What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-01 compared with 2020-03-02 · 150 added, 151 removed, 572 unchanged (34% of the section changed)

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Historically, repurchases have been made from time to time as, in the opinion of management, market conditions warranted, in the open market or in privately negotiated transactions.

No repurchases were made of the Company’s common stock during 2018.

In March 2019, the Board of Directors of the Company approved a share repurchase program for up to 1,200,000 shares.

The Company may repurchase shares from time to time in the open market, in privately negotiated share purchases or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission and applicable federal securities laws.

The share repurchase plan does not obligate the Company to acquire any particular amount of common stock, and it may be modified or suspended at any time at the Company’s discretion.

During the year ended December 31, 2019, the Company repurchased a total of 540,018 shares, leaving 659,982 shares remaining for repurchase under the program.

The share repurchase plan does not obligate the Company to acquire any particular amount of common stock, and it may be modified or suspended at any time at the Company's discretion.

During the year ended December 31, 2020, the Company repurchased a total of 54,693 shares.

As of December 31, 2020, shares remaining for repurchase under the program were 605,289.

The following table details share repurchases for the year 2020:

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First quarter 2020

Second quarter 2019

Third quarter 2019

Fourth quarter 2019:

November 2019

December 2019

Total Fourth quarter 2019

During the first quarter of 2020, the Company suspended its share repurchase program due to the potential risks of COVID-19.

On January 26, 2021, the Board of Directors lifted such suspension.

Federal laws and regulations contain restrictions on the ability of the Parent Corporation and the Bank to pay dividends.

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available-for-sale

Securities –

held-to-maturity

Goodwill and other intangible assets

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Provision for loan losses

Net interest income after provision for loan losses

Noninterest income

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Nonperforming assets (2) to total assets

Allowance for loan losses to nonaccrual loans (excluding loans held- for-sale

Allowance for loan losses to nonaccrual loans (excluding tax medallion loans)

Net loan charge-offs to average loans (3)

Capital Ratios

Company Capital Ratios

Leverage ratio

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The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

Note 1 to our audited consolidated financial statements contains a summary of our significant accounting policies.

Management believes our policy with respect to the methodology for the determination of the allowance for loan losses involves a higher degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters.

Changes in these judgments, assumptions or estimates could materially impact results of operations.

This critical policy and its application are periodically reviewed with the Audit Committee and our Board of Directors.

Accounting policies considered critical to our financial results include the allowance for loan losses and related provision, income taxes, goodwill and business combinations.

For information on our significant accounting policies, see Note 1a in the Notes to Consolidated Financial Statements.

Allowance for Loan Losses and Related Provision

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To the extent actual outcomes differ from management estimates, additional provisions for loan losses may be required that could materially adversely impact earnings in future periods.

Additional information can be found in Note 1 of the Notes to Consolidated Financial Statements.

Additional information can be found in Note 1a of the Notes to Consolidated Financial Statements.

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns.

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The Company has adopted the provisions of FASB ASC 350-10-05, which requires that goodwill be reported separate from other intangible assets in the Consolidated Statements of Condition and not be amortized but tested for impairment annually or more frequently if indicators arise for impairment.

The goodwill impairment evaluation involves significant estimates and subjective assumptions, which requires Management’s judgment on factors such as discount rate, prospective financial information, earnings retention rate and peer group market data.

Changes in these estimates and assumptions could have a significant impact on the conclusions reached regarding whether impairment occurred and the amount of impairment.

No impairment charge was deemed necessary for the years ended December 31, 2020, 2019 and 2018.

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Net income is also affected by the amount of noninterest income and noninterest expenses.

The following discussion and analysis presents the more significant factors affecting the Company’s financial condition as of December 31, 2019 and 2018 and results of operations for each of the years in the three-year period ended December 31, 2019.

The following discussion and analysis present the more significant factors affecting the Company’s financial condition as of December 31, 2020 and 2019 and results of operations for each of the years in the three-year period ended December 31, 2020.

The MD&A should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and other information contained in this report.

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Operating Results Overview

Net income for the year ended December 31, 2020 was $71.3 million, a decrease of $2.1 million, or 2.9%, compared to net income of $73.4 million for 2019.

Diluted earnings per share were $1.79 for 2020, a 13.5% decrease from $2.07 for 2019.

The change in net income from 2019 to 2020 was attributable to the following:

Increased provision for loan losses of $32.9 million was primarily due to the continued economic uncertainties associated with the COVID-19 pandemic.

Increase in noninterest expenses of $28.8 million, primarily due to an increase in salaries and employee benefits of $9.9 million, merger expenses of $5.7 million, occupancy and equipment expense of $4.2 million and professional and consulting expenses of $1.9 million.

These increases are mainly attributable to the acquisition of BNJ.

Additionally, the Company saw an increase in value of acquisition price of $2.3 million related to its BoeFly acquisition.

Increased net interest income of $51.7 million primarily due to the acquisition of BNJ and an 11-basis point widening of the net interest margin.

Increase in noninterest income of $6.4 million primarily resulting from an increase in deposit, loan, and other income, increase in bank owned life insurance and net gains on sale of loans held-for-sale.

Decrease in income tax expense of $1.5 million resulting primarily from a decrease in income from taxable sources.

Net income for the year ended December 31, 2019 was $73.4 million, an increase of $13.0 million, or 21.6%, compared to net income of $60.4 million for 2018.

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The change in net income from 2018 to 2019 was attributable to the following:

Increased net interest income of $29.1 million primarily due to the acquisition of GHB.

