What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-02 · 197 added, 114 removed, 289 unchanged (52% of the section changed)

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At or For the

Three Months Ended

Six Months Ended

Per Share Data:

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

Policies with respect to the methodologies it uses to determine the allowance for credit losses on loans held for investment and fair value

of loans acquired in a business combination 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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These factors include:

(1) lending policies and procedures;

(1) lending policies and procedures and the experience, ability, and depth of the lending management and other relevant staff;

(2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets;

(3) the nature and volume of the loan portfolio;

(4) the experience, ability, and depth of the lending management and other relevant staff;

(4) the volume and severity of past due loans;

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Such agencies may require the Bank to recognize adjustments to the allowance based on their judgments of the information available to them at the time of their examination.

Fair value of loans acquired in a business combination

Methods and Assumptions Underlying the Estimate

On February 1, 2021, the Company completed a merger of equals business combination accounted for as a reverse merger using the acquisition method of accounting.

As a part of accounting for the Merger, fair value estimates were calculated with a combination of assumptions by management and by using a third party.

The fair value often involved third-party estimates utilizing input assumptions by management which may be complex or uncertain.

The fair value of acquired loans was based on a discounted cash flow methodology that considers factors such as type of loan and related collateral, and requires management’s judgment on estimates about discount rates, expected future cash flows, market conditions and other future events.

For purchased financial loans with credit deterioration (“PCD”), an estimate of expected credit losses was made for loans with similar risk characteristics and was added to the purchase price to establish the initial amortized cost basis of the PCD loans.

Any difference between the unpaid principal balance and the amortized cost basis is considered to relate to non-credit factors and resulted in a discount or premium.

Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans.

For acquired loans not deemed PCD at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans.

Uncertainties Regarding the Estimate

Management relied on economic forecasts, internal valuations, or other relevant factors which were available at the time of the Merger in the determination of the assumptions used to calculate the fair value of the acquired loans.

Discount rates, expected future cash flows, market conditions and other future events are subjective and may differ from estimates.

Impact on Financial Condition and Results of Operations

The estimate of fair values on acquired loans contributed to the recorded goodwill from the Merger.

In future income statement periods, interest income on loans will include the amortization and accretion of any premiums and discounts resulting from the fair value of acquired loans.

Additionally, the provision for credit losses on acquired individually analyzed PCD loans may be impacted due to changes in the assumptions used to calculate expected cash flows.

Liquidity and Capital Resources

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The availability of funds changes daily.

The Bank utilizes repurchase agreements as part of its borrowing policy to add liquidity.

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

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 $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.

Total deposits (including escrow) increased $497.8 million during the six months ended June 30, 2024, compared to an increase of $268.3 million for the six months ended June 30, 2023.

Within deposits, core deposits ( i.e., non-CDs) increased $723.2 million during the six months ended June 30, 2024 compared to a decrease of $147.1 million during the six months ended June 30, 2023.

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

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.

At June 30, 2024, the Bank had remaining borrowing capacity of $1.88 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 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.

The Bank reduced its outstanding FHLBNY advances by $680.0 million during the six months ended June 30, 2024, compared to a $317.0 million increase during the six months ended June 30, 2023.

“FHLBNY Advances” for further information.

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

Subordinated debentures totaled $262.8 million and $200.2 million at June 30, 2024 and at December 31, 2023, respectively.

Subsequently, on July 9, 2024, the Company issued and sold an additional $9.8 million of Notes, pursuant to an overallotment option granted to the underwriters of the offering.

Including the overallotment option, the total gross proceeds from the offering were $74.8 million, before discounts and estimated offering expenses.

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

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.

During the six months ended June 30, 2024 and 2023, business loan originations totaled $171.6 million and $143.6 million, respectively.

During the six months ended June 30, 2024 and 2023, real estate loan originations (excluding owner-occupied commercial real estate) totaled $88.2 million and $508.9 million, respectively.

The Bank did not have any sales of securities available-for-sale during the six months ended June 30, 2024.

The Bank had sales of securities available for sale of $78.7 million during the six months ended June 30, 2023.

