NorthEast munity Bancorp(NECB) - 2024 Q1 - Quarterly Report

Financial Performance - Net income for the three months ended March 31, 2024, was $11.4 million, a 1.2% increase from $11.2 million for the same period in 2023 [155]. - Net interest income totaled $25.0 million for the three months ended March 31, 2024, an increase of $2.2 million, or 9.4%, from $22.8 million for the same period in 2023 [156]. - Total interest and dividend income increased by $9.6 million, or 33.7%, to $38.1 million for the three months ended March 31, 2024, from $28.5 million for the same period in 2023 [160]. - Non-interest income decreased by $561,000, or 50.3%, to $554,000 for the three months ended March 31, 2024, primarily due to an unrealized loss of $307,000 on equity securities [169]. - The effective income tax rate increased to 29.0% for the three months ended March 31, 2024, compared to 28.7% for the same period in 2023 [185]. Asset and Liability Management - Total assets increased by $102.8 million, or 5.8%, to $1.9 billion at March 31, 2024, from $1.8 billion at December 31, 2023 [138]. - Total deposits increased by $112.0 million, or 8.0%, to $1.5 billion at March 31, 2024, from $1.4 billion at December 31, 2023 [150]. - Loans, net of the allowance for credit losses, increased by $67.8 million, or 4.3%, to $1.6 billion at March 31, 2024 [142]. - Stockholders' equity increased by $9.6 million, or 3.4%, to $288.9 million at March 31, 2024, from $279.3 million at December 31, 2023 [154]. - The allowance for credit losses related to loans decreased to $4.9 million as of March 31, 2024, from $5.1 million as of December 31, 2023 [144]. Interest Rate Risk - Interest rate risk remains a significant concern, with potential adverse effects from both rising and falling interest rates depending on the company's asset/liability structure [215]. - As of March 31, 2024, net interest income is projected to increase by approximately 7.06% to 14.01% in a rising interest rate environment over a one-year horizon [225]. - In a declining interest rate environment, one-year net interest income is expected to decrease by approximately 8.68% to 17.68% [225]. - The economic value at risk is positively impacted by rising interest rates and negatively impacted by declining rates, with an established interest rate floor of zero percent [226]. - Management employs both income simulation and economic value simulation to measure and control interest rate risk [220]. Operational Expenses - Salaries and employee benefits increased by $809,000, or 17.8%, to $5.4 million for the three months ended March 31, 2024, driven by hiring additional personnel [173]. - Non-interest expense rose by $1.5 million, or 18.2%, to $9.7 million for the three months ended March 31, 2024, mainly due to increased salaries and other operating expenses [172]. - Outside data processing expense increased by $122,000, or 23.7%, to $637,000 for the three months ended March 31, 2024, due to increased transactions [182]. - Advertising expense surged by $39,000, or 79.6%, to $88,000 for the three months ended March 31, 2024, primarily to promote deposit product interest rates [183]. Loan Performance - Loan originations for the three months ended March 31, 2024, were $180.5 million, a decrease of 15.9% from $214.7 million in the same period of 2023 [206]. - Total non-performing assets remained stable at $5.8 million as of March 31, 2024, unchanged from December 31, 2023, with a non-performing loans to total loans ratio of 0.27% [192]. - Charge-offs remained stable at $21,000 for both the three months ended March 31, 2024, and 2023, related to unpaid overdrafts in demand deposit accounts [164]. Liquidity and Borrowing - The liquidity ratios averaged 7.2% for Cash Liquidity, 9.4% for On Balance Sheet Liquidity, and 71.7% for On Balance Sheet Liquidity & Borrowing Capacity for the three months ended March 31, 2024 [202]. - The company had an available borrowing limit of $32.1 million from the Federal Home Loan Bank of New York as of March 31, 2024, an increase from $29.7 million at December 31, 2023 [207]. - The company maintained liquid assets of $2.4 million as of March 31, 2024, to meet its liquidity needs [212]. - Unfunded commitments on construction and multi-family mortgage loans totaled $477.0 million as of March 31, 2024 [210]. Interest Rate Risk Management - The simulation reports are produced quarterly and compare baseline results to interest rate shock scenarios to assess interest rate risk exposure [221]. - The interest rate risk exposure is monitored through various assumptions regarding asset and liability repricing, prepayment speeds, and optionality [222]. - The results indicate that the company is adequately positioned with acceptable net interest income and economic value at risk within policy guidelines [227]. - Management periodically reviews rate assumptions based on economic conditions and consults with industry experts to validate model results [223].