Increased net interest income of $29.1 million primarily due to the acquisition of GHB.

Decreased provision for loan losses of $13.0 million primarily due to $17.0 million increase in specific reserves (then concurrently charged-off) within the taxi medallion loan portfolio in 2018.

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The increases are mainly attributable to the acquisition of GHB.

Increase in income tax expense of $9.8 million resulting primarily from an increase in income from taxable sources.

Net income for the year ended December 31, 2018 was $60.4 million, an increase of $17.1 million, or 39.6%, compared to net income of $43.2 million for 2017.

Diluted earnings per share were $1.86 for 2018, a 38.8% increase from $1.34 for 2017.

The change in net income from 2017 to 2018 was attributable to the following:

Increased net interest income of $12.1 million primarily due to organic growth.

Increased provision for loan losses of $15.1 million primarily due to $17.0 million increase in specific reserves (then concurrently charged-off) within the taxi medallion loan portfolio, offset by a decrease in provision on the remaining loan portfolio due to slower loan growth.

Decrease in noninterest income of $2.5 million primarily resulting from lower net gains on the sale of investment securities ($1.6 million) and lower net gains on the sale of loans held-for-sale in 2018 ($0.6 million).

Decrease in noninterest expense of approximately $8.0 million primarily due to a $15.6 million increase in valuation allowance for loans held-for-sale related to the Company’s taxi medallion loans in 2017, offset by increase in salaries and employee benefits ($4.7 million), merger expenses ($1.3 million) and other expenses ($1.5 million).

Decreased income tax expense of $14.5 million resulting primarily from a decrease in the federal statutory rate used in 2018 and a charge against the Company’s deferred tax assets of $5.6 million in 2017, both due to the impact of the Tax Cuts and Jobs Act of 2017.

Increase in income tax expense of $9.8 million resulting primarily from an increase in income from taxable sources.

Net Interest Income

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The increase in net interest income was due to an increase in average interest-earning assets, which grew by 23.6% to $6.9 billion and a widening of 11 basis-points in the net interest margin.

The widening of the net interest margin was mainly attributable to higher interest-earning assets, specifically rate and volume of loans, offset by higher cost of funds.

The widening of the net interest margin was mainly attributable to lower cost of funds, offset by higher average cash balances and lower yields on loans and securities.

Average total loans, which includes loans held-for-sale, increased by 22.8% to $6.2 billion in 2020 from $5.0 billion in 2019.

The increase in average total loans is primarily attributable to the acquisition of GHB.

The increase in average total loans is primarily attributable to the acquisition of BNJ.

Fully taxable equivalent net interest income for 2019 totaled $188.0 million, an increase of $28.8 million, or 18.1%, from 2018.

The increase in net interest income was due to an increase in average interest-earning assets, which grew by 12.8% to $4.9 billion, offset by a 17 basis-points contraction in the net interest margin.

The decrease in the net interest margin was primarily attributable to the issuance of long-term subordinated debt during the first quarter of 2018, the change in the taxable equivalent adjustment due to the Tax Act, an increase in deposit funding costs, and lower yields earned on securities.

Average total loans increased by 13.6% to $4.3 billion in 2018 from $3.8 billion in 2017.

The increase in net interest income was due to an increase in average interest-earning assets, which grew by 15.7% to $5.6 billion and a widening of 7 basis-points in the net interest margin.

The widening of the net interest margin was mainly attributable to increases in both rates and the volume of loans, offset by higher cost of funds.

Average total loans, which includes loans held-for-sale, increased by 16.6% to $5.0 billion in 2019 from $4.3 billion in 2018.

The increase in average total loans is primarily attributable to the acquisition of GHB.

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Average Balance Sheets

The following table sets forth certain information relating to our average assets and liabilities for the years ended December 31, 2019, 2018 and 2017 and reflects the average yield on assets and average cost of liabilities for the periods indicated.

The following table sets forth certain information relating to our average assets and liabilities for the years ended December 31, 2020, 2019 and 2018 and reflects the average yield on assets and average cost of liabilities for the periods indicated.

Such yields are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown.

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Investment securities (1) (2)

Loans (2) (3) (4)

Loans receivable and loans held-for-sale (2) (3) (4)

Federal funds sold and interest-earning deposits with banks

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LIABILITIES & STOCKHOLDERS’

Savings, NOW, money market, interest checking

Time deposits

Other interest-bearing deposits

Total interest-bearing deposits

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Average balances are based on amortized cost.

Interest income is presented on a tax equivalent basis using 21% federal tax rate for 2019 and 2018 and 35% for 2017.

Includes loan fee income.

Loans include nonaccrual loans and loans held-for-sale.

Average balances are net of debt issuance costs of $1,447, $1,710 and $545 as of December 31, 2019, December 31, 2018 and December 31, 2017, respectively.

Amortization expense related to debt issuance costs included in interest expense were $329, $332 and $165 as of December 31, 2019, December 31, 2018 and December 31, 2017, respectively.

Interest income is presented on a tax equivalent basis using 21% federal tax rate.

Includes loan fee income and accretion of purchase accounting adjustments.

Loans include nonaccrual loans.

Represents difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a tax equivalent basis.

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Investment securities:

Loans receivable and loans held- for-sale

Federal funds sold and interest- earnings deposits with banks

Restricted investment in bank stocks

Total interest income:

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Time deposits

Borrowings and subordinated debentures

Capital lease obligation

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levels and trends in delinquencies, impaired loans and net charge-offs and the results of independent third party loan review.

