8-K
ECB Bancorp, Inc. /MD/ (ECBK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 15, 2024
ECB BANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Maryland | 001-41456 | 88-1502079 |
|---|---|---|
| (State or Other Jurisdiction | (Commission | (IRS Employer |
| of Incorporation or Organization) | File Number) | Identification No.) |
419 Broadway, Everett, Massachusetts 02149
(Address of principal executive offices) (Zip Code)
(617) 387-1110
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | ECBK | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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. ☐
Item 2.02 Results of Operations and Financial Condition
On February 15, 2024, ECB Bancorp, Inc., the holding company for Everett Co-operative Bank, issued a press release announcing its financial results at and for the three months and year ended December 31, 2023.
A copy of the press release is included as Exhibit 99.1 to this report and shall not be deemed “filed” for any purpose, nor shall the information or Exhibit 99.1 be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended.
Item 8.01 Other Events
On February 15, 2024, ECB Bancorp, Inc. also announced that its annual meeting of stockholders will be held on June 5, 2024.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| 99.1 | Press release dated February 15, 2024 |
|---|---|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
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 thereunto duly authorized.
ECB BANCORP, INC.
Date: February 15, 2024 By: /s/Richard J. O'Neil, Jr.
Richard J. O’Neil, Jr.
President and Chief Executive Officer
EX-99.1
For Immediate Release
Date: February 15, 2024
| Contact: | Richard J. O’Neil, Jr. |
|---|---|
| President and Chief Executive Officer | |
| Phone: | 617-387-1110 |
| Email: | rjoneil@everettbank.com |
ECB Bancorp, Inc. Reports Fourth Quarter Results
EVERETT, MA, February 15, 2024 - ECB Bancorp, Inc. (NASDAQ-ECBK) (the “Company”), the holding company for Everett Co-operative Bank (the “Bank”), a state-chartered co-operative bank headquartered in Everett, Massachusetts, today reported net income of $789,000, or $0.09 per diluted share for the quarter ended December 31, 2023 compared to $975,000, or $0.12 per diluted share for the quarter ended December 31, 2022, a decrease of $186,000 in net income. For the year ended December 31, 2023, the Company reported net income of $4.5 million, or $0.52 per diluted share as compared to net income of $2.7 million, or $0.32 per diluted share for the year ended December 31, 2022, an increase of $1.7 million in net income.
Richard J. O’Neil, Jr., President and Chief Executive Officer, said, "The rapid increases in short term rates combined with the inverted yield curve continued to place pressure on our net interest margin. Despite these headwinds impacting the entire industry we have continued to grow our balance sheet with strong loan growth supported by steady deposit growth. At the close of the 4th quarter our net charge offs were $1,000 for the full year. With the addition of our branch in Woburn, MA we have enhanced our business development and deposit gathering opportunities. Our on-balance sheet and off-balance sheet liquidity levels continued to strengthen as we exercise our orderly and diligent strategic growth strategy. Despite the net interest margin compression, we continued to return capital to our shareholders through our share buyback program."
NET INTEREST AND DIVIDEND INCOME
Net interest and dividend income before provision for credit losses decreased $873,000, or 12.8%, to $5.9 million for the quarter ended December 31, 2023 from $6.8 million for the quarter ended December 31, 2022. This decrease was primarily due to higher cost of funds. The provision for credit losses decreased $1.0 million, or 90.5%, to $108,000 for the quarter ended December 31, 2023 from $1.1 million for the quarter ended December 31, 2022. The decrease in the provision for credit losses was driven by lower loan growth during the quarter ended December 31, 2023 as compared to the quarter ended December 31, 2022. The combination of these items resulted in an increase of $159,000, or 2.8%, in net interest and dividend income after provision for credit losses for the quarter ended December 31, 2023 as compared to the quarter ended December 31, 2022.
Net interest and dividend income before provision for credit losses increased $1.2 million, or 4.9% to $24.8 million for the year ended December 31, 2023 from $23.6 million for the year ended December 31, 2022. This increase was driven by an increase in the average balance of net interest earning assets partially offset by a decrease in the net interest rate spread. The provision for credit losses decreased $2.1 million, or 72.7% to $803,000 for the year ended December 31, 2023 from $2.9 million for the year ended December 31, 2022. The decrease in the provision for credit losses was driven by lower loan growth in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The combination of these items resulted in an increase of $3.3 million, or 15.9%, in net interest and dividend income after provision for credit losses for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
NONINTEREST INCOME
Noninterest income increased $29,000, or 12.5%, to $261,000 for the quarter ended December 31, 2023 from $232,000 for the quarter ended December 31, 2022.
