Company: NECB
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001558370-25-002975
Chunk: 37

Company: NorthEast Community Bancorp, Inc./MD/
Filing Date: 2025-03-14
Form: 10-K
Item: Item 1A
Chunk 37
---
Item 1A.RISK FACTORS

Investing in the Company’s common stock involves risks.  The investor should carefully consider the following risk factors before deciding to make an investment decision regarding the Company’s stock.  The risk factors may cause future earnings to be lower or the financial condition to be less favorable than expected.  In addition, other risks that the Company is not aware of, or which are not believed to be material, may cause earnings to be lower, or may deteriorate the financial condition of the Company.  Consideration should also be given to the other information in this Annual Report on Form 10-K, as well as in the documents incorporated by reference into this Form 10-K.

Risks Related to Our Lending Activities

Our emphasis on construction lending involves risks that could adversely affect our financial condition and results of operations.

In recent years, we have shifted our loan originations to focus primarily on construction loans, while continuing to originate a limited number of commercial and industrial loans, multifamily, mixed-use and non-residential real estate loans.  We expect this focus to continue given the needs of the communities we serve in the New York Metropolitan Area.  Our construction loan portfolio has increased to $1.4 billion, net of loans-in-process of $398.4 million, or 78.6% of total loans, at December 31, 2024 from $251.0 million, net of loans-in-process of $145.8 million, or 39.8% of total loans, at December 31, 2016.  As a result, our credit risk profile may be higher than traditional community banks that have higher concentrations of one- to four-family residential loans and other real estate-based loans.

Construction lending involves additional risks when compared to one- to four-family residential real estate lending because funds are advanced upon the security of the project, which is of uncertain value prior to its completion.  Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio.  This type of lending also typically involves higher loan principal amounts and is often concentrated with a small number of builders.  These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing,