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

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Paragraph-level year-over-year comparison of NorthEast Community 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.

+358 added−327 removedSource: 10-K (2024-03-28) vs 10-K (2023-03-30)

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

358 paragraphs added · 327 removed · 243 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

104 edited+20 added−9 removed165 unchanged
Biggest changeAt December 31, 2022, our largest outstanding construction loan relationship with one borrower was comprised of thirteen construction loans with $40.3 million in committed amount of which $10.0 million of the commitment has been sold to another financial institution thereby reducing our committed portion to $30.3 million.
Biggest changeOf the $47.1 million in committed amount, $11.2 million of the commitment in construction loans has been sold to two other financial institutions thereby reducing our committed portion to $35.9 million. Our portion of these construction loans had an outstanding balance of $17.5 million and undisbursed loans in process of $2.5 million at December 31, 2023.
The Bank’s principal business consists of originating primarily construction loans and, to a lesser extent, commercial and industrial loans and multifamily and mixed-use residential real estate loans and non-residential real estate loans.
The Bank’s principal business consists of originating primarily construction loans and, to a lesser extent, commercial and industrial loans, multifamily and mixed-use residential real estate loans, and non-residential real estate loans.
Market Area We are headquartered in White Plains, New York, which is located in Westchester County, and we operate through our main and annex offices in White Plains, two full-service branch offices in the New York City borough of Manhattan (New York County), one full-service branch office in the New York City borough of the Bronx (Bronx County), two full-service branch offices in Rockland County, New York, two full-service branch offices in Orange County, New York, one full-service branch office in Sullivan County, New York, and three full-service branches in Danvers (Essex County), Framingham (Middlesex County) and Quincy (Norfolk County), Massachusetts, and loan 1 Table of Contents production offices in White Plains, New York, New City, New York and Danvers, Massachusetts.
Market Area We are headquartered in White Plains, New York, which is located in Westchester County, and we operate through our main and annex offices in White Plains, two full-service branch offices in the New York City borough of Manhattan (New York County), one full-service branch office in the New York City borough of the Bronx (Bronx County), two full-service branch offices in Rockland County, New York, two full-service branch offices in Orange 1 Table of Contents County, New York, one full-service branch office in Sullivan County, New York, and three full-service branches in Danvers (Essex County), Framingham (Middlesex County) and Quincy (Norfolk County), Massachusetts, and loan production offices in White Plains, New York, New City, New York and Danvers, Massachusetts.
We also obtain deposits from our commercial and industrial and construction loan customers. These deposits tend to be a stable source of funds. We offer of a broad selection of deposit instruments, including checking accounts, money market accounts, regular savings accounts, non-interest bearing demand accounts (such as checking accounts and certificates of deposits.
We also obtain deposits from our commercial and industrial and construction loan customers. These deposits tend to be a stable source of funds. We offer a broad selection of deposit instruments, including checking accounts, money market accounts, regular savings accounts, non-interest bearing demand accounts (such as checking accounts and certificates of deposits.
In addition, amendments made by the Dodd-Frank Act to permit banks to establish de novo branches on an interstate basis to the extent that branching is authorized by the law of the host state for the banks chartered by that state. Prompt Corrective Regulatory Action.
In addition, amendments made by the Dodd-Frank Act permit banks to establish de novo branches on an interstate basis to the extent that branching is authorized by the law of the host state for the banks chartered by that state. Prompt Corrective Regulatory Action.
Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.
The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. The Bank has elected to be deemed a “savings association” under the Home Owners’ Loan Act, as amended.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate credit loss reserves for regulatory purposes. The Bank has elected to be deemed a “savings association” under the Home Owners’ Loan Act, as amended.
In making multifamily and mixed-use real estate loans, we primarily consider the net operating income generated by the real estate to support the debt service, the financial resources, income level and managerial expertise of the borrower, the marketability of the property and our lending experience with the borrower. We typically require a personal guarantee of the borrower.
In making multifamily and mixed-use real estate loans, we primarily consider the net operating income generated by the real estate to support the debt service, the borrower’s financial resources, the income level and managerial expertise of the borrower, the marketability of the property and our lending experience with the borrower. We typically require a personal guarantee of the borrower.
Loan operations are also subject to state and federal laws applicable to credit transactions, such as the: ● Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; ● Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; and ● Rules and regulations of the various federal and state agencies charged with the responsibility of implementing such federal and state laws.
Loan operations are also subject to state and federal laws applicable to credit transactions, such as the: ● Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; 15 Table of Contents ● Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; and ● Rules and regulations of the various federal and state agencies charged with the responsibility of implementing such federal and state laws.
Under the prompt corrective action regulations, the Federal Reserve Board may prohibit a bank or savings and holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.” 16 Table of Contents Federal Reserve Board policy also provides that a holding company should inform the Federal Reserve Board supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, as of the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.
Under the prompt corrective action regulations, the Federal Reserve Board may prohibit a bank or savings and holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.” Federal Reserve Board policy also provides that a holding company should inform the Federal Reserve Board supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, as of the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.
If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including 12 Table of Contents but not limited to an order by the FDIC to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company.
If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the FDIC to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company.
A bank that ceases to meet any qualifying criteria is provided with a two-quarter grace period to comply with the community bank leverage ratio requirements or the general capital regulations by the federal regulators. As of December 31, 2022, the Bank had not elected the community bank leverage ratio alternative reporting framework.
A bank that ceases to meet any qualifying criteria is provided with a two-quarter grace period to comply with the community bank leverage ratio requirements or the general capital regulations by the federal regulators. As of December 31, 2023, the Bank had not elected the community bank leverage ratio alternative reporting framework.
We generate deposits through our main office and eleven branch offices. We conduct lending activities primarily in the State of New York, the Commonwealth of Massachusetts, and, to a lesser extent, in New Jersey. We also have a limited number of loans in Connecticut and Pennsylvania, states in which we no longer originate loans.
We generate deposits through our main office and eleven branch offices. We conduct lending activities primarily in the State of New York, the Commonwealth of Massachusetts, and, to a lesser extent, in New Jersey. We also have a limited number of loans in Connecticut, a state in which we no longer originate loans.
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. As of December 31, 2022, the Bank was a “well capitalized” institution under FDIC regulations.
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. As of December 31, 2023, the Bank was a “well capitalized” institution under FDIC regulations.
At December 31, 2022, the majority of our mixed-use real estate loans are secured by properties that are at least 85% residential. Loans secured by multifamily and mixed-use real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans.
At December 31, 2023, the majority of our mixed-use real estate loans are secured by properties that are at least 85% residential. Loans secured by multifamily and mixed-use real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans.
The capital conservation buffer requirement began being phased in starting on January 1, 2016 at 0.625% of risk-weighted assets and increased each year until fully implemented at 2.5% on January 1, 2019. At December 31, 2022, the Bank exceeded the fully phased in regulatory requirement for the capital conservation buffer.
The capital conservation buffer requirement began being phased in starting on January 1, 2016 at 0.625% of risk-weighted assets and increased each year until fully implemented at 2.5% on January 1, 2019. At December 31, 2023, the Bank exceeded the fully phased in regulatory requirement for the capital conservation buffer.
In the Massachusetts/Boston Metropolitan Area, where we have also originated such loans, the primary source of mortgage loan originations are from personal contacts by our loan officers and referrals from existing customers. We generally retain for our portfolio all of the loans that we originate in Massachusetts.
In the Massachusetts/Boston Metropolitan Area, where we have also originated such loans, the primary source of mortgage loan originations are from personal contacts by our loan officer and referrals from existing customers. We generally retain for our portfolio all of the loans that we originate in Massachusetts.
Hom ​ Executive Vice President and Chief Financial Officer ​ Below is information regarding our executive officer who is not also a director. Mr. Hom has held his current position for the period indicated below. Age presented is as of December 31, 2022. Donald S.
Hom ​ Executive Vice President and Chief Financial Officer ​ Below is information regarding our executive officer who is not also a director. Mr. Hom has held his current position for the period indicated below. Age presented is as of December 31, 2023. Donald S.
Hom joined the Company and the Bank in 2007, serving as Chief Financial Officer since 2013. Prior to joining the Company and the Bank, Mr. Hom served for 23 years as a bank examiner and financial analyst for a Federal banking regulatory agency and six years as the chief executive officer of a New Jersey community bank.
Hom joined the Company and the Bank in 2007, serving as Chief Financial Officer since 2013. Prior to joining the Company and the Bank, Mr. Hom served for 23 years as a bank examiner and financial analyst for a Federal banking regulatory agency and six years as the chief executive officer of a New Jersey community bank. Age 69. ​
Interstate Banking and Branching. Federal law permits well capitalized and well managed bank and savings and loan holding companies to acquire banks in any state, subject to Federal Reserve Board approval, certain concentration limits and other specified conditions. Interstate mergers of banks are also authorized, subject to regulatory approval and other specified conditions.
Federal law permits well capitalized and well managed bank and savings and loan holding companies to acquire banks in any state, subject to Federal Reserve Board approval, certain concentration limits and other specified conditions. Interstate mergers of banks are also authorized, subject to regulatory approval and other specified conditions.
All construction, multifamily, mixed use and nonresidential real estate loans and commercial and industrial loans must be approved by a unanimous vote of the members of the Loan Committee, which is composed of the Chairman and Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer.
All construction, multifamily, mixed use and nonresidential real estate loans and commercial and industrial loans must be approved by a unanimous vote of the members of the Loan Committee, which is composed of the Chairman and Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer, and a Senior Vice President.
Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that made such an election regarding the treatment of accumulated other comprehensive income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that made such an election regarding the treatment of accumulated other comprehensive income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
In addition, if construction loans are for condominiums, as a backstop, the project will be underwritten as if they will be rental properties. We generally require the borrower to contribute between 40 to 50% of the total raw land acquisition cost.
In addition, if construction loans are for condominiums, as a backstop, the project will be underwritten as if they will be rental properties. We generally require the borrower to contribute 50% of the total raw land acquisition cost.
In addition, the aggregate amount of extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired capital and surplus. Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers. Enforcement. The FDIC has extensive enforcement authority over insured state-chartered savings banks, including the Bank.
In addition, the aggregate amount of 13 Table of Contents extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired capital and surplus. Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers. Enforcement. The FDIC has extensive enforcement authority over insured state-chartered savings banks, including the Bank.
While in the past we purchased a limited number of participations from one financial institution that also serves high absorption areas in Brooklyn, New York, we currently do not have any purchased participation loan in our portfolio. We also purchased whole residential and non-residential mortgage loans from a Massachusetts financial institution during 2021.
While in the past we purchased a limited number of participations from one financial institution that also serves high absorption areas in Brooklyn, New York, we currently do not have any purchased participation loan in our portfolio. We also purchased whole residential and non-residential mortgage loans from a Massachusetts financial 7 Table of Contents institution during 2021.
As of December 31, 2022, the average loan size in our multifamily and mixed-use portfolio was approximately $1.1 million. Non-Residential Real Estate Loans . Our non-residential real estate loans are generally secured by office buildings, medical facilities and retail shopping centers that are primarily located within our lending area.
As of December 31, 2023, the average loan size in our multifamily and mixed-use portfolio was approximately $1.6 million. Non-Residential Real Estate Loans . Our non-residential real estate loans are generally secured by office buildings, medical facilities, and retail shopping centers that are primarily located within our lending area.
The CRA does require the FDIC, in connection with its examination of a non-member bank, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution, including applications to acquire branches and other financial institutions.
The CRA does require the FDIC, in connection with its examination of a non-member bank, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution, including applications to acquire branches and other 14 Table of Contents financial institutions.
A qualifying community bank with capital meeting the specified requirements (including off balance sheet exposures of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) and electing to follow the alternative framework is considered to meet all applicable regulatory capital requirements including the risk-based requirements.
A qualifying community bank with capital meeting the specified requirements (including off balance sheet exposures of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) and electing to follow the alternative framework is considered to meet all applicable regulatory capital requirements including the risk- 11 Table of Contents based requirements.
In evaluating applications by holding companies to acquire savings associations, the Federal Reserve Board must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds the convenience and needs of the community and competitive factors.
In 16 Table of Contents evaluating applications by holding companies to acquire savings associations, the Federal Reserve Board must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds the convenience and needs of the community and competitive factors.
NECB Financial Services Group, LLC , a New York limited liability company and wholly owned subsidiary of the Bank, was formed in the third quarter of 2012 as a complement to Harbor West Wealth Management Group to sell life insurance and fixed rate annuities.
NECB Financial Services Group, LLC , a New York limited liability company and wholly owned subsidiary of the Bank, was formed in the third quarter of 2012 as a complement to Harbor West Wealth Management Group to sell life insurance and fixed rate annuities. NECB Financial Services Group, LLC is licensed in New York State.
This loan is secured by three properties located in Brooklyn, New York consisting of a 17,850 square foot single story warehouse building, a 7,650 square foot single story bus maintenance garage, and a 0.39 acre paved parking lot. As of December 31, 2022, the average balance of loans in our non-residential loan portfolio was $633,000. Consumer Loans.
This loan is secured by three properties located in Brooklyn, New York consisting of a 17,850 square foot single story warehouse building, a 7,650 square foot single story bus maintenance garage, and a 0.39 acre paved parking lot. As of December 31, 2023, the average balance of loans in our non-residential loan portfolio was $621,000. Consumer Loans.
In New York, most of the apartment buildings that we lend on are rent-stabilized. Mixed-use real estate loans are secured by properties that are intended for both residential and business use. We originate multifamily and mixed-use real estate loans in Massachusetts and, on a limited basis, in New Jersey.
In New York, most of the apartment buildings that we lend on are rent-stabilized or free market buildings. Mixed-use real estate loans are secured by properties that are intended for both residential and business use. We originate multifamily and mixed-use real estate loans in Massachusetts and, on a limited basis, in New Jersey.
The vast majority of our depositors are residents of the States of New York and Massachusetts. Deposits are obtained primarily from customers residing in or working in the communities in which our 8 Table of Contents branches are located, and we rely on our long-standing relationships with our customers to retain these deposits.
The vast majority of our depositors are residents of the States of New York and Massachusetts. Deposits are obtained primarily from customers residing in or working in the communities in which our branches are located, and we rely on our long-standing relationships with our customers to retain these deposits.
Properties securing multifamily and mixed-use real estate loans are appraised by independent appraisers, inspected by us and generally require Phase 1 environmental surveys. 5 Table of Contents The majority of the multifamily real estate loans in our portfolio are secured by ten unit to 100 unit apartment buildings.
Properties securing multifamily and mixed-use real estate loans are appraised by independent appraisers, inspected by us and generally require Phase 1 environmental surveys. The majority of the multifamily real estate loans in our portfolio are secured by ten unit to 100 unit apartment buildings.
The Bank is a member of the Federal Home Loan Bank of New York. The regulation and supervision of the Bank establish a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of depositors and borrowers and, for purposes of the 9 Table of Contents FDIC, the protection of the insurance fund.
The Bank is a member of the Federal Home Loan Bank of New York. The regulation and supervision of the Bank establish a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of depositors and borrowers and, for purposes of the FDIC, the protection of the insurance fund.
Total capital includes Tier 1 capital 10 Table of Contents (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. 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.
Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. 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.
We have longstanding relationships with mortgage brokers in the New York market area, who are familiar with our lending practices and our underwriting standards. We also deal directly with building owners throughout our lending area. At December 31, 2022, multifamily and mixed-use real estate loans to borrowers in the New York State/New York Metropolitan Area totaled $63.3 million.
We have longstanding relationships with mortgage brokers in the New York market area, who are familiar with our lending practices and our underwriting standards. We also deal directly with building owners throughout our lending area. At December 31, 2023, multifamily and mixed-use real estate loans to borrowers in the New York State/New York Metropolitan Area totaled $71.3 million.
Approval of the Superintendent is required if the total of all dividends declared by the bank in a calendar year would exceed the total of its net profits for that year combined with its retained net profits for the preceding two years, less prior dividends paid.
Approval of the 10 Table of Contents Superintendent is required if the total of all dividends declared by the bank in a calendar year would exceed the total of its net profits for that year combined with its retained net profits for the preceding two years, less prior dividends paid.
