An investment in the Company’s common stock or the Series A Preferred Stock involves risks.
−Removed: Stockholders should carefully consider the risks described below, together with other information contained in this Annual Report on Form 10-K and that was filed with the Securities and Exchange Commission (the “SEC”), before making any purchase or sale decisions regarding the Company’s common stock or Series A Preferred Stock.
+Added: Stockholders should carefully consider the risks described below, together with other information contained in this Annual Report on Form 10-K and that was filed with the SEC, before making any purchase or sale decisions regarding the Company’s common stock or Series A Preferred Stock.
If any of the following risks actually occur, the Company’s financial condition or operating results may be harmed.
11 unchanged sentences
The collateral securing the loans and leases often depreciates over time, is difficult to appraise and liquidate and fluctuates in value based on the success of the business.
−Removed: The level of the commercial real estate loan portfolio may subject the Company to additional regulatory scrutiny.
−Removed: The OCC and the other federal bank regulatory agencies have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending.
+Added: The level of commercial real estate loans may subject the Company to additional regulatory scrutiny.
+Added: The OCC and the other federal bank regulatory agencies have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate loans.
Under the guidance, a financial institution that, like the Bank, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations.
1 unchanged sentence
Based on these factors, the Bank has a concentration in multi-family and commercial real estate lending, as such loans represented 447% of total bank capital as of December 31, 2023.
−Removed: The guidance focuses on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or in an abundance of caution).
+Added: The guidance focuses on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment).
The guidance assists banks in developing risk management practices and determining capital levels commensurate with the level and nature of real estate concentrations.
1 unchanged sentence
While it is management’s belief that policies and procedures with respect to the Bank’s commercial real estate loan portfolio have been implemented consistent with this guidance, bank regulators could require that additional policies and procedures be implemented consistent with their interpretation of the guidance that may result in additional costs or that may result in the curtailment of commercial real estate and multi-family lending that would adversely affect the Company’s loan originations and profitability.
−Removed: The Dodd-Frank Act imposes obligations on originators of residential mortgage loans .
+Added: The Company’s concentrations of loans in certain industries could have adverse effects on credit quality.
+Added: As of December 31, 2023, the Company’s commercial real estate loan portfolio included loans to:
+Added: (i) lessors of office buildings of $1.3 billion, or 13% of total loans;
+Added: and (ii) borrowers in the retail industry of $1.2 billion, or 12% of total loans.
+Added: Because of these concentrations of loans in specific industries, a deterioration within these industries, especially those that have been particularly adversely impacted by long-term work-from-home arrangements on the commercial real estate sector, including retail stores, hotels and office buildings, creates greater risk exposure for the Company’s commercial real estate loan portfolio.
+Added: Should the fundamentals of the commercial real estate market deteriorate, the Company’s financial condition and results of operations could be adversely affected.
+Added: The Dodd-Frank Act imposes obligations on originators of residential mortgage loans, which if not followed could lead to loan losses, litigation-related expenses, and delays in taking title to real estate collateral in a foreclosure .
Among other things, the Dodd-Frank Act requires originators to make a reasonable and good faith determination based on documented information that a borrower has a reasonable ability to repay a particular mortgage loan over the long term.
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The Company provides for losses by reserving what it believes to be an adequate amount to absorb any estimated lifetime expected credit losses.
−Removed: A charge-off reduces the Company’s allowance for possible credit losses.
If the Company’s allowance was insufficient, it would be required to record a provision, which would reduce earnings for that period.
−Removed: Changes to the economic forecasts within the model could positively or negatively impact the actual results.
+Added: Changes to the economic forecasts within the model could positively or negatively impact the calculation of the allowance.
In addition, regulatory agencies, as an integral part of their examination process, may require additions to the allowance based on their judgment about information available to them at the time of their examination.
2 unchanged sentences
The judicial foreclosure process is protracted, especially in New Jersey, where foreclosure timelines remain among the longest in the nation, which delays the Company’s ability to resolve non-performing loans through the sale of the underlying collateral.
−Removed: The longer timelines have been the result of the economic crisis, additional consumer protection initiatives related to the foreclosure process, increased documentary requirements and judicial scrutiny, and, both voluntary and mandatory programs under which lenders may consider loan modifications or other alternatives to foreclosure.
+Added: The longer timelines have been the result of the economic environment, additional consumer protection initiatives related to the foreclosure process, increased documentary requirements and judicial scrutiny, and, both voluntary and mandatory programs under which lenders may consider loan modifications or other alternatives to foreclosure.
These reasons and the legal and regulatory responses have impacted the foreclosure process and completion time of foreclosures f or residential mortgage lenders.
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Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
−Removed: Over the past year, in response to a pronounced rise in inflation, the FRB has raised certain benchmark interest rates to combat inflation.
+Added: Over the past two years, in response to a pronounced rise in inflation, the FRB raised certain benchmark interest rates to combat inflation.
As discussed below under Risks Related to Interest Rates—Changes in interest rates could adversely affect results of operations and financial condition , as inflation increases and market interest rates rise, the value of the Company’s investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments.
2 unchanged sentences
Sustained higher interest rates by the FRB to tame persistent inflationary price pressures could also push down asset prices and weaken economic activity.
−Removed: A deterioration in economic conditions in the United States and the Company’s markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for the Company’s products and services, all of which, in turn, would adversely affect the Company’s business, financial condition and results of operations.
−Removed: A worsening of economic conditions in the market area could reduce demand for the products and services and/or result in increases in the level of non-performing loans, which could adversely affect the Company’s business, financial condition, and results of operations.
−Removed: A deterioration in economic conditions, especially local conditions, as a result of COVID-19, inflation, recession or otherwise, could have the following consequences, any of which could have a material adverse effect on the
−Removed: business, financial condition, liquidity and results of operations, and could more negatively affect the Company compared to a financial institution that operates with more geographic diversity:
+Added: A deterioration in economic conditions in the United States and the Company’s markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for the Company’s products and services, any of which, in turn, would adversely affect the Company’s business, financial condition and results of operations.