For the year ended December 31, 2019, the provision for loan losses was $8.1 million, a decrease of $13.0 million, compared to the provision for loan losses of $21.1 million for 2018, due primarily to specific reserves (and concurrent charge-offs) of $17.0 million related to the taxi medallion loans in 2018.

For the year ended December 31, 2018, the provision for loan losses was $21.1 million, an increase of $15.1 million, compared to the provision for loan losses of $6.0 million for 2017, due primarily to specific reserves (and concurrent charge-offs) of $17.0 million related to the taxi medallion loans in 2018, offset by a decrease in the provision for the remaining loan portfolio resulting from slower loan growth.

For the year ended December 31, 2020, the provision for loan losses was $41.0 million, an increase of $32.9 million, compared to the provision for loan losses of $8.1 million for 2019.

The increase was due to the continued economic uncertainties associated with the COVID-19 pandemic and increases to specific reserves within our commercial portfolio.

For the year ended December 31, 2019, the provision for loan losses was $8.1 million, a decrease of $13.0 million, compared to the provision for loan losses of $21.1 million for 2018.

The decline was due primarily to specific reserves (and concurrent charge-offs) of $17.0 million related to the taxi medallion loans in 2018.

With the adoption of CECL beginning on January 1, 2021, provision expense may become more volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance.

See Note 1b to our audited financial statements included herein.

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Noninterest Income

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The increase was primarily the result of a $3.0 million increase in deposit, loan and other income.

This increase was mainly attributable to higher overdrafts fees and income related to the operations of BoeFly.

Increase in net gains on sale of loans held-for-sale of $0.5 million was mainly attributable to increases in mortgage loan sales of $0.3 million and net gains on the sale of a pool of commercial real estate loans during the third quarter 2019 of $0.2 million.

This increase was largely attributable to loan referral fee income of $2.3 million generated by BoeFly as a result of its participation in the PPP program.

Additionally, increases in net gains on sale of loans held-for-sale of $1.6 million and increases in bank owned life insurance of $1.5 million contributed to the overall increase in noninterest income.

Noninterest income for the full-year 2019 increased by $2.6 million, or 46.8%, to $8.0 million from $5.5 million in 2018.

The increase was primarily the result of a $1.4 million increase in deposit, loan and other income.

This increase was mainly attributable to higher overdraft fees and income related to the operations of BoeFly.

Increase in net gains on sale of loans held-for-sale of $0.5 million was mainly attributable to increases in gains on mortgage loan sales of $0.3 million and net gains on the sale of a pool of commercial real estate loans during the third quarter 2019 of $0.2 million.

Other increases in noninterest income include an increase of $0.4 million in BOLI and increase of $0.6 million in net gains on equity securities, offset by net losses in sales of securities available-for-sale of $0.3 million.

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Noninterest income for the full-year 2018 decreased by $2.5 million, or 30.0%, to $5.7 million from $8.2 million in 2017.

The decrease was primarily the result of a $1.6 million decrease in net gains on sale of investment securities and a $0.6 million decrease in net gains on sale of loans held-for-sale.

Noninterest Expense

Noninterest expenses for the full-year 2020 increased by $28.8 million, or 31.2%, to $121.0 million from $92.2 million in 2019.

The increase was primarily attributable to increases in salaries and employee benefits of $9.6 million, merger expenses of $7.6 million, professional and consulting of $1.9 million, occupancy and equipment of $1.4 million and amortization of core deposit intangibles of $0.8 million.

These increases were mainly the result of the acquisition of GHB and BNJ.

The increase was primarily attributable to increases in salaries and employee benefits of $9.9 million, merger expenses of $5.7 million, occupancy and equipment of $4.2 million, increase in value of acquisition price of $2.3 million, FDIC insurance expense of $2.0 million, professional and consulting of $1.9 million and amortization of core deposit intangibles of $1.1 million.

These increases were mainly the result of the acquisition of BNJ.

Noninterest expenses for the full-year 2019 increased by $21.8 million, or 30.9%, to $92.2 million from $70.5 million in 2018.

These increases were mainly the result of the acquisitions of GHB and BNJ.

In addition, the Bank had a loss on extinguishment of debt of $1.0 million during the second quarter of 2019.

Lastly, there was a decrease in FDIC expense of $1.1 million that was attributable to the Bank receiving a small bank credit of approximately $1.3 million during the second quarter of 2019.

Noninterest expenses for the full-year 2018 decreased by $8.0 million, or 10.2%, to $70.7 million from $78.8 million in 2017.

Included in noninterest expense in 2017 was a $15.6 million valuation allowance for loans held-for-sale related to the Company’s taxi medallion loans.

Excluding the valuation allowance, noninterest expenses increased $7.6 million, or 12.0%, from 2017.

The balance of the increase was attributable to an increased level of business and staff resulting from organic growth.

Salaries and employee benefits increased by $4.7 million, professional and consulting increased by $0.7 million and other expenses increased by $1.5 million.

Additionally, $1.3 million in merger expenses were incurred in 2018 as a result of the acquisition of GHB.

Income tax expense was $19.1 million for 2020 compared to $20.6 million for 2019 and $10.8 million for 2018.

The slight decrease in income tax expense in 2020 when compared to 2019 was primarily the result of lower taxable income.

The higher level of income tax expense in 2019 when compared to 2018 was primarily attributable to higher income before taxes and the negative impact of recent tax legislation in New Jersey.