Under our loan-refinancing program, borrowers who are current under the terms and conditions of their contractual obligations can apply to refinance their existing loans to the rates and terms then offered on new loans after the payment of their contractual prepayment penalties.
Under our loan-refinancing program, borrowers who are current under the terms and conditions of their contractual obligations can 5 Table of Contents apply to refinance their existing loans to the rates and terms then offered on new loans after the payment of their contractual prepayment penalties.
At December 31, 2022, these whole purchased loans totaled $2.8 million and were performing according to their terms. We occasionally sell participations interests in construction loans we have originated in high absorption areas to other community banks in order to maintain compliance with our loans-to-one borrower limits.
At December 31, 2023, these whole purchased loans totaled $2.4 million and were performing according to their terms. We occasionally sell participations interests in construction loans we have originated in high absorption areas to other community banks in order to maintain compliance with our loans-to-one borrower limits.
If an existing structure is to be demolished, the loan to value ratio will be limited to 60% of the improved land value alone.
If an existing structure is to be demolished, the loan to value ratio will be limited to 50% of the improved land value alone.
Interest rates and payments on our commercial and industrial loans are typically indexed to the prime rate as published in the Wall Street Journal and adjusted as the prime rate changes. At December 31, 2022, the average balance of loans in our commercial and industrial loan portfolio was $592,000.
Interest rates and payments on our commercial and industrial loans are typically indexed to the prime rate as published in the Wall Street Journal and adjusted as the prime rate changes. At December 31, 2023, the average balance of loans in our commercial and industrial loan portfolio was $639,000.
At December 31, 2022, the largest outstanding non-residential real estate loan had an outstanding balance of $2.3 million and was performing in accordance with its terms.
At December 31, 2023, the largest outstanding non-residential real estate loan had an outstanding balance of $2.2 million and was performing in accordance with its terms.
Certain of these statutes authorize private individual and class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of violations. 14 Table of Contents USA PATRIOT Act.
Certain of these statutes authorize private individual and class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of violations. USA PATRIOT Act.
The guidelines address internal controls and information systems, the internal audit system, credit underwriting, loan documentation, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. The agencies have also 11 Table of Contents established standards for safeguarding customer information.
The guidelines address internal controls and information systems, the internal audit system, credit underwriting, loan documentation, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. The agencies have also established standards for safeguarding customer information.
At December 31, 2022, based on the 15% limitation, the Bank’s loans-to-one-borrower limit was approximately $33.4 million. On the same date, the Bank had no borrowers with outstanding balances in excess of this amount. Loan Commitments . We issue commitments for adjustable-rate mortgage loans conditioned upon the occurrence of certain events.
At December 31, 2023, based on the 15% limitation, the Bank’s loans-to-one-borrower limit was approximately $38.3 million. On the same date, the Bank had no borrowers with outstanding balances in excess of this amount. Loan Commitments . We issue commitments for adjustable-rate mortgage loans conditioned upon the occurrence of certain events.
At each monthly meeting of the board of directors, the board reviews all commitments issued, regardless of size. 7 Table of Contents Loans to One Borrower .
At each monthly meeting of the board of directors, the board reviews all commitments issued, regardless of size. Loans to One Borrower .
Phase 1 environmental surveys are required for most loans and property inspections are required for all loans. At December 31, 2022, we had $25.3 million in non-residential real estate loans outstanding, or 2.1% of total loans.
Phase 1 environmental surveys are required for most loans and property inspections are required for all loans. At December 31, 2023, we had $21.1 million in non-residential real estate loans outstanding, or 1.3% of total loans.
If we were to combine land, construction and development loans as one loan on a project, the average size in our construction loan portfolio was $4.6 million in committed amount, comprised of outstanding disbursed balances of $2.7 million and undisbursed loans in process of $1.8 million at December 31, 2022.
If we were to combine land, construction and development loans as one loan on a project, the average loan size in our construction loan portfolio was $5.4 million in committed amount, comprised of outstanding disbursed balances of $3.8 million and undisbursed loans in process of $1.5 million at December 31, 2023.
We also require the borrower to submit various construction documentations, including but not necessarily limited to cost estimates, property surveys, approved building plans and specifications, and approved building permits. We require our borrowers to fund an interest reserve in advance.
We also require the borrower to submit various construction documentations, including but not necessarily limited to cost estimates, property surveys, approved building plans and specifications, and approved building permits. We generally require our borrowers to fund an interest reserve in advance. We do not fund interest reserves from the loan proceeds.
At December 31, 2022, our investment portfolio consisted primarily of mutual funds, residential mortgage-backed securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae with stated final maturities of 10 years or more, and municipal securities with maturities of three years or more. Our investment portfolio is primarily viewed as a source of liquidity.
At December 31, 2023, our investment portfolio consisted primarily of mutual funds, residential mortgage-backed securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae with stated final maturities of 10 years or more, and municipal securities with maturities of one years or more. 8 Table of Contents Our investment portfolio is primarily viewed as a source of liquidity.
On December 31, 2022, the largest outstanding multifamily real estate loan had a balance of $13.3 million and was performing according to its terms at December 31, 2022. This loan is secured by a 62 unit two building apartment complex located in Boston, Massachusetts.
As of December 31, 2023, the largest outstanding multifamily real estate loan had a balance of $13.0 million and was performing according to its terms. This loan is secured by a 62-unit two building apartment complex located in Boston, Massachusetts.
At December 31, 2022, multifamily and mixed-use real estate loans to borrowers in the Massachusetts/Boston Metropolitan Area totaled $74.4 million. We originate a variety of adjustable-rate and balloon multifamily and mixed-use real estate loans.
At December 31, 2023, multifamily and mixed-use real estate loans to borrowers in the Massachusetts/Boston Metropolitan Area totaled $151.2 million. We originate a variety of adjustable-rate and balloon multifamily and mixed-use real estate loans.
We have also historically sold participation interests in our construction loans to the Company and we may continue to do so in the future. At December 31, 2022, the Company held $13.7 million in participation interests in construction loans originated by the Bank.
We have also historically sold participation interests in our construction loans to the Company and we may continue to do so in the future. At December 31, 2023, the Company held $14.1 million in participation interests in construction loans originated by the Bank.
An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater.
An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater. 12 Table of Contents An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%.
Insured institutions of less than $10 billion of assets received credits for the portion of their assessments that contributed to raising the reserve ratio between 1.15% and 1.35% effective when the fund rate achieves 1.38%.
The FDIC indicated in November 2018 that the 1.35% ratio was exceeded. Insured institutions of less than $10 billion of assets received credits for the portion of their assessments that contributed to raising the reserve ratio between 1.15% and 1.35% effective when the fund rate achieves 1.38%.
We have generally required that the properties securing non-residential real estate loans have debt service coverage ratios (the ratio of earnings after subtracting all operating expenses to debt service payments) of between 1.25x and 1.40x. The average non-residential 6 Table of Contents loan debt-service coverage ratio is 2.11x and the average loan-to-value ratio of our non-residential loans is 40.3%.
We have generally required that the properties securing non-residential real estate loans have debt service coverage ratios (the ratio of earnings after subtracting all operating expenses to debt service payments) of between 1.25x and 1.40x. The average non-residential loan debt-service coverage ratio is 2.20x and the average loan-to-value ratio of our non-residential loans is 38.8%.
Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. 17 Table of Contents The Company will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the completion of the Company’s second-step conversion and offering, which occurred on July 12, 2021; (ii) the first fiscal year after our annual gross revenues are $1.07 billion (adjusted for inflation) or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year.
The Company will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the completion of the Company’s second-step conversion and offering, which occurred on July 12, 2021; (ii) the first fiscal year after our annual gross revenues are $1.1 billion (adjusted for inflation) or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year.
Personnel At December 31, 2022, we had 134 full-time employees and five part-time employees, none of whom are represented by a collective bargaining unit. We believe our relationship with our employees is good. Subsidiaries The Company’s only direct subsidiary is the Bank.
Personnel At December 31, 2023, we had 135 full-time employees and six part-time employees, none of whom are represented by a collective bargaining unit. We believe our relationship with our employees is good. 18 Table of Contents Subsidiaries The Company’s only direct subsidiary is the Bank.
At December 31, 2022, if we were to combine land, construction and development loans as one loan on a project, our construction loan portfolio consisted of 350 loans totaling $1.6 billion in committed amount, comprised of outstanding disbursed balance of $930.6 million and undisbursed loans in process of $637.4 million.
At December 31, 2023, if we were to combine land, construction and development loans as one loan on a project, our construction loan portfolio consisted of 322 loans totaling $1.7 billion in committed amount, comprised of outstanding disbursed balance of $1.2 billion and undisbursed loans in process of $486.3 million.
It is our policy to require a guaranty of all owners of the borrower who own 20% or more of the business and we impose collateral requirements on our commercial and industrial loans.
Our policy requires a 4 Table of Contents guaranty of all owners of the borrower who own 20% or more of the business and we impose collateral requirements on our commercial and industrial loans.
At December 31, 2022, the Bank had a maximum borrowing capacity from the Federal Home Loan Bank of New York of $52.5 million comprising of $31.5 million in available borrowings and $21.0 million in outstanding borrowings.
At December 31, 2023, the Bank had a maximum borrowing capacity from the Federal Home Loan Bank of New York of $43.7 million comprising of $29.7 million in available borrowings and $14.0 million in outstanding borrowings.
At December 31, 2022, if we were to count land, construction and development loans as separate loans, our construction loan portfolio consisted of 612 loans totaling $1.6 billion in committed amount, comprised of outstanding disbursed balances of $930.6 million and undisbursed loans in process of $637.4 million.
At December 31, 2023, if we were to count land, construction and development loans as separate loans, our construction loan portfolio consisted of 560 loans totaling $1.7 billion in committed amount, comprised of outstanding disbursed balances of $1.2 billion and undisbursed loans in process of $486.3 million.
For projects above $33 million, we generally partner with a participating bank from outside our market area. 3 Table of Contents We typically grant separate land and construction loans and occasionally site development loans secured by the project.
We also lend on projects, completed in stages, of up to $45 million. For projects above $33 million, we generally partner with a participating bank from outside our market area. We typically grant separate land and construction loans and occasionally site development loans secured by the project.
At December 31, 2022, our non-residential real estate loan portfolio was comprised mainly of $18.4 million of loans secured by properties in the New York State/New York Metropolitan Area, $4.4 million of loans secured by properties in the Massachusetts/Boston Metropolitan Area, and $2.6 million of loans secured by properties in Connecticut, New Jersey, and Pennsylvania.
At December 31, 2023, our non-residential real estate loan portfolio was comprised mainly of $15.7 million of loans secured by properties in the New York State/New York Metropolitan Area, $3.9 million of loans secured by properties in the Massachusetts/Boston Metropolitan Area, and $1.5 million of loans secured by properties in Connecticut and New Jersey.
Interest rates and payments on these loans generally are based on the one-, two-, three- or five-year FHLB of New York or FHLB of Boston advance rate plus a margin. The lifetime interest rate cap is five percentage points over the initial interest rate of the loan (four percentage points for loans with one-, two- and three-year terms).
Interest rates and payments on these loans generally are based on the one-, two-, three- or five-year FHLB of New York or FHLB of Boston advance rate plus a margin.
At December 31, 2022, $1.1 billion, or 89.4%, of our portfolio was secured by loans in the New York State/New York Metropolitan Area, $105.3 million, or 8.7%, of our portfolio was secured by loans in the Massachusetts/Boston Metropolitan Area and $22.7 million, or 1.9%, of our portfolio was secured by loans in Connecticut, New Jersey, and Pennsylvania. Construction Loans.
At December 31, 2023, $1.4 billion, or 88.1%, of our portfolio was secured by loans in the New York State/New York Metropolitan Area, $159.2 million, or 10.0%, of our portfolio was secured by loans in the Massachusetts/Boston Metropolitan Area and $28.3 million, or 1.9%, of our portfolio was secured by loans in Connecticut and New Jersey. Construction Loans.
We believe that our long-standing presence in our market areas in New York and Massachusetts, and our personal service philosophy enhance our ability to compete favorably in attracting and retaining individual and business customers. We actively solicit deposit-related customers and compete for deposits by offering customers personal attention, professional service and competitive interest rates.
We believe that our long-standing presence in our market areas in New York and Massachusetts, and our personal service philosophy enhance our ability to compete favorably in attracting and retaining individual and business customers.
We also charge prepayment penalties, with five points of the outstanding loan balance generally being charged on loans that refinance in the first year of the mortgage, scaling down to one point on loans that refinance in year five.
Properties securing non-residential real estate loans are appraised by independent appraisers and inspected by us. We also charge prepayment penalties, with five points of the outstanding loan balance generally being charged on loans that refinance in the first year of the mortgage, scaling down to one point on loans that refinance in year five.
We will make construction loans on condominium buildings, containing between two to more than 250 units or for single family homes and single family housing developments of as many as 400 homes, in each case in high absorption and/or homogeneous areas. For such loans, we do not offer permanent financing.
Generally, in homogeneous communities, units that are under construction have purchase contracts before they are complete. We will make construction loans on condominium buildings, containing between two to more than 250 units or for single family homes and single family housing developments of as many as 400 homes, in each case in high absorption and/or homogeneous areas.
Such grandfathering authority may be terminated upon the FDIC’s determination that such investments pose a safety and soundness risk to the Bank or if the Bank converts its charter or undergoes a change in control In addition, the FDIC is authorized to permit such institutions to engage in other state authorized activities or investments (other than non-subsidiary equity investments) that meet all applicable capital requirements if it is determined that such activities or investments do not pose a significant risk to the Deposit Insurance Fund.
In addition, the FDIC is authorized to permit such institutions to engage in other state authorized activities or investments (other than non-subsidiary equity investments) that meet all applicable capital requirements if it is determined that such activities or investments do not pose a significant risk to the Deposit Insurance Fund. Interstate Banking and Branching.
Management informs the board of directors on a monthly basis of the amount of loans delinquent more than 30 days, all loans in foreclosure and all foreclosed and repossessed property that we own.
Management informs the board of directors on a monthly basis of the amount of loans delinquent more than 30 days, all loans in foreclosure and all foreclosed and repossessed property that we own. Investment Activities We have legal authority to invest in various types of liquid assets, including U.S.
All of these loans were performing in accordance with their terms at December 31, 2022. Commercial and Industrial Loans. We provide credit to commercial and industrial businesses that are located within our market area. We also provide commercial and industrial loans to real estate developers in the New York Metropolitan Area.
Commercial and Industrial Loans. We provide credit to commercial and industrial businesses that are located within our market area. We also provide commercial and industrial loans to real estate developers in the New York Metropolitan Area.
In recent years, except for Massachusetts, we have de-emphasized multifamily and mixed-use real estate lending as we have focused more on construction lending. We have been originating multifamily and mixed-use real estate loans in the New York State/New York Metropolitan Area for 89 years.
We have been originating multifamily and mixed-use real estate loans in the New York State/New York Metropolitan Area for 89 years.
The average multifamily loan debt-service coverage is 2.87x and the average loan-to-value ratio of our multifamily real estate loans is 30.1%. The average mixed-use real estate loan debt-service coverage is 2.96x and the average loan-to-value ratio of our mixed-use real estate loans is 24.8%.
The average multifamily loan debt-service coverage is 2.91x and the average loan-to-value ratio of our multifamily real estate loans is 31.2%. The average mixed-use real estate loan debt-service coverage is 2.95x and the average loan-to-value ratio of our mixed-use real estate loans is 38.6%.
Any company that acquires control would then be subject to regulation as a savings and loan holding company. Federal Securities Laws. The Company’s common stock is registered with the Securities and Exchange Commission and, as a result, the Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.
The Company’s common stock is registered with the Securities and Exchange Commission and, as a result, the Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934. Sarbanes-Oxley Act of 2002.
NECB Financial Services Group, LLC is licensed in the States of New York and Connecticut. 72 West Eckerson LLC , a New York limited liability company and wholly owned subsidiary of the Bank, was formed in April 2015 to facilitate the purchase or lease of real property by the Bank and currently owns the Bank branch locations in Spring Valley, New York and Monroe, New York. 166 Route 59 Realty LLC , a New York limited liability company and wholly owned subsidiary of the Bank, was formed in April 2021 to facilitate the purchase or lease of real property by the Bank and currently owns the Bank branch located in Airmont, New York. 3 Winterton Realty LLC , a New York limited liability company and wholly owned subsidiary of the Bank, was formed in October 2021 to facilitate the purchase of real property by the Bank and currently owns the property for a proposed Bank branch located in Bloomingburg, New York.
