What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-11-02 · 99 added, 227 removed, 304 unchanged (52% of the section changed)

12 unchanged sentences

At or For the

Three Months Ended

Nine Months Ended

September 30,

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 combination 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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Methods and Assumptions Underlying the Estimate

On January 1, 2021, we adopted the Current Expected Credit Losses (“CECL”) Standard, which requires that loans held for investment be accounted for under the current expected credit losses model.

The allowance for credit losses is established and maintained through a provision for credit losses based on expected losses inherent in our loan portfolio.

67 unchanged sentences

Although maturities and scheduled amortization of loans and investments are predictable sources of funds, deposit flows and prepayments on real estate loans and MBS are influenced by interest rates, economic conditions and competition.

The Bank is a member of AFX, through which it may either borrow or lend funds on an overnight or short-term basis with other member institutions.

The Bank is a member of American Financial Exchange (“AFX”), through which it may either borrow or lend funds on an overnight or short-term basis with other member institutions.

The availability of funds changes daily.

1 unchanged sentence

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

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.

As of March 31, 2024 and December 31, 2023 the Bank did not have any repurchase agreements.

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 $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.

Total deposits (including escrow) increased $368.2 million during the three months ended March 31, 2024, compared to an increase of $315.8 million for the three months ended March 31, 2023.

Within deposits, core deposits ( i.e., non-CDs) increased $420.7 million during the three months ended March 31, 2024 compared to a decrease of $88.1 million during the three months ended March 31, 2023.

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.

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, 2024, the Bank had remaining borrowing capacity of $1.76 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 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.

The Bank reduced its outstanding FHLBNY advances by $540.0 million during the three months ended March 31, 2024, compared to a $367.0 million increase during the three months ended March 31, 2023.

“FHLBNY Advances” for further information.

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

Subordinated debentures totaled $200.2 million at March 31, 2024 and at December 31, 2023, respectively.

“Subordinated Debentures” to our Consolidated Financial Statements for further information.

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.

During the three months ended March 31, 2024 and 2023, real estate loan originations totaled $98.3 million and $346.7 million, respectively.

During the three months ended March 31, 2024 and 2023, C&I loan originations totaled $21.1 million and $5.2 million, respectively.

The Bank did not have any sales or purchases of securities available-for-sale during the three months ended March 31, 2024.

The Bank had sales and purchases of securities available-for-sale of $79.3 million and $78.2 million, respectively during the three months ended March 31, 2023.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $29.7 million and $16.2 million for the three months ended March 31, 2024 and 2023, respectively.

The Bank did not have any sales of held-to-maturity securities during the three months ended March 31, 2024 or 2023, respectively.

The Bank did not have any purchases of securities held-to-maturity during the three months ended March 31, 2024.

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

Proceeds from pay downs and calls and maturities of held-to-maturity securities were $6.1 million and $4.7 million for the three months ended March 31, 2024 and 2023, 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 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.

At March 31, 2024, 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 September 30, 2023

Actual Ratios at March 31, 2024

To Be Categorized as

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

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, Use of Proceeds and Issuer Purchases of Equity Securities"

for additional information about repurchases of common stock.

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.

During the three months ended March 31, 2024, the Holding Company did not repurchase any shares of its common stock.

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

As of March 31, 2024, 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, Use of Proceeds and Issuer Purchases of Equity Securities" 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, 2024 and 2023, respectively.

The Holding Company paid $9.7 million and $9.2 million in cash dividends on its common stock during the three months ended March 31, 2024 and 2023, respectively.

Contractual Obligations

The Bank generally has outstanding at any time borrowings in the form of FHLBNY advances, short-term or overnight borrowings, subordinated debt, as well as customer CDs with fixed contractual interest rates.

The Bank generally has borrowings outstanding in the form of FHLBNY advances, short-term or overnight borrowings, subordinated debt, as well as customer CDs with fixed contractual interest rates.

In addition, the Bank is obligated to make rental payments under leases on certain of its branches and equipment.

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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 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.

As of March 31, 2024, the Bank had $142.0 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 ending December 31, 2024.

Additionally, in connection with a loan securitization completed in December 2017, the Bank executed a reimbursement agreement with FHLMC that obligates the Company to reimburse FHLMC for any contractual principal and interest payments on defaulted loans, not to exceed 10% of the original principal amount of the loans comprising the aggregate balance of the loan pool at securitization.

The maximum exposure under this reimbursement obligation is $28.0 million.