Purchases of available-for-sale securities totaled $4.0 million and $79.3 million during the six months ended June 30, 2024 and 2023, respectively.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $76.8 million and $38.4 million for the six months ended June 30, 2024 and 2023, respectively.

The Bank did not have any sales of held-to-maturity securities during the six months ended June 30, 2024 or 2023, respectively.

The Bank had purchases of securities held-to-maturity of $7.4 million and $27.1 million during the six months ended June 30, 2024 and 2023, respectively.

Proceeds from pay downs and calls and maturities of held-to-maturity securities were $15.8 million and $10.7 million for the six months ended June 30, 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 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.

At June 30, 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 March 31, 2024

Actual Ratios at June 30, 2024

To Be Categorized as

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

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.

During the six months ended June 30, 2024, the Holding Company did not repurchase any shares of its common stock.

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

As of June 30, 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.

The Holding Company paid $3.6 million in cash dividends on its preferred stock during the six months ended June 30, 2024 and 2023, respectively.

The Holding Company paid $19.0 million and $18.5 million in cash dividends on its common stock during the six months ended June 30, 2024 and 2023, respectively.

Contractual Obligations

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

As of March 31, 2024, the Bank had $142.0 million of firm loan commitments that were accepted by the borrowers.

As of June 30, 2024, the Bank had $189.0 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.

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Our management reviews delinquent loans on a monthly basis and reports to our Board of Directors at each regularly scheduled Board meeting regarding the status of all non-performing and otherwise delinquent loans in our loan portfolio.

Our loan servicing policies and procedures require that an automated late notice be sent to a delinquent borrower as soon as possible after a payment is ten days late in the case of multifamily residential, commercial real estate loans, and C&I loans, or fifteen days late in connection with one-to-four family or consumer loans.

Our loan servicing policies and procedures require that an automated late notice be sent to a delinquent borrower as soon as possible after a payment is ten days late in the case of multifamily residential, commercial real estate loans, and commercial and industrial (“C&I”) loans, or fifteen days late in connection with one-to-four family or consumer loans.

Thereafter, periodic letters are mailed and phone calls placed to the borrower until payment is received.

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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 $34.8 million at March 31, 2024 and $29.1 million at December 31, 2023.

Within our held-for-investment loan portfolio, non-accrual loans totaled $24.8 million at June 30, 2024 and $29.1 million at December 31, 2023.

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

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Total non-performing assets to total assets

TDR Disclosures Prior to Our Adoption of ASU No.

Prior to our adoption of ASU No.

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.

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

Loan Restructurings

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 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.

There was no carrying value of OREO properties on our Consolidated Statement of Financial Condition at June 30, 2024 or December 31, 2023.

We did not recognize any provisions for losses on OREO properties during the six months ended June 30, 2024 or 2023.

Past Due Loans

Loans Delinquent 30 to 59 Days

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

At June 30, 2024, we had loans totaling $20.9 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 March 31, 2024, we had loans totaling $25.2 million that were past due between 60 and 89 days.

At June 30, 2024, we had loans totaling $32.4 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 March 31, 2024 or at December 31, 2023.

There were no accruing loans 90 days or more past due at June 30, 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 $2.9 million and $2.7 million at March 31, 2024 and December 31, 2023, respectively.

The amount of our allowance was $3.1 million and $2.7 million at June 30, 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 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.

We recorded a credit loss provision of $10.8 million during the six months ended June 30, 2024, compared to a credit loss recovery of $2.8 million for the six months ended June 30, 2023.

The $10.8 million credit loss provision for the six months ended June 30, 2024, was primarily associated with provisioning for the Bank’s pooled multifamily loan portfolio.

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 Purchased Credit Deteriorated (“PCD”) loans that were acquired as part of the Company’s 2021 Merger.

For a further discussion of the allowance for credit losses and related activity during the six months ended June 30, 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.

March 31, 2024

June 30, 2024

December 31, 2023

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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 Three Months Ended March 31,

At or for the Six Months Ended June 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 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.

Comparison of Financial Condition at June 30, 2024 and December 31, 2023

Assets totaled $13.55 billion at June 30, 2024, $87.2 million below their level at December 31, 2023, primarily due to decreases of $73.7 million in total investment securities, $43.6 million in cash and due from banks, $30.3 million in restricted stock and $8.8 million in premises and fixed assets, partially offset by increases of $45.4 million in the loan portfolio, $12.4 million in derivative assets and $4.9 million in BOLI.