We terminated our license in Connecticut on February 22, 2024 due to the sale of all the Bank’s assets relating to Harbor West Wealth Management Group to a third party in January 2024. 72 West Eckerson LLC , a New York limited liability company and wholly owned subsidiary of the Bank, was formed in April 2015 to facilitate the purchase or lease of real property by the Bank and currently owns the Bank branch locations in Spring Valley, New York and Monroe, New York. 166 Route 59 Realty LLC , a New York limited liability company and wholly owned subsidiary of the Bank, was formed in April 2021 to facilitate the purchase or lease of real property by the Bank and currently owns the Bank branch located in Airmont, New York. 3 Winterton Realty LLC , a New York limited liability company and wholly owned subsidiary of the Bank, was formed in October 2021 to facilitate the purchase of real property by the Bank and currently owns the Bank branch located in Bloomingburg, New York.
This lack of balance between supply and demand leads to available units being under contracts of sale or leases signed very soon after certificates of occupancy are received by the building owners. Generally, in homogeneous communities, units that are under construction have purchase contracts before they are complete.
The demand for housing (whether for rent or for purchase) is far greater in these high absorption communities than the available supply. This lack of balance between supply and demand leads to available units being under contracts of sale or leases signed very soon after certificates of occupancy are received by the building owners.
Our largest committed construction loan had a total commitment of $43.6 million of which 50.0% of the commitment has been sold to another financial institution thereby reducing our committed portion to $21.8 million. Our portion of this construction loan had an outstanding balance of $9.5 million and was performing in accordance with its terms at December 31, 2022.
Our largest committed construction loan project at December 31, 2023 was comprised of four loans with a total commitment of $43.6 million of which 50.0% of the commitment has been sold to another financial institution thereby reducing our committed portion to $21.8 million.
The Bank, as a member of the Federal Home Loan Bank of New York, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank.
The Bank, as a member of the Federal Home Loan Bank of New York, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank. The Bank was in compliance with requirements for the Federal Home Loan Bank of New York with an investment of $859,000 at December 31, 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

30 edited+12 added−17 removed82 unchanged
Biggest changeA breakdown in 22 Table of Contents our internal control systems, improper operation of our systems or improper employee actions could result in material financial loss to us, the imposition of regulatory action, and damage to our reputation.
Biggest changeA breakdown in our internal control systems, improper operation of our systems or improper employee actions could result in material financial loss to us, the imposition of regulatory action, and damage to our reputation. 23 Table of Contents Risks Related to Our Growth Strategy The building of market share through our branch office strategy, and our ability to achieve profitability on new branch offices, may increase our expenses and negatively affect our earnings.
Our construction loans are primarily originated in high absorption areas within Bronx, Kings, Orange, Rockland and Sullivan Counties in New York. Competition for constructions loans in these high absorption areas comes from commercial banks, savings institutions and credit unions operating in the Metropolitan New York area and nationwide.
Our construction loans are primarily originated in high absorption areas within Bronx, Orange, Rockland and Sullivan Counties in New York. Competition for constructions loans in these high absorption areas comes from commercial banks, savings institutions and credit unions operating in the Metropolitan New York area and nationwide.
If the actual results are different from our estimates, or our analyses are inaccurate, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to our allowance and would decrease our net income.
If the actual results are different from our estimates, or our analyses are inaccurate, our allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to our allowance and would decrease our net income.
Our emphasis on loan growth, as well as any future credit deterioration, will require us to increase our allowance further in the future. In addition, our banking regulators periodically review our allowance for loan losses and could require us to increase our provision for loan losses.
Our emphasis on loan growth, as well as any future credit deterioration, will require us to increase our allowance further in the future. In addition, our banking regulators periodically review our allowance for credit losses – loans and could require us to increase our provision for credit losses.
Further, deterioration in local economic conditions could necessitate an increase in our provision for loan losses and a resulting reduction to our earnings and capital. Economic conditions could result in increases in our level of non-performing loans and/or reduce demand for our products and services, which could have an adverse effect on our results of operations.
Further, deterioration in local economic conditions could necessitate an increase in our provision for credit losses and a resulting reduction to our earnings and capital. Economic conditions could result in increases in our level of non-performing loans and/or reduce demand for our products and services, which could have an adverse effect on our results of operations.
Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
Although the CRE Guidance did not establish 20 Table of Contents specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
While we believe that our long-standing presence in our market areas in New York and Massachusetts, and our personal service philosophy enhance our ability to compete favorably in attracting and retaining individual and business customers, price competition for loans may result in originating fewer loans, or earning less on our loans and price competition for deposits may result in a reduction of our deposit base of paying more on deposits.
While we believe that our long-standing presence in our market areas in New York and Massachusetts, and our personal service philosophy enhance our ability to compete favorably in attracting and retaining individual and business customers, price competition for loans may result in originating fewer loans, or earning 22 Table of Contents less on our loans and price competition for deposits may result in a reduction of our deposit base of paying more on deposits.
Consideration should also be given to the other information in this Annual Report on Form 10-K, as well as in the documents incorporated by reference into this Form 10-K. Risks Related to Our Lending Activities Our emphasis on construction lending involves risks that could adversely affect our financial condition and results of operations.
Consideration should also be given to the other information in this Annual Report on Form 10-K, as well as in the documents incorporated by reference into this Form 10-K. 19 Table of Contents Risks Related to Our Lending Activities Our emphasis on construction lending involves risks that could adversely affect our financial condition and results of operations.
Competition for non-construction loans comes from the numerous national, regional and local community financial institutions operating in our market area, including a number of independent banks and credit unions, in addition to other 21 Table of Contents financial service companies, such as brokerage firms and other similar entities.
Competition for non-construction loans comes from the numerous national, regional and local community financial institutions operating in our market area, including a number of independent banks and credit unions, in addition to other financial service companies, such as brokerage firms and other similar entities.
Our loan portfolio is concentrated in construction loans and multifamily, mixed-use and non-residential real estate loans primarily located in the New York Metropolitan Area, including the Mid-Hudson Region, and the Boston Metropolitan Area. Our construction loans are primarily located in Orange, Rockland and Sullivan Counties in New York and Brooklyn (Kings County).
Our loan portfolio is concentrated in construction loans and multifamily, mixed-use and non-residential real estate loans primarily located in the New York Metropolitan Area, including the Mid-Hudson Region, and the Boston Metropolitan Area. Our construction loans are primarily located in Orange, Rockland and Sullivan Counties in New York and the Bronx (Bronx County).
Any increase in our allowance for loan losses or loan charge-offs resulting from these regulatory reviews may have a material adverse effect on our results of operations and financial condition. The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in our primary market area.
Any increase in our allowance for credit losses or credit charge-offs 21 Table of Contents resulting from these regulatory reviews may have a material adverse effect on our results of operations and financial condition. The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in our primary market area.
If our allowance for loan losses is not sufficient to cover actual loan losses, our results of operations would be negatively affected.
If our allowance for credit losses - loans is not sufficient to cover actual loan losses, our results of operations would be negatively affected.
In addition, vacancies, deferred maintenance, 19 Table of Contents repairs and market stigma can result in prospective buyers expecting sale price concessions to offset their real or perceived economic losses for the time it takes them to return the property to profitability.
In addition, vacancies, deferred maintenance, repairs and market stigma can result in prospective buyers expecting sale price concessions to offset their real or perceived economic losses for the time it takes them to return the property to profitability.
See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Management of Credit Risk.” Our portfolio of commercial and industrial loans may expose us to increased lending risks. At December 31, 2022, $110.1 million, or 9.0%, of our loan portfolio consisted of commercial and industrial loans.
See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Management of Credit Risk.” Our portfolio of commercial and industrial loans may expose us to increased lending risks. At December 31, 2023, $111.1 million, or 7.0%, of our loan portfolio consisted of commercial and industrial loans.
Because our information technology and telecommunications systems interface with and depend on third-party systems, 24 Table of Contents we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions.
Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions.
Construction loans represented 417% of the Bank’s total risk-based capital at December 31, 2022, and our multifamily, mixed-use and nonresidential real estate loan portfolio represented 77% of the Bank’s total risk-based capital on that same date. In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”).
Construction loans represented 478% of the Bank’s total risk-based capital at December 31, 2023, and our multifamily, mixed-use and nonresidential real estate loan portfolio represented 98% of the Bank’s total risk-based capital on that same date. In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”).
In determining the amount of the allowance for loan losses, we analyze, among other things, our loss and delinquency experience by portfolio segments, the debt service ratios and loan-to-value ratios of each segment of our 20 Table of Contents portfolio, and the effect of existing economic conditions.
In determining the amount of the allowance for credit losses - loans, we analyze, among other things, our loss and delinquency experience by portfolio segments, the debt service ratios and loan-to-value ratios of each segment of our portfolio, and the effect of existing economic conditions.
If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile. ​
Investors may find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile. ​
For construction loans we originate, we require our borrowers to fund an interest reserve account in advance. Our portfolio of multifamily residential, mixed-use and non-residential real estate lending could expose us to increased lending risks. At December 31, 2022, $170.6 million, or 14.0%, of our loan portfolio consisted of multifamily, mixed-use and non-residential real estate loans.
For construction loans we originate, we require our borrowers to fund an interest reserve account in advance. Our portfolio of multifamily residential, mixed-use and non-residential real estate lending could expose us to increased lending risks. At December 31, 2023, $249.7 million, or 15.8%, of our loan portfolio consisted of multifamily, mixed-use and non-residential real estate loans.
A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. As such, we strive to conduct our business in an honorable manner that enhances our reputation.
A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas.
Our business may be adversely affected by instability, disruption or destruction in the markets in which we operate, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or man-made disasters, including storm or other events beyond our control, such as the COVID-19 pandemic, which resulted in the imposition of related public health measures and travel restrictions, and civil unrest.
Our business may be adversely affected by instability, disruption or destruction in the markets in which we operate, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or man-made disasters, including storm or other events beyond our control, such as pandemics and civil unrest.
Risks Related to Our Business and Industry Generally Changes in interest rates may hurt our profits and asset values and our strategies for managing interest rate risk may not be effective. We are subject to significant interest rate risk as a financial institution.
Risks Related to Our Business and Industry Generally Changes in interest rates may hurt our profits and asset values and our strategies for managing interest rate risk may not be effective. We are subject to significant interest rate risk as a financial institution. Our interest-bearing liabilities reprice or mature more quickly than our interest-earning assets.
At December 31, 2022, $852.7 million, or 91.6% of our construction loan portfolio and 70.1% of our loan portfolio, represented loans made in high absorption areas of these five counties of New York. This may make us vulnerable to a downturn in the local economy and real estate markets and to a decrease in new construction in these counties.
At December 31, 2023, $1.1 billion, or 92.4% of our construction loan portfolio and 76.7% of our loan portfolio, represented loans made in high absorption areas of these four counties of New York. This may make us vulnerable to a downturn in the local economy and real estate markets and to a decrease in new construction in these counties.
The ability to keep pace with technological change is important, and the failure to do so, due to cost, proficiency or otherwise, could have a material adverse impact on our business and therefore on our financial condition and results of operations. 25 Table of Contents The COVID-19 pandemic adversely affected, and could continue to adversely affect, our business, financial condition, and results of operations.
The 26 Table of Contents ability to keep pace with technological change is important, and the failure to do so, due to cost, proficiency or otherwise, could have a material adverse impact on our business and therefore on our financial condition and results of operations. Acts of terrorism and other external events could impact our business.
At December 31, 2022, brokered deposits, military deposits and deposits obtained through listing services totaled $150.0 million, or 13.4% of total deposits, of which brokered deposits represents $114.2 million or 10.2% of total deposits. Generally, these deposits may not be as stable as other types of deposits.
At December 31, 2023, brokered deposits, military deposits and deposits obtained through listing services totaled $361.4 million, or 25.8% of total deposits, of which brokered deposits represents $311.2 million or 22.2% of total deposits. Generally, these deposits may not be as stable as other types of deposits.
This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and communities.
As such, we strive to conduct our business in an honorable manner that enhances our 25 Table of Contents reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and communities.
Our construction loan portfolio has increased to $930.6 million, net of loans-in-process of $637.4 million, or 76.4% of total loans, at December 31, 2022 from $251.0 million, net of loans-in-process of $145.8 million, or 39.8% of total loans, at December 31, 2016.
Our construction loan portfolio has increased to $1.2 billion, net of loans-in-process of $486.3 million, or 76.9% of total loans, at December 31, 2023 from $251.0 million, net of loans-in-process of $145.8 million, or 39.8% of total loans, at December 31, 2016.
We have also elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.
We have also elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.
Acts of terrorism and other external events could impact our business. Financial institutions have been, and continue to be, targets of terrorist threats aimed at compromising operating and communication systems.
Financial institutions have been, and continue to be, targets of terrorist threats aimed at compromising operating and communication systems.
Interest rates are highly sensitive to many factors, including government monetary policies, domestic and international economic and political conditions and other factors beyond our control. 23 Table of Contents Economic, social and political conditions or civil unrest in the United States may affect the markets in which we operate, our customers, our ability to provide customer service, and could have a material adverse impact on our business, results of operations, or financial condition.
Furthermore, the recent bank failures may result in strengthening of capital and liquidity rules which, if the revised rules apply to us, could adversely affect our financial condition and results of operations. ​ Economic, social and political conditions or civil unrest in the United States may affect the markets in which we operate, our customers, our ability to provide customer service, and could have a material adverse impact on our business, results of operations, or financial condition.
Removed
The offering will allow us to increase our loans-to-one borrower limit, which may result in larger loans being originated.
Added
Interest rates are highly sensitive to many factors, including government monetary policies, domestic and international economic and political conditions and other factors beyond our control. Ineffective liquidity management could adversely affect our financial results and condition. ​ Effective liquidity management is essential for the operation of our business.
Removed
The implementation of the Current Expected Credit Loss accounting standard could require us to increase our allowance for credit losses and may have a material adverse effect on our financial condition and results of operations.
Added
We require sufficient liquidity to meet customer loan requests, customer deposit maturities/withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and other unpredictable circumstances causing industry or general financial market stress.
Removed
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss model, or CECL. ASU 2016-13.
Added
Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally.
Removed
We previously elected to defer the adoption of ASU 2016-13 until December 31, 2020, as permitted by the CARES Act, and based on legislation enacted in December 2020 which extended certain provision of the CARES Act, we elected to extend adopting of CECL until January 1, 2023 in accordance with the recent legislation.
Added
Factors that could detrimentally impact our access to liquidity sources include a downturn in the geographic markets in which our loans and operations are concentrated or difficult credit markets. Our access to deposits may also be affected by the liquidity needs of our depositors.
Removed
This standard requires earlier recognition of expected credit losses on loans and certain other instruments, compared to the incurred loss model. The change to the CECL framework requires us to greatly increase the data we must collect and review to determine the appropriate level of the allowance for credit losses.
Added
In particular, a majority of our liabilities are checking accounts and other liquid deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial majority of our assets are loans, which cannot be called or sold in the same time frame.
Removed
The adoption of CECL may result in greater volatility in the level of the allowance for credit losses, depending on various factors and assumptions applied in the model, such as the forecasted economic conditions in the foreseeable future and loan payment behaviors.
Added
Although we have historically been able to replace maturing deposits and advances as necessary, we might not be able to replace such funds in the future, especially if a large number of our depositors seek to withdraw their accounts, regardless of the reason.
Removed
Any increase in the allowance for credit losses, or expenses incurred to determine the appropriate level of the allowance for credit losses, may have an adverse effect on our financial condition and results of operations.
Added
A failure to maintain adequate liquidity could materially and adversely affect our business, results of operations or financial condition. ​ Financial challenges at other banking institutions could lead to depositor concerns that spread within the banking industry causing disruptive and destabilizing deposit outflows. ​ In March 2023, Silicon Valley Bank and Signature Bank experienced large deposit outflows coupled with insufficient liquidity to meet withdrawal demands, resulting in the institutions being placed into FDIC receivership.
