BAYONNE, N.J., Oct. 21, 2020 (GLOBE NEWSWIRE) -- BCB Bancorp, Inc. (the “Company”), (NASDAQ: BCBP), the holding company for BCB Community Bank (the “Bank”), today reported net income of $8.3 million for the third quarter of 2020, compared to $2.7 million for the second quarter of 2020, and $5.2 million for the third quarter of 2019. Earnings per diluted share for the third quarter of 2020 were $0.47, compared to $0.14 in the preceding quarter and $0.30 in the third quarter of 2019. For the first nine months of the year, net income was $13.6 million, or $0.73 per diluted common share, compared with $15.9 million, or $0.91 per diluted common share, for the first nine months of 2019.

“Financial results for the third quarter improved substantially compared to both the prior quarter and prior year’s third quarter, reflecting strong earnings growth and improved operating efficiencies. Those operating efficiencies, and management’s efforts to delever its balance sheet, yielded significant growth in net interest margin of 53 basis points for the third quarter of 2020 as compared to the second quarter of 2020. Our successful deployment of cash, as well as tightly managing the cost of funds, has yielded desired results, and positions us well moving forward,” stated Thomas Coughlin, President and Chief Executive Officer.

“The strong earnings growth recognized this quarter included the execution of three initiatives the Company undertook; the sale-leaseback of one of its properties, the purchase of $60 million in bank-owned life insurance (“BOLI”), and the redemption of its Series C 6% and Series F 6% preferred stock. During the quarter, we recognized a gain of approximately $4.4 million related to the sale-leaseback project and approximately $385,000 in income from the investment in BOLI. The investment in BOLI provides a new form of non-interest income, that is nontaxable, and helps to diversify our revenue streams. We called all outstanding Series C 6% and Series F 6% preferred stock and replaced the majority of it with Series H 3.5% preferred stock, effectively reducing our cost of preferred dividends overall, while remaining well-capitalized.

“Third quarter results were affected by an increase to the loan loss provision as a result of the COVID-19 pandemic on the economy, as well as the low interest rate environment. We evaluated factors related to the COVID-19 pandemic and its impact on our New Jersey and New York markets. We recorded $2.7 million to our provision for loan losses in the third quarter, bringing our total reserves to $31.8 million. We believe this reserve level is adequate to cover potential future loan losses from the pandemic.

“Due to the positive trends within our loan portfolio, and the commitment of our staff, we have reduced the total percentage of loan deferrals from over 30% of our loan portfolio during the second quarter of 2020 to less than 1% at October 16, 2020,” said Coughlin. “At the onset of the COVID-19 pandemic, we worked closely with our customers to ensure they had the financial support they needed to continue operating, given the unprecedented nature of the pandemic. The return to normal payment status highlights both the Bank’s conservative underwriting process as well as our strong customer base. For the remaining 11 loans that are currently in deferment, totaling approximately $5.2 million, we have determined that no specific reserve is necessary at this time.

“To help service the needs of our business customers, we continued to offer Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans until the program was completed on August 8, 2020. As of September 30, 2020, we had helped approximately 1,100 customers receive $129 million in PPP funding. We are now starting to process applications for PPP loan forgiveness for our customers. Unearned PPP loan fees, net of unearned PPP costs, are $2.4 million. We expect the timing of the loan forgiveness to benefit fourth quarter 2020 and first quarter 2021 operating results,” Coughlin concluded.  

