Gouverneur Bancorp IncMD

Previous wording

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. We consider these accounting policies to be our critical accounting policies. The judgments and assumptions we use are based on

Current wording

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. We consider these accounting policies to be our critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Previous wording

We consider the allowance for credit losses to be a critical accounting policy. Note 2 to the Company’s Consolidated Financial Statements for the three and six months ended March 31, 2024 discusses significant accounting policies, including the allowance for credit losses and the adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans and investment securities, now referred to as the allowance for credit losses. Please refer to Note 2 to the Company’s Consolidated Financial Statements for detail regarding the Company’s adoption of ASU 206-13:Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and the allowance for credit losses. 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.

Current wording

We consider the allowance for credit losses to be a critical accounting policy. Note 2 to the Company’s Consolidated Financial Statements for the three and nine months ended June 30, 2024 discusses significant accounting policies, including the allowance for credit losses and the adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans and investment securities, now referred to as the allowance for credit losses. Please refer to Note 2 to the Company’s Consolidated Financial Statements for detail regarding the Company’s adoption of ASU 206-13:Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and the allowance for credit losses. 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.

Previous wording

Our financial results are affected by the changes in and the level of the allowance for credit losses. This process involves our analysis of complex internal and external variables, and it requires that we exercise judgement to estimate an appropriate allowance for credit losses. As a result of the uncertainty associated with this subjectivity, we cannot assure the precision of the amount reserved, should we experience sizeable loan losses in any particular period. For example, changes in the financial condition of individual borrowers, economic conditions, or the condition of various markets in which collateral may be sold could require us to significantly decrease or increase the level of the allowance for credit losses. Such an adjustment could materially affect net income as a result of the change in provision for credit losses. We also have approximately $1.2 million as of March 31, 2024 in non-performing assets consisting of non-performing loans and one property held in other real estate owned. We continue to assess the collectability of these loans and update our appraisals on these loans as appropriate.

Current wording

Our financial results are affected by the changes in and the level of the allowance for credit losses. This process involves our analysis of complex internal and external variables, and it requires that we exercise judgement to estimate an appropriate allowance for credit losses. As a result of the uncertainty associated with this subjectivity, we cannot assure the precision of the amount reserved, should we experience sizeable loan losses in any particular period. For example, changes in the financial condition of individual borrowers, economic conditions, or the condition of various markets in which collateral may be sold could require us to significantly decrease or increase the level of the allowance for credit losses. Such an adjustment could materially affect net income as a result of the change in provision for credit losses. We also have approximately $529,000 as of June 30, 2024 in non-performing assets consisting of non-performing loans. We continue to assess the collectability of these loans and update our appraisals on these loans as appropriate.

Previous wording

We establish a general allowance for loans that share common risk characteristics to recognize the expected lifetime credit losses associated with lending activities, but which, unlike specific allowances, has not been allocated to particular problem assets. This general valuation allowance is determined by segregating the loans by loan category and using historical experience, current conditions, and reasonable and supportable forecasts to estimate the expected lifetime credit losses inherent. The allowance may be adjusted for significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary market area, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, recent loss experience in particular segments of the portfolio, duration of the current business cycle and bank regulatory examination results. The applied loss factors are re-evaluated quarterly to ensure their relevance in the current real estate environment.

Current wording

We establish a general allowance for loans that share common risk characteristics to recognize the expected lifetime credit losses associated with lending activities, but which, unlike specific allowances, has not been allocated to particular problem assets. This general valuation allowance is determined by segregating the loans by loan category and using historical experience, current conditions, and reasonable and supportable forecasts to estimate the expected lifetime credit losses inherent. The allowance may be adjusted for significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary market area, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, recent loss experience in particular

Previous wording

value of the equity interests transferred. We consider the assumptions required to calculate the fair value of equity of an acquired company using discounted cash flow models (income approach) and/or change of control premium models (market approach) which are generally based on a higher level of market participant inputs and therefore a lower level of subjectivity when compared to the assumptions required to calculate the fair value of equity interests transferred under a fair value pricing model. As a result, we consider the calculation of the fair value of the equity of an acquired company to be more reliable than the calculation of the fair value of the equity interests transferred. Goodwill is assessed at least annually for impairment and any such impairment will be recognized in the period identified. Goodwill is not amortized but is evaluated annually for impairment.

