What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-08 · 225 added, 108 removed, 301 unchanged (53% of the section changed)

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These reclassifications did not have an impact on net income or total stockholders' equity.

COVID-19 Pandemic Response

Following the March 2020 passage of the Paycheck Protection Program (“PPP”), administered by the SBA, the Company participated in assisting its customers with applications for resources through the program.

Since the inception of the program, the consolidated PPP originations for the Company through December 31, 2021, including originations by both Legacy Dime and Bridge, exceeded $1.90 billion.

Following the completion of the PPP, the Company sold its 2021 PPP loan originations in order to re-deploy funds into ongoing loan portfolio growth.

The Company believes that the remainder of its SBA PPP loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

As of March 31, 2023, the Company had SBA PPP loans totaling $2.1 million, net of deferred fees.

It is the Company’s expectation that loans funded through the PPP are fully guaranteed by the U.S.

We continue to monitor unfunded commitments, including commercial and home equity lines of credit, for evidence of increased credit exposure as borrowers utilize these lines for liquidity purposes.

It is possible that there will be continued material, adverse impacts to significant estimates, asset valuations, and business operations, including intangible assets, investments, loans, deferred tax assets, and derivative counter party risk, changes in consumer behavior, and supply chain interruptions as a result of the COVID-19 pandemic.

Future government actions in response to the COVID-19 pandemic, including vaccination mandates, may also affect our workforce, human capital resources, and infrastructure.

Selected Financial Highlights and Other Data

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At or For the

Three Months Ended

Six Months Ended

Per Share Data:

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These accounting policies may require various levels of subjectivity, estimates or judgment by management.

Policies with respect to the methodologies it uses to determine the allowance for credit losses on loans held for investment and fair value of loans acquired in a business combinations are critical accounting policies because they are important to the presentation of the Company’s consolidated financial condition and results of operations.

Policies with

respect to the methodologies it uses to determine the allowance for credit losses on loans held for investment and fair value of loans acquired in a business combinations are critical accounting policies because they are important to the presentation of the Company’s consolidated financial condition and results of operations.

These critical accounting estimates involve a significant degree of complexity and require management to make difficult and subjective judgments which often necessitate assumptions or estimates about highly uncertain matters.

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If our assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover expected losses in the loan portfolio, resulting in additions to the allowance.

Future additions or reductions to the allowance may be necessary

based on changes in economic, market or other conditions.

Changes in estimates could result in a material change in the allowance through charges to earnings would materially decrease our net income.

Future additions or reductions to the allowance may be necessary based on changes in economic, market or other conditions.

Changes in estimates could result in a material change in the allowance through charges to earnings which would materially decrease our net income.

We may experience significant credit losses if borrowers experience financial difficulties, which could have a material adverse effect on our operating results.

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In addition, a twelve-month liquidity forecast is presented to ALCO in order to assess potential future liquidity concerns.

forecast of cash flow data for the upcoming 12 months is presented to the Board of Directors on an annual basis.

A forecast of cash flow data for the upcoming 12 months is presented to the Board of Directors on an annual basis.

Given recent banking industry events, management is also monitoring the level of uninsured deposits on a daily basis.

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Repurchase agreements represent funds received from customers, generally on an overnight basis, which are collateralized by investment securities.

As of March 31, 2023 and December 31, 2022, the Bank’s repurchase agreements totaling $2.1 million and $1.4 million, respectively, were included in other short-term borrowings on the consolidated balance sheets.

As of June 30, 2023 the Bank did not have any repurchase agreements.

As of December 31, 2022, the Bank’s repurchase agreements totaling $1.4 million and were included in other short-term borrowings on the consolidated balance sheets.

The Bank gathers deposits in direct competition with commercial banks, savings banks and brokerage firms, many among the largest in the nation.

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However, favorable performance of the equity or bond markets could adversely impact the Bank’s deposit flows.

Total deposits increased $315.8 million during the three months ended March 31, 2023 compared to a decrease of $28.9 million for the three months ended March 31, 2022.

Within deposits, core deposits ( i.e., non-CDs) decreased $88.1 million during the three months ended March 31, 2023 and increased $42.6 million during the three months ended March 31, 2022.

CDs increased $403.9 million during the three months ended March 31, 2023 compared to a decrease of $71.5 million during the three months ended March 31, 2022.

The decrease in core deposits and increase in CDs was due to customer migration to higher-rate CDs as a result of the increasing interest rate environment.

In the event that the Bank should require funds beyond its ability or desire to generate them internally, an additional source of funds is available through its borrowing line at the FHLBNY or borrowing capacity through AFX and lines of credit with unaffiliated correspondent banks.

At March 31, 2023, the Bank had an additional unused borrowing capacity of $1.53 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements ( i.e.

Total deposits (including escrow) increased $268.3 million during the six months ended June 30, 2023 compared to an increase of $107.0 million for the six months ended June 30, 2022.

Within deposits, core deposits ( i.e., non-CDs) decreased $147.1 million during the six months ended June 30, 2023 and increased $957 thousands during the six months ended June 30, 2022.

CDs increased $415.4 million during the six months ended June 30, 2023 compared to an increase of $106.1 million during the six months ended June 30, 2022.

