What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 182 added, 90 removed, 365 unchanged (43% of the section changed)

28 unchanged sentences

Earnings and Performance Overview

Revenues (net interest income plus noninterest income) for the quarter ended March 31, 2024 were $22.1 million, versus $27.1 million for the quarter ended March 31, 2023.

The decrease in revenues for the quarter was attributable to an increase in interest expense and lower gains from loan sales partially offset by an increase in interest on loans, given higher loan yields and prepayment fees.

Net income available to common shareholders was $3.8 million, or $0.48 per diluted share, and $10.4 million, or $1.33 per diluted share, for the three months ended March 31, 2024 and 2023, respectively.

The decrease was primarily due to the aforementioned decrease in revenues and an increase in provision for credit losses.

Returns on average shareholders' equity and average assets for the three months ended March 31, 2024 were 5.59% and 0.47%, respectively, compared to 17.48% and 1.30%, respectively, for the three months ended March 31, 2023.

Revenues (net interest income plus no ninterest income) for the three months ended June 30, 2024 were $21.9 million, versus $25.4 million for the quarter ended June 30, 2023.

Revenues for the six months ended June 30, 2024 were $44.0 million, versus $52.5 million for the six months ended June 30, 2023.

The decrease in revenues for the quarter and six months ended June 30, 2024 was attributable to an increase in interest expense on deposits and lower gains from loan sales partially offset by an increase in interest and fees on loans, given higher loan yields and prepayment fees.

Net income available to common shareholders was $1.1 million, or $0.14 per diluted share, and $8.0 million, or $1.02 per diluted share, for the three months ended June 30, 2024 and 2023, respectively.

Net income available to common shareholders was $4.9 million, or $0.62 per diluted share, and $18.4 million, or $2.34 per diluted share, for the six months ended June 30, 2024 and 2023, respectively.

The decrease in net income for the quarter and six months ended June 30, 2024 was primarily due to the aforementioned decrease in revenues and an increase in provision for credit losses.

Returns on average shareholders' equity and average assets for the three months ended June 30, 2024 were 1.65% and 0.14%, respectively, compared to 12.91% and 0.99%, respectively, for the three months ended June 30, 2023.

Returns on average shareholders' equity and average assets for the six months ended June 30, 2024 were 3.61% and 0.31%, respectively, compared to 15.15% and 1.14%, respectively, for the six months ended June 30, 2023.

Results of Operations

7 unchanged sentences

Premium amortization and discount accretion are included in the respective interest income and interest expense amounts.

FTE net interest income for the three months ended March 31, 2024 and 2023 was $21.2 million and $25.6 million, respectively.

FTE interest income for the three months ended March 31, 2024 increased by $4.0 million, or 9.0%, to $48.3 million, compared to FTE interest income for the three months ended March 31, 2023.

FTE net interest income for the three months ended June 30, 2024 and 2023 was $21.3 million and $24.1 million, respectively.

FTE net interest income for the six months ended June 30, 2024 and 2023 was $42.5 million and $49.6 million, respectiv ely.

FTE interest income for the three months ended June 30, 2024 increased by $1.1 million, or 2.3%, to $47.7 million, compared to FTE interest income for the three months ended June 30, 2023.

FTE interest income for the six months ended June 30, 2024 increased by $5.2 million, or 5.7%, to $96.1 million, co mpared to FTE interest income for the six months ended June 30, 2023.

This increase was due to an increase in interest and fees on loans due to higher overall loan yields.

Interest expense for the three months ended March 31, 2024 increased by $8.4 million compared to interest expense for the three months ended March 31, 2023.

The increase in interest expense for the three months ended March 31, 2024 was driven by an increase in interest expense on deposits, resulting from an increase in rates on interest bearing deposits.

Interest expense for the three months ended June 30, 2024 increased by $3.9 million compared to interest expense for the three months ended June 30, 2023.

Interest expense for the six months ended June 30, 2024 increased by $12.3 million compared to interest expense for the six months ended June 30, 2023.

The increase in interest expense for the three and six months ended June 30, 2024 was driven by an increase in interest expense on deposits, resulting from an increase in rates on interest bearing deposits.