+Added: A worsening of economic conditions in the Company’s market area could reduce demand for the products and services and/or result in increases in the level of non-performing loans, which could adversely affect the Company’s business, financial condition, and results of operations.
+Added: A deterioration in economic conditions, especially local conditions, continued high interest
+Added: inflation, recession or otherwise, could have the following consequences, any of which could have a material adverse effect on the business, financial condition, liquidity and results of operations, and could more negatively affect the Company compared to a financial institution that operates with more geographic diversity:
• demand for the products and services may decline;
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• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments.
−Removed: Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, civil unrest, an outbreak of hostilities or other international or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond the Company’s control could further impact these local economic conditions and could further negatively affect the financial results of banking operations.
+Added: Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, civil unrest, an outbreak of hostilities or other internati onal or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond the Company’s control could further impact these local economic conditions and could further negatively affect the financial results of banking operations.
In addition, deflationary pressures, while possibly lowering operating costs, could have a significant negative effect on borrowers, especially business borrowers, and the values of underlying collateral securing loans, which could negatively affect financial performance.
1 unchanged sentence
Most of the Bank’s loans are s ecured by real estate and are made to borrowers throughout New Jersey and the major metropolitan areas of Philadelphia, New York, Baltimore, and Boston, as well as their surrounding areas.
−Removed: A return of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which the Company does its business, the value of loans, investments, and collateral securing loans and classified assets, reduce the demand for the Company’s products and services, and/or the ongoing operations, costs and profitability.
+Added: A return of recessionary conditions and/or negative developments in the domestic and interna tional credit markets may significantly affect the markets in which the Company does its business, the value of loans, investments, and collateral securing loans and classified assets, reduce the demand for the Company’s products and services, and/or the ongoing operations, costs and profitability.
Any of these negative events could increase the amount of non-performing loans and cause residential and commercial real estate loans to become inadequately collateralized, any of which could expose the Company to a greater risk of loss and may adversely affect the Company’s capital, liquidity and financial conditions.
+Added: The failure to address the federal debt ceiling in a timely manner, downgrades of the U.S.
+Added: credit rating and uncertain credit and financial market conditions may affect the stability of securities issued or guaranteed by the federal government, which may affect the valuation or liquidity of the investment securities portfolio and increase future borrowing costs .
+Added: As a result of uncertain political, credit and financial market conditions, including the potential consequences of the federal government defaulting on its obligations for a period of time due to federal debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose credit default and liquidity risks.
+Added: Given that future deterioration in the U.S.
+Added: credit and financial markets is a possibility, losses or significant deterioration in the fair value of the U.S.
+Added: government issued or guaranteed investments may occur.
+Added: Downgrades to the U.S.
+Added: credit rating could affect the stability of securities issued or guaranteed by the federal government and the valuation or liquidity of the portfolio of such investment securities, and could result in the Company’s counterparties requiring additional collateral for borrowings.
+Added: Further, unless and until U.S.
+Added: political, credit and financial market conditions have been sufficiently resolved or stabilized, it may increase the Company’s future borrowing costs.
+Added: Risks Related to Interest Rates
+Added: Rising interest rates have decreased the value of the Company’s securities portfolio, and the Company would realize losses if it were required to sell such securities to meet liquidity needs.
+Added: As a result of inflationary pressures and the resulting rapid increases in interest rates in 2023, the trading value of previously issued government and other fixed income securities has declined significantly.
+Added: These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the securities portfolios and reported as a separate component of stockholders’ equity.
+Added: While the Company does not currently intend to sell these securities, if the Company were required to sell such securities to meet liquidity needs, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and could require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability.
+Added: While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
+Added: Furthermore, while the Federal Reserve Board has announced a Bank Term Funding Program available to eligible depository institutions secured by U.S.
+Added: treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments, there is no guarantee that such programs will be effective in addressing liquidity needs as they arise.
+Added: Changes in interest rates could adversely affect results of operations and financial condition .
+Added: The Company’s ability to make a profit largely depends on net interest income, which could be negatively affected by changes in interest rates.
+Added: Further, interest-
+Added: bearing liabilities generally have shorter contractual maturities than interest-earning assets and are subject to repricing based on economic conditions, competition, and funding availability, among other factors.
+Added: This imbalance can create significant earnings volatility as market interest rates change over time.
+Added: In a period of rising interest rates, the interest income earned on interest-earning assets may not increase as rapidly as the interest paid on interest-bearing liabilities, which would be expected to compress the interest rate spread and have a negative effect on the Company’s profitability.
+Added: Additionally, a flat or an inverted yield curve, where short-term rates are close to, or above, long-term rates, could adversely affect the Company’s financial condition and results of operations.
+Added: In addition, changes in interest rates can affect the average life of loans and investment securities.
+Added: A reduction in interest rates causes increased prepayments of loans and mortgage-backed securities as borrowers refinance their debt to reduce their borrowing costs.
+Added: This creates reinvestment risk, which is the risk that the Company may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates earned on the prepaid loans or securities.
+Added: Conversely, an increase in interest rates generally reduces prepayments.
+Added: Additionally, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable-rate loans.
+Added: Changes in interest rates may also affect the current estimated fair value of the securities portfolio.
+Added: Generally, the value of securities moves inversely with changes in interest rates.
+Added: Unrealized net losses on securities available-for-sale are reported as a separate component of stockholders’ equity.
+Added: To the extent interest rates increase and the value of the available-for-sale portfolio decreases, stockholders’ equity will be adversely affected.
+Added: Changes in the estimated fair value of debt securities may reduce stockholders’ equity and net income .
+Added: At December 31, 2023, the Company maintained a debt securities portfolio of $1.91 billion, of which $753.9 million was classified as available-for-sale.
+Added: The estimated fair value of the available-for-sale debt securities portfolio may change depending on the credit quality of the underlying issuer, market liquidity, changes in interest rates and other factors.
+Added: Stockholders’ equity increases or decreases by the amount of the change in the unrealized gain or loss (difference between the estimated fair value and the amortized cost) of the available-for-sale debt securities portfolio, net of the related tax expense or benefit, under the category of accumulated other comprehensive income (loss).
+Added: During the year ended December 31, 2023, the Company incurred other comprehensive gains of $14.3 million, net of tax, related to net changes in unrealized holding gains in the available-for-sale investment securities portfolio, which positively impacted stockholders’ equity, as well as book value per common share.
+Added: The increase occurred even though the securities are not sold.
+Added: The Company conducts a periodic review of the debt securities portfolio to determine if any decline in the estimated fair value of any security below its cost basis is considered impaired.
+Added: Factors which are considered in the analysis include, but are not limited to, the extent to which the fair value is less than the amortized cost basis, the financial condition, credit rating and future prospects of the issuer, whether the debtor is current on contractually obligated interest and principal payments and the Company’s intent and ability to retain the security for a period of time sufficient to allow for any anticipated recovery in fair value and the likelihood of any near-term fair value recovery.
+Added: If such decline is deemed to be uncollectible, the security is written down to a new cost basis and the resulting loss will be recognized as a securities provision for credit losses through an allowance for securities credit losses.
+Added: Hedging against interest rate exposure may adversely affect the Company’s earnings .
+Added: On occasion the Company has employed various financial risk methodologies that limit, or “hedge,” the adverse effects of rising or decreasing interest rates on the loan portfolios and short-term liabilities.
+Added: The Company also engages in hedging strategies with respect to arrangements where customers swap floating-rate obligations for fixed-rate obligations, or vice versa.
+Added: The hedging activity varies based on the level and volatility of interest rates and other changing market conditions.
+Added: Interest rate hedging may fail to protect the Company from loss.
+Added: Moreover, hedging activities could result in losses if the event against which we hedge does not occur.
+Added: Additionally, interest rate hedging could fail to protect the Company or adversely affect the Company because, among other things:
+Added: • available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;
+Added: • the duration of the hedge may not match the duration of the related liability;
+Added: • the party owing money in the hedging transaction may default on its obligation to pay;
+Added: • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs the ability to sell or assign the Company’s side of the hedging transaction;
+Added: • the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value;
+Added: • downward adjustments, or “mark-to-market” losses, would reduce the Company’s stockholders’ equity.
Risks Related to Acquisitions and Growth
The Company must successfully integrate the operations and retain the customers of its acquired institutions .
−Removed: The Company regularly completes acquisitions of financial institutions and continues to explore acquisition opportunities as part of its strategic plan.
+Added: The Company completes acquisitions of financial institutions and other service companies and continues to explore acquisition opportunities.
Future results of operations will depend in large part on the Company’s ability to successfully integrate the operations of the institutions it acquires and retain the employees and customers of those institutions.
4 unchanged sentences
Success will also depend on the ability of officers and key employees to continue to implement and improve operational and other systems, to manage multiple, concurrent customer relationships and to retain, hire, train and manage skilled employees.
−Removed: In addition, to successfully manage substantial growth, the Company may need to increase non-interest expenses through additional leasehold and data processing costs, and other infrastructure costs.
+Added: In order to successfully manage substantial growth, the Company may need to increase non-interest expenses through additional leasehold and data processing costs, and other infrastructure costs.
In order to successfully manage growth, the Company may need to adopt and effectively implement new or revise existing policies, procedures and controls to maintain credit quality, control costs and oversee the Company’s operations.
3 unchanged sentences
Entering into new markets involves risks, such as competitive disadvantages through a lack of name recognition, increased marketing costs, and the inability to otherwise grow market share as needed to offset the costs associated with expansion.
−Removed: The failure to successfully implement a geographic growth strategy could adversely affect the Company’s results of operations.
+Added: The failure to successfully expand the Company’s footprint or do so in an effective manner could adversely affect the Company’s results of operations.
The Company may need to raise additional capital in the future and such capital may not be available when needed or at terms that are beneficial to stockholders.
6 unchanged sentences
Future acquisition activity could otherwise negatively affect financial condition and results of operations .
−Removed: The Company continues to evaluate opportunities to acquire institutions and/or bank branches.
+Added: The Company continues to evaluate opportunities to acquire financial institutions, financial service companies and/or bank branches.
Acquiring other banks, businesses, or branches may have an adverse effect on financial results and may involve various other risks commonly associated with acquisitions, including those discussed above, as well as, among other things:
−Removed: • payment of a premium over book and market values that may dilute the book value and earnings per share in the short and long-term;
+Added: • payment of a premium over book and market values may dilute the book value and earnings per share in the short and long-term;
• potential exposure to unknown or contingent liabilities of the target company;
5 unchanged sentences
• potential changes in banking or tax laws or regulations that may affect the target company.
−Removed: Acquisitions may reduce or not enhance cash flows, business, financial condition, results of operations or prospects as expected and, as a result, such acquisitions may have an adverse effect on the results of operations, particularly during periods in which the acquisitions are being integrated into operations.
−Removed: Risks Related to Interest Rates
−Removed: The reversal of the historically low interest rate environment may adversely affect net interest income and profitability.
−Removed: The FRB decreased benchmark interest rates significantly, to near zero, in response to the COVID-19 pandemic.
−Removed: The FRB has reversed its policy of near zero interest rates given its concerns over inflation.
−Removed: Market interest rates have risen in response to the FRB’s recent rate increases.
−Removed: As discussed below, the increase in market interest rates could have an adverse effect on the Company’s net interest income and profitability.
−Removed: Changes in interest rates could adversely affect results of operations and financial condition .
−Removed: The Company’s ability to make a profit largely depends on net interest income, which could be negatively affected by changes in interest rates.
−Removed: Further, interest-bearing liabilities generally have shorter contractual maturities than interest-earning assets and are subject to repricing based on economic conditions, competition, and funding availability among other factors.
−Removed: This imbalance can create significant earnings volatility as market interest rates change over time.
−Removed: In a period of rising interest rates, the interest income earned on interest-earning assets may not increase as rapidly as the interest paid on interest-bearing liabilities, which would be expected to compress the interest rate spread and have a negative effect on the Company’s profitability.
−Removed: Additionally, a flat or an inverted yield curve, where short-term rates are close to, or above, long-term rates, could adversely affect the Company’s financial condition and results of operations.
−Removed: In addition, changes in interest rates can affect the average life of loans and investment securities.
−Removed: A reduction in interest rates causes increased prepayments of loans and mortgage-backed securities as borrowers refinance their debt to reduce their borrowing costs.
−Removed: This creates reinvestment risk, which is the risk that the Company may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates earned on the prepaid loans or securities.
−Removed: Conversely, an increase in interest rates generally reduces prepayments.
−Removed: Additionally, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable-rate loans.
−Removed: Changes in interest rates may also affect the current estimated fair value of the securities portfolio.
−Removed: Generally, the value of securities moves inversely with changes in interest rates.
−Removed: Unrealized net losses on securities available-for-sale are reported as a
−Removed: separate component of stockholders’ equity.
−Removed: To the extent interest rates increase and the value of the available-for-sale portfolio decreases, stockholders’ equity will be adversely affected.
−Removed: Changes in the estimated fair value of debt securities may reduce stockholders’ equity and net income .
−Removed: At December 31, 2022, the Company maintained a debt securities portfolio of $1.68 billion, of which $457.6 million was classified as available-for-sale.
−Removed: The estimated fair value of the available-for-sale debt securities portfolio may change depending on the credit quality of the underlying issuer, market liquidity, changes in interest rates and other factors.
−Removed: Stockholders’ equity is increased or decreased by the amount of the change in the unrealized gain or loss (difference between the estimated fair value and the amortized cost) of the available-for-sale debt securities portfolio, net of the related tax expense or benefit, under the category of accumulated other comprehensive income (loss).
−Removed: During the year ended December 31, 2022, the Company incurred other comprehensive losses of $33.4 million, net of tax, related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio, which negatively impacted stockholders’ equity, as well as book value per common share.
−Removed: The decrease occurred even though the securities are not sold.
−Removed: The Company conducts a periodic review of the debt securities portfolio to determine if any decline in the estimated fair value of any security below its cost basis is considered impaired.
−Removed: Factors which are considered in the analysis include, but are not limited to, the extent to which the fair value is less than the amortized cost basis, the financial condition, credit rating and future prospects of the issuer, whether the debtor is current on contractually obligated interest and principal payments and the intent and ability to retain the security for a period of time sufficient to allow for any anticipated recovery in fair value and the likelihood of any near-term fair value recovery.
−Removed: If such decline is deemed to be uncollectible, the security is written down to a new cost basis and the resulting loss will be recognized as a securities credit loss expense through an allowance for securities credit losses.
+Added: Acquisitions may reduce or not enhance cash flows, business, financial condition, results of operations or prospects and, as a result, such acquisitions may have an adverse effect on the results of operations, particularly during periods in which the acquisitions are being integrated into operations.
Risks Related to Loan Sales
2 unchanged sentences
The loan sale agreements generally require the repurchase of certain loans previously sold in the event of a violation of various representations and warranties custom ary in the mortgage banking industry.
−Removed: FNMA, FHLMC and investors carefully examine loan documentation on delinquent loans for a possible reason to request a repurchase by the loan originator.
+Added: FHLB, Fannie Mae, Freddie Mac and investors carefully examine loan documentation on delinquent loans for a possible reason to request a repurchase by the loan originator.
A subsequent sale of a repurchased mortgage loan could be at a significant discount to the unpaid principal balance.
The Company maintains a reserve for repurchased loans.
−Removed: However, if repurchase activity or the amount of loss on the sale of a repurchased loan is greater than anticipated, the reserve may need to be increased to cover actual losses, which could harm future earnings.
+Added: However, if repurchase activity or the amount of loss on the sale of a repurchased loan is greater than anticipated, the reserve may need to be increased to cover actual losses, which could harm earnings.
Risks Related to Laws and Regulations
5 unchanged sentences
The laws and regulations that govern the Company’s and the Bank’s operations are designed for the protection of depositors and the public, but not the Company’s stockholders.
−Removed: These provisions, as well as any other aspects of current or future regulatory or legislative changes to laws applicable to the financial industry, may impact the profitability of the Company’s business activities and may change certain business practices, including the ability to offer new products, obtain financing, generate fee income, attract deposits, make loans and achieve satisfactory interest spreads, and could expose the Company to additional costs, including increased compliance costs.
−Removed: These changes also may require the Company to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect the Company’s business, financial condition, and results of operations.
+Added: These provisions, as well as future regulatory or legislative changes applicable to the financial industry, may impact the profitability of the Company’s business activities and may change certain business practices, including the ability to offer new products, obtain financing, generate fee income, attract deposits, make loans and achieve satisfactory interest spreads, and could expose the Company to additional costs, including increased compliance costs.
+Added: Such changes also may require the Company to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect the Company’s business, financial condition, and results of operations.
As part of its lending activity, the Company may enter into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan to a fixed-rate commercial loan.
Under these agreements, the Company enters into a variable rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable rate loan into a fixed rate loan.
−Removed: The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement, as well as more broadly hedges variable cash flows associated with its floating rate loans.
+Added: The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement, as well as more broadly to hedge variable cash flows associated with its floating rate loans.
Offering these products can subject the Company to additional regulatory oversight and cost, as well as additional risk.
The Dodd-Frank Act contains a comprehensive framework for over-the-counter derivatives transactions.
−Removed: Even though many of the requirements do not impact the Company directly, since the Bank does not meet the definition of swap dealer or “major swap participant,” the Company continues to review and
−Removed: evaluate the extent to which such requirements impact its business indirectly or if and when such requirements may apply to the Bank directly.
+Added: Even though many of the requirements do not impact the Company directly, since the Bank does not meet the definition of swap dealer or “major swap participant,” the Company continues to review and evaluate the extent to which such requirements impact its business indirectly or if and when such requirements may apply to the Bank directly.
The Commodity Futures Trading Commission set the permanent aggregate gross notional amount threshold for the de minimis exception from the definition of swap dealer at $8.0 billion in swap dealing activity entered into by a person over the preceding 12 months.
The Company’s swap dealing activities are currently below this threshold.
