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NorthEast munity Bancorp(NECB) - 2021 Q2 - Quarterly Report

Part I Financial Information Financial Statements The financial statements detail the company's financial position and performance, highlighting increased assets and net income for the periods ended June 30, 2021 Consolidated Statements of Financial Condition Total assets grew 11.2% to $1.08 billion, primarily from a surge in cash due to stock subscription proceeds, with deposits and equity also rising Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2021 | Dec 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total cash and cash equivalents | $163,835 | $69,191 | +136.8% | | Net loans | $825,214 | $819,733 | +0.7% | | Total assets | $1,076,533 | $968,221 | +11.2% | | Total deposits | $798,804 | $771,706 | +3.5% | | Stock Subscription | $74,933 | $0 | N/A | | Total liabilities | $915,686 | $814,396 | +12.4% | | Total stockholders' equity | $160,847 | $153,825 | +4.6% | Consolidated Statements of Income Net income increased by 50.2% to $3.7 million for Q2 2021, driven by higher net interest income and a reduced provision for loan losses Income Statement Summary (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $10,378 | $9,508 | $20,733 | $18,961 | | Provision for loan loss | $0 | $518 | $17 | $532 | | Net Income | $3,721 | $2,478 | $6,966 | $5,734 | | EPS (Diluted) | $0.31 | $0.21 | $0.58 | $0.48 | Consolidated Statements of Comprehensive Income Total comprehensive income for Q2 2021 was $3.715 million, slightly below net income due to a minor other comprehensive loss Comprehensive Income (in thousands) | Period | Net Income | Other Comprehensive (Loss)/Income | Total Comprehensive Income | | :--- | :--- | :--- | :--- | | Q2 2021 | $3,721 | $(6) | $3,715 | | Q2 2020 | $2,478 | $10 | $2,488 | | 6 Months 2021 | $6,966 | $(3) | $6,963 | | 6 Months 2020 | $5,734 | $20 | $5,754 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $160.8 million, primarily driven by $7.0 million in net income for the six-month period - For the six months ended June 30, 2021, stockholders' equity increased by $7.0 million, primarily due to net income of $6.966 million17 - A cash dividend of $0.03 per share was declared during the first six months of 2021, totaling $144,00017 Consolidated Statements of Cash Flows Cash and cash equivalents increased by $94.6 million, primarily from $101.5 million in financing activities, including a stock subscription Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $7,179 | $7,547 | | Net Cash Used in Investing Activities | $(14,025) | $(55,050) | | Net Cash Provided by (Used in) Financing Activities | $101,490 | $(7,745) | | Net Increase (Decrease) in Cash | $94,644 | $(55,248) | - Financing activities in the first half of 2021 were dominated by $74.9 million in proceeds from a stock subscription related to the company's second-step conversion19 Notes to Condensed Consolidated Financial Statements The notes disclose the July 2021 second-step conversion, the Bank's 'well capitalized' status, and a loan portfolio concentrated in construction loans - The company completed its second-step conversion on July 12, 2021, selling 9,784,077 shares of common stock at $10.00 per share for gross proceeds of $97.8 million22 - The Bank's principal business is originating construction loans, commercial and industrial loans, and multifamily/mixed-use residential real estate loans25 - As of June 30, 2021, the Bank met all capital adequacy requirements and was categorized as 'well capitalized' by the FDIC3739 Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Construction | $571,963 | $545,788 | | Residential real estate | $122,547 | $127,184 | | Commercial and industrial | $79,973 | $90,577 | | Non-residential real estate | $55,144 | $60,665 | | Total Loans | $829,970 | $824,708 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, noting net interest income growth, balance sheet changes, stable asset quality, and strong liquidity COVID-19 Pandemic Impact The company monitors COVID-19 impact, with payment deferrals significantly reduced from $190.8 million to $9.5 million by June 30, 2021 - The company granted payment deferrals on 195 loans totaling $190.8 million due to the COVID-19 pandemic146 - As of June 30, 2021, the number of loans in deferral status had significantly decreased to two loans with a total balance of $9.5 million146 Balance Sheet Analysis Total assets grew by $108.3 million (11.2%), primarily due to a $94.6 million cash increase