PB Bankshares(PBBK) - 2021 Q3 - Quarterly Report

Part I Financial Information Item 1. Financial Statements The unaudited condensed consolidated financial statements detail the company's financial position and performance, including the impact of its July 2021 IPO Condensed Consolidated Balance Sheets Total assets grew to $312.5 million, driven by loan growth and a significant increase in stockholders' equity from the IPO Condensed Consolidated Balance Sheets (in thousands) | | September 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $312,486 | $275,324 | | Cash and cash equivalents | $46,002 | $50,591 | | Loans receivable, net | $225,948 | $186,045 | | Total Liabilities | $266,951 | $253,355 | | Deposits | $248,547 | $231,416 | | Long-term borrowings | $16,698 | $20,553 | | Total Stockholders' Equity | $45,535 | $21,969 | Condensed Consolidated Statements of Income Net income increased significantly for the three and nine-month periods ended September 30, 2021, driven by higher net interest income Income Statement Highlights (in thousands) | | Three Months Ended Sep 30, | Nine Months Ended Sep 30, | | :--- | :--- | :--- | | | 2021 | 2020 | 2021 | 2020 | | Net interest income | $2,109 | $1,692 | $5,700 | $5,038 | | Provision for Loan Losses | $83 | $73 | $221 | $621 | | Total Noninterest Income | $186 | $166 | $537 | $493 | | Total Noninterest Expenses | $1,955 | $1,710 | $5,362 | $4,766 | | Net Income | $210 | $65 | $540 | $132 | | Net income per common share - basic and diluted | $0.08 | N/A | $0.21 | N/A | Condensed Consolidated Statements of Cash Flows Net cash from financing activities, driven by the IPO, largely offset cash used in investing activities, resulting in a net decrease in cash Cash Flow Summary for Nine Months Ended September 30 (in thousands) | | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $1,004 | $(112) | | Net Cash Used in Investing Activities | $(42,170) | $(6,913) | | Net Cash Provided by Financing Activities | $36,577 | $40,851 | | (Decrease) Increase in cash and cash equivalents | $(4,589) | $33,826 | Notes to Condensed Consolidated Financial Statements The notes detail the basis of presentation, the July 2021 mutual-to-stock conversion, COVID-19 impacts, and the bank's well-capitalized status - On July 14, 2021, the company completed its mutual-to-stock conversion and IPO, selling 2,777,250 shares at $10.00 per share for gross proceeds of $27.77 million[22][27][29] - The company granted short-term payment deferrals on 68 loans totaling $22.4 million due to COVID-19; all have returned to normal payment status[69][135] - The Bank elected to use the Community Bank Leverage Ratio (CBLR) framework and was well-capitalized, with a Tier 1 capital to average assets ratio of 11.17%[84][86][88] Loan Portfolio Composition (in thousands) | Loan Type | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | One-to four-family residential | $103,767 | $106,413 | | Commercial Real Estate | $88,495 | $59,514 | | Construction | $13,910 | $8,700 | | Commercial and industrial | $20,531 | $11,801 | | Total Loans | $229,725 | $189,484 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis highlights improved net income from loan growth and a strategic shift to commercial lending, alongside impacts from the IPO Comparison of Financial Condition Total assets grew by 13.5% to $312.5 million, fueled by IPO proceeds and significant growth in commercial loans - Gross loans increased by $40.2 million, primarily in the commercial real estate, commercial and industrial, and construction portfolios[150][152] - Stockholders' equity increased by $23.5 million (107.3%), mainly due to $26.2 million in net proceeds from the stock offering[157] Comparison of Operating Results Net income increased due to strong loan growth and a lower provision for loan losses, while noninterest expenses rose with public company costs - Net interest margin for the nine months ended Sep 30, 2021 decreased 19 basis points to 2.65% from 2.84% in the prior year period[194] - Noninterest expenses for the nine months increased by $596,000 (12.5%), primarily due to higher salaries, benefits, and public company costs[203] Net Income Comparison (in thousands) | | Three Months Ended Sep 30, | Nine Months Ended Sep 30, | | :--- | :--- | :--- | | | 2021 | 2020 | 2021 | 2020 | | Net Interest Income | $2,109 | $1,692 | $5,700 | $5,038 | | Provision for Loan Losses | $83 | $73 | $221 | $621 | | Net Income | $210 | $65 | $540 | $132 | Non-Performing Assets and Allowance for Loan Losses Non-performing loans decreased significantly to $1.7 million, improving asset quality and the allowance for loan losses coverage ratio - The provision for loan losses for the nine months ended September 30, 2021 was $221,000, a decrease from $621,000 in the same period of 2020[220] Non-Performing Assets (in thousands) | | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total non-accrual loans | $1,695 | $2,815 | | Foreclosed assets | $0 | $0 | | Total non-performing assets | $1,695 | $2,815 | | Total non-performing loans to total loans | 0.74% | 1.49% | | Total non-performing assets to total assets | 0.54% | 1.02% | Liquidity and Capital Resources The company maintains a strong liquidity position and was considered 'well capitalized' under all regulatory guidelines following its IPO - Primary sources of funds are deposits, principal and interest payments on loans and securities, and borrowings from the Federal Home Loan Bank of Pittsburgh[222] - At September 30, 2021, the company had the ability to borrow approximately $99.4 million from the FHLB of Pittsburgh, with $16.7 million advanced[222] - At September 30, 2021, Presence Bank exceeded all regulatory capital requirements and was considered 'well capitalized' under regulatory guidelines[227] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the company is not required to provide information for this item - As a smaller reporting company, PB Bankshares, Inc. is not required to provide quantitative and qualitative disclosures about market risk[232] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[233] - No changes occurred during the third quarter of 2021 that materially affected the company's internal control over financial reporting[234] Part II Other Information Item 1. Legal Proceedings The company is not a party to any legal proceedings that would materially affect its financial condition or operations - The Company is not currently a named party in any legal proceeding that would have a material effect on its financial condition or operations[236] Item 1A. Risk Factors As a smaller reporting company, the company is not required to provide information for this item - As a smaller reporting company, PB Bankshares, Inc. is not required to provide risk factor disclosures in its Form 10-Q[237] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details the use of $26.2 million in net proceeds from its July 2021 initial public offering IPO Use of Proceeds (in millions) | | Amount | | :--- | :--- | | Gross Proceeds | $27.8 | | Offering Expenses | $1.6 | | Net Proceeds | $26.2 | | Contribution to Bank | $15.7 | | Retained by Holding Company | $10.5 | Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including required CEO and CFO certifications - The report includes certifications from the CEO and CFO as required by Sections 302 and 906 of the Sarbanes-Oxley Act[246]