What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 302 added, 130 removed, 462 unchanged (48% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis of the financial condition at March 31, 2024 and December 31, 2023, and results of operations for the three months ended March 31, 2024 and 2023, is intended to assist in understanding the financial condition and results of operations of Ponce Financial Group, Inc.

Management’s discussion and analysis of the financial condition at June 30, 2024 and December 31, 2023, and results of operations for the three and six months ended June 30, 2024 and 2023, is intended to assist in understanding the financial condition and results of operations of Ponce Financial Group, Inc.

(the “Company”).

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Emergency Capital Investment Program

On June 7, 2022, Ponce Financial Group, Inc.

(the “Company”), the holding company for Ponce Bank,‎ closed a private placement (the “Private Placement”) of 225,000 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series A‎, par value $0.01 (the “Preferred Stock”) for an aggregate purchase price equal to $225,000,000 in cash, to the United States Department of the Treasury (the “Treasury”) pursuant to the Emergency Capital Investment Program (“ECIP”).‎ The holders of the Preferred Stock will be entitled to a dividend payable in cash quarterly at an annual rate dependent on certain factors as reported by the Company to Treasury in a quarterly supplemental report.

The initial dividend rate is zero percent for the first two years after issuance, and thereafter the floor dividend rate is 0.50% and the ceiling dividend rate is 2.00%.

On June 7, 2022, the Company closed a private placement (the “Private Placement”) of 225,000 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series A‎, par value $0.01 (the “Preferred Stock”) for an aggregate purchase price equal to $225.0 million in cash, to the United States Department of the Treasury (the “Treasury”) pursuant to the Emergency Capital Investment Program (“ECIP”).‎ The holders of the Preferred Stock will be entitled to a dividend payable in cash quarterly at an annual rate dependent on certain factors as reported by the Company to Treasury in a quarterly supplemental report.

The initial dividend rate is zero percent for the first two years after issuance, and thereafter the floor dividend rate is 0.50% and the ceiling dividend rate is 2.00%, based on achievement of certain qualified lending targets.

After 10 years of issuance, the perpetual dividend rate in effect, will be determined based on said floor and ceiling.

The actual dividend rate that will be paid by the Company on the Preferred Stock cannot be determined at this time.

The Company began paying dividends on its Preferred Stock during the quarter ended June 30, 2024, as required by the terms thereof.

The Bank exceeded the dividend rate reduction threshold for qualified lending targets designated by the U.S.

Treasury Department pursuant to the ECIP.

The Bank's “qualified lending” as measured pursuant to ECIP totaled $1.162 billion from June 8, 2023 through March 31, 2024.

This reduces the dividend obligation on the Preferred Stock to 0.50% for the quarterly dividends payable through June 2025.

The ECIP investment by the Treasury is part of a program to invest over $8.7 billion into Community Development Financial Institution (“CDFI”) or ‎Minority Depository Institution (“MDI”), of which Ponce Bank is both.

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Pursuant to the terms of its arrangement with Grain, loans found to be fraudulent were put back to Grain and the Company discontinued originating new loans with Grain after May 31, 2022.

On November 1, 2023, the Company and Grain signed a Perpetual Software License Agreement in order for the Bank to assume the servicing of the remaining Grain loans.

In order to facilitate the transfer of the servicing responsibilities to the Bank, Grain granted the Bank a perpetual right and license to use the Grain software, including the source code to service the ‎remaining loans.

On November 1, 2023, Ponce Financial Group, Inc.

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At March 31, 2024, the Bank had 11,939 Grain microloans outstanding, net of put backs, with an aggregate balance totaling $5.7 million and which were performing, in management’s opinion, comparably to similar portfolios, offset by an $4.9 million allowance for credit losses, resulting in $0.9 million in Grain microloans.

Since the beginning of the Bank’s agreement with Grain and through March 31, 2024, 45,322 microloans amounting to $24.1 million have been deemed to be fraudulent and put back to Grain.

At June 30, 2024, the Bank had 10,098 Grain microloans outstanding with an aggregate balance totaling $4.3 million and which were performing, in management’s opinion, comparably to similar portfolios, offset by an $3.6 million allowance for credit losses, resulting in $0.7 million in Grain microloans.

Since the beginning of the Bank’s agreement with Grain and through June 30, 2024, 45,322 microloans amounting to $24.0 million have been deemed to be fraudulent and put back to Grain.

The Company has written-down a total of $15.3 million, net of recoveries, of the Grain Receivable and received $6.8 million in cash from Grain and through the application of security deposits connected to fraudulent loan accounts.

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Additionally, the Company wrote-off its equity investment in Grain of $1.0 million during the year ended December 31, 2022.

As of March 31, 2024, the Company’s total exposure to Grain was $0.9 million of the remaining microloans, net of allowance for credit losses, excluding $1.6 million of security deposits by Grain borrowers.

The $0.1 million of recoveries for the three months ended March 31, 2024 and the $0.9 million recoveries for the three months ended March 31, 2023 related to Grain is included in non-interest expense in the accompanying Consolidated Statements of Operations.

As of June 30, 2024, the Company’s total exposure to Grain was $0.7 million of the remaining microloans, net of allowance for credit losses, excluding $1.6 million of security deposits by Grain borrowers.

The $0.1 million of recoveries for the six months ended June 30, 2024 and the $1.3 million recoveries for the six months ended June 30, 2023 related to Grain is included in non-interest expense in the accompanying Consolidated Statements of Operations.

Grain Technology, Inc.