Distribution of Assets, Liabilities and Shareholders’ Equity;

Interest Rates and Interest Differential

The following table presents the average balances and yields earned on interest earning assets and average balances and weighted average rates paid on our funding liabilities for the three months ended March 31, 2024 and 2023.

The following tables present the average balances and yields earned on interest earning assets and average balances and weighted average rates paid on our funding liabilities for the three and six months ended June 30, 2024 and 2023.

For the Quarter Ended

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

Balance Interest Yield/

33 unchanged sentences

(1) Average balances and yields for securities are based on amortized cost.

(2) The adjustment for securities and loans taxable eq uivalency amounted to $51 thousand and $50 thousand for the three months ended March 31, 2024 and 2023, respectively.

(2) The adjustment for securities and loans taxable eq uivalen cy amounted to $67 thousand and $5 1 thousand for the three months ended June 30, 2024 and 2023, respectively.

(3) Annualized net interest income as a percentage of earning assets.

(4) Yields are calculated using the contractual day count convention for each respective product type.

For the Six Months Ended

June 30, 2024 June 30, 2023

Balance Interest Yield/

Cash and Fed funds sold $ 282,981 $ 7,255 5.16 % $ 271,328 $ 6,590 4.90 %

Securities (1)

136,049 2,199 3.23 129,225 1,912 2.96

Commercial real estate 1,911,896 56,295 5.82 1,926,852 52,125 5.38

Residential real estate 49,624 1,490 6.01 58,207 1,286 4.42

Construction 160,080 5,844 7.22 186,684 6,651 7.09

Commercial business 520,188 21,314 8.10 549,963 21,394 7.74

Consumer 41,150 1,442 7.05 23,971 749 6.30

Total loans 2,682,938 86,385 6.37 2,745,677 82,205 5.95

Federal Home Loan Bank stock 5,678 239 8.49 5,442 193 7.14

Total earning assets 3,107,646 $ 96,078 6.12 % 3,151,672 $ 90,900 5.74 %

Other assets 93,179 90,427

Total assets $ 3,200,825 $ 3,242,099

Liabilities and shareholders' equity:

Interest bearing liabilities:

NOW $ 99,493 $ 88 0.18 % $ 95,494 $ 81 0.17 %

Money market 858,670 17,698 4.14 905,021 14,468 3.22

Savings 91,979 1,402 3.06 124,387 1,586 2.57

Time 1,304,332 30,851 4.76 1,275,417 21,675 3.43

Total interest bearing deposits 2,354,474 50,039 4.27 2,400,319 37,810 3.18

Borrowed Money 159,257 3,555 4.49 162,215 3,454 4.24

Total interest bearing liabilities 2,513,731 $ 53,594 4.29 % 2,562,534 $ 41,264 3.25 %

Noninterest bearing deposits 352,768 389,608

Other liabilities 62,775 45,494

Total liabilities 2,929,274 2,997,636

Shareholders' equity 271,551 244,463

Total liabilities and shareholders' equity $ 3,200,825 $ 3,242,099

Net interest income (2)

$ 42,484 $ 49,636

Interest rate spread 1.83 % 2.49 %

Net interest margin (3)

2.73 % 3.15 %

(1) Average balances and yields for securities are based on amortized cost.

(2) The adjustment for securities and loans taxable eq uival ency amounted to $118 thousand and $102 thousand for the six months ended June 30, 2024 and 2023, respectively.

(3) Annualized net interest income as a percentage of earning assets.

(4) Yields are calculated using the contractual day count convention for each respective product type.

Effect of changes in interest rates and volume of average earning assets and average interest bearing liabilities

5 unchanged sentences

Changes attributable to both volume and rate have been allocated proportionately based on the relationship of the absolute dollar amount of change in each.

Three Months Ended

March 31, 2024 vs 2023

Three Months Ended June 30, 2024 vs 2023

Increase (Decrease) Six Months Ended

June 30, 2024 vs 2023

Increase (Decrease)

(In thousands) Volume Rate Total

(In thousands) Volume Rate Total Volume Rate Total

Interest and dividend income:

10 unchanged sentences

Interest expense:

NOW 4 2 6 3 5 8

Money market (647) 1,116 469 (773) 4,003 3,230

8 unchanged sentences

The provision for credit losses is charged against earnings in order to maintain our ACL-Loans and ACL-Unfunded Commitments and reflects management’s best estimate of probable losses inherent in our loan portfolio as of the balance sheet date.

