What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-02-23 compared with 2023-02-24 · 49 added, 80 removed, 188 unchanged (41% of the section changed)

4 unchanged sentences

Risks Applicable to Our Business:

The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business,  

results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are  

difficult to predict.

Global health concerns relating to the COVID-19 outbreak and its variants and related government actions taken to reduce the spread of the virus have weighed on the macroeconomic environment in our New Jersey/New York metropolitan market trade area, and the outbreak has significantly increased economic uncertainty and reduced economic activity.

The outbreak has resulted in authorities implementing numerous measures to try to mitigate the virus, and such measures, even as certain of them have been eased, have impacted consumer and business spending.

In addition, the pandemic has changed consumer and employee behavior, such as through the rise in working from home, in ways that may negatively impact the overall economy of our Metropolitan New York economy and the businesses of our customers.

The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the virus, including the passage of the CARES Act and the Economic Aid Act, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion.

The outbreak has adversely impacted and is likely to further adversely impact our workforce and operations and the operations of our borrowers, clients and business partners.

In particular, we may experience financial losses due to a number of operational factors impacting us or our borrowers, clients or business partners, including but not limited:

to credit losses resulting from financial stress being experienced by our borrowers as a result of the outbreak and related governmental actions, particularly in the hospitality, energy and retail industries, but across other industries as well.

As of December 31, 2022, the bank had no loans on deferrals;

declines in collateral values;

third party disruptions, including outages at network providers and other suppliers;

increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online and remote activity;

operational failures due to changes in our normal business practices necessitated by the outbreak and related governmental actions.

These factors may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided.

The extent to which the coronavirus outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak, its severity, new variants of the virus and their impact, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions resume.

Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change.

We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole.

However, the effects could have a material impact on our results of operations and heighten many of our known risks described in this “Risk Factors”

The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.

Global health concerns relating to the COVID-19 outbreak and its variants and related government actions taken to reduce the spread of the virus and changes in customer, employer and employee behavior have weighed on and may continue to effect the macroeconomic environment in our New Jersey/New York metropolitan market trade area and have caused economic uncertainty and reduced economic activity.

Given the ongoing and dynamic nature of the pandemic, it is difficult to predict the full impact of the COVID-19 pandemic on our business and that of our clients, employees and third-party service providers.

The extent of such an impact will depend on future developments, which are highly uncertain.

Our growth-oriented business strategy could be adversely affected if we are not able to attract and retain skilled employees or if we lose the services of our senior management team.

13 unchanged sentences

Any significant failure to pay on time by our clients or a significant default by our clients would materially and adversely affect us.

As of December 31, 2022, we had $6.2 billion of commercial real estate loans (nonowner-occupied, owner-occupied and multifamily), including construction loans, which represented 76.3% of loans receivable.

As of December 31, 2023, we had $6.5 billion of commercial real estate loans (nonowner-occupied, owner-occupied multifamily and land), including construction loans, which represented 78.1% of loans receivable.

Concentrations in commercial real estate are monitored by regulatory agencies and subject to scrutiny.

Guidance from these regulatory agencies includes all commercial real estate loans, including commercial construction loans, in calculating our commercial real estate concentration, but excludes owner-occupied commercial real estate loans.

Based on this regulatory definition, our commercial real estate loans represented 483% of the Bank’s Tier 1 capital plus the allowance for credit losses on loans.

Based on this regulatory definition, our commercial real estate loans represented 463% of the Bank’s Tier 1 capital plus the allowance for credit losses on loans.

Loans secured by owner-occupied real estate are reliant on the operating businesses to provide cash flow to meet debt service obligations, and as a result may be more susceptible to the general impact on the economic environment affecting those operating companies as well as the real estate.

2 unchanged sentences

dollar, potential international trade tariffs, inflation and changes in federal tax laws affecting the deductibility of state and local taxes and mortgage interest could negatively impact our local economy and real estate market.

Accordingly, it may be more difficult for commercial real estate borrowers to repay their loans in a timely manner, as commercial real estate borrowers’

ability to repay their loans frequently depends on the successful development of their properties.