The Bank has pledged $28.0 million of available-for-sale pass-through MBS issued by GSEs as collateral.

The Bank has pledged $27.9 million of pass-through MBS issued by GSEs as collateral.

Asset Quality

We do not originate or purchase loans, either whole loans or loans underlying mortgage-backed securities (“MBS”), which would have been considered subprime loans at origination, i.e ., real estate loans advanced to borrowers who did not qualify for market interest rates because of problems with their income or credit history.

We do not originate or purchase loans, either whole loans or loans underlying MBS, which would have been considered subprime loans at origination, i.e ., real estate loans advanced to borrowers who did not qualify for market interest rates because of problems with their income or credit history.

See Note 6 to our unaudited condensed Consolidated Financial Statements for a discussion of evaluation for impaired securities.

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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.

We generally attempt to utilize all available remedies, such as note sales in lieu of foreclosure, in an effort to resolve non-accrual loans and OREO properties as quickly and prudently as possible in consideration of market conditions, the physical condition of the property and any other mitigating circumstances.

We generally attempt to utilize all available remedies, such as note sales in lieu of foreclosure, in an effort to resolve non-accrual loans

and OREO properties as quickly and prudently as possible in consideration of market conditions, the physical condition of the property and any other mitigating circumstances.

We have not initiated any expected or imminent foreclosure proceedings that are likely to have a material adverse impact on our Consolidated Financial Statements.

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Non-accrual Loans

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.

Within our held-for-investment loan portfolio, non-accrual loans totaled $34.8 million at March 31, 2024 and $29.1 million at December 31, 2023.

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

September 30,

(Dollars in thousands)

4 unchanged sentences

Non-owner-occupied commercial real estate

Acquisition, development, and construction

Total non-accrual loans

1 unchanged sentence

Total non-performing assets to total assets

Troubled Debt Restructuring Disclosures Prior to Our Adoption of ASU No.

TDR Disclosures Prior to Our Adoption of ASU No.

Prior to our adoption of ASU No.

2022-02, we accounted for a Troubled Debt Restructuring (“TDRs”) as a loan that we, for economic or legal reasons related to a borrower’s financial difficulties, granted a concession to the borrower that we would not otherwise grant.

2022-02, we accounted for TDRs as a loan that we, for economic or legal reasons related to a borrower’s financial difficulties, granted a concession to the borrower that we would not otherwise grant.

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.

The accrual status of each restructured loan is determined separately in accordance with our policies for determining accrual or non-accrual status.

At the time the modification agreement is entered into between the Bank and the borrower the loan can be on either accrual or non-accrual status.

At the time the modification agreement is entered into

between the Bank and the borrower the loan can be on either accrual or non-accrual status.

If a loan is on non-accrual status at the time it is restructured, it continues to be classified as non-accrual until the borrower has demonstrated compliance with the modified loan terms for a period of at least six months.

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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 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.

There was no carrying value of OREO properties on our Consolidated Statement of Financial Condition at March 31, 2024 or December 31, 2023.

We did not recognize any provisions for losses on OREO properties during the three months ended March 31, 2024 or 2023.

Past Due Loans

Loans Delinquent 30 to 59 Days

At September 30, 2023, we had loans totaling $23.0 million that were past due between 30 and 59 days.

At March 31, 2024, we had loans totaling $26.2 million that were past due between 30 and 59 days.

At December 31, 2023, we had loans totaling $12.0 million that were past due between 30 and 59 days.

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Loans Delinquent 60 to 89 Days

At September 30, 2023, we had loans totaling $12.1 million that were past due between 60 and 89 days.

At March 31, 2024, we had loans totaling $25.2 million that were past due between 60 and 89 days.

At December 31, 2023, we had loans totaling $1.3 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 September 30, 2023 or at December 31, 2022.

There were no accruing loans 90 days or more past due at March 31, 2024 or at December 31, 2023.

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 September 30, 2023 and December 31, 2022, respectively.

The amount of our allowance was $2.9 million and $2.7 million at March 31, 2024 and December 31, 2023, 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 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.

We recorded a credit loss provision of $5.2 million during the three months ended March 31, 2024, compared to a credit loss recovery of $3.6 million for the three months ended March 31, 2023.

The $5.2 million credit loss provision for the three months ended March 31, 2024, was primarily associated with provisioning for the Bank’s pooled multifamily loan portfolio.

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.

For a further discussion of the allowance for credit losses and related activity during the three months ended March 31, 2024 and 2023, 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.