("Grain") Total Exposure as of March 31, 2024

("Grain") Total Exposure as of June 30, 2024

(in thousands)

Receivable from Grain

Microloans originated - put back to Grain (inception-to-March 31, 2024)

Write-downs, net of recoveries (inception-to-date as of March 31, 2024)

Cash receipts from Grain (inception-to-March 31, 2024)

Grant/reserve (inception-to-March 31, 2024)

Net receivable as of March 31, 2024

Microloans originated - put back to Grain (inception-to-June 30, 2024)

Write-downs, net of recoveries (inception-to-date as of June 30, 2024)

Cash receipts from Grain (inception-to-June 30, 2024)

Grant/reserve (inception-to-June 30, 2024)

Net receivable as of June 30, 2024

Microloan receivables from Grain borrowers

Grain originated loans receivable as of March 31, 2024

Allowance for credit losses as of March 31, 2024 (1)

Microloans, net of allowance for credit losses as of March 31, 2024

Grain originated loans receivable as of June 30, 2024

Allowance for credit losses as of June 30, 2024 (1)

Microloans, net of allowance for credit losses as of June 30, 2024

Investment in Grain

Investment in Grain write-off

Investment in Grain as of March 31, 2024

Total exposure to Grain as of March 31, 2024 (2)

Investment in Grain as of June 30, 2024

Total exposure to Grain as of June 30, 2024 (2)

(1) Excludes $1.6 million of security deposits by Grain originated borrowers reported in deposits in the accompanying Consolidated Statements of Financial Conditions.

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The Company also established a relationship with Raisin Solutions US LLC ("Raisin") (formerly known as SaveBetter, LLC), a fintech startup focusing on deposits.

As of March 31, 2024, the Company had $445.9 million in such deposits.

As of June 30, 2024, the Company had $433.7 million in such deposits.

The recent regulatory easing of brokered deposit rules enables the Company to classify such deposits as core deposits.

On October 1, 2022, the Company entered into a Membership Interest Purchase Agreement with Bamboo Payment Holding LLC ("Bamboo").

Under the agreement, the Company purchased from Bamboo 180 Membership Interest Units representing an aggregate amount equal to up to 19.84% of total issued and outstanding Membership Interest in Bamboo for a purchase price of $2.5 million.

During 2023, the Company made additional contributions for a total of $1.2 million.

During the first quarter of 2024, the Company

made two additional contributions for a total of $0.5 million and made an additional payment of $0.2 million in April of 2024 for a total investment in Bamboo of $4.4 million.

With over a decade processing payments in Latin America, Bamboo has a diverse network connects Latin American local payment processing to global companies as well as domestic solutions to locally based organizations.

On October 1, 2022, the Company entered into a Membership Interest Purchase Agreement with Bamboo Payment Holding LLC ("Bamboo"), pursuant to which the Company purchased from Bamboo 180 Membership Interest Units representing 19.84% of the total issued and outstanding Membership Interest in Bamboo for an investment of $4.4 million.

With over a decade processing payments in

Latin America, Bamboo has a diverse network connects Latin American local payment processing to global companies as well as domestic solutions to locally based organizations.

At December 31, 2018, the Company had approximately $1.06 billion in assets, $918.5 million in loans and $809.8 million in deposits.

The Company has since grown to $2.82 billion in assets, $1.98 billion in loans receivables, net of allowance for credit losses of $24.7 million, and $1.59 billion in deposits at March 31, 2024, all while investing in infrastructure, implementing digital banking, diversifying its product offering and partnering with Fintech companies.

The Company has since grown to $2.84 billion in assets, $2.02 billion in loans receivables, net of allowance for credit losses of $24.1 million, and $1.61 billion in deposits at June 30, 2024, all while investing in infrastructure, implementing digital banking, diversifying its product offering and partnering with Fintech companies.

Now, the Company believes that it is poised to enhance its presence, locally and in similar communities outside New York, as a leading CDFI and MDI financial institution holding company.

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For years three through ten, depending upon the level of qualified and/or deep impact lending made in targeted communities, as defined in the ECIP guidelines, dividends will be at an annual rate of either 2.0%, 1.25% or 0.5% and, thereafter, will be fixed at one of the foregoing rates.

The Company began paying dividends on its Preferred Stock during the quarter ended June 30, 2024, as required by the terms thereof.

The Bank exceeded the dividend rate reduction threshold for qualified lending targets designated by the U.S.

Treasury Department pursuant to the ECIP.

The Bank's “qualified lending” as measured pursuant to ECIP totaled $1.162 billion from June 8, 2023 through March 31, 2024.

This reduces the dividend obligation on the Preferred Stock to 0.50% for the quarterly dividends payable through June 2025.

Holders of Preferred Stock generally do not have any voting rights, with the exception of voting rights on certain matters as outlined in the Certificate of Designations.

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Part 217 (or, as and if applicable, the successor capital adequacy guidelines, rules or regulations of the Federal Reserve or the capital adequacy guidelines, rules or regulations of any successor appropriate federal banking agency), as then in effect and applicable, for as long as any share of Preferred Stock is outstanding.

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

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

Total Assets .

Total consolidated assets increased $68.0 million, or 2.5%, to $2.82 billion at March 31, 2024 from $2.75 billion at December 31, 2023.

The increase in total assets is largely attributable to increases of $85.5 million in net loans receivable, $4.5 million in Federal Home Loan Bank of New York stock and $1.3 million in premises and equipment, partially offset by decreases of $8.8 million in held-to-maturity securities, $4.5 million in cash and cash equivalents, $3.9 million in available-for-sale securities, $3.6 million in other assets and $2.1 million in mortgage loans held for sale.

Total consolidated assets increased $91.3 million, or 3.3%, to $2.84 billion at June 30, 2024 from $2.75 billion at December 31, 2023.

The increase in total assets is largely attributable to increases of $126.3 million in net loans receivable, $27.8 million in mortgage loans held for sale and $4.6 million in Federal Home Loan Bank of New York stock, partially offset by decreases of $36.0 million in cash and cash equivalents, $19.6 million in held-to-maturity securities, $6.8 million in available-for-sale securities, $3.2 million in other assets, $1.2 million in deferred tax assets and $0.6 million in accrued interest receivable.

Cash and Cash Equivalents .

Cash and cash equivalents decreased $4.5 million, or 3.2%, to $134.7 million at March 31, 2024, compared to $139.2 million at December 31, 2023.