Current wording

Goodwill represents the excess cost of the acquisition of Citizens Bank of Cape Vincent over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. When calculating goodwill in accordance with FASB ASC 805-30-55-3, we evaluate whether the fair value of equity of the acquired company is a more reliable measure than the fair value of the equity interests transferred. We consider the assumptions required to calculate the fair value of equity of an acquired company using discounted cash flow models (income approach) and/or change of control premium models (market approach) which are generally based on a higher level of market participant inputs and therefore a lower level of subjectivity when compared to the assumptions required to calculate the fair value of equity interests transferred under a fair value pricing model. As a result, we consider the calculation of the fair value of the equity of an acquired company to be more reliable than the calculation of the fair value of the equity interests transferred. Goodwill is assessed at least annually for impairment and any such impairment will be recognized in the period identified. Goodwill is not amortized but is evaluated annually for impairment.

Previous wording

Total assets decreased by $2.2 million, or 1.06%, to $203.7 million at March 31, 2024 from $205.9 million at September 30, 2023. The decrease in assets was primarily due to decreases in acquired loans of $2.6 million and cash and due from banks of $949,000, partially offset by an increase in originated loans of $1.3 million and an increase in securities available for sale of $1.3 million.

Current wording

Total assets decreased by $10.8 million, or 5.26%, to $195.1 million at June 30, 2024 from $205.9 million at September 30, 2023. The decrease in assets was primarily due to decreases in acquired loans of $3.4 million and cash and due from banks of $5.2 million, partially offset by an increase in originated loans of $1.4 million and an increase in interest bearing deposits with banks of $1.1 million.

Previous wording

Cash and cash equivalents decreased by $294,000, or 2.83%, to $10.1 million at March 31, 2024 from $10.4 million at September 30, 2023. The decrease in cash and cash equivalents can be primarily attributed to a repayment of Federal Home Loan Bank borrowings of $8.9 million, partially offset by an increase in deposits of $4.0 million and the funding of loans.

Current wording

Cash and cash equivalents decreased by $4.1 million, or 39.67%, to $6.3 million at June 30, 2024 from $10.4 million at September 30, 2023. The decrease in cash and cash equivalents can be primarily attributed to a repayment of Federal Home Loan Bank borrowings of $9.0 million and a decrease in deposits of $5.4 million, partially offset by a decrease in securities available for sale of $2.9 million due to principal maturities.

Previous wording

Loans receivable, net of the allowance for credit losses, decreased by $1.7 million, or 1.36%, to $123.7 million at March 31, 2024 from $125.4 million at September 30, 2023. The decrease in loans receivable, net of the allowance for credit losses, was primarily due to a decrease in net loans acquired from Citizens Bank of Cape Vincent of $2.6 million and the transition adjustment of the adoption of CECL, which resulted in an increase in the allowance for credit losses on loans of $436,000, partially offset by an increase in newly originated loans of $1.3 million.

Current wording

Loans receivable, net of the allowance for credit losses, decreased by $2.3 million, or 1.84%, to $123.1 million at June 30, 2024 from $125.4 million at September 30, 2023. The decrease in loans receivable, net of the allowance for credit losses, was primarily due to a decrease in net loans acquired from Citizens Bank of Cape Vincent of $3.4 million and the transition

Previous wording

Securities available for sale increased by $1.3 million, or 2.74%, to $47.9 million at March 31, 2024 from $46.6 million at September 30, 2023. The increase was primarily due to an increase in the market value on the portfolio, partially offset by principal paydowns and maturities.

