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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File Number: 001-40589

NorthEast Community Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland

86-3173858

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

325 Hamilton Avenue

White Plains, New York 10601

(Address of Principal Executive Offices)

(914) 684-2500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

NECB

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

  

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of August 10, 2022, there were 16,331,836 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS

`

    

    

    

    

 

    

    

Page

Part I

Financial Information

3

Item 1.

Financial Statements

3

Consolidated Statements of Financial Condition as of June 30, 2022 and December 31, 2021 (Unaudited)

3

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)

5

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)

6

Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)

7

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (Unaudited)

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

48

Item 4.

Controls and Procedures

49

Part II

Other Information

50

Item 1.

Legal Proceedings

50

Item 1A.

Risk Factors

50

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

50

Item 3.

Defaults Upon Senior Securities

50

Item 4.

Mine Safety Disclosures

50

Item 5.

Other Information

50

Item 6.

Exhibits

50

Exhibit Index

51

Signatures

52

2

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

June 30, 

December 31, 

    

2022

    

2021

(In thousands, except share

and per share amounts)

ASSETS

Cash and amounts due from depository institutions

$

14,302

$

8,344

Interest-bearing deposits

 

71,925

 

143,925

Total cash and cash equivalents

 

86,227

 

152,269

Certificates of deposit

 

100

 

100

Equity securities

 

18,879

 

19,943

Securities available-for-sale, at fair value

 

1

 

1

Securities held-to-maturity (fair value of  $24,385 and $17,620, respectively)

 

27,189

 

17,880

Loans receivable

 

1,023,622

 

972,851

Deferred loan costs, net

527

484

Allowance for loan losses

(5,467)

(5,242)

Net loans

1,018,682

 

968,093

Premises and equipment, net

 

26,215

 

23,907

Investments in restricted stock, at cost

 

1,238

 

1,569

Bank owned life insurance

 

25,588

 

25,291

Accrued interest receivable

 

5,232

 

4,283

Goodwill

 

651

 

651

Real estate owned

 

1,996

 

1,996

Property held for investment

 

1,463

 

1,481

Right of Use Assets – Operating

 

2,296

 

2,564

Right of Use Assets – Financing

 

357

 

359

Other assets

 

5,476

 

4,683

Total assets

$

1,221,590

$

1,225,070

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Liabilities:

 

  

 

  

Deposits:

 

  

 

  

Non-interest bearing

$

362,484

$

330,853

Interest bearing

 

566,116

 

596,311

Total deposits

 

928,600

 

927,164

Advance payments by borrowers for taxes and insurance

 

1,737

 

1,884

Federal Home Loan Bank advances

 

21,000

 

28,000

Lease Liability – Operating

 

2,344

 

2,604

Lease Liability – Financing

 

514

 

496

Accounts payable and accrued expenses

 

11,083

 

13,540

Total liabilities

 

965,278

 

973,688

 

  

 

  

See notes to interim unaudited consolidated financial statements.

3

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (continued)

(Unaudited)

June 30, 

December 31, 

    

2022

    

2021

(In thousands, except share

and per share amounts)

Stockholders’ equity:

 

  

 

  

Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding

 

$

 

$

Common stock, $0.01 par value; 75,000,000 shares authorized; 16,377,936 shares issued; and 16,377,936 shares outstanding

164

164

Additional paid-in capital

 

145,404

145,335

Unearned Employee Stock Ownership Plan (“ESOP”) shares

 

(7,866)

(8,301)

Retained earnings

 

118,708

114,323

Accumulated other comprehensive loss

 

(98)

(139)

Total stockholders’ equity

 

256,312

 

251,382

Total liabilities and stockholders’ equity

$

1,221,590

$

1,225,070

See notes to interim unaudited consolidated financial statements.

