What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-02 · 125 added, 120 removed, 406 unchanged (38% of the section changed)

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Per Share Data:

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

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.

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

As of December 31, 2022, the Bank’s repurchase agreements totaled $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 (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.

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 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.

Total deposits (including escrow) increased $382.1 million during the nine months ended September 30, 2023 compared to an increase of $29.7 million for the nine months ended September 30, 2022.

Within deposits, core deposits ( i.e., non-CDs) increased $55.2 million during the nine months ended September 30, 2023 compared to a decrease of $47.8 million during the nine months ended September 30, 2022.

CDs increased $326.9 million during the nine months ended September 30, 2023 compared to an increase of $77.5 million during the nine months ended September 30, 2022.

The increase in core deposits was primarily due to growth in business deposits.

The increase in CDs was primarily due to growth in brokered deposits and promotional consumer CD offerings.

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 September 30, 2023, the Bank had an additional unused borrowing capacity of $1.49 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 $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.

The Bank decreased its outstanding FHLBNY advances by $8.0 million during the nine months ended September 30, 2023, compared to a $595.0 million increase during the nine months ended September 30, 2022.

“FHLBNY Advances” for further information.

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

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

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

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.

During the nine months ended September 30, 2023 and 2022, real estate loan originations totaled $772.9 million and $2.13 billion, respectively.

During the nine months ended September 30, 2023 and 2022, C&I loan originations totaled $41.6 million and $66.2 million, respectively.

Sales of securities available-for-sale totaled $79.3 million during the nine months ended September 30, 2023.

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

Purchases of available-for-sale securities totaled $80.6 million and $29.7 million during the nine months ended September 30, 2023 and 2022, respectively.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $60.2 million and $140.0 million for the nine months ended September 30, 2023 and 2022, respectively.

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

Purchases of held-to-maturity securities totaled $28.3 million and $63.2 million during the nine months ended September 30, 2023 and 2022, respectively.

Proceeds from pay downs and calls and maturities of held-to-maturity securities were $16.4 million and $25.3 million for the nine months ended September 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 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"

At September 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 June 30, 2023

Actual Ratios at September 30, 2023

To Be Categorized as

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

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.

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

The Holding Company repurchased 1,422,995 shares of its common stock at an aggregate cost of $46.5 million during the nine months ended September 30, 2022.

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

See "Part II - Item 2.

Other Information - Unregistered Sales of Equity Securities and Use of Proceeds"

Other Information - Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities"

for additional information about repurchases of common stock.

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.

The Holding Company paid $5.5 million in cash dividends on its preferred stock during the nine months ended September 30, 2023 and 2022, respectively.

The Holding Company paid $28.0 million and $27.7 million in cash dividends on its common stock during the nine months ended September 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 June 30, 2023, the Bank had $122.0 million of firm loan commitments that were accepted by the borrowers.

As of September 30, 2023, the Bank had $116.0 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 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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Non-accrual Loans

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.

Within our held-for-investment loan portfolio, non-accrual loans totaled $23.3 million at September 30, 2023 and $34.2 million at December 31, 2022.

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

September 30,

(Dollars in thousands)

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Those concessions included a reduction of interest rate for the remaining term of the loan, the maturity date of the loan was extended with a stated interest rate lower than the current market rate for new debt with similar risk, and the outstanding principal amount and/or accrued interest have been reduced.

In instances in which the interest rate had been reduced, management would not deem the modification a TDR in the event that the reduction in interest rate reflected either a general decline in market interest rates or an effort to maintain a relationship with a borrower who could readily obtain funds from other sources at the current market interest rate, and the terms of the restructured loan are comparable to the terms offered by the Bank to non-troubled debtors.

In instances in which the interest rate had been reduced, management would not deem the modification a TDR in the event that the reduction in

interest rate reflected either a general decline in market interest rates or an effort to maintain a relationship with a borrower who could readily obtain funds from other sources at the current market interest rate, and the terms of the restructured loan are comparable to the terms offered by the Bank to non-troubled debtors.

On January 1, 2023, we adopted ASU 2022-02, which eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023.

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Conversely, if at the time of restructuring the loan is performing (and accruing) it will remain accruing throughout its restructured period, unless the loan subsequently meets any of the criteria for non-accrual status under our policy and agency regulations.

Within the allowance for credit losses, losses are estimated for restructured loan on accrual status and well as restructured loans on non-accrual status that are one-to-four family loans or consumer loans, on a pooled basis with loans that share similar risk characteristics.