Total loans, net of allowance increased $45.4 million during the six months ended June 30, 2024, to $10.75 billion at period end.

During the six months ended June 30, 2024, we had loan originations of $259.9 million.

Total investment securities decreased $73.7 million during the six months ended June 30, 2024, to $1.41 billion at period end, primarily due to proceeds from principal payments, calls and maturities of $92.2 million, offset by purchases of $11.4 million and a decrease in unrealized losses of $7.1 million.

There were no transfers to or from securities held-to-maturity during the six months ended June 30, 2024.

Premises and fixed assets decreased $8.8 million during the six months ended June 30, 2024, to $36.1 million at period end, primarily due to the sale of two Bank owned buildings.

Total restricted stock decreased $30.3 million during the six months ended June 30, 2024, to $68.4 million at period end, primarily due to a reduction in FHLB advances.

Derivative assets increased $12.4 million during the six months ended June 30, 2024, to $134.5 million at period end, primarily due to an increase in cash flows hedges.

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.

Total liabilities decreased $111.6 million during the six months ended June 30, 2024, to $12.30 billion at period end, primarily due to a decrease of $680.0 million in FHLB advances and a decrease of $14.4 million in other liabilities, partially offset by increases of $497.8 million in deposits (including mortgage escrow accounts), $62.6 million in subordinated debt and $22.0 million in derivative cash collateral.

Subordinated debt increased $62.6 million during the six months ended June 30, 2024, to $262.8 million at period end, due to the Company raising $65.0 million of gross proceeds from a registered public offering of its 9.000% fixed-to-floating rate subordinated notes due 2034 (the “Notes”).

Subsequently, on July 9, 2024, the Company issued and sold an additional $9.8 million of Notes, pursuant to an overallotment option granted to the underwriters of the offering.

Including the overallotment option, the total gross proceeds from the offering were $74.8 million, before discounts and estimated offering expenses.

Stockholders’ Equity .

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.

Stockholders’ equity increased $24.4 million during the six months ended June 30, 2024, to $1.25 billion at period end, primarily due to net income of $36.2 million and other comprehensive income of $8.8 million, partially offset by common stock dividends of $19.5 million, and preferred stock dividends of $3.6 million.

Comparison of Operating Results for the Three Months Ended June 30, 2024 and 2023

Net income was $18.5 million during the three months ended June 30, 2024, compared to net income of $27.5 million for the three months ended June 30, 2023.

During the three months ended June 30, 2024, net interest income decreased by $4.7 million, the credit loss provision increased by $4.7 million, non-interest expense increased by $3.5 million, non-interest income increased by $1.4 million, and income tax expense decreased by $2.5 million, compared to the three months ended June 30, 2023.

The discussion of net interest income for the three months ended June 30, 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.

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.

Net loan costs included in interest income were $7 thousand during the three months ended June 30, 2024.

Net loan fees included in interest income were $363 thousand during the three months ended June 30, 2023.

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

Analysis of Net Interest Income

Three Months Ended March 31,

Three Months Ended June 30,

(Dollars in thousands)

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Net interest income

Net interest spread (4)

Net interest rate spread (4)

Net interest-earning assets

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

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

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

(2) Includes mortgage escrow 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.

(6) At June 30, 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 March 31, 2024

Compared to Three Months Ended March 31, 2023

Rate/Volume Analysis

Three Months Ended June 30, 2024

Compared to Three Months Ended June 30, 2023

Increase / (Decrease) Due to:

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Net change in net interest income

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

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

Net interest income was $75.5 million during the three months ended June 30, 2024, a decrease of $4.7 million from the three months ended June 30, 2023.

Average interest-earning assets were $12.62 billion for the three months ended June 30, 2024, a decrease of $264.0 million from $12.89 billion for the three months ended June 30, 2023.

Net interest margin was 2.41% during the three months ended June 30, 2024, down from 2.50% during the three months ended June 30, 2023.

Interest Income.

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.

Interest income was $159.4 million during the three months ended June 30, 2024, compared to $152.1 million during the three months ended June 30, 2023.