The decrease in core deposits and increase in CDs was primarily due to customer migration to higher-rate CDs as a result of the increasing interest rate environment.

correspondent banks.

At June 30, 2023, the Bank had an additional unused borrowing capacity of $1.21 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements ( i.e.

, 4.5% of the Bank’s outstanding FHLBNY borrowings).

The Bank increased its outstanding FHLBNY advances by $367.0 million during the three months ended March 31, 2023, compared to a $25.0 million increase during the three months ended March 31, 2022.

The Bank increased its outstanding FHLBNY advances by $317.0 million during the six months ended June 30, 2023, compared to a $75.0 million increase during the six months ended June 30, 2022.

“FHLBNY Advances” for further information.

Subordinated debentures totaled $200.3 million at March 31, 2023 and $197.1 million at March 31, 2022.

Subordinated debentures totaled $200.2 million at June 30, 2023 and $200.3 million at December 31, 2022.

“Subordinated Debentures” to our consolidated financial statements for further information.

During the three months ended March 31, 2023 and 2022, real estate loan originations totaled $346.7 million and $454.3 million, respectively.

During the three months ended March 31, 2023 and 2022, C&I loan originations totaled $5.2 million and $26.1 million, respectively.

Sale of securities available-for-sale totaled $79.3 million during the three months ended March 31, 2023.

The Bank did not have any sale of securities available-for-sale during the three months ended March 31, 2022.

Purchases of available-

for-sale securities totaled $78.2 million and $3.0 million during the three months ended March 31, 2023 and 2022, respectively.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $16.2 million and $49.9 million for the three months ended March 31, 2023 and 2022, respectively.

The Bank did not have proceeds from sales of held-to-maturity securities during the three months ended March 31, 2023 or 2022, respectively.

Purchases of held-to-maturity securities totaled $23.7 million and $31.9 million during the three months ended March 31, 2023 and 2022, respectively.

Proceeds from pay downs and calls and maturities of held-to-maturity securities were $4.7 million and $2.7 million for the three months ended March 31, 2023 and 2022, respectively.

The Company and the Bank are subject to minimum regulatory capital requirements imposed by its primary federal regulator.

During the six months ended June 30, 2023 and 2022, real estate loan originations totaled $638.5 million and $1.34 billion million, respectively.

During the six months ended June 30, 2023 and 2022, C&I loan originations totaled $14.1 million and $49.9 million, respectively.

Sale of securities available-for-sale totaled $79.3 million during the six months ended June 30, 2023.

The Bank did not have any sale of securities available-for-sale during the six months ended June 30, 2022.

Purchases of available-for-sale securities totaled $78.7 million and $6.2 million during the six months ended June 30, 2023 and 2022, respectively.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $38.4 million and $112.2 million for the six months ended June 30, 2023 and 2022, respectively.

The Bank did not have proceeds from sales of held-to-maturity securities during the six months ended June 30, 2023 or 2022, respectively.

Purchases of held-to-maturity securities totaled $27.1 million and $41.6 million during the six months ended June 30, 2023 and 2022, respectively.

Proceeds from pay downs and calls and maturities of held-to-maturity securities were $10.7 million and $14.1 million for the six months ended June 30, 2023 and 2022, respectively.

The Company and the Bank are subject to minimum regulatory capital requirements imposed by their primary federal regulators.

As a general matter, these capital requirements are based on the amount and composition of an institution’s assets.

At March 31, 2023, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered "well capitalized"

At June 30, 2023, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered "well capitalized"

for all regulatory purposes.

The following table summarizes Company and Bank capital ratios calculated under the Basel III Capital Rules framework as of the period indicated:

Actual Ratios at March 31, 2023

Actual Ratios at June 30, 2023

To Be Categorized as

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(1) Only the Bank is subject to these requirements.

During the three months ended March 31, 2023, the Holding Company repurchased 24,813 shares of its common stock at an aggregate cost of $715 thousand.

The Holding Company repurchased 505,005 shares of its common stock at an aggregate cost of $17.4 million during the three months ended March 31, 2022.

As of March 31, 2023, 1,578,947 shares remained available for purchase under the authorized share repurchase programs.

During the six months ended June 30, 2023, the Holding Company repurchased 36,813 shares of its common stock at an aggregate cost of $947 thousand.

The Holding Company repurchased 1,222,649 shares of its common stock at an aggregate cost of $40.3 million during the six months ended June 30, 2022.

As of June 30, 2023, 1,566,947 shares remained available for purchase under the authorized share repurchase programs.

See "Part II - Item 2.

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for additional information about repurchases of common stock.

The Holding Company paid $1.8 million in cash dividends on its preferred stock during the three months ended March 31, 2023 and 2022, respectively.

The Holding Company paid $9.2 million and $9.4 million in cash dividends on its common stock during the three months ended March 31, 2023 and 2022, respectively.

The Holding Company paid $3.6 million in cash dividends on its preferred stock during the six months ended June 30, 2023 and 2022, respectively.

The Holding Company paid $18.5 million and $18.7 million in cash dividends on its common stock during the six months ended June 30, 2023 and 2022, respectively.

Contractual Obligations

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Available lines of credit may not be drawn on or may expire prior to funding, in whole or in part, and amounts are not estimates of future cash flows.

