LOANS

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

LOANS

NOTE 5 – LOANS

Loans are summarized as follows at June 30, 2022 and December 31, 2021:

	June 30, 2022			December 31, 2021
Real estate:	(unaudited)
Residential	$	379,776,653		$	319,968,234
Commercial and multi-family real estate		173,619,693			175,375,419
Construction		51,799,501			41,384,687
Commercial and industrial		2,068,871			7,905,524
Consumer:
Home equity and other		25,798,836			27,728,979
Total loans		633,063,554			572,362,843
Allowance for loan losses		(2,253,174	)		(2,153,174	)
Net loans	$	630,810,380		$	570,209,669

As a qualified Small Business Administration lender, the Bank was automatically authorized to originate loans under the Paycheck Protection Program (“PPP”). During 2020, the Bank received and processed 113 PPP applications totaling approximately $10.5 million. The Bank participated in the second round of PPP loans and during the first half of 2021, the Bank received and processed 54 applications totaling $6.9 million. All outstanding PPP loans are included in the table above under commercial and industrial loans. Since origination, the Bank has processed forgiveness applications for $13.4 million and the outstanding balance of PPP loans at June 30, 2022 and December 31, 2021 was $1.4 million and $5.8 million, respectively.

The Bank has granted loans to officers and directors of the Bank. At June 30, 2022 and December 31, 2021, such loans totaled $1,754,815 and $577,143, respectively. At June 30, 2022 and December 31, 2021 deferred loan fees were $2,127,170 and $1,249,233, respectively.

Purchased credit impaired ("PCI") loans are loans acquired at a discount primarily due to deteriorated credit quality. These loans are initially recorded at fair value at acquisition, based upon the present value of expected future cash flows, with no related allowance for loan losses. PCI loans acquired in the Gibraltar Bank acquisition totaled $4.7 million at June 30, 2022.

The following table presents changes in accretable yield for PCI loans for the six months ended June 30, 2022 and 2021.

	Three months ended June 30, 2022		Six months ended June 30, 2022		Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Balance at the beginning of period	$	160,457	$	170,075	$	217,789	$	—
Acquisition		—		—		—		217,789
Accretion		8,603		18,221		—		—
Reclassification of non-accretable discount		—		—		—		—
Balance at the end of period	$	151,854	$	151,854	$	217,789	$	217,789

NOTE 5 – LOANS (Continued)

The following table presents the activity in the allowance for loan losses by portfolio segments for the three months ended June 30, 2022 and 2021.

	Residential First Mortgage			Commercial and Multi- Family Real Estate			Construction		Commercial and Industrial			Home equity & other			Total
Three months  June 30, 2022
Allowance for loan losses:
Beginning balance	$	1,092,474		$	768,600		$	195,000	$	9,400		$	87,700		$	2,153,174
(Credit) provision for loan losses		159,450			(88,600	)		37,000		(2,400	)		(5,450	)		100,000
Loans charged off		—			—			—		—			—			—
Recoveries		—			—			—		—			—			—
Total ending allowance balance	$	1,251,924		$	680,000		$	232,000	$	7,000		$	82,250		$	2,253,174
June 30, 2021
Allowance for loan losses:
Beginning balance	$	1,185,674		$	849,000		$	48,000	$	13,500		$	86,000		$	2,182,174
(Credit) provision for loan losses		(58,980	)		4,000			6,000		(5,020	)		—			(54,000	)
Loans charged off		—			—			—		—			—			—
Recoveries		—			—			—		—			—			—
Total ending allowance balance	$	1,126,694		$	853,000		$	54,000	$	8,480		$	86,000		$	2,128,174

The following table presents the activity in the allowance for loan losses by portfolio segments for the six months ended June 30, 2022 and 2021.

	Residential First Mortgage			Commercial and Multi- Family Real Estate			Construction		Commercial and Industrial			Home equity & other			Total
Six months June 30, 2022
Allowance for loan losses:
Beginning balance	$	1,092,474		$	768,600		$	195,000	$	9,400		$	87,700		$	2,153,174
Provision for loan losses (credit)		159,450			(88,600	)		37,000		(2,400	)		(5,450	)		100,000
Loans charged off		—			—			—		—			—			—
Recoveries		—			—			—		—			—			—
Total ending allowance balance	$	1,251,924		$	680,000		$	232,000	$	7,000		$	82,250		$	2,253,174
June 30, 2021
Allowance for loan losses:
Beginning balance	$	1,254,174		$	841,000		$	45,000	$	14,000		$	87,000		$	2,241,174
Provision for loan losses (credit)		(127,480	)		12,000			9,000		(5,520	)		(1,000	)		(113,000	)
Loans charged off		—			—			—		—			—			—
Recoveries		—			—			—		—			—			—
Total ending allowance balance	$	1,126,694		$	853,000		$	54,000	$	8,480		$	86,000		$	2,128,174

NOTE 5 – LOANS (Continued)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segments and based on impairment method as of June 30, 2022 and December 31, 2021:

	Residential First Mortgage		Commercial and Multi- Family Real Estate		Construction		Commercial and Industrial		Home equity & other consumer		Total
June 30, 2022
Allowance for loan losses:
Ending allowance balance    attributable to loans:
Individually evaluated for    impairment	$	35,859	$	—	$	—	$	—	$	—	$	35,859
Collectively evaluated for    impairment		1,216,065		680,000		232,000		7,000		82,250		2,217,315
Acquired with deteriorated    credit quality		—		—		—		—		—		—
Total ending allowance balance	$	1,251,924	$	680,000	$	232,000	$	7,000	$	82,250	$	2,253,174
Loans:
Loans individually evaluated    for impairment	$	832,754	$	—	$	—	$	—	$	18,239	$	850,993
Loans collectively evaluated    for impairment		375,642,159		172,240,349		51,799,501		2,068,871		25,745,345		627,496,225
Loans acquired with deteriorated    credit quality		3,301,740		1,379,344		—		—		35,252		4,716,336
Total ending loan balance	$	379,776,653	$	173,619,693	$	51,799,501	$	2,068,871	$	25,798,836	$	633,063,554
December 31, 2021
Allowance for loan losses:
Ending allowance balance    attributable to loans:
Individually evaluated for    impairment	$	35,859	$	—	$	—	$	—	$	—	$	35,859
Collectively evaluated for    impairment		1,056,615		768,600		195,000		9,400		87,700		2,117,315
Total ending allowance balance	$	1,092,474	$	768,600	$	195,000	$	9,400	$	87,700	$	2,153,174
Loans:
Loans individually evaluated    for impairment	$	1,099,793	$	—	$	—	$	—	$	18,507	$	1,118,300
Loans collectively evaluated    for impairment		314,754,870		173,962,424		41,384,687		7,866,263		27,710,472		565,678,716
Loans acquired with deteriorated    credit quality		4,113,571		1,412,995		—		39,261		—		5,565,827
Total ending loan balance	$	319,968,234	$	175,375,419	$	41,384,687	$	7,905,524	$	27,728,979	$	572,362,843

NOTE 5 – LOANS (Continued)

Impaired loans as of and for the three and six months ended June 30, 2022 were as follows:

	Loans With no related allowance recorded		Loans with an allowance recorded		Amount of allowance for loan losses allocated
Residential first mortgages	$	1,215,530	$	173,353	$	35,859
Commercial and Multi-Family		488,849		—		—
Construction		—		—		—
Commercial & Industrial		—		—		—
Home equity & other consumer		18,239		—		—
	$	1,722,618	$	173,353	$	35,859

	Average Of individually Impaired loans for the
	Three months ended June 30, 2022		Six months ended June 30, 2022
Residential first mortgages	$	1,393,122	$	1,482,496
Commercial and Multi-Family		488,752		488,504
Construction		—		—
Commercial & Industrial		—		—
Home equity & other consumer		28,907		25,440
	$	1,910,781	$	1,996,440

Impaired loans as of December 31, 2021 and for the three and six months ended June 30, 2021 were as follows:

	Loans With no related allowance recorded		Loans with an allowance recorded		Amount of allowance for loan losses allocated
Residential first mortgages	$	1,486,469	$	174,776	$	35,859
Commercial and Multi-Family		488,003		—		—
Construction		—		—		—
Commercial & Industrial		—		—		—
Home equity & other consumer		18,507		—		—
	$	1,992,979	$	174,776	$	35,859

	Average Of individually Impaired loans for the
	Three months ended June 30, 2021		Six months ended June 30, 2021
Residential first mortgages	$	1,217,094	$	1,231,099
Commercial and Multi-Family		222,534		227,226
Construction		—		—
Commercial & Industrial		—		—
Home equity & other consumer		18,980		19,353
	$	1,458,608	$	1,477,678

NOTE 5 – LOANS (Continued)

The Bank has three residential loans totaling $469,102 that were troubled debt restructurings (“TDRs”) as of June 30, 2022, with one loan totaling $173,353 with a specific reserve of $35,859. At December 31, 2021, the Bank had four residential loans totaling $728,288 that were TDRs and one loan totaling $174,776 with a specific reserve of $35,859. The Bank has not committed to lend additional amounts as of June 30, 2022 or December 31, 2021 to customers with outstanding loans that are classified as TDRs. There were no loans modified as TDRs during the six-month periods ended June 30, 2022 or 2021. There were no TDRs in payment default within twelve months following the modification during the six months ended June 30, 2022 or 2021.

Interest income recognized on impaired loans for the three and six months ended June 30, 2022 and June 30, 2021 was nominal.

The following table presents the recorded investment in nonaccrual and loans past due 90 days or more and still on accrual, excluding PCI loans, by class of loans as of June 30, 2022 and December 31, 2021:

	Nonaccrual		Loans Past Due 90 Days or More Still Accruing
June 30, 2022
Residential	$	832,754	$	—
Home equity and other consumer		18,239		—
Total	$	850,993	$	—
December 31, 2021
Residential	$	846,037	$	—
Home equity and other consumer		18,507		—
Total	$	864,544	$	—

The Bank had no other real estate owned at either June 30, 2022 or December 31, 2021.

NOTE 5 – LOANS (Continued)

The following table presents the aging of the recorded investment in past due loans as of June 30, 2022 and December 31, 2021, by class of loans:

	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due		PCI loans		Total
June 30, 2022
Residential	$	—	$	559,838	$	286,744	$	846,582	$	375,628,331	$	3,301,740	$	379,776,653
Commercial and multi-family		—		—		—		—		172,240,349		1,379,344		173,619,693
Construction		—		—		—		—		51,799,501		—		51,799,501
Commercial and industrial		—		—		—		—		2,068,871		—		2,068,871
Home equity and other consumer		137,112		—		—		137,112		25,626,472		35,252		25,798,836
Total	$	137,112	$	559,838	$	286,744	$	983,694	$	627,363,524	$	4,716,336	$	633,063,554
December 31, 2021
Residential	$	—	$	312,616	$	857,676	$	1,170,292	$	314,684,371	$	4,113,571	$	319,968,234
Commercial and multi-family		—		—		—		—		173,962,424		1,412,995		175,375,419
Construction		—		—		—		—		41,384,687		—		41,384,687
Commercial and industrial		—		—		—		—		7,905,524		—		7,905,524
Home Equity & Consumer		27,529		—		—		27,529		27,662,189		39,261		27,728,979
Total	$	27,529	$	312,616	$	857,676	$	1,197,821	$	565,599,195	$	5,565,827	$	572,362,843

Loans greater than 89 days past due and loans on non-accrual are considered to be nonperforming.

Credit Quality Indicators

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. Commercial and multi-family real estate, commercial and industrial and construction loans are graded on an annual basis. Residential and consumer loans are primarily evaluated based on performance. Refer to the immediately preceding table for the aging of the recorded investment of these loan segments. The Bank uses the following definitions for risk ratings:

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above are considered to be Pass rated loans.

NOTE 5 – LOANS (Continued)

Based on the most recent analysis performed, the risk category of loans by class is as follows:

	Pass		Special Mention		Substandard		Doubtful		Totals
June 30, 2022
Residential	$	378,943,899	$	372,332	$	460,422	$	—	$	379,776,653
Commercial and multi-family		173,619,693		—		—		—		173,619,693
Construction		51,799,501		—		—		—		51,799,501
Commercial and industrial		2,068,871		—		—		—		2,068,871
Home equity and other consumer		25,780,597		—		18,239		—		25,798,836
Total	$	632,212,561	$	372,332	$	478,661	$	—	$	633,063,554
December 31, 2021
Residential	$	318,868,440	$	383,034	$	716,760	$	—	$	319,968,234
Commercial and multi-family		174,173,925		—		1,201,494		—		175,375,419
Construction		41,384,687		—		—		—		41,384,687
Commercial and industrial		7,905,524		—		—		—		7,905,524
Home equity and other consumer		27,710,472		—		18,507		—		27,728,979
Total	$	570,043,048	$	383,034	$	1,936,761	$	—	$	572,362,843