Executive Summary

• Net Interest Margin was 2.98 percent for the third quarter of 2020, compared to 2.45 percent for the second quarter of 2020, and 3.06 percent for the third quarter of 2019.o Total yield on interest-earning assets increased 35 basis points to 4.06 percent for the third quarter of 2020, compared to 3.71 percent for the second quarter of 2020 and decreased 57 basis points from 4.63 percent for the third quarter of 2019.o Total cost of interest-bearing liabilities decreased 20 basis points to 1.35 percent for the third quarter of 2020, compared to 1.55 percent for the second quarter of 2020 and decreased 52 basis points from 1.87 percent for the third quarter of 2019.
• Net income was $8.3 million in the third quarter of 2020, compared to $2.7 million in the prior quarter and $5.2 million in the third quarter a year ago.
• Earnings per diluted share were $0.47 in the third quarter of 2020, compared to $0.14 in the prior quarter and $0.30 in the third quarter of 2019.
• Loans receivable, net of allowance for loan losses, increased by 6.1 percent, to $2.392 billion at September 30, 2020, from $2.254 billion a year earlier.
• The provision for loan losses increased by $1.8 million, to $2.7 million for the third quarter of 2020, from $900,000 for the third quarter of 2019, primarily due to factors related to the COVID-19 pandemic.
• Allowance for loan losses as a percentage of non-accrual loans was 444.1 percent at September 30, 2020, compared to 486.6 percent at September 30, 2019, as total non-accrual loans increased to $7.2 million as compared to $5.1 million at September 30, 2019.
• Total deposits were $2.273 billion at September 30, 2020 from $2.263 billion a year ago.
• The Company purchased $60.0 million of BOLI during the third quarter of 2020.
• The Company redeemed $10.5 million of its preferred stock during the third quarter of 2020, which included the Company’s Series C 6% and Series F 6% preferred stock and issued $9.0 million of Series H 3.5% preferred stock.
• On October 14, 2020 the Company’s Board of Directors declared a regular quarterly cash dividend of $0.14 per share. The dividend will be payable November 20, 2020, to common shareholders of record on November 6, 2020.

Balance Sheet Review

Total assets decreased by $144.6 million, or 4.8 percent, to $2.842 billion at September 30, 2020, from $2.987 billion at June 30, 2020, and increased by $16.8 million, or 0.6 percent, from $2.825 billion at September 30, 2019. The decrease in total assets in the current quarter was mainly related to decreases in total cash and cash equivalents, partly offset by increases in loans receivable and a purchase of $60.0 million of BOLI.

Loans receivable, net, increased by $48.4 million, or 2.1 percent, to $2.392 billion at September 30, 2020 from $2.344 billion at June 30, 2020, and increased by $138.3 million, or 6.1 percent compared to $2.254 billion at September 30, 2019. A substantial portion of the 12-month increase in loans occurred in the first nine months of 2020 and included $48.4 million of purchased loans and $129.0 million from the Company’s participation in the federal PPP loan program. Total loan increases for the first nine months of 2020 included $133.6 million in commercial business loans, which included PPP loans, $70.7 million in commercial real estate and multi-family loans, $29.8 million in construction loans, and $88,000 in consumer loans, partly offset by decreases of $6.6 million in residential one-to-four family loans and $3.7 million in home equity loans.

Total investment securities decreased by $6.1 million, or 4.3 percent, to $134.1 million at September 30, 2020, from $140.2 million at June 30, 2020, and increased $30.1 million, or 28.9 percent, compared to $104.1 million at September 30, 2019.

Total deposits decreased by $168.9 million, or 6.9 percent, to $2.273 billion at September 30, 2020, from $2.442 billion at June 30, 2020, and increased by $9.9 million, or 0.4 percent, from $2.263 billion at September 30, 2019. The decrease in deposits in the current quarter mainly related to the maturity of certain high-rate, promotional certificate of deposit accounts in the third quarter. Some of these matured deposits went into other forms of deposits while others were withdrawn from the Bank.

Debt obligations decreased by $16.0 million, or 5.1 percent, to $296.6 million at September 30, 2020 from $312.6 million at September 30, 2019. The weighted average interest rate of FHLB advances was 1.99 percent at September 30, 2020 and 2.15 percent at September 30, 2019. During the three months ended September 30, 2020, the Company opted to extinguish a $15.0 million FHLB advance which held a rate of 2.68% and was set to mature in June, 2021. The effect of the extinguishment of the debt reduced the weighted average cost of FHLB borrowings by approximately four basis points on an annualized basis. The related non-recurring expense for the extinguishment of this debt is included in noninterest expense.