As of March 31, 2023, the

Bank had $105.3 million of firm loan commitments that were accepted by the borrowers.

As of June 30, 2023, the Bank had $122.0 million of firm loan commitments that were accepted by the borrowers.

All of these commitments are expected to close during the remainder of the year ended December 31, 2023.

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We generally initiate foreclosure proceedings on real estate loans when a loan enters non-accrual status based upon non-payment, unless the borrower is paying in accordance with an agreed upon modified payment agreement.

We obtain an updated appraisal upon the commencement of legal action to calculate a potential collateral shortfall and to reserve appropriately for the potential loss.

We obtain an updated appraisal upon the commencement of legal action to calculate a potential collateral shortfall and to reserve

appropriately for the potential loss.

If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure action is completed, the property securing the loan is transferred to Other Real Estate Owned (“OREO”) status.

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Smaller C&I loans are monitored based on performance and the ability to draw against a credit line is curtailed if there are any indications of credit deterioration.

Guarantors are also

required to update their financial reporting.

Guarantors are also required to update their financial reporting.

All exposures are risk rated and those entering adverse ratings due to financial performance concerns of the borrower or material delinquency of any payments or financial reporting are subjected to added management scrutiny.

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Non-accrual Loans

Within our held-for-investment loan portfolio, non-accrual loans totaled $31.5 million at March 31, 2023 and $34.2 million at December 31, 2022.

Within our held-for-investment loan portfolio, non-accrual loans totaled $27.7 million at June 30, 2023 and $34.2 million at December 31, 2022.

The following is a reconciliation of non-accrual loans as of the dates indicated:

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Non-accrual loans:

Business loans

One-to-four family residential, including condominium and cooperative apartment

Multifamily residential and residential mixed-use real estate

Multifamily residential and residential mixed-use

Non-owner-occupied commercial real estate

Acquisition, development, and construction

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Restructured loans on non-accrual status excluding one-to-four family and consumer loans are individually evaluated to determine expected credit losses.

For restructured loans that are collateral-dependent where we

have determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses (“ACL”) is measured based on the difference between the fair value of collateral, less the estimated costs to sell, and the amortized cost basis of the loan as of the measurement date.

For restructured loans that are collateral-dependent where we have determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses (“ACL”) is measured based on the difference between the fair value of collateral, less the estimated costs to sell, and the amortized cost basis of the loan as of the measurement date.

For non-collateral-dependent loans, the ACL is measured based on the difference between the present value of expected cash flows and the amortized cost basis of the loan as of the measurement date.

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As a result, OREO properties have generally not warranted subsequent independent appraisals.

There was no carrying value of OREO properties on our consolidated balance sheets at March 31, 2023 or December 31, 2022.

We did not recognize any provisions for losses on OREO properties during the three months ended March 31, 2023 or 2022.

There was no carrying value of OREO properties on our consolidated balance sheets at June 30, 2023 or December 31, 2022.

We did not recognize any provisions for losses on OREO properties during the six months ended June 30, 2023 or 2022.

Past Due Loans

Loans Delinquent 30 to 59 Days

At March 31, 2023, we had loans totaling $18.7 million that were past due between 30 and 59 days.

At June 30, 2023, we had loans totaling $16.4 million that were past due between 30 and 59 days.

At December 31, 2022, we had loans totaling $23.5 million that were past due between 30 and 59 days.

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Loans Delinquent 60 to 89 Days

At March 31, 2023, we had loans totaling $1.4 million that were past due between 60 and 89 days.

At June 30, 2023, we had loans totaling $8.1 million that were past due between 60 and 89 days.

At December 31, 2022, we had loans totaling $0.7 million that were past due between 60 and 89 days.

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Accruing Loans 90 Days or More Past Due

There were no accruing loans 90 days or more past due at March 31, 2023 or at December 31, 2022.

There were no accruing loans 90 days or more past due at June 30, 2023 or at December 31, 2022.

Allowance for Off-Balance Sheet Exposures

We maintain an allowance, recorded in other liabilities, associated with unfunded loan commitments accepted by the borrower.

The amount of our allowance was $2.8 million at March 31, 2023 and at December 31, 2022, respectively.

The amount of our allowance was $2.7 million at June 30, 2023 and $2.8 million at December 31, 2022, respectively.

This allowance is determined based upon the outstanding volume of loan commitments at each period end.

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Allowance for Credit Losses

We recognized a credit loss recovery of $3.6 million during the three months ended March 31, 2023, compared to a credit loss recovery of $1.6 million for the three months ended March 31, 2022.

The $3.6 million credit loss recovery for the three months ended March 31, 2023 was primarily associated with a reduction in reserves on pooled Purchased Credit

Deteriorated ("PCD”) loans that were acquired as part of the Company’s 2021 merger of equals transaction.

The $1.6 million credit loss recovery for the first quarter of 2022 was primarily associated with the improvement in forecasted macroeconomic conditions , as well as a reduction in reserves for individually evaluated loans.

For a further discussion of the allowance for credit losses and related activity during the three months ended March 31, 2023 and 2022, please see Note 7 to the condensed consolidated financial statements.

We recognized a credit loss recovery of $2.7 million and $1.5 million during the six months ended June 30, 2023 and 2022, respectively.

The $2.7 million credit loss recovery for the six months ended June 30, 2023 was primarily associated with a reduction in reserves on pooled Purchased Credit Deteriorated ("PCD”) loans that were acquired as part of the Company’s 2021 merger of equals transaction.

The $1.5 million credit loss recovery for the six months ended June 30, 2022 was primarily due to releases of reserves on PCD loans.

For a further discussion of the allowance for credit losses and related activity during the six months ended June 30, 2023 and 2022, please see Note 7 to the condensed consolidated financial statements.

The following table presents our allowance for credit losses allocated by loan type and the percent of loans in each category to total loans as of the dates indicated.

March 31, 2023

June 30, 2023

December 31, 2022

(Dollars in thousands)

Business loans

One-to-four family residential and cooperative/condominium apartment

Multifamily residential and residential mixed-use

Non-owner-occupied commercial real estate

Acquisition, development, and construction

The following table sets forth information about our allowance for credit losses at or for the dates indicated:

At or for the Three Months Ended March 31,

At or for the Six Months Ended June 30,

(Dollars in thousands)

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Ratio of net charge-offs to average loans outstanding during the period:

Business loans

One-to-four family residential and cooperative/condominium apartment

Multifamily residential and residential mixed-use

Non-owner-occupied commercial real estate

Acquisition, development, and construction

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(2) Total average loans represent gross loans (including loans held for sale), inclusive of deferred loan fees/costs and premiums/discounts.

Comparison of Financial Condition at March 31, 2023 and December 31, 2022

Assets totaled $13.84 billion at March 31, 2023, $651.8 million above their level at December 31, 2022, primarily due to increases of $493.8 million in cash and due from banks, $170.2 million in our loan portfolio and $16.5 million in restricted stock, partially offset by a decrease of $24.2 million in derivative assets and a decrease of $3.9 million in total investment securities.

Total loans increased $170.2 million during the three months ended March 31, 2023, to $10.65 billion at period end.

During the period, we had loan originations of $351.9 million.

Total securities decreased $3.9 million during the three months ended March 31, 2023, to $1.53 billion at period end, primarily due to proceeds from principal payments, calls, maturities, and sales of $105.0 million, offset in part by purchases of $101.9 million.

There were no transfers to or from securities held-to-maturity during the three months ended March 31, 2023.

Total liabilities increased $630.1 million during the three months ended March 31, 2023, to $12.65 billion at period end, primarily due to an increase of $367.0 million in FHLBNY advances and an increase of $315.8 million in deposits, partially offset by a decrease of $32.4 million in derivative cash collateral and a decrease of $21.8 million in derivative liabilities.

Comparison of Financial Condition at June 30, 2023 and December 31, 2022

Assets totaled $13.80 billion at June 30, 2023, $612.9 million above their level at December 31, 2022, primarily due to increases of $317.4 million in our loan portfolio, $283.2 million in cash and due from banks and $37.7 million in other assets, partially offset by a decrease of $37.6 million in total investment securities.

Total loans, net of allowance increased $317.4 million during the six months ended June 30, 2023, to $10.80 billion at June 30, 2023.

During the six months ended June 30, 2023, we had loan originations of $652.6 million.

Total investment securities decreased $37.6 million during the six months ended June 30, 2023, to $1.50 billion at June 30, 2023, primarily due to proceeds from principal payments, calls, maturities, and sales of $128.3 million and an increase in unrealized losses of $12.1 million, offset in part by purchases of $105.8 million.

There were no transfers to or from securities held-to-maturity during the six months ended June 30, 2023.

Liabilities .

Total liabilities increased $580.0 million during the six months ended June 30, 2023, to $12.60 billion at June 30, 2023, primarily due to an increase of $317.0 million in FHLBNY advances and an increase of $268.3 million in deposits (including mortgage escrow accounts).

Stockholders’ Equity .

Stockholders’ equity increased $21.7 million during the three months ended March 31, 2023 to $1.19 billion at period end, primarily due to net income for the period of $37.3 million, partially offset by common stock dividends of $9.2 million, other comprehensive loss of $4.3 million, preferred stock dividends of $1.8 million and repurchases of shares of common stock of $715 thousand.

Comparison of Operating Results for the Three Months Ended March 31, 2023 and 2022

Net income was $37.3 million during the three months ended March 31, 2023, compared to net income of $34.5 million for the three months ended March 31, 2022.

During the three months ended March 31, 2023, non-interest expense decreased by $2.4 million, the credit loss provision decreased by $2.1 million, non-interest income increased by $1.8 million, net interest income decreased by $3.3 million, and income tax expense increased by $138 thousand, compared to the three months ended March 31, 2022.

The discussion of net interest income for the three months ended March 31, 2023 and 2022 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated.

Stockholders’ equity increased $32.9 million during the six months ended June 30, 2023 to $1.20 billion at June 30, 2023, primarily due to net income of $64.8 million, partially offset by common stock dividends of $18.5 million, other comprehensive loss of $10.0 million, preferred stock dividends of $3.6 million and repurchases of shares of common stock of $947 thousand.