The provision for credit losses for the three months ended March 31, 2024 was $3.7 million compared to a provision for credit losses of $0.8 million for the three months ended March 31, 2023.

The increase in provision for credit losses for the three months ended March 31, 2024 was primarily driven by net charge-offs of $3.7 million.

The provision for credit losses for the three months ended June 30, 2024 was $8.2 million compared to a provision for credit losses of $2.6 million for the three months ended June 30, 2023.

The provision for credit losses for the for the six months ended June 30, 2024 was $11.9 million compared to a provision for credit losses of $3.4 million for the six months ended June 30, 2023.

The increase in the provision for credit losses for the quarter was primarily due to an additional $7.4 million in specific reserve for two loans.

Of the $7.4 million:

• $6.6 million is related to a specific reserve taken against an $8.7 million commercial business credit.

The credit had been previously reported as a non-performing loan as of the fourth quarter of 2023 and had previously carried a $0.4

million specific reserve.

The Company's estimated remaining exposure for the commercial business credit is $1.7 million.

• $0.8 million specific reserve was related to a construction loan.

The increase in provision for credit losses for the six months ended June 30, 2024 was primarily driven by aforementioned increase in specific reserves.

Noninterest Income

Noninterest income is a component of our revenue and is comprised primarily of fees generated from deposit relationships with our clients, fees generated from sales and referrals of loans, and income earned on bank-owned life insurance.

The following tables compare noninterest income for the three months ended March 31, 2024 and 2023:

The following tables compare noninterest income for the three and six months ended June 30, 2024 and 2023:

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2024 2023 $ %

4 unchanged sentences

Total noninterest income $ 683 $ 1,401 $ (718) (51.2) %

Noninterest income decreased by $0.6 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

The decrease in noninterest income was driven by lower gains from loan sales for the quarter ended March 31, 2024.

Six Months Ended

June 30, Change

(Dollars in thousands) 2024 2023 $ %

Gains and fees from sales of loans $ 366 $ 1,656 $ (1,290) (77.9) %

Bank-owned life insurance 662 573 89 15.5

Service charges and fees 799 647 152 23.5

Other (229) 51 (280) Unfavorable

Total noninterest income $ 1,598 $ 2,927 $ (1,329) (45.4) %

Noninterest income decreased by $0.7 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Noninterest income decreased by $1.3 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

The decrease in noninterest income for the three and six months ended June 30, 2024 was driven by lower gains from loan sales.

Noninterest Expense

The following table compares noninterest expense for the three months ended March 31, 2024 and 2023:

The following table compares noninterest expense for the three and six months ended June 30, 2024 and 2023:

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2024 2023 $ %

8 unchanged sentences

Total noninterest expense $ 12,245 $ 12,641 $ (396) (3.1) %

Noninterest expense increased by $0.6 million to $13.3 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Six Months Ended

June 30, Change

(Dollars in thousands) 2024 2023 $ %

Salaries and employee benefits $ 12,467 $ 12,471 $ (4) — %

Occupancy and equipment 4,561 4,288 273 6.4

Professional services 2,054 2,014 40 2.0

Data processing 1,495 1,400 95 6.8

Director fees 1,206 845 361 42.7

FDIC insurance 1,635 2,112 (477) (22.6)

Marketing 203 328 (125) (38.1)

Other 1,921 1,874 47 2.5

Total noninterest expense $ 25,542 $ 25,332 $ 210 0.8 %

Nonint erest expense decreased by $0.4 million to $12.2 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

The decrease in noninterest expense was primarily driven by a decrease in FDIC insurance costs mainly driven by a reduction in the Bank's brokered deposits.

Noninterest expense increased by $0.2 million to $25.5 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

The increase in noninterest expense was primarily driven by an increase in director fees related to timing of compensation and accelerated vestings in connection with the death of a director.

Income tax expense for the three mont hs ended March 31, 2024 and 2023 totaled $1.3 million and $3.2 million, respectively.

The effective tax rates for the three months ended March 31, 2024 and 2023 were 26.0% and 23.4%, respectively .

The increase was partially offset by a decrease in FDIC insurance costs mainly attributable by a reduction in the Bank's brokered deposits.

Income tax expense for the three mont hs ended June 30, 2024 and 2023 totaled $0.4 million and $2.2 million, respectively.

The effective tax rates for the three months ended June 30, 2024 and 2023 were 24.2% and 21.5%, respectively.

Income tax expense for the six months ended June 30, 2024 and 2023 totaled $1.7 million and $5.4 million, respectively.

The effective tax rates for the six months ended June 30, 2024 and 2023 were 25.5% and 22.6%, respectively.

Financial Condition

Assets totaled $3.2 billion at March 31, 2024 a decrease of $60.2 million or 1.9% compared to December 31, 2023.

Gross loans totaled $2.7 billion at March 31, 2024, a decrease of $39.0 million or 1.4% compared to December 31, 2023.

Deposits totaled $2.7 billion at March 31, 2024, a decrease of $63.2 million, or 2.3% compared to December 31, 2023.

Shareholders’ equity totaled $268.0 million as of March 31, 2024, an increase of $2.3 million compared to December 31, 2023, primarily a result of net income of $3.8 million for the three months ended March 31, 2024.

The increase was partially offset by dividends paid of $1.6 million and share repurchases of $0.9 million.

Assets totaled $3.1 billion at June 30, 2024 a decrease of $73.8 million or 2.3% compared to December 31, 2023.

Gross loans totaled $2.7 billion at June 30, 2024, a decrease of $61.4 million or 2.3% compared to December 31, 2023.

Deposits totaled $2.7 billion at June 30, 2024, a decrease of $74.4 million, or 2.7% compared to December 31, 2023.

Shareholders’ equity totaled $267.0 million as of June 30, 2024, an increase of $1.2 million compared to December 31, 2023, primarily a result of net income of $4.9 million for the six months ended June 30, 2024.

The increase was partially offset by dividends paid of $3.2 million.

Loan Portfolio

2 unchanged sentences

Our loan portfolio is the largest category of our earning assets.

Total loa ns before deferred loan fees and the ACL-Loans were $2.7 billion at March 31, 2024 and $2.7 billion at December 31, 2023.

Total gross loans decreased $39.0 million as of March 31, 2024 com pared to the year ended December 31, 2023.

Total loans before deferred loan fees and the ACL-Loans were $2.7 billion at June 30, 2024 and $2.7 billion at December 31, 2023.

Total gross loans decreased $61.4 million as of June 30, 2024 compared to the year ended December 31, 2023.

The following table compares the composition of our loan portfolio for the dates indicated:

(In thousands) At March 31, 2024 At December 31, 2023 Change

(In thousands) At June 30, 2024

At December 31, 2023

Real estate loans:

6 unchanged sentences

Total loans $ 2,657,185 $ 2,718,607 $ (61,422)

The following table compares the composition of our commercial real estate loan portfolio by non-owner occupied and owner occupied loans at March 31, 2024 and December 31, 2023:

At March 31, 2024

At December 31, 2023 Change

The following table compares the composition of our commercial real estate loan portfolio by non-owner occupied and owner occupied loans at June 30, 2024 and December 31, 2023:

At June 30, 2024

At December 31, 2023

Total % Total % Total

5 unchanged sentences

$ 1,913,480 100.00 % $ 1,946,906 100.00 % $ (33,426)

(1) Excludes the negative fair value effect of the portfolio layer swap of $616 thousand and the positive fair value effective of the portfolio layer swap of $742 thousand for C ommercial Real Estate at March 31, 2024 and December 31, 2023, respectively.

The following table compares the composition of our commercial real estate loan portfolio by property type, and collateral location as of March 31, 2024 :

(1) Excl udes the negative fair value effect of the portfolio layer swap of $779 thousand and the positive fair value effective of the portfolio layer swap of $742 thousand for Commercial Real Estate at June 30, 2024 and December 31, 2023, respectively.