from the stock offering and deposit growth - Total assets increased by $108.3 million (11.2%) to $1.076 billion at June 30, 2021163 - The primary driver of asset growth was a $94.6 million increase in cash and cash equivalents, attributed to a $74.9 million increase in stock subscriptions and a $27.1 million increase in deposits164 - Stockholders' equity increased by $7.0 million (4.6%) to $160.8 million, mainly due to net income of $7.0 million for the period173 Results of Operations Net income for Q2 2021 was $3.7 million, driven by increased net interest income and a reduced provision for loan losses Net Interest Income and Margin Comparison | Period | Net Interest Income ($M) | Net Interest Margin (%) | | :--- | :--- | :--- | | Q2 2021 | $10.4 | 4.49% | | Q2 2020 | $9.5 | 4.31% | | 6 Months 2021 | $20.7 | 4.54% | | 6 Months 2020 | $19.0 | 4.37% | - The increase in net interest income was primarily due to a 53.8% decrease in interest expense for Q2 2021, as the cost of interest-bearing liabilities fell by 89 basis points year-over-year178 - The provision for loan losses was $0 for Q2 2021 and $17,000 for the first six months of 2021, compared to $518,000 and $532,000 for the respective periods in 2020181201 Asset Quality Asset quality remained stable, with total non-performing assets at $5.6 million and non-performing loans at 0.43% of total loans Non-Performing Assets (in thousands) | Metric | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total non-accrual loans | $3,593 | $3,572 | | Real estate owned | $1,996 | $1,996 | | Total non-performing assets | $5,589 | $5,568 | | Ratio of non-performing loans to total loans | 0.43% | 0.43% | - The allowance for loan losses was $5.1 million at June 30, 2021, representing 141.78% of non-performing loans228 Liquidity and Capital Resources The company maintains adequate liquidity through deposits and earnings, with significant loan originations and FHLB borrowing capacity - Primary sources of liquidity are deposits, loan/security repayments, and earnings. Loan originations totaled $285.1 million for the six months ended June 30, 2021232234 - The company had an available borrowing limit of $41.2 million from the Federal Home Loan Bank of New York as of June 30, 2021235 - At June 30, 2021, the company had unfunded commitments on construction loans of $349.4 million and outstanding commitments to originate loans of $315.7 million238 Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk, demonstrating an asset-sensitive position where a 100 basis point rate increase boosts net interest income by 15.58% Interest Rate Sensitivity Analysis (as of June 30, 2021) | Change in Interest Rates (Basis Points) | Twelve Month Net Interest Income (% Change) | Net Portfolio Value (% Change) | | :--- | :--- | :--- | | +200 | 31.32% | 12.15% | | +100 | 15.58% | 6.24% | | 0 | — | — | | -100 | (4.65)% | (2.72)% | - The company's interest rate risk profile indicates that net interest income would increase in a rising rate environment and decrease in a falling rate environment, demonstrating an asset-sensitive position255 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report258 - No changes in internal controls over financial reporting occurred during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, these controls259 Part II Other Information Legal Proceedings The company is involved in various legal actions in the normal course of business, not expected to have a material adverse impact - The company is involved in various legal actions arising in the normal course of business, which are not expected to have a material adverse impact262 Risk Factors No material changes to the company's risk factors have occurred since the prospectus filed on May 24, 2021 - As of June 30, 2021, the company's risk factors have not changed materially from those disclosed in the prospectus filed on May 24, 2021263 Other Items (Items 2, 3, 4, 5) This section reports several items, such as Unregistered Sales of Equity Securities, as not applicable or with no information to disclose - Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 4 (Mine Safety Disclosures) are all marked as 'Not applicable'264265266 - Item 5 (Other Information) is marked as 'None'267 Exhibits This section references the Exhibit Index, listing all documents filed as part of the Form 10-Q report, including certifications and XBRL data - The report includes standard corporate governance documents, CEO/CFO certifications under Sarbanes-Oxley, and financial data formatted in XBRL271