Income tax expense for 2017 included a $5.6 million charge to adjust the value of deferred tax assets to reflect the lower corporate tax rate, resulting from The Tax Cuts and Jobs Act of 2017 (“the Act”).

The lower level of income tax expense in 2018 when compared to 2017 was primarily attributable to the reduction of the federal statutory rate resulting from the Act.

The effective tax rates were 21.1% in 2020, 21.9% in 2019 and 15.2% for 2018.

Excluding the effect of the $5.6 million charge, the effective tax rate in 2017 was 28.8%.

For a more detailed description of income taxes see Note 11 of the Notes to Consolidated Financial Statements.

Financial Condition Overview

At December 31, 2019, the Company’s total assets were $6.2 billion, an increase of $712 million from December 31, 2018.

Total loans (including loans held-for-sale) were $5.1 billion, an increase of $606 million from December 31, 2018.

Deposits were $4.8 billion, an increase of $675 million from December 31, 2018.

At December 31, 2018, the Company’s total assets were $5.5 billion, an increase of $354 million from December 31, 2017.

As of December 31, 2020, the Company’s total assets were $7.5 billion, an increase of $1.4 billion from December 31, 2019.

Total loans (including loans held-for-sale) were $6.2 billion, an increase of $1.1 billion from December 31, 2019.

Deposits were $6.0 billion, an increase of $1.2 billion from December 31, 2019.

These increases were primarily the result of the acquisition of BNJ.

As of December 31, 2019, the Company’s total assets were $6.2 billion, an increase of $712 million from December 31, 2018.

Total loans (including loans held-for-sale) were $5.1 billion, an increase of $606 million from December 31, 2018.

Deposits were $4.8 billion, an increase of $675 million from December 31, 2018.

These increases were primarily the result of the acquisition of GHB.

Loan Portfolio

The Bank’s lending activities are generally oriented to small-to-medium sized businesses, high net worth individuals, professional practices and consumer and retail clients living and working in the Bank’s metropolitan, New York market area consisting of Bergen, Union, Morris, Essex, Hudson, Mercer and Monmouth counties, New Jersey, as well as NYC’s five boroughs, and Nassau Rockland, Orange and Westchester counties, in New York.

The Bank’s lending activities are generally oriented to small-to-medium sized businesses, high net worth individuals, professional practices and consumer and retail clients living and working in the Bank’s metropolitan, New York market area, consisting of Bergen, Union, Morris, Essex, Hudson, Mercer and Monmouth counties, New Jersey, as well as NYC’s five boroughs, Nassau Rockland, Orange and Westchester counties, in New York.

The Bank has not made loans to borrowers outside of the United States.

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During 2019 and 2018, loan portfolio growth was positively impacted in several ways including (i) an increase in demand for small business lines of credit and business term loans as economic conditions remained strong (ii) industry consolidation and lending restrictions involving larger competitors allowing the Bank to gain market share, (iii) an increase in refinancing strategies employed by borrowers during the current low rate environment, and (iv) the Bank’s success in attracting highly experienced commercial loan officers with substantial local market knowledge.

Gross loans at December 31, 2019 totaled $5.1 billion, an increase of $574 million, or 12.6%, over gross loans at December 31, 2018 of $4.5 billion.

The increase in gross loans was primarily attributable to the acquisition of GHB.

The largest component of the gross loan portfolio at December 31, 2019 and December 31, 2018 was commercial real estate loans.

Commercial real estate loans at December 31, 2019 totaled $3.0 billion, an increase of $264 million, or 9.5%, compared to commercial real estate loans at December 31, 2018 of $2.8 billion.

Commercial construction loans at December 31, 2019 totaled $623 million, an increase of $158 million, or 33.9%, compared to construction loans at December 31, 2018 of $465 million.

Commercial loans totaled $1.1 billion at December 31, 2019, an increase of $141 million, or 14.3%, compared to commercial loans at December 31, 2018 of $989 million.

Residential real estate loans totaled $320 million at December 31, 2019, an increase of $10 million, or 3.2%, compared to residential real estate loans at December 31, 2018 of $310 million.

Consumer loans at December 31, 2019 totaled $3.3 million, an increase of $0.1 million, or 28.3%, compared to consumer loans of $2.6 million at December 31, 2018.

The growth in our gross loans for 2019 was primarily attributable to the acquisition of GHB.

Gross loans as of December 31, 2020 totaled $6.3 billion, an increase of $1.2 billion, or 23.8%, over gross loans as of December 31, 2019 of $5.1 billion.

The increase in gross loans was primarily attributable to the acquisition of BNJ.

The largest component of the gross loan portfolio as of December 31, 2020 and December 31, 2019 was commercial real estate loans.

Commercial real estate loans as of December 31, 2020 totaled $3.8 billion, an increase of $742 million, or 24.4%, compared to commercial real estate loans as of December 31, 2019 of $3.0 billion.

Commercial loans totaled $1.5 billion as of December 31, 2020, an increase of $392 million, or 34.7%, compared to commercial loans as of December 31, 2019 of $1.1 billion.

Included in commercial loans were PPP loans of $397.5 million, contributing to the increase.

Commercial construction loans as of December 31, 2020 totaled $618 million, a decrease of $5.6 million, or 0.9%, compared to construction loans as of December 31, 2019 of $623 million.

Residential real estate loans totaled $323 million as of December 31, 2020, an increase of $3 million, or 0.8%, compared to residential real estate loans as of December 31, 2019 of $320 million.

Consumer loans as of December 31, 2020 totaled $2 million, a decrease of $1 million, or 44.3%, compared to consumer loans of $3 million as of December 31, 2019.