Stockholders’ equity increased by $1.7 million, or 0.7 percent, to $242.7 million at September 30, 2020, from $241.0 million three months earlier, and increased $19.0 million, or 8.5 percent, from $223.7 million a year ago. The increase in stockholders’ equity over the prior year included the issuance of $12.5 million of common stock in December, 2019 and an increase in retained earnings of $7.8 million, representing earnings net of dividends paid. Additional paid-in-capital for preferred stock decreased by $4.5 million to $23.5 million at September 30, 2020, from $28.0 million at June 30, 2020, and decreased $1.5 million compared to $25.0 million at September 30, 2019, primarily related to the redemption of $10.5 million of the Company’s then-outstanding preferred stock, which included the Company’s Series C 6% and Series F 6% preferred stock, partly offset by the issuance of $9.0 million of Series H 3.5% preferred stock. Accumulated other comprehensive income increased $3.1 million over the prior year, based upon favorable market conditions. Treasury stock was $26.9 million at September 30, 2020, which was unchanged compared to June 30, 2020, and increased $4.9 million from $22.0 million at September 30, 2019, related to the repurchase of Company common shares.

ThirdQuarter 2020 Income Statement Review

Net interest income increased by $130,000, or 0.6 percent, to $20.9 million for the three months ended September 30, 2020 from $20.8 million for the three months ended September 30, 2019. The increase in net interest income resulted primarily from a decrease in interest expense related to a decrease in the average rate on interest-bearing liabilities of 52 basis points to 1.35 percent for the three months ended September 30, 2020 from 1.87 percent for the three months ended September 30, 2019, as well as a decrease in the average balance of interest-bearing liabilities of $18.0 million, or 0.8 percent, to $2.247 billion for the three months ended September 30, 2020 from $2.265 billion for the three months ended September 30, 2019. Interest income was $2.9 million lower than the prior year, related to a decrease in the average yield on interest-earning assets of 57 basis points to 4.06 percent for the three months ended September 30, 2020 from 4.63 percent for the three months ended September 30, 2019, partly offset by an increase in the average balance of interest-earning assets of $97.0 million, or 3.6 percent, to $2.807 billion for the three months ended September 30, 2020 from $2.710 billion for the three months ended September 30, 2019. The lower rates for interest income and interest expense were driven by the reduction of the federal funds rate by 175 basis points from October, 2019 through September, 2020. Interest income on loans for the three months ended September 30, 2020 included $230,000 of amortization of purchase credit fair value adjustments. The fair value adjustments relate to the 2018 acquisition of IA Bancorp, Inc. (“IAB”), which added approximately three basis points to the average yield on interest earning assets. Interest income on loans also included $360,000 of net deferred fees related to the Bank’s PPP loans.

Net interest margin was 2.98 percent for the third quarter of 2020, compared to 2.45 percent for the second quarter of 2020 and 3.06 percent for the third quarter of 2019. The significant improvement in net interest margin over the prior quarter was the result of the effective deployment of cash and aligning our cost of funds with the market. The Company increased its average yield on total interest-earning assets by 35 basis points to 4.06 percent for the third quarter of 2020 compared to 3.71 percent for the second quarter of 2020, highlighting the successful deployment of cash during the quarter into loan originations and the purchases of investment securities. The Company decreased its average cost of total interest-bearing liabilities by 20 basis points to 1.35 percent for the third quarter of 2020 compared to 1.55 percent for the second quarter of 2020. The decrease in total interest-bearing liabilities included a decrease in the average cost of total deposit liabilities of 23 basis points to 1.18 percent for the third quarter of 2020 compared to 1.41 percent for the second quarter of 2020. The decrease in the net interest margin compared to the third quarter of 2019 was the result of the current volatile financial markets attributable to the COVID-19 pandemic and the low interest rate environment. The Company’s average yield on interest-earning assets decreased by 57 basis points to 4.06 percent for the third quarter of 2020 compared to 4.63 percent for the third quarter of 2019, highlighting the impact market volatility surrounding the pandemic has had on rates. Management has been proactive in managing its cost of funds and decreased the average cost on total interest-costing liabilities by 52 basis points to 1.35 percent for the third quarter of 2020 compared to 1.87 percent for the third quarter of 2019.