−Removed: The USA Patriot and Bank Secrecy Acts require financial institutions to develop programs and procedures to prevent financial institutions from being used for money laundering, terrorist financing and other illicit activities, including filing suspicious activity reports and establishing procedures for identifying and verifying the identity of customers seeking to open new financial accounts.
−Removed: Failure to comply with these regulations could result in wide variety of sanctions, including payment of damages and civil money penalties, injunctive relief, and restrictions on mergers and acquisitions activity and expansion.
+Added: The USA Patriot and Bank Secrecy Acts require financial institutions to develop programs and procedures to prevent financial institutions from being used for money laundering, terrorist financing and other illicit activities, including filing suspicious activity reports and establishing procedures for identifying and verifying the identity of customers seeking to open new accounts.
+Added: Failure to comply with these regulations could result in wide variety of sanctions, including payment of damages and civil money penalties, injunctive relief, and restrictions on mergers and acquisitions activity and expansionary activities.
Although the Company has developed policies and procedures designated to comply with these laws and regulations, these policies and procedures may not be effective in preventing violations of these laws and regulations.
6 unchanged sentences
and (iv) a Tier 1 leverage ratio of 4%.
−Removed: The regulations also establish a “capital conservation buffer” of 2.5%, which if complied will result in the following minimum ratios:
+Added: The regulations also establish a “capital conservation buffer” of 2.5%, which if complied with, will result in the following minimum ratios:
(i) a common equity Tier 1 capital ratio of 7%;
2 unchanged sentences
An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the capital conservation buffer amount.
−Removed: The application of these capital requirements could, among other things, require the Company to maintain higher capital resulting in lower returns on equity, and require the Company to obtain additional capital to comply or result in regulatory actions if the Company is unable to comply with such requirements.
+Added: The application of these capital requirements could, among other things, require the Company to maintain higher capital resulting in lower returns on equity, and could require the Company to obtain additional capital to comply or result in regulatory actions if the Company is unable to comply with such requirements.
See Regulation and Supervision, Bank Holding Company Regulation .
9 unchanged sentences
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions.
−Removed: A successful regulatory challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in sanctions, including payment of damages and civil money penalties, injunctive relief, and restrictions on mergers and acquisitions activity and expansion.
+Added: A successful regulatory challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in sanctions, including payment of damages and civil money penalties, injunctive relief, and restrictions on mergers and acquisitions activity and expansionary activities.
Private parties may also challenge an institution’s performance under fair lending laws in private class action litigation.
Such actions could have a material adverse effect on the Company’s business, financial condition, and results of operations.
+Added: Needs to Improve rating under The Community Reinvestment Act may restrict the Company’s operations and limit its ability to pursue certain strategic opportunities.
+Added: The Bank received a CRA Performance Evaluation from the OCC with a rating of “Needs to Improve” for the evaluation period January 1, 2018 through December 31, 2020.
+Added: Based on its performance on the individual components of the CRA tests, the Bank received a rating of “Low Satisfactory” for the Lending, Investment, and Service Tests.
+Added: The Bank’s final overall rating, however, was downgraded to “Needs to Improve” because of a Fair Housing Act violation cited by the OCC.
+Added: The Bank’s management has taken actions, including adding to its compliance staff, to address the deficiencies and is committed to taking further voluntary corrective actions.
+Added: A “Needs to Improve” rating may restrict certain expansionary activities, including certain mergers and acquisitions and the establishment of Bank branches.
+Added: The rating also results in a loss of expedited processing of applications to undertake certain activities.
+Added: The rating will remain in place until the OCC issues a revised CRA rating following a subsequent CRA examination.
+Added: The next CRA examination is expected to commence sometime in 2024 for the CRA examination period 2021 to 2023.
+Added: The precise timing of the examination and any results therefrom will not be known until after the completion of the examination.
The Federal Reserve Board may require the Company to commit capital resources to support the Bank .
2 unchanged sentences
A capital injection may be required at times when the holding company may not have the resources to provide it and therefore may require the holding company to borrow the funds or raise capital.
−Removed: Thus, any borrowing or funds needed to raise capital required to make a capital injection becomes more difficult and expensive and could have an adverse effect on the Company’s business, financial condition, and results of operations.
+Added: Under such a scenario, any borrowing or funds needed to raise capital required to make a capital injection may be more difficult and expensive and could have an adverse effect on the Company’s business, financial condition, and results of operations.
The Company is subject to heightened regulatory requirements as a result of total assets exceeding $10 billion .
−Removed: The Company’s total assets were $13.1 billion at December 31, 2022 and banks or financial institutions with assets in excess of $10 billion are subject to requirements imposed by the Dodd-Frank Act and its implementing regulations, including the examination authority
−Removed: of the CFPB to assess compliance with federal consumer financial laws, imposition of higher FDIC premiums, reduced debit card interchange fees, and enhanced risk management frameworks, all of which increase operating costs and reduce earnings.
−Removed: Additional costs have been and will be incurred to implement processes, procedures, and monitoring of compliance with these imposed requirements, including investing significant management attention and resources to make the necessary changes to comply with the requirements under the Dodd-Frank Act.
−Removed: The Company faces the risk of failing to meet these requirements, which could result in regulatory action.
−Removed: While the effect of any presently contemplated or future changes in the laws or regulations or their interpretations would have is unpredictable, these changes could be materially adverse to the Company’s investors.
+Added: The Company’s total assets were $13.5 billion at December 31, 2023, thereby making it subject to requirements imposed by the Dodd-Frank Act and its implementing regulations, including examination by the CFPB to assess compliance with federal consumer financial laws, imposition of higher FDIC premiums, reduced debit card interchange fees, and enhanced risk management frameworks, all of which increase operating costs and reduce earnings.
+Added: Additional costs have been and will be incurred to implement processes, procedures, and monitoring of compliance with these requirements, including investing significant management attention.
Furthermore, the level of dividends the Company receives from the Federal Reserve Bank of Philadelphia is reduced due to its asset size.
−Removed: The asset size was originally established at $10 billion, but has been increased for inflation such that, for 2022, the asset level is $11.23 billion.
−Removed: Financial institutions whose assets exceed that level receive dividends generally equal to the rate of the 10-year Treasury note, as opposed to 6% for smaller financial institutions.