The growth in our gross loans for 2020 was primarily attributable to the acquisition of BNJ.

The following table sets forth the classification of our loans by loan portfolio segment for the periods presented.

(dollars in thousands)

Commercial (1)

Commercial real estate

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Net loans receivable

Included in commercial loans as of December 31, 2020 were PPP loans of $397.5 million.

The following table sets forth the classification of our gross loans by loan portfolio segment and by fixed and adjustable rate loans as of December 31, 2020 by remaining contractual maturity.

At December 31, 2019, Maturing

As of December 31, 2020, Maturing

(dollars in thousands)

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Factors considered by management in determining impairment include payment status and the probability of collecting scheduled principal and interest payments when due.

Loans for which the terms have been modified as a concession to the borrower due to the borrower experiencing financial difficulties are considered troubled debt restructurings (“TDR”) and are classified as impaired, unless the restructuring complies with the provisions of the CARES Act and regulatory guidance related to the COVID-19 pandamic.

Loans considered to be TDRs can be categorized as nonaccrual or performing.

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and that management establish acceptable allowance evaluation processes that meet the objectives set forth in the policy statement.

Our management believes that, based on information currently available, our allowance for loan

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losses is maintained at a level which covers all known and probable incurred losses in the portfolio at each reporting date.

Our management believes that, based on information currently available, our allowance for loan losses is maintained at a level which covers all known and probable incurred losses in the portfolio at each reporting date.

However, actual losses are dependent upon future events and, as such, further additions to the level of allowances for loan losses may become necessary.

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The table below sets forth information on our classified loans and loans designated as special mention (excluding loans held-for-sale) as of the dates presented:

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During the year ended December 31, 2020, “substandard”

loans and “doubtful”

loans, which include lower credit quality loans which possess higher risk characteristics than “special mention”

loans, increased from $67.3 million, or 1.5% of loans receivable, at December 31, 2018 to $82.3 million, or 1.6% of loans receivable, at December 31, 2019.

loans, increased from $82.3 million, or 1.6% of loans receivable, as of December 31, 2019 to $119.7 million, or 1.9% of loans receivable, as of December 31, 2020.

During the year ended December 31, 2020, “special mention”

loans increased to $37.0 million, or 0.7% of loans receivable from $21.5 million, or 0.5% of loans receivable, at December 31, 2018.

The increase in both substandard and special mention loans is primarily attributable to the acquisition of GHB.

loans increased to $79.9 million, or 1.3% of loans receivable from $37.0 million, or 0.7% of loans receivable, as of December 31, 2019.

The increase in both substandard and special mention loans is primarily attributable to an increased level in deferrals resulting from the continued economic uncertainty regarding the ongoing pandemic.

Deferred loans as of December 31, 2020 were $207.1 million, of which $166.8 million were not included in the table above.

Nonperforming Loans, Performing Troubled Debt Restructurings, Past Due Loans and OREO

Nonperforming loans include nonaccrual loans and accruing loans which are contractually past due 90 days or greater.

Nonperforming loans include nonaccrual loans.

Nonaccrual loans represent loans on which interest accruals have been suspended.

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The following table sets forth, as of the dates indicated, the amount of the Company’s nonaccrual loans, other real estate owned (“OREO”), performing troubled debt restructurings (“TDRs”) and loans past due 90 days or greater and still accruing:

At December 31,

As of December 31,

(dollars in thousands)

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creditworthiness, and the impact of examinations by regulatory agencies all could cause changes to our allowance for loan losses.

At December 31, 2019, the allowance for loan losses was $38.3 million, an increase of $3.3 million, or 9.6%, from $35.0 million as of December 31, 2018.

The increase in the allowance for loan losses was primarily attributable to increases in our general reserves due to loan growth, as well as increase in specific reserves.

With the adoption of CECL beginning on January 1, 2020, provision expense may become more volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance.

As of December 31, 2020, the allowance for loan losses was $79.2 million, an increase of $40.9 million, or 106.9%, from $38.3 million as of December 31, 2019.

The increase in the allowance for loan losses was primarily attributable to an increase in general provisioning related to economic uncertainties associated with the COVID-19 pandemic.

With our adoption of CECL beginning on January 1, 2021, provision expense may become more volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance.

During the year ended December 31, 2020, the Bank recorded net charge-offs of $0.1 million, compared with net charge-offs of $4.8 million during the year ended December 31, 2019.

The allowance for loan losses as a percentage of loans receivable was 0.75% at December 31, 2019 and 0.77% at December 31, 2018.

During 2018, the Bank charged-off $17.0 million related to the taxi medallion loan portfolio, which contributed to the large increase in net charge-off activity when compared to the current year.

In addition, the Bank also recorded a partial charge-off of $0.9 million in 2018 for one commercial real estate loan that was reported as nonaccrual as of December 31, 2018.

The Company adopted ASU No.

The allowance for loan losses as a percentage of loans receivable was 1.27% as of December 31, 2020 and 0.75% as of December 31, 2019.

Excluding PPP loans receivable, which are 100% federally guaranteed, the allowance for loan losses as a percentage of loans receivable was 1.36% as of December 31, 2020.

During 2019, the bank had a $2.1 million charge-off related to one commercial real estate secured credit.

In 2020, a $0.8 million recovery was received for this credit.

The Company is adopting ASU No.

2016-13, Financial Instruments –

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The Company’s CECL implementation efforts are continuing to focus on completion of model validation, developing new disclosures, establishing formal policies and procedures and other governance and control documentation.