Accordingly, it may be more difficult for commercial real estate borrowers to repay their loans in a timely manner, as commercial real estate borrowers’ ability to repay their loans frequently depends on the successful development and leasing of their properties.

The deterioration of one or a few of our commercial real estate loans could cause a material increase in our level of nonperforming loans, which would result in a loss of revenue from these loans and could result in an increase in the provision for credit losses and/or an increase in charge-offs, all of which could have a material adverse impact on our net income.

We also may incur losses on commercial real estate loans due to declines in occupancy rates and rental rates, which may decrease property values and may decrease the likelihood that a borrower may find permanent financing alternatives.

Any weakening of the commercial real estate market may increase the likelihood of default of these loans, which could negatively impact our loan portfolio’s performance and asset quality.

Any weakening of the commercial real estate market may increase the likelihood of default on these loans, which could negatively impact our loan portfolio’s performance and asset quality.

If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, we could incur material losses.

4 unchanged sentences

If there is any deterioration in our commercial real estate portfolio or if our regulators conclude that we have not implemented appropriate risk management practices, it could adversely affect our business, and could result in the requirement to maintain increased capital levels.

Such capital may not be available at that time and may result in our regulators requiring us to reduce our concentration in commercial real estate loans.

Such capital may not be available at that time and may result in our regulators requiring us to reduce our concentration on commercial real estate loans.

If we are limited in our ability to originate loans secured by commercial real estate, we may face greater risk in our loan portfolio.

1 unchanged sentence

For example, we are and may continue to seek to further increase our growth rate in commercial and industrial loans, including both secured and unsecured commercial and industrial loans.

Unsecured loans generally involve a higher degree of risk of loss than do secured loans because, without collateral, repayment is wholly dependent upon the success of the borrowers’

businesses and personal guarantees.

Unsecured loans generally involve a higher degree of risk of loss than do secured loans because, without collateral, repayment is wholly dependent upon the success of the borrowers’ businesses and personal guarantees.

Secured commercial and industrial loans are generally collateralized by accounts receivable, inventory, equipment or other assets owned by the borrower and typically include a personal guaranty of the business owner.

2 unchanged sentences

The nature and growth rate of our commercial loan portfolio may expose us to increased lending risks.

Given the significant growth in our loan portfolio, many of our commercial real estate loans are unseasoned, meaning that they were originated relatively recently.

As of December 31, 2022, we had $5.8 billion in commercial real estate loans outstanding.

Approximately 67.4% of the loans, or $3.9 billion, had been originated in the past three years.

Given the significant growth in our loan portfolio, many of our commercial real estate loans are unseasoned, meaning that they originated relatively recently.

As of December 31, 2023, we had $5.9 billion in commercial real estate loans outstanding.

Approximately 64.5% of the loans, or $3.8 billion, were originated in the past three years.

As a result, it may be difficult to predict the future performance of our loan portfolio.

These loans may have delinquency or charge-off levels above our expectations, which could negatively affect our performance.

The small-to medium-sized businesses that the Bank lends to may have fewer resources to weather a downturn in the economy, which may impair a borrower ’

s ability to repay a loan to the Bank that could materially harm our operating results.

The small-to medium-sized businesses that the Bank lends to may have fewer resources to weather a downturn in the economy, which may impair a borrower ’ s ability to repay a loan to the Bank that could materially harm our operating results.

The Bank targets its business development and marketing strategy primarily to serve the banking and financial services needs of small-to medium-sized businesses.

These small-to medium-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience significant volatility in operating results.

Any one or more of these factors may impair the borrower’s ability to repay a loan.

In addition, the success of a small-to medium-sized business often depends on the management talents and efforts of one or two persons or a small group of persons, and the death, disability or resignation of one or more of these persons could have a material adverse impact on the business and its ability to repay a loan.

10 unchanged sentences

We face substantial competition in originating loans.

This competition currently comes principally from other banks, savings institutions, mortgage banking companies, credit unions and other lenders, including online “fintech”

This competition currently comes principally from other banks, savings institutions, mortgage banking companies, credit unions and other lenders, including online “fintech” companies.

Many of our competitors enjoy advantages, including greater financial resources and higher lending limits, a wider geographic presence, more accessible branch office locations, the ability to offer a wider array of services or more favorable pricing alternatives, as well as lower origination and operating costs.