The decrease in cash and cash equivalents was primarily the result of increases of $79.3 million in net loans, $7.7 million decrease in accrued interest in payable, $6.0 million purchase of loans, $4.5 million in net redemption of FHLB stock and $4.0 million repayment of borrowings.

The decrease was offset by an increase of $78.2 million in net deposits, $11.4 million in principal repayment on securities, $3.6 million decrease in other assets, $2.5 million from advance payments by borrowers and $2.4 million in net loans held for sale.

The composition of securities at March 31, 2024 and December 31, 2023 and the amounts maturing of each classification are summarized as follows:

March 31, 2024

Cash and cash equivalents decreased $36.0 million, or 25.9%, to $103.2 million at June 30, 2024, compared to $139.2 million at December 31, 2023.

The decrease in cash and cash equivalents was primarily the result of an increase of $142.5 million in net loans, $6.0 million in purchase of loans, $5.1 million decrease in accrued interest payable, an increase of $4.7 million in loans held for sale, $4.6 million in purchase of FHLB stock and $4.0 million repayment of borrowings.

The decrease in cash

and cash equivalents was offset by an increase of $98.5 million in net deposits, $25.5 million in principal repayment on securities and $3.2 million decrease in other assets.

The composition of securities at June 30, 2024 and December 31, 2023 and the amounts maturing of each classification are summarized as follows:

June 30, 2024

December 31, 2023

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Total Held-to-Maturity Securities

The Company securities portfolio decreased $8.8 million in held-to-maturity and $3.9 million in available-for-sale during the three months ended March 31, 2024.

The decrease was primarily due to changes in principal.

The Company securities portfolio decreased $6.8 million in available-for-sale and $19.6 million in held-to-maturity during the six months ended June 30, 2024.

The decrease in the securities portfolio was primarily due to changes in principal amount of the securities.

Gross Loans Receivable.

The composition of gross loans receivable at March 31, 2024 and at December 31, 2023 and the percentage of each classification to total loans are summarized as follows:

March 31, 2024

The composition of gross loans receivable at June 30, 2024 and at December 31, 2023 and the percentage of each classification to total loans are summarized as follows:

June 30, 2024

December 31, 2023

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Consumer loans (1)

(1) As of March 31, 2024 and December 31, 2023, consumer loans include $5.7 million and $8.0 million of microloans originated by the Bank pursuant to its arrangement with Grain.

(1) As of June 30, 2024 and December 31, 2023, consumer loans include $4.3 million and $8.0 million of microloans originated by the Bank pursuant to its arrangement with Grain.

Based on current internal loan reviews, the Company believes that the quality of our underwriting, our weighted average loan-to-value ratio of 58.3% and our customer selection processes have served us well and provided us with a reliable base with which to maintain a well-protected loan portfolio.

The majority of the $138.0 million growth in construction and land mortgage loans is related to funding of existing commitments prior to 2024 as opposed to new originations in 2024.

Our commitments to grant new mortgage loans decreased by $62.0 million as of June 30, 2024 compared to December 31, 2023.

See Note 11 ("Commitments, Contingencies and Credit Risk") of Notes to the Consolidated Financial Statements.

Within the construction and land mortgage loans, as indicated in the composition of gross loans receivable table above, there are 22 loans at 100% completion, with balances of $161.4 million as of June 30, 2024.

Of these 22 projects, 14 have been issued a temporary certificate of occupancy, six have a final certificate of occupancy and two are pending certificate of occupancy.

Commercial real estate loans, as defined by applicable banking regulations, include multifamily residential, nonresidential properties, and construction and land mortgage loans.

At March 31, 2024 and December 31, 2023, approximately 5.0% and 5.3%, respectively, of the outstanding principal balance of the Bank’s commercial real estate mortgage loans were secured by owner-occupied commercial real estate.

At June 30, 2024 and December 31, 2023, approximately 4.8% and 5.3%, respectively, of the outstanding principal balance of the Bank’s commercial real estate mortgage loans were secured by owner-occupied commercial real estate.

Owner-occupied commercial real estate is similar in many ways to commercial and industrial lending in that these loans are generally made to businesses predominantly on the basis of the cash flows of the business rather than on valuation of the real estate.

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Both ratios are calculated by dividing certain types of loan balances for each of the two categories by the Bank’s total risk-based capital.

At March 31, 2024 and December 31, 2023, the Bank’s construction and land mortgage loans as a percentage of total risk-based capital was 122.8% and 102.5%, respectively.

Investor owned commercial real estate mortgage loans as a percentage of total risk-based capital was 299.0% and 269.1% as of March 31, 2024 and December 31, 2023, respectively.

At March 31, 2024, the Bank was slightly above the 100% guidelines established by the banking regulations but under the 150% guidelines set by the Bank for construction and land mortgage loans and within the 300% guideline for investor owned commercial real estate mortgage loans established by banking regulators.

At June 30, 2024 and December 31, 2023, the Bank’s construction and land mortgage loans as a percentage of total risk-based capital was 132.8% and 102.5%, respectively.

Investor-owned commercial real estate mortgage loans as a percentage of total risk-based capital was 294.3% and 269.1% as of June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024, the Bank was above the 100% guidelines established by the banking regulations but under the 150% guidelines set by the Bank for construction and land mortgage loans and within the 300% guideline established by banking regulators for investor owned commercial real estate mortgage loans.

Management believes that it has established the appropriate level of controls to monitor the Bank’s lending in these areas.

Loans Held For Sale .

Loans held for sale, at fair value, at March 31, 2024 decreased $2.1 million, or 21.2%, to $7.9 million from $10.0 million at December 31, 2023.

The composition of deposits at March 31, 2024 and December 31, 2023 and changes in dollars and percentages are summarized as follows:

March 31, 2024

Loans held for sale, at fair value, at June 30, 2024 increased $27.8 million, or 278.4%, to $37.8 million from $10.0 million at December 31, 2023.