Based on the Company’s portfolio balances, and forecasted economic conditions as of December 31, 2019, management believes the adoption of the CECL standard could result in an increase to its total current reserves to a range of $50 million to $60 million, as compared to the Company’s current reserve levels of $38.3 million.

The estimated increase to the Company's reserve level includes nonaccretable credit marks on PCI loans of approximately $8.4 million, which will be transferred into current reserves at adoption.

This preliminary estimate is contingent upon continued validation of our model, testing and refinement of the model methodologies and judgments utilized to determine the estimate.

Additionally, the preliminary estimate does not incorporate the impact of the merger with BNJ which closed during the first quarter of 2020.

Based on the Company’s portfolio balances, and forecasted economic conditions as of December 31, 2020, management believes the adoption of the CECL standard will result in an increase to its total current reserves.

An increase to the Company's reserve levels will include nonaccretable credit marks on PCI loans, which will be transferred into current reserves at adoption.

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Five-Year Statistical Allowance for Loan Losses

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Ratio of net charge-offs (recoveries) during the year to average loans outstanding during the year

Allowance for loan losses as a percentage of loans receivable at December 31,

(1) For the years ended December 31, 2019, December 31, 2018 and December 31, 2016, the loan charge-offs within the commercial loan segment were primarily made up of $1.0 million, $17.0 million and $36.7 million in charge-offs related to the taxi medallion portfolio, respectively.

Allowance for loan losses as a percentage of loans receivable as of December 31,

(1) For the years ended December 31, 2019, December 31, 2018 and December 31, 2016, the loan charge-offs within the commercial loan segment included $1.0 million, $17.0 million and $36.7 million in charge-offs related to the taxi medallion portfolio, respectively.

For additional information regarding loans, see Note 5 of the Notes to the Consolidated Financial Statements.

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Implicit in the lending function is the fact that loan losses will be experienced and that the risk of loss will vary with the type of loan being made, the creditworthiness of the borrower and prevailing economic conditions.

The allowance for loan losses has been allocated in the table below according to the estimated amount deemed to be reasonably necessary to provide for the possibility of losses being incurred within the following categories of loans at December 31, for each of the past five years.

The table below shows, for three types of loans, the amounts of the allowance allocable to such loans and the percentage of such loans to gross loans, along with the amount of the unallocated allowance.

Commercial loan type shown below includes commercial, commercial real estate and construction loans.

Residential Real Estate

(dollars in thousands)

For the year ended December 31, 2019, the average volume of investment securities, including equity securities, increased by $45.7 million to approximately $478.5 million or 8.5% of average earning assets, from $432.8 million, or 8.9% of average earning assets, for the year ended December 31, 2019.

At December 31, 2019, the principal components of the investment portfolio are U.S.

For the year ended December 31, 2020, the average volume of investment securities, including equity securities, decreased by $34.4 million to approximately $444.1 million or 6.4% of average earning assets, from $478.5 million, or 8.5% of average earning assets, for the year ended December 31, 2019.

As of December 31, 2020, the principal components of the investment portfolio are U.S.

Treasury and Government Agency Obligations, Federal Agency Obligations including mortgage-backed securities, Obligations of U.S.

States and Political Subdivision, Corporate Bonds and other debt and equity securities.

During the year ended December 31, 2019, rate related factors decreased investment revenue by $0.1 million, while volume related factors increased investment revenue by $1.3 million.

States and Political Subdivisions, Corporate Bonds and other debt and equity securities.

During the year ended December 31, 2020, rate related factors decreased investment revenue by $3.1 million, while volume related factors decreased investment revenue by $0.8 million.

The tax-equivalent yield on investments decreased by 65 basis points to 2.25% from a yield of 2.90% during the year ended December 31, 2019.

This was primarily due to over declines in prevailing market rates and investment rates over the course of 2019.

This was primarily due to overall declines in prevailing investment rates over the course of 2020.

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Securities available-for-sale are a part of the Company’s interest rate risk management strategy and may be sold in response to changes in interest rates, changes in prepayment risk, liquidity management and other factors.

The Company continues to reposition the investment portfolio as part of an overall corporate-wide strategy to produce reasonable and consistent margins where feasible, while attempting to limit risks inherent in the Company’s Consolidated Statement of Condition.

At December 31, 2019, net unrealized gains on securities available-for-sale, which are carried as a component of accumulated other comprehensive income and included in stockholders’

equity, net of tax, amounted to $2.7 million as compared with net unrealized losses of $5.8 million at December 31, 2018.

The increase in unrealized losses is predominately attributable to changes in market conditions and interest rates.

As of December 31, 2020, net unrealized gains on securities available-for-sale, which are carried as a component of accumulated other comprehensive income and included in stockholders’

equity, net of tax, amounted to $7.9 million as compared with net unrealized gains of $2.7 million as of December 31, 2019.

The increase in unrealized gains is predominately attributable to changes in market conditions and interest rates.

For additional information regarding the Company’s investment portfolio, see Note 4, Note 16 and Note 21 of the Notes to the Consolidated Financial Statements.

During 2019, there were sales totaling $183.7 million from the Company’s available-for-sale portfolio, as compared with no sales in 2018 and $29.5 million in sales in 2017.

The gross realized gains or (losses) on securities sold, called or matured amounted to approximately $(0.3) million in 2019 and $1.6 million in 2017, while there were no impairment charges in 2019, 2018 and 2017.

During 2020, there were sales totaling $19.6 million from the Company’s available-for-sale portfolio, as compared with $183.7 million in sales in 2019 and no sales in 2018.