4

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

(In thousands, except per share amounts)

INTEREST INCOME:

 

  

 

  

  

 

  

Loans

$

14,412

$

11,575

$

27,473

$

23,302

Interest-earning deposits

 

249

11

 

304

21

Securities

 

177

90

 

335

173

Total Interest Income

 

14,838

 

11,676

 

28,112

 

23,496

INTEREST EXPENSE:

 

  

 

  

 

  

 

  

Deposits

 

1,160

1,113

 

2,337

2,395

Borrowings

 

127

176

 

288

350

Financing lease

 

9

9

 

19

18

Total Interest Expense

 

1,296

 

1,298

 

2,644

 

2,763

Net Interest Income

 

13,542

 

10,378

 

25,468

 

20,733

Provision for loan loss

 

 

 

 

17

Net Interest Income after Provision for Loan Losses

 

13,542

 

10,378

 

25,468

 

20,716

NON-INTEREST INCOME:

 

  

 

  

 

  

 

  

Other loan fees and service charges

 

627

393

 

1,018

715

Gain on disposition of equipment

 

46

7

 

46

7

Earnings on bank owned life insurance

 

150

148

 

297

295

Investment advisory fees

 

120

124

 

257

242

Unrealized (loss) gain on equity securities

 

(430)

93

 

(1,064)

(62)

Other

 

23

13

 

40

24

Total Non-Interest Income

 

536

 

778

 

594

 

1,221

NON-INTEREST EXPENSES:

 

  

 

  

 

  

 

  

Salaries and employee benefits

 

3,613

3,512

 

7,441

7,169

Occupancy expense

 

562

472

 

1,166

1,045

Equipment

 

276

239

 

566

488

Outside data processing

 

479

337

 

915

824

Advertising

 

51

24

 

105

47

Real estate owned expense

 

21

26

 

52

68

Other

 

2,005

1,699

 

3,982

3,223

Total Non-Interest Expenses

 

7,007

 

6,309

 

14,227

 

12,864

INCOME BEFORE PROVISION FOR INCOME TAXES

 

7,071

 

4,847

 

11,835

 

9,073

PROVISION FOR INCOME TAXES

 

1,678

 

1,126

 

2,797

 

2,107

NET INCOME

$

5,393

$

3,721

$

9,038

$

6,966

EARNINGS PER COMMON SHARE – BASIC AND DILUTED¹

$

0.35

$

0.23

$

0.58

$

0.43

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED¹

 

15,544

16,181

15,534

16,176

¹Shares amounts related to periods prior to the July 12, 2021 closing of the Company’s second-step conversion offering have been restated to give retroactive recognition to the 1.3400 exchange ratio applied in the conversion offering.

See notes to interim unaudited consolidated financial statements.

5

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

(In thousands)

(In thousands)

Net Income

$

5,393

$

3,721

$

9,038

$

6,966

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Defined benefit pension:

 

  

 

 

  

 

Reclassification adjustments out of accumulated other comprehensive income:

 

  

 

  

 

  

 

  

Amortization of actuarial loss¹

 

6

 

8

 

13

 

16

Actuarial loss (gain) arising during period

 

23

 

(15)

 

40

 

(21)

Total

 

29

 

(7)

 

53

 

(5)

Income tax effect²

 

(7)

 

1

 

(12)

 

2

Total other comprehensive income (loss)

 

22

 

(6)

 

41

 

(3)

Total Comprehensive Income

$

5,415

$

3,715

$

9,079

$

6,963

¹Amounts are included in salaries and employees benefits in the audited consolidated statements of income as part of net periodic pension cost. See Note 9 for further information.

²Amounts are included in provision for income taxes in the audited consolidated statements of income.

See notes to interim unaudited consolidated financial statements.

6

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Six months Ended June 30, 2022 and 2021

(Unaudited)

Accumulated

Additional

Other

Number of

Common

Paid- in

Unearned

Retained

Treasury

Comprehensive

    

Shares, net¹

    

Stock

    

Capital

    

ESOP Shares

    

Earnings

    

Stock

    

Loss

    

Total

(In thousands, except share and per share amounts)

Balance – December 31, 2020

17,721,500

$

132

$

56,901

$

(1,296)

$

105,305

$

(7,032)

$

(185)

$

153,825

Net income

 

 

 

 

 

3,245

 

 

 

3,245

Other comprehensive income

 

 

 

 

 

 

 

3

 

3

Cash dividend declared ($0.02 per share)

 

 

 

 

 

(144)

 

 

 

(144)

ESOP shares earned

 

 

 

32

 

65

 

 

 

 

97

Balance - March 31, 2021

17,721,500

$

132

$

56,933

$

(1,231)

$

108,406

$

(7,032)

$

(182)

$

157,026

Net income

 

 

 

 

 

3,721

 

 

 

3,721

Other comprehensive income (loss)

 

 

 

 

 

 

 

(6)

 

(6)

ESOP shares earned

 

 

 

41

 

65

 

 

 

 

106

Balance - June 30, 2021

17,721,500

$

132

$

56,974

$

(1,166)