Noninterest income decreased $349,000, or 24.9% to $1.1 million for the year ended December 31, 2023 from $1.4 million for the year ended December 31, 2022. The 2022 results benefited from a $430,000 gain recognized into income from a life insurance policy death benefit in the second quarter of 2022. Additional pressure on noninterest income in 2023 resulted from a decrease of $63,000 in net gain on sales of loans due to a lower number of loans sold.
NONINTEREST EXPENSE
Noninterest expense increased $492,000, or 10.8%, to $5.0 million for the quarter ended December 31, 2023 from $4.5 million for the quarter ended December 31, 2022. Significant changes are as follows:
• Director compensation increased $98,000, or 93.9%, driven by $83,000 in stock based compensation recorded in the quarter ended December 31, 2023, related to the 2023 Equity Incentive Plan. There were no stock based compensation costs in 2022 related to this plan;
• Occupancy and equipment expense increased $54,000, or 28.1%, driven by our new Woburn, MA branch office;
• Data processing costs increased $58,000, or 25.7%, driven by both increased core processor operating costs as well as costs related to our new online account opening platform;
• Professional fees increased $107,000, or 37.4%, driven by increased costs related to operating as a public company; and
• FDIC deposit insurance expense increased $118,000, or 190.3%, driven by both increases in assessment rates charged by the FDIC as well as an increase in our asset size.
Noninterest expense increased $447,000, or 2.4%, to $19.1 million for the year ended December 31, 2023 from $18.6 million for the year ended December 31, 2022. Significant changes are as follows:
• Salaries and employee benefits increased $1.8 million, or 17.6%, driven by additional staffing to support our strategic plan, merit increases, as well as expenses related to the ESOP which did not exist in the first half of 2022 and expenses related to the 2023 Equity Incentive Plan which did not exist in 2022;
• Director compensation increased $152,000, or 35.4%, driven by $103,000 in stock-based compensation recorded in the year ended December 31, 2023, related to the 2023 Equity Incentive Plan. There were no stock-based compensation costs in 2022 related to this plan;
• Occupancy and equipment expense increased $188,000, or 25.0%, driven by our new Woburn, MA branch office;
• FDIC deposit insurance expense increased $568,000, or 252.4%, driven by both increases in assessment rates charged by the FDIC as well as an increase in our asset size;
• Professional fees increased $509,000, or 60.2%, driven by increased costs related to operating as a public company;
• Charitable contributions decreased $3.2 million, or 99.5%, driven by a $3.2 million contribution to the Everett Co-operative Bank Charitable Foundation made in the third quarter of 2022 in connection with the Company’s initial public offering; and
• Other expenses increased $206,000, or 15.7%, driven by increased costs related to operating as a public company.
INCOME TAXES
We recorded a provision for income tax expense of $266,000 for the quarter ended December 31, 2023, compared to a provision for income tax expense of $383,000 for the quarter ended December 31, 2022, reflecting an effective tax rate of 25.2% and 28.2%, respectively. The lower effective tax rate in the 2023 period was driven by a higher non-taxable income from bank-owned life insurance as a percentage of pre-tax income. We recorded a provision for income taxes of $1.5 million for the year ended December 31, 2023, compared to a provision for income taxes of $776,000 for the year ended December 31, 2022, reflecting effective tax rates of 25.5% and 22.2%, respectively. The lower tax rate in 2022 was driven by non-taxable death benefits received on bank-owned life insurance.
BALANCE SHEET
Total assets increased $215.9 million, or 20.3%, from $1.06 billion at December 31, 2022 to $1.28 billion at December 31, 2023.
Total loans increased $155.5 million, or 17.4%, from $893.1 million at December 31, 2022 to $1.05 billion at December 31, 2023.
• One-to-four family residential real estate loans increased $54.8 million, from $355.4 million at December 31, 2022 to $410.1 million at December 31, 2023;
• Multi-family real estate loans increased $45.4 million, from $242.0 million at December 31, 2022 to $287.4 million at December 31, 2023; and
• Commercial real estate loans increased $40.2 million, from $156.2 million at December 31, 2022 to $196.4 million at December 31, 2023.
Cash and cash equivalents increased $56.9 million, or 91.8%, from $62.1 million at December 31, 2022 to $119.0 million at December 31, 2023. The increase in cash and cash equivalents was driven by our focus on maintaining strong levels of liquidity.
Deposits increased $150.1 million, or 20.9%, from $718.1 million at December 31, 2022 to $868.2 million at December 31, 2023.
• Certificates of deposit increased $178.7 million, or 55.9%, from $319.8 million at December 31, 2022 to $498.5 million at December 31, 2023.