Current wording

Securities available for sale decreased by $2.9 million, or 6.18%, to $43.7 million at June 30, 2024 from $46.6 million at September 30, 2023. The decrease was primarily due to principal paydowns and maturities, partially offset by an increase in the market value on the portfolio.

Previous wording

Foreclosed real estate decreased to $39,000 at March 31, 2024 from $101,000 at September 30, 2023 due to the write-down and sale of a foreclosed property.

Current wording

The Bank held no foreclosed real estate at June 30, 2024, down from $101,000 at September 30, 2023 due to the write-down and sale of two foreclosed properties.

Previous wording

Total deposits increased by $4.0 million, or 2.51%, to $162.8 million at March 31, 2024 from $158.8 million at September 30, 2023. The increase in deposits can primarily be attributed to a $5.8 million increase in time deposits, partially offset by a $1.8 million decrease in non-maturing deposits. The increase in time deposits can primarily be attributed to an increase in offering rates as market and competitor rates have increased. Uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit, currently set at $250,000 per insured account, were approximately $42.9 million at March 31, 2024 and $42.3 million at September 30, 2023. Municipal deposits held at GS&L Municipal Bank accounted for approximately $23.4 million and $17.5 million of the uninsured deposits at March 31, 2024 and September 30, 2023, respectively. At March 31, 2024, we had $57.1 million in available liquidity with the Federal Home Loan Bank of New York and $10.1 million in cash and cash equivalents, which was sufficient to cover 100% of our uninsured and uncollateralized deposits. Municipal deposits held by GS&L Municipal Bank are fully collateralized by available for sale government and collateralized mortgage obligation securities.

Current wording

Total deposits decreased by $5.4 million, or 3.36%, to $153.4 million at June 30, 2024 from $158.8 million at September 30, 2023. The decrease in deposits can primarily be attributed to a $13.9 million decrease in non-maturing deposits, due to seasonal fluctuations with municipal deposits, partially offset by an $8.5 million increase in time deposits. The increase in time deposits can primarily be attributed to an increase in offering rates as market and competitor rates have increased. Uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit, currently set at $250,000 per insured account, were approximately $32.5 million at June 30, 2024 and $42.3 million at September 30, 2023. Municipal deposits held at GS&L Municipal Bank accounted for approximately $15.2 million and $17.5 million of the uninsured deposits at June 30, 2024 and September 30, 2023, respectively. At June 30, 2024, we had $56.7 million in available liquidity with the Federal Home Loan Bank of New York and $6.3 million in cash and cash equivalents, which was sufficient to cover 100% of our uninsured and uncollateralized deposits. Municipal deposits held by GS&L Municipal Bank are fully collateralized by available for sale government and collateralized mortgage obligation securities.

Previous wording

Federal Home Loan Bank advances decreased to $5.0 million at March 31, 2024 from $14.0 million at September 30, 2023. The decrease in advances was primarily due to principal maturities, increase in total deposits and increase in the Bank’s internal accounts from the net stock offering proceeds.

Current wording

Federal Home Loan Bank advances decreased to $4.9 million at June 30, 2024 from $14.0 million at September 30, 2023. The decrease in advances was primarily due to principal maturities and increase in the Bank’s internal accounts from the net stock offering proceeds.

Previous wording

Shareholders’ equity increased by $6.6 million, or 26.39%, to $31.7 million at March 31, 2024 from $25.1 million at September 30, 2023. The increase in shareholders’ equity was primarily a result of the completion of the second-step conversion on October 31, 2023, at which time the Company sold, for gross proceeds of $7.2 million, a total of 723,068 shares of common stock at $10.00 per share, including 57,845 shares sold to the Bank’s employee stock ownership plan. There was also a $1.8 million increase to the market value adjustment on the securities portfolio included in the accumulated other comprehensive income component.

Current wording

Shareholders’ equity increased by $6.6 million, or 26.27%, to $31.7 million at June 30, 2024 from $25.1 million at September 30, 2023. The increase in shareholders’ equity was primarily a result of the completion of the second-step conversion on October 31, 2023, at which time the Company sold, for gross proceeds of $7.2 million, a total of 723,068 shares of common stock at $10.00 per share, including 57,845 shares sold to the Bank’s employee stock ownership plan. There was also a $1.5 million increase to the market value adjustment on the securities portfolio included in the accumulated other comprehensive income component.

Previous wording

Net income for the three months ended March 31, 2024 was $102,000 compared to a net loss of $(47,000) for the three months ended March 31, 2023. Net income for the three months ended March 31, 2024 was higher than the three months ended March 31, 2023 primarily due to a $349,000 increase in the unrealized loss on interest rate swap agreements as of March 31, 2024. The Company also recognized $319,000 in realized losses on sales of securities which closely matched the realized gain of $310,000 on swaps unwound for the three months ended March 31, 2023. Interest expense for the three months ended March 31, 2024 was $337,000 compared to $69,000 for the three months ended March 31, 2023. Interest expense was higher for the three months ended March 31, 2024 primarily due to a $270,000 increase in interest expense on deposits.

Current wording

Net income for the three months ended June 30, 2024 was $183,000 compared to $232,000 for the three months ended June 30, 2023. Net income for the three months ended June 30, 2024 was lower than the three months ended June 30, 2023 primarily due to an increase in total interest expense and a $67,000 decrease in the unrealized loss on interest rate swap agreements as of June 30, 2024. The Company also recognized $13,000 in realized gains on sales of securities for the three months ended June 30, 2024. Interest expense for the three months ended June 30, 2024 was $387,000 compared to $187,000 for the three months ended June 30, 2023, primarily due to a $183,000 increase in interest expense on deposits.

Previous wording

Net interest income totaled $3.6 million for the six months ended March 31, 2024, as compared to $3.9 million for the six months ended March 31, 2023. The decrease in net interest income of $321,000, or 8.16%, was primarily due to an increase in deposit interest expense of $489,000 and an increase in borrowing interest expense of $153,000, partially offset by an increase in interest income on loans of $262,000 and $80,000 of income earned on the swap agreements hedged against borrowings.

Current wording

Net interest income totaled $1.8 million for the three months ended June 30, 2024 and also for the three months ended June 30, 2023. Net interest income for the three months ended June 30, 2024 decreased by $89,000, or 4.81%, primarily due to an increase in deposit interest expense of $183,000 and a decrease in interest income on the swap agreements hedged against borrowings of $44,000, partially offset by an increase in interest income on loans of $131,000 and a decrease in borrowing interest expense of $27,000.

Previous wording

Interest income increased by $127,000, or 6.29%, for the three months ended March 31, 2024 due to an increase in market rates resulting in higher interest rates on loan originations and loan repricing.

Current wording

Interest income increased by $111,000, or 5.49%, for the three months ended June 30, 2024 due to an increase in market rates resulting in higher interest rates on loan originations and loan repricing.

Previous wording

Interest expense increased by $562,000, or 567.68%, due to the increase in interest expense on deposits and Federal Home Loan Bank borrowings offset by the income earned on swap agreements hedged against certain borrowings.

Current wording

Interest expense increased by $200,000, or 107.19%, due to the increase in interest expense on deposits and decrease in income earned on swap agreements hedged against certain borrowings offset by a decrease in Federal Home Loan Bank borrowing interest expense.

Previous wording

Net interest margin decreased by 28 basis points, to 4.06% compared to 4.34% for the three months ended March 31, 2024 driven primarily by an increase in interest bearing liability costs resulting from the increase in market rates over the prior year.

Current wording

Net interest margin decreased by 10 basis points, to 4.03% compared to 4.13% for the three months ended June 30, 2024 driven primarily by an increase in interest bearing liability costs resulting from the increase in market rates over the prior year.