“The net interest margin expanded compared to the immediate prior quarter due to an increase in the average yield on our assets and a decrease in the average cost of our liabilities. This shift in our balance sheet underscores management’s efforts to delever by way of decreasing higher-costing liabilities, namely certain borrowings and promotional and maturing certificates of deposit, and deploying our high cash balances into higher-yielding loans, securities and BOLI,” said Coughlin.

Total noninterest income increased by $5.6 million, or 402.9 percent, to $7.0 million for the third quarter of 2020 from $1.4 million for the third quarter of 2019. The increase in total noninterest income was mainly related to a gain on sale of premises of $4.4 million, an increase in the unrealized gain on equity securities of $823,000 and BOLI income of $385,000. The gain on sale of premises relates to the completion of a sale/leaseback of certain offices that the Company sold to a private investor group in September, 2020. The unrealized gains or losses on equity securities are based on market conditions. The increase in BOLI income relates to an initial purchase of $60.0 million BOLI product in the third quarter of 2020.

Total noninterest expense decreased by $310,000, or 2.3 percent, to $13.3 million for the third quarter of 2020, from $13.6 million for the third quarter of 2019. Salaries and employee benefits expense decreased by $909,000, or 12.5 percent, to $6.4 million for the third quarter of 2020, from $7.3 million for the third quarter of 2019, reflecting fewer full-time equivalent employees and $200,000 of costs deferred for PPP loans, partly offset by normal compensation increases. Occupancy and equipment expense increased by $349,000, or 13.2 percent, to $3.0 million for the third quarter of 2020 from $2.6 million for the third quarter of 2019, largely related to costs incurred for a new branch, which opened in July 2020, as well as the opening of two de novo branches and the relocation of one of our existing branches during 2019. Data processing and service fees increased by $161,000, or 20.7 percent, to $937,000 for the third quarter of 2020 from $776,000 for the third quarter of 2019. The increase was largely attributable to additional branches and system applications. Regulatory assessments increased by $402,000 to $311,000, for the third quarter of 2020, from a credit of $91,000 for the third quarter of 2019. The increase was primarily due to the receipt of an FDIC Small Bank Assessment Credit in the third quarter of 2019, and increases in the FDIC assessment rate and assessment base. Other noninterest expense decreased by $790,000, or 34.8 percent, to $1.5 million for the three months ended September 30, 2020 from $2.3 million for the three months ended September 30, 2019. Other noninterest expense consisted of loan expense, business development, office supplies, correspondent bank fees, telephone and communication and miscellaneous fees and expenses. The decrease in the current period was primarily related to a reduction of business development and loan-related expenses, largely attributable to the current pandemic condition.

The income tax provision increased by $1.1 million, or 46.9 percent, to $3.5 million for the third quarter of 2020 from $2.4 million for the third quarter of 2019. The increase in the income tax provision was a result of higher taxable income for the third quarter of 2020 as compared with that same period for 2019. The consolidated effective tax rate for the third quarter of 2020 was 29.4 percent compared to 31.1 percent for the third quarter of 2019. The lower rate in the current period related primarily to non-taxable BOLI income and lower non-deductible costs in the current year period.

Year-to-Date Income Statement Review

Net interest income decreased by $4.9 million, or 7.8 percent, to $57.7 million for the first nine months of 2020, from $62.6 million for the first nine months of 2019. The decrease in net interest income resulted primarily from a decrease in the average yield on interest-earning assets of 70 basis points to 3.94 percent for the first nine months of 2020, compared to 4.64 percent for the first nine months of 2019, partly offset by an increase in the average balance of interest-earning assets of $223.1 million, or 8.4 percent, to $2.882 billion, for the first nine months of 2020, from $2.659 billion for the first nine months of 2019. Interest income on loans receivable decreased by $5.7 million, or 6.6 percent, to $80.1 million, for the first nine months of 2020, from $85.8 million for the first nine months of 2019. The decrease was primarily attributable to a decrease in the average yield on loans of 26 basis points to 4.67 percent for the first nine months of 2020, from 4.93 percent for the first nine months of 2019, as well as a decrease in the average balance of loans receivable of $32.2 million, or 1.4 percent, to $2.286 billion for the first nine months of 2020 from $2.318 billion for the first nine months of 2019. Interest income on loans also included $967,000 of amortization of purchase credit fair value adjustments. The fair value adjustments relate to the 2018 acquisition of IAB for the nine months ended September 30, 2020, which added approximately four basis points to the average yield on interest earning assets. Interest income on loans also included $630,000 of net deferred fees related to the Bank’s PPP loans. Interest expense decreased related to a decrease in the average rate on interest-bearing liabilities of 24 basis points to 1.56 percent for the nine months ended September 30, 2020 from 1.80 percent for the nine months ended September 30, 2019, partly offset by an increase in the average balance of interest-bearing liabilities of $116.6 million, or 5.2 percent, to $2.339 billion for the nine months ended September 30, 2020 from $2.223 billion for the nine months ended September 30, 2019. The lower rates for interest income and interest expense were driven by the reduction of the federal funds rate by 175 basis points from October, 2019 through September, 2020.

Net interest margin was 2.67 percent for the first nine months of 2020 and 3.14 percent for the first nine months of 2019. The Company’s average yield on total interest-earning assets decreased by 70 basis points to 3.94 percent for the first nine months of 2020 compared to 4.64 percent for the first nine months of 2019, highlighting the impact market volatility surrounding the pandemic has had on rates. The Company decreased its average cost of total interest-bearing liabilities by 24 basis points to 1.56 percent for the first nine months of 2020 compared to 1.80 percent for the first nine months of 2019. The decrease in the cost of total interest-bearing liabilities included a decrease in the average cost of total deposit liabilities of 25 basis points to 1.42 percent for the first nine months of 2020 compared to 1.67 percent for the first nine months of 2019.

Total noninterest income increased by $4.4 million, or 100.1 percent, to $8.8 million for the first nine months of 2020, from $4.4 million for the first nine months of 2019. The increase in total noninterest income was mainly related to a gain on sale of premises of $4.4 million, an increase in the unrealized gain of equity securities of $560,000, BOLI income of $385,000 and an increase in other noninterest income of $248,000, partly offset by a decrease of $552,000 in gains on the sale of loans and a decrease in fees and service charges of $402,000. The gain on sale of premises relates to the completion of a sale/leaseback of certain offices that the Company sold to a private investor group in September, 2020. The unrealized gains or losses on equity securities are based on market conditions. The BOLI income relates to an initial purchase of $60.0 million in BOLI in the third quarter of 2020. The increase in other noninterest income related primarily to the reversal of certain liabilities previously recorded for IAB acquired loans that paid off in the first nine months of 2020. The lower level of loan sales was attributable to the curtailment of loan growth, while the decline in fees and service charges related in part to the pandemic condition as well as lower servicing fee income resulting from fewer loan sales.

Total noninterest expense decreased by $1.7 million, or 4.0 percent, to $39.7 million, for the first nine months of 2020, from $41.4 million for the first nine months of 2019. Salaries and employee benefits expense decreased by $1.7 million, or 7.9 percent, to $19.5 million for the first nine months of 2020, from $21.2 million for the first nine months of 2019, primarily related to $1.3 million of costs deferred for PPP loans and fewer full-time equivalent employees, partly offset by normal compensation increases. The costs deferred represent current period salaries and benefit costs associated with direct PPP loan origination costs, which are amortized over the life of the loan. The number of full-time equivalent employees for the first nine months of 2020 was 338, as compared with 359 for the like period in 2019. Occupancy and equipment expense increased by $804,000, or 10.1 percent, to $8.7 million for the nine months ended September 30, 2020 from $7.9 million for the nine months ended September 30, 2019, largely related to costs incurred for a new branch which opened in July 2020, as well as the opening of two branches and the relocation of one of our existing branches during 2019. Data processing and service fees increased by $598,000, or 26.8 percent, to $2.8 million for the nine months ended September 30, 2020 from $2.2 million for the nine months ended September 30, 2019, largely attributable to additional branches and system applications. Other noninterest expense decreased by $1.8 million, or 26.7 percent, to $4.8 million for the nine months ended September 30, 2020 from $6.6 million for the nine months ended September 30, 2019. Other noninterest expense consisted of loan expense, business development, office supplies, correspondent bank fees, telephone and communication and miscellaneous fees and expenses. The decrease in the current period was primarily related to a reduction of business development and loan-related expenses, largely attributable to the current pandemic condition.

