6 unchanged sentences
● We are subject to the various risks associated with our banking business and operations, including, among others, credit, market, liquidity, interest rate and compliance risks, which may have an adverse effect on our business, financial condition and results of operations if we are unable to manage such risks.
−Removed: ● SBA and other government guaranteed lending are an increasingly important part of our business, and changes to SBA or other government guaranteed lending programs, or the rules governing such programs or other government guaranteed lending programs, may adversely affect our profitability.
+Added: ● SBA and other government guaranteed lending programs are an increasingly important part of our business, and changes to SBA or other government guaranteed lending programs, including funding for such programs, or the rules governing such programs or other government guaranteed lending programs, may adversely affect our profitability.
In addition, we may incur greater risk on our SBA and other government guaranteed lending as we seek to expand our guaranteed lending activities outside of our primary market area.
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Inflationary pressures and rising prices may affect our results of operations and financial condition.
−Removed: Inflation began to rise sharply at the end of 2021 and has remained at an elevated level through 2023.
+Added: Inflation rose sharply at the end of 2021 and remained at an elevated level through 2024.
Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
1 unchanged sentence
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition.
−Removed: Our stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.
−Removed: Further, if we were unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, which have come under greater scrutiny in light of recent bank failures, we may experience a material adverse effect on our financial condition and results of operations.
−Removed: On March 9, 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations.
−Removed: On March 10, 2023, Silicon Valley Bank, Santa Clara, California, was closed by the California Department of Financial Protection and Innovation (the “DFPI”), on March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services and on May 1, 2023, First Republic Bank, San Francisco, California, was closed by the DFPI, and in each case the FDIC was appointed receiver for the failed institution.
−Removed: These banks had elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits.
−Removed: These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.
−Removed: These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of their deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management.
If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, we may experience a material adverse effect on our financial condition and results of operations.
+Added: If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, we may experience a material adverse effect on our financial condition and results of operations.
We must maintain sufficient funds to respond to the needs of depositors and borrowers.
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Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff.
−Removed: Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments, which may include Federal Home Loan Bank of New York advances, federal funds purchased and brokered certificates of deposit.
+Added: Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments, which may include Federal Home Loan Bank of New York advances, Federal Reserve Bank of New York’s discount window advances, federal funds purchased and brokered certificates of deposit.
Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources.
Any decline in available funding could adversely impact our ability to originate loans, invest in securities, pay our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.
−Removed: A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed on us by regulators.
+Added: A lack of liquidity could also attract increased regulatory scrutiny and result in potential restraints imposed on us by regulators.
Depending on the capitalization status and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits.
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If alternative funding sources were no longer available to us, we may need to sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets.
−Removed: As of September 30, 2023, we had a net unrealized loss of $2.1 million on our available for-sale investment securities portfolio as a result of the rising interest rate environment.
−Removed: Our investment securities totaled $15.0 million, or 0.7% of total assets, at September 30, 2023.
+Added: As of December 31, 2024, we had a net unrealized loss of $1.3 million on our available for-sale investment securities portfolio as a result of the higher interest rate environment.
+Added: Our investment securities totaled $87.5 million, or 3.8% of total assets, at December 31, 2024.
The details of this portfolio are included in Note 2 to the consolidated financial statements.
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In addition, the market value of the real estate securing loans as collateral could be adversely affected by unfavorable changes in market and economic conditions.
−Removed: As of September 30, 2023, 77% of our real estate loan portfolio was secured by real estate located in the five boroughs of New York City and Nassau County, New York.
+Added: As of December 31, 2024, 67% of our commercial real estate loan portfolio was secured by real estate located in the five boroughs of New York City and Nassau County, New York.
Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio and have an adverse impact on our revenues and financial condition.
−Removed: In particular, we may experience increased loan delinquencies, which could result in a higher provision for loan losses and increased charge-offs.
+Added: In particular, we may experience increased loan delinquencies, which could result in a higher provision for credit losses and increased charge-offs.
Any sustained period of increased non-payment, delinquencies, foreclosures or losses caused by adverse market or economic conditions in our market area could adversely affect the value of our assets, revenues, financial condition and results of operations.
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We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability.
−Removed: At September 30, 2023, approximately $1.8 billion, or 95%, of our total loan portfolio was secured by real estate, almost all of which is located in our primary lending market.
+Added: At December 31, 2024, approximately $1.8 billion, or 91%, of our total loan portfolio was secured by real estate, almost all of which is located in our primary lending market.
Future declines in the real estate values in the New York metro area and Nassau County and surrounding markets could significantly impair the value of the particular collateral securing our loans and our ability to sell the collateral upon foreclosure for an amount necessary to satisfy the borrower’s obligations to us.
−Removed: This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
+Added: This could require increasing our allowance for credit losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and repossessed personal property may not accurately describe the net value of the asset.
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In addition, we rely on appraisals and other valuation techniques to establish the value of our other real estate owned (“OREO”) and personal property that we acquire through foreclosure proceedings and to determine certain loan impairments.
−Removed: If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our OREO, and our allowance for loan losses may not reflect accurate loan impairments.
+Added: If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our OREO, and our allowance for credit losses may not reflect accurate loan impairments.
This could have an adverse effect on our business, financial condition or results of operations.
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Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we would be exposed to the risks inherent in the ownership of real estate.
−Removed: Although we held no OREO properties at September 30, 2023, it is possible that in future periods we may take title to OREO properties in the event of defaults on outstanding loans.
+Added: Although we held no OREO properties at December 31, 2024, it is possible that in future periods we may take title to OREO properties in the event of defaults on outstanding loans.
The amount that we, as a mortgagee, may realize after a default depends on factors outside of our control, including, but not limited to, general or local economic conditions, environmental cleanup liabilities, assessments, interest rates, real estate tax rates, operating expenses of the mortgaged properties, our ability to obtain and maintain adequate occupancy of the properties, zoning laws, governmental and regulatory rules, and natural disasters.
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● an increase in the level of nonperforming and classified loans;
−Removed: ● an increase in provisions for loan losses and loan charge-offs;
+Added: ● an increase in provisions for credit losses and loan charge-offs;
● a decrease in net interest income derived from our lending and deposit gathering activities;
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We generally retain the non-guaranteed portions of the SBA loans that we originate.
−Removed: Consequently, as of September 30, 2023, we held $115.5 million of SBA loans on our balance sheet, $90.6 million of which consisted of the non-guaranteed portion of SBA loans and $24.9 million consisted of the guaranteed portion of SBA loans.
+Added: Consequently, as of December 31, 2024, we held $187.4 million of SBA loans on our balance sheet, $134.1 million of which consisted of the non-guaranteed portion of SBA loans and $53.3 million consisted of the guaranteed portion of SBA loans.
The non-guaranteed portion of SBA loans have a higher degree of credit risk and risk of loss as compared to the guaranteed portion of such loans.
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Imposition of limits by bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings.
−Removed: In 2006, the OCC, the FDIC, and the FRB, or collectively, the Agencies, issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the “CRE Guidance.” Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
−Removed: Our commercial real estate loan balance has increased 7% during fiscal year 2023 and commercial real estate loans represent 448% of our risk-based capital at September 30, 2023, a decrease from 453% at September 30, 2022.
+Added: In 2006, the OCC, the FDIC, and the FRB, or collectively, the Agencies, issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the “CRE Guidance.” Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure will receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
+Added: Our commercial real estate and multi-family loans balance have decreased 4% combined for the year ended December 31, 2024 and commercial real estate loans represent 385% of our risk-based capital at December 31, 2024, a decrease from 432% at December 31, 2023 and 448% at September 30, 2023.
In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending, or the “2015 Statement.” In the 2015 Statement, the Agencies, among other things, indicated the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward.