Within the allowance for credit losses, losses are estimated for restructured loans on accrual status and well as restructured loans on non-accrual status that are one-to-four family loans or consumer loans, on a pooled basis with loans that share similar risk characteristics.

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 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.

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 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 allowance for credit losses 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.

Property acquired by the Bank, or a subsidiary, as a result of foreclosure on a mortgage loan or a deed in lieu of foreclosure is classified as OREO.

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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 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.

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

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

Past Due Loans

Loans Delinquent 30 to 59 Days

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

At September 30, 2023, we had loans totaling $23.0 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 June 30, 2023, we had loans totaling $8.1 million that were past due between 60 and 89 days.

At September 30, 2023, we had loans totaling $12.1 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 June 30, 2023 or at December 31, 2022.

There were no accruing loans 90 days or more past due at September 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 $2.7 million at June 30, 2023 and $2.8 million at December 31, 2022, respectively.

The amount of our allowance was $2.8 million at September 30, 2023 and 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 $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.

We recorded a credit loss recovery of $950 thousand during the nine months ended September 30, 2023, compared to a credit loss provision of $5.0 million for the nine months ended September 30, 2022.

The $950 thousand credit loss recovery for the nine months ended September 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 $5.0 million credit loss provision for the nine months ended September 30, 2022 was primarily due to changes to the forecasted macroeconomic conditions and loan growth, offset by releases on acquired PCD individually analyzed loans.

For a further discussion of the allowance for credit losses and related activity during the nine months ended September 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.

June 30, 2023

September 30, 2023

December 31, 2022

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

At or for the Six Months Ended June 30,

At or for the Nine Months Ended September 30,

(Dollars in thousands)

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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 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.

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

Assets totaled $13.65 billion at September 30, 2023, $461.5 million above their level at December 31, 2022, primarily due to increases of $294.7 million in our loan portfolio, $189.5 million in cash and due from banks and $22.9 million in derivative assets, partially offset by a decrease of $66.2 million in total investment securities.

Total loans, net of allowance increased $294.7 million during the nine months ended September 30, 2023, to $10.78 billion at September 30, 2023.

During the nine months ended September 30, 2023, we had loan originations of $814.6 million.

Total investment securities decreased $66.2 million during the nine months ended September 30, 2023, to $1.47 billion at September 30, 2023, primarily due to proceeds from principal payments, calls, maturities, and sales of $155.7 million and an increase in unrealized losses of $16.5 million, offset in part by purchases of $109.0 million.

There were no transfers to or from securities held-to-maturity during the nine months ended September 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).

Total liabilities increased $426.7 million during the nine months ended September 30, 2023, to $12.45 billion at September 30, 2023, primarily due to an increase of $382.1 million in deposits (including mortgage escrow accounts), an increase of $32.6 million in derivative cash collateral and $23.4 million in derivative liabilities.

Stockholders’ Equity .

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.

Stockholders’ equity increased $34.8 million during the nine months ended September 30, 2023, to $1.20 billion at September 30, 2023, primarily due to net income of $79.8 million, partially offset by common stock dividends of $28.8 million, other comprehensive loss of $12.5 million, preferred stock dividends of $5.5 million and repurchases of shares of common stock of $947 thousand.

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

Net income was $15.0 million during the three months ended September 30, 2023, compared to net income of $39.5 million for the three months ended September 30, 2022.

During the three months ended September 30, 2023, net interest income decreased by $23.9 million, non-interest income decreased by $1.4 million, non-interest expense increased by $11.2 million, the credit loss provision decreased by $4.8 million, and income tax expense decreased by $7.3 million, compared to the three months ended September 30, 2022.

The discussion of net interest income for the three months ended September 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 $363 thousand and $455 thousand during the three months ended June 30, 2023 and 2022, respectively.

Loan fees included in interest income were $320 thousand and $1.1 million during the three months ended September 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.

Analysis of Net Interest Income

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in thousands)

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Rate/Volume Analysis

Three Months Ended June 30, 2023

Compared to Three Months Ended June 30, 2022

Three Months Ended September 30, 2023

Compared to Three Months Ended September 30, 2022

Increase / (Decrease) Due to:

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Net interest income.

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.

Net interest income was $76.5 million during the three months ended September 30, 2023, a decrease of $23.9 million from the three months ended September 30, 2022.

Average interest-earning assets were $12.98 billion for the three months ended September 30, 2023, an increase of $1.20 billion from $11.78 billion for the three months ended September 30, 2022.