Removed
Risks Related to Our Growth Strategy The building of market share through our branch office strategy, and our ability to achieve profitability on new branch offices, may increase our expenses and negatively affect our earnings.
Added
Additionally, in May 2023, First Republic Bank experienced similar circumstances which resulted in the institution 24 Table of Contents being placed in FDIC receivership. In the aftermath of these events, there has been substantial market disruption and concerns that diminished depositor confidence could spread across the banking industry, leading to deposit outflows that could destabilize other institutions.
Removed
During the past several years, it has been the policy of the Federal Reserve Board to maintain interest rates at historically low levels. As a result, recent market rates on the loans we have originated and the yields on securities we have purchased have been at relatively low levels.
Added
To strengthen public confidence in the banking system, the FDIC took action to protect funds held in uninsured deposit accounts at Silicon Valley Bank and Signature Bank following the placement of those institutions into receivership. However, the FDIC has not committed to protecting uninsured deposits in other institutions that experience outsized withdrawal demands.
Removed
Accordingly, if market interest rates change, our net interest income may be adversely affected and may decrease, which may have an adverse effect on our future profitability.
Added
To further bolster the banking system, the Federal Reserve Board created a new Bank Term Funding Program to provide an additional source of liquidity.
Removed
In March 2022, the SEC published a new set of proposed cybersecurity disclosure rules for public companies, such as the Company, which would significantly increase SEC scrutiny of public companies’ cybersecurity-related business activities, decision-making processes, and the Board’s new role in overseeing cybersecurity.
Added
At December 31, 2023, we had uninsured deposits totaling $344.8 million and $102.7 million in available liquidity, including $68.7 million in cash, as well as $865.1 million in borrowing capacity at the FRBNY which was sufficient to cover our uninsured deposits.
Removed
Under the new rules, companies will be required to develop and maintain reasonable cybersecurity practices, describe those practices in public filings, explain how their senior leadership oversee those programs effectively, and report cybersecurity incidents in a way that provides appropriate information to shareholders.
Added
Notwithstanding our significant liquidity, large deposit outflows could adversely affect our financial condition and results of operations and could result in the closure of the Bank.
Removed
The comment period for the proposed rules ended on May 9, 2022, with hundreds of comments submitted, and it is unclear when the rules will be finalized or effective and to what extent the final rules will change from the proposed rules published in March 2022.
Removed
The COVID-19 pandemic created a global public-health crisis that resulted in challenging economic conditions for households and businesses and negatively affected our business and the communities in which we operate.
Removed
While many areas of consumer spending have rebounded since the initial onset of the COVID-19 pandemic, there remains uncertainty surrounding the future economic conditions that will emerge in the years following the COVID-19 pandemic.
Removed
As a result, management is confronted with a significant and unfamiliar degree of uncertainty in estimating the impact of the pandemic on credit quality, revenues and asset values. ​ The extent to which COVID-19 will continue to negatively affect our business is unknown and will depend on a number of factors, including the overall severity of the disease and of new variants of the virus, the duration of the pandemic, and the ultimate effects of COVID-19, including those described above and those not yet known or knowable, could have a negative effect on the stock price, business prospects, financial condition and results of operations of the Company.
Removed
Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. 26 Table of Contents Investors may find our common stock less attractive if we choose to rely on these exemptions.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also have a wealth management office in Westport, Connecticut. At December 31, 2022, we leased six of our offices, and the total net book value of our land, buildings, furniture, fixtures and equipment was $26.1 million. ​
Biggest changeAt December 31, 2023, we leased five of our offices, and the total net book value of our land, buildings, furniture, fixtures and equipment was $25.5 million. ​
PROPERTIES At December 31, 2022, we conducted business through our administrative headquarters located in White Plains, New York and through our eleven branch offices located in Bronx, New York, Rockland, Orange, and Sullivan Counties in New York and Essex, Middlesex, and Norfolk Counties in Massachusetts and three loan production offices located in White Plains and New City, New York and Danvers, Massachusetts.
PROPERTIES At December 31, 2023, we conducted business through our administrative headquarters located in White Plains, New York and through our eleven branch offices located in Bronx, New York, Rockland, Orange, and Sullivan Counties in New York and Essex, Middlesex, and Norfolk Counties in Massachusetts and three loan production offices located in White Plains and New City, New York and Danvers, Massachusetts.
Added
We previously operated a leased wealth management office in Westport, Connecticut. However, we no longer maintain this office following the sale of all of the Bank’s assets relating to Harbor West Wealth Management Group to a third party in January 2024, which the third party is currently leasing the office from us.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, the Company and the Bank are involved in routine legal proceedings in the ordinary course of business. At December 31, 2022, such routine legal proceedings, in the aggregate, are believed by management to be immaterial to our financial condition, results of operations and cash flows. ​
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, the Company and the Bank are involved in routine legal proceedings in the ordinary course of business. At December 31, 2023, such routine legal proceedings, in the aggregate, are believed by management to be immaterial to our financial condition, results of operations and cash flows. ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock repurchase program is the Company’s first repurchase program since completing its second-step conversion and related stock offering in July 2021. ​ 28 Table of Contents The following table provides information on repurchases by the Company of its common stock under the Company’s stock repurchase program during the three months ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Shares ​ Maximum Number of ​ ​ ​ ​ ​ ​ ​ Purchased as Part of Shares that May Yet Be ​ Total Number of ​ Average Price Paid Publicly Announced Purchased Under the Period ​ Shares Purchased ​ ​ Per Share ​ Plans or Programs ​ Plans or Programs October 1 - 31, 2022 ​ 63,004 $ 12.80 63,004 1,324,502 November 1 - 30, 2022 ​ 116,300 ​ ​ 14.01 ​ 116,300 ​ 1,208,202 December 1 - 31, 2022 ​ 250,927 ​ ​ 14.64 ​ 250,927 ​ 957,275 Total ​ 430,231 ​ ​ ​ ​ 430,231 ​ ​ ​ ​ ​
Biggest changeOn May 30, 2023, following the completion of the Company’s first stock repurchase program, the Company announced that its Board of Directors had authorized a second stock repurchase program to acquire up to an additional 1,509,218 shares, or 10%, of the Company’s currently issued and outstanding common stock. ​ ​ 29 Table of Contents The following table provides information on repurchases by the Company of its common stock under the Company’s stock repurchase program during the three months ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Shares ​ Maximum Number of ​ ​ ​ ​ ​ ​ ​ Purchased as Part of Shares that May Yet Be ​ Total Number of ​ Average Price Paid Publicly Announced Purchased Under the Period ​ Shares Purchased ​ ​ Per Share ​ Plans or Programs ​ Plans or Programs October 1 - 31, 2023 ​ 200,655 $ 14.87 200,655 697,998 November 1 - 30, 2023 ​ 124,700 ​ ​ 16.07 ​ 124,700 ​ 573,298 December 1 - 31, 2023 ​ - ​ ​ - ​ - ​ 573,298 Total ​ 325,355 ​ ​ ​ ​ 325,355 ​ ​ ​ ​ ​
Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information regarding outstanding options and shares outstanding under the Company’s previously disclosed 2022 Equity Incentive Plan at December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (a) ​ ​ (b) ​ (c) ​ ​ ​ ​ ​ ​ ​ Numbers of Securities ​ ​ ​ ​ ​ ​ ​ Remaining Available ​ ​ ​ ​ ​ ​ ​ for Future Issuance ​ ​ Numbers of Securities to ​ ​ Weighted-Average ​ Under Equity ​ ​ be Issued Upon Exercise ​ ​ Exercise Price of ​ Compensation Plans ​ of Outstanding Options, ​ Outstanding Options, (Excluding Securities Period ​ Warrants and Rights ​ ​ Warrants and Rights ​ Reflected in Column (a)) Equity compensation plan approved by security holders ​ 978,408 $ 13.67 98,311 Equity compensation plan not approved by security holders ​ - ​ ​ - ​ - Total ​ 978,408 ​ ​ ​ ​ 98,311 ​ Share Repurchases On July 27, 2022, the Company announced that its Board of Directors had authorized a stock repurchase program to acquire up to 1,637,794 shares, or 10%, of the Company's currently issued and outstanding common stock commencing on August 1, 2022.
Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information regarding outstanding options and shares outstanding under the Company’s previously disclosed 2022 Equity Incentive Plan at December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (a) ​ ​ (b) ​ (c) ​ ​ ​ ​ ​ ​ ​ Numbers of Securities ​ ​ ​ ​ ​ ​ ​ Remaining Available ​ ​ ​ ​ ​ ​ ​ for Future Issuance ​ ​ Numbers of Securities to ​ ​ Weighted-Average ​ Under Equity ​ ​ be Issued Upon Exercise ​ ​ Exercise Price of ​ Compensation Plans ​ of Outstanding Options, ​ Outstanding Options, (Excluding Securities Period ​ Warrants and Rights ​ ​ Warrants and Rights ​ Reflected in Column (a)) Equity compensation plan approved by security holders ​ 880,097 $ 13.67 98,311 Equity compensation plan not approved by security holders ​ - ​ ​ - ​ - Total ​ 880,097 ​ ​ ​ ​ 98,311 ​ Share Repurchases On July 27, 2022, the Company announced that its Board of Directors had authorized a stock repurchase program to acquire up to 1,637,794 shares, or 10%, of the Company's currently issued and outstanding common stock commencing on August 1, 2022.
Dividends The Company has historically paid a quarterly cash dividend to stockholders. During the year ended December 31, 2022, the Company paid regular quarterly cash dividends of $0.06 per share.
Dividends The Company has historically paid a quarterly cash dividend to stockholders. During the year ended December 31, 2023 and 2022, the Company paid regular quarterly cash dividends of $0.06 per share.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The common stock of the Company is traded on the Nasdaq Capital Market under the ticker symbol “NECB.” Holders The number of shareholders of record of the Company at March 30, 2023 was 321.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The common stock of the Company is traded on the Nasdaq Capital Market under the ticker symbol “NECB.” Holders The number of shareholders of record of the Company at March 28, 2024 was 317.
Added
The stock repurchase program was the Company’s first repurchase program since completing its second-step conversion and related stock offering in July 2021.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2022 ​ ​ 2021 ​ ​ ​ ​ % of Allowance % of Loans in ​ ​ ​ % of Allowance % of Loans in ​ ​ ​ ​ ​ Amount to Total ​ Category to Total ​ ​ ​ ​ ​ Amount to Total ​ Category to Total ​ ​ Amount ​ Allowance ​ Loans ​ ​ Amount ​ Allowance ​ Loans ​ ​ (Dollars in thousands) ​ Residential real estate loans: ​ ​ ​ ​ ​ One- to four-family ​ $ 11 0.20 % 0.45 % ​ $ 17 0.32 % 0.74 % Multifamily ​ 479 8.75 10.14 ​ 481 9.18 8.68 ​ Mixed-use ​ 38 0.69 1.73 ​ 73 1.39 2.95 ​ Non-residential real estate loans ​ 131 2.39 2.08 ​ 381 7.27 5.14 ​ Construction loans ​ 3,835 70.06 75.32 ​ 3,143 59.96 70.29 ​ Commercial and industrial ​ 955 17.45 10.24 ​ 973 18.56 12.17 ​ Consumer loans ​ 18 0.33 0.04 ​ 10 0.19 0.03 ​ Total general allowance ​ $ 5,467 99.87 % 100.00 % ​ $ 5,078 96.87 % 100.00 % Unallocated ​ 7 0.13 — ​ 164 3 — Total allowance for loan losses ​ $ 5,474 100.00 % 100.00 % ​ $ 5,242 100.00 % 100.00 % ​ 45 Table of Contents The following table sets forth an analysis of the activity in the allowance for loan losses for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended December 31, ​ ​ ​ 2022 2021 ​ ​ (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans net of deferred fees ​ $ 1,217,693 ​ $ 973,335 ​ Average loans outstanding ​ 1,054,577 ​ 866,518 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance at beginning of period ​ $ 5,242 ​ $ 5,088 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs: ​ ​ ​ Residential real estate loans: ​ ​ ​ One- to four-family ​ — ​ — ​ Multifamily ​ — ​ (150) ​ Mixed-use ​ (103) ​ — ​ Total residential real estate loans ​ (103) ​ (150) ​ Non-residential real estate loans ​ (53) ​ 3,591 ​ Construction loans ​ 328 ​ — ​ Commercial and industrial loans ​ — ​ — ​ Consumer loans ​ 35 ​ 15 ​ Total net charge-offs ​ 207 ​ 3,456 ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for loan losses ​ 439 ​ 3,610 ​ Allowance at end of period ​ $ 5,474 ​ $ 5,242 ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loan outstanding: ​ ​ ​ Residential real estate loans: ​ ​ ​ One- to four-family ​ 6,213 ​ 5,490 ​ Multifamily ​ 83,907 ​ 84,748 ​ Mixed-use ​ 24,333 ​ 28,263 ​ Total residential real estate loans ​ 114,453 ​ 118,501 ​ Non-residential real estate loans ​ 33,531 ​ 52,094 ​ Construction loans ​ 795,340 ​ 602,585 ​ Commercial and industrial loans ​ 110,452 ​ 93,101 ​ Consumer loans ​ 501 ​ 237 ​ Total ​ 1,054,277 ​ 866,518 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs as a percentage of average loans outstanding ​ ​ ​ Residential real estate loans: ​ ​ ​ One- to four-family ​ — % — % Multifamily ​ — ​ (0.18) ​ Mixed-use ​ (0.42) ​ — ​ Total residential real estate loans ​ (0.09) ​ (0.13) ​ Non-residential real estate loans ​ (0.16) ​ 6.89 ​ Construction loans ​ 0.04 ​ — ​ Commercial and industrial loans ​ — ​ — ​ Consumer loans ​ 6.99 ​ 6.33 ​ Total net charge-offs ​ 0.02 % 0.40 % ​ ​ ​ ​ ​ ​ ​ ​ Credit Quality Ratios: ​ ​ ​ ​ ​ ​ ​ As a percentage of year-end loans, net of unearned income: ​ ​ ​ ​ ​ ​ ​ Allowance for loan loss ​ 0.45 % 0.54 % Nonaccrual loans ​ ​ — % ​ — % Nonperforming loans ​ ​ — % ​ — % Allowance for loan losses to nonaccrual loans ​ — % — % Allowance for loan losses to nonperforming loans ​ — % — % ​ 46 Table of Contents The allowance for loan losses increased by $232,000 to $5.5 million at December 31, 2022 from $5.2 million at December 31, 2021.