The increase in loans held for sale, at fair value, was mainly attributable to one loan that was transferred from loans held for investment to loans held for sale.

The loan was subsequently sold in July of 2024 with no losses.

The composition of deposits at June 30, 2024 and December 31, 2023 and changes in dollars and percentages are summarized as follows:

June 30, 2024

December 31, 2023

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(1) As of December 31, 2023, $58.2 million were reclassified from demand to NOW/IOLA accounts.

(2) As of March 31, 2024 and December 31, 2023, there were $1.5 million and $0.3 million, respectively, in individual listing service deposits amounting to $250,000 or more.

(2) As of June 30, 2024 and December 31, 2023, there were $1.5 million and $0.3 million, respectively, in individual listing service deposits amounting to $250,000 or more.

All brokered certificates of deposit individually amounted to less than $250,000.

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The Company’s Interest Rate Risk Policy imposes limitations on overall wholesale funding and noncore funding reliance.

The overall reliance on wholesale funding and noncore funding were within those policy limitations as of March 31, 2024 and December 31, 2023.

The overall reliance on wholesale funding and noncore funding were within those policy limitations as of June 30, 2024 and December 31, 2023.

The Management Asset/Liability Committee generally meets on a bi-weekly basis to review funding needs, if any, and to ensure the Company operates within the approved limitations.

The Bank had outstanding borrowings at March 31, 2024 and December 31, 2023 of $680.4 million and $684.4 million, respectively, in term advances from the FHLBNY and FRBNY.

Additionally, the Bank had two unsecured lines of credit in the amount of $75.0 million with two correspondent banks for both periods at March 31, 2024 and December 31, 2023, under which there was nothing outstanding at both March 31, 2024 and December 31, 2023.

The Bank had no overnight line of credit advance at March 31, 2024 and December 31, 2023.

The Bank had outstanding borrowings at June 30, 2024 and December 31, 2023 of $680.4 million and $684.4 million, respectively, in term advances from the FHLBNY and FRBNY.

Additionally, the Bank had two unsecured lines of credit in the amount of $75.0 million with two correspondent banks for both periods at June 30, 2024 and December 31, 2023, under which there was nothing outstanding at both June 30, 2024 and December 31, 2023.

The Bank had no overnight line of credit advance at June 30, 2024 and December 31, 2023.

Stockholders’ Equity .

The Company’s consolidated stockholders’ equity increased $2.3 million, or 0.47%, to $493.7 million at March 31, 2024 from $491.4 million at December 31, 2023.

This increase in stockholders’ equity was largely attributable to $2.4 million in net income, $0.5 million impact to additional paid in capital as a result of share-based compensation and $0.3 million from release of ESOP shares, offset by $0.9 million in other comprehensive loss.

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

The discussion of the Company’s results of operations for the three months ended March 31, 2024 and 2023 are presented below.

The Company’s consolidated stockholders’ equity increased $6.3 million, or 1.27%, to $497.7 million at June 30, 2024 from $491.4 million at December 31, 2023.

This increase in stockholders’ equity was largely attributable to $5.5 million in net income available to common stockholders, $1.0 million impact to additional paid in capital as a result of share-based compensation and $0.6 million from release of ESOP shares, offset by $0.9 million in other comprehensive loss.

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

The discussion of the Company’s results of operations for the three months ended June 30, 2024 and 2023 are presented below.

The results of operations for interim periods may not be indicative of future results.

Net income for the three months ended March 31, 2024 was $2.4 million compared to net income of $0.3 million for the three months ended March 31, 2023.

Earnings per basic and diluted share was $0.11 for the three months ended March 31, 2024 compared to earnings per basic and diluted share of $0.01 for three months ended March 31, 2023.

The $2.1 million increase of net income from the three months ended March 31, 2023, was due to increases of $3.6 million in net interest income, partially offset by increases of $0.8 million in provision for income taxes and $0.6 million in non-interest expense and a decrease of $0.1 million in noninterest income.

Net income available to common stockholders was $3.1 million for the three months ended June 30, 2024 compared to net loss available to common stockholders of $0.1 million for the three months ended June 30, 2023.

Earnings per basic and diluted share was $0.14 for the three months ended June 30, 2024 compared to earnings per basic and diluted share of $0.00 for the three months ended June 30, 2023.

The $3.2 million increase of net income available to common stockholders for the three months ended June 30, 2024 was due to increases of $7.7 million in interest and dividend income and $1.4 million in benefit for credit losses, a decrease of $0.9 million in non-interest expense and an increase of $0.8 million in non-interest income, offset by $6.1 million in interest expense and $0.1 million in payments and accrued dividends on preferred shares.

Net income for the three months ended June 30, 2024, which excludes $0.1 million in dividend payments and accruals on preferred shares, was $3.2 million.

The Company began paying dividends on its preferred stock during the quarter ended June 30, 2024, as required by the terms thereof.

The following table presents the results of operations for the periods indicated:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Increase (Decrease)

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Net interest income

Benefit for credit losses

Net interest income benefit provision for loan losses

(Benefit) provision for credit losses

Net interest income after (benefit) provision for credit losses

Non-interest income

Non-interest expense

Income (loss) before income taxes

Provision (benefit) for income taxes

Net income (loss)

Dividends on preferred shares

Net income (loss) available to common stockholders

Earnings per share:

Interest and Dividend Income.

Interest and dividend income increased $7.7 million, or 24.9%, to $38.8 million for the three months ended June 30, 2024 from $31.1 million for the three months ended June 30, 2023.

Interest income on loans receivable, which is the Company’s primary source of income, increased $8.3 million, or 35.9%, to $31.3 million for the three months ended June 30, 2024 from $23.0 million for the three months ended June 30, 2023.

Interest and dividend income on securities and FHLBNY stock and deposits due from banks decreased $0.5 million, or 6.6%, to $7.5 million for the three months ended June 30, 2024 from $8.0 million for the three months ended June 30, 2023.