Comparison of Operating Results for the Three Months Ended June 30, 2023 and 2022

Net income was $27.5 million during the three months ended June 30, 2023, compared to net income of $38.5 million for the three months ended June 30, 2022.

During the three months ended June 30, 2023, non-interest expense increased by $348 thousand, the credit loss provision increased by $848 thousand, non-interest income decreased by $1.7 million, net interest income decreased by $13.3 million, and income tax expense decreased by $5.2 million, compared to the three months ended June 30, 2022.

The discussion of net interest income for the three months ended June 30, 2023 and 2022 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated.

The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented.

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The yields include loan fees consisting of amortization of loan origination and commitment fees and certain direct and indirect origination costs, prepayment fees, and late charges that are considered adjustments to yields.

Loan fees included in interest income were $292 thousand and $834 thousand during the three months ended March 31, 2023 and 2022, respectively.

Loan fees included in interest income were $363 thousand and $455 thousand during the three months ended June 30, 2023 and 2022, respectively.

The decrease in loan fees was primarily due to a decline in loan prepayment fees in 2023.

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Analysis of Net Interest Income

Three Months Ended March 31,

Three Months Ended June 30,

(Dollars in thousands)

Interest-earning assets:

Real estate loans (1)

Commercial and industrial loans (1)

Business loans (1)(3)

One-to-four family residential, including condo and coop (3)

Multifamily residential and residential mixed-use (3)

Non-owner-occupied commercial real estate (3)

Acquisition, development, and construction (3)

Other loans (3)

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Deposits (including non-interest-bearing checking accounts) (2)

(1) Business loans include commercial and industrial loans, owner-occupied commercial real estate loans and PPP loans.

(2) Includes mortgage escrow deposits.

(3) Amounts are net of deferred origination costs/(fees) and allowance for credit losses, and include loans held for sale.

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Rate/Volume Analysis

Three Months Ended March 31, 2023

Compared to Three Months Ended March 31, 2022

Three Months Ended June 30, 2023

Compared to Three Months Ended June 30, 2022

Increase / (Decrease) Due to:

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Interest-earning assets:

Real estate loans (1)

Commercial and industrial (1)

Business loans (1)(2)

One-to-four family residential, including condo and coop (2)

Multifamily residential and residential mixed-use (2)

Non-owner-occupied commercial real estate (2)

Acquisition, development, and construction (2)

Other loans (2)

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Net change in net interest income

(1) Business loans include commercial and industrial loans, owner-occupied commercial real estate loans and PPP loans.

(2) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.

Net interest income.

Net interest income was $85.8 million during the three months ended March 31, 2023, a decrease of $3.3 million from the three months ended March 31, 2022.

Average interest-earning assets were $12.69 billion for the three months ended March 31, 2023, an increase of $1.36 billion from $11.33 billion for the three months ended March 31, 2022.

Net interest margin (“NIM”) was 2.74% during the three months ended March 31, 2023, down from 3.19% during the three months ended March 31, 2022.

Net interest income was $80.2 million during the three months ended June 30, 2023, a decrease of $13.3 million from the three months ended June 30, 2022.

Average interest-earning assets were $12.89 billion for the three months ended June 30, 2023, an increase of $1.48 billion from $11.41 billion for the three months ended June 30, 2022.

Net interest margin (“NIM”) was 2.50% during the three months ended June 30, 2023, down from 3.29% during the three months ended June 30, 2022.

Interest Income.

Interest income was $140.7 million during the three months ended March 31, 2023, compared to $93.9 million during the three months ended March 31, 2022.

During the first quarter of 2023, interest income increased $46.8 million from the first quarter of 2022, primarily reflecting increases in interest income of $33.1 million on real estate loans, $8.9 million on C&I loans, $3.4 million on other short-term investments and $1.3 million on securities, partially offset by decrease in interest income of $82 thousand on other loans.

The increased interest income on real estate loans was related to an increase of a 91-basis point increase in the average yield and an increase of $1.26 billion in the average balance of such loans in the 2023 period.

The increased interest income on C&I loans was related to a 294-basis point increase in the average yield and an increase of $129.0 million in the average balance of such loans in the period.

The increased interest income on short-term investments was due to an increase of a 375-basis point increase in the average yield offset by a $7.1 million decrease in the average balance of such short-term investments during the period.

The increased interest income on securities was due to an increase of a 33-basis point increase in the average yield offset by a $26.3 million decrease in the average balance of such securities during the period.

The decreased interest income on other loans was due to a 108-basis point increase in the average yield offset by a $8.1 million decrease in the average balance of other loans during the period.

Interest income was $152.1 million during the three months ended June 30, 2023, compared to $100.9 million during the three months ended June 30, 2022.

During the three months ended June 30, 2023, interest income increased $51.2 million from the three months ended June 30, 2022, primarily reflecting increases in interest income of $14.1 million on non-owner occupied loan income, $13.8 million on business loan income, $13.1 million on multifamily loan income, $5.1 million on other short-term investments, $3.0 million on one-to-four family loan income, $1.2 million on acquisition, development and construction loan income and $847 thousand on securities, partially offset by decrease in interest income of $42 thousand on other loans.