The following table compares the composition of our commercial real estate loan portfolio by property type, and collateral location as of June 30, 2024 :

Commercial Real Estate CT All Other NY NYC NJ FL OH PA All Other Total (1)

12 unchanged sentences

$ 557,007 $ 271,983 $ 197,014 $ 106,925 $ 320,533 $ 88,049 $ 61,891 $ 310,078 $ 1,913,480

(1) Excludes the negative fair value effect of the portfolio layer swap of $616 thousand for Comm ercial Real Estate at March 31, 2024 .

(1) Excludes the negative fair value effect of the portfolio layer swap of $779 thousand for Commercial Real Estate at June 30, 2024.

(2) Primarily consists of skilled nursing and assisted living facilities.

(3) Includes Special use, self storage, and land.

As of March 31, 2024, the Bank had $189.6 million of loans collateralized by offices, which represented 7.1% of the total loan portfolio.

As of June 30, 2024, the Bank had $188.6 million of loans collateralized by offices, which represented 9.9% of the total loan portfolio.

Most of the properties in this portfolio are in suburban locations, with no properties located in New York City.

98.4% of this portfolio was pass rated, and there were two relationships totaling $3.1 million on nonaccrual status.

As of March 31, 2024, we had $265.0 million of loans collateralized by multifamily properties, which represented 9.9% of the total loan portfolio.

100% of the portfolio is pass rated and current.

These properties are all located in Connecticut, New York, or New Jersey, with eight properties, totaling $52.2 million, located in New York City.

91.0% of this portfolio was pass rated, and there were three relationships totaling $16.9 million on nonaccrual status.

As of June 30, 2024, we had $284.6 million of loans collateralized by multifamily properties, which represented 14.9% of the total loan portfolio.

100% of this portfolio is pass rated and current.

These properties are all located in Connecticut, New York, or New Jersey, with nine properties, totaling $51.8 million, located in New York City.

79.0% of the New York City exposure is located in Brooklyn, 11.6% in Manhattan and the remaining 9.4% in Queens .

$16.3 million of the New York City exposure, or 0.6% of the total loan portfolio, have either rent stabilized or rent controlled units.

The following table presents an analysis of the commercial real estate portfolio's loan to value at origination and by property type as of March 31, 2024 .

The following table presents an analysis of the commercial real estate portfolio's loan to value at origination and by property type as of June 30, 2024 .

Commercial Real Estate Total CRE Portfolio (1)

13 unchanged sentences

Total $ 1,913,480 100.0 % 61.2 %

(1) Excludes the negative fair value effect of the portfolio layer swap of $616 thousand for Commercial Real Estate at March 31, 2024.

(1) Excludes the negative fair value effect of the portfolio layer swap of $779 thousand for Commercial Real Estate at June 30, 2024.

(2) Primarily consists of skilled nursing and assisted living facilities.

20 unchanged sentences

The following table presents nonperforming assets and additional asset quality data for the dates indicated:

(In thousands) At March 31, 2024 At December 31, 2023

(In thousands) At June 30, 2024

At December 31, 2023

Nonaccrual loans:

12 unchanged sentences

Total past due loans to total gross loans 0.84 % 0.78 %

Nonaccrual loans totaled $46.5 million at March 31, 2024 and $49.2 million at December 31, 2023.

There was no Other Real Estate Owned ("OREO") at March 31, 2024 or December 31, 2023.

Nonaccrual loans totaled $56.2 million at June 30, 2024 and $49.2 million at December 31, 2023.

The increase was primarily due to a $13.9 million commercial real estate non-owner occupied office loan put on nonaccrual during the six months ended June 30, 2024.

This loan represents a 16.5% participation in a $84.3 million club transaction.

The increase was partially offset by the payoff of two loans totaling $4.4 million and four loans that were partially charged-off for a total of $4.0 million during the six months ended June 30, 2024.

Of the $56.2 million total nonaccrual loans, $8.2 million, or 14.6%, are SBA-guaranteed.

There was no Other Real Estate Owned ("OREO") at June 30, 2024 or December 31, 2023.

