, the level of brokered time deposits was $115.5 million and $100.8 million, respectively. At December 31, 2023 and 2022 the level of FHLB advances was $234.0 million and $174.0 million, respectively.
Our commercial real estate and multifamily loan portfolios increased to $156.2 million and $242.0 million, respectively, at December 31, 2022 from $100.0 million and $59.5 million, respectively, at December 31, 2021. • Reduced focus on one- to four-family residential real estate lending.
Our commercial real estate and multifamily real estate loan portfolios increased to $196.4 million and $287.4 million, respectively, at December 31, 2023 from $156.2 million and $242.0 million, respectively, at December 31, 2022. • Reduced emphasis on one-to-four family residential real estate lending.
The table above indicates that at December 31, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 17.8% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 7.3% increase in EVE.
The table above indicates that at December 31, 2023, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 53.6% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 16.9% increase in EVE.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. 47 At December 31, 2022, we had $43.9 million in loan commitments outstanding. In addition to commitments to originate and purchase loans, we had $80.2 million in unused lines of credit to borrowers and $72.4 million in unadvanced construction loans.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. 49 At December 31, 2023, we had $23.1 million in loan commitments outstanding. In addition to commitments to originate and purchase loans, we had $78.4 million in unused lines of credit to borrowers and $53.0 million in unadvanced construction loans.
Interest expense on deposit accounts increased $1.0 million, or 28.8%, to $4.6 million for the year ended December 31, 2022 from $3.5 million for the year ended December 31, 2021, due to an increase in the weighted average rate on interest-bearing deposits to 0.85% for the year ended December 31, 2022 from 0.77% for the year ended December 31, 2021, as well as an increase in the average balance of interest-bearing deposits of $77.9 million, or 16.9% to $538.1 million for the year ended December 31, 2022 from $460.2 million for the year ended December 31, 2021.
Interest expense on deposit accounts increased $16.8 million, or 369.0%, to $21.4 million for the year ended December 31, 2023 from $4.6 million for the year ended December 31, 2022, due to an increase in the weighted average rate on interest-bearing deposits of 220 basis points to 3.05% for the year ended December 31, 2023 from 0.85% for the year ended December 31, 2022, as well as an increase in the average balance of interest-bearing deposits of $164.4 million, or 30.6%, to $702.5 million for the year ended December 31, 2023 from $538.1 million for the year ended December 31, 2022.
The increase in these loan portfolios reflects our strategy to grow the balance sheet by continuing to diversify into higher-yielding commercial real estate and multi-family real estate loans to improve net margins and manage interest rate risk.
The increase in these loan portfolios reflects our strategy to grow the balance sheet by continuing to diversify into higher-yielding commercial real estate and multi-family real estate loans to improve net margins and manage interest rate risk. Federal Home Loan Bank stock. The Federal Home Loan Bank (FHLB) is a cooperative bank that provides services to its member banking institutions.
The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. Securities Valuation and Impairment .
These judgments may require us to make projections of future taxable income and/or to carryback to taxable income in prior years. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change.
The capital raised in the offering has and will continue to allow us to increase our commercial lending capacity by enabling us to originate and retain all or a greater portion of loans that we historically participated out to other local institutions. 37 Given that our regulatory loans to one borrower limits have increased with our increase in capital, we have revised our lending policies and loans to one borrower limitations to increase our lending limits and the type and size of loans we choose to originate and hold in our portfolio.
The capital raised in the offering has and will continue to allow us to increase our commercial lending capacity by enabling us to originate and retain all or a greater portion of loans that we 39 historically participated out to other local institutions.
Other interest income increased $671,000, or 1,525% from $44,000 for the year ended December 31, 2021 to $715,000 for the year ended December 31, 2022. This increase was due to the yield on short term investments increasing by 1.61% from 0.10% for the year ended December 31, 2021 to 1.71% for the year ended December 31, 2022.