• Savings accounts decreased $10.5 million, or 7.1%, from $148.4 million at December 31, 2022 to $137.8 million at December 31, 2023.
• Interest bearing checking accounts decreased $6.8 million, or 23.4%, from $28.9 million at December 31, 2022 to $22.2 million at December 31, 2023.
• Demand deposit accounts decreased $6.6 million, or 7.7%, from $84.9 million at December 31, 2022 to $78.3 million at December 31, 2023.
• Money market deposit accounts decreased $4.7 million, or 3.5%, from $136.1 million at December 31, 2022 to $131.4 million at December 31, 2023.
FHLB advances increased $60.0 million, or 34.5%, from $174.0 million at December 31, 2022 to $234.0 million at December 31, 2023.
Total shareholders' equity increased $2.2 million, or 1.3%, to $164.9 million as of December 31, 2023 from $162.7 million as of December 31, 2022. This increase is primarily the result of earnings of $4.5 million partially offset by a $677,000 reduction in retained earnings related to the adoption of CECL and a $2.2 million reduction in additional paid-in capital due to share repurchases.
ASSET QUALITY
Asset quality remains strong. The allowance for credit losses in total and as a percentage of total loans as of December 31, 2023 was $8.6 million and 0.82%, respectively, as compared to $7.2 million and 0.81%, respectively, as of December 31, 2022. For the year ended December 31, 2023 the Company recorded net charge offs of $1,000. For the year ended December 31, 2022 the Company recorded net recoveries of $24,000. Total non-performing assets were $1.2 million, or 0.09% of total assets as of December 31, 2023 and $656,000, or 0.06% of total assets as of December 31, 2022.
Annual Meeting of Stockholders
On February 15, 2024, the Company also announced that its annual meeting of stockholders will be held on June 5, 2024.
Company Profile
ECB Bancorp, Inc. is headquartered in Everett, Massachusetts and is the registered bank holding company for Everett Co-operative Bank. The Bank provides financial services to individuals, families, municipalities and businesses through its three full-service branch offices located in Everett, Lynnfield and Woburn, Massachusetts. The Company's common stock is traded on the NASDAQ Capital Market under the symbol "ECBK." For more information, visit the Company's website at www.everettbank.com.
Forward-looking statements
Certain statements herein constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on the beliefs and expectations of management, as well as the assumptions made using information currently available to management. Since these statements reflect the views of management concerning future events, these statements involve risks, uncertainties and assumptions. As a result, actual results may differ from those contemplated by these statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." Certain factors that could cause actual results to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, the Company's ability to continue to increase loans and deposit growth, legislative and regulatory changes that adversely affect the businesses in which the Company is engaged and changes in the securities market. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company disclaims any intent or obligation to update any forward-looking statements, whether in response to new information, future events or otherwise, except as may be required by law.
ECB Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
December 31, 2023 (unaudited) and December 31, 2022
(in thousands except share data)
| December 31, 2022 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Cash and due from banks | 3,786 | $ | 3,123 | ||
| Short-term investments | 115,250 | 58,927 | |||
| Total cash and cash equivalents | 119,036 | 62,050 | |||
| Interest-bearing time deposits | — | 300 | |||
| Investments in available-for-sale securities (at fair value) | 5,003 | 5,001 | |||
| Investments in held-to-maturity securities, at cost (fair values of 70,590 at December 31, 2023 (unaudited) and 69,707 at December 31, 2022) | 76,979 | 77,591 | |||
| Loans, net of allowance for credit losses of 8,591 as of December 31, 2023 (unaudited) and 7,200 as of December 31, 2022 | 1,039,789 | 885,674 | |||
| Federal Home Loan Bank stock, at cost | 9,892 | 7,293 | |||
| Premises and equipment, net | 3,754 | 3,698 | |||
| Accrued interest receivable | 3,766 | 2,632 | |||
| Deferred tax asset, net | 4,767 | 4,344 | |||
| Bank-owned life insurance | 14,472 | 14,067 | |||
| Other assets | 2,877 | 1,812 | |||
| Total assets | 1,280,335 | $ | 1,064,462 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Deposits: | |||||
| Noninterest-bearing | 78,342 | $ | 84,903 | ||
| Interest-bearing | 789,872 | 633,246 | |||
| Total deposits | 868,214 | 718,149 | |||
| Federal Home Loan Bank advances | 234,000 | 174,000 | |||
| Other liabilities | 13,220 | 9,583 | |||
| Total liabilities | 1,115,434 | 901,732 | |||
| Shareholders' Equity: | |||||
| Preferred Stock, par value 0.01; Authorized: 1,000,000 shares; Issued and outstanding: 0 shares and 0 shares, respectively | — | — | |||
| Common Stock, par value 0.01; Authorized: 30,000,000 shares; Issued and outstanding: 9,291,810 shares and 9,175,247 shares, respectively | 93 | 92 | |||
| Additional paid-in capital | 87,431 | 89,286 | |||
| Retained earnings | 83,855 | 80,076 | |||
| Accumulated other comprehensive income | 128 | 249 | |||
| Unallocated common shares held by the Employee Stock Ownership Plan | (6,606 | ) | (6,973 | ) | |
| Total shareholders' equity | 164,901 | 162,730 | |||
| Total liabilities and shareholders' equity | 1,280,335 | $ | 1,064,462 | ||
| Shareholders' Equity Ratios | |||||
| Book value per common share | 17.75 | $ | 17.74 | ||
| Regulatory Capital Ratios (Everett Co-operative Bank) | |||||
| Total capital to risk weighted assets | 17.30 | % | 16.40 | % | |
| Tier 1 capital to risk weighted assets | 16.22 | % | 15.49 | % | |
| Tier 1 capital to average assets | 11.31 | % | 13.89 | % |
All values are in US Dollars.