Previous wording

Management recorded no credit loss provisions for the three months ended March 31, 2024 and loan loss provisions of $47,000 on loans for the three months ended March 31, 2023. Based on a review of the loans that were in the loan portfolio at March 31, 2024, management believes that the allowance is maintained at a level that represents its best estimate of inherent credit losses in the loan portfolio that were both probable and reasonably estimable.

Current wording

Management recorded no credit loss provisions for the three months ended June 30, 2024 and loan loss provisions of $30,000 on loans for the three months ended June 30, 2023. Based on a review of the loans that were in the loan portfolio at June 30, 2024, management believes that the allowance is maintained at a level that represents its best estimate of inherent credit losses in the loan portfolio that were both probable and reasonably estimable.

Previous wording

Non-performing loans were $1.2 million and $700,000 at March 31, 2024 and September 30, 2023, respectively. At March 31, 2024, non-performing loans consisted primarily of residential and commercial mortgage loans with the increase attributed to seasonal fluctuations. Non-performing loans included troubled debt restructurings of $435,000 at September 30, 2023.

Current wording

Non-performing loans were $529,000 and $700,000 at June 30, 2024 and September 30, 2023, respectively. At June 30, 2024, non-performing loans consisted primarily of residential mortgage loans. Non-performing loans included troubled debt restructurings of $435,000 at September 30, 2023.

Previous wording

The following table sets forth a summary of non-interest income (loss) for the periods indicated:

Current wording

The following table sets forth a summary of non-interest income for the periods indicated:

Previous wording

The increase in total non-interest income was primarily due to the reduction in the unrealized loss on swap agreements resulting from fluctuations with long term bond rates and projected short-term rates. The unrealized loss on swap agreements was $38,000 at March 31, 2024 compared to an unrealized loss of $387,000 at March 31, 2023. For the three months ended March 31, 2023, the Company unwound two off-balance sheet swaps for a realized gain of $310,000 and sold ten investments for a loss of $319,000.

Current wording

The decrease in total non-interest income was primarily due to the increase in the unrealized loss on swap agreements resulting from fluctuations with long-term bond rates and projected short-term rates. The unrealized loss on swap agreements was $27,000 at June 30, 2024 compared to an unrealized gain of $40,000 at June 30, 2023. For the three months ended June 30, 2024, the Company sold three investments for a gain of $13,000.

Previous wording

The increase in total noninterest expense included a $72,000 increase in professional fees for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, due to ongoing professional services resulting from the Bank’s second step conversion, which was completed during the first quarter of fiscal year 2024, and expenses related to the Company’s operations as a public company.

Current wording

The decrease in total noninterest expense included a $71,000 decrease in other non-interest expenses for the three months ended June 30, 2024 compared to the three months ended June 30, 2024. There was a $43,000 increase in professional fees for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, due to ongoing professional services resulting from the Bank’s second step conversion, which was completed during the first quarter of fiscal year 2024, and expenses related to the Company’s operations as a public company.

Previous wording

The Company recorded income tax benefit of $34,000 for the six months ended March 31, 2024 and income tax benefit of $108,000 for the six months ended March 31, 2023. The decrease in income tax benefit resulted from an increase in pre-tax book income. The Company’s effective income tax rates were (18.28)% and 100.00% for the six months ended March 31, 2024 and 2023, respectively.