The gross realized gains or (losses) on securities sold, called or matured mounted to approximately $29 thousand in 2020, $(280) thousand in 2019 and $-0- in 2018, while there were no impairment charges in 2020, 2019 and 2018.

The table below illustrates the maturity distribution and weighted average yield on a tax-equivalent basis for amortized cost of our investment securities, excluding equity securities, as of December 31, 2020, on a contractual maturity basis.

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Obligations of U.S.

States and Political Subdivisions

Corporate Bonds and Notes

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Total Investment Securities

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For information regarding the carrying value of the investment portfolio, see Note 4, Note 16 and Note 21 of the Notes to the Consolidated Financial Statements.

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There were no municipal securities, or corporate securities, of any single issuer exceeding 10% of stockholders’

equity at December 31, 2019.

equity as of December 31, 2020.

Other securities do not have a contractual maturity and are included in the “Due in 1 year or less”

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Certificates of deposit

Equity securities (1)

Other securities

Beginning January 1, 2018, equity securities were reclassified out of investment securities available-for-sale in conjunction with ASU 2016-01.

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For other information regarding the Company’s investment securities portfolio, see Note 4, Note 16 and Note 21 of the Notes to the Consolidated Financial Statements.

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As of December 31, 2019, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous increase in the general level of interest rates would increase our net interest income by 2.86%, while a 100 basis-point instantaneous decrease in interest rates would decrease net interest income by 4.86%.

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An EVE analysis is also used to dynamically model the present value of asset and liability cash flows with instantaneous rate shocks of up 200 basis points and down 100 basis points.

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See Note 21 of the Notes to Consolidated Financial Statements for additional discussion.

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These estimates are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.

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While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flow and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

At December 31, 2019, the amount of liquid assets remained at a level management deemed adequate to ensure that, on a short and long-term basis, contractual liabilities, depositors’

As of December 31, 2020, the amount of liquid assets remained at a level management deemed adequate to ensure that, on a short and long-term basis, contractual liabilities, depositors’

withdrawal requirements, and other operational and client credit needs could be satisfied.

As of December 31, 2019, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $506 million, which represented 8.2% of total assets and 9.6% of total deposits and borrowings, compared to $441.4 million at December 31, 2018, which represented 8.1% of total assets and 9.4% of total deposits and borrowings on such date.

As of December 31, 2020, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $697.4 million, which represented 9.2% of total assets and 10.9% of total deposits and borrowings, compared to $506.0 million as of December 31, 2019, which represented 8.2% of total assets and 9.6% of total deposits and borrowings on such date.

The Bank is a member of the Federal Home Loan Bank of New York and, based on available qualified collateral as of December 31, 2020, had the ability to borrow $2.0 billion.

In addition, at December 31, 2019, the Bank had in place borrowing capacity of $25 million through correspondent banks.

The Bank also has a credit facility established with the Federal Reserve Bank of New York for direct discount

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window borrowings with capacity based on pledged collateral of $5.4 million.

At December 31, 2019, the Bank had aggregate available and unused credit of approximately $1.1 billion, which represents the aforementioned facilities totaling $2.0 billion net of $900 million in outstanding borrowings and letters of credit.

At December 31, 2019, outstanding commitments for the Bank to extend credit were $1.0 billion.

Cash and cash equivalents totaled $201.5 million on December 31, 2019, increasing by $29.1 million from $172.4 million at December 31, 2018.

In addition, as of December 31, 2020, the Bank had in place borrowing capacity of $25 million through correspondent banks.

The Bank also has a credit facility established with the Federal Reserve Bank of New York for direct discount window borrowings with capacity based on pledged collateral of $5.2 million.

As of December 31, 2020, the Bank had aggregate available and unused credit of approximately $1.1 billion, which represents the aforementioned facilities totaling $2.0 billion net of $935 million in outstanding borrowings and letters of credit.

As of December 31, 2020, outstanding commitments for the Bank to extend credit were $0.9 billion.

Cash and cash equivalents totaled $303.8 million on December 31, 2020, increasing by $102.3 million from $201.5 million as of December 31, 2019.

Operating activities provided $81.1 million in net cash.

Investing activities used $102.5 million in net cash, primarily reflecting an increase in loans and net cash flow from the securities portfolio.

Investing activities used $323.4 million in net cash, primarily reflecting an increase in loans.

Financing activities provided $344.5 million in net cash, primarily reflecting a net increase of $410.6 million in deposits, offset by net FHLB repayments of $123.9 million.

Deposits are our primary source of funds.

Average total deposits increased $775 million, or 20.1% to $4.6 billion in 2019 from $3.9 billion in 2018 and increased $392 million, or 11.3% to $3.9 billion in 2018 from 2017.

The increase in total average deposits in 2019 was primarily attributable to both the acquisition of GHB and organic growth, while the increase in 2018 was attributable to organic growth.

Average total deposits increased by $1.2 billion, or 25.3%, to $5.8 billion in 2020 from $4.6 billion in 2019 and increased $775 million, or 20.1%, to $4.6 billion in 2019 from 2018.

The increase in total average deposits in 2020 was primarily attributable to both the acquisition of BNJ and organic growth, while the increase in 2019 was attributable to the acquisition of GHB and organic growth.

The following table sets forth the year-to-date average balances and weighted average rates for various types of deposits for 2020, 2019 and 2018.

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Total Deposits

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The following table sets forth the distribution of total deposit accounts, by account types for each of the dates indicated.