During the three months ended June 30, 2024, interest income increased $7.3 million from the three months ended June 30, 2023, primarily reflecting increases in interest income of $6.2 million on business loan income, $2.2 million on non-owner-occupied loan income, $1.3 million on one-to-four family loan income and $652 thousand on multifamily loan income.

The increased interest income on business loans was due to a $140.5 million increase in the average balances and a 67-basis point increase in the yield of such loans in the period.

During the three months ended June 30, 2024, there was a recovery of interest income from a loan that was previously on non-accrual status in the amount of $1.3 million.

The increased interest income on non-owner-occupied loan income was related to an increase of $21.3 million in the average balances and a 25-basis point increase in the yield of such loans in the period.

The increased interest income on one-to-four family loans was related to a 33-basis point increase in the yield and a $57.7 million increase in the average balances of such loans in the period.

The increased interest income on multifamily loans was related to a 26-basis point increase in the yield, partially offset by a decrease of $166.5 million 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 $83.9 million during the three months ended June 30, 2024, compared to $71.9 million during the three months ended June 30, 2023.

During the three months ended June 30, 2024, interest expense increased $12.0 million, primarily reflecting an increase in interest expense of $20.3 million on deposits.

The increased interest expense on deposits primarily reflects a $782.2 million increase in average balances of money market accounts and a 112-basis point increase in rates paid on such deposits, a $56.5 million increase in average balances of savings accounts and a 92-basis point increase in rates paid on such deposits, and a 75-basis point increase in rates paid on CDs, partially offset by a decrease of $152.6 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 provision of $5.6 million during the three months ended June 30, 2024, compared to a credit loss provision of $892 thousand for the three months ended June 30, 2023.

The $5.6 million credit loss provision for the three months ended June 30, 2024, was primarily associated with increased provisioning for our pooled multifamily loan portfolio.

The $892 thousand credit loss provision for the three months ended June 30, 2023, was primarily 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 Merger in 2021.

Non-Interest Income.

Non-interest income was $11.8 million during the three months ended June 30, 2024, compared to $10.4 million during the three months ended June 30, 2023.

During the three months ended June 30, 2024, non-interest income increased $1.4 million from the three months ended June 30, 2023, reflecting an increase of $3.7 million from gain on sale of Bank’s premises, partially offset by a decrease of $1.4 million related to loan level derivative income.

Non-Interest Expense.

Non-interest expense was $55.7 million during the three months ended June 30, 2024, compared to $52.2 million during the three months ended June 30, 2023.

During the three months ended June 30, 2024, non-interest expense increased $3.5 million from the three months ended June 30, 2023, primarily due to a $2.3 million increase in salaries and employee benefits and a $1.1 million increase in professional services.

Non-interest expense was 1.66% and 1.53% of average assets during the three months ended June 30, 2024 and 2023, respectively.

Income Tax Expense.

Income tax expense was $7.6 million during the three months ended June 30, 2024, compared to income tax expense of $10.0 million during the three months ended June 30, 2023.

The reported effective tax rate for the three months ended June 30, 2024 was 29.0%, and 26.8% for the three months ended June 30, 2023.

Comparison of Operating Results for the Six Months Ended June 30, 2024 and 2023

Net income was $36.2 million during the six months ended June 30, 2024, compared to net income of $64.8 million for the six months ended June 30, 2023.

During the six months ended June 30, 2024, net interest income decreased by $18.9 million, credit loss provision increased by $13.6 million, non-interest expense increased by $8.5 million, non-interest income increased by $2.9 million, and income tax expense decreased by $9.5 million, compared to the six months ended June 30, 2023.

The discussion of net interest income for the six months ended June 30, 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.

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.

Net loan costs included in interest income were $304 thousand during the six months ended June 30, 2024.

Net loan fees included in interest income were $655 thousand during the six months ended June 30, 2023.

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

Analysis of Net Interest Income

Six Months Ended June 30,

(Dollars in thousands)

Interest-earning assets:

Business loans (1) (3) (6)

One-to-four family residential, including condo and coop (3) (6)

Multifamily residential and residential mixed-use (3) (6)

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

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)

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 rate 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 and owner-occupied commercial real estate 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.