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Our loan portfolio includes a significant concentration of one- to four- family residential mortgage loans.
−Removed: As of September 30, 2023, we had $657.3 million in one- to four- family residential mortgage loans, representing 35% of our total loan portfolio.
+Added: As of December 31, 2024, we had $729.3 million in one- to four- family residential mortgage loans, representing 37% of our total loan portfolio.
Approximately 91% of these loans are secured by properties in the five boroughs of New York City and Nassau County, New York and 66% of these loans are rental properties and are not owner-occupied.
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Non-qualified mortgage loans are considered to have a higher degree of risk and are less liquid than qualified mortgage loans.
−Removed: For the years ended September 30, 2023 and 2022, we originated $196.0 million and $182.7 million in non-qualified mortgage loans, respectively.
−Removed: During the years ended September 30, 2023 and 2022, we sold into the secondary market $0 and $19.4 million, respectively of our non-qualified mortgages.
−Removed: We also have a concentration in the secondary market for our non-qualified mortgage loans, as a substantial portion of our non-qualified mortgage loans have historically been sold to one purchaser.
−Removed: If this purchaser is unwilling to purchase loans from us in the future, our resale market may decline and we may have difficulty selling our non-conforming residential mortgage loans, which could decrease our non-interest income as well as limit the number of non-conforming residential mortgage loans we can originate without excess interest rate risk.
+Added: For the year ended December 31, 2024 and fiscal year ended September 30, 2023, we originated $130.4 million and $196.0 million in non-qualified mortgage loans, respectively.
+Added: During the year ended December 31, 2024 we sold into the secondary market $37.6 million of our non-qualified mortgages.
+Added: There were no such sales for the fiscal year ended September 30, 2023.
Although we have developed underwriting standards and procedures designed to reduce the risk of loss, we can provide no assurance that these standards and procedures will be effective in reducing losses.
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Economic downturns and other events that negatively impact our market areas could cause us to incur substantial credit losses that could negatively affect our financial condition and results of operations.
−Removed: Our allowance for loan losses may not be adequate to cover actual losses.
−Removed: We maintain an allowance for loan losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio.
−Removed: As of September 30, 2023, our allowance for loan losses totaled $14.7 million, which represented approximately 0.78% of our total loans held for investment.
+Added: Our allowance for credit losses may not be adequate to cover actual losses.
+Added: We maintain an allowance for credit losses that represents management’s judgment of expected credit losses and risks inherent in our loan portfolio.
+Added: As of December 31, 2024, our allowance for credit losses totaled $22.8 million, which represented approximately 1.15% of our total loans held for investment.
The level of the allowance reflects management’s continuing evaluation of general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels, adequacy of collateral and historical peer charge-off data.
−Removed: The determination of the appropriate level of our allowance for loan losses is inherently highly subjective and requires management to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes.
−Removed: Our federal and state regulators, as an integral part of their examination process, review our methodology for calculating, and the adequacy of, our allowance for loan losses and may direct us to make additions to the allowance based on their judgments about information available to them at the time of their examination.
−Removed: Further, if actual charge-offs in future periods exceed the amounts allocated to our allowance for loan losses, we may need additional provisions for loan losses to restore the adequacy of our allowance for loan losses.
−Removed: While we believe our allowance for loan losses is appropriate for the risk identified in our loan portfolio, we cannot provide assurance that we will not further increase the allowance for loan losses, that it will be sufficient to address losses, or that regulators will not require us to increase this allowance.
+Added: The determination of the appropriate level of our allowance for credit losses is inherently highly subjective and requires management to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes.
+Added: Our federal and state regulators, as an integral part of their examination process, review our methodology for calculating, and the adequacy of, our allowance for credit losses and may direct us to make additions to the allowance based on their judgments about information available to them at the time of their examination.
+Added: Further, if actual charge-offs in future periods exceed the amounts allocated to our allowance for credit losses, we may need additional provisions for credit losses to restore the adequacy of our allowance for credit losses.