Biggest changeAs a result, our banking regulators could require us to increase our allowance for credit losses - loans. ​ The following table sets forth the breakdown of the allowance for credit losses by loan category at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2023 ​ ​ 2022 ​ ​ ​ ​ % of Allowance % of Loans in ​ ​ ​ % of Allowance % of Loans in ​ ​ ​ ​ ​ Amount to Total ​ Category to Total ​ ​ ​ ​ ​ Amount to Total ​ Category to Total ​ ​ Amount ​ Allowance ​ Loans ​ ​ Amount ​ Allowance ​ Loans ​ ​ (Dollars in thousands) ​ Residential real estate loans: ​ ​ ​ ​ ​ One- to four-family ​ $ 44 0.86 % 0.33 % ​ $ 11 0.20 % 0.45 % Multifamily ​ 2,186 42.92 12.54 ​ 479 8.75 10.14 ​ Mixed-use ​ 203 3.99 1.87 ​ 38 0.69 1.80 ​ Non-residential real estate loans ​ 126 2.47 1.33 ​ 131 2.39 2.08 ​ Construction loans ​ 1,914 37.58 76.85 ​ 3,835 70.06 76.45 ​ Commercial and industrial ​ 472 9.27 7.00 ​ 955 17.45 9.04 ​ Consumer loans ​ 148 2.91 0.08 ​ 18 0.33 0.04 ​ Total general allowance ​ $ 5,093 100.00 % 100.00 % ​ $ 5,467 99.87 % 100.00 % Unallocated ​ — - — ​ 7 0.13 — Total allowance for credit losses ​ $ 5,093 100.00 % 100.00 % ​ $ 5,474 100.00 % 100.00 % ​ 48 Table of Contents The following table sets forth an analysis of the activity in the allowance for credit losses related to loans for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended December 31, ​ ​ ​ 2023 2022 ​ ​ (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans net of deferred fees ​ $ 1,586,897 ​ $ 1,217,693 ​ Average loans outstanding ​ 1,401,492 ​ 1,054,577 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance at beginning of period ​ $ 5,474 ​ $ 5,242 ​ ​ ​ ​ ​ ​ ​ ​ ​ Impact of adopting ASC 326 ​ ​ (1,584) ​ ​ — ​ Net charge-offs: ​ ​ ​ Residential real estate loans: ​ ​ ​ One- to four-family ​ — ​ — ​ Multifamily ​ — ​ — ​ Mixed-use ​ — ​ (103) ​ Total residential real estate loans ​ — ​ (103) ​ Non-residential real estate loans ​ — ​ (53) ​ Construction loans ​ 159 ​ 328 ​ Commercial and industrial loans ​ — ​ — ​ Consumer loans ​ 154 ​ 35 ​ Total net charge-offs ​ 313 ​ 207 ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for credit losses ​ 1,516 ​ 439 ​ Allowance at end of period ​ $ 5,093 ​ $ 5,474 ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loan outstanding: ​ ​ ​ Residential real estate loans: ​ ​ ​ One- to four-family ​ 5,240 ​ 6,213 ​ Multifamily ​ 141,836 ​ 83,907 ​ Mixed-use ​ 28,034 ​ 24,333 ​ Total residential real estate loans ​ 175,110 ​ 114,453 ​ Non-residential real estate loans ​ 23,196 ​ 33,531 ​ Construction loans ​ 1,088,219 ​ 795,340 ​ Commercial and industrial loans ​ 113,908 ​ 110,452 ​ Consumer loans ​ 1,059 ​ 501 ​ Total ​ 1,401,492 ​ 1,054,277 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs as a percentage of average loans outstanding ​ ​ ​ Residential real estate loans: ​ ​ ​ One- to four-family ​ — % — % Multifamily ​ — ​ — ​ Mixed-use ​ — ​ (0.42) ​ Total residential real estate loans ​ — ​ (0.09) ​ Non-residential real estate loans ​ — ​ (0.16) ​ Construction loans ​ 0.01 ​ 0 ​ Commercial and industrial loans ​ — ​ — ​ Consumer loans ​ 14.54 ​ 6.99 ​ Total net charge-offs ​ 0.02 % 0.02 % ​ ​ ​ ​ ​ ​ ​ ​ Credit Quality Ratios: ​ ​ ​ ​ ​ ​ ​ As a percentage of year-end loans, net of unearned income: ​ ​ ​ ​ ​ ​ ​ Allowance for credit loss ​ 0.32 % 0.45 % Nonaccrual loans ​ ​ 0.28 % ​ — % Nonperforming loans ​ ​ 0.28 % ​ — % Allowance for credit losses to nonaccrual loans ​ 116.15 % — % Allowance for credit losses to nonperforming loans ​ 116.15 % — % ​ 49 Table of Contents The allowance for credit losses related to loans decreased by $381,000 to $5.1 million at December 31, 2023 from $5.5 million at December 31, 2022.
Impact of Inflation and Changing Prices The consolidated financial statements and related notes of the have been prepared in accordance with GAAP, which generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation.
Impact of Inflation and Changing Prices The consolidated financial statements and related notes of the Company have been prepared in accordance with GAAP, which generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation.
Our results of operations also are affected by our provisions for loan losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of loan fees, service charges, and earnings on bank owned life insurance. Non-interest expense currently consists primarily of salaries and employee benefits, deposit insurance premiums, directors’ fees, occupancy and equipment, data processing and professional fees.
Our results of operations also are affected by our provisions for credit losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of loan fees, service charges, and earnings on bank owned life insurance. Non-interest expense currently consists primarily of salaries and employee benefits, deposit insurance premiums, directors’ fees, occupancy and equipment, data processing and professional fees.
The write down of $540,000 on the fair market value of a foreclosed property was due to the increase in interest rates resulting in an increase in the capitalization rate thereby reducing the calculated fair market value of the property.
The write down of $540,000 on the fair market value of a foreclosed property in 2022 was due to the increase in interest rates resulting in an increase in the capitalization rate thereby reducing the calculated fair market value of the property.
No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to 35 Table of Contents interest income or interest expense.
No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to 38 Table of Contents interest income or interest expense.
The simulation uses projected repricing of assets and liabilities at December 31, 2022. The income simulation analysis presented represents a one-year impact of the interest scenario assuming a static balance sheet. Various assumptions are made regarding the prepayment speed and optionality of loans, investment securities and deposits, which are based on analysis and market information.
The simulation uses projected repricing of assets and liabilities at December 31, 2023. The income simulation analysis presented represents a one-year impact of the interest scenario assuming a static balance sheet. Various assumptions are made regarding the prepayment speed and optionality of loans, investment securities and deposits, which are based on analysis and market information.
Our senior management team also spends 29 Table of Contents substantial time conducting construction site visits and visiting regularly with community leaders and borrowers in our high absorption communities, which enables us to understand the needs of our communities and to stay informed as to matters affecting those communities.
Our senior management team also 30 Table of Contents spends substantial time conducting construction site visits and visiting regularly with community leaders and borrowers in our high absorption communities, which enables us to understand the needs of our communities and to stay informed as to matters affecting those communities.
The results at December 31, 2022 indicate the level of risk within the parameters of our model. Our management believes that the December 31, 2022 results indicate a profile that reflects interest rate risk exposures in both rising and declining rate environments for both net interest income and economic value. Model Simulation Analysis.
The results at December 31, 2023 indicate the level of risk within the parameters of our model. Our management believes that the December 31, 2023 results indicate a profile that reflects interest rate risk exposures in both rising and declining rate environments for both net interest income and economic value. Model Simulation Analysis.
Loans classified as impaired for financial reporting purposes are generally those loans classified as substandard or doubtful for regulatory reporting purposes. An insured institution is required to establish allowances for loan losses in an amount deemed prudent by management for loans classified as substandard or doubtful, as well as for other problem loans.
Loans classified as impaired for financial reporting purposes are generally those loans classified as substandard or doubtful for regulatory reporting purposes. An insured institution is required to establish allowances for credit losses in an amount deemed prudent by management for loans classified as substandard or doubtful, as well as for other problem loans.
In addition, we have a borrowing agreement with Atlantic Community Bankers Bank (“ACBB”) to provide short-term borrowings of $8.0 million at December 31, 2022 and 2021. There were no outstanding borrowings with ACBB at December 31, 2022 and 2021.
In addition, we have a borrowing agreement with Atlantic Community Bankers Bank (“ACBB”) to provide short-term borrowings of $8.0 million at December 31, 2023 and 2022. There were no outstanding borrowings with ACBB at December 31, 2023 and 2022.
The difference between the two results reflects the relatively long terms of a portion of our assets which is captured by the economic value at risk but has less impact on the one year net interest income sensitivity. 48 Table of Contents Overall, our December 31, 2022 results indicate that we are adequately positioned with an acceptable net interest income and economic value at risk and that all interest rate risk results continue to be within our policy guidelines.
The difference between the two results reflects the relatively long terms of a portion of our assets which is captured by the economic value at risk but has less impact on the one year net interest income sensitivity. 51 Table of Contents Overall, our December 31, 2023 results indicate that we are adequately positioned with an acceptable net interest income and economic value at risk and that all interest rate risk results continue to be within our policy guidelines.
An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the institution will sustain “some loss” if the deficiencies are not corrected.
An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the 44 Table of Contents collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the institution will sustain “some loss” if the deficiencies are not corrected.
The following table sets forth certain information at December 31, 2022 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The tables do not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience 33 Table of Contents to differ from that shown below.
The following table sets forth certain information at December 31, 2023 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The tables do not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience 36 Table of Contents to differ from that shown below.
We classify an asset as “special mention” if the asset has a potential weakness that warrants management’s escalated level of attention. While 41 Table of Contents such assets are not impaired, management has concluded that if the potential weakness in the asset is not addressed, the value of the asset may deteriorate, adversely affecting the repayment of the asset.
We classify an asset as “special mention” if the asset has a potential weakness that warrants management’s escalated level of attention. While such assets are not impaired, management has concluded that if the potential weakness in the asset is not addressed, the value of the asset may deteriorate, adversely affecting the repayment of the asset.
The primary impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation. ​
The primary impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets 53 Table of Contents and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation. ​
Strong asset quality is a key to the long-term financial success of any financial institution. We have been successful in maintaining strong asset quality in recent years. Our ratio of non-performing assets to total assets was 0.10%, 0.16%, and 0.58% at December 31, 2022, 2021 and 2020, respectively.
Strong asset quality is a key to the long-term financial success of any financial institution. We have been successful in maintaining strong asset quality in recent years. Our ratio of non-performing assets to total assets was 0.33%, 0.10%, and 0.16% at December 31, 2023, 2022 and 2021, respectively.
The increase in net interest income was also due to increases in loans and investment securities, partially offset by decreases in interest-bearing deposits at other financial institutions and Federal Home Loan Bank stock as we continued to grow the Company by leveraging the proceeds raised in our July 2021 second-step conversion.
The increase in net interest income was also due to increases in the average balances of loans, partially offset by decreases in the average balances of interest-earning deposits at other financial institutions, investment securities, and Federal Home Loan Bank stock as we continued to grow the Company by leveraging the proceeds raised in our July 2021 second-step conversion.
It can identify the quantity of interest rate risk as a function of the changes in the economic values of assets and liabilities, and the corresponding change in the economic value of equity of the Bank.
It can identify the quantity of interest rate risk as a function of 50 Table of Contents the changes in the economic values of assets and liabilities, and the corresponding change in the economic value of equity of the Bank.
Economic value simulation reflects the interest rate sensitivity of assets and liabilities in a more 47 Table of Contents comprehensive fashion, reflecting all future time periods.
Economic value simulation reflects the interest rate sensitivity of assets and liabilities in a more comprehensive fashion, reflecting all future time periods.
However, during the existing low interest rate environment, we have strategically allowed these metrics to fall below the minimum thresholds at times to provide for the effective management of extension risk and other interest rate risks.
However, during the interest rate environment in 2023, we have strategically allowed these metrics to fall below the minimum thresholds at times to provide for the effective management of extension risk and other interest rate risks.
Our primary investing activities are the origination of construction loans, commercial and industrial loans, multifamily loans, and to a lesser extent, mixed-use real estate loans and other loans. For the years ended December 31, 2022 and 2021, our loan originations totaled $700.1 million and $727.3 million, respectively.
Our primary investing activities are the origination of construction loans, commercial and industrial loans, multifamily loans, and to a lesser extent, mixed-use real estate loans and other loans. For the years ended December 31, 2023 and 2022, our loan originations totaled $815.8 million and $700.1 million, respectively.
The decrease in investment advisory fees was due to a decrease in assets under management of Harbor West and a decrease in commission income from Harbor West due to market conditions.
The decrease in investment advisory fees was due to a decrease in assets under management of Harbor West, our former wealth management division, and a decrease in commission income from Harbor West due to market conditions.
The following table sets forth the stated maturities and weighted average yields of investment securities at December 31, 2022. Weighted average yields on tax-exempt securities are presented on a tax equivalent basis using a combined federal and state marginal rate of 24.9%.
The following table sets forth the stated maturities and weighted average yields of investment securities at December 31, 2023. Weighted average yields on tax-exempt securities are presented on a tax equivalent basis using a combined federal and state marginal rate of 28.5%.
Net income for the year ended December 31, 2022 was greater than the year ended December 31, 2021 primarily due to an increase in net interest income and a decrease in provision for loan losses expense, partially offset by a decrease in non-interest income, an increase in non-interest expenses, and an increase in income tax expense.
Net income for the year ended December 31, 2023 was greater than the year ended December 31, 2022 primarily due to an increase in net interest income and an increase in non-interest income, partially offset by an increase in provision for credit losses expense, an increase in non-interest expenses, and an increase in income tax expense.
We had an available borrowing limit of $31.5 million and $29.4 million from the Federal Home Loan Bank of New York as of December 31, 2022 and 2021, respectively. Federal Home Loan Bank advances were $21.0 million and $28.0 million at December 31, 2022 and 2021, respectively.
We had an available borrowing limit of $29.7 million and $31.5 million from the Federal Home Loan Bank of New York as of December 31, 2023 and 2022, respectively. Federal Home Loan Bank advances were $14.0 million and $21.0 million at December 31, 2023 and 2022, respectively.
The remaining two TDR loans with an aggregate balance of $855,000 at December 31, 2022 were to one borrower and secured by two adjacent non-residential properties but were performing in accordance with their restructured terms for the requisite period of time (generally at least six consecutive months) to be returned to accrual status.
At December 31, 2022, we had two modified loans with an aggregate balance of $855,000 to one borrower and secured by two adjacent mixed-use properties but were performing in accordance with their restructured terms for the requisite period of time (generally at least six consecutive months) to be returned to accrual status.
In the event a significant portion of our deposits are not retained by us, we will have to utilize other funding sources, such as various types of sourced deposits, and/or Federal Home Loan Bank advances, in order to maintain our level of assets. Alternatively, we could reduce our level of liquid assets, such as our cash and cash equivalents.
In the event a significant portion of our deposits are not retained by us, we will have to utilize other funding sources, such as various types of sourced deposits, Federal Home Loan Bank advances, and/or FRBNY borrowings, in order to maintain our level of assets.
Accrued interest receivable increased by $4.3 million, or 100.7%, to $8.6 million at December 31, 2022 from $4.3 million at December 31, 2021 due to an increase in the loan portfolio and seven interest rate increases in 2022 that resulted in an increase in the interest rates on loans in our construction loan portfolio.
Accrued interest receivable increased by $3.7 million, or 43.2%, to $12.3 million at December 31, 2023 from $8.6 million at December 31, 2022 due to an increase in the loan portfolio and interest rate increases in 2023 that resulted in an increase in the interest rates on loans in our construction loan portfolio.
Our Cash Liquidity ratio, On Balance Sheet Liquidity ratio, and On Balance Sheet Liquidity & Borrowing Capacity ratio averaged 11.2%, 15.5%, and 19.0%, respectively, for the year ended December 31, 2022 compared to 12.7%, 15.7%, and 21.7%, respectively, for the year ended December 31, 2021.
Our Cash Liquidity ratio, On Balance Sheet Liquidity ratio, and On Balance Sheet Liquidity & Borrowing Capacity ratio averaged 6.7%, 9.6%, and 32.7%, respectively, for the year ended December 31, 2023 compared to 11.2%, 15.5%, and 19.0%, respectively, for the year ended December 31, 2022.
Deferred loan fees totaled $372,000 and $484,000 for the years ended December 31, 2022 and 2021, respectively.
Deferred loan fees totaled $176,000 and $372,000 for the years ended December 31, 2023 and 2022, respectively.
At December 31, 2022, the Company had liquid assets of $20.3 million. Off-Balance Sheet Arrangements For the year ended December 31, 2022, we did not engage in any off-balance sheet transactions reasonably likely to have a material adverse effect on our financial condition, results of operations or cash-flows.
Off-Balance Sheet Arrangements For the year ended December 31, 2023, we did not engage in any off-balance sheet transactions reasonably likely to have a material adverse effect on our financial condition, results of operations or cash-flows.
One-year net interest income would decrease by approximately 10.75% in a declining interest rate environment over the same period. Conversely, economic value at risk would be negatively impacted by a rise in interest rates. We have established an interest rate floor of zero percent for measuring interest rate risk.
One-year net interest income would decrease by approximately 8.07% to 24.50% in a declining interest rate environment over the same period. Economic value at risk would be positively impacted by a rise in interest rates and negatively impacted by a decline in interest rates. We have established an interest rate floor of zero percent for measuring interest rate risk.
Total deposits increased by $194.8 million at December 31, 2022 due to 49 Table of Contents increases in non-interest bearing demand deposits, savings account deposits, and certificates of deposits, offset by a decrease in NOW/money market balances. Liquidity management is both a daily and long-term function of business management.