ECB Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(unaudited)
(in thousands except share data)
| Three months ended | Year ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| Interest and dividend income: | ||||||||
| Interest and fees on loans | $ | 12,969 | $ | 8,859 | $ | 48,330 | $ | 26,954 |
| Interest and dividends on securities | 751 | 466 | 2,701 | 1,488 | ||||
| Other interest income | 1,178 | 360 | 3,745 | 715 | ||||
| Total interest and dividend income | 14,898 | 9,685 | 54,776 | 29,157 | ||||
| Interest expense: | ||||||||
| Interest on deposits | 6,599 | 2,234 | 21,413 | 4,566 | ||||
| Interest on Federal Home Loan Bank advances | 2,360 | 638 | 8,573 | 948 | ||||
| Interest on Federal Funds purchased | - | 1 | - | 1 | ||||
| Total interest expense | 8,959 | 2,873 | 29,986 | 5,515 | ||||
| Net interest and dividend income | 5,939 | 6,812 | 24,790 | 23,642 | ||||
| Provision for credit losses | 108 | 1,140 | 803 | 2,940 | ||||
| Net interest and dividend income after provision for credit losses | 5,831 | 5,672 | 23,987 | 20,702 | ||||
| Noninterest income: | ||||||||
| Customer service fees | 138 | 120 | 508 | 446 | ||||
| Income from bank-owned life insurance | 106 | 97 | 479 | 828 | ||||
| Net gain on sales of loans | 8 | - | 21 | 84 | ||||
| Other income | 9 | 15 | 44 | 43 | ||||
| Total noninterest income | 261 | 232 | 1,052 | 1,401 | ||||
| Noninterest expense: | ||||||||
| Salaries and employee benefits | 3,056 | 2,968 | 11,679 | 9,928 | ||||
| Director compensation | 202 | 104 | 581 | 429 | ||||
| Occupancy and equipment expense | 246 | 192 | 941 | 753 | ||||
| Data processing | 284 | 226 | 1,093 | 850 | ||||
| Computer software and licensing fees | 69 | 79 | 286 | 259 | ||||
| Advertising and promotions | 218 | 241 | 794 | 752 | ||||
| Professional fees | 393 | 286 | 1,355 | 846 | ||||
| Federal Deposit Insurance Corporation deposit insurance | 180 | 62 | 793 | 225 | ||||
| Charitable contribution | 1 | 7 | 17 | 3,256 | ||||
| Other expense | 388 | 380 | 1,515 | 1,309 | ||||
| Total noninterest expense | 5,037 | 4,545 | 19,054 | 18,607 | ||||
| Income before income tax expense | 1,055 | 1,359 | 5,985 | 3,496 | ||||
| Income tax expense | 266 | 383 | 1,529 | 776 | ||||
| Net income | $ | 789 | $ | 976 | $ | 4,456 | $ | 2,720 |
| Share data: | ||||||||
| Weighted average shares outstanding, basic | 8,406,925 | 8,463,823 | 8,466,021 | 8,456,218 | ||||
| Weighted average shares outstanding, diluted | 8,433,257 | 8,463,823 | 8,523,705 | 8,456,218 | ||||
| Basic earnings per share | $ | 0.09 | $ | 0.12 | $ | 0.53 | $ | 0.32 |
| Diluted earnings per share | $ | 0.09 | $ | 0.12 | $ | 0.52 | $ | 0.32 |