Rate/Volume Analysis

Six Months Ended June 30, 2024

Compared to Six Months Ended June 30, 2023

Increase / (Decrease) Due to:

Interest-earning assets:

Business loans (1) (2)

One-to-four family residential, including condo and coop

Multifamily residential and residential mixed-use

Non-owner-occupied commercial real estate

Other short-term investments

Total interest-earning assets

Interest-bearing liabilities:

Interest-bearing checking

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 and owner-occupied commercial real estate 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 $147.0 million during the six months ended June 30, 2024, a decrease of $18.9 million from the six months ended June 30, 2023.

Average interest-earning assets were $12.82 billion for the six months ended June 30, 2024, an increase of $32.7 million from $12.79 billion for the six months ended June 30, 2023.

Net interest margin was 2.31% during the six months ended June 30, 2024, down from 2.62% during the six months ended June 30, 2023.

Interest Income.

Interest income was $320.4 million during the six months ended June 30, 2024, compared to $292.8 million during the six months ended June 30, 2023.

During the six months ended June 30, 2024, interest income increased $27.6 million from the six months ended June 30, 2023, primarily reflecting increases in interest income of $11.8 million on business loan income, $7.3 million on non-owner-occupied loan income, $4.3 million on multifamily loan income, $3.5 million on one-to-four family loan income and $4.3 million on other short-term investments.

The increased interest income on business loans was due to a 65-basis point increase in the yield and an increase of $124.0 million in the average balances of such loans in the period.

During the six months ended June 30, 2024, there was a recovery of interest income from a loan that was previously on non-accrual status in the amount of $1.3 million.

The increased interest income on non-owner-occupied loan income was related to a 37-basis point increase in the yield and an increase of $37.8 million in the average balances of such loans in the period.

1 unchanged sentence

The increased interest income on one-to-four family loans was related to a 42-basis point increase in the yield and a $77.9 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.

The increased interest income on short-term investments was to a 93-basis point increase in the yield and a $84.2 million increase in the average balances of such short-term investments in the period.

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

Interest Expense.

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.

Interest expense was $173.4 million during the six months ended June 30, 2024, compared to $126.8 million during the six months ended June 30, 2023.

During the six months ended June 30, 2024, interest expense increased $46.6 million, primarily reflecting an increase in interest expense of $56.1 million on deposits.

The increased interest expense on deposits primarily reflects a 135-basis point increase in rates paid on money market accounts and a $721.2

$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.

million increase in average balances of such deposits, a 113-basis point increase in rates paid on savings accounts and an increase of $49.3 million in average balances of such deposits, and a 127-basis point increase in rates paid on CDs and an increase of $166.7 million in average balances of such deposits.

Provision for Credit Losses.

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.

We recorded a credit loss provision of $10.8 million during the six months ended June 30, 2024, compared to a credit loss recovery of $2.8 million for the six months ended June 30, 2023.

The $10.8 million credit loss provision for the six months ended June 30, 2024, was primarily associated with increased provisioning for our pooled multifamily loan portfolio.

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.

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 income was $22.3 million during the six months ended June 30, 2024, compared to $19.4 million during the six months ended June 30, 2023.

During the six months ended June 30, 2024, non-interest income increased $2.9 million from the six months ended June 30, 2023, primarily reflecting an increase of $6.7 million from gain on sale of Bank’s premises, partially offset by a decrease of $4.1 million related to loan level derivative income.

Non-Interest Expense.

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.

Non-interest expense was $108.2 million during the six months ended June 30, 2024, compared to $99.7 million during the six months ended June 30, 2023.

During the six months ended June 30, 2024, non-interest expense increased $8.5 million from the six months ended June 30, 2023, primarily due to a $7.7 million increase in salaries and employee benefits.

Non-interest expense was 1.59% and 1.47% of average assets during the six months ended June 30, 2024 and 2023, respectively.

Income Tax Expense.

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.

Income tax expense was $14.1 million during the six months ended June 30, 2024, compared to income tax expense of $23.7 million during the six months ended June 30, 2023.

The reported effective tax rate for the six months ended June 30, 2024, was 28.1%, and 26.8% for the six months ended June 30, 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