The following table presents interest income on loans receivable for the periods indicated:

For the Three Months Ended June 30,

(Dollars in thousands)

1-4 Family residential

Multifamily residential

Nonresidential properties

Construction and land

Business loans

Consumer loans

Total interest income on loans receivable

The following table presents interest and dividend income on securities and FHLBNY stock and deposits due from banks for the periods indicated:

For the Three Months Ended June 30,

(Dollars in thousands)

Interest on deposits due from banks

Interest on securities

Dividend on FHLBNY stock

Total interest and dividend income

Interest Expense.

Interest expense increased $6.1 million, or 41.4%, to $20.9 million for the three months ended June 30, 2024 from $14.8 million for the three months ended June 30, 2023, primarily due to an increase in the average cost of funds.

The following table presents expense for the periods indicated:

For the Three Months Ended June 30,

(Dollars in thousands)

Certificates of deposit

Advance payments by borrowers

Total interest expense

Net Interest Income.

Net interest income increased $1.6 million, or 10.0%, to $17.9 million for the three months ended June 30, 2024 from $16.3 million for the three months ended June 30, 2023.

The $1.6 million increase in net interest income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was attributable to an increase of $8.3 million in interest and dividend income primarily due to increases in average loans receivable, offset by an increase of $6.1 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities and a $0.5 million decrease in interest and dividend income on securities and FHLBNY stock and deposits due from banks,.

Net interest rate spread decreased by 3 basis point to 1.72% for the three months ended June 30, 2024 from 1.75% for the three months ended June 30, 2023.

The decrease in the net interest rate spread for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily due to an increase in the average rates paid on interest-bearing liabilities of 66 basis points to 3.97% for the three months ended June 30, 2024 from 3.31% for the three months ended June 30, 2023 and an increase in the average yields on interest-earning assets of 63 basis points to 5.69% for the three months ended June 30, 2024 from 5.06% for the three months ended June 30, 2023.

Net interest margin decreased 3 basis points for the three months ended June 30, 2024 to 2.62% from 2.65% for the three months ended June 30, 2023.

In 2023, the Federal Reserve raised the target range for the federal funds rate to 5.25%-5.50%, pushing borrowing costs to the highest level in 23 years.

The Federal Reserve has kept the federal funds interest rate steady and signaled that there will likely be a rate cut at its September 2024 meeting.

The decrease in federal funds rate will be in response to lower inflation as well as a cooler job market.

In a lower rate environment, the significant competitive pressures in our markets and the potential positive impact of these factors on our deposit and loan pricing, our net interest margin may be positively impacted.

Our net interest income may also be positively impacted if the demand for loans increases due to the lower rates, alone or in tandem with lower inflation.

Non-Interest Income.

Non-interest income increased $0.8 million, or 51.3% to $2.3 million for the three months ended June 30, 2024 from $1.5 million for the three months ended June 30, 2023.

The increase in non-interest income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was attributable to increases of $0.5 million in other non-interest income related to the mark to market adjustments on a private equity fund investment made by the Company, $0.2 million in income on sale of mortgage loans and $0.1 million in late and prepayment charges.

The following table presents non-interest income for the periods indicated:

For the Three Months Ended June 30,

(Dollars in thousands)

Service charges and fees

Brokerage commissions

Late and prepayment charges

Income on sale of mortgage loans

Total non-interest income

Non-Interest Expense.

Non-interest expense decreased $0.9 million, or 5.5%, to $16.1 million for the three months ended June 30, 2024 from $17.1 million for the three months ended June 30, 2023.

The $0.9 million decrease in non-interest expense for the three months ended June 30, 2024, compared to the three months ended June 30, 2023 was attributable to decreases of $1.0 million in provision for contingencies, $0.5 million in professional fees, $0.3 million in office supplies, telephone and postage, $0.2 million in

occupancy and equipment, $0.2 million in data processing expenses and $0.2 million in marketing and promotional expenses, partially offset by increases of $0.5 million in other operating expense, $0.3 million in direct loan expenses, $0.3 million in compensation and benefits and a decrease of $0.3 million in Grain recoveries.

The following table presents non-interest expense for the periods indicated:

For the Three Months Ended June 30,

(Dollars in thousands)

Compensation and benefits

Occupancy and equipment

Data processing expenses

Direct loan expenses

(Benefit) provision for contingencies

Insurance and surety bond premiums

Office supplies, telephone and postage

Professional fees

Grain recoveries

Marketing and promotional expenses

Directors fees and regulatory assessment

Other operating expenses

Total non-interest expense

Income Tax (Benefit) Provision.

The Company had provision for income taxes of $1.2 million for the three months ended June 30, 2024 compared to a benefit for income taxes of $0.2 million for the three months ended June 30, 2023.

Average Balance Sheets

The following table sets forth average outstanding balances, average yields and rates, and certain other information for the periods indicated.

No tax-equivalent yield adjustments have been made, as the effects would be immaterial.

Average balances are derived from average daily balances.

Non-accrual loans were included in the computation of average balances.

The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

For the Three Months Ended June 30,

Yield/Rate (1)

(Dollars in thousands)

Interest-earning assets:

Securities (3)

Other (4) (5)

Total interest-earning assets

Non-interest-earning assets (5)

Interest-bearing liabilities:

NOW/IOLA (6) (7)

Money market (7) (8)

Certificates of deposit (8)

Total deposits

Advance payments by borrowers

Total interest-bearing liabilities

Non-interest-bearing liabilities:

Non-interest-bearing demand (6)

Other non-interest-bearing liabilities

Total non-interest-bearing liabilities

Total liabilities

Total liabilities and total equity

Net interest income

Net interest rate spread (9)

Net interest-earning assets (10)

Net interest margin (11)

Average interest-earning assets to interest-bearing liabilities

(1) Annualized where appropriate.

(2) Loans include loans and mortgage loans held for sale, at fair value.