The increased interest income on non-owner occupied loan income was related to a 129-basis point increase in the average yield and an increase of $347.4 million in the average balance of such loans in the 2023 period.

The increased interest income on business loans was related to a 190-basis point increase in the average yield and an increase of $277.7 million in the average balance of such loans in the period.

The increased interest income on multifamily loans was related to a 73-basis point increase in the average yield and an increase of $614.7 million in the average balance of such loans in the period.

The increased interest income on short-term investments was due to a 377-basis point increase in the average yield and an increase of $231.9 million in the average balance of such short-term investments during the period.

The increased interest income on one-to-four family loans was related to a $144.7 million increase in the average balance and a 78-basis point increase in the average yield of such loans in the period.

The increased interest income on acquisition, development,

and construction loans was related to a 417-basis point increase in the average yield, offset by a decrease of $81.7 million in the average balance of such loans in the period.

The increased interest income on securities was due to a 26-basis point increase in the average yield offset by a $53.7 million decrease in the average balance of such securities during the period.

Interest Expense.

Interest expense was $54.9 million during the three months ended March 31, 2023, compared to $4.8 million during the three months ended March 31, 2022, primarily reflecting increases in interest expense of $34.7 million on deposits, $13.9 million on total borrowings and $1.5 million on derivative cash collateral.

The increased interest expense

on deposits primarily reflects a 247-basis point increase in rates paid on savings accounts and an increase of $1.07 billion in average balance of such deposits, a 197 basis-point increase in rates paid on money market accounts offset by $932.8 million in average balances of such deposits and a 206 basis-point increase in rates paid on CDs and an increase of $342.9 million in average balance of such deposits.

The increases in interest expenses on money market accounts, saving accounts and CDs were primarily due to intense price competition among banks and other financial institutions.

Interest expense was $71.9 million during the three months ended June 30, 2023, compared to $7.4 million during the three months ended June 30, 2022, primarily reflecting increases in interest expense of $48.9 million on deposits, $14.2 million on total borrowings and $1.4 million on derivative cash collateral.

The increased interest expense on deposits primarily reflects a 283-basis point increase in rates paid on savings accounts and an increase of $769.9 million in average balance of such deposits, a 254-basis point increase in rates paid on money market accounts offset by a $434.7 million decrease in average balances of such deposits and a 310-basis point increase in rates paid on CDs and an increase of $719.0 million in average balance of such deposits.

The increases in interest expenses on money market accounts, saving accounts and CDs were primarily due to intense price competition among banks and other financial institutions and the rising interest rate environment.

The increased interest expense on total borrowings primarily reflects a $1.25 billion increase in the average balance of FHLBNY advances and a 373-basis point increase in rates paid on such advances.

Provision for Credit Losses.

We recognized a credit loss recovery of $3.6 million during the three months ended March 31, 2023, compared to a credit loss recovery of $1.6 million for the three months ended March 31, 2022.

The $3.6 million credit loss recovery for the first quarter of 2023 was primarily associated with a reduction in reserves on pooled Purchased Credit Deteriorated (“PCD”) loans that were acquired as part of the Company’s 2021 merger of equals transaction.

The $1.6 million credit loss recovery for the first quarter of 2022 was primarily associated with an improvement in forecasted macroeconomic conditions , as well as a reduction in reserves for individually evaluated loans.

We recognized a credit loss provision of $892 thousand during the three months ended June 30, 2023, compared to a credit loss provision of $44 thousand for the three months ended June 30, 2022.

The $892 thousand credit loss provision for the three months ended June 30, 2023 was associated with growth in the loan portfolio and deterioration in forecasted macroeconomic conditions offset by a reduction in the reserve on Purchased Credit Deteriorated ("PCD”) loans that were acquired as part of the Company’s merger of equals transaction in 2021.

The $44 thousand credit loss provision for the three months ended June 30, 2022 was primarily associated with a $366 thousand credit loss provision on the loan portfolio primarily due to growth, partially offset by a $323 thousand credit loss recovery in reserves for unfunded loan commitments primarily due to lower balances .

Non-Interest Income.

Non-interest income was $9.0 million during the three months ended March 31, 2023, compared to $7.2 million during the three months ended March 31, 2022.

During the first quarter of 2023, non-interest income increased $1.8 million from the first quarter of 2022, reflecting an increase of $3.1 million in loan level derivative income, an increase of $324 thousand in BOLI income and a $274 thousand increase in gain on sale of SBA, partially offset by a $1.4 million loss on sale of securities and a $244 thousand decrease on service charges and other fees during the 2023 period.

Non-interest income was $10.4 million during the three months ended June 30, 2023, compared to $12.1 million during the three months ended June 30, 2022.

During the three months ended June 30, 2023, non-interest income decreased $1.7 million from the three months ended June 30, 2022, reflecting a decrease of $1.3 million in BOLI income, an increase of $780 thousand related to a loss on equity securities, a decrease of $513 thousand from gain on sale of SBA loans and a decrease of $437 thousand on title fees, partially offset by a increase of $752 thousand of loan level derivative income and a $519 thousand increase on service charges and other fees during the 2023 period.

Non-Interest Expense.

Non-interest expense was $47.5 million during the three months ended March 31, 2023, compared to $49.9 million during the three months ended March 31, 2022.