The income tax provision decreased by $1.5 million, or 20.5 percent, to $5.7 million, for the first nine months of 2020, from $7.2 million for the first nine months of 2019. The decrease in the income tax provision was a result of lower taxable income for the first nine months of 2020 as compared to that same period for 2019. The consolidated effective tax rate for the first nine months of 2020 was 29.5 percent compared to 30.9 percent for the first nine months of 2019. The lower rate in the current period related primarily to non-taxable BOLI income and lower non-deductible costs in the current year period.

Asset Quality

During the third quarter of 2020, the Company recognized $192,000 in net recoveries, compared to $2,000 in net recoveries for the third quarter of 2019, and $8,000 in net recoveries during the second quarter of 2020.

The COVID-19 pandemic has caused disruption to the global economy, but the extent and duration of the disruption is uncertain at this time. Management will continue to monitor any activity for loan deferment requests and delinquencies on a regular basis.

The provision for loan losses increased by $1.8 million, to $2.7 million, for the third quarter of 2020, from $900,000 for the third quarter of 2019, primarily due to COVID-19 related factors. In the second quarter of 2020, the provision for loan losses was $3.3 million. The provision for loan losses increased by $5.0 million to $7.5 million for the first nine months of 2020, from $2.5 million for the first nine months of 2019. The Bank had non-accrual loans totaling $7.2 million, or 0.29 percent, of gross loans at September 30, 2020, as compared to $5.1 million, or 0.22 percent, of gross loans at September 30, 2019.

Performing troubled debt restructured (“TDR”) loans that were not included in nonaccrual loans at September 30, 2020, were $16.4 million, compared to $16.5 million at September 30, 2019. Borrowers who are in financial difficulty and who have been granted concessions (excluding COVID-19 modifications) that may include interest rate reductions, term extensions, or payment alterations are categorized as TDR loans.

The allowance for loan losses was $31.8 million, or 1.31 percent of gross loans at September 30, 2020, and $24.7 million, or 1.08 percent of gross loans at September 30, 2019. The allowance for loan losses was 444.1 percent of non-accrual loans at September 30, 2020 and 486.6 percent of non-accrual loans at September 30, 2019.

COVID-19 Response

With the global outbreak of COVID-19, the Company remains focused on protecting the health and wellbeing of its employees and the communities in which it operates while assuring the continuity of its business operations. 

The Company activated its dedicated pandemic team that proactively implemented its business continuity plans and has taken a variety of measures to ensure the ongoing availability of services, while taking health and safety measures, including enhanced cleaning and hygiene protocols in all of its facilities and remote work policies, where possible. To date, as a result of these business continuity measures, the Company has not experienced significant disruptions in its operations. 

“We believe we have sufficient liquidity on hand to continue business operations during this volatile period,” said Coughlin. As of September 30, 2020, the Company had over $160 million of cash on hand and available wholesale borrowing capacity of over $700 million.