(3) Securities include available-for-sale securities and held-to-maturity securities.

(4) Includes FHLBNY demand account and FHLBNY stock dividends and FRBNY demand deposits.

(5) FRBNY demand deposits for prior period have been reclassified for consistency.

(6) Includes reclassification of $44.0 million average outstanding balances from non-interest-bearing demand to NOW/IOLA for the three months ended June 30, 2023.

(7) Includes $0.3 million of interest expense reclassified from money market to NOW/IOLA for the three months ended June 30, 2023.

(8) Includes reclassification of $130.7 million average outstanding balances and $1.5 million of interest expenses from money market to certificates of deposit for the three months ended June 30, 2023.

(9) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(10) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

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

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on the Company’s net interest income for the periods indicated.

The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).

The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume).

The total column represents the sum of the prior columns.

For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.

For the Three Months Ended June 30,

Increase (Decrease) Due to

Total Increase

(In thousands)

Interest-earning assets:

Securities (2)

Total interest-earning assets

Interest-bearing liabilities:

Certificates of deposit

Total deposits

Total interest-bearing liabilities

Change in net interest income

(1) Loans include loans and mortgage loans held for sale, at fair value.

(2) Securities include available-for-sale securities and held-to-maturity securities.

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

The discussion of the Company’s results of operations for the six months ended June 30, 2024 and 2023 are presented below.

The results of operations for interim periods may not be indicative of future results.

Net income available to common stockholders was $5.5 million for the six months ended June 30, 2024 compared to net income available to common stockholders of $0.2 million for the six months ended June 30, 2023.

Earnings per basic and diluted share was $0.25 for the six months ended June 30, 2024 compared to earnings per basic and diluted share of $0.01 for six months ended June 30, 2023.

The $5.3 million increase of net income available to common stockholders from the six months ended June 30, 2023, was due to increases of $5.2 million in net interest income, $1.4 million in benefit for credit losses and $0.7 million in non-interest income and a decrease of $0.4 million in non-interest expense, partially offset by an increase of $2.2 million in provision for income taxes and $0.1 million in dividends on preferred shares.

Net income for the six months ended June 30, 2024, which excludes $0.1 million in dividend payments and accruals on preferred shares, was $5.6 million.

The following table presents the results of operations for the periods indicated:

For the Six Months Ended June 30,

Increase (Decrease)

(Dollars in thousands)

Interest and dividend income

Interest expense

Net interest income

(Benefit) provision for credit losses

Net interest income after (benefit) provision for credit losses

Non-interest income

Non-interest expense

Income before income taxes

Provision for income taxes

Dividends on preferred shares

Net income available to common stockholders

Earnings per share:

Interest and Dividend Income.

Interest and dividend income increased $13.3 million, or 50.5%, to $39.7 million for the three months ended March 31, 2024 from $26.4 million for the three months ended March 31, 2023.

Interest income on loans receivable, which is the Company’s primary source of income, increased $11.0 million, or 55.7%, to $30.7 million for the three months ended March 31, 2024 from $19.7 million for the three months ended March 31, 2023.

Included in this increase was the recovery of $1.0 million in interest income from a construction loan that was previously nonperforming.

Interest and dividend income on securities and FHLBNY stock and deposits due from banks increased $2.3 million, or 35.2%, to $9.0 million for the three months ended March 31, 2024 from $6.7 million for the three months ended March 31, 2023.

Interest and dividend income increased $21.0 million, or 36.7%, to $78.5 million for the six months ended June 30, 2024 from $57.4 million for the six months ended June 30, 2023.

Interest income on loans receivable, which is the Company’s primary source of income, increased $19.2 million, or 45.0%, to $61.9 million for the six months ended June 30, 2024 from $42.7 million for the six months ended June 30, 2023.

Total interest and dividend income increased $1.8 million, or 12.4%, to $16.5 million for the six months ended June 30, 2024 from $14.7 million for the six months ended June 30, 2023.

The increase was primarily attributable to $2.4 million increase in interest on deposits due from banks, offset by $0.7 million in dividend on FHLYNY stock.

The following table presents interest income on loans receivable for the periods indicated:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(Dollars in thousands)

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The following table presents interest and dividend income on securities and FHLBNY stock and deposits due from banks for the periods indicated:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(Dollars in thousands)

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Interest Expense.

Interest expense increased $9.7 million, or 87.6%, to $20.8 million for the three months ended March 31, 2024 from $11.1 million for the three months ended March 31, 2023, primarily due to an increase in the average cost of funds.

For the Three Months Ended March 31,

Interest expense increased $15.8 million, or 61.2%, to $41.7 million for the six months ended June 30, 2024 from $25.9 million for the six months ended June 30, 2023, primarily due to an increase in the average cost of funds.

The following table presents interest expense for the periods indicated:

For the Six Months Ended June 30,

(Dollars in thousands)

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Net Interest Income.

Net interest income increased $3.6 million, or 23.5%, to $18.8 million for the three months ended March 31, 2024 from $15.2 million for the three months ended March 31, 2023.

The $3.6 million increase in net interest income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was attributable to an increase of $13.3 million in interest and dividend income primarily due to increases in average loans receivable, interest and dividend income on securities and FHLBNY stock and deposits due from banks, partially offset by an increase of $9.7 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities,

Net interest rate spread decreased by 6 basis points to 1.82% for the three months ended March 31, 2024 from 1.88% for the three months ended March 31, 2023.

The decrease in the net interest rate spread for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to an increase in the average rates paid on interest-bearing liabilities of 102 basis points to 3.89% for the three months ended March 31, 2024 from 2.87% for the three months ended March 31, 2023 and an increase in the average yields on interest-earning assets of 96 basis points to 5.71% for the three months ended March 31, 2024 from 4.75% for the three months ended March 31, 2023.

Net interest margin decreased 4 basis points for the three months ended March 31, 2024, to 2.71% from 2.75% for three months ended March 31, 2023, reflecting an increase in cost of funds.

The Federal Reserve raised the target range for the federal funds rate by 25 basis points to 5.25%-5.50% during its July 26, 2023 meeting, pushing borrowing costs to the highest level in 22 years.

At the January 31, 2024 meeting, the Federal Reserve signaled that it will hold interest steady and indicated it is not ready to start cutting rates.

The prior rate increases were in response to inflation rising at a rate not seen in over 40 years.

Because of this rising rate environment, the speed with which it is anticipated to be implemented, the significant competitive pressures in our markets and the potential negative impact of these factors on our deposit and loan pricing, our net interest margin may be negatively impacted.

Our net interest income may also be negatively impacted if the demand for loans decreases due to the rate increases, alone or in tandem with the concurrent inflationary pressures.

We may be negatively impacted if we are unable to appropriately time adjustments to our funding costs and the rates we earn on our loans.

Net interest income increased $5.2 million, or 16.5%, to $36.7 million for the six months ended June 30, 2024 from $31.5 million for the six months ended June 30, 2023.

The $5.2 million increase in net interest income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was attributable to an increase of $19.2 million in interest and dividend income primarily due to increases in average loans receivable and $2.4 million in deposits due from banks, partially offset by an increase of $15.8 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities and a decrease of $0.6 million in interest and dividend income on securities and FHLBNY stock.

Net interest rate spread decreased by 2 basis points to 1.77% for the six months ended June 30, 2024 from 1.79% for the six months ended June 30, 2023.

The decrease in the net interest rate spread for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to an increase in the average rates paid on interest-bearing liabilities of 82 basis points to 3.93% for the six months ended June 30, 2024 from 3.11% for the six months ended June 30, 2023 and an increase in the average yields on interest-earning assets of 79 basis points to 5.70% for the six months ended June 30, 2024 from 4.91% for the six months ended June 30, 2023.

Net interest margin decreased 3 basis points for the six months ended June 30, 2024, to 2.67% from 2.70% for six months ended June 30, 2023.

Non-Interest Income.

Non-interest income decreased $0.1 million, or 6.2%, to $1.7 million for the three months ended March 31, 2024 from $1.8 million for the three months ended March 31, 2023.

The $0.1 million decrease in non-interest income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was attributable to a decrease of $0.4 million in late and prepayment charges, partially offset by an increase of $0.2 million in income from mortgage loans and $0.1 million in other non-interest income.

Non-interest income increased $0.7 million, or 19.8%, to $4.0 million for the six months ended June 30, 2024 from $3.3 million for the six months ended June 30, 2023.

The $0.7 million increase in non-interest income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was attributable to increases of $0.6 million in other non-interest income and $0.4 million in income on sale of mortgage loans, partially offset by a decrease $0.3 million in late and prepayment charges.

The following table presents non-interest income for the periods indicated:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(Dollars in thousands)

5 unchanged sentences

Non-Interest Expense.

Non-interest expense increased $0.6 million, or 3.60%, to $17.0 million for the three months ended March 31, 2024 from $16.4 million for the three months ended March 31, 2023.

The $0.6 million increase in non-interest expense for the three months ended March 31, 2024, compared to the three months ended March 31, 2023 was attributable to a $0.9 million decrease in Grain consumer microloan recoveries, increases of $0.4 million in compensation and benefits, $0.3 million in direct loan expense and

$0.3 million in professional fees, partially offset by decreases of $0.8 million in provision for contingencies, $0.3 million in other operating expenses and $0.2 million in office supplies, telephone and postage.

Non-interest expense decreased $0.4 million, or 1.1%, to $33.1 million for the six months ended June 30, 2024 from $33.5 million for the six months ended June 30, 2023.

The $0.4 million decrease in non-interest expense for the six months ended June 30, 2024, compared to the six months ended June 30, 2023 was attributable to decreases of $1.8 million in provision for contingencies, $0.4 million in office supplies, telephone and postage, $0.3 million in professional fees, $0.3 million in data processing expenses, $0.2 million in other operating expenses and $0.1 million in occupancy and equipment, partially offset by a decrease of $1.1 million in Grain recoveries, and increases of $0.7 million in compensation and benefits and $0.6 million in direct loan expenses and $0.2 million in marketing and promotional expenses.

The following table presents non-interest expense for the periods indicated:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(Dollars in thousands)

2 unchanged sentences

Data processing expenses

Direct loan expense

Provision for contingencies

Direct loan expenses

(Benefit) provision for contingencies

Insurance and surety bond premiums

7 unchanged sentences

Income Tax Provision.

The Company had a provision for income taxes of $1.3 million for the three months ended March 31, 2024 compared to a provision for income taxes of $0.5 million for three months ended March 31, 2023.

The Company had a provision for income taxes of $2.5 million for the six months ended June 30, 2024 compared to a provision for income taxes of $0.3 million for six months ended June 30, 2023.

Average Balance Sheets

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The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Yield/Rate (1)

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(5) FRBNY demand deposits for prior period have been reclassified for consistency.

(6) Includes reclassification of $48.4 million average outstanding balances from non-interest bearing demand to NOW/IOLA for the three months ended March 31, 2023.

(7) Include $0.7 million of interest expense reclassified from money market to NOW/IOLA for the three months ended March 31, 2023.

(8) Includes reclassification of $135.0 million average outstanding balances and $1.4 million of interest expenses from money market to certificates of deposit for the three months ended March 31, 2023.

(6) Includes reclassification of $46.2 million average outstanding balances from non-interest-bearing demand to NOW/IOLA for the six months ended June 30, 2023.

(7) Includes $1.0 million of interest expense reclassified from money market to NOW/IOLA for the six months ended June 30, 2023.

(8) Includes reclassification of $132.8 million average outstanding balances and $2.8 million of interest expenses from money market to certificates of deposit for the six months ended June 30, 2023.