Allowance for Credit Losses - Loans ("ACL-Loans")

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(Dollars in thousands) 2024 2023 2024 2023

7 unchanged sentences

Total charge-offs (543) (25) (4,227) (476)

Residential real estate 141 — 141 —

Commercial real estate 113 — 113 —

Commercial business — 32 27 33

Consumer 13 11 17 15

Total recoveries 267 43 298 48

4 unchanged sentences

ACL-Loans to total gross loans 1.36 % 1.11 % 1.36 % 1.11 %

At March 31, 2024, our ACL-Loans was $28.0 million and represented 1.04% of total gross loans, compared to $27.9 million or 1.03% of total gross loans, at December 31, 2023.

At June 30, 2024, our ACL-Loans was $36.1 million and represented 1.36% of total gross loans, compared to $27.9 million or 1.03% of total gross loans, at December 31, 2023.

The following table presents the allocation of the ACL-Loans balance and the related allocation percentage of these loans across the total loan portfolio:

At March 31, 2024 At December 31, 2023

June 30, 2024

December 31, 2023

(Dollars in thousands) ACL-Loans Amount ACL-Loans Percentage Loan Segment to Total Loans Percentage ACL-Loans Amount ACL-Loans Percentage Loan Segment to Total Loans Percentage

5 unchanged sentences

Total ACL-Loans $ 36,083 100.00 % 100.00 % $ 27,946 100.00 % 100.00 %

The allocation of the ACL-Loans at March 31, 2024 reflects our assessment of credit risk and probable loss within each portfolio.

We believe that the level of the ACL-Loans at March 31, 2024 is appropriate to cover probable losses.

The allocation of the ACL-Loans at June 30, 2024 reflects our assessment of credit risk and probable loss within each portfolio.

We believe that the level of the ACL-Loans at June 30, 2024 is appropriate to cover probable losses.

ACL- Unfunded Commitments

3 unchanged sentences

Investment Securities

At March 31, 2024, the carrying val ue of our investment securities portfolio totaled $126.2 million and represented 4.0% of total assets, compared to $127.6 million, or 4.0% of total assets, at December 31, 2023.

The net unrealized loss position on our investment portfolio at March 31, 2024 was $8.0 million and included gross unrealized gains of $0.5 million.

The net unrealized loss position on our investment portfolio at December 31, 2023 was $7.5 million and included gross unrealized gains of $0.8 million.

At June 30, 2024, the carrying value of our investment securities portfolio totaled $138.0 million and represented 4.4% of total assets, compared to $127.6 million, or 4.0% of total assets, at December 31, 2023.

The net unrealized loss position on our investment portfolio at June 30, 2024 was $6.7 million and included gross unrealized gains of $1.7 million.

The net unrealized loss position on our investment portfolio at December 31, 2023 was $7.5 million and included gross unrealized gai ns of $0.8 million.

Deposit Activities and Other Sources of Funds

March 31, 2024 December 31, 2023

June 30, 2024

December 31, 2023

(Dollars in thousands) Amount Percent Amount Percent

5 unchanged sentences

Total deposits $ 2,662,375 100.00 % $ 2,736,757 100.00 %

Tota l deposits were $2.7 billion at March 31, 2024, a decrease of $63.2 million, from t he balance at December 31, 2023.

Brokered certificates of depo sits totaled $780.5 million at March 31, 2024 and $860.5 million at December 31, 2023, respectively.

Brokered money market accounts tota led $51.4 million at March 31, 2024 and $91.4 million at December 31, 2023, respectively.

There were no certificates of deposits from national listing services, one-way buy CDARS or one-way buy ICS at March 31, 2024 or December 31, 2023.

Tota l deposits were $2.7 billion at June 30, 2024, a decrease of $74.4 million , from t he balance at December 31, 2023.

Brokered certificates of depo sits totaled $755.5 million at June 30, 2024 and $860.5 million at December 31, 2023, respectively.

Brokered money market accounts tota led $52.1 million at June 30, 2024 and $91.4 million at December 31, 2023, respectively.

There were no certificates of deposits from national listing services, one-way buy CDARS or one-way buy ICS at June 30, 2024 or December 31, 2023.

Brokered deposits are comprised of Brokered CDs, brokered money market accounts, one-way buy CDARS, and one-way buy ICS.

As of March 31, 2024, our FDIC insured deposits were $1,907.6 million, or 71% of total deposits.