• Operational Initiativeso The pandemic response team meets on a biweekly basis and actively monitors guidance released by regulators, and banking associations.o In-person meetings are closely managed and are held on an as needed basis only.o Some employees are working remotely, temporarily relocated or are working alternate days to increase social distancing.o Barriers have been installed in branches and back offices to provide protection.o Branch and operational offices are cleaned and sanitized weekly. This practice will continue until further notice. Employees have access to masks, gloves and disinfectant.o Masks are required for entry and social distancing is strictly enforced.  o Management provides updates to employees on a regular basis.o The Call Center is open seven days a week to assist with customer inquiries.
• Allowance for Loan Losses (“ALLL”) o Although several of the Company’s asset quality metrics have not been adversely affected in a significant manner during the first nine months of 2020, management determined it is prudent to increase its loan loss reserves through the addition of $2.7 million and $7.5 million in loan loss provisions for the three and nine-month periods ended September 30, 2020, respectively, due primarily to the economic downturn as a result of the COVID-19 pandemic. This compares to $900,000 and $2.5 million in loan loss provisions for the three and nine-month periods ended September 30, 2019, respectively. The loan loss reserve to total loans ratio was 1.31 percent at September 30, 2020, compared to 1.08 percent at September 30, 2019. The increased reserve includes provisions taken in response to changes in risks associated with loan classification assignments and a declining economy in New Jersey and New York.o The Bank considered qualitative factors, such as changes in underwriting policies, current economic conditions, delinquency statistics, the adequacy of the underlying collateral and the financial strength of borrowers in arriving at its loan loss provision. All of these factors are likely to be affected by the COVID-19 pandemic. Individual deferred loans were stress tested to assess potential credit risks. The impact of COVID-19 is likely to be felt over the next several quarters. Adjustments to the ALLL may be required as the full impact of COVID-19 on the borrowers’ capacity to make payments and the value of the underlying collateral becomes known.
• Loan Defermentso The Bank, like other financial institutions, has received a significant number of requests to defer principal and/or interest payments, and has agreed to such deferrals or is in the process of doing so on a case by case basis. The banking regulatory agencies, through an Interagency Statement dated April 7, 2020, are encouraging financial institutions to work prudently with borrowers who request loan modifications or deferrals as a result of COVID-19.o The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provided over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. Under Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. A financial institution can then suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a TDR, and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. These loans are accruing interest and the Bank is considering the loans within the overall allowance for loan loss analysis.o The Bank began receiving requests for loan deferments on March 13, 2020. The forbearance period provided by the Bank is generally three months with the Bank retaining the sole option to extend the forbearance period for an additional three months. Payments received upon the expiration of the forbearance period will first be applied to interest accrued, then towards escrow advances, and any remaining amount towards principal.

The following is a summary of deferment requests by loan type as of September 30, 2020 and October 16, 2020 (dollars in thousands):

Loan deferments peaked at $730.1 million in mid-June 2020. The Bank has worked diligently with its customers by reaching out to them as the end of the three-month deferral term was approaching, and to understand the need for any prudent requests of an extension of the deferral period. The Bank has been encouraged with the results, as we have experienced a 99% decline in loan deferment balances through October 16, 2020 since the peak in mid June.

Loan Deferment maturities for the remainder of the year are as follows (in thousands):

Management continues to perform detail stress testing of loan deferments related to various loan to value and cash flow scenarios. The specific ALLL reserves allocated to these stress tests are deemed to be adequate and will continue to be analyzed as the economic conditions progress.

• Paycheck Protection Program (PPP)  o As a qualified SBA lender, the Bank was automatically authorized to originate PPP loans.o Through September 30, 2020, the Bank had closed and funded approximately $129 million for almost 1,100 PPP loans.o The Company had received approximately $4.7 million of processing fees from the SBA through September 30, 2020. These fees, net of direct costs relating to the origination of these loans, have been deferred and are being amortized over the life of the loans. The amount of net deferred fees recorded to interest income through September 30, 2020 was approximately $640,000. The Company anticipates recognizing $375,000 of net deferred fee income in the fourth quarter of 2020, excluding any amounts resulting from loan forgiveness.
• Main Street lending Programo The Main Street Lending Program is a program announced on April 9, 2020, under which the Federal Reserve will purchase loans that banks give to small and mid-sized businesses. The Federal Reserve will purchase 95% of each loan.o The program is designed to keep credit flowing to small and mid-sized businesses that were in good financial standing before the onset of the COVID-19 crisis, but which are now under extreme stress due to stay-at-home and business closure orders from state and local governments. The Bank has been approved as an eligible lender, and has received inquiries since the program became operational on July 8, 2020.
• Industry Exposure o The Company has identified various industries that may be particularly adversely impacted by the COVID-19 pandemic. Though the hotspots may change through the progression of the pandemic, the following sectors are currently being disproportionately impacted: Strip Retail, Hospitality/Hotels, Golf Courses and Banquet Halls, Restaurants and Retail.

