PBバンクシェアーズの四半期報告

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40612

(Exact name of registrant as specified in its charter)

Maryland

86-3947794

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

185 E Lincoln Highway

Coatesville, PA 19320

(Address of Principal Executive Offices)

(610) 384-8282

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading symbol	Name of Exchange on which registered
Common Shares, par value $0.01 per share	PBBK	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer ☐


Non-accelerated filer	☒	Smaller reporting company	☒	Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As Common Stock, $0.01 par value - 2,607,640 shares outstanding as of May 9, 2024.

Table of Contents

TABLE OF CONTENTS

		Page

Part I	Financial Information

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023	3

	Condensed Consolidated Statements of Income for the three months ended March 31, 2024 and 2023 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023 (Unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41

Item 4.	Controls and Procedures	41

Part II	Other Information

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3.	Defaults Upon Senior Securities	42

Item 4.	Mine Safety Disclosures	42

Item 5.	Other Information	42

Item 6.	Exhibits	42

Exhibit Index

Signatures

Table of Contents

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

PB BANKSHARES, INC.

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share data)


	March 31,
	2024		December 31,
	(Unaudited)		2023
Assets
Cash and due from banks	$	59,625	$	18,256
Federal funds sold		7,162		14,182

Cash and cash equivalents		66,787		32,438

Debt securities available-for-sale, at fair value		32,138		68,115
Equity securities, at fair value		790		793
Restricted stocks, at cost		2,416		2,590
Loans receivable, net of allowance for credit losses of $4,465 at March 31, 2024 and $4,511 at December 31, 2023		333,288		321,382
Premises and equipment, net		2,019		2,057
Deferred income taxes, net		1,652		1,732
Accrued interest receivable		1,545		1,253
Bank owned life insurance		8,283		8,230
Other assets		1,516		1,158

Total Assets	$	450,434	$	439,748

Liabilities and Stockholders' Equity

Liabilities
Deposits	$	348,389	$	332,966
Borrowings		50,819		55,104
Accrued expenses and other liabilities		4,457		4,689

Total Liabilities		403,665		392,759

Commitments and contingencies - see notes 9 and 10

Stockholders' Equity
Preferred Stock, $0.01 par value, 10,000,000 shares authorized; -0- issued and outstanding at March 31, 2024 and December 31, 2023		—		—
Common Stock, $0.01 par value, 40,000,000 shares authorized; 2,629,967 (including 108,115 restricted shares) and 2,679,967 (including 108,115 restricted shares) issued and outstanding at March 31, 2024 and December 31, 2023, respectively		25		26
Additional paid-in capital		23,582		24,115
Retained earnings		26,875		26,558
Unearned ESOP shares, 188,853 shares at March 31, 2024 and December 31, 2023		(2,463)		(2,463)
Accumulated other comprehensive loss		(1,250)		(1,247)

Total Stockholders' Equity		46,769		46,989

Total Liabilities and Stockholders' Equity	$	450,434	$	439,748

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PB BANKSHARES, INC.

Condensed Consolidated Statements of Income

(dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended
	March 31,
	2024		2023

Interest and Dividend Income
Loans, including fees	$	4,551	$	3,798
Securities		311		183
Other		752		388
Total Interest and Dividend Income		5,614		4,369

Interest Expense
Deposits		2,486		928
Borrowings		496		396
Total Interest Expense		2,982		1,324

Net interest income		2,632		3,045

Provision for Credit Losses		(84)		183

Net interest income after provision for credit losses		2,716		2,862

Noninterest Income
Service charges on deposit accounts		55		47
(Loss) gain on equity securities		(8)		12
Bank owned life insurance income		53		43
Debit card income		50		50
Other service charges		17		19
Loss on disposal of premises and equipment		—		(40)
Other income		20		7
Total Noninterest Income		187		138

Noninterest Expenses
Salaries and employee benefits		1,356		1,349
Occupancy and equipment		175		164
Data and item processing		280		267
Advertising and marketing		51		25
Professional fees		165		180
Directors’ fees		107		107
FDIC insurance premiums		49		40
Pennsylvania shares tax		79		77
Debit card expenses		41		35
Other		195		221
Total Noninterest Expenses		2,498		2,465

Income before income tax expense		405		535

Income Tax Expense		88		126

Net Income	$	317	$	409
Earnings per common share - basic	$	0.13	$	0.16
Earnings per common share - diluted	$	0.13	$	0.16

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PB BANKSHARES, INC.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended
	March 31,
	2024		2023


Net Income	$	317	$	409

Other Comprehensive (Loss) Income
Unrealized (losses) gains on debt securities available-for-sale:
Unrealized holding (losses) gains arising during period		(4)		505
Tax effect		1		(106)

Other comprehensive (loss) income		(3)		399


Total Comprehensive Income	$	314	$	808

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PB BANKSHARES, INC.

Condensed Consolidated Statements of Stockholders’ Equity

Three months ended March 31, 2024 and 2023

(In thousands)

(Unaudited)


									Accumulated
			Additional					Unearned	Other
	Common		Paid-In		Retained		ESOP		Comprehensive
	Stock		Capital		Earnings		Shares		Loss		Total
Balance, January 1, 2023	$	27	$	25,721	$	24,779	$	(2,608)	$	(1,932)	$	45,987

Net income		—		—		409		—		—		409
Repurchased common stock, 35,651 shares		—		(498)		—		—		—		(498)
Adoption of CECL		—		—		(140)		—		—		(140)
Stock based compensation expense		—		134		—		—		—		134
Other comprehensive income		—		—		—		—		399		399

Balance, March 31, 2023	$	27	$	25,357	$	25,048	$	(2,608)	$	(1,533)	$	46,291

Balance, January 1, 2024	$	26	$	24,115	$	26,558	$	(2,463)	$	(1,247)	$	46,989

Net income		—		—		317		—		—		317
Repurchased common stock, 50,000 shares		(1)		(667)		—		—		—		(668)
Stock based compensation expense		—		134		—		—		—		134
Other comprehensive loss		—		—		—		—		(3)		(3)

Balance, March 31, 2024	$	25	$	23,582	$	26,875	$	(2,463)	$	(1,250)	$	46,769

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PB BANKSHARES, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended
	March 31,

	2024		2023
Cash Flows from Operating Activities
Net income	$	317	$	409
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for credit losses		(84)		183
Depreciation and amortization		82		74
Loss on disposal of premises and equipment		—		40
Net accretion of securities premiums and discounts		(165)		(86)
Deferred income tax expense		81		46
Loss (gain) on equity securities		8		(12)
Deferred loan (cost) fees, net		(11)		52
Earnings on bank owned life insurance		(53)		(43)
Stock-based compensation expense		134		134
Increase in accrued interest receivable and other assets		(633)		(257)
(Decrease) increase in accrued expenses and other liabilities		(236)		7

Net Cash (Used in) Provided by Operating Activities		(560)		547

Cash Flows from Investing Activities
Activity in debt securities available-for-sale:
Maturities, calls, and principal repayments		36,138		20,181
Dividends on equity securities reinvested		(5)		(5)
Redemption of restricted stocks		174		19
Net increase in loans receivable		(11,850)		(8,162)
Purchases of premises and equipment		(18)		(337)

Net Cash Provided by Investing Activities		24,439		11,696

Cash Flows from Financing Activities
Net increase in deposits		15,423		5,942
Repurchased common stock		(668)		(498)
Advances of borrowings		—		6,900
Repayments of borrowings		(4,285)		(6,837)

Net Cash Provided by Financing Activities		10,470		5,507

Increase in cash and cash equivalents		34,349		17,750

Cash and Cash Equivalents, Beginning of Period		32,438		17,204

Cash and Cash Equivalents, End of Period	$	66,787	$	34,954

Supplementary Cash Flows Information
Interest paid	$	2,886	$	1,231
Right-of-use lease assets and liabilities		43		—
Income taxes paid		—		—

Supplementary Non-Cash Flows Information
Unrealized (loss) gain on debt securities available-for-sale	$	(4)	$	505

The accompanying notes are an integral part of these condensed consolidated financial statements.

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1. Basis of Presentation

Organization and Nature of Operations

PB Bankshares, Inc., a Maryland corporation (the “Company”) is the holding company of Presence Bank (the “Bank”) and was formed in connection with the conversion of the Bank from the mutual to the stock form of organization. On July 14, 2021, the mutual to stock conversion of the Bank was completed and the Company became the parent holding company for the Bank. Shares of the Company began trading on the Nasdaq Capital Market on July 15, 2021. The Company is subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Bank”).

The Bank is a state-chartered savings bank established in 1919. The main office is located in Coatesville, Pennsylvania with three other branches located in New Holland, Oxford, and Georgetown, Pennsylvania. The Bank is principally engaged in the business of attracting deposits from the general public and using these deposits, together with borrowings and other funds, to make loans primarily secured by real estate and, to a lesser extent, consumer loans. The Bank competes with other banking and financial institutions in its primary market communities encompassing Chester, Cumberland, Dauphin, Lancaster, and Lebanon Counties in Pennsylvania. The Bank is regulated by the Federal Deposit Insurance Corporation (the “FDIC”) and the Pennsylvania Department of Banking and Securities (the “PADOB”).

Principles of Consolidation

The consolidated financial statements include accounts of the Company and its wholly-owned subsidiary, the Bank. The Bank also includes the accounts of CSB Investments, Inc. (“CSB”), a wholly-owned subsidiary of the Bank located in Wilmington, Delaware. The sole purpose of CSB is to maintain and manage the Bank’s investment portfolio. All significant intercompany accounts and transactions have been eliminated in consolidation.

Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to the Securities and Exchange Commission’s Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

In the opinion of management, all adjustments considered necessary (consisting only of normal recurring accruals) for a fair presentation have been included. Operating results for the three month period ended March 31, 2024 are not necessarily indicative of the results for the year ending December 31, 2024 or any other interim periods. For further information, refer to the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 as filed in the annual report on Form 10-K filed with the Securities and Exchange Commission on April 1, 2024.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses on loans.