Current wording

The Company recorded income tax benefit of $5,000 for the three months ended June 30, 2024 and income tax expense of $12,000 for the three months ended June 30, 2023. The decrease in income taxes resulted from a decrease in pre-tax book income and a change in interest income in tax exempt securities. The Company’s effective income tax rates were (2.81)% and 4.92% for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Results of Operations for the Six Months Ended March 31, 2024 and 2023

Current wording

Results of Operations for the Nine Months Ended June 30, 2024 and 2023

Previous wording

Net income for the six months ended March 31, 2024 was $220,000 compared to $0 for the six months ended March 31, 2023. Net income for the six months ended March 31, 2024 was higher than the six months ended March 31, 2023 primarily due to a $642,000 increase in the unrealized loss on interest rate swap agreements as of March 31, 2024. The Company also recognized $661,000 in realized losses on sales of securities which closely matched the realized gain of $654,000 on swaps unwound for the six months ended March 31, 2023. Interest expense for the six months ended March 31, 2024 was $661,000 compared to $99,000 for the six months ended March 31, 2023. Interest expense was higher for the six months ended March 31, 2024 primarily due to a $489,000 increase in interest expense on deposits.

Current wording

Net income for the nine months ended June 30, 2024 was $403,000 compared to $232,000 for the nine months ended June 30, 2023. Net income for the nine months ended June 30, 2024 was higher than the nine months ended June 30, 2023 primarily due to a $575,000 increase in the unrealized loss on interest rate swap agreements as of June 30, 2024. The Company also recognized $661,000 in realized losses on sales of securities which closely matched the realized gain of $654,000 on swaps unwound for the nine months ended June 30, 2023. Interest expense for the nine months ended June 30, 2024 was $1.0 million compared to $286,000 for the nine months ended June 30, 2023. Interest expense was higher for the nine months ended June 30, 2024 primarily due to a $672,000 increase in interest expense on deposits.

Previous wording

Net interest income totaled $1.8 million for the three months ended March 31, 2024, as compared to $1.9 million for the three months ended March 31, 2023. The decrease in net interest income of $141,000, or 7.23%, was primarily due to an increase in deposit interest expense of $270,000 and an increase in borrowing interest expense of $28,000, partially offset by an increase in interest income on loans of $143,000 and $30,000 of income earned on the swap agreements hedged against borrowings.

Current wording

Net interest income totaled $5.4 million for the nine months ended June 30, 2024, as compared to $5.8 million for the nine months ended June 30, 2023. The decrease in net interest income of $410,000, or 7.09%, was primarily due to an increase in deposit interest expense of $672,000 and an increase in borrowing interest expense of $126,000, partially offset by an increase in interest income on loans of $392,000 and $36,000 of income earned on the swap agreements hedged against borrowings.

Previous wording

Interest income increased by $241,000, or 5.98%, for the six months ended March 31, 2024 due to an increase in market rates resulting in higher interest rates on loan originations and loan repricing.

Current wording

Interest income increased by $352,000, or 5.80%, for the nine months ended June 30, 2024 due to an increase in market rates resulting in higher interest rates on loan originations and loan repricing.

Previous wording

Interest expense increased by $268,000, or 388.41%, due to the increase in interest expense on deposits and Federal Home Loan Bank borrowings offset by the income earned on swap agreements hedged against certain borrowings.

Current wording

Interest expense increased by $762,000, or 266.43%, due to the increase in interest expense on deposits and Federal Home Loan Bank borrowings offset by the income earned on swap agreements hedged against certain borrowings.

Previous wording

Net interest margin decreased by 29 basis points, to 4.03% compared to 4.32% for the six months ended March 31, 2024 driven primarily by an increase in interest bearing liability costs resulting from the increase in market rates over the prior year.

Current wording

Net interest margin decreased by 23 basis points, to 4.03% compared to 4.26% for the nine months ended June 30, 2024 driven primarily by an increase in interest bearing liability costs resulting from the increase in market rates over the prior year.

Previous wording

Management recorded loan loss provisions of $68,000 on loans and $2,000 on unfunded commitments and $62,000 on loans for the six months ended March 31, 2024 and 2023, respectively. Based on a review of the loans that were in the loan portfolio at March 31, 2024, management believes that the allowance is maintained at a level that represents its best estimate of inherent credit losses in the loan portfolio that were both probable and reasonably estimable.