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

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 Nine Months Ended September 30,

At or for the Three Months Ended March 31,

(Dollars in thousands)

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Non-owner-occupied commercial real estate

Acquisition, development, and construction

(1) Total loans represent gross loans (excluding loans held for sale), inclusive of deferred fees/costs and premiums/discounts.

(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 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.

Comparison of Financial Condition at March 31, 2024 and December 31, 2023

Assets totaled $13.50 billion at March 31, 2024, $134.9 million below their level at December 31, 2023, primarily due to decreases of $86.7 million in cash and due from banks, $32.3 million in total investment securities, $24.4 million in restricted stock and $13.2 million in the loan portfolio, partially offset by an increase of $13.0 million in derivative assets.

Total loans, net of allowance decreased $13.2 million during the three months ended March 31, 2024, to $10.69 billion at period end.

During the three months ended March 31, 2024, we had loan originations of $98.3 million.

Total investment securities decreased $32.3 million during the three months ended March 31, 2024, to $1.45 billion at period end, primarily due to proceeds from principal payments, calls and maturities of $35.6 million, offset by a decrease in unrealized losses of $3.3 million.

There were no transfers to or from securities held-to-maturity during the three months ended March 31, 2024.

Total restricted stock decreased $24.4 million during the three months ended March 31, 2024, to $74.3 million at period end, primarily due to FHLB advance terminations.

Derivative assets increased $13.1 million during the three months ended March 31, 2024, to $135.2 million at period end, primarily due to an increase in cash flows hedges.

Liabilities .

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.

Total liabilities decreased $148.1 million during the three months ended March 31, 2024, to $12.26 billion at period end, primarily due to a decrease of $540.0 million in FHLB advances, partially offset by increases of $368.2 million in deposits (including mortgage escrow accounts), and $24.8 million in derivative cash collateral.

Stockholders’ Equity .

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.

Stockholders’ equity increased $13.1 million during the three months ended March 31, 2024, to $1.24 billion at period end, primarily due to net income of $17.7 million and other comprehensive income of $6.1 million, partially offset by common stock dividends of $9.7 million, and preferred stock dividends of $1.8 million.

Comparison of Operating Results for the Three Months Ended March 31, 2024 and 2023

Net income was $17.7 million during the three months ended March 31, 2024, compared to net income of $37.3 million for the three months ended March 31, 2023.

During the three months ended March 31, 2024, net interest income decreased by $14.2 million, non-interest income increased by $1.5 million, non-interest expense increased by $5.0 million, the credit loss provision increased by $8.9 million, and income tax expense decreased by $7.0 million, compared to the three months ended March 31, 2023.

The discussion of net interest income for the three months ended March 31, 2024 and 2023 should be read in conjunction with the following tables, which set forth certain information related to the Consolidated Statements of Operations 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 $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.

Net loan costs included in interest income were $297 thousand during the three months ended March 31, 2024.

Net loan fees included in interest income were $292 thousand during the three months ended March 31, 2023.

The decrease in net loan fees was primarily due to the decline in loan prepayment fees in 2024.

Analysis of Net Interest Income

Three Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

4 unchanged sentences

Non-owner-occupied commercial real estate (3) (6)

Acquisition, development, and construction (3)

Other loans (3)

5 unchanged sentences

Interest-bearing checking (2)

Certificates of deposit

Total interest-bearing deposits

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

(6) At March 31, 2024, the loan portfolio included a fair value hedge basis point adjustment to the carrying amount of hedged owner-occupied commercial real estate in business loans, one-to-four family residential mortgage loans, multifamily residential mortgage loans and non-owner occupied commercial real estate loans.

Rate/Volume Analysis

Three Months Ended September 30, 2023

Compared to Three Months Ended September 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 $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 $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.

The increased interest income on short-term investments was due to a 367-basis point increase in the average yield and an increase of $315.7 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 $173.5 million increase in the average balance and a 59-basis point increase in the average yield of such loans in the period.

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

Interest Expense.

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.

The increased interest expense on total borrowings primarily reflects a $1.08 billion increase in the average balance of FHLBNY advances and a 354-basis point increase in rates paid on such advances.

Provision for Credit Losses.

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 $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 $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 1.73% and 1.54% of average assets during the three months ended September 30, 2023 and 2022, respectively.

Income Tax Expense.

Income tax expense was $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.

equivalent adjustments have been made for interest income exempt from federal, state, and local taxation.

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.

Nine Months Ended September 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.