4 unchanged sentences

We have also been active in competing for New York and New Jersey governmental and municipal deposits.

As of December 31, 2022, governmental and municipal deposits accounted for approximately $797.6 million in deposits.

As of December 31, 2023, governmental and municipal deposits accounted for approximately $745.0 million in deposits.

The governor of New Jersey has proposed that the state form and own a bank in which governmental and municipal entities would deposit their excess funds, with the state-owned bank then financing small businesses and municipal projects in New Jersey.

17 unchanged sentences

Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general.

Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to market factors or an adverse regulatory action against us.

In addition, our ability to use alternate deposit origination channels could be substantially impaired if we fail to remain “well capitalized”.

Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to market factors or an adverse regulatory action against us, as well as events affecting other market participants, such as failures of other insured depository institutions.

In addition, our ability to use alternate deposit origination channels could be substantially impaired if we fail to remain “well capitalized”.

Our ability to borrow could also be impaired by factors that are not specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole.

2 unchanged sentences

Declines in the value of our investment securities portfolio may adversely impact our results.

As of December 31, 2022, we had approximately $634.9 million in investment securities, available-for-sale.

We may be required to record impairment charges on our investment securities if they suffer a decline in value below their amortized cost basis that is considered credit related.

As of December 31, 2023, we had approximately $617.2 million in fair value of investment securities, all of which are classified as available-for-sale.

We may be required to record an allowance for credit on our investment securities if they suffer a decline in value below their amortized cost basis that is considered credit related.

Numerous factors, including lack of liquidity for re-sales of certain investment securities, absence of reliable pricing information on investment securities, adverse changes in business climate, adverse actions by regulators, or unanticipated changes in the competitive environment could have a negative effect on our investment portfolio in future periods.

If an impairment charge is significant enough, it could affect the ability of the Bank to upstream dividends to the Company, which could have a material adverse effect on our liquidity and our ability to pay dividends to shareholders and could also negatively impact our regulatory capital ratios.

The Bank ’

s ability to pay dividends is subject to regulatory limitations, which, to the extent that the Company requires such dividends in the future, may affect the Company ’

s ability to honor its obligations and pay dividends.

The Bank ’ s ability to pay dividends is subject to regulatory limitations, which, to the extent that the Company requires such dividends in the future, may affect the Company ’ s ability to honor its obligations and pay dividends.

As a bank holding company, the Company is a separate legal entity from the Bank and its subsidiaries and does not have significant operations.

We currently depend on the Bank’s cash and liquidity to pay our operating expenses and to fund dividends to shareholders.

We cannot assure you that in the future the Bank will have the capacity to pay the necessary dividends and that we will not require dividends from the Bank to satisfy our obligations.

Various statutes and regulations limit the availability of dividends from the Bank.

It is possible, depending upon our and the Bank’s financial condition and other factors, that bank regulators could assert that payment of dividends or other payments by the Bank are an unsafe or unsound practice.

In the event that the Bank is unable to pay dividends, we may not be able to service our obligations, as they become due, or pay dividends on our capital stock.

Consequently, the inability to receive dividends from the Bank could adversely affect our financial condition, results of operations, cash flows and prospects.

In addition, as described under “Capital Adequacy Guidelines,”

banks and bank holding companies are required to maintain a capital conservation buffer on top of minimum risk-weighted asset ratios.

In addition, as described under “Capital Adequacy Guidelines,” banks and bank holding companies are required to maintain a capital conservation buffer on top of minimum risk-weighted asset ratios.

The capital conservation buffer is 2.5%.

23 unchanged sentences

Success will also depend on the ability of officers and key employees to continue to implement and improve operational and other systems, to manage multiple, concurrent client relationships and to hire, train and manage employees.

Finally, substantial growth may stress regulatory capital levels, and may require us to raise additional capital. No assurance can be given that we will be able to raise any required capital, or that it will be able to raise capital on terms that are beneficial to stockholders.

Finally, substantial growth may stress regulatory capital levels, and may require us to raise additional capital.

No assurance can be given that we will be able to raise any required capital, or that we will be able to raise capital on terms that are beneficial to stockholders.