Current wording

Management recorded loan loss provisions of $68,000 on loans and $2,000 on unfunded commitments and $92,000 on loans for the nine months ended June 30, 2024 and 2023, respectively. Based on a review of the loans that were in the loan portfolio at June 30, 2024, management believes that the allowance is maintained at a level that represents its best estimate of inherent credit losses in the loan portfolio that were both probable and reasonably estimable.

Previous wording

The increase in total non-interest income (loss) was primarily due to the reduction in the unrealized loss on swap agreements resulting from fluctuations with long term bond rates and projected short-term rates. The unrealized loss on swap agreements was $181,000 at March 31, 2024 compared to an unrealized loss of $823,000 at March 31, 2023. For the six months ended March 31, 2023, the Company unwound four off-balance sheet swaps for a realized gain of $661,000 and sold fourteen investments for a loss of $654,000.

Current wording

The increase in total non-interest income (loss) was primarily due to the reduction in the unrealized loss on swap agreements resulting from fluctuations with long-term bond rates and projected short-term rates. The unrealized loss on swap agreements was $208,000 at June 30, 2024 compared to an unrealized loss of $783,000 at June 30, 2023. For the nine months ended June 30, 2023, the Company unwound four off-balance sheet swaps for a realized gain of $661,000 and sold fourteen investments for a loss of $654,000.

Previous wording

The increase in total noninterest expense included a $115,000 increase in professional fees for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023, due to professional services resulting from the Bank’s second step conversion, which was completed during the first quarter of fiscal year 2024, and expenses related to the Company’s operations as a public company.

Current wording

The increase in total non-interest expense included a $159,000 increase in professional fees for the nine months ended June 30, 2024, as compared to the nine months ended June 30, 2023, due to professional services resulting from the Bank’s second step conversion, which was completed during the first quarter of fiscal year 2024, and expenses related to the Company’s operations as a public company. Other non-interest expense decreased $129,000 for the nine months ended June 30, 2024, as compared to the nine months ended June 30, 2023, due to a reduction in one-time expenses related to the acquisition of CBCV and second step conversion.

Previous wording

The Company recorded income tax benefit of $17,000 for the three months ended March 31, 2024 and income tax benefit of $72,000 for the three months ended March 31, 2023. The decrease in income tax benefit resulted from an increase in pre-tax book income. The Company’s effective income tax rates were (20.00)% and 60.50% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

The Company recorded income tax benefit of $40,000 for the nine months ended June 30, 2024 and income tax benefit of $96,000 for the nine months ended June 30, 2023. The decrease in income tax benefit resulted from an increase in pre-tax book income and a change in interest income in tax exempt securities. The Company’s effective income tax rates were (11.02)% and (70.59)% for the nine months ended June 30, 2024 and 2023, respectively.

Previous wording

Non-performing loans were $1.2 million and $700,000 at March 31, 2024 and September 30, 2023, respectively. At March 31, 2024, non-performing loans consisted primarily of residential and commercial mortgage loans with the increase attributed to seasonal fluctuations. Non-performing loans included troubled debt restructurings of $435,000 at September 30, 2023.

Current wording

Non-performing loans were $529,000 and $700,000 at June 30, 2024 and September 30, 2023, respectively. At June 30, 2024, non-performing loans consisted primarily of residential mortgage loans. Non-performing loans included troubled debt restructurings of $435,000 at September 30, 2023.

Previous wording

From time to time, as part of our loss mitigation strategy, we may renegotiate the loan terms based on the economic or legal reasons related to the borrower’s financial difficulties. There were no loans modified to borrowers experiencing financial difficulty during the six months ended March 31, 2024. Loans modified to borrowers experiencing financial difficulty may be considered to be non-performing and, if so, are placed on non-accrual, except for those that have established a sufficient performance history (generally a minimum of six consecutive months of performance) under the terms of the restructured loan.