+Added: While we believe our allowance for credit losses is appropriate for the risk identified in our loan portfolio, we cannot provide assurance that we will not further increase the allowance for credit losses, that it will be sufficient to address losses, or that regulators will not require us to increase this allowance.
We also cannot be certain that actual results will be consistent with forecasts and assumptions used in our modeling.
Any of these occurrences could materially and adversely affect our financial condition and results of operations.
−Removed: The implementation of the Current Expected Credit Loss accounting standard could require us to increase our allowance for loan losses and may have a material adverse effect on our financial condition and results of operations.
−Removed: Effective October 1, 2023, we will be required to adopt the Financial Accounting Standards Board (the “FASB”) Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments , commonly referred to as “CECL.” CECL changes the allowance for loan losses methodology from an incurred loss concept to an expected loss concept, which is more dependent on future economic forecasts, assumptions and models than previous accounting standards and could result in increases in, and add volatility to, our allowance for credit losses and future provisions for credit losses.
−Removed: These forecasts, assumptions, and models are inherently uncertain and are based upon management’s reasonable judgment in light of information currently available.
−Removed: Our allowance for credit losses may not be adequate to absorb actual credit losses, and future provisions for credit losses could materially and adversely affect our operating results.
If our non-performing assets increase, our earnings will be adversely affected.
−Removed: At September 30, 2023, our non-performing assets, which consist of non-performing loans and OREO (of which we had none at September 30, 2023), were $15.1 million, or 0.70% of total assets.
+Added: At December 31, 2024, our non-performing assets, which consist of non-performing loans and OREO (of which we had none at December 31, 2024), were $16.4 million, or 0.71% of total assets.
Our non-performing assets adversely affect our net income in various ways:
● we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for OREO;
−Removed: ● we must provide for probable loan losses through a current period charge to the provision for loan losses;
+Added: ● we must provide for expected credit losses through a current period charge to the provision for credit losses;
● non-interest expense increases when we write down the value of properties in our OREO portfolio to reflect changing market values;
124 unchanged sentences
Increases in FDIC insurance premiums could adversely affect our earnings and results of operations.
−Removed: The deposits of our bank are insured by the FDIC up to legal limits and, accordingly, subject it to the payment of FDIC deposit insurance assessments as determined according to the calculation described in “Supervision and Regulation-Deposit Insurance.” Increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures.
+Added: The deposits of our bank are insured by the FDIC up to legal limits and, accordingly, subject it to the payment of FDIC deposit insurance assessments as determined according to the calculation described in “Supervision and Regulation-Deposit Insurance.” In addition, the FDIC has the ability to assess special assessments against insured depository institutions if required to recapitalize the DIF.
+Added: Increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures.
Any future special assessments, increases in assessment rates or required prepayments in FDIC insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could have a material adverse effect on our business, financial condition and results of operations.
5 unchanged sentences
The net deferred tax asset is measured by applying currently enacted income tax rates to the accounting period during which the tax benefit is expected to be realized.
−Removed: As of September 30, 2023, our net deferred tax asset was $1.5 million.
+Added: As of December 31, 2024, our net deferred tax asset was $1.6 million.
Failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions.
31 unchanged sentences
Our deposit services for businesses in the state licensed cannabis industry could expose us to liabilities and regulatory compliance costs.
−Removed: Commencing in fourth calendar quarter of 2023, we implemented specialized deposit and lending services intended for a limited number of state licensed medical-use cannabis business customers.
+Added: Commencing in fourth calendar quarter of 2023, we implemented specialized deposit and lending services intended for cannabis-related business customers (“CRBs”).
Medical use cannabis, as well as recreational use businesses, are legal in numerous states and the District of Columbia, including our primary markets of New York and New Jersey.
3 unchanged sentences
We have implemented a comprehensive control framework that includes written policies and procedures related to the on-boarding of such businesses and the monitoring and maintenance of such business accounts that comports with the FinCEN guidance.
−Removed: Additionally, our policies call for due diligence review of the cannabis business before the business is on-boarded, including confirmation that the business is properly licensed and maintains the license in good standing in the applicable state.
−Removed: Throughout the relationship, our policies call for continued monitoring of the business, including periodic site visits, confirmation that licenses are in good standing and reviews of business and compliance data, as applicable, to determine that the business continues to satisfy our requirements.
−Removed: The Bank may offer additional banking products and services to cannabis related customers in the future.
+Added: Additionally, our policies call for due diligence review of CRBs before they are on-boarded, including confirmation that businesses requiring licenses are properly licensed and maintain their licenses in good standing in the applicable state.
+Added: Throughout the relationships, our policies call for continued monitoring of the businesses, including periodic site visits, confirmation that licenses are in good standing and reviews of business and compliance data, as applicable, to determine that the businesses continue to satisfy our requirements.
+Added: The Bank may offer additional banking products and services to CRBs in the future.
While we believe our policies and procedures allow us to operate in compliance with the FinCEN guidelines, there can be no assurance that compliance with the FinCEN guidelines will protect us from federal prosecution or other regulatory sanctions.
54 unchanged sentences
If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results may be materially adversely affected.
−Removed: We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth.
−Removed: We have experienced rapid organic and acquisition-driven growth in recent periods.
−Removed: As a strategy, we have focused on growth by aggressively pursuing business development opportunities.
−Removed: Our assets have grown from $68.5 million at December 31, 2012 to $2.15 billion at September 30, 2023, representing a compound annual growth rate of approximately 38%.
−Removed: We cannot guarantee that we will sustain our recent asset and revenue growth rate in future periods.
−Removed: Our asset and revenue growth may slow or our revenue may decline for a number of other reasons, including reduced demand for our services, increased competition, a decrease in the growth or reduction in size of our overall market, or if we cannot capitalize on growth opportunities.
−Removed: Although we believe that our growth strategy will support our long-term profitability and franchise value, the expenses associated with our growth, including compensation expense for the employees needed to support this growth and leasehold and other expenses associated with our increasing number of office locations, has and may continue to affect our results.
−Removed: We expect our operating expenses to increase in future periods, and if our revenue growth does not increase to offset these anticipated increases in our operating expenses, it will have a material adverse effect on our business, financial condition and results of operations and we may not be able to achieve or maintain profitability.
−Removed: Further, our rapid growth may make it difficult to evaluate our future prospects.
−Removed: Our ability to forecast our future results of operations is subject to a number of uncertainties, including our ability to effectively plan for and model future growth.
−Removed: If we fail to achieve the necessary level of efficiency in our organization as it grows, or if we are not able to accurately forecast future growth, it could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Our rapid growth has placed, and will continue to place, a significant strain on our management capabilities, administrative and operational infrastructure, facilities and other resources.
−Removed: To effectively manage growth, we must continue to:
−Removed: improve our key business applications, processes, and computing infrastructure;
−Removed: enhance information and communication systems;
−Removed: and ensure that our policies and procedures evolve to reflect our current operations.
−Removed: These enhancements and improvements will require additional investments and allocation of valuable management and employee time and resources.
−Removed: Failure to effectively manage growth could result in difficulty or delays in deploying our solutions, declines in quality or client satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties, and any of these difficulties could materially adversely affect our business performance and results of operations.
We are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors.
71 unchanged sentences
In the event of any liquidation, dissolution or winding up of our business or of the Bank, our common stock would rank below all claims of debt holders against us.
−Removed: As of September 30, 2023, we had outstanding approximately $25.0 million in aggregate principal amount of subordinated notes.
+Added: As of December 31, 2024, we had outstanding approximately $25.0 million in aggregate principal amount of subordinated notes.
Our debt obligations are senior to our shares of common stock.
8 unchanged sentences
For further information see “Supervision and Regulation—Dividends.”
−Removed: Unresolved Staff Comments
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.