Attractive acquisition opportunities may not be available to us in the future.

4 unchanged sentences

Among other things, our regulators will consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill when considering acquisition and expansion proposals.

Any acquisition could be dilutive to our earnings and shareholders’

equity per share of our common stock.

Any acquisition could be dilutive to our earnings and shareholders’ equity per share of our common stock.

Hurricanes or other adverse weather or health related events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations.

2 unchanged sentences

Finally, health related events, such as a viral pandemic, could adversely affect the business of our clients and our local economies, thereby adversely affecting our results of operations.

The Company will be subject to heightened regulatory requirements when total assets exceed $10 billion.

The Company’s total assets were $9.6 billion as of December 31, 2022.

The Company will be subject to heightened regulatory requirements when total assets exceed $10 billion.

The Company’s total assets were $9.856 billion as of December 31, 2023.

Banks with assets in excess of $10 billion are subject to requirements imposed by the Dodd-Frank Act and its implementing regulations, including:

4 unchanged sentences

Upon reaching this threshold, the Company faces the risk of failing to meet these requirements, which may negatively impact results of operations and financial condition.

Reforms to and uncertainty regarding LIBOR may adversely affect the business.

In 2017, a committee of private-market derivative participants and their regulators convened by the Federal Reserve, the Alternative Reference Rates Committee, or “ARRC”, was created to identify an alternative reference interest rate to replace LIBOR.

The ARRC announced Secured Overnight Financing Rate, or “SOFR”, a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, as its preferred alternative to LIBOR.

bank regulatory agencies have directed U.S.

insured depository institutions to cease using LIBOR in new loan or other financial agreements effective December 31, 2021.

Certain LIBOR maturity rates will no longer be published after December 31, 2021, with publication of the remaining maturity rates ending in 2023.The Federal Reserve Bank commenced publication of SOFR rates on April 2, 2018.

The uncertainty as to the nature and effect of such reforms and actions may adversely affect the value of and return on the Company’s financial assets and liabilities that are based on or are linked to LIBOR, the Company’s results of operations or financial condition. 

Risks Applicable to the Banking Industry Generally:

Recent events impacting the financial services industry.

Recent events impacting the financial services industry, including the failures of Silicon Valley Bank, Signature Bank and First Republic Bank, have resulted in increased volatility and reduced valuations of equity and other securities of banks in the capital markets.

In addition, the Federal Reserve, in order to combat inflation, has employed quantitative tightening in order to reduce the size of its balance sheet, resulting in increased competition and costs for bank deposits and an increased risk of an economic recession.

These recent events have, and could continue to, increase competition for deposits and adversely impact the market price and volatility of the Company’s common stock.

These recent events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business.

We may be impacted by concerns regarding the soundness or creditworthiness of other financial institutions, which can cause substantial disruption within the financial markets and increased expenses.

The cost of resolving the recent bank failures has caused the FDIC to issue additional special assessments and could cause the FDIC to increase premiums or issue additional special assessments in the future.

Our allowance for credit losses may not be adequate to cover actual losses.

1 unchanged sentence

The process for determining the amount of the allowance is critical to our financial results and condition.

It requires difficult, subjective and complex judgments about the future, as well as the impact of national and regional economic conditions on the ability of our borrowers to repay their loans.

It requires difficult, subjective and complex judgments about the future, as well as the impact of national and regional economic conditions on the ability of our borrowers to repay their loans.

If our judgment proves to be incorrect, our allowance may not be sufficient to cover losses in our loan portfolio.

1 unchanged sentence

Further increases to the allowance could adversely affect our earnings.

Changes in interest rates, including increases to address inflation, as well as other actions the Federal Reserve may take to address inflation, may adversely affect our earnings and financial condition.

Changes in interest rates, as well as other actions the Federal Reserve may take may adversely affect our earnings and financial condition.

Our net income depends primarily upon our net interest income.

1 unchanged sentence

The level of net interest income is primarily a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of such liabilities.

These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve Board of Governors (the “FOMC”), and market interest rates.