As of June 30, 2024, our FDIC insured deposits were $1,940.0 million, or 73% of total deposits.

Additionally, deposits totaling $89.2 million, or 3% of total deposits, are insured by standby letters of credit with the Federal Home Loan Bank of Boston.

At March 31, 2024 and December 31, 2023, time deposits with a denomination of $100 thousand or more, including CDARS and brokered deposits, totaled $1,164.0 million and $1,199.7 million, respectively, maturing during the periods indicated in the table below:

(Dollars in thousands) March 31, 2024 December 31, 2023

At June 30, 2024 and December 31, 2023, time deposits with a denomination of $100 thousand or more, including CDARS and brokered deposits, totaled $1,161.8 million and $1,199.7 million, respectively, maturing during the periods indicated in the table below:

(Dollars in thousands) June 30, 2024

December 31, 2023

Within 3 months $ 225,804 $ 343,084

4 unchanged sentences

We utilize advances from the Federal Home Loan Bank of Boston, or FHLB, as part of our overall funding strategy and to meet short-term liquidity needs, and to a lesser degree, manage interest rate risk arising from the difference in asset and liability maturities.

Total FHLB advances w ere $90.0 million at both March 31, 2024 and December 31, 2023.

Total FHLB advances w ere $90.0 million at both June 30, 2024 and December 31, 2023.

The Bank has addition al borrowing capacity at the FHLB up to a certain percentage of the value of qualified collateral.

In accordance with agreements with the FHLB, the qualified collateral must be free and clear of liens, pledges and encumbrances.

At March 31, 2024, the Bank had pledged $843.8 million of eligible loans as collateral to support borrowing capacity at the FHLB.

As of March 31, 2024, the Bank had immediate availability to borrow an additional $327.8 million from the FHLB based on qualified collateral.

At March 31, 2024 , the Bank had a secured borrowing line with the FRB, a letter of credit with the FHLB, and unsecured lines of credit with Zions Bank, Pacific Coast Bankers Bank ("PCBB"), and Atlantic Community Bankers Bank ("ACBB").

The total borrowing line, letter, or line of credit and the amount outstanding at March 31, 2024 is summarized below:

March 31, 2024

At June 30, 2024, the Bank had pledged $815.2 million of eligible loans as collateral to support borrowing capacity at the FHLB.

As of June 30, 2024, the Bank had immediate availability to borrow an additional $334.7 million from the FHLB based on qualified collateral.

At June 30, 2024 , the Bank had a secured borrowing line with the FRB, a letter of credit with the FHLB, and unsecured lines of credit with Zions Bank, Pacific Coast Bankers Bank ("PCBB"), and Atlantic Community Bankers Bank ("ACBB").

The total borrowing line, letter, or line of credit and the amount outstanding at June 30, 2024 is summarized below:

June 30, 2024

Total Letter or Line of Credit Total Outstanding

19 unchanged sentences

The Bank has established unsecured borrowing capacity with Zions Bank, PCBB, and ACBB.

The Bank also maintains additional collateralized borrowing capacity with the FRB and the FHLB in excess of levels used in the ordinary course of business.

The Bank also maintains additional collateralized

borrowing capacity with the FRB and the FHLB in excess of levels used in the ordinary course of business.

Our sources of liquidity include cash, unpledged investment securities, borrowings from the FRB, FHLB, lines of credit from Zions Bank, PCBB, and ACBB, the brokered deposit market and national CD listing services.

Capital Resources

The increase was partially offset by dividends paid of $1.6 million and share repurchases of $0.9 million.

The increase was partially offset by dividends paid of $3.2 million.

The Bank and Company are subject to various regulatory capital requirements administered by the federal banking agencies.

Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.

At March 31, 2024, the Bank met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the reg ulatory framework for prompt corrective action.

At March 31, 2024, the Bank’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 11.60%, total capital to risk-weighted assets was 11.60%, Tier 1 capital to risk-weighted assets was 12.63% and Tier 1 capital to average assets was 10.09%.

At March 31, 2024, the Company met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the reg ulatory framework for prompt corrective action.

At March 31, 2024, the Company’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 9.47% , total capital to risk-weighted assets was 9.47% , Tier 1 capital to risk-weighted assets was 12.96% and Tier 1 capital to average assets was 8.28% .

