PB Bankshares(PBBK) - 2021 Q4 - Annual Report

Part I Business PB Bankshares, Inc. is a bank holding company for Presence Bank, strategically shifting to commercial lending in Pennsylvania post-2021 conversion, under federal and state regulation Lending Activities The company's lending shifted from residential to commercial real estate and industrial loans, with commercial real estate growing to 43.8% of the $253.0 million total loan portfolio in 2021 Loan Portfolio Composition (in thousands) | Loan Type | 2021 Amount | 2021 Percent | 2020 Amount | 2020 Percent | | :--- | :--- | :--- | :--- | :--- | | One- to four-family residential | $106,024 | 41.91% | $106,413 | 56.16% | | Commercial | $110,729 | 43.77% | $59,514 | 31.41% | | Construction | $13,751 | 5.44% | $8,700 | 4.59% | | Commercial and industrial | $19,417 | 7.68% | $11,801 | 6.23% | | Consumer | $3,038 | 1.20% | $3,056 | 1.61% | | Total | $252,959 | 100.00% | $189,484 | 100.00% | - The company's largest credit relationship totaled $3.6 million as of December 31, 2021, well within its legal lending limit of approximately $5.8 million[73] - In 2021, Presence Bank began participating in the Paycheck Protection Program (PPP), originating approximately $6.0 million in loans, with $859,000 remaining outstanding at year-end[61] Asset Quality Asset quality improved in 2021, with non-performing loans decreasing from 1.49% to 0.65% of total loans, primarily due to reduced residential non-performers Non-Performing Assets (in thousands) | Metric | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total non-accrual loans | $1,653 | $2,815 | | Foreclosed assets | $0 | $0 | | Total non-performing assets | $1,653 | $2,815 | | Total non-performing assets to total assets | 0.52% | 1.02% | | Total non-performing loans to total loans | 0.65% | 1.49% | - The decrease in non-performing loans was mainly due to a $941,000 reduction in non-performing one- to four-family residential real estate loans[86] Classified and Special Mention Loans (in thousands) | Classification | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Substandard loans | $2,618 | $3,839 | | Doubtful loans | $0 | $0 | | Loss loans | $0 | $0 | | Total classified loans | $2,618 | $3,839 | | Special mention loans | $625 | $1,214 | Allowance for Loan Losses The allowance for loan losses increased to $3.1 million in 2021, while the provision for loan losses significantly decreased to $287,000 due to lower COVID-19 related uncertainties Activity in Allowance for Loan Losses (in thousands) | | For the Year Ended Dec 31, 2021 | For the Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Beginning Balance | $2,854 | $1,839 | | Provision for loan losses | $287 | $760 | | Charge-offs | $0 | $(18) | | Recoveries | $4 | $273 | | Ending Balance | $3,145 | $2,854 | | Allowance to total loans | 1.24% | 1.51% | | Allowance to non-accrual loans | 190.26% | 101.39% | - The provision for loan losses decreased by $473,000 (62.2%) in 2021, primarily because the prior year's provision was higher to account for the uncertain impacts of the COVID-19 pandemic[96] Sources of Funds Deposits, the primary funding source, grew 8.5% to $251.1 million in 2021, driven by lower-cost core deposits, while FHLB borrowings decreased to $16.7 million Deposit Composition (Average Balance, in thousands) | Account Type | 2021 Avg. Balance | 2020 Avg. Balance | | :--- | :--- | :--- | | Noninterest-bearing demand | $30,188 | $14,868 | | Interest-bearing demand | $71,879 | $61,548 | | Savings deposits | $20,465 | $18,533 | | Money market deposits | $49,388 | $33,568 | | Certificates of deposit | $81,277 | $74,843 | | Total | $253,197 | $203,360 | - At December 31, 2021, the company had borrowing capacity of approximately $107.5 million from the FHLB of Pittsburgh, with $16.7 million advanced[119] - Uninsured deposits (over $250,000) increased to $96.3 million at the end of 2021 from $73.8 million at the end of 2020[116][117] Regulation and Supervision The company and Presence Bank are extensively regulated by state and federal authorities, including the Federal Reserve, FDIC, and Pennsylvania Department of Banking, and were "well capitalized" under CBLR in 2021 - Presence Bank is regulated by the Pennsylvania Department of Banking and the FDIC, while the holding company, PB Bankshares, is regulated by the Federal Reserve Board[123][127] - The company qualifies as an "emerging growth company" under the JOBS Act, allowing for reduced reporting requirements and an extended transition period for new accounting standards[179][180] Community Bank Leverage Ratio (CBLR) | Date | Actual Ratio | Required Ratio (to be well capitalized) | | :--- | :--- | :--- | | Dec 31, 2021 | 11.65% | 8.50% | | Dec 31, 2020 | 8.15% | 8.00% | - PB Bankshares, Inc. was formed in March 2021 as the holding company for Presence Bank following its mutual to stock conversion on July 14, 2021, where 2,777,250 shares were sold at $10.00 per share[16] - The company is shifting its business strategy from a traditional thrift model to developing a commercial lending infrastructure, focusing on commercial real estate and commercial and industrial lending to small businesses[20] Consolidated Financial Highlights as of December 31, 2021 | Metric | Value (in millions) | | :--- | :--- | | Total Consolidated Assets | $314.9 | | Total Deposits | $251.1 | | Total Stockholders' Equity | $45.8 | Properties The company's properties, including its main office and three owned branches, had a net book value of $1.9 million as of December 31, 2021, with two additional leased loan production offices Office Properties as of December 31, 2021 | Location | Type | Ownership | Net Book Value | | :--- | :--- | :--- | :--- | | Coatesville | Main Office | Owned | $201,000 | | New Holland | Branch | Owned | $526,000 | | Oxford | Branch | Owned | $140,000 | | Christiana | Branch | Owned | $510,000 | | Harrisburg | LPO | Leased | — | | Elizabethtown | LPO | Leased | — | Legal Proceedings The company is involved in incidental litigation but does not anticipate any material adverse effects from pending legal proceedings as of December 31, 2021 - As of December 31, 2021, the company does not believe that any currently pending legal proceedings will have a material adverse effect on its business, financial condition or results of operations[201] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities PB Bankshares, Inc. common stock began trading on Nasdaq under "PBBK" on July 14, 2021, with no dividends paid to date and no unregistered securities sold or shares repurchased in Q4 2021 - The company's common stock has been listed on The Nasdaq Capital Market under the symbol "PBBK" since July 14, 2021[203] - PB Bankshares has never paid dividends on its common stock, with future payments subject to various legal and regulatory restrictions from the FRB, FDIC, and Pennsylvania Department of Banking[203][207][208] - There were no sales of unregistered securities or repurchases of common stock during the quarter ended December 31, 2021[209] Management's Discussion and Analysis of Financial Condition and Results of Operations Financial condition improved in 2021, with total assets growing 14.4% to $314.9 million and net income reaching $785,000, driven by loan growth and reduced loan loss provisions - Net income increased by $1.2 million to $785,000 for the year ended December 31, 2021, from a net loss of $415,000 in 2020[214][254] Year-over-Year Financial Changes | Metric | Dec 31, 2021 | Dec 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $314.9M | $275.3M | +14.4% | | Net Loans Receivable | $249.2M | $186.0M | +33.9% | | Total Deposits | $251.1M | $231.4M | +8.5% | | Stockholders' Equity | $45.8M | $22.0M | +108.6% | - The business strategy focuses on growing the loan portfolio with an emphasis on commercial real estate and commercial/industrial lending, increasing core deposits, and managing credit risk[222] - As of December 31, 2021, all 78 loans that had received short-term payment deferrals due to COVID-19 had returned to normal payment status or were paid off[220] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for PB Bankshares, Inc. for 2021 and 2020, including Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows, with accompanying notes and auditor's report Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $26,864 | $50,591 | | Net loans receivable | $249,196 | $186,045 | | Total Assets | $314,929 | $275,324 | | Liabilities & Equity | | | | Deposits | $251,130 | $231,416 | | Total Liabilities | $269,095 | $253,355 | | Total Stockholders' Equity | $45,834 | $21,969 | | Total Liabilities & Equity | $314,929 | $275,324 | Consolidated Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net interest income | $7,862 | $6,633 | | Provision for Loan Losses | $287 | $760 | | Noninterest Income | $790 | $666 | | Noninterest Expenses | $7,410 | $7,094 | | Net Income (Loss) | $785 | $(415) | | Earnings per share | $0.31 | N/A | Controls and Procedures Management concluded disclosure controls were effective as of December 31, 2021, with no material changes to internal controls, and no management assessment or auditor attestation is included as permitted for emerging growth companies - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[468] - No material changes were made to internal control over financial reporting during the fourth quarter of 2021[469] - The annual report does not include a management assessment or auditor attestation on internal control over financial reporting, as permitted for newly public and emerging growth companies[470] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance, including the Code of Ethics, will be provided in an amendment to this Form 10-K within 120 days of fiscal year-end - The company has adopted a Code of Ethics applicable to its principal officers, which is available on its website[472] - Detailed information for this item will be filed by amendment to the Annual Report on Form 10-K within 120 days of December 31, 2021[472] Executive Compensation Executive compensation details will be filed as an amendment to this Form 10-K within 120 days of December 31, 2021 - The information required for this item will be filed by amendment to the Annual Report on Form 10-K within 120 days of December 31, 2021[473] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership details will be filed as an amendment to the Form 10-K; no securities were authorized under stock-based compensation plans, and no change of control arrangements are known - The company had no securities authorized for issuance under stock-based compensation plans[474] - Detailed information on security ownership will be filed by amendment to the Annual Report on Form 10-K within 120 days of December 31, 2021[474] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence will be filed as an amendment to this Form 10-K within 120 days of December 31, 2021 - The information required for this item will be filed by amendment to the Annual Report on Form 10-K within 120 days of December 31, 2021[475] Principal Accountant Fees and Services Details on principal accountant fees and services will be filed as an amendment to this Form 10-K within 120 days of December 31, 2021 - The information required for this item will be filed by amendment to the Annual Report on Form 10-K within 120 days of December 31, 2021[476] Part IV Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed with the Form 10-K, including governance documents, employment agreements, and CEO/CFO certifications, with no financial statement schedules filed - The consolidated financial statements and the Report of Independent Registered Public Accounting Firm are filed as part of this report[477] - Exhibits filed include governance documents, executive employment agreements, and required certifications under the Sarbanes-Oxley Act[479]