
Part I - Financial Information Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for NorthEast Community Bancorp, Inc. as of March 31, 2022, and for the three months then ended, including statements of financial condition, income, comprehensive income, changes in stockholders' equity, and cash flows, along with accompanying notes Consolidated Statements of Financial Condition Total assets increased to $1.28 billion as of March 31, 2022, from $1.23 billion at December 31, 2021, driven primarily by growth in net loans and cash equivalents, with total liabilities also growing mainly due to increased deposits, and total stockholders' equity seeing a modest increase Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :--- | :--- | :--- | | Total Assets | $1,281,359 | $1,225,070 | | Total cash and cash equivalents | $174,684 | $152,269 | | Net loans | $1,002,224 | $968,093 | | Total Liabilities | $1,026,986 | $973,688 | | Total deposits | $991,938 | $927,164 | | Federal Home Loan Bank advances | $21,000 | $28,000 | | Total Stockholders' Equity | $254,373 | $251,382 | Consolidated Statements of Income For the three months ended March 31, 2022, net income increased to $3.6 million from $3.2 million in the prior-year period, driven by a 15.2% increase in net interest income to $11.9 million, with earnings per share (EPS) rising to $0.23 from $0.20 year-over-year Consolidated Income Statement Highlights (Unaudited) | Income Statement Item | Three Months Ended Mar 31, 2022 (In thousands) | Three Months Ended Mar 31, 2021 (In thousands) | | :--- | :--- | :--- | | Net Interest Income | $11,925 | $10,355 | | Provision for loan loss | $0 | $17 | | Total Non-Interest Income | $58 | $443 | | Total Non-Interest Expenses | $7,220 | $6,554 | | Net Income | $3,645 | $3,245 | | EPS (Basic and Diluted) | $0.23 | $0.20 | Consolidated Statements of Cash Flows For the three months ended March 31, 2022, cash and cash equivalents increased by $22.4 million, primarily due to net cash provided by financing activities of $57.2 million (driven by deposit growth), which offset net cash used in investing activities of $35.6 million (mainly from loan portfolio growth) Consolidated Cash Flow Highlights (Unaudited) | Cash Flow Item | Three Months Ended Mar 31, 2022 (In thousands) | Three Months Ended Mar 31, 2021 (In thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $828 | $4,598 | | Net Cash Used in Investing Activities | ($35,591) | ($11,293) | | Net Cash Provided by (Used in) Financing Activities | $57,178 | ($6,630) | | Net Increase (Decrease) in Cash | $22,415 | ($13,325) | | Cash and Cash Equivalents – Ending | $174,684 | $55,866 | Notes to Condensed Consolidated Financial Statements The notes provide detailed information on accounting policies, regulatory capital, financial instruments, and other key aspects of the financial statements, confirming the Bank remains 'well capitalized' under regulatory standards, with a loan portfolio heavily concentrated in construction loans that grew during the quarter, and the company has not yet adopted the CECL accounting standard - The Bank's principal business is originating construction loans, which comprised the largest portion of its loan portfolio at $736.7 million as of March 31, 20222859 Bank Regulatory Capital Ratios (as of March 31, 2022) | Capital Ratio | Actual Ratio | Minimum for Adequacy | Minimum to be Well-Capitalized | | :--- | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | 15.03% | ≥8.00% | ≥10.00% | | Tier 1 capital (to risk-weighted assets) | 14.64% | ≥6.00% | ≥8.00% | | Common equity tier 1 capital | 14.64% | ≥4.50% | ≥6.50% | | Core (Tier 1) capital (to adjusted total assets) | 16.03% | ≥4.00% | ≥5.00% | - The company has elected to defer the adoption of the Current Expected Credit Loss (CECL) model (ASU 2016-13) until January 1, 2023, as permitted by the CARES Act159 - As of March 31, 2022, the company had no loans in deferral status under the CARES Act, down from a peak of 196 loans totaling $190.9 million82148 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for Q1 2022, highlighting a 4.6% increase in total assets to $1.3 billion, driven by a $34.1 million growth in net loans, with net income rising to $3.6 million from $3.2 million year-over-year primarily due to higher net interest income, and asset quality remaining strong with no non-performing loans, and liquidity deemed adequate Balance Sheet Analysis Total assets grew by $56.3 million (4.6%) to $1.3 billion at March 31, 2022, from year-end 2021, primarily funded by a $64.8 million (7.0%) rise in total deposits, which supported a $34.1 million (3.5%) expansion in the net loan portfolio, mainly in construction loans, while FHLB advances were reduced by $7.0 million - Total assets increased by $56.3 million, or 4.6%, to $1.3 billion at March 31, 2022162 - Net loans increased by $34.1 million, or 3.5%, primarily due to $121.8 million in loan originations, of which $112.8 million were construction loans165 - Total deposits increased by $64.8 million, or 7.0%, led by a $50.4 million increase in non-interest bearing demand deposits170172 Results of Operations Net income for Q1 2022 was $3.6 million, up from $3.2 million in Q1 2021, with net interest income growing 15.2% to $11.9 million driven by a larger average balance of interest-earning assets, though the net interest margin compressed by 51 basis points to 4.08%, while non-interest income fell sharply due to an unrealized loss on equity securities, and non-interest expense increased by 10.2% due to higher operating and personnel costs - Net interest income increased by $1.5 million (15.2%) year-over-year, due to a $268.0 million increase in the average balance of interest-earning assets177179 - Net interest margin decreased by 51 basis points to 4.08% for Q1 2022 from 4.59% in Q1 2021182 - The company recorded no provision for loan losses in Q1 2022, compared to a $17,000 provision in Q1 2021183 - Non-interest income decreased to $58,000 from $443,000, primarily due to a $634,000 unrealized loss on equity securities in Q1 2022186 Asset Quality Asset quality remained strong as of March 31, 2022, with the company reporting no non-performing loans, consistent with the end of 2021, and total non-performing assets stable at $2.0 million, consisting entirely of one real estate owned (REO) property, while the allowance for loan losses increased slightly to $5.3 million, representing 0.53% of total loans Non-Performing Assets | Asset Category | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :--- | :--- | :--- | | Total non-accrual loans | $0 | $0 | | Real estate owned | $1,996 | $1,996 | | Total non-performing assets | $1,996 | $1,996 | | Ratio of non-performing assets to total assets | 0.16% | 0.16% | - The allowance for loan losses was $5.3 million, or 0.53% of total loans, at March 31, 2022208209 Liquidity and Capital Resources The company maintains adequate liquidity through deposits, loan repayments, and earnings, with an available borrowing limit of $30.5 million from the FHLB of New York and $8.0 million from ACBB as of March 31, 2022, and significant unfunded commitments including $435.7 million for construction loans and $263.8 million for loan originations - The company's primary sources of liquidity are deposits, loan prepayments, and funds from operations215 - At March 31, 2022, the company had available borrowing capacity of $30.5 million from the FHLB and $8.0 million from ACBB218219 - Unfunded commitments included $435.7 million for construction loans and $263.8 million for new loan originations220 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company manages interest rate risk by analyzing its impact on both short-term net interest income and the long-term economic value of equity, with its balance sheet positioned to benefit from rising interest rates as of March 31, 2022, projecting a 16.41% increase in net interest income over one year from a 100 basis point rate increase, while a 100 basis point decrease would lower it by 8.59% Interest Rate Sensitivity Analysis (as of March 31, 2022) | Change in Interest Rates (Basis Points) | % Change in Net Interest Income (12-Month) | % Change in Net Portfolio Value | | :--- | :--- | :--- | | +200 | 32.88% | 7.02% | | +100 | 16.41% | 3.72% | | 0 | — | — | | -100 | (8.59)% | (4.19)% | Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of the end of the period covered by this report, with no material changes made to internal controls over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2022238 - There were no changes in internal controls over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls240 Part II - Other Information Item 1. Legal Proceedings The company is involved in various legal actions in the normal course of business, but management does not expect these to have a material adverse impact on its financial condition - The company states that ongoing legal actions are not expected to have a material adverse impact on its financial condition242 Item 1A. Risk Factors There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - As of March 31, 2022, the company's risk factors have not changed materially from those disclosed in its 2021 Form 10-K243 Other Items (Items 2, 3, 4, 5, 6) This section confirms that there were no unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, or other material information to report for the period, and refers to the Exhibit Index for a list of filed exhibits - Items 2, 3, 4, and 5 are noted as 'Not applicable' or 'None'244245246247