Net interest margin was 2.34% during the three months ended September 30, 2023, down from 3.38% during the three months ended September 30, 2022.

Interest Income.

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.

Interest income was $157.8 million during the three months ended September 30, 2023, compared to $114.5 million during the three months ended September 30, 2022.

During the three months ended September 30, 2023, interest income increased $43.3 million from the three months ended September 30, 2022, primarily reflecting increases in interest income of $12.2 million on business loan income, $11.0 million on non-owner occupied loan income, $9.7 million on multifamily loan income, $6.1 million on other short-term investments and $2.9 million on one-to-four family loan income.

The increased interest income on business loans was related to a 159-basis point increase in the average yield and an increase of $246.3 million in the average balance of such loans in the period.

The increased interest income on non-owner- occupied loan income was related to a 96-basis point increase in the average yield and an increase of $263.7 million in the average balance of such loans in the period.

The increased interest income on multifamily loans was related to a 68-basis point increase in the average yield and an increase of $282.7 million in the average balance of such loans in the period.

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The increased interest income on one-to-four family loans was related to a $173.5 million increase in the average balance and a 59-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.

Increased yields across interest-earning assets were a result of the rising interest rate environment.

Interest Expense.

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.

Interest expense was $81.4 million during the three months ended September 30, 2023, compared to $14.1 million during the three months ended September 30, 2022.

During the three months ended September 30, 2023,

interest expense increased $67.3 million, primarily reflecting increases in interest expense of $52.4 million on deposits, $13.4 million on total borrowings and $1.5 million on derivative cash collateral.

The increased interest expense on deposits primarily reflects a 293-basis point increase in rates paid on money market accounts and a $323.8 million increase in average balances of such deposits, a 256-basis point increase in rates paid on savings accounts and an increase of $98.5 million in average balance of such deposits, and a 311-basis point increase in rates paid on CDs and an increase of $505.7 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.

1 unchanged sentence

Provision for Credit Losses.

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 .

We recorded a credit loss provision of $1.8 million during the three months ended September 30, 2023, compared to a credit loss provision of $6.6 million for the three months ended September 30, 2022.

The $1.8 million credit loss provision for the three months ended September 30, 2023, was primarily associated with increased provisioning for individually analyzed loans.

The $6.6 million credit loss provision for the three months ended September 30, 2022 was primarily due to changes in forecasted macroeconomic conditions.

Non-Interest Income.

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 income was $7.9 million during the three months ended September 30, 2023, compared to $9.4 million during the three months ended September 30, 2022.

During the three months ended September 30, 2023, non-interest income decreased $1.4 million from the three months ended September 30, 2022, reflecting a decrease of $1.4 million from net gain on sale of securities and other assets, an increase of $299 thousand related to a loss on equity securities and a decrease of $183 thousand on title fees, partially offset by an increase of $234 thousand of loan level derivative income, an increase of $140 thousand in BOLI income and a $93 thousand increase in all other non-interest income during the 2023 period.

Non-Interest Expense.

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.

Non-interest expense was $59.5 million during the three months ended September 30, 2023, compared to $48.3 million during the three months ended September 30, 2022.

During the three months ended September 30, 2023, non-interest expense increased $11.2 million from the three months ended September 30, 2022, primarily due to a $8.6 million increase in severance expense, a $1.3 million increase in salaries and employee benefits, a $1.1 million increase in federal deposit insurance premiums, a $875 thousand increase in data processing costs and a $548 thousand increase in marketing expenses, offset by decreases of $839 thousand in professional services, and $607 thousand in occupancy and equipment expense.

The increase in severance expense was due to the Chief Executive Officer succession.

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 1.53% and 1.71% of average assets during the three months ended June 30, 2023 and 2022, respectively.

Non-interest expense was 1.73% and 1.54% of average assets during the three months ended September 30, 2023 and 2022, respectively.

Income Tax Expense.

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.

Income tax expense was $8.1 million during the three months ended September 30, 2023, compared to income tax expense of $15.4 million during the three months ended September 30, 2022.

The reported effective tax rate for the three months ended September 30, 2023 was 35.1%, and 28.1% for the three months ended September 30, 2022.

Comparison of Operating Results for the Nine Months Ended September 30, 2023 and 2022

Net income was $79.8 million during the nine months ended September 30, 2023, compared to net income of $112.5 million for the nine months ended September 30, 2022.

During the nine months ended September 30, 2023, net interest income decreased by $40.6 million, income tax expense decreased by $12.4 million, non-interest expense increased by $9.2 million, the provision for credit losses decreased by $6.0 million, and non-interest income decreased by $1.4 million, compared to the nine months ended September 30, 2022.