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Total Deposits

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The following table summarizes the maturity distribution of time deposits in denomination of $100,000 or more:

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As of December 31, 2020, the Company had a net carrying value of $426.0 million in notes outstanding at a weighted average interest rate of 1.07%.

As of December 31, 2018, the Company had $600.0 million in notes outstanding at a weighted average interest rate of 2.59%.

As of December 31, 2019, the Company had a net carrying value of $500.3 million in notes outstanding at a weighted average interest rate of 1.96%.

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Contractual Obligations and Other Commitments

The following table summarizes contractual obligations at December 31, 2019 and the effect such obligations are expected to have on liquidity and cash flows in future periods.

The following table summarizes contractual obligations as of December 31, 2020 and the effect such obligations are expected to have on liquidity and cash flows in future periods.

December 31, 2020

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Time Deposits

Federal Home Loan Bank advances and repurchase agreements

Capital lease

Federal Home Loan Bank advances and repurchase agreements, net

Finance lease

Subordinated debentures

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Total contractual obligations and other commitments

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The maintenance of a solid capital foundation continues to be a primary goal for the Company.

Accordingly, capital plans and dividend policies are monitored on an ongoing basis.

Accordingly, capital plans, stock repurchases, and dividend policies are monitored on an ongoing basis.

The most important objective of the capital planning process is to balance effectively the retention of capital to support future growth and the goal of providing stockholders with an attractive long-term return on their investment.

The Company’s Tier 1 leverage capital (defined as tangible stockholders’

equity for common stock and Trust Preferred Capital Securities) at December 31, 2019 amounted to $563.5 million or 9.5% of average total assets.

At December 31, 2018, the Company’s Tier 1 leverage capital amounted to $478.9 million or 9.3% of average total assets.

The increase in Tier 1 capital reflects the Company’s retained earnings during 2019 and the acquisition of GHB.

equity for common stock and Trust Preferred Capital Securities) as of December 31, 2020 amounted to $694.9 million or 9.5% of average total assets.

As of December 31, 2019, the Company’s Tier 1 leverage capital amounted to $563.5 million or 9.5% of average total assets.

The increase in Tier 1 capital reflects the Company’s retained earnings during 2019 and the acquisition of BNJ.

United States bank regulators have issued guidelines establishing minimum capital standards related to the level of assets and off balance-sheet exposures adjusted for credit risk.

Specifically, these guidelines categorize assets and off balance-sheet items into four risk-weightings and require banking institutions to maintain a minimum ratio of capital to risk-weighted assets.

At December 31, 2019, the Company’s CET 1, Tier 1 and total risk-based capital ratios were 10.0%, 10.0% and 13.0%, respectively.

Specifically, these guidelines categorize assets and off balance-sheet items into risk-weightings and require banking institutions to maintain a minimum ratio of capital to risk-weighted assets.

As of December 31, 2020, the Company’s CET 1, Tier 1 and total risk-based capital ratios were 10.79%, 10.87% and 15.08%, respectively.

For information on risk-based capital and regulatory guidelines for the Parent Corporation and its bank subsidiary, see Note 15 to the Consolidated Financial Statements.

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Capital amounts and classifications are also subject to qualitative judgments by the bank regulators regarding capital components, risk weightings, and other factors.

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Subordinated Debentures

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The floating interest rate on the subordinated debentures is three-month LIBOR plus 2.85% and re-prices quarterly.

The rate at December 31, 2019 was 4.79%.

During June 2015, the Parent Corporation issued $50 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “fixed-to-floating rate Notes”) to certain institutional accredited investors.

The net proceeds from the sale of the fixed-to-floating rate Notes were used in the first quarter of 2016 to redeem $11.3 million in the Company’s outstanding.

Senior Noncumulative Perpetual Preferred Stock issued to the U.S.

Treasury under the Small Business Lending Fund Program, and for general corporate purposes, which included the Parent Corporation contributing $35 million of the net proceeds to the Bank in the form of common equity.

The fixed-to-floating rate Notes are non-callable for five years, have a stated maturity of July 1, 2025, and bear interest at a fixed rate of 5.75% per year, from and including June 30, 2015 to, but excluding July 1, 2020.

From and including July 1, 2020 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month LIBOR rate plus 393 basis points.

The rate as of December 31, 2020 was 3.06%.

During June 2020, the Parent Corporation issued $75 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “2020 Notes”).

The 2020 Notes bear interest at 5.75% annually from, and including, the date of initial issuance to, but excluding, June 15, 2025 or the date of earlier redemption, payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 2020.

From and including June 15, 2025 through maturity or earlier redemption, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR (as defined in the Second Supplemental Indenture), plus 560.5 basis points, payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2025.

Notwithstanding the foregoing, if the benchmark rate is less than zero, then the benchmark rate shall be deemed to be zero.

During January 2018, the Parent Corporation issued $75 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “Notes”) to certain accredited investors.

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From and including February 1, 2023 to, but excluding the maturity date, or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month LIBOR rate plus 284 basis points.

During June 2015, the Parent Corporation issued $50 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “2015 Notes”).

As of December 31, 2020, the 2015 Notes have a stated maturity of July 1, 2025, and bear interest until the maturity date or early redemption date at a variable rate equal to the then current three-month LIBOR rate plus 393 basis points.

As of December 31, 2020, the variable interest rate was 4.16% and all costs related to 2015 issuance have been amortized.

The 2015 Notes were redeemed in full on January 1, 2021.

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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-K

Item 5. Market for Registrant’s Common Equity