While management uses available information to recognize estimated losses on loans, future additions to the allowance for credit losses may be necessary based on changes in economic conditions and underlying collateral values, if any. In addition, the FDIC and PADOB, as an integral part of their examination process, periodically review the Bank’s allowance for credit losses. These agencies may require the Bank to recognize additions to the allowance based on their judgments of information available to them at the time of their examinations.

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2. Recent Accounting Pronouncements

This section provides a summary description of recent ASUs issued by the FASB to the ASC that had or that management expects may have an impact on the financial statements issued upon adoption. The Company is classified as an emerging growth company and has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Effective dates reflect this election.

Recently Issued, But Not Yet Effective Accounting Pronouncement

In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024, for public business entities. For entities other than public business entities the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements.

3. Debt and Equity Securities

The amortized cost, gross unrealized gains and losses, and fair value of securities available-for-sale and equity securities are as follows (in thousands):


			Gross Unrealized		Gross Unrealized
March 31, 2024	Amortized Cost		Gains		Losses		Fair Value
Debt securities:
Agency bonds	$	22,245	$	—	$	(1,331)	$	20,914
Treasury securities		8,913		3		(12)		8,904
Mortgage-backed securities		80		1		—		81
Collateralized mortgage obligations		2,482		—		(243)		2,239
Total available-for-sale debt securities	$	33,720	$	4	$	(1,586)	$	32,138

Equity securities:
Mutual funds (fixed income)							$	790

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			Gross Unrealized		Gross Unrealized
December 31, 2023	Amortized Cost		Gains		Losses		Fair Value
Debt securities:
Agency bonds	$	23,244	$	—	$	(1,384)	$	21,860
Treasury securities		43,750		32		—		43,782
Mortgage-backed securities		83		2		—		85
Collateralized mortgage obligations		2,616		—		(228)		2,388
Total available-for-sale debt securities	$	69,693	$	34	$	(1,612)	$	68,115

Equity securities:
Mutual funds (fixed income)							$	793

The table below indicates the length of time individual available-for-sale securities have been in a continuous unrealized loss position at March 31, 2024 and December 31, 2023 (in thousands):


March 31, 2024	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Agency bonds	$	999	$	—	$	19,915	$	(1,331)	$	20,914	$	(1,331)
Treasury securities		6,911		(12)		—		—		6,911		(12)
Collateralized mortgage obligations		—		—		2,239		(243)		2,239		(243)

Total	$	7,910	$	(12)	$	22,154	$	(1,574)	$	30,064	$	(1,586)


December 31, 2023	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Agency bonds	$	1,998	$	(1)	$	19,862	$	(1,383)	$	21,860	$	(1,384)
Collateralized mortgage obligations		—		—		2,388		(228)		2,388		(228)

Total	$	1,998	$	(1)	$	22,250	$	(1,611)	$	24,248	$	(1,612)

As of March 31, 2024 and December 31, 2023, the mortgage-backed securities and collateralized mortgage obligations included in the securities portfolio consisted of securities issued by U.S. government sponsored agencies. There were no private label mortgage-backed securities or collateralized mortgage obligations held in the securities portfolio as of March 31, 2024 and December 31, 2023.

At March 31, 2024, 47 agency bonds, three treasury securities and 33 collateralized mortgage obligations were in an unrealized loss position. In analyzing an issuer’s financial condition, management considers whether downgrades by bond rating agencies have occurred and industry analysts’ reports.

As of March 31, 2024, management believes that the estimated fair value of securities disclosed above is primarily dependent upon the movement in market interest rates particularly given the negligible inherent credit risk associated with these securities. Although the fair value will fluctuate as the market interest rates move, management believes that these fair values will recover as the underlying portfolios mature and are reinvested in market yielding investments. Additionally, all securities remain highly rated and all issuers have continued to make timely payments of interest and principal.

As the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost basis, which may be maturity, the Company concluded that a credit loss did not exist in its portfolio at March 31, 2024, and therefore, no allowance for credit losses was recorded.

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There were no securities sold during the three months ended March 31, 2024 and 2023. The amortized cost and fair value of debt securities available-for-sale at March 31, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).


	Available-for-Sale
	Amortized Cost		Fair Value		Yield
Due less than one year	$	9,672	$	9,591	3.82	%
Due one year through five years		21,486		20,227	2.82
Due after five years through ten years		—		—	—
Mortgage-backed securities		80		81	5.50
Collateralized mortgage obligations		2,482		2,239	1.93

Total available-for-sale debt securities	$	33,720	$	32,138	2.09	%

At March 31, 2024 and December 31, 2023, the Company had securities with fair values totaling $1,811,000 and $1,878,000, respectively, pledged to secure borrowings.

At March 31, 2024 and December 31, 2023, the Company had securities with fair values totaling $15,097,000 and $15,073,000, respectively, pledged primarily for public fund depositors.

4. Loans Receivable and Allowance for Credit Losses

The Company’s loans are stated at their face amount and consist of the classes of loans included in the table below. The Company has elected to exclude accrued interest receivable, totaling $1.5 million and $1.3 million at March 31, 2024 and December 31, 2023, respectively, from the amortized cost basis of loans.

Major classifications of net loans receivable at March 31, 2024 and December 31, 2023 are as follows (in thousands):


	March 31,		December 31,
	2024		2023
Real estate:
One-to four-family residential	$	109,083	$	108,534
Commercial		195,140		184,868
Construction		11,378		10,805
Commercial and industrial		16,054		16,552
Consumer and other		6,715		5,836

		338,370		326,595
Deferred loan fees, net		(617)		(702)
Allowance for credit losses		(4,465)		(4,511)

Total loans receivable, net	$	333,288	$	321,382

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The following table summarizes the activity in the allowance for credit losses - loans by loan class for the three months ended March 31, 2024 (in thousands):


	Allowance for Credit Losses - Loans

							Provisions
							for Credit
	Beginning						Losses -		Ending
	Balance		Charge-offs		Recoveries		Loans		Balance
Real Estate:
One- to four-family residential	$	1,267	$	—	$	—	$	(49)	$	1,218
Commercial		2,637		—		—		145		2,782
Construction		112		—		—		(8)		104
Commercial and industrial		229		—		2		(30)		201
Consumer and other		71		(6)		2		2		69
Unallocated		195		—		—		(104)		91

Total	$	4,511	$	(6)	$	4	$	(44)	$	4,465

The following table summarizes the activity in the allowance for credit losses - loans by loan class for the three months ended March 31, 2023 (in thousands):


	Allowance for Credit Losses - Loans

	Balance								Provisions
	Prior to		Impact of						for Credit
	Adoption of		Adoption of						Losses -		Ending
	ASC 326		ASC 326		Charge-offs		Recoveries		Loans		Balance
Real Estate:
One- to four-family residential	$	1,156	$	45	$	—	$	15	$	(28)	$	1,188
Commercial		1,829		75		—		—		122		2,026
Construction		316		(34)		—		—		(42)		240
Commercial and industrial		308		(84)		(75)		1		108		258
Consumer and other		87		3		—		—		19		109
Unallocated		296		(5)		—		—		(22)		269

Total	$	3,992	$	—	$	(75)	$	16	$	157	$	4,090

The following table presents a breakdown of the provision for credit losses for the periods indicated (in thousands):


	Three Months Ended March 31,
	2024		2023
Provision for credit losses:
Provision for loans	$	(44)	$	157
Provision for unfunded commitments		(40)		26

Total provision for credit losses	$	(84)	$	183

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The following tables present the amortized cost basis of loans on nonaccrual status and the amortized cost basis of loans on nonaccrual status for which there was no related allowance for credit losses as of March 31, 2024 and December 31, 2023 (in thousands):


	March 31, 2024
			Nonaccural
	Nonaccrual		With No ACL
Real estate:
One- to four-family residential	$	134	$	134
Commercial		1,011		1,011
Commercial and industrial		191		191

Total	$	1,336	$	1,336


	December 31, 2023
			Nonaccural
	Nonaccrual		With No ALL
Real estate:
One- to four-family residential	$	149	$	149
Commercial		1,065		1,065
Commercial and industrial		207		207

Total	$	1,421	$	1,421

The following table presents the amortized cost basis of collateral-dependent loans to borrowers experiencing financial difficulty by loan class as of March 31, 2024 (in thousands):


	March 31, 2024
					Total
	Real Estate		Non-Real Estate		Collateral		Allowance for
	Secured		Secured		Dependent		Credit Losses-
	Loans		Loans		Loans		Loans
Real estate:
One- to four-family residential	$	338	$	—	$	338	$	—
Commercial		1,521		—		1,521		114
Construction		—		—		—		—
Commercial and industrial		192		—		192		—
Consumer and other		—		—		—		—

Total	$	2,051	$	—	$	2,051	$	114

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The following table presents the amortized cost basis of collateral-dependent loans to borrowers experiencing financial difficulty by loan class as of December 31, 2023 (in thousands):


	December 31, 2023
					Total
	Real Estate		Non-Real Estate		Collateral		Allowance for
	Secured		Secured		Dependent		Credit Losses-
	Loans		Loans		Loans		Loans
Real estate:
One- to four-family residential	$	355	$	—	$	355	$	—
Commercial		1,577		—		1,577		—
Construction		—		—		—		—
Commercial and industrial		207		—		207		—
Consumer and other		—		—		—		—

Total	$	2,139	$	—	$	2,139	$	—

A loan is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” loans include those characterized by the “distinct possibility” that the Company will sustain “some loss” if the deficiencies are not corrected. Loans classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Loans classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific allowance for credit losses is not warranted. Loans that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management. Loans that are performing as agreed are classified as “pass”.

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The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of March 31, 2024 (in thousands); as well as gross charge-offs (in thousands) for the three months ended March 31, 2024:


	Year of Origination
															Revolving
															Loans
													Revolving		Converted to
	2024		2023		2022		2021		2020		Prior		Loans		Term Loans		Total
Real estate: one- to four-family residential
Pass	$	2,065	$	8,235	$	17,571	$	17,888	$	12,123	$	39,578	$	8,947	$	1,290	$	107,697
Special Mention		—		—		—		466		—		581		—		—		1,047
Substandard		—		—		—		—		—		339		—		—		339
Total real estate: one- to four-family residential	$	2,065	$	8,235	$	17,571	$	18,354	$	12,123	$	40,498	$	8,947	$	1,290	$	109,083
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Real estate: commercial
Pass	$	10,148	$	44,664	$	44,644	$	45,330	$	20,574	$	25,958	$	2,036	$	—	$	193,354
Special Mention		—		—		265		—		—		—		—		—		265
Substandard		—		—		—		—		—		1,521		—		—		1,521
Total real estate: commercial	$	10,148	$	44,664	$	44,909	$	45,330	$	20,574	$	27,479	$	2,036	$	—	$	195,140
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Real estate: construction
Pass	$	—	$	—	$	3,703	$	5,000	$	83	$	120	$	2,472	$	—	$	11,378
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Total real estate: construction	$	—	$	—	$	3,703	$	5,000	$	83	$	120	$	2,472	$	—	$	11,378
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and industrial
Pass	$	432	$	594	$	2,277	$	2,362	$	653	$	247	$	9,236	$	61	$	15,862
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		192		—		—		192
Total commercial and industrial	$	432	$	594	$	2,277	$	2,362	$	653	$	439	$	9,236	$	61	$	16,054
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer and other
Pass	$	600	$	—	$	2,009	$	2,000	$	959	$	—	$	1,147	$	—	$	6,715
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Total consumer and other	$	600	$	—	$	2,009	$	2,000	$	959	$	—	$	1,147	$	—	$	6,715
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total loans, gross
Pass	$	13,245	$	53,493	$	70,204	$	72,580	$	34,392	$	65,903	$	23,838	$	1,351	$	335,006
Special Mention		—		—		265		466		—		581		—		—		1,312
Substandard		—		—		—		—		—		2,052		—		—		2,052
Total loans, gross	$	13,245	$	53,493	$	70,469	$	73,046	$	34,392	$	68,536	$	23,838	$	1,351	$	338,370
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of December 31, 2023 (in thousands); as well as gross charge-offs (in thousands) for the year ended December 31, 2023:


	Year of Origination
															Revolving
															Loans
													Revolving		Converted to
	2023		2022		2021		2020		2019		Prior		Loans		Term Loans		Total
Real estate: one- to four-family residential
Pass	$	8,452	$	17,677	$	18,152	$	12,310	$	8,188	$	32,444	$	9,077	$	1,293	$	107,593
Special Mention		—		—		—		—		—		586		—		—		586
Substandard		—		—		—		—		—		355		—		—		355
Total real estate: one- to four-family residential	$	8,452	$	17,677	$	18,152	$	12,310	$	8,188	$	33,385	$	9,077	$	1,293	$	108,534
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Real estate: commercial
Pass	$	44,872	$	42,737	$	46,182	$	20,797	$	4,025	$	22,485	$	2,193	$	—	$	183,291
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		1,577		—		—		1,577
Total real estate: commercial	$	44,872	$	42,737	$	46,182	$	20,797	$	4,025	$	24,062	$	2,193	$	—	$	184,868
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Real estate: construction
Pass	$	269	$	7,179	$	—	$	85	$	116	$	365	$	2,233	$	—	$	10,247
Special Mention		—		89		469		—		—		—		—		—		558
Substandard		—		—		—		—		—		—		—		—		—
Total real estate: construction	$	269	$	7,268	$	469	$	85	$	116	$	365	$	2,233	$	—	$	10,805
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and industrial
Pass	$	616	$	3,273	$	1,631	$	728	$	19	$	243	$	9,773	$	62	$	16,345
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		207		—		—		207
Total commercial and industrial	$	616	$	3,273	$	1,631	$	728	$	19	$	450	$	9,773	$	62	$	16,552
Current period gross charge-offs	$	—	$	—	$	(144)	$	—	$	—	$	—	$	—	$	—	$	(144)

Consumer and other
Pass	$	—	$	2,010	$	2,000	$	982	$	—	$	—	$	844	$	—	$	5,836
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Total consumer and other	$	—	$	2,010	$	2,000	$	982	$	—	$	—	$	844	$	—	$	5,836
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total loans, gross
Pass	$	54,209	$	72,876	$	67,965	$	34,902	$	12,348	$	55,537	$	24,120	$	1,355	$	323,312
Special Mention		—		89		469		—		—		586		—		—		1,144
Substandard		—		—		—		—		—		2,139		—		—		2,139
Total loans, gross	$	54,209	$	72,965	$	68,434	$	34,902	$	12,348	$	58,262	$	24,120	$	1,355	$	326,595
Current period gross charge-offs	$	—	$	—	$	(144)	$	—	$	—	$	—	$	—	$	—	$	(144)

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The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of March 31, 2024 (in thousands):


													Loans
													Receivable
											Total		90 or More
	30‑59 Days		60‑89 Days		90 or More		Total Past				Loans		Days and
	Past Due		Past Due		Days Past Due		Due		Current		Receivable		Accruing
Real estate:
One- to four-family residential	$	106	$	—	$	34	$	140	$	108,943	$	109,083	$	—
Commercial		510		—		—		510		194,630		195,140		—
Construction		—		—		—		—		11,378		11,378		—
Commercial and industrial		—		—		—		—		16,054		16,054		—
Consumer and other		—		—		—		—		6,715		6,715		—

Total loans, gross	$	616	$	—	$	34	$	650	$	337,720	$	338,370	$	—


													Loans
													Receivable
											Total		90 or More
	30‑59 Days		60‑89 Days		90 or More		Total Past				Loans		Days and
	Past Due		Past Due		Days Past Due		Due		Current		Receivable		Accruing
Real estate:
One- to four-family residential	$	89	$	—	$	28	$	117	$	108,417	$	108,534	$	—
Commercial		—		655		—		655		184,213		184,868		—
Construction		—		—		—		—		10,805		10,805		—
Commercial and industrial		—		—		—		—		16,552		16,552		—
Consumer and other		—		—		—		—		5,836		5,836		—

Total loans, gross	$	89	$	655	$	28	$	772	$	325,823	$	326,595	$	—

The Company may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan. The Company may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.

The Company identifies loans for potential modification primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

No loans were modified during the three months ended March 31, 2024 and 2023 to borrowers experiencing financial difficulty.

The Company closely monitors the performance of modified loans to understand the effectiveness of its modification efforts. Upon the determination that all or a portion of a modified loan is uncollectible, that amount is charged against the allowance for credit losses. There were no payment defaults during the three months ended March 31, 2024 and 2023 of modified loans.

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At March 31, 2024 and December 31, 2023, there was no other real estate owned. There was no real estate in process of foreclosure as of March 31, 2024 and December 31, 2023.

5. Leases

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable prepaid rent, initial direct costs and any incentives received from the lessor.

The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The following tables present information about the Company’s leases as of March 31, 2024 and December 31, 2023, and for the three months ended March 31, 2024 and 2023 (dollars in thousands):


		March 31,			December 31,
		2024			2023
Right-of-use assets	$	864			852
Lease liability	$	828			814
Weighted average remaining lease term		12.29	years		12.31	years
Weighted average discount rate		4.79	%		4.73	%

		Three Months			Three Months
		Ended			Ended
		March 31,			March 31,
		2024			2023
Operating lease cost	$	25		$	26
Short-term lease cost		4			20
Total lease costs	$	29		$	46

Cash paid for amounts included in the measurement of lease liabilities	$	34		$	33

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows:


	As of
	March 31,
Lease payments due (in thousands):	2024

Nine months ending December 31, 2024	$	105
2025		137
2026		85
2027		69
2028		66
Thereafter		647
Total undiscounted cash flows		1,109
Discount		281
Lease Liability	$	828

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6. Borrowings

The Company has an unsecured line of credit with Atlantic Community Bankers Bank (“ACBB”) of up to $7,500,000, expiring on June 30, 2024, which it intends to renew annually. Interest on the line of credit is charged at fed funds rate plus 0.25%. The Company had no outstanding borrowings under the ACBB line of credit at March 31, 2024 and December 31, 2023. The Company has an unsecured line of credit with SouthState Bank, N.A. of up to $5,000,000. There were no borrowings outstanding under the SouthState Bank, N.A. line of credit at March 31, 2024 and December 31, 2023. The Company also has the ability to borrow up to $2,000,000 through the Federal Reserve Bank’s discount window. Funds obtained through the discount window are secured by the Company’s U.S. Government and agency obligations. There were no borrowings outstanding through the discount window at March 31, 2024 and December 31, 2023.

The Company has an open-ended line of credit (short-term borrowing) of $89,200,000 and $45,630,000 at March 31, 2024 and December 31, 2023, respectively, to obtain advances from the Federal Home Loan Bank (“FHLB”). Interest on the line of credit is charged at the FHLB’s overnight rate of 5.67% and 5.68% at March 31, 2024 and December 31, 2023 respectively. The Company had no outstanding borrowings under this line of credit at March 31, 2024 and December 31, 2023.

Maximum borrowing capacity with the FHLB was approximately $202,068,000 and $178,468,000 at March 31, 2024 and December 31, 2023, respectively. The Company had three unfunded letters of credit with the FHLB for $13,400,000 at March 31, 2024 and three letters of credit with FHLB that totaled $13,850,000 at December 31, 2023 that were pledged to secure public funds.

Borrowings from the FHLB at March 31, 2024 and December 31, 2023 consist of the following (dollars in thousands):


	March 31,				December 31,
	2024				2023
			Weighted				Weighted
Maturity	Amount		Rate		Amount		Rate
2024	$	7,500	5.19	%	$	11,500	5.41	%
2025		4,500	5.30			4,500	5.30
2026		3,034	3.13			3,241	3.02
2027		19,500	2.69			19,500	2.69
2028		13,650	4.00			13,650	4.00
2032		2,635	1.83			2,713	1.83

Total borrowings	$	50,819	3.62	%	$	55,104	3.77	%

7. Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

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The Company had the following off-balance sheet financial instruments whose contract amounts represent credit risk at March 31, 2024 and December 31, 2023 (in thousands):


	March 31,		December 31,
	2024		2023
Commitments to grant loans	$	32,557	$	31,481
Unfunded commitments under lines of credit		12,948		12,186
Standby letters of credit		4,402		1,808

Total off-balance sheet financial instruments	$	49,907	$	45,475

Outstanding loan commitments represent the unused portion of loan commitments available to individuals and companies as long as there is no violation of any condition established in the contract. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based upon management’s credit evaluation of the customer. Various types of collateral may be held, including property and marketable securities. The credit risk involved in these financial instruments is essentially the same as that involved in extending loan facilities to customers.

8. Contingencies

In the normal course of business, the Company is subject to various lawsuits involving matters generally incidental to its business. As of March 31, 2024, management is of the opinion that the ultimate liability, if any, resulting from any pending actions or proceedings will not have a material effect on the consolidated balance sheet or results of operations and cash flows of the Company.

9. Stock-Based Compensation

The Company’s stockholders approved the PB Bankshares, Inc. 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”) at the Annual Meeting on September 28, 2022. An aggregate of 388,815 shares of authorized but unissued common stock of the Company was reserved for future grants of incentive and nonqualified stock options and restricted stock awards and restricted stock units under the 2022 Equity Incentive Plan. Of the 388,815 authorized shares, the maximum number of shares of the Company’s common stock that may be issued under the 2022 Equity Incentive Plan pursuant to the exercise of stock options is 277,725 shares, and the maximum number of shares of the Company’s common stock that may be issued as restricted stock awards or restricted stock units is 111,090 shares.

The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted stock under the Company’s 2022 Equity Incentive Plan. Management recognizes compensation expense for the fair value of restricted stock on a straight-line basis over the requisite service period for the entire award. As of March 31, 2024 and December 31, 2023, there were 14,628 and 13,628 shares available for future awards under this plan, respectively. The shares available for future award includes 11,653 and 10,653 shares available for incentive and non-qualified stock options as of March 31, 2024 and December 31, 2023, respectively, and 2,975 shares available for restricted stock awards as of those same dates. The stock options and restricted shares vest over a five-year period.

Stock option expense was $68,000 and $69,000 for the three month periods ended March 31, 2024 and March 31, 2023, respectively. At March 31, 2024, total unrecognized compensation cost related to stock options was $1,034,000.

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A summary of the Company’s stock option activity and related information for the three month period ended March 31, 2024 was as follows (dollars in thousands, except per share data):


					Weighted-Average
					Remaining
			Weighted-Average		Contractual Life		Aggregate Intrinsic
	Options		Exercise Price		(in years)		Value
Outstanding, January 1, 2024		267,072	$	12.29		8.88		—
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited		(1,000)		13.80		8.80		—

Outstanding, March 31, 2024		266,072	$	12.28		8.63	$	165
Exercisable, March 31, 2024		53,214	$	12.28		8.63	$	33

Restricted stock expense was $66,000 and $65,000 for the three month periods ended March 31, 2024 and March 31, 2023, respectively. At March 31, 2024, the unrecognized compensation expense relating to non-vested stock outstanding was $997,000.

A summary of the Company’s restricted stock activity and related information for the three month period ended March 31, 2024 was as follows:


			Weighted-Average
		Number of	Grant Date
	Shares		Fair Value
Non-vested, January 1, 2024		86,493	$	12.28
Granted		—		—
Vested		—		—
Forfeited		—		—

Non-vested at March 31, 2024		86,493	$	12.28

10. Regulatory Matters

The Bank is subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of March 31, 2024, the Bank met all capital adequacy requirements to which it was subject.

Prompt corrective action regulations provide five classifications; well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2024, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets above the minimum but below the conservation buffer will face limitations on dividends, stock repurchases and certain discretionary bonus payments to management based on the amount of the shortfall.

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Under Basel III rules, banks must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The required capital conservation buffer is 2.50%.

On January 1, 2023, the Company adopted ASC 326. Regulatory capital rules permitted the Bank to phase-in the day-one effects of adopting ASC 326 over a three-year transition period. The Bank elected to take the phase-in for the amount of $140,000.

The following tables present actual and required capital ratios as of March 31, 2024 and December 31, 2023 under the Basel III Capital Rules. Bank capital levels required to be considered well capitalized are based upon prompt corrective action regulations.

Actual and required capital amounts (in thousands) and ratios are presented below at quarter-end.


													To be Well
									For Capital				Capitalized under
					For Capital				Adequacy Purposes				Prompt Corrective
March 31, 2024	Actual				Adequacy Purposes				with Capital Buffer				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)	$	44,591	14.15	%	$	25,209	8.00	%	$	33,087	10.500	%	$	31,511	10.00	%
Tier 1 capital (to risk-weighted assets)	$	40,645	12.90	%	$	18,907	6.00	%	$	26,784	8.500	%	$	25,209	8.00	%
Common equity (to risk-weighted assets)	$	40,645	12.90	%	$	14,180	4.50	%	$	22,058	7.000	%	$	20,482	6.50	%
Tier 1 capital (to average assets)	$	40,645	9.25	%	$	17,569	4.00	%		N/A	N/A		$	21,961	5.00	%


													To be Well
									For Capital				Capitalized under
					For Capital				Adequacy Purposes				Prompt Corrective
December 31, 2023	Actual				Adequacy Purposes				with Capital Buffer				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)	$	44,168	14.20	%	$	24,875	8.00	%	$	32,649	10.500	%	$	31,094	10.00	%
Tier 1 capital (to risk-weighted assets)	$	40,276	12.95	%	$	18,657	6.00	%	$	26,430	8.500	%	$	24,875	8.00	%
Common equity (to risk-weighted assets)	$	40,276	12.95	%	$	13,992	4.50	%	$	21,766	7.000	%	$	20,211	6.50	%
Tier 1 capital (to average assets)	$	40,276	9.78	%	$	16,467	4.00	%		N/A	N/A		$	20,584	5.00	%

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11. Earnings Per Common Share

The factors used in the earning per common share computation follow (dollars in thousands, except per share data):


	Three Months Ended		Three Months Ended
	March 31,		March 31,
	2024		2023
Net income	$	317	$	409

Weighted average common shares outstanding		2,568,090		2,731,251
Less: Average unearned ESOP shares		(188,853)		(199,962)

Weighted average shares outstanding (basic)		2,379,237		2,531,289

Dilutive common stock equivalents		33,287		15,469

Weighted average shares outstanding (diluted)		2,412,524		2,546,758

Basic earnings per common share	$	0.13	$	0.16
Diluted earnings per common share	$	0.13	$	0.16

12. Fair Value of Financial Instruments

The Company groups its assets and liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 - Valuation is based on unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuation is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.

Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is determined at a reasonable point within the range that is most representative of fair value under current market conditions.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective quarter ends, and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates.

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As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each quarter end.

An asset’s or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following methods and assumptions were used by the Company in estimating fair value disclosures for its financial assets and liabilities:

Debt and Equity Securities (Carried at Fair Value)

The fair value of debt and equity securities (carried at fair value) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt and equity securities without relying exclusively on quoted market prices for the specific debt and equity securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Individually Evaluated Collateral Dependent Loans (Generally Carried at Fair Value)

The estimated fair value of individually evaluated collateral dependent loans is based on the value of the underlying collateral or the value of the underlying collateral, less estimated cost to sell, as appropriate. Collateral is generally real estate; however, collateral may include vehicles, equipment, inventory, accounts receivable, and/or other assets. The value of real estate collateral is generally determined using a market valuation approach based on an appraisal conducted by an independent, licensed appraiser. The value of other assets may also be based on an appraisal, market quotations, aging schedules or other sources. Any fair value adjustments are recorded in the period incurred as a provision for credit losses on the Consolidated Statements of Income. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. At March 31, 2024, the fair value consisted of the recorded investment in the collateral dependent loans of $396,000, which was net of a valuation allowance of $114,000. At December 31, 2023, there were no individually evaluated collateral dependent loans with a specific reserve. Collateral dependent individually evaluated loans are included in Loans Receivable in the table below, which details the fair value of all the Company’s financial instruments.

For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2024 and December 31, 2023 are as follows (in thousands):


			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
March 31, 2024	Total		(Level 1)		(Level 2)		(Level 3)
Agency bonds	$	20,914	$	—	$	20,914	$	—
Treasury securities		8,904		8,904		—		—
Mortgage-backed securities		81		—		81		—
Collateralized mortgage obligations		2,239		—		2,239		—
Mutual funds		790		790		—		—

Total assets measured at fair value on a recurring basis	$	32,928	$	9,694	$	23,234	$	—

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			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
December 31, 2023	Total		(Level 1)		(Level 2)		(Level 3)
Agency bonds	$	21,860	$	—	$	21,860	$	—
Treasury securities		43,782		43,782		—		—
Mortgage-backed securities		85		—		85		—
Collateralized mortgage obligations		2,388		—		2,388		—
Mutual funds		793		793		—		—

Total assets measured at fair value on a recurring basis	$	68,908	$	44,575	$	24,333	$	—

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2024 and December 31, 2023 are as follows (in thousands):


			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
March 31, 2024	Total		(Level 1)		(Level 2)		(Level 3)
Individually evaluated collateral dependent loans	$	396	$	—	$	—	$	396

Total assets measured at fair value on a nonrecurring basis	$	396	$	—	$	—	$	396

Quoted

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

December 31, 2023

Total

(Level 1)

(Level 2)

(Level 3)

Individually evaluated collateral dependent loans

—

Total assets measured at fair value on a nonrecurring basis

—

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to measure fair value at March 31, 2024 and December 31, 2023 (dollars in thousands):


March 31, 2024
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
Individually evaluated collateral dependent loans	$	396	Appraisal of collateral	Selling expenses and discounts (1)	22.3% (22.3%)

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December 31, 2023
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
Individually evaluated collateral dependent loans	$	—	Appraisal of collateral	Selling expenses and discounts (1)	N/A

(1)	Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

The carrying amounts and fair values of the Company’s financial instruments as of the indicated dates are presented in the following table:


	Fair Value	March 31, 2024				December 31, 2023
	Hierarchy	Carrying		Estimated		Carrying		Estimated
(In thousands)	Level	Amounts		Fair Values		Amounts		Fair Values
Financial assets:
Cash and cash equivalents	1	$	66,787	$	66,787	$	32,438	$	32,438
Debt securities - available-for-sale	1 & 2		32,138		32,138		68,115		68,115
Equity securities	1		790		790		793		793
Restricted stocks	2		2,416		2,416		2,590		2,590
Loans, net	3		333,288		321,326		321,382		319,763
Accrued interest receivable	1		1,545		1,545		1,253		1,253
Bank owned life insurance	2		8,283		8,283		8,230		8,230

Financial liabilities:
Demand deposits, savings, and money market	1		186,594		186,594		187,455		187,455
Certificates of deposit	2		161,795		160,835		145,511		138,418
Borrowings	2		50,819		50,001		55,104		54,428
Accrued interest payable	1		1,011		1,011		914		914

13. Noninterest Revenues

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and investments. In addition, certain noninterest income streams such as gains on equity investments, income associated with bank owned life insurance, and loan fees are also not in scope of the guidance. Topic 606 is applicable to noninterest revenue streams such as service charges on deposit accounts and gains on sale of other real estate owned. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Noninterest revenue streams in-scope of Topic 606 are discussed below.

Service Fees on Deposit Accounts

Service charges on deposit accounts consist of fees on depository accounts, which includes NSF fees, miscellaneous deposit-based service fees, monthly maintenance fees for consumer and commercial, and account analysis and related fees (commercial).

Service charges and fees charged daily are a result of an event or service being provided on the day with the Company recognizing the revenue on the same day. The Company has determined that all performance obligations for daily service charges and fees are met on the same day as the transaction and, therefore, should be recognized as these occur.

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Monthly maintenance/service charges and fees are charged on the last day of the month (i.e. the same month as charges are incurred) after the system has completed its processing. The Company has determined that all performance obligations for monthly fees are typically met during the month or the same day as the customer has not met its obligation. As monthly fees are typically incurred by the customer throughout the month, the fees should be recognized upon completion of the month since the performance obligations have been met for those services.

Account analysis service charges and fees are recorded on a monthly basis on the last day of the month. The Company has determined that all performance obligations for account analysis fees are met during the month.

Debit Card Income

Debit card income consists of interchange fees from consumer debit card networks and other card related services. Interchange rates are set by the card networks. Interchange fees are based on purchase volumes and other factors and are recognized as transactions occur.

Gains on Sale of Other Real Estate Owned

The sale of other real estate owned is currently recognized on the closing date of sale when all performance obligations have been met, and control of the asset has been transferred to the buyer. Any gains are included in noninterest expenses in the consolidated statements of income.

For the Company, there are no other material revenue streams within the scope of Topic 606. The following table presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three months ended March 31, 2024 and 2023 (in thousands):


	Three Months Ended
	March 31,
Noninterest income in scope of Topic 606	2024		2023
Service charges on deposit accounts	$	55	$	47
Debit card income		50		50
Other service charges		17		19
Loss on disposal of premises and equipment		—		(40)
Other noninterest income		20		7
Noninterest income (in scope for Topic 606)		142		83
Noninterest income (out of scope for Topic 606)		45		55
Total noninterest income	$	187	$	138

Contract Balances

A contract assets balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transaction activity, or standard month-end revenue accruals. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term contracts with customers, and therefore, does not experience significant contract balances. As of March 31, 2024 and December 31, 2023, the Company did not have any significant contract balances.

Contract Acquisition Costs

In connection with the adoption of Topic 606, an entity is required to capitalize, and subsequently amortize as an expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the assets that would have resulted from capitalizing these costs would have been amortized in one year or less.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the accompanying financial statements. You should read the information in this section in conjunction with the business and financial information regarding the Company and Bank provided in this Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on April 1, 2024.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:


	·	statements of our goals, intentions and expectations;


	·	statements regarding our business plans, prospects, growth and operating strategies;


	·	statements regarding the asset quality of our loan and investment portfolios; and


	·	estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this quarterly report.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

•

general economic conditions, either nationally or in our market areas, that are worse than expected;

•

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;

•

our ability to access cost-effective funding;

•

recent events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock;

•

fluctuations in real estate values and both residential and commercial real estate market conditions;

•

demand for loans and deposits in our market area;

•

our ability to implement and change our business strategies;

•

competition among depository and other financial institutions;

•

inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

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•

the rate of delinquencies and amounts of loans charged-off;

•

adverse changes in the securities markets;

•

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

•

our ability to enter new markets successfully and capitalize on growth opportunities;

•our ability to capitalize on strategic opportunities;

•our ability to successfully introduce new products and services;

•

our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;

•our ability to retain our existing customers;

•changes in consumer spending, borrowing and savings habits;

•

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

•changes in our organization, compensation and benefit plans;

•changes in the quality or composition of our loan or investment portfolios;

•

a breach in security of our information systems, including the occurrence of a cyber incident or a deficiency in cyber security;

•political instability or civil unrest;

•acts of war or terrorism;

•

acts of public health crises, such as epidemics or pandemics;

•

competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers, including retail businesses and technology companies;

•the failure to attract and retain skilled people;

•

any future FDIC insurance premium increases, or special assessments may adversely affect our earnings;

•the fiscal and monetary policies of the federal government and its agencies; and

•

other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this quarterly report.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

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Overview

Our business has traditionally focused on originating fixed-rate one- to four-family residential real estate loans and offering retail deposit accounts. In September 2019, we hired our current president and chief executive officer, Janak M. Amin, and under his leadership team we have developed a commercial lending infrastructure, with a particular focus on expanding our commercial real estate and commercial and industrial loan portfolios to diversify our balance sheet, improve our interest rate risk exposure and increase interest income. Our primary market area now consists of Chester and Lancaster Counties and the surrounding Pennsylvania counties of Cumberland, Dauphin, and Lebanon. Management has also emphasized the importance of attracting commercial deposit accounts from its customers. As a result of these initiatives and the completion of our initial public stock offering on July 14, 2021, we were able to grow and strengthen our balance sheet. There was an increase in our consolidated assets of $10.7 million, or 2.4%, from $439.7 million at December 31, 2023 to $450.4 million at March 31, 2024 and an increase in our deposits of $15.4 million, or 4.6%, from $333.0 million at December 31, 2023 to $348.4 million at March 31, 2024.

Our results of operations depend primarily on our net interest income and, to a lesser extent, noninterest income. Net interest income is the difference between the interest income we earn on our interest- earning assets, consisting primarily of loans, debt securities and other interest-earning assets (primarily cash and cash equivalents), and the interest we pay on our interest-bearing liabilities, consisting primarily of savings accounts, demand accounts, money market accounts, certificates of deposit and borrowings. Noninterest income consists primarily of debit card income, service charges on deposit accounts, earnings on bank owned life insurance, other service charges and other income. Our results of operations also are affected by our provision for credit losses and noninterest expenses. Noninterest expenses consist primarily of salaries and employee benefits, occupancy and equipment, data and item processing costs, advertising and marketing, professional fees, directors’ fees, FDIC insurance premiums, Pennsylvania shares tax, debit card expenses, and other expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, government policies and actions of regulatory authorities.

For the three months ended March 31, 2024, we reported net income of $317,000 compared to net income of $409,000 for the three months ended March 31, 2023. The period over period decrease in earnings of $92,000 was primarily attributable to a decrease in net interest income and an increase in noninterest expenses, partially offset by a decrease in provision for credit losses, an increase in noninterest income and a decrease in income tax expense.

Critical Accounting Estimates

The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting estimates discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

In 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

Allowance for credit losses on loans. We establish the allowance for credit losses through charges to earnings in the form of a provision for credit losses. Loan losses are charged against the allowance for credit losses for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

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The allowance for credit losses (“ACL”) at March 31, 2024 represents the Company’s current estimate of the lifetime credit losses expected from its loan portfolio. Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans’ expected remaining term.

Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. In addition, management’s estimate of expected credit losses is based on the cash flows over the remaining life of loans held for investment, and changes in expected prepayment behavior may result in changes in the remaining life of loans and expected credit losses.

The allowance may be affected materially by a variety of qualitative factors that the Company considers to reflect its current judgement of various events and risks that are not measured in our statistical procedures. These qualitative risk factors include: (1) lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices; (2) national, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for collateral dependent loans; (3) nature and volume of the portfolio and terms of loans; (4) volume and severity of past due, classified and nonaccrual loans as well as loan modifications; (5) existence and effect of any concentrations of credit and changes in the level of such concentrations; (6) effect of external factors, such as competition and legal and regulatory requirements; (7) experience, ability, and depth of lending department management and other relevant staff; (8) quality of loan review and board of directors oversight; (9)The effect of other external factors (i.e. competition, legal and regulatory requirements); (10) the level of estimated credit losses change in the inflationary environment; (11) the level of estimated credit losses change in the interest rate environment. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. In evaluating the level of the allowance, we consider a range of possible assumptions and outcomes related to the various factors identified above. The level of the allowance is particularly sensitive to changes in the actual and forecasted probability of default of benchmarked banks and changes in current conditions or reasonably expected future conditions affecting the collectability of loans.

Although we believe that we use the best information available to establish the allowance for credit losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the FDIC and the PADOB, as an integral part of their examination process, periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses. However, regulatory agencies are not directly involved in establishing the allowance for credit losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Comparison of Financial Condition at March 31, 2024 and December 31, 2023

Total assets. Total assets increased $10.7 million to $450.4 million at March 31, 2024 from $439.7 million at December 31, 2023. The increase in assets was primarily due to increases in cash and cash equivalents and net loans receivable, partially offset by a decrease in debt securities available-for-sale. Growth in total assets was funded by the increase in deposits while growth in loans and cash equivalents was primarily the results of maturities of short-term treasury securities that were not reinvested in additional securities and instead used to enhance commercial loan growth and our cash position. Cash and cash equivalents increased $34.3 million to $66.8 million at March 31, 2024 from $32.4 million at December 31, 2023. Gross loans increased $11.8 million, or 3.6%, to $338.4 million at March 31, 2024 from $326.6 million at December 31, 2023, primarily due to growth in the commercial real estate portfolio. Debt securities available-for-sale decreased $36.0 million to $32.1 million at March 31, 2024 from $68.1 million at December 31, 2023, primarily due to the maturity of short-term treasury securities.

Net loans receivable increased $11.9 million, or 3.7%, to $333.3 million at March 31, 2024 from $321.4 million at December 31, 2023 primarily due to the increase in the commercial real estate portfolio. Commercial real estate loans increased $10.3 million, or 5.6%, to $195.1 million at March 31, 2024 from $184.9 million at December 31, 2023. The increase in commercial real estate loans was primarily due to the continued implementation of our strategy to expand our commercial loan portfolio to diversify our balance sheet. Consumer and other loans increased $879,000, or 15.1%, to $6.7 million at March 31, 2024 from $5.8 million at December 31, 2023. Construction real estate loans increased $573,000, or 5.3%, to $11.4 million at March 31, 2024 from $10.8 million at December 31, 2023 primarily due to new loans and draws on existing loans.

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One- to four-family residential loans increased $549,000, or 0.5%, to $109.1 million at March 31, 2024 from $108.5 million at December 31, 2023 primarily due to new loans. Commercial and industrial loans decreased $498,000, or 3.0%, to $16.1 million at March 31, 2024 from $16.6 million at December 31, 2023 primarily due to loan payoffs.

Management is monitoring the commercial real estate portfolio and concentration, assessing its associated risks. As part of its risk management process, the Bank segments and stress tests its commercial real estate portfolio. As of March 31, 2024, approximately 74% or $118.1 million of the non-owner occupied commercial real estate loan portfolio was subject to stress testing (loans having exposure under $250,000 and one- to four- family properties are not subject to stress testing). At March 31, 2024, the commercial real estate portfolio has an average Loan-to-Value ratio of 60.0% and a Debt Service Coverage ratio of 1.48 times, exclusive of any sponsor or guarantor support. The commercial real estate portfolio is diverse with respect to both property type as well as location with concentrations limited. Two segments, office space and hospitality, are the subject of market scrutiny with these segments’ exposure and selected credit metrics outlined below.

The Bank has reviewed its loan portfolio for exposure to office space given the uncertainty and potential risks associated with vacancy, future demand, and repricing risk for these assets. The Bank’s exposure to this segment is minimal with only $9.4 million in non-owner-occupied office space at March 31, 2024. Notably the five loans comprising the office segment are all medical related, which the Bank believes has not suffered the same decline that the general office market has experienced. The office space loan portfolio has an average Loan-to-Value ratio of 72.4% and Debt Service Coverage ratio of 1.50 times, exclusive of any sponsor or guarantor support at March 31, 2024.

The Bank’s hospitality portfolio is also an area of market focus. Loan exposure to this segment totaled $21.4 million (seven hotel properties) at March 31, 2024. At March 31, 2024, the average Loan-to-Value ratio of the Bank’s hospitality portfolio was 50.7% with Debt Service Coverage ratio of 1.88 times, exclusive of any sponsor or guarantor support. The Bank believes guarantor support for the hospitality sector is strong and loans are supported by experienced hotel operators.

Cash and cash equivalents increased $34.3 million, or 105.9%, to $66.8 million at March 31, 2024 from $32.4 million at December 31, 2023 due to an increase in cash and due from banks, partially offset by a decrease in fed funds sold. The increase was due to the maturity of $35.0 million of short-term treasury securities and $1.0 million of agency bonds that were not reinvested and utilized for liquidity within cash and cash equivalents.

Debt securities available-for-sale decreased $36.0 million, or 52.8%, to $32.1 million at March 31, 2024 from $68.1 million at December 31, 2023 due to the maturity of $35.0 million of treasury securities and $1.0 million of agency bonds and a $4,000 year to date decrease in the fair market value of debt securities available for sale.

Deposits and borrowings. Total deposits increased $15.4 million, or 4.6%, to $348.4 million at March 31, 2024 from $333.0 million at December 31, 2023. The increase in our deposits reflected a $16.3 million increase in certificates of deposit and a $2.9 million increase in noninterest-bearing demand deposits accounts, partially offset by a $2.0 million decrease in interest-bearing demand deposit accounts, a $1.4 million decrease in money market accounts and a $376,000 decrease in savings accounts, due to customers utilizing their deposits or moving deposits to higher yielding deposit products. Demand deposits increased primarily due to management’s continuing focus on increasing the commercial deposit accounts of its customers. The increase in certificates of deposit was due to offering deposit specials to maintain current certificate of deposit customers, partially offset by a decrease in listing service deposits that were not replaced. Uninsured deposits, excluding public deposits, which are secured with pledged investments and FHLB Letters of Credit, were approximately $39.6 million and $43.7 million, or 11.4% and 14.4% of total deposits at March 31, 2024 and December 31, 2023, respectively.

Total borrowings from the FHLB decreased $4.3 million, or 7.8%, to $50.8 million at March 31, 2024 from $55.1 million at December 31, 2023 due to advances that matured during the first quarter of 2024 not being replaced.

Stockholders’ Equity. Stockholders’ equity decreased $220,000, or 0.5%, to $46.8 million at March 31, 2024 from $47.0 million at December 31, 2023. The decrease was due to the repurchase of 50,000 shares of common stock for $668,000, partially offset by net income of $317,000 and stock based compensation expense of $134,000.

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Comparison of Operating Results for the Three Months Ended March 31, 2024 and March 31, 2023

General. Net income decreased $92,000, or 22.5%, to $317,000 for the three months ended March 31, 2024 from $409,000 for the three months ended March 31, 2023. The $92,000 period over period decrease in earnings was attributable to a $1.7 million increase in interest expense and a $33,000 increase in noninterest expense, partially offset by a $1.3 million increase in interest and dividend income, a $267,000 decrease in the provision for credit losses, a $49,000 increase in noninterest income and a $38,000 decrease in income tax expense.

Interest and dividend income. Total interest and dividend income increased $1.3 million, or 28.5%, to $5.6 million for the three months ended March 31, 2024 from $4.4 million for the three months ended March 31, 2023. The increase in interest and dividend income was primarily the result of a 54 basis points increase in the average yield on interest-earning assets. The average yield on average interest-earning assets increased to 5.20% for the three months ended March 31, 2024 from 4.66% for the three months ended March 31, 2023. The increase was also due to a $54.3 million increase period over period in the average balance of interest-earning assets, driven by a $26.7 million increase in average loan balances, a $22.9 million increase in the average balance of cash and cash equivalents, a $4.4 million increase in average balance of debt and equity securities available for sale and a $295,000 increase in the average balance of restricted stocks.

Interest income on loans, including fees, increased $753,000, or 19.8%, to $4.6 million for the three months ended March 31, 2024 as compared to $3.8 million for the three months ended March 31, 2023, reflecting a 48 basis points increase in the average yield on loans to 5.53% for the three months ended March 31, 2024 from 5.05% for the three months ended March 31, 2023 and an increase in the average balance of loans to $331.1 million for the three months ended March 31, 2024 from $304.4 million for the three months ended March 31, 2023. The average yield on loans increased as a result of the higher interest rate environment when new loans were originated and the increase in the variable rate loan yields. The increase in the average balance of loans was due primarily to an increase in the average balance of commercial real estate loans reflecting our strategy to grow commercial lending.

Interest income on securities and restricted stocks increased $128,000, or 69.9%, to $311,000 for the three months ended March 31, 2024 from $183,000 for the three months ended March 31, 2023. The increase in interest income on debt and equity securities of $117,000 for the three months ended March 31, 2024 from the three months ended March 31, 2023 was due to a 103 basis points increase in the average yield on debt and equity securities to 2.66% for the three months ended March 31, 2024 from 1.63% for the three months ended March 31, 2023 and an increase in the average balance of debt and equity securities of $4.4 million, or 12.8%, to $39.2 million for the three months ended March 31, 2024 from $34.8 million for the three months ended March 31, 2023. The increase in the average yield on the average balance of debt and equity securities was primarily due to the purchase of higher yielding short term agency bonds and treasury securities during the three months ended March 31, 2024. Restricted stock income is also included in the interest income on securities. Restricted stock income increased $11,000 for the three months ended March 31, 2024 from the three months ended March 31, 2023 due to a 89 basis points increase in the average yield on restricted stocks to 8.29% for the three months ended March 31, 2024 from 7.40% for the three months ended March 31, 2023 and due to an increase in the average balance of restricted stocks of $295,000, or 13.2%, to $2.5 million for the three months ended March 31, 2024 from $2.2 million for the three months ended March 31, 2023. The increase in average yield on restricted stock was due to the Federal Home Loan Bank dividend increasing and the average balance in restricted stocks increased due to increases in Federal Home Loan Bank borrowings that requires an increase in our ownership of Federal Home Loan Bank stock.

Interest income on cash and cash equivalents increased $364,000, or 93.8%, to $752,000 for the three months ended March 31, 2024, from $388,000 for the three months ended March 31, 2023. The increase in interest income on cash and cash equivalents was attributable to an increase in the average balance of cash and cash equivalents of $22.9 million, or 60.0%, to $61.1 million for the three months ended March 31, 2024 from $38.2 million for the three months ended March 31, 2023 and an increase in the average yield on cash and cash equivalents of 88 basis points to 4.95% for the three months ended March 31, 2024 from 4.07% for the three months ended March 31, 2023.

Interest expense. Interest expense increased $1.7 million, or 125.2%, to $3.0 million for the three months ended March 31, 2024 20from $1.3 million for the three months ended March 31, 2023 as a result of increases in interest expense on deposits and borrowings in the rising interest rate environment. The increase was due to a 152 basis points increase in the average cost of interest-bearing liabilities from 1.72% for the three months ended March 31, 2023 to 3.24% for the three months ended March 31, 2024 and an increase in the average balance of interest-bearing liabilities of $59.0 million to $370.5 million for the three months ended March 31, 2024 from $311.5 million for the three months ended March 31, 2023.

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Interest expense on deposits increased $1.6 million, or 167.9%, to $2.5 million for the three months ended March 31, 2024 from $928,000 for the three months ended March 31, 2023 as a result of a 172 basis points increase in the average cost of interest-bearing deposits and an increase of $54.1 million in the average balance of our interest-bearing deposits. The increase in the average cost of deposits was primarily due to a 204 basis points increase in the average cost of certificates of deposit, traditionally our higher costing deposits, to 4.25% for the three months ended March 31, 2024 from 2.21% for the three months ended March 31, 2023. The average cost of transaction accounts, traditionally our lower costing deposit accounts, consisting of demand, savings, and money market accounts increased 129 basis points to 2.13% for the three months ended March 31, 2024 from 0.84% for the three months ended March 31, 2023. The increase in rates was due to the rising interest rate environment and increased competition for deposits. An increase of $40.9 million in the average balance of certificates of deposit to $153.2 million for the three months ended March 31, 2024 from $112.3 million for the three months ended March 31, 2023 was due to promotional specials to increase deposits in the rising rate environment. An increase in the average balance of our transaction accounts by $13.3 million to $164.1 million for the three months ended March 31, 2024 from $150.8 million for the three months ended March 31, 2023 was due to continued strategies to grow deposits through relational banking.

Interest expense on Federal Home Loan Bank borrowings increased $100,000, or 25.3%, to $496,000 for the three months ended March 31, 2024 from $396,000 for the three months ended March 31, 2023. The increase in interest expense on Federal Home Loan Bank borrowings resulted from an increase in the average cost of these funds of 47 basis points to 3.75% for the three months ended March 31, 2024 from 3.28% for the three months ended March 31, 2023 as higher cost Federal Home Loan Bank borrowings were incurred to increase liquidity. There was an increase of $4.8 million in the average balance of Federal Home Loan Bank borrowings to $53.2 million for the three months ended March 31, 2024 from $48.3 million for the three months ended March 31, 2023 as a result of using Federal Home Loan Bank borrowings to fund loan growth and increase liquidity.

Net interest income. Net interest income decreased $413,000, or 13.6%, to $2.6 million for the three months ended March 31, 2024 as compared to $3.0 million for the three months ended March 31, 2023. The decrease in net interest income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to the increases in interest expense on deposits and borrowings, partially offset by increases in interest income on loans, cash and cash equivalents and debt securities available-for-sale. Average net interest-earning assets decreased by $4.6 million to $63.5 million for the three months ended March 31, 2024 from $68.1 million for the three months ended March 31, 2023. Our net interest margin decreased 82 basis points to 2.44% for the three months ended March 31, 2024 from 3.26% for the three months ended March 31, 2023. Our net interest rate spread decreased 98 basis points to 1.96% for the three months ended March 31, 2024 from 2.94% for the three months ended March 31, 2023.

Provision for credit losses. We charge provisions for credit losses to operations in order to maintain our allowance for credit losses on loans and reserve for unfunded commitments at a level that is considered reasonable and necessary to absorb expected credit losses inherent in the loan portfolio and expected losses on commitments to grant loans that are expected to be advanced at the consolidated balance sheet date. In determining the level of the allowance for credit losses, we consider our past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current and forecasted economic conditions, and the levels of non-performing and other classified loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change. We assess the allowance for credit losses on a quarterly basis and make provisions for credit losses in order to maintain the allowance.

Based on our evaluation of the above factors, we recorded an $84,000 reversal of the provision for credit losses for the three months ended March 31, 2024 compared to a $183,000 provision for credit losses for the three months ended March 31, 2023. The reversal of provision for credit losses was primarily due to lower qualitative factor allocations within the Company’s current expected credit losses methodology and a lower required allowance for unfunded commitments due to the decline in volume of unfunded commitments. The allowance for credit losses on loans was $4.5 million, or 1.32%, of loans outstanding at March 31, 2024 and $4.5 million, or 1.38%, of loans outstanding at December 31, 2023.

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To the best of our knowledge, we have recorded our best estimate of expected losses in the loan portfolio and for unfunded commitments at March 31, 2024. However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for credit losses. In addition, the PADOB and the FDIC, as an integral part of their examination process, will periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses. However, regulatory agencies are not directly involved in establishing the allowance for credit losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

Noninterest income. Noninterest income information is as follows.


	Three Months Ended
	March 31,				Change
	2024		2023		Amount		Percent

	(Dollars in thousands)
Service charges on deposit accounts	$	55	$	47	$	8	17.0	%
(Loss) gain on equity securities		(8)		12		(20)	(166.7)
Bank owned life insurance income		53		43		10	23.3
Debit card income		50		50		—	—
Other service charges		17		19		(2)	(10.5)
Loss on disposal of premises and equipment		—		(40)		40	100.0
Other income		20		7		13	185.7
Total noninterest income	$	187	$	138	$	49	35.5	%

Noninterest income increased by $49,000, or 35.5%, to $187,000 for the three months ended March 31, 2024 from $138,000 for the three months ended March 31, 2023. The increase in noninterest income resulted primarily from a loss of $40,000 on disposal of premises and equipment during the first quarter of 2023 as compared to no similar loss in the first quarter of 2024. In addition, noninterest income increased as a result of an increase in other income of $13,000 and an increase in bank owned life insurance income of $10,000. Other income increased $13,000 primarily due to loan related fee income earned for brokering interest rate swap agreements between the Bank’s customers and counterparties unrelated to the Bank. Bank owned life insurance income increased $10,000 due to the purchase of additional policies in 2023.

Noninterest Expenses. Noninterest expenses information is as follows.


	Three Months Ended
	March 31,				Change
	2024		2023		Amount		Percent

	(Dollars in thousands)
Salaries and employee benefits	$	1,356	$	1,349	$	7	0.5	%
Occupancy and equipment		175		164		11	6.7
Data and item processing		280		267		13	4.9
Advertising and marketing		51		25		26	104.0
Professional fees		165		180		(15)	(8.3)
Directors’ fees		107		107		—	—
FDIC insurance premiums		49		40		9	22.5
Pennsylvania shares tax		79		77		2	2.6
Debit card expenses		41		35		6	17.1
Other		195		221		(26)	(11.8)
Total noninterest expenses	$	2,498	$	2,465	$	33	1.3	%

Noninterest expenses increased $33,000, or 1.3%, to remain at $2.5 million for the three months ended March 31, 2024. The increase in noninterest expenses was primarily the result of increases in advertising and marketing expense of $26,000. Advertising and marketing expense increased $26,000 due to a search engine optimization campaign for $12,000 and increases to media advertising and event sponsorships of $13,000 year over year.

Income tax expense. Income tax expense decreased $38,000, or 30.2%, to $88,000 for the three months ended March 31, 2024 from $126,000 for the three months ended March 31, 2023. The effective tax rates were 21.7% and 23.6% for the three month periods ended March 31, 2024 and 2023, respectively. The decrease in income tax expense for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to an decrease in income before income taxes and relatively consistent levels of income not subject to taxes.

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Average balances and yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or interest expense.


	For the Three Months Ended March 31,
	2024							2023
	Average							Average
	Outstanding					Average		Outstanding					Average
	Balance			Interest		Yield/Rate (4)		Balance			Interest		Yield/Rate (4)

	(Dollars in thousands)
Interest-earning assets:
Loans	$	331,069		$	4,551	5.53	%	$	304,396		$	3,798	5.05	%
Debt and equity securities		39,224			259	2.66	%		34,787			142	1.63	%
Restricted stocks		2,524			52	8.29	%		2,229			41	7.40	%
Cash and cash equivalents		61,119			752	4.95	%		38,206			388	4.07	%
Total interest-earning assets		433,936			5,614	5.20	%		379,618			4,369	4.66	%
Noninterest-earning assets		9,971							9,200
Total assets	$	443,907						$	388,818

Interest-bearing liabilities:
Interest-bearing demand deposits	$	101,303			523	2.08	%	$	77,583			111	0.58	%
Savings deposits		13,355			9	0.27	%		21,250			18	0.35	%
Money market deposits		49,443			336	2.73	%		51,992			186	1.45	%
Certificates of deposit		153,192			1,618	4.25	%		112,342			613	2.21	%
Total interest-bearing deposits		317,293			2,486	3.15	%		263,167			928	1.43	%
Long-term borrowings		53,154			496	3.75	%		48,325			396	3.28	%
Total interest-bearing liabilities		370,447			2,982	3.24	%		311,492			1,324	1.72	%
Noninterest-bearing demand deposits		22,029							27,775
Other noninterest-bearing liabilities		4,386							3,017
Total liabilities		396,862							342,284
Stockholders' equity		47,045							46,534
Total liabilities and stockholders' equity	$	443,907						$	388,818
Net interest income				$	2,632						$	3,045
Net interest rate spread (1)						1.96	%						2.94	%
Net interest-earning assets (2)	$	63,489						$	68,126
Net interest margin (3)						2.44	%						3.26	%
Average interest-earning assets to interest-bearing liabilities		117.14	%						121.87	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.

(4)	Annualized.

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Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total increase (decrease) column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.


	Three Months Ended
	March 31, 2024 vs. 2023
	Increase (Decrease) Due to				Total
					Increase
	Volume		Rate		(Decrease)

	(In thousands)
Interest-earning assets:
Loans	$	335	$	418	$	753
Debt and equity securities		18		99		117
Restricted stocks		5		6		11
Cash and cash equivalents		232		132		364
Total interest-earning assets		590		655		1,245

Interest-bearing liabilities:
Interest-bearing demand deposits		34		378		412
Savings deposits		(7)		(2)		(9)
Money market deposits		(9)		159		150
Certificates of deposit		224		781		1,005
Total deposits		242		1,316		1,558
Borrowings		39		61		100
Total interest-bearing liabilities		281		1,377		1,658
Change in net interest income	$	309	$	(722)	$	(413)

Non-Performing Assets and Allowance for Credit Losses

Non-performing loans. Non-performing loans are reviewed on a weekly basis by management and again by our credit committee on a monthly basis. Nonaccrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on nonaccrual status unless the loan is well secured and in the process of collection. When loans are placed on nonaccrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

Real estate owned. When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property. Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for credit losses. After acquisition, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell. We had no real estate owned at March 31, 2024 or as of December 31, 2023.

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Non-Performing Assets. The following table sets forth information regarding our non-performing assets.


		March 31,			December 31,
	2024			2023

	(Dollars in thousands)
Nonaccrual loans:
Real estate:
One- to four-family residential	$	134		$	149
Commercial		1,011			1,065
Construction		—			—
Commercial and industrial		191			207
Consumer and other		—			—
Total nonaccrual loans		1,336			1,421

Accruing loans past due 90 days or more
Real estate:
One- to four-family residential		—			—
Commercial		—			—
Construction		—			—
Commercial and industrial		—			—
Consumer and other		—			—
Total accruing loans past due 90 days or more		—			—
Total non-performing loans	$	1,336		$	1,421
Foreclosed assets		—			—
Total non-performing assets	$	1,336		$	1,421


Total non-performing loans to total loans		0.39	%		0.44	%
Total nonaccrual loans to total loans		0.39	%		0.44	%
Total non-performing assets to total assets		0.30	%		0.32	%

Non-performing loans were $1.3 million, or 0.39% of total loans, at March 31, 2024 and $1.4 million, or 0.44% of total loans, at December 31, 2023. During the three months ended March 31, 2024, payments on nonaccrual loans resulted in the decrease in nonaccrual loans.

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Allowance for credit losses. The following table sets forth activity in our allowance for credit losses for the periods indicated.


	At or For the Three Months Ended March 31,
	2024			2023

	(Dollars in thousands)
Allowance for credit losses at beginning of year	$	4,511		$	3,992
Provision for credit losses		(44)			157
Charge-offs:
Real estate:
One- to four-family residential		—			—
Commercial		—			—
Construction		—			—
Commercial and industrial		—			(75)
Consumer and other		(6)			—
Total charge-offs		(6)			(75)

Recoveries:
Real estate:
One- to four-family residential		—			15
Commercial		—			—
Construction		—			—
Commercial and industrial		2			1
Consumer and other		2			—
Total recoveries		4			16

Net charge-offs		(2)			(59)

Allowance for credit losses at end of period	$	4,465		$	4,090

Allowance to nonaccrual loans		334.21	%		496.36	%
Allowance to total loans outstanding at the end of the period		1.32	%		1.30	%
Net charge-offs to average loans outstanding during the period (annualized)		—	%		0.08	%

The provision for credit losses decreased $267,000, or 145.9%, to ($84,000) for the three months ended March 31, 2024 from a provision of $183,000 for the three months ended March 31, 2023. The reversal of the provision for credit losses in the first quarter of 2024 was primarily due to lower qualitative factor allocations within the Company’s current expected credit losses methodology and a lower required allowance for unfunded commitments due to the decline in volume of unfunded commitments. An additional partial charge-off of a previously written down commercial and industrial loan for $75,000 was taken in the three months ended March 31, 2023. Delinquencies remain benign, reserve levels are deemed to be adequate and the allowance coverage ratio has increased at March 31, 2024. The allowance to total loans outstanding was 1.32% at March 31, 2024, decreasing from 1.38% at December 31, 2023.

Liquidity and Capital Resources

Liquidity management. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from sales, maturities and calls of securities. We also have the ability to borrow from the Federal Home Loan Bank of Pittsburgh. At March 31, 2024, we had the ability to borrow approximately $202.1 million from the Federal Home Loan Bank of Pittsburgh, of which $50.8 million had been advanced in addition to $13.4 million held in reserve to secure three letters of credit to collateralize municipal deposits. Additionally, at March 31, 2024, we had the ability to borrow $7.5 million from the Atlantic Community Bankers Bank, $5.0 million from SouthState Bank, N.A. and we also maintained a line of credit of $2.0 million with the Federal Reserve Bank of Philadelphia. We did not borrow against the credit line with the Atlantic Community Bankers Bank, SouthState Bank, N.A., or the Federal Reserve Bank of Philadelphia during the three months ended March 31, 2024.

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The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We seek to maintain a liquidity ratio of 5.0% or greater. For the three months ended March 31, 2024 and 2023, our liquidity ratio averaged 18.0% and 12.0%, respectively. We believe that we had enough sources of liquidity to satisfy our short and long-term liquidity needs as of March 31, 2024.

We monitor and adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand; (2) expected deposit flows; (3) yields available on cash and cash equivalents and securities; and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in cash and cash equivalents and short-and intermediate-term securities.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents, which include federal funds sold. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At March 31, 2024, cash and cash equivalents totaled $66.8 million. Debt securities classified as available-for-sale, which provide additional sources of liquidity, totaled $32.1 million at March 31, 2024.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of March 31, 2024, totaled $141.6 million, or 87.5% of our certificates of deposit, and 40.7% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Capital management. At March 31, 2024, Presence Bank exceeded all regulatory capital requirements and was considered “well capitalized” under regulatory guidelines. See Note 10 of the Notes to the Financial Statements for more information regarding our capital resources.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At March 31, 2024, we had outstanding commitments to originate loans of $32.6 million, unused lines of credit totaling $12.9 million and $4.4 million in stand-by letters of credit outstanding. We anticipate that we will have sufficient funds available to meet our current lending commitments. Certificates of deposit that are scheduled to mature in less than one year from March 31, 2024 totaled $141.6 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new deposits, which may result in higher levels of interest expense.

Contractual obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for equipment, agreements with respect to borrowed funds and deposit liabilities.

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Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. Higher inflation and its impacts, nationally or in the markets that the Company serves could adversely affect, among other things, real estate valuations, unemployment levels, the ability of businesses to remain viable, and consumer and business confidence, which could lead to decreases in demand for loans and deposits and increases in loan delinquencies and defaults.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information related to this item.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

As of the end of the period covered by this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on their evaluation of the Company’s disclosure controls and procedures as of March 31, 2024, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations are operating in an effective manner.

Internal control over financial reporting.

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

As of March 31, 2024, the Company is not currently a named party in a legal proceeding, the outcome of which would have a material effect on the financial condition or results of operations of the Company.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information related to this item.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

There were no sales of unregistered securities during the quarter ended March 31, 2024.

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The following table reports information regarding repurchases by the Company of its common stock in each month of the quarter ended March 31, 2024:


						Total Number
						of Shares		Maximum
						Purchased as		Number of
						Part of		Shares that
						Publicly		May Yet Be
		Total Number		Average Price		Announced		Purchased
		of Shares		Paid Per		Plans or		Under Plans or
Period		Purchased		Share		Programs		Programs (1)
	January 1 through January 31, 2024		15,000	$	12.91		220,398		57,327
	February 1 through February 29, 2024		20,000		13.92		240,398		37,327
	March 1 through March 31, 2024		15,000		13.04		255,398		22,327
	Total		50,000	$	13.35		255,398		22,327

(1)

On August 5, 2023, the Company announced it adopted a stock repurchase program. The stock repurchase program authorizes the Company to repurchase up to an aggregate of 277,725 shares, or approximately 10% of its then outstanding shares. The repurchase program permits shares to be repurchased in open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The repurchase program was extended by the Board of Directors on August 28, 2023.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the first quarter of 2024, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations.

Item 6. Exhibits

See Exhibit Index.

EXHIBIT INDEX


Exhibit No.		Description

31.1†		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2†		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1†		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2†		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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101.INS†		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH†		XBRL Taxonomy Extension Schema Document

101.CAL†		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB†		XBRL Taxonomy Extension Label Linkbase Document

101.PRE†		XBRL Taxonomy Extension Presentation Linkbase Document
104†		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

† Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.

Date: May 15, 2024


	PB BANKSHARES, INC.

	By:	/s/ Janak M. Amin
	Name:	Janak M. Amin
	Title:	President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Lindsay S. Bixler
	Name:	Lindsay S. Bixler
	Title:	Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-31.1 2 pbbk-20240331xex31d1.htm EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Janak M. Amin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PB Bankshares, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2024

	By:	/s/ Janak M. Amin
	Name:	Janak M. Amin
	Title:	President and Chief Executive Officer

EX-31.2 3 pbbk-20240331xex31d2.htm EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Lindsay S. Bixler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PB Bankshares, Inc.;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2024



	By:	/s/ Lindsay S. Bixler
	Name:	Lindsay S. Bixler
	Title:	Executive Vice President and Chief Financial Officer

EX-32.1 4 pbbk-20240331xex32d1.htm EX-32.1

Exhibit 32.1

Certification of CEO Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of PB Bankshares, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, the undersigned, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2024

	By:	/s/ Janak M. Amin
	Name:	Janak M. Amin
	Title:	President & Chief Executive Officer

EX-32.2 5 pbbk-20240331xex32d2.htm EX-32.2

Exhibit 32.2

Certification of CFO Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: Mary 15, 2024



	By:	/s/ Lindsay S. Bixler
	Name:	Lindsay S. Bixler
	Title:	Executive Vice President and Chief Financial Officer