Other interest income increased $3.0 million, or 423.8% to $3.7 million for the year ended December 31, 2023 from $715,000 43 for the year ended December 31, 2022. This increase was due to the yield on short-term investments increasing by 3.5% to 5.21% for the year ended December 31, 2023 from 1.71% for the year ended December 31, 2022.
The purchase of stock in the FHLB is a requirement for a member to gain access to funding. We purchase and/or are subject to redemption of FHLB stock proportional to the volume of funding received and view the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return.
We purchase and/or are subject to redemption of FHLB stock proportional to the volume of funding received and view the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return. We held an investment in FHLB stock of $9.9 million and $7.3 million at December 31, 2023 and 2022, respectively.
At December 31, 2022, $355.4 million, or 39.8%, of our total loan portfolio was comprised of one- to four-family residential real estate loans, $242.0 million, or 27.1%, of our total loan portfolio was comprised of multifamily real estate loans, $156.2 million, or 17.5%, of our total loan portfolio was comprised of commercial real estate loans, $107.3 million, or 12.0%, of our total loan portfolio was comprised of construction loans and $27.8 million, or 3.1%, of our total loan portfolio was comprised of home equity lines of credit and loans.
At December 31, 2023, $410.1 million, or 39.1%, of our total loan portfolio was comprised of one-to-four family residential real estate loans, $287.4 million, or 27.4%, of our total loan portfolio was comprised of multifamily real estate loans, $196.4 million, or 18.7%, of our total loan portfolio was comprised of commercial real estate loans, $112.0 million, or 10.7%, of our total loan portfolio was comprised of construction loans, $33.4 million, or 3.2%, of our total loan portfolio was comprised of home equity lines of credit and loans and $9.2 million, or 0.9% of our total loan portfolio was comprised of commercial loans.
Interest and dividend income increased $6.8 million, or 30.3%, to $29.1 million for the year ended December 31, 2022 from $22.4 million for the year ended December 31, 2021, primarily due to a $5.6 million increase in interest and fees on loans.
Interest and dividend income increased $25.6 million, or 87.9%, to $54.8 million for the year ended December 31, 2023 from $29.2 million for the year ended December 31, 2022 due to a $21.4 million increase in interest and fees on loans, a $1.2 million increase in interest and dividends on securities and a $3.0 million increase in other interest income.
Noninterest expense increased $4.5 million, or 32.0%, to $18.6 million for the year ended December 31, 2022 from $14.1 million for the year ended December 31, 2021.
Noninterest expense increased $447,000, or 2.4%, to $19.1 million for the year ended December 31, 2023 from $18.6 million for the year ended December 31, 2022.
The increase in interest and fees on loans was driven by an increase of $146.4 million in the average balance of the loan portfolio to $643.3 million for the year ended December 31, 2022 from $496.9 million for the year ended December 31, 2021, partially offset by a decrease in the yield by 10 basis points from 4.29% during the year ended December 31, 2021 to 4.19% during the year ended December 31, 2022.
The increase in interest and fees on loans was driven by an increase of $351.5 million in the average balance of the loan portfolio to $994.8 million for the year ended December 31, 2023 from $643.3 million for the year ended December 31, 2022, as well as an increase in the yield of 67 basis points to 4.86% during the year ended December 31, 2023 from 4.19% during the year ended December 31, 2022.
The decrease in the effective tax rate was driven by increased non-taxable income from bank-owned life insurance in 2022 as compared to 2021. 43 Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the years indicated. Average balances are daily average balances.
The lower effective tax rate in 2022 was driven by non-taxable death benefits received on bank-owned life insurance. 45 Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the years indicated. Average balances are daily average balances. Non-accrual loans are included in average balances only.
Income tax expense decreased $653,000, or 45.7%, to $776,000 for the year ended December 31, 2022 from $1.4 million for the year ended December 31, 2021. The effective tax rate was 22.2% and 26.1% for the years ended December 31, 2022 and 2021, respectively.
Income tax expense increased $753,000, or 97.0%, to $1.5 million for the year ended December 31, 2023 from $776,000 for the year ended December 31, 2022. The effective tax rate was 25.5% and 22.2% for the years ended December 31, 2023 and 2022, respectively.