The discussion of net interest income for the nine months ended September 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.

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.

Loan fees included in interest income were $975 thousand and $2.4 million during the nine months ended September 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,

Nine Months Ended September 30,

(Dollars in thousands)

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(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

Nine Months Ended September 30, 2023

Compared to Nine Months Ended September 30, 2022

Increase / (Decrease) Due to:

21 unchanged sentences

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.

Net interest income was $242.5 million during the nine months ended September 30, 2023, a decrease of $40.6 million from the nine months ended September 30, 2022.

Average interest-earning assets were $12.85 billion for the nine months ended September 30, 2023, an increase of $1.34 billion from $11.51 billion for the nine months ended September 30, 2022.

Net interest margin was 2.52% during the nine months ended September 30, 2023, down from 3.29% during the nine months ended September 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.

Interest income was $450.6 million during the nine months ended September 30, 2023, compared to $309.4 million during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023, interest income increased $141.2 million from the nine months ended September 30, 2022, primarily reflecting increases in interest income of $39.9 million on business loan income, $38.5 million on non-owner occupied loan income, $34.7 million on multifamily loan income, $14.6 million on other short-term investments and $7.6 million on one-to-four family loan income

The increased interest income on business loans was related to a 185-basis point increase in the average yield and an increase of $255.7 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 non-owner- occupied loan income was related to a 114-basis point increase in the average yield and an increase of $339.0 million in the average balance of such loans in the period.

The increased interest income on multifamily loans was related to and a 64-basis point increase in the average yield of such loans in the period, offset by an increase of $537.9 million in the average balance.

The increased interest income on one-to-four family loans was related to an increase of $145.5 million in the average balance and a 62-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 398-basis point increase in the average yield and an increase of $181.4 million in the average balance of such short-term investments during the period.

Increased yields across interest-earning assets were a result of the rising interest rate environment.

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.

Interest expense was $208.2 million during the nine months ended September 30, 2023, compared to $26.3 million during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023, interest expense increased $181.9 million from the nine months ended September 30, 2022, primarily reflecting increases in interest expense of $136.0 million on deposits, $41.5 million on total borrowings, and $4.4 million on derivative cash collateral.

The increased interest expense on deposits primarily reflects a 252-basis point increase in rates paid on money

market accounts offset by a decrease of $343.3 million in average balances of such deposits, a 254-basis point increase in rates paid on savings accounts and an increase of $642.7 million in average balance of such deposits and a 281-basis point increase in rates paid on CDs and an increase of $523.1 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.

The increased interest expense on total borrowings primarily reflects a 354-basis point increase in rates paid and a $1.18 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.

We recorded a credit loss recovery of $950 thousand during the nine months ended September 30, 2023, compared to a credit loss provision of $5.0 million for the nine months ended September 30, 2022.

The $5.0 million credit loss provision for the nine months ended September 30, 2022, was primarily due to changes to the forecasted macroeconomic conditions and loan growth, offset by releases on acquired PCD individually analyzed 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 income was $27.3 million during the nine months ended September 30, 2023, compared to $28.7 million during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023, non-interest income decreased $1.4 million from the nine months ended September 30, 2022, reflecting a decrease of $2.9 million gain on sale of securities, a $1.1 million increase in loss on equity securities, a $827 thousand decrease in BOLI income, and a $749 thousand decrease in title fees, partially offset by a $4.1 million increase in loan level derivative income and a $53 thousand increase in all other non-interest income.

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.

Non-interest expense was $159.2 million during the nine months ended September 30, 2023, compared to $150.0 million during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023, non-interest expense increased $9.2 million from the nine months ended September 30, 2022, primarily due to a $6.9 million increase in severance expense, a $2.5 million increase in federal deposit insurance premiums, a $1.6 million increase in data processing services and a $1.0 million increase in all other non-interest expenses, partially offset by a $1.4 million decrease in salaries and employee benefits and a $1.4 million decrease in professional services.

The increase in severance expense was due to the Chief Executive Officer succession.

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.

Non-interest expense was 1.56% and 1.63% of average assets during the nine months ended September 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.

Income tax expense was $31.8 million during the nine months ended September 30, 2023, compared to income tax expense of $44.2 million during the nine months ended September 30, 2022.

The reported effective tax rate for the nine months ended September 30, 2023 was 28.5%, and 28.2% for the nine months ended September 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