What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-05 compared with 2024-08-01 · 131 added, 132 removed, 354 unchanged (43% of the section changed)

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Per Share Data:

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Liquidity and Capital Resources

The Board of Directors of the Bank has approved a liquidity policy that it reviews and updates at least annually.

The Board of Directors has approved a liquidity policy that it reviews and updates at least annually.

Senior management is responsible for implementing the policy.

The Bank’s Asset Liability Committee (“ALCO”) is responsible for general oversight and strategic implementation of the policy and management of the appropriate departments are designated responsibility for implementing any strategies established by ALCO.

On a daily basis, appropriate senior management receives a current cash position report and one-week forecast to ensure that all short-term obligations are timely satisfied and that adequate liquidity exists to fund future activities.

Reports detailing the Bank’s liquidity reserves are presented to appropriate senior management on a monthly basis, and the Board of Directors at each of its meetings.

On a daily basis, appropriate senior management receives a current cash position report and 30-day forecast to ensure that all short-term obligations are timely satisfied, and that adequate liquidity exists to fund future activities.

Reports detailing the Bank’s liquidity reserves are presented to appropriate senior management on at least a monthly basis, and the Board of Directors at each of its meetings.

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

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

A forecast of cash flow data for the upcoming 12 months is presented to the Board of Directors no less than annually.

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

Liquidity is primarily needed to meet customer borrowing commitments and deposit withdrawals, either on demand or on contractual maturity, to repay borrowings as they mature, to fund current and planned expenditures and to make new loans and investments as opportunities arise.

The Bank’s primary sources of funding for its lending and investment activities include deposits, loan and MBS payments, investment security principal and interest payments and advances from the FHLBNY.

The Bank’s primary sources of funding for its lending and investment activities include deposits, loan, investment security principal and interest payments and advances from the FHLBNY.

The Bank may also sell or securitize selected multifamily residential, mixed-use or one-to-four family residential real estate loans to private sector secondary market purchasers and has in the past sold such loans to FNMA and FHLMC.

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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 $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.

Total deposits (including escrow) increased $886.7 million during the nine months ended September 30, 2024, compared to an increase of $382.1 million during the nine months ended September 30, 2023.

Within deposits, core deposits ( i.e., non-CDs) increased $1.08 billion during the nine months ended September 30, 2024 compared to an increase of $55.2 million during the nine months ended September 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 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.

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

At September 30, 2024, the Bank had remaining borrowing capacity of $1.98 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 $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.

The Bank reduced its outstanding FHLBNY advances by $805.0 million during the nine months ended September 30, 2024, compared to a $8.0 million decrease during the nine months ended September 30, 2023.

“FHLBNY Advances” for further information.

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 totaled $272.3 million at September 31, 2024 compared to $200.2 million at December 31, 2023.

The increase was due to the Company’s issuance of subordinated notes that are described in more detail in Note 13.

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

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.

During the nine months ended September 30, 2024 and 2023, business loan originations totaled $236.1 million and $209.7 million, respectively.

During the nine months ended September 30, 2024, and 2023, real estate loan originations (excluding owner-occupied commercial real estate) totaled $147.2 million and $604.7 million, respectively.

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

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

At June 30, 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 September 30, 2024, both the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered "well capitalized" for all regulatory purposes.

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

Actual Ratios at June 30, 2024

Actual Ratios at September 30, 2024

To Be Categorized as

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

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.

During the nine months ended September 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 nine months ended September 30, 2023.

As of September 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 $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.

The Holding Company paid $5.5 million in cash dividends on its preferred stock during the nine months ended September 30, 2024, and 2023, respectively.

The Holding Company paid $28.5 million and $28.0 million in cash dividends on its common stock during the nine months ended September 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 June 30, 2024, the Bank had $189.0 million of firm loan commitments that were accepted by the borrowers.

As of September 30, 2024, the Bank had $63.8 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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We obtain an updated appraisal to calculate a potential collateral shortfall and to reserve appropriately for the potential loss.

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

Upon completion of a foreclosure action, 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.

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Non-accrual Loans

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.

Within our held-for-investment loan portfolio, non-accrual loans totaled $49.5 million at September 30, 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)

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

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

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

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

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

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

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

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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 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.

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

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

Past Due Loans

Loans Delinquent 30 to 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.

At September 30, 2024, there were $8.2 million of loans between 30 and 59 days past due.

At December 31, 2023, there were $12.0 million of loans between 30 and 59 days past due.

The 30 to 59-day delinquency levels fluctuate monthly and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.

Loans Delinquent 60 to 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.

At September 30, 2024, there were $30.0 million of loans between 60 and 89 days past due.

At December 31, 2023, there were $1.3 million of loans 60 and 89 days past due.

The 60 to 89-day delinquency levels fluctuate monthly and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.

Accruing Loans 90 Days or More Past Due

There were no accruing loans 90 days or more past due at June 30, 2024 or at December 31, 2023.

There were no accruing loans 90 days or more past due at September 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 $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.

The Bank maintains an allowance, recorded in other liabilities, associated with unfunded loan commitments accepted by the borrower.

The amount of our allowance was $3.1 million and $2.7 million at September 30, 2024 and December 31, 2023, respectively.

Any increases or reductions in this allowance are recognized in provision for credit losses.

Allowance for Credit Losses

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.

Provision for credit losses for the nine months ended September 30, 2024 was $22.4 million, compared to a credit loss recovery of $950 thousand for the nine months ended September 30, 2023.

The $22.4 million credit loss provision for the nine months ended September 30, 2024, was related to a combination of factors including, provisioning for growth and individually analyzed loans in the business loan portfolio as well as provisioning for the pooled multifamily loan portfolio.

The $950 thousand credit loss recovery for the nine months ended September 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 nine months ended September 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.

June 30, 2024

September 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 Six Months Ended June 30,

At or for the Nine Months Ended September 30,

(Dollars in thousands)

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

Comparison of Financial Condition at June 30, 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.

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

Assets totaled $13.75 billion at September 30, 2024, $110.5 million above their level at December 31, 2023, primarily due to increases of $168.5 million in cash and due from banks, $105.1 million in the loan portfolio and $22.6 million in BOLI, partially offset by decreases of $113.8 million in total investment securities, $34.5 million in restricted stock, $16.5 million in derivative assets and $9.8 million in premises and fixed assets.

Total loans, net of allowance increased $105.1 million during the nine months ended September 30, 2024, to $10.81 billion at period end.

During the nine months ended September 30, 2024, we had loan originations of $383.4 million.

Total investment securities decreased $113.8 million during the nine months ended September 30, 2024, to $1.37 billion at period end, primarily due to proceeds from principal payments, calls and maturities of $167.1 million, offset by purchases of $21.0 million and a decrease in unrealized losses of $32.3 million.

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

Premises and fixed assets decreased $9.8 million during the nine months ended September 30, 2024, to $35.1 million at period end, primarily due to the sale of two Bank owned buildings.

Total restricted stock decreased $34.5 million during the nine months ended September 30, 2024, to $64.2 million at period end, primarily due to a reduction in FHLBNY advances.

Liabilities .

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.

Total liabilities increased $72.8 million during the nine months ended September 30, 2024, to $12.48 billion at period end, primarily due to an increase of $886.7 million in deposits (including mortgage escrow accounts) and an increase of $72.1 million in subordinated debt, partially offset by decreases of $805.0 million in FHLBNY advances, $39.1 million in derivative cash collateral and $23.2 million in derivative liabilities.

Subordinated debt increased $72.1 million during the nine months ended September 30, 2024, to $272.3 million at period end, due to the Company raising $74.8 million of gross proceeds from a registered public offering of its 9.000% fixed-to-floating rate subordinated notes due 2034 (the “Notes”).

Stockholders’ Equity .

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.

Stockholders’ equity increased $37.7 million during the nine months ended September 30, 2024, to $1.26 billion at period end, primarily due to net income of $49.5 million and other comprehensive income of $18.6 million, partially offset by common stock dividends of $29.3 million, and preferred stock dividends of $5.5 million.

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

Net income was $13.3 million during the three months ended September 30, 2024, compared to net income of $15.0 million for the three months ended September 30, 2023.

During the three months ended September 30, 2024, net interest income increased by $3.4 million, the credit loss provision increased by $9.8 million, non-interest income decreased by $297 thousand, non-interest expense decreased by $1.8 million, and income tax expense decreased by $3.2 million, compared to the three months ended September 30, 2023.

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

Net loan fees included in interest income were $849 thousand during the three months ended September 30, 2024.

Net loan fees included in interest income were $320 thousand during the three months ended September 30, 2023.

The increase in net loan fees was primarily due to increases in prepayment penalty fees and deferred fees on loans in 2024.

Analysis of Net Interest Income

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in thousands)

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

(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.

(6) At September 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 June 30, 2024

Compared to Three Months Ended June 30, 2023

Three Months Ended September 30, 2024

Compared to Three Months Ended September 30, 2023

Increase / (Decrease) Due to:

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Net interest income.

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.

Net interest income was $79.9 million during the three months ended September 30, 2024, an increase of $3.4 million from the three months ended September 30, 2023.

Average interest-earning assets were $12.73 billion for the three months ended September 30, 2024, a decrease of $250.0 million from $12.98 billion for the three months ended September 30, 2023.

Net interest margin was 2.50% during the three months ended September 30, 2024, up from 2.34% during the three months ended September 30, 2023.

Interest Income.

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.

Interest income was $164.2 million during the three months ended September 30, 2024, compared to $157.8 million during the three months ended September 30, 2023.

During the three months ended September 30, 2024, interest income increased $6.4 million from the three months ended September 30, 2023, primarily reflecting increases in interest income of $8.3 million on business loans, $1.9 million on one-to-four family loans and $620 thousand on non-owner-occupied loans.

The increased interest income on business loans was due to a $349.7 million increase in the average balances and a 37-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 62-basis point increase in the yield and a $44.5 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.

The increased interest income on non-owner-occupied loan income was related to a 22-basis point increase in the yield, partially offset by a decrease of $85.2 million in the average balances of such loans in the period.

Increased yields on loans 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.

Interest expense was $84.3 million during the three months ended September 30, 2024, compared to $81.4 million during the three months ended September 30, 2023.

During the three months ended September 30, 2024, interest expense increased $2.9 million, primarily reflecting an increase in interest expense of $11.5 million on deposits and an increase of $1.8 million in interest expense on subordinated debt, partially offset by a $9.9 million decrease in interest expense on FHLBNY advances.

The increased interest expense on deposits primarily reflects a 65-basis point increase in rates paid on money market deposits and a $796.3 million increase in average balances of such deposits.

The increased interest expense on subordinated debt was due to a $71.2 million increase in the average balance of such debt and a 125-basis point increase in the cost of subordinated debt in the period.

The decreased interest expense on FHLBNY advances was due to a $722.1 million decrease in the average balance of such advances and a 121-basis point decrease in the cost of FHLBNY advances in the period.

The increases in interest expense on money market accounts was 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.

We recorded a credit loss provision of $11.6 million during the three months ended September 30, 2024, compared to a credit loss provision of $1.8 million for the three months ended September 30, 2023.

The $11.6 million credit loss provision for the three months ended September 30, 2024, was primarily associated with increased provisioning for the Bank’s business loan portfolio.

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.

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 income was $7.6 million during the three months ended September 30, 2024, compared to $7.9 million during the three months ended September 30, 2023.

During the three months ended September 30, 2024, non-interest income decreased $297 thousand from the three months ended September 30, 2023, reflecting a decrease of $651 thousand related to loan level derivative income, partially offset by an increase of $338 thousand from fair value change in equity securities and loans held for sale.

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.

Non-interest expense was $57.7 million during the three months ended September 30, 2024, compared to $59.5 million during the three months ended September 30, 2023.

During the three months ended September 30, 2024, non-interest expense decreased $1.8 million from the three months ended September 30, 2023, primarily due to a decrease of $8.6 million in severance expense, partially offset by a $5.6 million increase in salaries and employee benefits.

Non-interest expense was 1.71% and 1.73% of average assets during the three months ended September 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.

Income tax expense was $4.9 million during the three months ended September 30, 2024, compared to income tax expense of $8.1 million during the three months ended September 30, 2023.

The reported effective tax rate for the three months ended September 30, 2024 was 26.9%, and 35.1% for the three months ended September 30, 2023.

The September 30, 2023 effective tax rate reflected non-deductible severance expense in the period.

Comparison of Operating Results for the Nine Months Ended September 30, 2024 and 2023

Net income was $49.5 million during the nine months ended September 30, 2024, compared to net income of $79.8 million for the nine months ended September 30, 2023.

During the nine months ended September 30, 2024, net interest income decreased by $15.5 million, credit loss provision increased by $23.3 million, non-interest expense increased by $6.8 million, non-interest income increased by $2.6 million, and income tax expense decreased by $12.7 million, compared to the nine months ended September 30, 2023.

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

2 unchanged sentences

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.

Net loan fees

included in interest income were $545 thousand during the nine months ended September 30, 2024.

Net loan fees included in interest income were $975 thousand during the nine months ended September 30, 2023.

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

Analysis of Net Interest Income

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in thousands)

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

Rate/Volume Analysis

Six Months Ended June 30, 2024

Compared to Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024

Compared to Nine Months Ended September 30, 2023

Increase / (Decrease) Due to:

17 unchanged sentences

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.