−Removed: Such reduction has significantly decreased the dividends received from the Federal Reserve Bank of Philadelphia, which totaled $1.3 million for the year ended December 31, 2022.
+Added: The asset size whereby an institution received reduced dividends was originally established at $10 billion, but has been increased for inflation such that, for 2023, the asset level is $12.12 billion.
Risks Related to Dividend Payments
1 unchanged sentence
The Board of Directors of the Company determines if, when and the amount of dividends that may be paid on the common stock.
−Removed: In making such determination under the Company’s capital management plan, the Board of Directors takes into account various factors including economic conditions, earnings, liquidity needs, the financial condition of the Company, applicable state law, regulatory requirements and other factors deemed relevant by the Board of Directors.
+Added: In making such determination under the Company’s capital management plan, the Board of Directors takes into account various factors including economic conditions, earnings, alternative uses of the Company’s capital, liquidity needs, the financial condition of the Company, applicable state law, tax and regulatory requirements and other factors deemed relevant by the Board of Directors.
Although the Company has a history of paying a quarterly dividend on its common stock, there is no guaranty that such dividends will continue to be paid in the future or at what rate.
1 unchanged sentence
Dividends on the Series A Preferred Stock are discretionary and will not be cumulative.
−Removed: If the Board of Directors does not declare a dividend on the Series A Preferred Stock in respect of a dividend period, then no dividend will be payable on the applicable dividend payment date, no dividend will be deemed to have accumulated for such dividend period, and the Company will have no obligation to pay any dividend for that dividend period at any time, whether or not the Board of Directors declares a dividend on the Series A Preferred Stock or any other class or series of the Company’s capital stock for any future dividend period.
−Removed: Any declaration and payment of dividends on the Series A Preferred Stock will depend upon, among other factors, the Company’s earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, the ability to service any equity or debt obligations senior to the Series A Preferred Stock, and other factors deemed relevant by the Board of Directors.
+Added: If the Board of Directors does not declare a dividend on the Series A Preferred Stock, no dividend will be deemed to have accumulated for such dividend period, and the Company will have no obligation to pay any dividend for that dividend period at any time, whether or not the Board of Directors declares a dividend on the Series A Preferred Stock or any other class or series of the Company’s capital stock for any future dividend period.
+Added: Any declaration and payment of dividends on the Series A Preferred Stock will depend upon, among other factors, the Company’s earnings and financial condition, liquidity and capital levels and requirements, the general economic and regulatory climate, the ability to service any equity or debt obligations senior to the Series A Preferred Stock, and other factors deemed relevant by the Board of Directors.
In addition, under the Federal Reserve’s capital rules, dividends on the Series A Preferred Stock may only be paid out of net income, retained earnings, or surplus related to other additional Tier 1 capital instruments.
1 unchanged sentence
Competition may adversely affect profitability and liquidity .
−Removed: The Company has substantial competition in originating commercial and consumer loans in its market area.
+Added: The Company experiences substantial competition in originating loans in its market area.
This competition comes principally from other banks, savings institutions, mortgage bankin g companies and other lenders.
12 unchanged sentences
The Company has also been active in competing for New Jersey governmental and municipal deposits.
−Removed: At December 31, 2022, these relationships included public school districts, local municipal governments, and cooperative health insurance funds, and such deposits accounted for approximately 25.1% of the Company’s total deposits.
−Removed: The governor of New Jersey has proposed that the state form and own a bank in which governmental and municipal entities may deposit their excess funds, with the state owned bank then financing small businesses and municipal projects in New Jersey.
−Removed: Should this proposal be adopted and a state owned bank formed, it could impede the Company’s ability to attract and retain governmental and municipal deposits and financing opportunities.
−Removed: Public fund deposits from local government entities such as counties, townships, school districts and other municipalities generally have highe r average balances and the Company ’s inability to retain such funds could adversely affect liquidity or result in the use of higher-cost funding sources.
+Added: At December 31, 2023, these relationships included public school districts, local municipal governments, and cooperative health insurance funds, which such deposits accounted for approximately 23% of the Company’s total deposits.
+Added: Public fund deposits from local government
+Added: entities such as counties, townships, school districts and other municipalities generally have highe r average balances and the Company ’s inability to retain such funds could adversely affect liquidity or result in the use of higher-cost funding sources.
Risks Related to Strategic Matters
7 unchanged sentences
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, financial condition, and results of operations.
−Removed: The Company’s inability to tailor its retail delivery model to respond to consumer preferences in banking may negatively affect earnings .
+Added: The Company’s inability to tailor its retail delivery model to respond to consumer preferences may negatively affect earnings .
The Company has expanded its market presence through acquisitions and growth.
10 unchanged sentences
Additionally, there is the risk of distributed denial-of-service or other similar attacks from technically sophisticated and well-resourced third parties, which are intended to disrupt online services.
−Removed: Despite the Company’s efforts to ensure the integrity of its systems, the Company may not be able to implement effective preventive measures against all security breaches, especially because the techniques used change frequently or are not
−Removed: recognized until launched, and because cyberattacks can originate from a wide variety of sources.
+Added: Despite the Company’s efforts to ensure the integrity of its systems, the Company may not be able to implement effective preventive measures against all security breaches, especially because the techniques used change frequently or are not recognized until launched, and because cyberattacks can originate from a wide variety of sources.
Those parties may also attempt to fraudulently induce employees, customers or other users of the Company’s systems to disclose sensitive information in order to gain access to the Company’s data or that of its customers or clients.
5 unchanged sentences
While management regularly reviews security assessments that were conducted on the Company’s third-party service providers that have access to sensitive and confidential information, there can be no assurance that their information security protocols are sufficient to withstand a cyber-attack or other security breach.
−Removed: The occurrence of any system failures, interruption, or breach of security of the Company’s or its vendors’ systems could cause serious negative consequences for the Company, including significant disruption of the Company’s operations, misappropriation of confidential information of the Company or that of its customers, or damage to computers or systems of the Company and those of its customers and counterparties, and which could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss of confidence in the Company’s security measures, customer dissatisfaction, significant litigation exposure, and harm to the Company’s reputation, all of which could have a material adverse effect on the Company.