During the first quarter of 2023, non-interest expense decreased $2.4 million from the first quarter of 2022, primarily due to a $4.2 million decrease in salaries and employee benefits, offset by increases of $723 thousand in federal deposit insurance premiums, $433 thousand in data processing costs and $631 thousand in all other non-interest expenses.

Non-interest expense was $52.2 million during the three months ended June 30, 2023, compared to $51.8 million during the three months ended June 30, 2022.

During the three months ended June 30, 2023, non-interest expense increased $348 thousand from the three months ended June 30, 2022, primarily due to a $1.4 million increase in salaries and employee benefits, and a $724 thousand in federal deposit insurance premiums, offset by decreases of $1.7 million in severance, $740 thousand in loss on extinguishment of debt, $352 thousand in professional services and $252 thousand in occupancy and equipment.

The increase in federal deposit insurance premiums relates to an increase in deposit insurance rates due to a special assessment by the FDIC.

Non-interest expense was 1.41% and 1.64% of average assets during the three months ended March 31, 2023 and 2022, respectively.

Non-interest expense was 1.53% and 1.71% of average assets during the three months ended June 30, 2023 and 2022, respectively.

Income Tax Expense.

Income tax expense was $13.6 million during the three months ended March 31, 2023, compared to income tax expense of $13.5 million during the three months ended March 31, 2022.

The reported effective tax rate for the first quarter ending March 31, 2023 was 26.8%, and 28.1% for the first quarter ending March 31, 2022.

Income tax expense was $10.0 million during the three months ended June 30, 2023, compared to income tax expense of $15.3 million during the three months ended June 30, 2022.

The reported effective tax rate for the three months ended June 30, 2023 was 26.8%, and 28.4% for the three months ended June 30, 2022.

Comparison of Operating Results for the Six Months Ended June 30, 2023 and 2022

Net income was $64.8 million during the six months ended June 30, 2023, compared to net income of $73.0 million for the six months ended June 30, 2022.

During the six months ended June 30, 2023, net interest income decreased by $16.7 million, income tax expense decreased by $5.1 million, non-interest expense decreased by $2.1 million and the credit loss recovery increased by $1.2 million, non-interest income increased by $79 thousand, compared to the six months ended June 30, 2022.

The discussion of net interest income for the six months ended June 30, 2023 and 2022 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated.

The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented.

Average balances were derived from average daily balances.

No tax-equivalent adjustments have been made for interest income exempt from Federal, state, and local taxation.

Loan fees included in interest income were $655 thousand and $1.3 million during the six months ended June 30, 2023 and 2022, respectively.

The decrease in loan fees was primarily due to a decline in loan prepayment fees in 2023.

There are no out-of-period adjustments included in the rate/volume analysis in the following table.

Six Months Ended June 30,

(Dollars in thousands)

Interest-earning assets:

Business loans (1)(3)

One-to-four family residential, including condo and coop (3)

Multifamily residential and residential mixed-use (3)

Non-owner-occupied commercial real estate (3)

Acquisition, development, and construction (3)

Other loans (3)

Other short-term investments

Total interest-earning assets

Non-interest earning assets

Liabilities and Stockholders' Equity:

Interest-bearing liabilities:

Interest-bearing checking (2)

Certificates of deposit

Total interest-bearing deposits

FHLBNY advances

Subordinated debt, net

Other short-term borrowings

Total borrowings

Derivative cash collateral

Total interest-bearing liabilities

Non-interest-bearing checking (2)

Other non-interest-bearing liabilities

Total liabilities

Stockholders' equity

Total liabilities and stockholders' equity

Net interest income

Net interest spread (4)

Net interest-earning assets

Net interest margin (5)

Ratio of interest-earning assets to interest-bearing liabilities

Deposits (including non-interest-bearing checking accounts) (2)

(1) Business loans include commercial and industrial loans, owner-occupied commercial real estate loans and PPP loans.

(2) Includes mortgage escrow deposits.

(3) Amounts are net of deferred origination costs/(fees) and allowance for credit losses, and include loans held for sale.

(4) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(5) Net interest margin represents net interest income divided by average-interest earning assets.

Six Months Ended June 30, 2023

Compared to Six Months Ended June 30, 2022

Increase / (Decrease) Due to:

(Dollars in thousands)

Interest-earning assets:

Business loans (1)(2)

One-to-four family residential, including condo and coop (2)

Multifamily residential and residential mixed-use (2)

Non-owner-occupied commercial real estate (2)

Acquisition, development, and construction (2)

Other loans (2)

Other short-term investments

Total interest-earning assets

Interest-bearing liabilities:

Interest-bearing checking

Certificates of deposit

FHLBNY advances

Subordinated debt, net

Other short-term borrowings

Derivative cash collateral

Total interest-bearing liabilities

Net change in net interest income

(1) Business loans include commercial and industrial loans, owner-occupied commercial real estate loans and PPP loans.

(2) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.

Net interest income.

Net interest income was $166.0 million during the six months ended June 30, 2023, a decrease of $16.6 million from the six months ended June 30, 2022.

Average interest-earning assets were $12.79 billion for the six months ended June 30, 2023, an increase of $1.42 billion from $11.37 billion for the six months ended June 30, 2022.