Net interest income was $227.0 million during the nine months ended September 30, 2024, a decrease of $15.5 million from the nine months ended September 30, 2023.

Average interest-earning assets were $12.79 billion for the nine months ended September 30, 2024, a decrease of $62.5 million from $12.85 billion for the nine months ended September 30, 2023.

Net interest margin was 2.37% during the nine months ended September 30, 2024, down from 2.52% during the nine months ended September 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.

Interest income was $484.7 million during the nine months ended September 30, 2024, compared to $450.6 million during the nine months ended September 30, 2023.

During the nine months ended September 30, 2024, interest income increased $34.1 million from the nine months ended September 30, 2023, primarily reflecting increases in interest income of $20.0 million on business loans, $7.9 million on non-owner-occupied loans, $5.3 million on one-to-four family loans, $4.0 million on multifamily loans, and $2.0 million on other short-term investments.

The increased interest income on business loans was due to a $199.7 million increase in the average balance and a 56-basis point increase in the yield of such loans in the period.

The increased interest income on non-owner-occupied loan income was related to a 32-basis point increase in the yield, partially offset by a decrease of $3.6 million in average balances of such loans in the period.

The increased interest income on multifamily loans was related to a 30-basis point increase in the yield, partially offset by a decrease of $151.1 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 48-basis point increase in the yield and a $66.5 million increase in the average balances of such loans in the period.

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.

The increased interest income on short-term investments was related to a 51-basis point increase in the yield and a $7.2 million increase in the average balances of such short-term investments in the period.

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

Interest Expense.

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.

Interest expense was $257.7 million during the nine months ended September 30, 2024, compared to $208.2 million during the nine months ended September 30, 2023.

During the nine months ended September 30, 2024, interest expense increased $49.5 million, primarily reflecting an increase in interest expense of $67.6 million on deposits, an increase of $1.8 million on subordinated debt and an increase of $340 thousand in the interest expense on derivative cash collateral, partially offset by a $20.0 million decrease in interest expense on FHLBNY advances.

The increased interest expense on deposits primarily reflects a 110-basis point increase in rates paid on money market accounts and a

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.

$746.1 million increase in average balances of such deposits, a 83-basis point increase in rates paid on savings accounts, partially offset by a decrease of $47.9 million in average balances of such deposits, and a 91-basis point increase in rates paid on CDs and an increase of $22.8 million in average balances of such deposits.

The increased interest expense on subordinated debt was due to a $24.5 million increase in the average balance of such debt and a 51-basis point increase in the cost of subordinated debt in the period.

The increased interest expense on derivative cash collateral reflects 97-basis point increase in rates paid on derivative cash collateral, partially offset by a decrease of $15.5 million in average balances of such cash collateral.

The decreased interest expense on FHLBNY advances was due to a $514.0 million decrease in the average balance of such advances and a 48-basis point decrease in the cost of such FHLBNY advances in the period .

Provision for Credit Losses.

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.

We recorded a credit loss provision of $22.4 million during the nine months ended September 30, 2024, compared to a credit loss recovery of $950 thousand for the nine months ended September 30, 2023.

The $22.4 million credit loss provision for the nine months ended September 30, 2024, was primarily associated with increased provisioning for the Bank’s business and multifamily loan portfolios.

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.

Non-Interest 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 income was $29.9 million during the nine months ended September 30, 2024, compared to $27.3 million during the nine months ended September 30, 2023.

During the nine months ended September 30, 2024, non-interest income increased $2.6 million from the nine months ended September 30, 2023.

The increase was primarily due to an increase of $6.7 million from a gain on sale of the Bank’s premises, partially offset by a decrease of $4.7 million related to loan level derivative income.

In addition, the prior period included $1.4 million of net losses on sale of securities.

Non-Interest Expense.

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.

Non-interest expense was $165.9 million during the nine months ended September 30, 2024, compared to $159.2 million during the nine months ended September 30, 2023.

During the nine months ended September 30, 2024, non-interest expense increased $6.8 million from the nine months ended September 30, 2023, primarily due to a $13.3 million increase in salaries and employee benefits, partially offset by a $9.0 million decrease in severance expense.

Non-interest expense was 1.63% and 1.56% of average assets during the nine months ended September 30, 2024 and 2023, respectively.

Income Tax Expense.

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.

Income tax expense was $19.0 million during the nine months ended September 30, 2024, compared to income tax expense of $31.8 million during the nine months ended September 30, 2023.

The reported effective tax rate for the nine months ended September 30, 2024, was 27.8%, and 28.5% for the nine months ended September 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