+Added: The occurrence of any system failures, interruption, or breach of security of the Company’s or its vendors’ systems could cause serious negative consequences for the Company, including significant disruption of the Company’s operations, misappropriation of confidential information of the Company or that of its customers, or damage to computers or systems of the Company and those of its customers and counterparties, which could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss of confidence in the Company’s security measures, customer dissatisfaction, significant litigation exposure, and harm to the Company’s reputation, all of which could have a material adverse effect on the Company.
+Added: The Company’s board of directors relies on management in overseeing cybersecurity risk management.
+Added: The Company has a standing Information Technology and Security Management Committee, consisting of leaders across multiple domains.
+Added: The Chief Information Security Officer is the primary management liaison to the committee.
+Added: The committee meets quarterly, or more frequently if needed, and reports to the board of directors after each meeting through committee minutes.
+Added: While select Board members of the Company have experience in multiple disciplines including cybersecurity risk management, the Board relies on the Chief Information Security Officer and management for cybersecurity guidance.
+Added: If the Company is not able to maintain qualified and experienced directors, it could negatively impact the Company’s security measures, reputation, and growth.
An inability to attract and retain qualified personnel or the unexpected loss of service of any key personnel could have a negative impact on financial condition and results of operations.
23 unchanged sentences
Hurricanes and other natural disasters, climate change or increases to flood insurance premiums could adversely affect asset quality and earnings .
−Removed: The Company’s trade area includes counties in New Jersey with extensive coastal regions.
−Removed: These areas may be vulnerable to flooding or other damage from future storms or hurricanes, which could negatively impact the Company’s results of operations by disrupting operations, adversely impacting the ability of the Company’s borrowers to repay their loans, damaging collateral or reducing the value of real estate used as collateral.
+Added: The Company’s market area includes counties in New Jersey with extensive coastal regions.
+Added: may be vulnerable to flooding or other damage from future storms or hurricanes, which could negatively impact the Company’s results of operations by disrupting operations, adversely impacting the ability of the Company’s borrowers to repay their loans, damaging collateral or reducing the value of real estate used as collateral.
The Company’s business, financial condition, and results of operations could be adversely affected by natural disasters, health epidemics, and other catastrophic events.
24 unchanged sentences
The termination of membership or any changes in card network rules or standards, including interpretation and implementation of existing rules or standards, could increase the cost of operating the merchant services business or limit the ability to provide debit card and cash management solutions to or through customers, and could have a material adverse effect on the Company’s business, financial condition, and results of operations.
−Removed: Risks Related to the COVID-19 Pandemic
−Removed: The ongoing COVID-19 pandemic and measures intended to prevent its spread could continue to adversely affect the Company’s business activities, financial condition, and results of operations and such effects will depend on future developments, which are highly uncertain and difficult to predict.
−Removed: Global health concerns relating to the COVID-19 pandemic and related government actions taken to reduce the spread of the virus have continued to affect the macroeconomic environment, both nationally and in the Company’s existing geographic footprint.
−Removed: Federal and state agencies may pass measures to address the economic and social consequences of the pandemic that could impact the Company’s financial results and have a destabilizing effect on financial markets, key market indices, and overall economic activity.
−Removed: Prolonged measures by public health or other governmental authorities encouraging or requiring significant restrictions on travel, assembly, or other core business practices would further harm the Company’s business and that of its customers, in particular small to medium-sized business customers.
−Removed: Although the Company has business continuity plans and other safeguards in place, there is no assurance that they will be effective.
−Removed: A decline in economic conditions generally and a prolonged negative impact on small to medium-sized businesses, in particular, due to the COVID-19 pandemic could result in a material adverse effect on the Company’s business, financial condition, and results of operations and may heighten many of the known risks described herein and in other filings with the SEC.
Other Risks Related to the Business
−Removed: Elimination of LIBOR and uncertainty of its replacement may adversely affect the Company .
−Removed: In 2017, the Alternative Reference Rates Committee (“ARRC”) was created to identify an alternative reference interest rate to replace LIBOR.
−Removed: The ARRC announced Secured Overnight Financing Rate (“SOFR”), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, as its preferred alternative to LIBOR.
−Removed: The Chief Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced its intention to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after June 2023.
−Removed: Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question.
−Removed: There are risks inherent with the transition to any alternative rate as the rate may behave differently than LIBOR in reaction to monetary, market and economic events.
−Removed: The discontinuance of LIBOR may adversely affect the value of and return on the Company’s financial assets and liabilities that are based on or are linked to LIBOR, the Company’s results of operations or financial condition.
−Removed: In addition, these reforms may require changes to existing contracts that govern LIBOR based products as well as the Company’s systems and processes.
+Added: The Company’s stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.
+Added: Further, if the Company is unable to adequately manage liquidity, deposits, capital levels and interest rate risk, which have come under greater scrutiny in light of recent bank failures, it may have a material adverse effect on the Company’s financial condition and results of operations.
+Added: On March 8, 2023, Silvergate Capital Corporation, La Jolla, California, the holding company for Silvergate Bank, announced its decision to voluntarily liquidate the Bank and wind down operations.
+Added: On March 10, 2023, Silicon Valley Bank, Santa Clara, California, and on May 1, 2023, First Republic Bank, San Francisco, California, were closed by the California Department of Financial Protection and Innovation.
+Added: On March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services.
+Added: These banks also 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.
+Added: These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.
+Added: 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 its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management.
+Added: If the Company is unable to adequately manage liquidity, deposits, capital levels and interest rate risk, it may have a material adverse effect on its financial condition and results of operations.
+Added: Negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
+Added: The high-profile bank failures in early 2023 have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks.
+Added: These market developments have negatively impacted customer confidence in the safety and soundness of financial institutions.
+Added: As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.
+Added: While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of these recently failed banks would have access to their deposits, including previously uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly.
+Added: The Company is a community bank and its ability to maintain its reputation is critical to the success of the business.
+Added: The failure to do so may materially adversely affect the Company’s performance.