At June 30, 2024, the Bank met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the reg ulatory framework for prompt corrective action.

At June 30, 2024, the Bank’s ratio of Common Equity Tier 1 capital to risk-weighted asset s was 11.67%, total capital to risk-weighted assets was 11.67%, Tier 1 capital to risk-weighted assets was 12.92% and Tier 1 capital to average assets was 10.17%.

At June 30, 2024, the Company met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under th e regulatory framework for prompt corrective action.

At June 30, 2024, the Company’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 9.56%, total capital to risk-weighted assets was 9.56%, Tier 1 capital to risk-weighted assets was 13.30% and Tier 1 capital to average assets was 8.34%.

Under the current guidelines, banking organizations must have a minimum total risk-based capital ratio of 8.0%, a minimum Tier 1 risk-based capital ratio of 6.0%, a minimum common equity Tier 1 risk-based capital ratio of 4.5%, and a minimum leverage ratio of 4.0% in order to be "adequately capitalized." In addition to these requirements, banking organizations must maintain a capital conservation buffer consisting of common Tier 1 equity in an amount above the minimum risk-based capital requirements for “adequately capitalized” institutions equal to 2.5% of total risk-weighted assets, resulting in a requirement for the Company and the Bank to effectively maintain common equity Tier 1, Tier 1 and total capital ratios of 7.0%, 8.5% and 10.5%, respectively.

19 unchanged sentences

For the Parallel Ramp Scenarios, rate changes are ramped over a twelve-month horizon based upon a parallel yield curve shift and then maintained at those levels over the remainder of the simulation horizon.

Parallel Shock Scenarios assume instantaneous parallel movements in the yield curve

compared to a flat yield curve scenario.

Parallel Shock Scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario.

Simulation analysis involves projecting a future balance sheet structure and interest income and expense under the various rate scenarios.

2 unchanged sentences

12% for a 200 basis point shift;

and 18% for a 300 basis point shift.

and 18% for a 300 basis point

Per Company policy, the Bank should not be outside these limits for twelve consecutive months unless the Bank's forecasted capital ratios are considered to be "well capitalized".

As of March 31, 2024, the Bank has met all minimum regulatory capital requirements to be considered "well capitalized".

The following tables set forth the estimated percentage change in our net interest income at risk over one-year simulation periods beginning March 31, 2024 and December 31, 2023:

As of June 30, 2024, the Bank has met all minimum regulatory capital requirements to be considered "well capitalized".

The following tables set forth the estimated percentage change in our net interest income at risk over one-year simulation periods beginning June 30, 2024 and December 31, 2023:

Parallel Ramp Estimated Percent Change in Net Interest Income

Rate Changes (basis points) March 31, 2024 December 31, 2023

Rate Changes (basis points) June 30, 2024 December 31, 2023

-100 1.70 % 1.70 %

1 unchanged sentence

Parallel Shock Estimated Percent Change in Net Interest Income

Rate Changes (basis points) March 31, 2024 December 31, 2023

Rate Changes (basis points) June 30, 2024 December 31, 2023

-100 1.90 % 3.60 %

2 unchanged sentences

+300 (4.80) (8.10)

The net interest income at risk simulation results indicate that, as of March 31, 2024, we remain liability sensitive.

The net interest income at risk simulation results indicate that, as of June 30, 2024, we remain liability sensitive.

The liability sensitivity is due to the fact that there are more liabilities than assets subject to repricing as market rates change.

10 unchanged sentences

Estimated Percent Change in Economic Value of Equity ("EVE")

Rate Changes (basis points) March 31, 2024 December 31, 2023

Rate Changes (basis points) June 30, 2024 December 31, 2023

-100 1.80 % 2.70 %

2 unchanged sentences

+300 (10.20) (12.60)

While ALCO reviews and updates simulation assumptions and also periodically back-tests the simulation results to ensure that the assumptions are reasonable and current, income simulation may not always prove to be an accurate indicator of interest rate

risk or future net interest margin.

Over time, the repricing, maturity and prepayment characteristics of financial instruments and the composition of our balance sheet may change to a different degree than estimated.

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis