ECB Bancorp, Inc. /MD/

Previous wording

Management’s discussion and analysis of the financial condition and results of operations at and for the three and nine months ended September 30, 2024 and 2023 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.

Current wording

Management’s discussion and analysis of the financial condition at March 31, 2025 compared to December 31, 2024 and results of operations for the three months ended March 31, 2025 and 2024 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.

Previous wording

Multi-family real estate loans increased $39.6 million, or 13.8%, to $327.0 million at September 30, 2024 from $287.4 million at December 31, 2023.

Current wording

Multi-family real estate loans increased $27.0 million, or 7.9%, to $371.0 million at March 31, 2025 from $344.0 million at December 31, 2024.

Previous wording

Home equity lines of credit increased $6.1 million, or 18.2%, to $39.4 million at September 30, 2024 from $33.4 million at December 31, 2023.

Current wording

Home equity lines of credit decreased $1.1 million, or 2.5%, to $44.0 million at March 31, 2025, from $45.2 million at December 31, 2024.

Previous wording

Federal Home Loan Bank stock. The Federal Home Loan Bank (FHLB) is a cooperative bank that provides services to its member banking institutions. The primary reason for our membership in the FHLB is to gain access to a reliable source of wholesale funding and as a tool to manage interest rate risk. The purchase of stock in the FHLB is a requirement for a member to gain access to funding. We purchase and/or are subject to redemption of FHLB stock proportional to the volume of funding received and view the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return. We held an investment in FHLB stock of $9.9 million at September 30, 2024 and December 31, 2023.

Current wording

Federal Home Loan Bank stock. The Federal Home Loan Bank (FHLB) is a cooperative bank that provides services to its member banking institutions. The primary reason for our membership in the FHLB is to gain access to a reliable source of wholesale funding and as a tool to manage interest rate risk. The purchase of stock in the FHLB is a requirement for a member to gain access to funding. We purchase and/or are subject to redemption of FHLB stock proportional to the volume of funding received and view the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return. We held an investment in FHLB stock of $10.0 million at March 31, 2025 and December 31, 2024.

Previous wording

Bank-owned Life Insurance. We invest in bank-owned life insurance to help offset the costs of our employee benefit plan obligations. Bank-owned life insurance also generally provides noninterest income that is nontaxable. Bank-owned life insurance increased $353,000, or 2.4%, to $14.8 million at September 30, 2024 from $14.5 million at December 31, 2023. The increase was due to an increase of $353,000 in the cash surrender value of our bank-owned life insurance portfolio during the nine months ended September 30, 2024.

Current wording

Bank-owned Life Insurance. We invest in bank-owned life insurance to help offset the costs of our employee benefit plan obligations. Bank-owned life insurance also generally provides noninterest income that is nontaxable. Bank-owned life insurance increased $116,000, or 0.8%, to $15.1 million at March 31, 2025 from $14.9 million at December 31, 2024. The increase was due to an increase of $116,000 in the cash surrender value of our bank-owned life insurance portfolio during the three months ended March 31, 2025.

Previous wording

Money market deposit accounts increased $32.1 million, or 24.4%, to $163.4 million at September 30, 2024 from $131.4 million at December 31, 2023.

Current wording

Money market deposit accounts increased $19.7 million, or 10.7%, to $204.3 million at March 31, 2025 from $184.6 million at December 31, 2024.

Previous wording

Demand deposit accounts decreased $4.3 million, or 5.5%, to $74.1 million at September 30, 2024 from $78.3 million at December 31, 2023.

Current wording

Demand deposit accounts decreased $5.1 million, or 6.0%, to $79.9 million at March 31, 2025 from $85.0 million at December 31, 2024.

Previous wording

Interest-bearing checking accounts decreased $3.2 million, or 14.5%, to $18.9 million at September 30, 2024 from $22.2 million at December 31, 2023

Current wording

Interest bearing checking accounts decreased $3.5 million, or 17.2%, to $17.0 million at March 31, 2025 from $20.5 million at December 31, 2024.

Previous wording

Core deposits (defined as all deposits other than certificates of deposit) decreased $6.9 million, or 1.9%, to $362.8 million at September 30, 2024 from $369.7 million at December 31, 2023.

Current wording

Core deposits (defined as all deposits other than certificates of deposit) increased $6.7 million, or 1.7%, to $399.7 million at March 31, 2025 from $393.0 million at December 31, 2024.

Previous wording

Shareholders' Equity. Total shareholders' equity increased $1.1 million, or 0.7%, to $166.0 million at September 30, 2024 from $164.9 million at December 31, 2023. This increase is primarily the result of net income of $2.5 million. Partially offsetting this increase in shareholders' equity was a decrease in accumulated other comprehensive income ("AOCI") of $910,000 and a decrease in additional paid-in capital of $761,000. The decrease in AOCI was driven by a decrease in the fair value of cash flow hedges entered into during the nine months ended September 30, 2024. The decrease in additional paid in capital was driven by $1.8 million in shares repurchased under our share repurchase plan, partially offset by an increase in additional paid in capital of $1.1 million related to stock based compensation and ESOP shares committed to be released. The book value per share increased $0.39 to $18.14 at September 30, 2024 from $17.75 at December 31, 2023.

Current wording

Shareholders' Equity. Total shareholders' equity increased $310,000, or 0.2%, to $168.6 million as of March 31, 2025 from $168.3 million as of December 31, 2024. This increase is primarily the result of earnings of $1.3 million. Partially offsetting the increase from earnings were decreases in additional paid-in capital ("APIC") and accumulated other comprehensive income ("AOCI") of $310,000 and $767,000, respectively. The decrease in APIC was driven by $672,000 in shares repurchased under our share repurchase plan, partially offset by an increase in APIC of $362,000 related to stock-based compensation and ESOP shares committed to be released. The decrease in AOCI was driven by a decrease in the fair value of cash flow hedges. Our book value per share increased by $0.13 to $18.63 at March 31, 2025 from $18.50 at December 31, 2024.

Previous wording

Net Income. We recorded net income of $1.1 million for the three months ended September 30, 2024, compared to net income of $1.3 million for the three months ended September 30, 2023. The decrease in net income was driven by an increase in net interest and dividend income, which was more than offset by an increase in provision for credit losses and an increase in noninterest expense.

Current wording

Net Income. We recorded net income of $1.3 million for the three months ended March 31, 2025, compared to net income of $621,000 for the three months ended March 31, 2024, or an increase of $676,000, or 108.9% in net income.

Previous wording

Interest and Dividend Income. Interest and dividend income increased $3.0 million, or 21.1%, to $17.2 million for the three months ended September 30, 2024 from $14.2 million for the three months ended September 30, 2023. This increase was due to a $2.5 million increase in interest and fees on loans, an $80,000 increase in interest and dividends on investment securities and a $373,000 increase in interest on short term investments. The increase in interest and fees on loans was driven by an increase of $119.6 million in the average balance of the loan portfolio to $1.12 billion for the three months ended September 30, 2024 from $1.00 billion for the three months ended September 30, 2023, as well as an increase in the average yield of 39 basis points to 5.27% during the three months ended September 30, 2024 from 4.88% during the three months ended September 30, 2023. The yield for the three months ended September 30, 2024 benefited from new loans with higher rates as well as adjustable rate loans repricing higher. The increase in interest and dividend income on investment securities was driven by an increase in the yield on securities of 42 basis points to 3.00% during the three months ended September 30, 2024 from 2.58% during the three months ended September 30, 2023. The increase in other interest income resulted primarily from an increase of $27.3 million in the average balance of short term investments to $110.5 million for the three months ended September 30, 2024 from $83.2 million for the three months ended September 30, 2023.

Current wording

Interest and Dividend Income. Interest and dividend income increased $1.9 million, or 12.3%, to $17.6 million for the three months ended March 31, 2025 from $15.7 million for the three months ended March 31, 2024. This increase was due to a $1.7 million increase in interest and fees on loans, an $89,000 increase in interest and dividends on investment securities and a $141,000 increase in interest on short term investments. The increase in interest and fees on loans was driven by an increase of $100.0 million in the average balance of the loan portfolio to $1.16 billion for the three months ended March 31, 2025 from $1.06 billion for the three months ended March 31, 2024, as well as an increase in the average yield of 19 basis points to 5.30% during the three months ended March 31, 2025 from 5.11% during the three months ended March 31, 2024. The yield for the three months ended March 31, 2025 benefited from new loans with higher rates. The increase in interest and dividend income on investment securities was driven by an increase in the yield on securities of 59 basis points to 3.37% during the three months ended March 31, 2025 from 2.78% during the three months ended March 31, 2024. The increase in interest on short term investments was driven by an increase of $39.3 million in the average balance of short term investments to $148.3 million for the three months ended March 31, 2025 from $109.0 million for the three months ended March 31, 2024, partially offset by a decrease in the yield of 103 basis points to 4.45% for three months ended March 31, 2025, from 5.48% for three months ended March 31, 2024.

Previous wording

Interest Expense. Total interest expense increased $2.8 million, or 34.5%, to $10.9 million for the three months ended September 30, 2024 from $8.1 million for the three months ended September 30, 2023. Interest expense on deposit accounts increased $3.0 million, or 50.5%, to $8.8 million for the three months ended September 30, 2024 from $5.8 million for the three months ended September 30, 2023, primarily due to an increase in the average balance of interest-bearing deposits of $165.7 million, or 23.2%, to $879.2 million for the three months ended September 30, 2024 from $713.5 million for the three months ended September 30, 2023 as well as an increase in the cost of interest-bearing deposits of 73 basis points to 3.98% for the three months ended September 30, 2024 from 3.25% for the three months ended September 30, 2023. Interest expense on FHLB advances decreased $168,000, or 7.5%, to $2.1 million for the three months ended September 30, 2024 from $2.2 million for the three months ended September 30, 2023, primarily due to a decrease in the average balance of FHLB advances of $15.1 million, or 6.8%, to $208.2 million for the three months ended September 30, 2024 from $223.3 million for the three months ended September 30, 2023, and a decrease in the cost of FHLB advances of 2 basis points to 3.95% for the three months ended September 30, 2024 from 3.97% for the three months ended September 30, 2023.

Current wording

Interest Expense. Total interest expense increased $1.2 million, or 12.1%, to $11.0 million for the three months ended March 31, 2025 from $9.8 million for the three months ended March 31, 2024. Interest expense on deposit accounts increased $1.3 million, or 17.7%, to $8.9 million for the three months ended March 31, 2025 from $7.5 million for the three months ended March 31, 2024, primarily due to an increase in the average balance of interest-bearing deposits of $144.5 million, or 18.1%, to $944.4 million for the three months ended March 31, 2025 from $799.9 million for the three months ended March 31, 2024 as well as an increase in the cost of interest bearing deposits of 2 basis points to 3.80% for the three months ended March 31, 2025 from 3.78% for the three months ended March 31, 2024. Interest expense on FHLB advances decreased $153,000, or 6.7%, to $2.1 million for the three months ended March 31, 2025 from $2.3 million for the three months ended March 31, 2024, primarily due to a decrease in the average balance of FHLB advances of $10.1 million, or 4.4%, to $217.1 million for the three months ended March 31, 2025 from $227.2 million for the three months ended March 31, 2024 as well as a decrease in the cost of FHLB advances of 6 basis points to 3.95% for the three months ended March 31, 2025 from 4.01% for the three months ended March 31, 2024.

Previous wording

Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, a provision for credit losses of $485,000 was recorded for the nine months ended September 30, 2024, compared to a provision for credit losses of $696,000 for the nine months ended September 30, 2023. The decrease in the provision for credit losses was driven by lower loan growth during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Current wording

Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, the benefit for credit losses was $10,000 for the three months ended March 31, 2025 compared to provision expense of $147,000 for the three months ended March 31, 2024.

Previous wording

Noninterest Income. Noninterest income increased $107,000, or 13.5%, to $898,000 for the nine months ended September 30, 2024 from $791,000 for the nine months ended September 30, 2023. The increase was driven by increases in net gains on sales of loans and customer service fees. The table below sets forth our noninterest income for the nine months ended September 30, 2024 and 2023:

Current wording

Noninterest Income. Noninterest income was $271,000 for the three months ended March 31, 2025, as compared to $307,000 for the three months ended March 31, 2024, or a decrease of $36,000, or 11.7%. The decrease was primarily due to decreases in net gains on sales of loans as we did not sell any loans during the three months ended March 31, 2025. The table below sets forth our noninterest income for three months ended March 31, 2025 and 2024:

Previous wording

The table below sets forth our noninterest expense for the three months ended September 30, 2024 and 2023:

Current wording

Noninterest Expense. Noninterest expense was $5.2 million for the quarter ended March 31, as compared to $5.2 million for the quarter ended March 31, 2024, or a decrease of $23,000, or 0.4%. The table below sets forth our noninterest expense for the three months ended March 31, 2025 and 2024:

Previous wording

Income Tax Expense. Income tax expense decreased $376,000, or 29.8%, to $887,000 for the nine months ended September 30, 2024 from $1.3 million for the nine months ended September 30, 2023. The effective tax rate was 25.8% and 25.6% for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

Income Tax Expense. Income tax expense increased $213,000, or 100.9%, to $424,000 for the three months ended March 31, 2025 from $211,000 for the three months ended March 31, 2024. The effective tax rate was 24.6% and 25.4% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

(1) Excludes interest and dividends on cost method investments of $202,000 and $193,000 for the three months ended September 30, 2024 and 2023, respectively.

Current wording

(1) Excludes interest and dividends on cost method investments of $181,000 and $207,000 for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

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 maturities of securities. We are also able to borrow from the Federal Home Loan Bank of Boston, the Federal Reserve Bank and the Atlantic Community Bankers Bank. At September 30, 2024, we had outstanding advances of $234.0 million from the Federal Home Loan Bank. At September 30, 2024, we had unused borrowing capacity of $274.2 million with the Federal Home Loan Bank, $15.1 million with the Federal Reserve Bank and $10.0 million with the Atlantic Community Bankers Bank.

Current wording

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 maturities of securities. We are also able to borrow from the Federal Home Loan Bank of Boston, the Federal Reserve Bank and the Atlantic Community Bankers Bank. At March 31, 2025, we had outstanding advances of $234.0 million from the Federal Home Loan Bank. At March 31, 2025, we had unused borrowing capacity of $328.3 million with the Federal Home Loan Bank, $16.8 million with the Federal Reserve Bank and $10.0 million with the Atlantic Community Bankers Bank.

Previous wording

At September 30, 2024, we had $34.3 million in loan commitments outstanding. In addition to commitments to originate and purchase loans, we had $78.0 million in unused lines of credit to borrowers and $47.0 million in unadvanced construction loans.

Current wording

At March 31, 2025, we had $31.0 million in loan commitments outstanding. In addition to commitments to originate and purchase loans, we had $89.0 million in unused lines of credit to borrowers and $52.4 million in unadvanced construction loans.

Previous wording

Non brokered certificates of deposit due within one year of September 30, 2024 totaled $259.8 million, or 27.5%, of total deposits. If these deposits do not remain with us, we may be required to seek other sources of funds, including brokered deposits and FHLB advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before September 30, 2025, or on our savings and money market accounts.

Current wording

Non brokered certificates of deposit due within one year of March 31, 2025 totaled $383.9 million, or 37.0%, of total deposits. If these deposits do not remain with us, we may be required to seek other sources of funds, including brokered deposits and FHLB advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before March 31, 2026, or on our savings and money market accounts.

Previous wording

Our primary investing activity is originating loans. During the nine months ended September 30, 2024 and the year ended December 31, 2023, we originated and purchased $149.3 million and $268.1 million of loans, respectively.

Current wording

Our primary investing activity is originating loans. During the three months ended March 31, 2025 and the year ended December 31, 2024, we originated and purchased $54.9 million and $160.4 million of loans, respectively.

Previous wording

Financing activities consist primarily of activity in deposit accounts and FHLB advances. We experienced net increases in deposits of $76.1 million and $150.1 million for the nine months ended September 30, 2024 and the year ended December 31, 2023, respectively. At September 30, 2024 and December 31, 2023, the level of brokered time deposits was $125.6 million and $115.5 million, respectively. Deposit flows are affected primarily by the overall level of interest rates and the interest rates and products offered by us and our competitors. FHLB advances stayed unchanged for the nine months ended September 30, 2024, compared to an increase of $60.0 million for the year ended December 31, 2023.

Current wording

Financing activities consist primarily of activity in deposit accounts and FHLB advances. We experienced net increases in deposits of $38.1 million and $130.3 million for the three months ended March 31, 2025 and the year ended December 31, 2024, respectively. At March 31, 2025 and December 31, 2024, the level of brokered time deposits was $133.9 million and $125.6 million, respectively. Deposit flows are affected primarily by the overall level of interest rates and the interest rates and products offered by us and our competitors. At March 31, 2025 and December 31, 2024, the level of FHLB advances was $234.0 million.

Previous wording

For additional information, see the consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023 included as part of the consolidated financial statements appearing elsewhere in this Form 10-Q.

Current wording

For additional information, see the consolidated statements of cash flows for the three months ended March 31, 2025 and 2024 included as part of the consolidated financial statements appearing elsewhere in this Form 10-Q.