Nine Months Ended September 30, 2023

Compared to Nine Months Ended September 30, 2022

Three Months Ended March 31, 2024

Compared to Three Months Ended March 31, 2023

Increase / (Decrease) Due to:

5 unchanged sentences

Non-owner-occupied commercial real estate

Acquisition, development, and construction (2)

Other loans (2)

Other short-term investments

2 unchanged sentences

Interest-bearing checking

Certificates of deposit

FHLBNY advances

7 unchanged sentences

Net interest income.

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.

Net interest income was $71.5 million during the three months ended March 31, 2024, a decrease of $14.2 million from the three months ended March 31, 2023.

Average interest-earning assets were $13.02 billion for the three months ended March 31, 2024, an increase of $330.5 million from $12.69 billion for the three months ended March 31, 2023.

Net interest margin was 2.21% during the three months ended March 31, 2024, down from 2.74% during the three months ended March 31, 2023.

Interest Income.

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 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 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.

Interest income was $161.0 million during the three months ended March 31, 2024, compared to $140.7 million during the three months ended March 31, 2023.

During the three months ended March 31, 2024, interest income increased $20.3 million from the three months ended March 31, 2023, primarily reflecting increases in interest income of $5.8 million on other short-term investments, $5.5 million on business loan income, $5.1 million on non-owner-occupied loan income, $3.7 million on multifamily loan income and $2.2 million on one-to-four family loan income.

The increased interest income on short-term investments was due to a $323.3 million increase in the average balances and a 139-basis point increase in the yield of such short-term investments in the period.

The increased interest income on business loans was due to a 62-basis point increase in the yield and an increase of $107.8 million in the average balances of such loans in the period.

The increased interest income on non-owner-occupied loan income was related to a 49-basis point increase in the yield and an increase of $54.4 million in the average balances of such loans in the period.

The increased interest income on multifamily loans was related to a 41-basis point increase in the yield, partially offset by a decrease of $73.5 million in the average balances of such loans in the period.

The increased interest income on one-to-four family loans was related to a 51-basis point increase in the yield and a $98.3 million increase in the average balances of such loans in the period.

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

Interest Expense.

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 354-basis point increase in rates paid and a $1.18 billion increase in the average balance of FHLBNY advances.

Interest expense was $89.5 million during the three months ended March 31, 2024, compared to $54.9 million during the three months ended March 31, 2023.

During the three months ended March 31, 2024, interest expense increased $34.6 million, primarily reflecting an increase in interest expense of $35.8 million on deposits.

The increased interest expense on deposits primarily reflects a 159-basis point increase in rates paid on money market accounts and a

$660.2 million increase in average balances of such deposits, a 193-basis point increase in rates paid on CDs and an increase of $488.1 million in average balances of such deposits and a 133-basis point increase in rates paid on savings accounts and an increase of $41.8 million in average balances of such deposits.

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

Provision for Credit Losses.

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.

We recorded a credit loss provision of $5.2 million during the three months ended March 31, 2024, compared to a credit loss recovery of $3.6 million for the three months ended March 31, 2023.

The $5.2 million credit loss provision for the three months ended March 31, 2024, was primarily associated with increased provisioning for our pooled multifamily loan portfolio.

Non-Interest Income.

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 income was $10.5 million during the three months ended March 31, 2024, compared to $9.0 million during the three months ended March 31, 2023.

During the three months ended March 31, 2024, non-interest income increased $1.5 million from the three months ended March 31, 2023, reflecting an increase of $3.0 million from gain on sale of Bank’s premises, partially offset by a decrease of $2.7 million related to loan level derivative income.

Non-Interest Expense.

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 1.56% and 1.63% of average assets during the nine months ended September 30, 2023 and 2022, respectively.

Non-interest expense was $52.5 million during the three months ended March 31, 2024, compared to $47.5 million during the three months ended March 31, 2023.

During the three months ended March 31, 2024, non-interest expense increased $5.0 million from the three months ended March 31, 2023, primarily due to a $5.4 million increase in salaries and employee benefits.

Non-interest expense was 1.52% and 1.41% of average assets during the three months ended March 31, 2024 and 2023, respectively.

Income Tax Expense.

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.

Income tax expense was $6.6 million during the three months ended March 31, 2024, compared to income tax expense of $13.6 million during the three months ended March 31, 2023.

The reported effective tax rate for the three months ended March 31, 2024 was 27.1%, and 26.8% for the three months ended March 31, 2023.

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