Net interest margin (“NIM”) was 2.62% during the six months ended June 30, 2023, down from 3.24% during the six months ended June 30, 2022.

Interest Income.

Interest income was $292.8 million during the six months ended June 30, 2023, compared to $194.8 million during the six months ended June 30, 2022.

During the six months ended June 30, 2023, interest income increased $97.9 million from the six months ended June 30, 2022, primarily reflecting increases in interest income of $27.5 million on non-owner occupied loan income, $27.3 million on business loan income, $25.0 million on multifamily loan income, $8.6 million on other short-term investments, $5.1 million on one-to-four family loan income, $2.4 million on acquisition, development and construction loan income and $2.1 million on securities, partially offset by a decrease in interest income of $124 thousand on other loans.

The increased interest income on non-owner occupied loan income was related to a 124-basis point increase in the average yield and an increase of $377.3 million in the average balance of such loans in the 2023 period.

The increased interest income on business loans was related to a 199-basis point increase in the average yield and an increase of $260.5 million in the average balance of such loans in the period.

The increased interest income on multifamily loans was related to an increase of $667.6 million in the average balance and a 63-basis point increase in the average yield of such loans in the period.

The increased interest income on one-to-four family loans was related to an increase of $131.2 million in the average balance and a 61-basis point increase in the average yield of such loans in the period.

The increased interest income on acquisition, development, and construction loans was related to a 417-basis point increase in the average yield and a decrease of $89.0 million in the average balance of such loans in the period.

The decreased interest income on other loans was due to a 117-basis point increase in the average yield offset by a $6.6 million decrease in the average balance of other loans during the period.

The increased interest income on securities was due to an increase of a 30-basis point increase in the average yield, offset by a $40.1 million decrease in the average balance of such securities during the period.

The increased interest income on short-term investments was due to a 391-basis point increase in the average yield and an increase of $113.1 million in the average balance of such short-term investments during the period.

Interest Expense.

Interest expense was $126.8 million during the six months ended June 30, 2023, compared to $12.2 million during the six months ended June 30, 2022, primarily reflecting increases in interest expense of $83.6 million on deposits, $28.5 million on FHLBNY advances, $28.1 million on total borrowings and $2.9 million on derivative cash collateral.

The increased interest expense on deposits primarily reflects a 264-basis point increase in rates paid on savings accounts and an increase of $919.3 million in average balance of such deposits, a 226-basis point increase in rates paid on money market accounts offset by a decrease of $682.3 million in average balances of such deposits and a 265-basis point increase in rates paid on CDs and an increase of $532.0 million in average balance of such deposits.

The increased interest expense on total borrowings primarily reflects a a 359-basis point increase in rates paid and a $1.23 billion increase in the average balance of FHLBNY advances.

Provision for Credit Losses.

We recognized a credit loss recovery of $2.8 million during the six months ended June 30, 2023, compared to a credit loss recovery of $1.5 million for the six months ended June 30, 2022.

The $2.8 million credit loss recovery for the six months ended June 30, 2023 was primarily associated with a reduction in reserves on pooled PCD loans that were acquired as part of the Company’s 2021 merger of equals transaction.

The $1.5 million credit loss recovery for the six months ended June 30, 2022 was primarily associated with releases of reserves on PCD loans.

Non-Interest Income.

Non-interest income was $19.4 million during the six months ended June 30, 2023, compared to $19.3 million during the six months ended June 30, 2022.

During the six months ended June 30, 2023, non-interest income increased $79 thousand from the six months ended June 30, 2022, reflecting an increase of $3.9 million of loan level derivative income and a $275 thousand increase on service charges and other fees, partially offset by a $1.4 million loss on sale of securities, a $967 thousand decrease in BOLI income, an increase of $780 thousand loss on equity securities, a $566 thousand decrease in title fee income, a $257 thousand decrease in gain on sale of residential loans and a $239 thousand decrease from gain on sale of SBA loans during the 2023 period.

Non-Interest Expense.

Non-interest expense was $99.7 million during the six months ended June 30, 2023, compared to $101.7 million during the six months ended June 30, 2022.

During the six months ended June 30, 2023, non-interest expense decreased $2.1 million from the six months ended June 30, 2022, primarily due to a $2.8 million decrease in salaries and employee benefits, a $1.7 million decrease in severance, a $740 thousand decrease in loss on extinguishment of debt, a $523 thousand decrease in professional services and $463 thousand decrease in occupancy and equipment, partially offset by increases of $2.1 million in other non-interest expenses, a $1.4 million increase in federal deposit insurance premiums, and a $717 thousand increase in data processing costs.

The increase in federal deposit insurance premiums relates to an increase in deposit insurance rates due to a special assessment by the FDIC.

Non-interest expense was 1.47% and 1.67% of average assets during the six months ended June 30, 2023 and 2022, respectively.

Income Tax Expense.

Income tax expense was $23.7 million during the six months ended June 30, 2023, compared to income tax expense of $28.8 million during the six months ended June 30, 2022.

The reported effective tax rate for the six months ended June 30, 2023 was 26.8%, and 28.3% for the six months ended June 30, 2022.

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