Noninterest income currently consists primarily of fees and service charges, gains on sales of loans and income on bank-owned life insurance. Noninterest expense currently consists primarily of expenses related to salary and employee benefits and director fees, occupancy and equipment, data processing, advertising, professional fees, federal deposit insurance assessments, charitable contributions and other general and administrative expenses.
Noninterest expense currently consists primarily of expenses related to salary and employee benefits and director fees, occupancy and equipment, data processing, computer software and licensing fees, advertising, professional fees, FDIC deposit insurance, charitable contributions and other general and administrative expenses.
Interest expense on Federal Home Loan Bank advances increased $813,000, or 602.2%, to $948,000 for the year ended December 31, 2022 from $135,000 for the year ended December 31, 2021.
Interest expense on Federal Home Loan Bank advances increased $7.6 million, or 804.3%, to $8.6 million for the year ended December 31, 2023 from $948,000 for the year ended December 31, 2022.
The Federal Home Loan Bank (FHLB) is a cooperative bank that provides services to its member banking institutions. The primary reason for our membership in the FHLB is to gain access to a reliable source of wholesale funding and as a tool to manage interest rate risk.
The primary reason for our membership in the FHLB is to gain access to a reliable source of wholesale funding and as a tool to manage interest rate risk. The purchase of stock in the FHLB is a 42 requirement for a member to gain access to funding.
Comparison of Operating Results for the Years Ended December 31, 2022 and December 31, 2021 Net Income. Net income was $2.7 million for the year ended December 31, 2022, compared to net income of $4.0 million for the year ended December 31, 2021, a decrease of $1.3 million, or 32.7%.
Comparison of Operating Results for the Years Ended December 31, 2023 and December 31, 2022 Net Income. Net income was $4.5 million for the year ended December 31, 2023, compared to net income of $2.7 million for the year ended December 31, 2022, an increase of $1.7 million, or 63.8%. Interest and Dividend Income.
Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. The following represent our significant accounting policies: Allowance for Loan Losses .
Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. The following represent our significant accounting policies: Allowance for Credit Losses . On January 1, 2023, the Company adopted the ASU 2016-13 Current Expected Credit Loss (CECL) methodology for estimating the credit losses for loans.
The table below sets forth our noninterest income for the years ended December 31, 2022 and 2021: Year Ended December 31, Change 2022 2021 Amount Percent (Dollars in thousands) Customer service fees $ 446 $ 393 $ 53 13.5 % Income from bank-owned life insurance 828 355 473 133.2 Net gain on sales of loans 84 446 (362 ) (81.2 ) Other 43 28 15 53.6 Total noninterest income $ 1,401 $ 1,222 $ 179 14.6 % Noninterest Expense.
The table below sets forth our noninterest income for the years ended December 31, 2023 and 2022: Year Ended December 31, Change 2023 2022 Amount Percent (Dollars in thousands) Customer service fees $ 508 $ 446 $ 62 13.9 % Income from bank-owned life insurance 479 828 (349 ) (42.1 ) Net gain on sales of loans 21 84 (63 ) (75.0 ) Other 44 43 1 2.3 Total noninterest income $ 1,052 $ 1,401 $ (349 ) (24.9 ) % 44 Noninterest Expense.
Advances from the Federal Home Loan Bank increased $165.0 million, or 1,833.3%, to $174.0 million at December 31, 2022 from $9.0 million at December 31, 2021. The increase in FHLB advances was utilized to support loan growth during the year ended December 31, 2022. Shareholders' Equity.
Federal Home Loan Bank Advances. Advances from the Federal Home Loan Bank increased $60.0 million, or 34.5%, to $234.0 million at December 31, 2023 from $174.0 million at December 31, 2022. The increase in FHLB advances was utilized to support loan growth and enhance liquidity. Shareholders’ Equity.
We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings.
Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period.
The allocation methodology applied by ECB Bancorp is designed to assess the appropriateness of the allowance for loan losses and includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and a component primarily based on other qualitative factors.
The allocation methodology applied by ECB Bancorp is designed to assess the appropriateness of the allowance for credit losses and includes allocations for individually evaluated loans and loss factor allocations for all remaining loans, with a quantitative model with an assessment of certain qualitative factors.
We classify our investments in debt securities as either held-to-maturity or available-for-sale. Securities classified as held-to maturity are recorded at cost or amortized cost. Available-for-sale securities are carried at fair value. We obtain our fair values from one or more third-party services. This service’s fair value calculations are based on quoted market prices when such prices are available.
We obtain our fair values from one or more third-party services. This service’s fair value calculations are based on quoted market prices when such prices are available.
Total shareholders' equity increased $85.5 million, or 110.6%, to $162.7 million at December 31, 2022 from $77.3 million at December 31, 2021.
Total shareholders’ equity increased $2.2 million, or 1.3%, to $164.9 million at December 31, 2023 from $162.7 million at December 31, 2022.
We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. At December 31, 2022, Everett Co-operative Bank exceeded all of its regulatory capital requirements, and was categorized as well-capitalized at that date.
We anticipate that we will have sufficient funds to meet our current funding commitments. In addition, based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.
Summary of Significant Accounting Policies The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with U.S. GAAP.
We intend to evaluate branch expansion opportunities, including through establishing one or more de novo branches and/or branch acquisitions as such opportunities arise. Summary of Significant Accounting Policies The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with U.S. GAAP.
We held an investment in FHLB stock of $7.3 million and $1.1 million at December 31, 2022 and 2021, respectively. The amount of stock we are required to purchase is in proportion to our FHLB borrowings and level of total assets. Accordingly, the increase in the FHLB stock is due to increased borrowing. Bank-owned Life Insurance.
The amount of stock we are required to purchase is in proportion to our FHLB borrowings and level of total assets. Accordingly, the increase in the FHLB stock is due to increased borrowing. Bank-owned Life Insurance. We invest in bank-owned life insurance to help offset the costs of our employee benefit plan obligations.
The decrease in the interest rate spread was due to an increase in the cost of interest-bearing liabilities that exceeded the increase in the yield on interest earning assets. Provision for Loan Losses.
The decrease in the net interest rate spread was due to an increase in the cost of interest-bearing liabilities that exceeded the increase in the yield on interest-earning assets resulting primarily from the significant increase in market interest rates that directly impacted our funding costs.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences 41 are expected to be recovered or settled.
As of December 31, 2022 Change in Interest Rates (basis points) (1) Net Interest Income Year 1 Forecast Year 1 Change from Level (Dollars in thousands) 400 21,237 -18.9 % 300 22,448 -14.3 % 200 23,657 -9.7 % 100 24,984 -4.6 % Level 26,201 0.0 % -100 26,746 2.1 % -200 26,770 2.2 % -300 26,983 3.0 % -400 27,446 4.8 % ____________________ 1.
As of December 31, 2023 Change in Interest Rates (basis points) (1) Net Interest Income Year 1 Forecast Year 1 Change from Level (Dollars in thousands) 400 23,724 -3.1 % 300 23,881 -2.5 % 200 24,037 -1.8 % 100 24,435 -0.2 % Level 24,489 0.0 % -100 23,372 -4.6 % -200 22,557 -7.9 % -300 21,872 -10.7 % -400 21,288 -13.1 % ____________________ 1.
This increase was driven by an increase in the yield of investment securities held-to-maturity and available-for-sale of 36 basis points from 1.49% for the year ended December 31, 2021 to 1.85% for the year ended December 31, 2022 as well as an increase in the average balance of $8.5 million from $66.4 million during the year ended December 31, 2021 to $75.0 million during the year ended December 31, 2022.
This increase was driven by an increase in the yield of investment securities of 71 basis points to 2.56% for the year ended December 31, 2023, from 1.85% for the year ended December 31, 2022 resulting from the higher market interest rate environment, as well as an increase in the average balance of $6.3 million from $75.0 million during the year ended December 31, 2022 to $81.3 million during the year ended December 31, 2023.

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