A sustained increase in market interest rates, such as has been in effect during the second half of 2022, could adversely affect our earnings if our cost of funds increases more rapidly than our yield on our earning assets and compresses our net interest margin.

In addition, the economic value of portfolio equity would decline if interest rates increases.

A sustained increase in market interest rates, such as has been in effect since the first half of 2023, could adversely affect our earnings if our cost of funds increases more rapidly than our yield on our earning assets and compresses our net interest margin.

In addition, the economic value of portfolio equity would decline as interest rates increase.

Different types of assets and liabilities may react differently, and at different times, to changes in market interest rates.

7 unchanged sentences

A rapid increase or decrease in interest rates could adversely affect our results of operations and financial performance.

In addition to increases in interest rates, the FOMC has also changed its stance on monetary policy as an additional effort to reduce inflation.

Beginning in the second half of 2022, the FOMC began reducing its balance sheet, implementing a program of quantitative tightening to reduce the overall money supply.

In addition to increases in interest rates, the FOMC has also changed its stance on monetary policy as an additional effort to reduce inflation.

Beginning in the second half of 2022, the FOMC began reducing its balance sheet, implementing a program of quantitative tightening to reduce the overall money supply.

As a result, we may face greater competition for deposits, resulting in a higher cost of funds and a reduced net interest margin, as well as greater liquidity risk to continue to fund our loan originations.

We are unable to predict the duration and ultimate impact of the FOMC’s quantitative tightening program.

However, if the program significantly tightens the nation’s money supply, it may adversely affect our 

results of operations and financial performance.     

We are unable to predict the duration and ultimate impact of the FOMC’s quantitative tightening program.

However, if the program significantly tightens the nation’s money supply, it may adversely affect our results of operations and financial performance.

The banking business is subject to significant government regulations.

6 unchanged sentences

For example, implementation of all required regulations under the Dodd-Frank Act may result in substantial new compliance costs.

The Dodd-Frank Act was signed into law on July 21, 2010. Generally, the Dodd-Frank Act is effective the day after it was signed into law, but different effective dates apply to specific sections of the law, many of which will not become effective until various Federal regulatory agencies have promulgated rules implementing the statutory provisions. 

The Dodd-Frank Act was signed into law on July 21, 2010.

Generally, the Dodd-Frank Act is effective the day after it was signed into law, but different effective dates apply to specific sections of the law, many of which will not become effective until various Federal regulatory agencies have promulgated rules implementing the statutory provisions.

Ultimately, final implementation the Dodd-Frank Act could have a material adverse impact either on the financial services industry as a whole, or on our business, results of operations and financial condition.

In addition, in order to implement Basel III and certain additional capital changes required by the Dodd-Frank Act, on July 9, 2013, the Federal banking agencies, including the FDIC, the Federal Reserve and the Office of the Comptroller of the Currency, approved, as an interim final rule, the regulatory capital requirements for U.S.

insured depository institutions and their holding companies.

This regulation requires financial institutions to maintain higher capital levels and more equity capital.

These provisions, as well as any other aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, may impact the profitability of our business activities and may change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs.

7 unchanged sentences

Legislative and regulatory changes may increase our cost of doing business or otherwise adversely affect us and create competitive advantages for non-bank competitors.

The potential impact of changes in monetary policy and interest rates may negatively affect our operations.

Our operating results may be significantly affected (favorably or unfavorably) by market rates of interest that, in turn, are affected by prevailing economic conditions, by the fiscal and monetary policies of the United States government and by the policies of various regulatory agencies.

Our earnings will depend significantly upon our interest rate spread (i.e., the difference between the interest rate earned on our loans and investments and the interest raid paid on our deposits and borrowings).

Like many financial institutions, we may be subject to the risk of fluctuations in interest rates, which, if significant, may have a material adverse effect on our operations.

We cannot predict how changes in technology will impact our business;

4 unchanged sentences

Internet-based banking, including personal computers, mobile phones and tablets;

Debit cards and so-called “smart cards”;

Remote deposit capture;

8 unchanged sentences

We cannot assure you that we will have sufficient resources or access to the necessary proprietary technology to remain competitive in the future, or that we will be able to maintain a secure electronic environment.

Unresolved Staff Comments

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 1A. Risk Factors