Current wording

From time to time, as part of our loss mitigation strategy, we may renegotiate the loan terms based on the economic or legal reasons related to the borrower’s financial difficulties. There were no loans modified to borrowers experiencing financial difficulty during the nine months ended June 30, 2024. Loans modified to borrowers experiencing financial difficulty may be considered to be non-performing and, if so, are placed on non-accrual, except for those that have established a sufficient performance history (generally a minimum of six consecutive months of performance) under the terms of the restructured loan.

Previous wording

The following tables set 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. Non-accrual loans were included in the computation of average balances only. 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. Deferred loan fees totaled $415,000 and $540,000 for the three and six months ended March 31, 2024 and 2023, respectively.

Current wording

The following tables set 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. Non-accrual loans were included in the computation of average balances only. 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. Deferred loan fees totaled $428,000 and $523,000 for the three and nine months ended June 30, 2024 and 2023, 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, proceeds from the sale of loans and proceeds from sales and maturities of securities. We also rely on borrowings from the Federal Home Loan Bank as supplemental sources of funds. At March 31, 2024, there were $5.0 million in outstanding advances from the Federal Home Loan Bank, and we had the ability to borrow $57.1 million. Additionally, at March 31, 2024, we had a line of credit with the Federal Reserve Discount Window totaling $5.0 million and a second line of credit with Atlantic Community Banker’s Bank totaling $4.0 million. At March 31, 2024, there were no outstanding balances under any of these additional credit facilities.

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, proceeds from the sale of loans and proceeds from sales and maturities of securities. We also rely on borrowings from the Federal Home Loan Bank as supplemental sources of funds. At June 30, 2024, there were $4.9 million in outstanding advances from the Federal Home Loan Bank, and we had the ability to borrow $56.7 million. Additionally, at June 30, 2024, we had a line of credit with the Federal Reserve Discount Window totaling $5.0 million and a second line of credit with Atlantic Community Bankers Bank totaling $4.0 million. At June 30, 2024, there were no outstanding balances under any of these additional credit facilities.

Previous wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities; investing activities and financing activities. Net cash (used in) provided by operating activities was $(3.6) million and $0.6 million for the six months ended March 31, 2024 and 2023, respectively. Net cash provided by investing activities, which consists primarily of disbursements for loan originations and purchases and the purchase of securities available-for-sale, offset by principal collections on loans, proceeds from sales, maturities and principal payments received on securities available-for-sale, was $3.2 million and $2.0 million for the six months ended March 31, 2024 and 2023. Net cash provided by (used in) financing activities, consisting primarily of activity in deposit accounts and Federal Home Loan Bank advances, was $30,000 for the six months ended March 31, 2024 and was $(9.3) million for the six months ended March 31, 2023.

Current wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities; investing activities and financing activities. Net cash (used in) provided by operating activities was $(3.3) million and $1.3 million for the nine months ended June 30, 2024 and 2023, respectively. Net cash provided by investing activities, which consists primarily of disbursements for loan originations and purchases and the purchase of securities available-for-sale, offset by principal collections on loans, proceeds from sales, maturities and principal payments received on securities available-for-sale, was $7.8 million and $2.9 million for the nine months ended June 30, 2024 and 2023. Net cash used in financing activities, consisting primarily of activity in deposit accounts and Federal Home Loan Bank advances, was $8.7 million for the nine months ended June 30, 2024 and was $10.9 million for the nine months ended June 30, 2023.

Previous wording

Bancorp is a separate legal entity from the Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations and to fund repurchases of shares of common stock. Bancorp’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to Bancorp is governed by applicable bank regulations. At March 31, 2024 and September 30, 2023, Bancorp (on an unconsolidated basis) had liquid assets of $2.6 million and $4.6 million, respectively.

Current wording

Bancorp is a separate legal entity from the Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations and to fund repurchases of shares of common stock. Bancorp’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to Bancorp is governed by applicable bank regulations. At June 30, 2024 and September 30, 2023, Bancorp (on an unconsolidated basis) had liquid assets of $2.5 million and $4.6 million, respectively.