Total deposits increased by $278.1 million at December 31, 2023 due to 52 Table of Contents increases in certificates of deposits and NOW/money market deposits, offset by decreases in savings account deposits, and non-interest bearing demand deposits. Liquidity management is both a daily and long-term function of business management.
In addition, the cost of such deposits may be significantly higher or lower depending on market interest rates at the time of renewal. The Company is a separate legal entity from the Bank and must provide for its own liquidity.
Alternatively, we could reduce our level of liquid assets, such as our cash and cash equivalents. In addition, the cost of such deposits may be significantly higher or lower depending on market interest rates at the time of renewal. The Company is a separate legal entity from the Bank and must provide for its own liquidity.
For the year ended December 31, 2022, the Company had approximately $740,000 in tax exempt income, compared to approximately $711,000 in tax exempt income for the year ended December 31, 2021. The Company’s effective income tax rates were 27.8% and 23.6% for the years ended December 31, 2022 and 2021, respectively.
For the year ended December 31, 2023, the Company had approximately $1.1 million in tax exempt income, compared to approximately $740,000 in tax exempt income for the year ended December 31, 2022. The Company’s effective income tax rates were 28.5% and 27.8% for the years ended December 31, 2023 and 2022, respectively.
The following table sets forth information with respect to our non-performing assets at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ 2022 ​ 2021 ​ ​ (Dollars in thousands) Total non-accrual loans ​ $ — ​ ​ $ — ​ Total accruing loans past due 90 days or more ​ ​ — ​ ​ — ​ Total non-performing loans ​ ​ — ​ ​ — ​ Real estate owned ​ ​ 1,456 ​ ​ 1,996 ​ Total non-performing assets ​ $ 1,456 ​ ​ $ 5,568 ​ Total non-performing loans to total loans ​ — % ​ — % Total non-performing assets to total assets ​ 0.10 % ​ 0.16 % ​ During the year ended December 31, 2022, non-performing assets decreased by $540,000, or 27.1%, to $1.5 million from $2.0 million as of December 31, 2021.
The following table sets forth information with respect to our non-performing assets at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ 2023 ​ 2022 ​ ​ (Dollars in thousands) Total non-accrual loans ​ $ 4,385 ​ ​ $ — ​ Total accruing loans past due 90 days or more ​ ​ — ​ ​ — ​ Total non-performing loans ​ ​ 4,385 ​ ​ — ​ Real estate owned ​ ​ 1,456 ​ ​ 1,456 ​ Total non-performing assets ​ $ 5,841 ​ ​ $ 1,456 ​ Total non-performing loans to total loans ​ 0.37 % ​ — % Total non-performing assets to total assets ​ 0.33 % ​ 0.10 % ​ During the year ended December 31, 2023, non-performing assets increased by $4.4 million, or 301.2%, to $5.8 million from $1.5 million as of December 31, 2022.
The increase in net interest income of $20.6 million, or 47.5%, was primarily due to an increase in interest income that exceeded an increase in interest expense in a manner consistent with the increase in 37 Table of Contents interest rates attributable to the Federal Reserve’s rate increases during the year ended December 31, 2022.
The increase in net interest income of $33.3 million, or 52.2%, was primarily 40 Table of Contents due to an increase in interest income that exceeded an increase in interest expense in a manner consistent with the increase in interest rates attributable to the Federal Reserve’s rate increases during the year ended December 31, 2023.
At December 31, 2022, $852.7 million, or 70.1%, of our total loan portfolio, net of loans in process, consisted of construction loans primarily located in high demand and high absorption areas in the New York Metropolitan Area.
At December 31, 2023, $1.2 billion, or 76.9%, of our total loan portfolio, net of loans in process, consisted of construction loans primarily located in high demand and high absorption areas in the New York Metropolitan Area.
Cash received from the sales, calls, maturities and pay-downs on securities totaled $1.5 million and $4.8 million for the years ended December 31, 2022 and 2021, respectively. We purchased $10.0 million and $25.3 million in securities for the years ended December 31, 2022 and 2021, respectively.
Cash received from the sales, calls, maturities and pay-downs on securities totaled $11.2 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively. We purchased $806,000 and $10.0 million in securities for the years ended December 31, 2023 and 2022, respectively.
The increase in loans, net of the allowance for loan losses, was primarily due to loan originations of $700.1 million during the year ended December 31, 2022, consisting primarily of $580.7 million in construction loans with respect to which approximately 31.3% of the funds were disbursed at loan closings, with the remaining funds to be disbursed over the terms of the construction loans.
The increase in loans, net of the allowance for credit losses, was primarily due to loan originations of $815.8 million during the year ended December 31, 2023, consisting primarily of $703.4 million in construction loans with respect to which approximately 38.4% of the funds were disbursed at loan closings, with the remaining funds to be disbursed over the terms of the construction loans.
The increase in the cost of interest bearing liabilities was also partially due to a shift to savings accounts from interest bearing certificates of deposits and interest bearing demand deposits as the average balances of savings accounts increased by $119.9 million, or 110.2%, from $108.9 million for the year ended December 31, 2021 to $228.8 million for the year ended December 31, 2022.
The increase in the cost of interest bearing liabilities was also partially due to a shift to interest bearing certificates of deposits and savings accounts from interest bearing demand deposits as the average balances of interest bearing certificates of deposits increased by $329.1 million, or 115.1%, from $286.0 million for the year ended December 31, 2022 to $615.1 million for the year ended December 31, 2023 and the average balances of savings accounts increased by $19.9 million, or 8.7%, from $228.8 million for the year ended December 31, 2022 to $248.7 million for the year ended December 31, 2023.
We had four impaired loans at December 31, 2021 totaling $1.6 million consisting of the four aforementioned TDR loans whereby two of the impaired TDR loans totaling 42 Table of Contents $746,000 loans were satisfied in 2022 and the other two impaired TDR loans totaling $855,000 were sold to a third party on January 5, 2023 at a loss of $86,000. ​ The following table summarizes classified and criticized assets of all portfolio types at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ 2022 2021 ​ ​ (In thousands) Classified loans: ​ ​ ​ Substandard ​ $ 855 ​ $ 746 Doubtful ​ — ​ — Loss ​ — ​ — Total classified loans ​ 855 ​ 746 Special mention ​ 946 ​ — Total criticized loans ​ $ 1,801 ​ $ 746 ​ On the basis of management’s review of our assets, we had one loan totaling $946,000 classified as special mention at December 31, 2022 compared to no assets classified as special mention at December 31, 2021.
We subsequently sold these two loans to a third party in January 2023 at a loss of $86,000. 45 Table of Contents The following table summarizes classified and criticized assets of all portfolio types at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ 2023 2022 ​ ​ (In thousands) Classified loans: ​ ​ ​ Substandard ​ $ 4,385 ​ $ 855 Doubtful ​ — ​ — Loss ​ — ​ — Total classified loans ​ 4,385 ​ 855 Special mention ​ 915 ​ 946 Total criticized loans ​ $ 5,300 ​ $ 1,801 ​ On the basis of management’s review of our assets, we had two loans totaling $4.4 million classified as substandard at December 31, 2023 compared to two loans totaling $855,000 classified as substandard at December 31, 2022.
The provision for loan losses during 2022 was primarily attributable to charge-offs totaling $426,000 comprising of a $328,000 charge-off against one construction project in connection with the sale to a third party of the project’s two non-performing loans precipitated by legal action between the two partners/borrowers in the project, an $86,000 charge-off against two mixed-used loans to a borrower in connection with the sale of the two performing troubled debt restructured loans to a third party, and a $34,000 charge-off against various unpaid overdrafts in our demand deposit accounts.
The charge-offs of $449,000 during the year ended December 31, 2022 were comprised of a $328,000 charge-off against one construction project in connection with the sale of the project’s two non-performing loans to a third party precipitated by legal action between the two partners/borrowers in the project, an $86,000 charge-off against two mixed-use loans to a borrower in connection with the sale of the two performing troubled debt restructured loans to a third party, and $35,000 charge-offs against various unpaid overdrafts in our demand deposit accounts.
At December 31, 2022, we had unfunded commitments on construction loans of $637.4 million, outstanding commitments to originate loans of $164.9 million, unfunded commitments under lines of credit of $133.9 million, and unfunded standby letters of credit of $12.5 million. At December 31, 2022, certificates of deposit scheduled to mature in less than one year totaled $258.9 million.
At December 31, 2023, we had unfunded commitments on construction loans of $489.7 million, outstanding commitments to originate loans of $125.9 million, unfunded commitments under lines of credit of $103.0 million, and unfunded standby letters of credit of $9.5 million. At December 31, 2023, certificates of deposit scheduled to mature in less than one year totaled $596.1 million.
For example, a bank with predominantly long-term fixed-rate assets and short-term liabilities could have an adverse earnings exposure to a rising rate environment. Conversely, a short-term or variable-rate asset base funded by longer-term liabilities could be negatively affected by falling rates. This is referred to as re-pricing or maturity mismatch risk.
Depending on a bank’s asset/liability structure, adverse movements in interest rates could be either rising or falling interest rates. For example, a bank with predominantly long-term fixed-rate assets and short-term liabilities could have an adverse earnings exposure to a rising rate environment. Conversely, a short-term or variable-rate asset base funded by longer-term liabilities could be negatively affected by falling rates.
Interest and dividend income increased by $23.6 million, or 48.8%, due to an increase in the yield on interest earning assets by 107 basis points from 4.92% for the year ended December 31, 2021 to 6.00% for the year ended December 31, 2022 and an increase in the average interest earning assets of $217.5 million, or 22.1%, from $983.1 million for the year ended December 31, 2021 to $1.2 billion for the year ended December 31, 2022.
The increase in interest and dividend income was due to an increase in the average balance of interest earning assets of $316.2 million, or 26.3%, to $1.5 billion for the year ended December 31, 2023 from $1.2 billion for the year ended December 31, 2022 and an increase in the yield on interest earning assets by 273 basis points from 6.00% for the year ended December 31, 2022 to 8.73% for the year ended December 31, 2023.
We also have a limited amount of one- to four-family residential real estate loans, which we no longer originate, and consumer loans, which we originate on a very limited basis. ​ The following table shows the loan portfolio at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ ​ Amount Percent Amount Percent ​ ​ (Dollars in thousands) Residential real estate loans: ​ ​ ​ ​ One- to four-family ​ $ 5,467 0.45 ​ $ 7,189 0.74 % Multifamily ​ 123,385 10.14 ​ 84,425 8.68 ​ Mixed-use ​ 21,902 1.80 ​ 28,744 2.95 ​ Total residential real estate loans ​ 150,754 12.39 ​ 120,358 12.37 ​ Non-residential real estate loans ​ 25,324 2.08 ​ 50,016 5.14 ​ Construction loans ​ 930,628 76.45 ​ 683,830 70.29 ​ Commercial and industrial loans ​ 110,069 9.04 ​ 118,378 12.17 ​ Consumer loans ​ 546 0.04 ​ 269 0.03 ​ Total loans ​ 1,217,321 100.00 % 972,851 100.00 % Allowance for losses ​ (5,474) ​ ​ (5,242) ​ Deferred loan costs, net ​ 372 ​ ​ 484 ​ Loans, net ​ $ 1,212,219 ​ ​ ​ $ 968,093 ​ ​ Loan Maturity .
We also have a limited amount of one- to four-family residential real estate loans, which we no longer originate, and consumer loans, which we originate on a very limited basis. ​ The following table shows the loan portfolio at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ ​ Amount Percent Amount Percent ​ ​ (Dollars in thousands) Residential real estate loans: ​ ​ ​ ​ One- to four-family ​ $ 5,252 0.33 % $ 5,467 0.45 % Multifamily ​ 198,927 12.54 ​ 123,385 10.14 ​ Mixed-use ​ 29,643 1.87 ​ 21,902 1.80 ​ Total residential real estate loans ​ 233,822 14.74 ​ 150,754 12.39 ​ Non-residential real estate loans ​ 21,130 1.33 ​ 25,324 2.08 ​ Construction loans ​ 1,219,413 76.85 ​ 930,628 76.45 ​ Commercial and industrial loans ​ 111,116 7.00 ​ 110,069 9.04 ​ Consumer loans ​ 1,240 0.08 ​ 546 0.04 ​ Total loans ​ 1,586,721 100.00 % 1,217,321 100.00 % Allowance for credit losses ​ (5,093) ​ ​ (5,474) ​ Deferred loan costs, net ​ 176 ​ ​ 372 ​ Loans, net ​ $ 1,581,804 ​ ​ ​ $ 1,212,219 ​ ​ Loan Maturity .
Loans, net of the allowance for loan losses, increased by $244.1 million, or 25.2%, to $1.2 billion at December 31, 2022 from $968.1 million at December 31, 2021.
Loans, net of the allowance for credit losses, increased by $369.6 million, or 30.5%, to $1.6 billion at December 31, 2023 from $1.2 billion at December 31, 2022.
During the same time period, the average balances of interest bearing certificates of deposits decreased by $30.7 million, or 9.7%, from $316.7 million for the year ended December 31, 2021 to $286.0 million for the year ended December 31, 2022 and the average balances of interest bearing demand deposits decreased by $6.9 million, or 6.0%, from $114.9 million for the year ended December 31, 2021 to $108.1 million for the year ended December 31, 2022.
During the same time period, the average balances of interest bearing demand deposits decreased by $14.7 million, or 13.7%, from $108.1 million for the year ended December 31, 2022 to $93.4 million for the year ended December 31, 2023.
The following table sets forth the deposits as a percentage of total deposits for the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2022 ​ 2021 ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ Balance Percent Rate Balance Percent Rate ​ ​ (Dollars in thousands) Demand deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest bearing ​ $ 355,118 ​ ​ 36.31% — ​ $ 260,529 ​ ​ 32.52% — ​ NOW and money market ​ 108,077 ​ ​ 11.05% 0.95% ​ 114,940 ​ ​ 14.35% 0.53% ​ Total ​ ​ 463,195 ​ ​ 47.36% ​ 0.18% ​ ​ 375,469 ​ ​ 46.87% ​ 0.14% ​ Savings accounts ​ 228,811 ​ ​ 23.40% 2.68% ​ 108,877 ​ ​ 13.59% 0.63% ​ Certificates of deposit ​ 285,991 ​ ​ 29.24% 2.52% ​ 316,690 ​ ​ 39.54% 0.97% ​ Total ​ $ 977,997 ​ ​ 100.00% 1.59% ​ $ 801,036 ​ ​ 100.00% 0.50% ​ ​ As of December 31, 2022 and 2021, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $672.8 million and $548.2 million, respectively.
The following table sets forth the deposits as a percentage of total deposits for the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2023 ​ 2022 ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ Balance Percent Rate Balance Percent Rate ​ ​ (Dollars in thousands) Demand deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest bearing ​ $ 322,185 ​ ​ 25.18% — ​ $ 355,118 ​ ​ 36.31% — ​ NOW and money market ​ 93,426 ​ ​ 7.30% 3.07% ​ 108,077 ​ ​ 11.05% 0.95% ​ Total ​ ​ 415,611 ​ ​ 32.48% ​ 1.00% ​ ​ 463,195 ​ ​ 47.36% ​ 0.18% ​ Savings accounts ​ 248,755 ​ ​ 19.44% 2.71% ​ 228,811 ​ ​ 23.40% 2.68% ​ Certificates of deposit ​ 615,124 ​ ​ 48.08% 4.62% ​ 285,991 ​ ​ 29.24% 2.52% ​ Total ​ $ 1,279,490 ​ ​ 100.00% 3.20% ​ $ 977,997 ​ ​ 100.00% 1.59% ​ ​ As of December 31, 2023 and 2022, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $344.8 million and $672.8 million, respectively.
Non-Interest Income The following table sets forth a summary of non-interest income for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 ​ ​ (Dollars in thousands) Other loan fees and service charges ​ $ 1,994 ​ $ 1,568 Gain on disposition of equipment ​ 98 ​ 7 Earnings on bank-owned life insurance ​ 604 ​ 600 Investment advisory fees ​ 474 ​ 514 Realized and unrealized loss on equity securities ​ (1,573) ​ (389) Other ​ 86 ​ 54 Total ​ $ 1,683 ​ $ 2,354 ​ The decrease in total non-interest income was primarily due to an unrealized loss of $1.9 million in our equity securities, partially offset by a one-time capital gains distribution of $329,000 from our equity securities resulting in a net unrealized loss on equity securities of $1.6 million in 2022 compared to an unrealized loss of $389,000 in 2021.
Non-Interest Income The following table sets forth a summary of non-interest income for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 ​ ​ (Dollars in thousands) Other loan fees and service charges ​ $ 1,891 ​ $ 1,994 (Loss) gain on disposition of equipment ​ (18) ​ 98 Earnings on bank-owned life insurance ​ 1,013 ​ 604 Investment advisory fees ​ 458 ​ 474 Realized and unrealized gain (loss) on equity securities ​ 294 ​ (1,573) Other ​ 105 ​ 86 Total ​ $ 3,743 ​ $ 1,683 ​ The increase in total non-interest income was primarily due to an increase of $1.9 million in unrealized gain in our equity securities, an increase of $409,000 in BOLI income, and an increase of $19,000 in other non-interest income.
Stockholders’ equity increased by $10.6 million, or 4.2% to $262.0 million at December 31, 2022, from $251.4 million at December 31, 2021.
Stockholders’ equity increased by $17.3 million, or 6.6% to $279.3 million at December 31, 2023, from $262.0 million at December 31, 2022.
The increase in stockholders’ equity was due to net income of $24.8 million for the year ended December 31, 2022, a reduction of $869,000 in unearned employee stock ownership plan shares coupled with an increase of $206,000 in earned employee stock ownership plan shares, $295,000 in other comprehensive income, and $208,000 in the amortization of restricted stock and stock options awarded in connection with the Company’s 2022 Equity Incentive Plan, partially offset by stock repurchases totaling $9.3 million and dividends paid and declared of $6.5 million.
The increase in stockholders’ equity was due to net income of $46.3 million for the year ended December 31, 2023, $1.7 million in the amortization of restricted stock and stock options granted under the Company’s 2022 Equity Incentive Plan, a reduction of $869,000 in unearned employee stock ownership plan shares coupled with an increase of $445,000 in earned employee stock ownership plan shares, and $161,000 in other 35 Table of Contents comprehensive income, partially offset by stock repurchases totaling $28.7 million, dividends paid and declared of $3.3 million, and a one-time adjustment to retained earnings of $99,000 due to the adoption of CECL.
Management uses available information to establish the appropriate level of the allowance for loan losses. Future additions or reductions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors.
Future additions or reductions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. As a result, our allowance for credit losses may not be sufficient to cover actual loan losses, and future provisions for credit losses could materially adversely affect our operating results.
Interest expense increased by $3.0 million, or 59.3%, due to an increase in average interest bearing liabilities of $76.6 million, or 13.5%, from $568.5 million for the year ended December 31, 2021 to $645.1 million for the year ended December 31, 2022 and an increase in the cost of interest bearing liabilities by 36 basis points from 0.90% for the year ended December 31, 2021 to 1.26% for the year ended December 31, 2022.
The increase in interest expense was due to an increase in the cost of interest bearing liabilities by 232 basis points from 1.26% for the year ended December 31, 2022 to 3.58% for the year ended December 31, 2023, and an increase in average interest bearing liabilities of $341.2 million, or 52.9%, to $986.3 million for the year ended December 31, 2023 from $645.1 million for the year ended December 31, 2022.
In addition, the FDIC and the New York State Department of Financial Services, as an integral part of their examination process, periodically review our allowance for loan losses and could require us to increase our allowance for loan losses.
The FDIC and the New York State Department of Financial Services, as an integral part of their examination process, periodically review our allowance for credit losses and make an assessment regarding its adequacy and the methodology employed in its determination.
Such agencies may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.
In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for credit losses. Such agencies may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.
The following table sets forth the portion of the Bank’s certificates of deposit, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of December 31, 2022: ​ ​ ​ ​ ​ ​ At ​ ​ December 31, 2022 ​ ​ (In thousands) Maturity Period: ​ Three months or less ​ $ 9,613 Over three through six months ​ 50,700 Over six through twelve months ​ 69,464 Over twelve months ​ 76,068 Total ​ $ 205,845 ​ ​ ​ ​ ​ ​ Average Balance Sheets The following tables set forth average balance sheets, average yields and costs, and certain other information for the years indicated.
We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance. ​ The following table sets forth the portion of the Bank’s certificates of deposit, by remaining time until maturity, that are in excess of the FDIC insurance limit as of December 31, 2023: ​ ​ ​ ​ ​ ​ At ​ ​ December 31, 2023 ​ ​ (In thousands) Maturity Period: ​ Three months or less ​ $ 70,969 Over three through six months ​ 23,029 Over six through twelve months ​ 58,365 Over twelve months ​ 25,749 Total ​ $ 178,112 ​ ​ ​ Average Balance Sheets The following tables set forth average balance sheets, average yields and costs, and certain other information for the years indicated.
Delinquent Loans The following table provides information about delinquencies in our loan portfolio at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2022 ​ 2021 ​ ​ Days Past Due ​ Days Past Due ​ ​ 30 – 59 60 – 89 90 or more 30 – 59 60 – 89 90 or more ​ ​ (In thousands) Residential real estate loans: ​ ​ ​ ​ ​ ​ ​ Multi-family ​ $ — ​ $ 946 ​ $ — ​ $ — ​ $ — ​ $ — Non-residential real estate loans ​ — ​ — ​ — ​ — ​ — ​ — Total ​ $ — ​ $ 946 ​ $ — ​ $ — ​ $ — ​ $ — ​ Analysis and Determination of the Allowance for Loan Losses Our allowance for loan losses is maintained at a level necessary to absorb loan losses which are both probable and reasonably estimable.
Delinquent Loans The following table provides information about delinquencies in our loan portfolio at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2023 ​ 2022 ​ ​ Days Past Due ​ Days Past Due ​ ​ 30 – 59 60 – 89 90 or more 30 – 59 60 – 89 90 or more ​ ​ (In thousands) Residential real estate loans: ​ ​ ​ ​ ​ ​ ​ Multi-family ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 946 ​ $ — Consumer loan: ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Construction loan: ​ 2,319 ​ — ​ 4,385 ​ — ​ — ​ — Total ​ $ 2,320 ​ $ — ​ $ 4,385 ​ $ — ​ $ 946 ​ $ — ​ Analysis and Determination of the Allowance for Credit Losses - Loans ​ The allowance for credit losses (“ACL”) is a valuation account that reflects management's evaluation of expected future losses in the loan portfolio.
The increase in other loan fees and service charges was due to increases of $375,000 in loan servicing fees and $194,000 in ATM and debit card usage fees, partially offset by decreases of $139,000 in loan fees and $3,000 in deposit accounts fees. ​ 39 Table of Contents Non-Interest Expense The following table sets forth an analysis of non-interest expense for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ ​ (Dollars in thousands) Salaries and employee benefits ​ $ 15,549 ​ $ 14,996 Occupancy expense ​ 2,428 ​ 2,115 Equipment ​ 1,107 ​ 993 Outside data processing ​ 1,886 ​ 1,652 Advertising ​ 299 ​ 139 Impairment loss on goodwill ​ 451 ​ — Real estate owned expense ​ 623 ​ 93 Other ​ 8,347 ​ 6,485 Total ​ $ 30,690 ​ $ 26,473 ​ Non-interest expense increased by $4.2 million, or 15.9%, to $30.7 million for the year ended December 31, 2022 from $26.5 million for the year ended December 31, 2021.
Non-Interest Expense The following table sets forth an analysis of non-interest expense for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 ​ ​ (Dollars in thousands) Salaries and employee benefits ​ $ 18,839 ​ $ 15,549 Occupancy expense ​ 2,595 ​ 2,428 Equipment ​ 1,055 ​ 1,107 Outside data processing ​ 2,210 ​ 1,886 Advertising ​ 521 ​ 299 Impairment loss on goodwill ​ — ​ 451 Loss on disposition of business ​ ​ 138 ​ ​ — Real estate owned expense ​ 93 ​ 623 Other ​ 9,770 ​ 8,347 Total ​ $ 35,221 ​ $ 30,690 ​ Non-interest expense increased by $4.5 million, or 14.8%, to $35.2 million for the year ended December 31, 2023 from $30.7 million for the year ended December 31, 2022.
Advance payments by borrowers for taxes and insurance increased by $485,000, or 25.7%, to $2.4 million at December 31, 2022 from $1.9 million at December 31, 2021 due primarily to the accumulation of tax payments from borrowers.
Advance payments by borrowers for taxes and insurance decreased by $349,000, or 14.7%, to $2.0 million at December 31, 2023 from $2.4 million at December 31, 2022 due primarily to remittance of real estate tax payments for our borrowers.
Equity securities decreased by $1.9 million, or 9.5%, to $18.0 million at December 31, 2022 from $19.9 million at December 31, 2021. The decrease in equity securities was attributable to market depreciation of $1.9 million as market interest rates increased during the year ended December 31, 2022.
Equity securities increased by $61,000, or 0.3%, to $18.1 million at December 31, 2023 from $18.0 million at December 31, 2022. The increase in equity securities was attributable to market appreciation of $61,000 due to market interest rate volatility during the year ended December 31, 2023.
Real estate owned expense increased by $530,000, or 569.9%, to $623,000 in 2022 from $93,000 in 2021 due to the write down of $540,000 in the value of the one foreclosed property in 2022, partially offset by a reduction of $10,000 in operating expenses to maintain the one real estate owned property in 2022.
Occupancy expense increased by $167,000, or 6.9%, to $2.6 million in 2023 from $2.4 million in 2022 primarily as a result of the increased cost of operating office space. 43 Table of Contents Real estate owned expense decreased by $530,000, or 85.1%, to $93,000 in 2023 from $623,000 in 2022 due to the write down of $540,000 in the value of the one foreclosed property in 2022, partially offset by an increase of $10,000 in operating expenses to maintain the one real estate owned property in 2023.
Loan originations resulted in a net increase of $246.8 million in construction loans, $39.0 million in multi-family loans, and $277,000 in consumer loans.
Loan originations during 2023 resulted in a net increase of $288.8 million in construction loans, $75.5 million in multi-family loans, $7.7 million in mixed-use loans, $1.0 million in commercial and industrial loans, and $694,000 in consumer loans.
In 2022, we collected no interest income from a loan that was in non-accrual status in 2022 and was charge-off in 2022. In 2021, we collected no interest income from a loan that was in non-accrual status in 2021 and was charge-off in 2021.
In 2023, we collected no interest income from loans that were in non-accrual status in 2023. In 2022, we collected no interest income from loans that were in non-accrual status in 2022.
In addition, the average balances of our non-interest bearing demand deposits increased by $94.6 million, or 36.3%, from $260.5 million for the year ended December 31, 2021 to $355.1 million for the year ended December 31, 2022.
The increase in the average balances of interest bearing certificates of deposits was primarily due to the funding of the loan portfolio growth. In addition, the average balances of our non-interest bearing demand deposits decreased by $32.9 million, or 9.3%, from $355.1 million for the year ended December 31, 2022 to $322.2 million for the year ended December 31, 2023.
The table below sets forth, as of December 31, 2022, the Bank’s net portfolio value, the estimated changes in our net portfolio value and net interest income that would result from the designated instantaneous parallel changes in market interest rates. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Month ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income ​ ​ Net Portfolio Value ​ ​ ​ ​ Percent ​ ​ ​ ​ ​ Percent ​ Change in Interest Rates (Basis Points) of Change ​ Estimated NPV of Change ​ +200 19.92 % ​ $ 314,474 5.00 % ​ +100 9.98 ​ ​ 308,494 3.00 ​ ​ 0 — ​ ​ 299,513 — ​ ​ -100 (10.75) % ​ $ 287,788 (3.91) % ​ ​ As of December 31, 2022, based on the scenarios above, net interest income would increase by approximately 9.98% to 19.92%, over a one-year time horizon in a rising interest rate environment.
The table below sets forth, as of December 31, 2023, the Bank’s net portfolio value, the estimated changes in our net portfolio value and net interest income that would result from the designated instantaneous parallel changes in market interest rates. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Month ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income ​ ​ Net Portfolio Value ​ ​ ​ ​ Percent ​ ​ ​ ​ ​ Percent ​ Change in Interest Rates (Basis Points) of Change ​ Estimated NPV of Change ​ +300 18.68 % ​ $ 298,388 4.25 % ​ +200 12.61 ​ ​ ​ 294,494 2.89 ​ ​ +100 6.39 ​ ​ 291,602 1.88 ​ ​ 0 — ​ ​ 286,231 — ​ ​ -100 (8.07) % ​ $ 277,917 (2.90) % ​ -200 (16.37) ​ ​ ​ 267,564 (6.52) ​ ​ -300 (24.50) ​ ​ ​ 254,985 (10.92) ​ ​ ​ As of December 31, 2023, based on the scenarios above, net interest income would increase by approximately 6.39% to 18.68%, over a one-year time horizon in a rising interest rate environment.
Loan balances exclude loans held for sale. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ 2022 ​ ​ 2021 ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ ​ Average ​ ​ Outstanding ​ ​ ​ ​ ​ Average ​ ​ ​ ​ Balance ​ ​ Interest ​ Yield/Rate ​ ​ Balance ​ ​ Interest ​ Yield/Rate ​ ​ ​ (Dollars in thousands) ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans receivable ​ $ 1,054,577 ​ ​ $ 69,992 6.64 % ​ $ 866,518 ​ ​ $ 47,898 5.53 % ​ Securities ​ ​ 42,771 ​ ​ ​ 681 1.59 ​ ​ ​ 23,026 ​ ​ ​ 320 1.39 ​ ​ Federal Home Loan Bank stock ​ ​ 1,299 ​ ​ ​ 69 5.31 ​ ​ ​ 1,576 ​ ​ ​ 71 4.51 ​ ​ Other interest-earning assets ​ ​ 101,999 ​ ​ ​ 1,260 1.24 ​ ​ ​ 91,999 ​ ​ ​ 115 0.13 ​ ​ Total interest-earning assets ​ ​ 1,200,646 ​ ​ ​ 72,002 6.00 ​ ​ ​ 983,119 ​ ​ ​ 48,404 4.92 ​ ​ Allowance for Loan Losses ​ ​ (5,387) ​ ​ ​ ​ ​ ​ ​ ​ ​ (5,154) ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-earning assets ​ ​ 79,835 ​ ​ ​ ​ ​ ​ ​ ​ 72,855 ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,275,094 ​ ​ ​ ​ ​ ​ ​ ​ $ 1,050,820 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 108,077 ​ ​ $ 918 ​ 0.85 % ​ $ 114,940 ​ ​ $ 696 0.61 % ​ Savings and club accounts ​ ​ 228,811 ​ ​ ​ 2,688 ​ 1.17 ​ ​ ​ 108,877 ​ ​ ​ 328 ​ 0.30 ​ ​ Certificates of deposit ​ ​ 285,991 ​ ​ ​ 3,938 ​ 1.38 ​ ​ ​ 316,690 ​ ​ ​ 3,335 1.05 ​ ​ Interest-bearing deposits ​ ​ 622,879 ​ ​ ​ 7,544 ​ 1.21 ​ ​ ​ 540,507 ​ ​ ​ 4,359 0.81 ​ ​ Federal Home Loan Bank advances and other ​ ​ 22,247 ​ ​ ​ 583 ​ 2.62 ​ ​ ​ 28,000 ​ ​ ​ 742 2.65 ​ ​ Total interest-bearing liabilities ​ ​ 645,126 ​ ​ $ 8,127 ​ 1.26 ​ ​ ​ 568,507 ​ ​ $ 5,101 0.90 ​ ​ Noninterest-bearing demand deposits ​ ​ 355,118 ​ ​ ​ ​ ​ ​ ​ ​ ​ 260,529 ​ ​ ​ ​ ​ ​ ​ ​ Other noninterest-bearing liabilities ​ ​ 16,137 ​ ​ ​ ​ ​ ​ ​ ​ ​ 24,310 ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ ​ 1,016,381 ​ ​ ​ ​ ​ ​ ​ ​ ​ 853,346 ​ ​ ​ ​ ​ ​ ​ ​ Total shareholders’ equity ​ ​ 258,713 ​ ​ ​ ​ ​ ​ ​ ​ ​ 197,474 ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 1,275,094 ​ ​ ​ ​ ​ ​ ​ ​ $ 1,050,820 ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ ​ ​ ​ ​ $ 63,875 ​ ​ ​ ​ ​ ​ ​ ​ $ 43,303 ​ ​ ​ Net interest rate spread (1) ​ ​ ​ ​ ​ ​ ​ ​ 4.74 % ​ ​ ​ ​ ​ ​ ​ ​ 4.02 % ​ Net interest margin (3) ​ ​ ​ ​ ​ ​ ​ ​ 5.32 % ​ ​ ​ ​ ​ ​ ​ ​ 4.40 % ​ Net interest-earning assets (2) ​ $ 555,520 ​ ​ ​ ​ ​ ​ ​ ​ $ 414,612 ​ ​ ​ ​ ​ ​ ​ ​ Average interest-earning assets to interest-bearing liabilities ​ ​ 186.11 % ​ ​ ​ ​ ​ ​ ​ ​ 172.93 % ​ ​ ​ ​ ​ ​ ​ (1) 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.
Loan balances exclude loans held for sale. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ 2023 ​ ​ 2022 ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ ​ Average ​ ​ Outstanding ​ ​ ​ ​ ​ Average ​ ​ ​ ​ Balance ​ ​ Interest ​ Yield/Rate ​ ​ Balance ​ ​ Interest ​ Yield/Rate ​ ​ ​ (Dollars in thousands) ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans receivable ​ $ 1,401,492 ​ ​ $ 127,486 9.10 % ​ $ 1,054,577 ​ ​ $ 69,992 6.64 % ​ Securities ​ ​ 37,819 ​ ​ ​ 777 2.05 ​ ​ ​ 42,771 ​ ​ ​ 681 1.59 ​ ​ Federal Home Loan Bank stock ​ ​ 984 ​ ​ ​ 82 8.33 ​ ​ ​ 1,299 ​ ​ ​ 69 5.31 ​ ​ Other interest-earning assets ​ ​ 76,542 ​ ​ ​ 4,143 5.41 ​ ​ ​ 101,999 ​ ​ ​ 1,260 1.24 ​ ​ Total interest-earning assets ​ ​ 1,516,837 ​ ​ ​ 132,488 8.73 ​ ​ ​ 1,200,646 ​ ​ ​ 72,002 6.00 ​ ​ Allowance for credit losses ​ ​ (4,676) ​ ​ ​ ​ ​ ​ ​ ​ ​ (5,387) ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-earning assets ​ ​ 84,287 ​ ​ ​ ​ ​ ​ ​ ​ 79,835 ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,596,448 ​ ​ ​ ​ ​ ​ ​ ​ $ 1,275,094 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 93,426 ​ ​ $ 2,459 ​ 2.63 % ​ $ 108,077 ​ ​ $ 918 ​ 0.85 % ​ Savings and club accounts ​ ​ 248,755 ​ ​ ​ 6,777 ​ 2.72 ​ ​ ​ 228,811 ​ ​ ​ 2,688 ​ 1.17 ​ ​ Certificates of deposit ​ ​ 615,124 ​ ​ ​ 24,945 ​ 4.06 ​ ​ ​ 285,991 ​ ​ ​ 3,938 ​ 1.38 ​ ​ Interest-bearing deposits ​ ​ 957,305 ​ ​ ​ 34,181 ​ 3.57 ​ ​ ​ 622,879 ​ ​ ​ 7,544 1.21 ​ ​ Federal Home Loan Bank advances and other ​ ​ 29,007 ​ ​ ​ 1,116 ​ 3.85 ​ ​ ​ 22,247 ​ ​ ​ 583 ​ 2.62 ​ ​ Total interest-bearing liabilities ​ ​ 986,312 ​ ​ $ 35,297 ​ 3.58 ​ ​ ​ 645,126 ​ ​ $ 8,127 1.26 ​ ​ Noninterest-bearing demand deposits ​ ​ 322,185 ​ ​ ​ ​ ​ ​ ​ ​ ​ 355,118 ​ ​ ​ ​ ​ ​ ​ ​ Other noninterest-bearing liabilities ​ ​ 17,139 ​ ​ ​ ​ ​ ​ ​ ​ ​ 16,137 ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ ​ 1,325,636 ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,016,381 ​ ​ ​ ​ ​ ​ ​ ​ Total shareholders’ equity ​ ​ 270,812 ​ ​ ​ ​ ​ ​ ​ ​ ​ 258,713 ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 1,596,448 ​ ​ ​ ​ ​ ​ ​ ​ $ 1,275,094 ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ ​ ​ ​ ​ $ 97,191 ​ ​ ​ ​ ​ ​ ​ ​ $ 63,875 ​ ​ ​ Net interest rate spread (1) ​ ​ ​ ​ ​ ​ ​ ​ 5.15 % ​ ​ ​ ​ ​ ​ ​ ​ 4.74 % ​ Net interest margin (3) ​ ​ ​ ​ ​ ​ ​ ​ 6.41 % ​ ​ ​ ​ ​ ​ ​ ​ 5.32 % ​ Net interest-earning assets (2) ​ $ 530,525 ​ ​ ​ ​ ​ ​ ​ ​ $ 555,520 ​ ​ ​ ​ ​ ​ ​ ​ Average interest-earning assets to interest-bearing liabilities ​ ​ 153.79 % ​ ​ ​ ​ ​ ​ ​ ​ 186.11 % ​ ​ ​ ​ ​ ​ ​ (1) 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.
The increase resulted primarily from increases of $1.9 million in other operating expense, $553,000 in salaries and employee benefits, $530,000 in real estate owned expense, $451,000 in goodwill impairment loss, $313,000 in occupancy expense, $234,000 in outside data processing expense, $160,000 in advertising expense, and $114,000 in equipment expense.
The increase resulted primarily from increases of $3.3 million in salaries and employee benefits, $1.4 million in other operating expense, $324,000 in outside data processing expense, $222,000 in advertising expense, $167,000 in occupancy expense, and $138,000 in loss on the disposition of the Bank’s assets relating to the Harbor West Wealth Management Group, partially offset by decreases of $530,000 in real estate owned expense, $451,000 in goodwill impairment charges, and $52,000 in equipment expense.
Other assets increased by $655,000, or 14.0%, to $5.3 million at December 31, 2022 from $4.7 million at December 31, 2021 due to increases in suspense accounts of $641,000, tax assets of $24,000, and prepaid expense of $12,000, partially offset by decreases in securities and principal receivables of $19,000 and miscellaneous assets of $2,000.
Other assets increased by $2.7 million, or 50.7%, to $8.0 million at December 31, 2023 from $5.3 million at December 31, 2022 due to an increase in tax assets of $2.2 million and an increase in suspense accounts of $484,000.
The total column represents the sum of the prior columns. or purposes of this table, changes attributable to both rate and volume, 36 Table of Contents which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended 12/31/2022 ​ ​ Compared to ​ ​ Year Ended 12/31/2021 ​ ​ Increase (Decrease) ​ ​ Due to ​ Volume Rate Total ​ ​ (Dollars in thousands) Interest income: ​ ​ ​ Loans receivable ​ $ 11,479 ​ $ 10,615 ​ $ 22,094 Securities ​ 309 ​ 52 ​ 361 Federal Home Loan Bank stock ​ ​ (14) ​ ​ 12 ​ ​ (2) Other interest-earning assets ​ 14 ​ 1,131 ​ 1,145 Total ​ $ 11,788 ​ $ 11,810 ​ $ 23,598 Interest expense: ​ ​ ​ ​ Interest bearing demand deposit ​ $ (44) ​ $ 266 ​ $ 222 Savings accounts ​ 650 ​ 1,710 ​ 2,360 Certificates of deposits ​ (347) ​ 950 ​ 603 Borrowed money ​ (151) ​ (8) ​ (159) Total ​ 108 ​ 2,918 ​ 3,026 Net change in net interest income ​ $ 11,680 ​ $ 8,892 ​ $ 20,572 ​ Results of Operations for the Years Ended December 31, 2022 and 2021 Financial Highlights Net income for the year ended December 31, 2022 was $24.8 million compared to net income of $11.9 million for the year ended December 31, 2021.
The total column represents the sum of the prior columns. or purposes of this table, changes attributable to both rate and volume, 39 Table of Contents which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended 12/31/2023 ​ ​ Compared to ​ ​ Year Ended 12/31/2022 ​ ​ Increase (Decrease) ​ ​ Due to ​ Volume Rate Total ​ ​ (Dollars in thousands) Interest income: ​ ​ ​ Loans receivable ​ $ 27,037 ​ $ 30,457 ​ $ 57,494 Securities ​ (85) ​ 181 ​ 96 Federal Home Loan Bank stock ​ ​ (20) ​ ​ 33 ​ ​ 13 Other interest-earning assets ​ (388) ​ 3,271 ​ 2,883 Total ​ $ 26,544 ​ $ 33,942 ​ $ 60,486 Interest expense: ​ ​ ​ ​ Interest bearing demand deposit ​ $ (140) ​ $ 1,681 ​ $ 1,541 Savings accounts ​ 253 ​ 3,836 ​ 4,089 Certificates of deposits ​ 7,809 ​ 13,198 ​ 21,007 Borrowed money ​ 210 ​ 323 ​ 533 Total ​ 8,132 ​ 19,038 ​ 27,170 Net change in net interest income ​ $ 18,412 ​ $ 14,904 ​ $ 33,316 ​ Results of Operations for the Years Ended December 31, 2023 and 2022 Financial Highlights Net income for the year ended December 31, 2023 was $46.3 million compared to net income of $24.8 million for the year ended December 31, 2022.
The increase in substandard assets was primarily due to the addition of two performing mixed-use mortgage loans totaling $855,000 that were classified as TDRs and as substandard because we incurred a loss of $83,000 on the sale to a third-party of these two loans on January 5, 2023, partially offset by the satisfaction in 2022 of two performing non-residential mortgage loans totaling $746,000 that were classified as TDRs and impaired loans but has been performing and management decided at classified as substandard at December 31, 2021.
The increase in substandard assets was due to the addition of two non-performing, non-accrual construction loans totaling $4.4 million secured by the same project located in the Bronx, New York, partially offset by the sale to a third-party in January 2023 of two performing mixed-use mortgage loans totaling $855,000 that were classified as TDRs and as substandard.
The goodwill was recorded in connection with the acquisition of Harbor West Financial Planning Wealth Management Group in 2007, which is operated as a division of the Bank. The goodwill impairment in 2022 was caused primarily by the expected decrease in revenue from this division due to a decrease in clients and the resulting decrease in assets under management.
The goodwill was recorded in connection with the acquisition of Harbor West Financial Planning Wealth Management Group in 2007, which then operated as a division of the Bank until January 2024, when the Bank sold all assets related to Harbor West and discontinued offering wealth management services.
In addition, we classified $855,000 as substandard at December 31, 2022 compared to $746,000 at December 31, 2021. There were no assets classified as doubtful or loss at December 31, 2022 or 2021. The loan portfolio is reviewed on a regular basis to determine whether any loans require classification in accordance with applicable regulations.
The loan portfolio is reviewed on a regular basis to determine whether any loans require classification in accordance with applicable regulations. Not all classified assets constitute non-performing assets.
Net interest margin increased by 92 basis points, or 20.8%, during the year ended December 31, 2022 to 5.32% compared to 4.40% at December 31, 2021. Provision for Loan Losses. A provision for loan losses of $439,000 was recorded for the year ended December 31, 2022 as compared to $3.6 million for the year ended December 31, 2021.
Net interest margin increased by 109 basis points, or 20.5%, for the year ended December 31, 2023 to 6.41% compared to 5.32% for the year ended December 31, 2022.
The net unrealized loss of $1.6 million on equity securities during the 2022 period was due to a rising interest rate environment and the Federal Reserve’s interest rate increases during the year ended December 31, 2022.
The increase of $1.9 million in unrealized gain on equity was due to an unrealized gain of $294,000 on equity securities during the year ended December 31, 2023 compared to an unrealized loss of $1.6 million on equity securities during the year ended December 31, 2022.
Summary Income Statements The following table sets forth the income summary for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ Change Fiscal 2022/2021 ​ 2022 2021 $ % ​ ​ (Dollars in thousands) Net interest income ​ $ 63,875 ​ $ 43,303 ​ $ 20,572 ​ 11.03 % Provision for loan losses ​ 439 ​ 3,610 ​ (3,171) ​ 343.49 % Non-interest income ​ 1,683 ​ 2,354 ​ (671) ​ (6.33) % Non-interest expenses ​ 30,690 ​ 26,473 ​ 4,217 ​ 5.52 % Income tax expense ​ 9,586 ​ 3,669 ​ 5,917 ​ 11.79 % Net income ​ $ 24,843 ​ $ 11,905 ​ $ 12,938 ​ (3.44) % Return on average assets ​ 1.95 % 1.13 % ​ ​ ​ Return on average equity ​ 9.60 % 6.03 % ​ ​ ​ ​ Net Interest Income Net interest income totaled $63.9 million for the year ended December 31, 2022, as compared to $43.3 million for the year ended December 31, 2021.
Summary Income Statements The following table sets forth the income summary for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ Change Fiscal 2023/2022 ​ 2023 2022 $ % ​ ​ (Dollars in thousands) Net interest income ​ $ 97,191 ​ $ 63,875 ​ $ 33,316 ​ 52.16 % Provision for credit losses ​ 972 ​ 439 ​ 533 ​ 121.41 % Non-interest income ​ 3,743 ​ 1,683 ​ 2,060 ​ 122.40 % Non-interest expenses ​ 35,221 ​ 30,690 ​ 4,531 ​ 14.76 % Income tax expense ​ 18,465 ​ 9,586 ​ 8,879 ​ 92.62 % Net income ​ $ 46,276 ​ $ 24,843 ​ $ 21,433 ​ 86.27 % Return on average assets ​ 2.90 % 1.95 % ​ ​ ​ Return on average equity ​ 17.09 % 9.60 % ​ ​ ​ ​ Net Interest Income Net interest income totaled $97.2 million for the year ended December 31, 2023, as compared to $63.9 million for the year ended December 31, 2022.
The increase in our loan portfolio was partially offset by decreases in non-residential loans of $24.7 million, commercial and industrial loans of $8.3 million, mixed-use loans of $6.8 million, and residential loans of $1.7 million, coupled with normal pay-downs and principal reductions.
The increase in our loan portfolio was partially offset by decreases of $4.2 million in non-residential loans, and $215,000 in residential loans, coupled with normal pay-downs and principal reductions. The allowance for credit losses related to loans decreased to $5.1 million as of December 31, 2023 from $5.5 million as of December 31, 2022.
The increase in assets was primarily due to increases in net loans of $244.1 million, investment securities held-to-maturity of $8.5 million, accrued interest receivable of $4.3 million, and premises and equipment of $2.2 million, partially offset by decrease in cash and cash equivalents of $57.0 million and investment in equity securities of $1.9 million. 31 Table of Contents Cash and cash equivalents decreased by $57.0 million, or 37.4%, to $95.3 million at December 31, 2022 from $152.3 million at December 31, 2021.
Balance Sheet Analysis General Total assets increased by $339.2 million, or 23.8%, to $1.8 billion at December 31, 2023, from $1.4 billion at December 31, 2022. The increase in assets was primarily due to an increase in net loans of $369.6 million, partially offset by decreases in cash and cash equivalents of $26.6 million and securities held-to-maturity of $10.5 million.
These increases were partially offset by a decrease in NOW/money market accounts of $30.3 million, or 25.6%, from December 31, 2021 to December 31, 2022. ​ 32 Table of Contents Federal Home Loan Bank advances decreased by $7.0 million, or 25.0%, to $21.0 million at December 31, 2022 from $28.0 million at December 31, 2021 due to maturity of borrowings.
Federal Home Loan Bank advances decreased by $7.0 million, or 33.3%, to $14.0 million at December 31, 2023 from $21.0 million at December 31, 2022 due to the maturity of borrowings in 2023. Federal Reserve Bank borrowings increased to $50.0 million at December 31, 2023 from no such borrowings outstanding at December 31, 2022.

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