$

112,127

$

(7,032)

$

(188)

$

160,847

Accumulated

Additional

Other

Number of

Common

Paid- in

Unearned

Retained

Treasury

Comprehensive

    

Shares, net

    

Stock

    

Capital

    

ESOP Shares

    

Earnings

    

Stock

    

Loss

    

Total

(In thousands, except share and per share amounts)

Balance – December 31, 2021

16,377,936

$

164

$

145,335

$

(8,301)

$

114,323

$

-

$

(139)

$

251,382

Net income

 

 

 

 

 

3,645

 

 

 

3,645

Other comprehensive income

 

 

 

 

 

 

 

19

 

19

Cash dividend declared ($0.06 per share)

 

 

 

 

 

(931)

 

 

 

(931)

ESOP shares earned

 

 

 

41

 

217

 

 

 

 

258

Balance – March 31, 2022

16,377,936

$

164

$

145,376

$

(8,084)

$

117,037

$

-

$

(120)

$

254,373

Net income

 

 

 

 

 

5,393

 

 

 

5,393

Other comprehensive income

 

 

 

 

 

 

 

22

 

22

Cash dividend declared ($0.24 per share)

 

 

 

 

 

(3,722)

 

 

 

(3,722)

ESOP shares earned

 

 

 

28

 

218

 

 

 

 

246

Balance – June 30, 2022

16,377,936

$

164

$

145,404

$

(7,866)

$

118,708

$

$

(98)

$

256,312

¹Shares amounts related to periods prior to the July 12, 2021 closing of the Company’s second-step conversion offering have been restated to give retroactive recognition to the 1.3400 exchange ratio applied in the conversion offering.

See notes to interim unaudited consolidated financial statements.

7

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30, 

    

2022

    

2021

(In thousands)

Cash Flows from Operating Activities:

 

  

 

  

Net income

$

9,038

$

6,966

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

Net accretion of securities premiums and discounts, net

 

(8)

(3)

Provision for loan losses

 

-

17

Depreciation

 

599

568

Net amortization of deferred loan fees and costs

 

277

23

Deferred income tax (benefit) expense

 

(785)

745

Unrealized loss recognized on equity securities

 

1,064

62

Earnings on bank owned life insurance

 

(297)

(295)

Gain on dispositions of premises and equipment

 

(46)

(7)

ESOP compensation expense

 

504

202

(Increase) decrease in accrued interest receivable

 

(949)

219

Decrease (increase) in other assets

 

280

(1,193)

(Decrease) increase in accounts payable - loan closing

(1,614)

222

Decrease in accounts payable and accrued expenses

 

(784)

(347)

Net Cash Provided by Operating Activities

 

7,279

 

7,179

Cash Flows from Investing Activities:

 

  

 

  

Net increase in loans

 

(52,919)

 

(8,669)

Proceeds from sale of loan

 

2,053

 

3,148

Principal repayments on securities held-to-maturity

 

737

 

793

Purchase of securities held-to-maturity

 

(10,038)

 

(4,250)

Net redemptions of restricted stock

 

331

 

26

Purchases of premises and equipment

 

(2,861)

 

(5,073)

Net Cash Used in Investing Activities

 

(62,697)

 

(14,025)

Cash Flows from Financing Activities:

 

  

 

  

Net increase in deposits

 

1,436

 

27,098

Repayment of FHLB of NY advances

 

(7,000)

 

Issuance of common stock funded by stock subscriptions

74,933

Decrease in advance payments by borrowers for taxes and insurance

 

(147)

 

(246)

Cash dividends paid

 

(4,913)

 

(295)

Net Cash (Used in) Provided by Financing Activities

 

(10,624)

 

101,490

Net (Decrease) Increase in Cash and Cash Equivalents

 

(66,042)

 

94,644

Cash and Cash Equivalents – Beginning

 

152,269

 

69,191

Cash and Cash Equivalents – Ending

$

86,227

$

163,835

See notes to interim unaudited consolidated financial statements.

8

NORTHEAST COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

Six Months Ended June 30, 

    

2022

    

2021

(In thousands)

Supplementary Cash Flows Information:

 

  

 

  

Income taxes paid

$

2,635

$

1,936

Interest paid

$

2,592

$

2,770

Supplementary Disclosure of Non-Cash Investing and Financing Activities:

 

  

 

  

Dividends declared and not paid

$

983

$