ECB Bancorp(ECBK) - 2022 Q4 - Annual Report

Financial Performance - The net income for the year ended December 31, 2022, was $2.7 million, down from $4.0 million in 2021, impacted by a $2.3 million after-tax charge related to a charitable foundation contribution [23]. - Total non-performing loans to total loans ratio was 0.07% as of December 31, 2022, down from 0.19% in 2021 [105]. - Total non-performing assets to total assets ratio was 0.06% as of December 31, 2022, compared to 0.15% in 2021 [105]. - Total charge-offs for the year were minimal at $2,000, while total recoveries were $26,000, resulting in net recoveries of $24,000 [111]. - Provision for loan losses rose significantly to $2,940,000 in 2022 compared to $360,000 in 2021, indicating an increase of 717% [111]. Loan Portfolio Composition - As of December 31, 2022, the total loan portfolio comprised $355.4 million (39.8%) in one- to four-family residential real estate loans, $242.0 million (27.1%) in multifamily real estate loans, and $156.2 million (17.5%) in commercial real estate loans [22]. - As of December 31, 2022, the total loan portfolio amounted to $893.1 million, an increase from $521.8 million in 2021 [47]. - One- to four-family residential real estate loans represented 39.8% of the total loan portfolio, totaling $355.4 million [50]. - The multifamily real estate loans reached $242.0 million, accounting for 27.1% of the total loan portfolio [60]. - Commercial real estate loans stood at $156.2 million, making up 17.5% of the total loan portfolio [60]. Lending Strategy and Operations - The company is focusing on enhancing its commercial real estate and multifamily lending operations, hiring experienced personnel to support this strategy [27]. - A new Chief Lending Officer was hired in January 2022 to strengthen the commercial real estate lending infrastructure [26]. - The management team has been enhanced to support a revised business strategy aimed at orderly loan growth and improved retail operations [31]. - The company plans to enhance its commercial real estate team and infrastructure to retain larger loans previously originated for participation [45]. - The company has revised its lending policies to increase lending limits and the types and sizes of loans it chooses to hold in its portfolio [92]. Capital and Funding Sources - The company raised approximately $89.2 million from the sale of 8,915,247 shares of common stock during its initial public offering [16]. - The company had $174.0 million in Federal Home Loan Bank advances and $100.8 million in brokered deposits outstanding as of December 31, 2022 [22]. - Deposits remained the primary source of funds for lending and investment activities, supplemented by borrowings and other income sources [126]. - As of December 31, 2022, core deposits totaled $398.3 million, representing 55.5% of total deposits of $718.1 million [127][132]. - The bank had the ability to borrow an additional $84.8 million from the Federal Home Loan Bank of Boston as of December 31, 2022 [134]. Asset Quality and Risk Management - The allowance for loan losses is maintained at a level deemed adequate to absorb probable credit losses inherent in the loan portfolio [109]. - Allowance for loan losses increased to $7,200,000 at the end of 2022 from $4,236,000 in 2021, representing a growth of 69.5% [111]. - The allowance for loan losses to non-performing loans ratio improved to 1097.56% in 2022 from 431.5% in 2021 [111]. - Special mention assets decreased from $1,563 thousand in 2021 to $467 thousand in 2022 [107]. - Total non-accrual loans amounted to $656 thousand as of December 31, 2022, down from $982 thousand in 2021 [105]. Regulatory Compliance and Capitalization - Everett Co-operative Bank's capital ratios exceeded all applicable requirements as of December 31, 2022 [162]. - The bank is considered "well capitalized" with a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, and a common equity Tier 1 ratio of 6.5% or greater [172]. - The bank's authority to extend credit to insiders is governed by Sections 22(g) and 22(h) of the Federal Reserve Act, requiring terms to be comparable to those for unaffiliated persons [167]. - The bank must comply with safety and soundness standards prescribed by federal banking agencies, which include internal controls and asset quality [170]. - ECB Bancorp is subject to regulations and reporting requirements applicable to bank holding companies, including the Home Mortgage Disclosure Act and the Equal Credit Opportunity Act [186]. Community Engagement and Customer Service - The bank's management emphasizes personal service, accessibility, and flexibility to attract and retain retail customers [128]. - The bank received a "Satisfactory" rating under the Community Reinvestment Act in its most recent federal examination [165]. - The bank is required to disclose its privacy policy and provide customers the ability to opt-out of sharing personal information with third parties [181]. - The unemployment rate in the Boston-Cambridge-Newton area was 2.7% as of December 2022, lower than the state and national rates [37]. - The bank's noninterest-bearing demand deposits were $84.9 million, accounting for 11.8% of total deposits, while interest-bearing demand deposits were $28.9 million, or 4.0% [132].