The following table summarizes the Bank’s portfolio and deferment balances for these industries, as a percent of the total loan portfolio, at September 30, 2020. At October16, 2020, the Bank only had $400,000 in deferment balances for these industries.

Description	Portfolio Balance ($000s)			Percentage of Loan Portfolio				Deferment Balance ($000s)			Percentage of Loan Portfolio
Strip Retail	$	119,505			5	%		$	10,649			Enhanced Investments, Inc. 329 South Oyster Bay Road #2085 Plainview, NY 11803 team@eninvs.com Performance About Strategies Team Screener Global Commodities Trending Ideas Rising Stars U.S. Leaders Eastern European Strategy Important disclosures Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance. All the strategies assume investments in equity invstrumenta only and are more relevant for "agressive investment profile". Eastern European flagship strategy assumes using up to 20% leverage of total portfolio. GlobalCommodities and US Growth strategy currently assume no leverage. Results for the Enhanced Investments strategies as compared to the performance of Illustrative Benchmarks is for informational purposes only. Our investment program does not mirror that of the Illustrative Benchmarks and the volatility may be materially different from the volatility of Illustrative Benchmarks. Reference or comparison to an Illustrative Benchmark does not imply that strategies of Enhanced Investments will be constructed in the same way as the Illustrative Benchmark or achieve returns, volatility, or other results similar to those of the Illustrative Benchmark. The S&P 500 is an unmanaged market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. Performance results were prepared by Enhanced Investments, and have not been compiled, reviewed or audited by an independent accountant. Performance estimates are subject to future adjustment and revision. Investors should be aware that a loss of investment is possible. Account holdings are for illustrative purposes only and are not investment recommendations. Additional information, including (i) the calculation methodology; and (ii) a list showing the contribution of each holding to the portfolio’s performance during the time period will be provided upon request. All statements made via social media sites sponsored or maintained by Enhanced Investments and its affiliates are for informational purposes only and do not constitute a comprehensive description of Enhanced Investments' investment advisory services. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and applicable fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Information provided by Enhanced Investments is for informational and general educational purposes only and is not investment or financial advice. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance. All the strategies assume investments in equity invstrumenta only and are more relevant for "agressive investment profile". Eastern European flagship strategy assumes using up to 20% leverage of total portfolio. GlobalCommodities and US Growth strategy currently assume no leverage. Results for the Enhanced Investments strategies as compared to the performance of Illustrative Benchmarks is for informational purposes only. Our investment program does not mirror that of the Illustrative Benchmarks and the volatility may be materially different from the volatility of Illustrative Benchmarks. Reference or comparison to an Illustrative Benchmark does not imply that strategies of Enhanced Investments will be constructed in the same way as the Illustrative Benchmark or achieve returns, volatility, or other results similar to those of the Illustrative Benchmark. The S&P 500 is an unmanaged market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. Performance results were prepared by Enhanced Investments, and have not been compiled, reviewed or audited by an independent accountant. Performance estimates are subject to future adjustment and revision. Investors should be aware that a loss of investment is possible. Account holdings are for illustrative purposes only and are not investment recommendations. Additional information, including (i) the calculation methodology; and (ii) a list showing the contribution of each holding to the portfolio’s performance during the time period will be provided upon request. All statements made via social media sites sponsored or maintained by Enhanced Investments and its affiliates are for informational purposes only and do not constitute a comprehensive description of Enhanced Investments' investment advisory services. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and applicable fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Information provided by Enhanced Investments is  for informational and general educational purposes only and is not investment or financial advice. © Enhanced Investments Inc. All rights reserved, 2023