+Added: The Company is a community bank, and its reputation is one of the most valuable components of its business.
+Added: A key component of the Company’s business strategy is to rely on its reputation for customer service and knowledge of local markets to expand its presence by capturing new business opportunities from existing and prospective customers in the Company’s market area and contiguous areas.
+Added: Threats to the Company’s reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, cybersecurity incidents and questionable or fraudulent activities of the Company’s customers.
+Added: In addition, third parties with whom the Company has relationships may take actions over which the Company has limited control that could negatively impact perceptions about the Company or the financial services industry.
+Added: The proliferation of social media may increase the likelihood that negative information about the Company, whether or not the information is accurate, could impact the Company’s reputation and business.
+Added: Negative publicity regarding the Company’s business, employees, or customers, with or without merit, may result in the loss of customers and employees, costly litigation and increased governmental regulation, all of which could adversely affect the Company’s business and operating results.
+Added: The Company’s funding sources may prove insufficient to replace deposits at maturity and support its future growth.
+Added: A lack of liquidity could adversely affect the financial condition and results of operations and result in regulatory limits being placed on the Company.
+Added: The Company maintains sufficient funds to respond to the needs of depositors and borrowers.
+Added: Deposits have traditionally been the Company’s primary source of funds for use in lending and investment activities.
+Added: The Company also receives funds from loan repayments, investment maturities and income on other interest-earning assets.
+Added: While the Company emphasizes the generation of low-cost deposits as a source of funding, there is strong competition for such deposits in the Company’s market area.
+Added: Additionally, deposit balances can decrease if customers identify alternative investments opportunities.
+Added: Accordingly, as a part of the Company’s liquidity management, the Company may use a number of funding sources in addition to deposits and repayments and maturities of loans and investments.
+Added: As the Company continues to grow, it is likely to become more dependent on these sources, which may include FHLB advances, federal funds purchased and brokered certificates of deposit.
+Added: Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources.
+Added: The Company’s financial flexibility will be severely constrained if it is unable to maintain its access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates.
+Added: Further, if the Company is required to rely more heavily on more expensive funding sources to support liquidity and future growth, the Company’s revenues may not increase proportionately to cover increased costs.
+Added: In this case, operating margins and profitability would be adversely affected.
+Added: Alternatively, the Company may need to sell a portion of its investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in realizing a loss.
+Added: Any decline in available funding could adversely impact the Company’s ability to originate loans, invest in securities, pay expenses, or fulfill obligations such as repaying borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on liquidity, business, financial condition and results of operations.
+Added: A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed by regulators.
+Added: 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.
FEDERAL AND STATE TAXATION
7 unchanged sentences
Inflation Reduction Act of 2022.
−Removed: The Inflation Reduction Act was signed into law by President Biden on August 16, 2022 which, amongst other things, implements a new alternative minimum tax of 15% on corporations with profits in excess of $1 billion, a 1% excise tax on stock repurchases, and several tax incentives to promote clean energy and climate initiatives.
−Removed: These provisions are effective beginning January 1, 2023.
−Removed: Based on its analysis of the provisions, the Company does not expect this legislation to have a material impact on its consolidated financial statements.
+Added: The Inflation Reduction Act implemented a new alternative minimum tax of 15% on corporations with profits in excess of $1 billion, a 1% excise tax on stock repurchases, and several tax incentives to promote clean energy and climate initiatives.
+Added: These provisions were effective beginning January 1, 2023.
+Added: This legislation has not had a material impact on the Company’s consolidated financial statements.
State and Local Taxation
4 unchanged sentences
For New Jersey tax purposes, regular corporations are presently taxed at a rate equal to 9% of taxable income.
−Removed: New Jersey also imposes a temporary surtax of 2.5% which is effective through December 31, 2023.
−Removed: For 2019 and prospectively, New Jersey law requires combined filing for members of an affiliated group, but excludes companies that qualify as a New Jersey Investment Company and Real Estate Investment Companies.
+Added: New Jersey also imposed a temporary surtax of 2.5% which was effective through December 31, 2023.
+Added: For 2019 and prospectively, New Jersey law requires combined filing for members of an affiliated group, but excludes companies that qualify as a New Jersey Investment Company (“ICs”) and Real Estate Investment Trusts (“REITs”).
The allocation and apportionment of taxable income to New Jersey may affect the overall tax rate.
+Added: During 2023, the New Jersey Division of Taxation enacted certain tax reform legislation.
+Added: Most notably to the Company, for periods ending on and after July 31, 2023, companies meeting the statutory definition of “captive” ICs and REITs are required to be included in the combined filing.
+Added: This legislation included an exception if at least 50% of the shares, by vote or value, are owned or controlled, directly or indirectly, by a state or federally chartered bank, savings bank, or savings and loan association (financial institution) with assets of $15 billion or less.
+Added: As of December 31, 2023 the Company qualified for this exception.
New York Taxation .
−Removed: The Company is required to file New York State, MTA, and New York City tax returns.
−Removed: The New York State and New York City returns require consolidation of all entities, including OceanFirst Realty, and taxable income,
−Removed: consistent with other states, generally means Federal taxable income subject to certain adjustments.
−Removed: The allocation and apportionment of taxable income to New York State and New York City may affect the overall tax rate.
+Added: The Company is required to file New York State (“NYS”) and New York City (“NYC”) tax returns.
+Added: The NYS and NYC returns require consolidation of all entities, including OceanFirst Realty, and taxable income, consistent with other states, generally means Federal taxable income subject to certain adjustments.
+Added: For NYS tax purposes, corporations are presently taxed at a rate equal to 7.25% of taxable income, in addition to a temporary Metropolitan Transportation Authority surtax of 30% of the NYS tax rate, which is effective through December 31, 2026, for an overall NYS rate of 9.425%.
+Added: For NYC tax purposes, the Company is taxed at a rate equal to 8.85%.
+Added: The allocation and apportionment of taxable income to NYS and NYC may affect the overall tax rate.
Pennsylvania Taxation .
4 unchanged sentences
As a Delaware holding company not earning income in Delaware, the Company is exempted from Delaware corporate income tax but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.
−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.