(9) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

7 unchanged sentences

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Increase (Decrease) Due to

7 unchanged sentences

Total deposits

Advance payments by borrowers

Total interest-bearing liabilities

17 unchanged sentences

To limit interest rate risk, the Bank has policy guidelines for earnings risk which seek to limit the variance of net interest income in both gradual and instantaneous changes to interest

As of March 31, 2024, in the event of an instantaneous upward and downward change in rates from management's interest rate forecast over the next twelve months, assuming a static balance sheet, the following estimated changes are calculated:

As of June 30, 2024, in the event of an instantaneous upward and downward change in rates from management's interest rate forecast over the next twelve months, assuming a static balance sheet, the following estimated changes are calculated:

Net Interest Income

9 unchanged sentences

In higher rate scenarios, any customer activity resulting in the replacement of low-cost or noninterest-bearing deposits with higher-yielding deposits or market-based funding would reduce the benefit in those scenarios.

At March 31, 2024, the earnings simulation model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy.

At June 30, 2024, the earnings simulation model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy.

Economic Value of Equity Model .

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The Interest Rate Risk Policy sets limits for those sensitivities.

At March 31, 2024, the EVE modeling calculated the following estimated changes in EVE due to instantaneous upward and downward changes in rates:

At June 30, 2024, the EVE modeling calculated the following estimated changes in EVE due to instantaneous upward and downward changes in rates:

EVE as a Percentage of Present

13 unchanged sentences

Further, EVE does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changing product spreads that could alter the adverse impact of changes in interest rates.

At March 31, 2024, the EVE model indicated that the Bank was in compliance with the Board of Directors’ approved Interest Rate Risk Policy.

At June 30, 2024, the EVE model indicated that the Bank was in compliance with the Board of Directors’ approved Interest Rate Risk Policy.

Most Likely Earnings Simulation Models .

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The historically low benchmark federal funds interest rate of the last several years implemented in response the turmoil resulting from COVID-19 pandemic has ended.

The Federal Reserve raised the target range for the federal funds rate by 25 basis points to 5.25%-5.50% during its July 26, 2023 meeting, pushing borrowing costs to the highest level in 22 years.

At the January 31, 2024 meeting, the Federal Reserve signaled that it will hold interest steady and indicated it is not ready to start cutting rates.

The recent increases were in response to inflation rising at a rate not seen in over 40 years.

Our net interest income may also be negatively impacted if the demand for loans decreases due to the rate increases, alone or in tandem with the concurrent inflationary pressures.

We may be negatively impacted if we are unable to appropriately time adjustments to our funding costs and the rates we earn on our loans.

In 2023, the Federal Reserve raised the target range for the federal funds rate to 5.25%-5.50%, pushing borrowing costs to the highest level in 23 years.

The Federal Reserve has kept the federal funds interest rate steady and signaled that there will likely be a rate cut at its September 2024 meeting.

The decrease in federal funds rate will be in response to lower inflation as well as a cooler job market.

Our net interest income may also be positively impacted if the demand for loans increases due to the lower rates, alone or in tandem with lower inflation

GAP Analysis .

1 unchanged sentence

A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing during a period exceeds the amount of interest rate sensitive liabilities maturing or repricing during the same period, and a gap is considered negative when the amount of interest rate sensitive liabilities maturing or repricing during a period exceeds the amount of interest rate sensitive assets maturing or repricing during the same period.

The following table sets forth the Company’s interest-earning assets and its interest-bearing liabilities at March 31, 2024, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions.

The amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability.

The table sets forth an approximation of the projected repricing of assets and liabilities at March 31, 2024, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments.

The following table sets forth the Company’s interest-earning assets and its interest-bearing liabilities at June 30, 2024, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions.

The amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing

or the contractual maturity of the asset or liability.

The table sets forth an approximation of the projected repricing of assets and liabilities at June 30, 2024, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments.

The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and as a result of contractual rate adjustments on adjustable-rate loans.

March 31, 2024

June 30, 2024

Time to Repricing

34 unchanged sentences

Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.

In this regard, the net interest income and EVE tables presented assume that the composition of the interest-sensitive assets

and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.

Accordingly, although the net interest income and EVE tables provide an indication of the interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on net interest income and EVE and will differ from actual results.

In this regard, the net interest income and EVE tables presented assume that the composition of the interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.

Accordingly, although the net interest income and EVE tables provide an indication of the interest rate risk exposure at a particular point

in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on net interest income and EVE and will differ from actual results.

Furthermore, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates.

9 unchanged sentences

The levels of these assets are dependent on operating, financing, lending, and investing activities during any given period.

The Bank had $480.4 million and $380.4 million of outstanding term advances from FHLBNY at March 31, 2024 and December 31, 2023, respectively.

The Bank had no overnight line of credit advance from the FHLBNY at March 31, 2024 and December 31, 2023.

The Bank also has additional borrowing capacity of $222.5 million with the FHLBNY secured by the Bank's loans portfolio at March 31, 2024.

The Bank had $200.0 million and $304.0 million of outstanding term advances from the FRBNY at March 31, 2024 and December 31, 2023, respectively.

Net cash provided by operating activities was $1.5 million and $6.1 million for the three months ended March 31, 2024 and 2023, respectively.

Net cash used in investing activities, which consists primarily of disbursements for loan originations and purchase of equipment offset by principal collections on loans and proceeds from maturities, calls and principal repayments on securities was ($80.1) million and ($91.3) million for the three months ended March 31, 2024 and 2023, respectively.

Net cash provided by financing activities, consisting of activities in borrowing and deposit accounts, was $74.2 million and $215.5 million for the three months ended March 31, 2024 and 2023, respectively.

The Bank had $480.4 million and $380.4 million of outstanding term advances from FHLBNY at June 30, 2024 and December 31, 2023, respectively.

The Bank had no overnight line of credit advance from the FHLBNY at June 30, 2024 and December 31, 2023.

The Bank also has additional borrowing capacity of $218.1 million with the FHLBNY secured by the Bank's loans portfolio at June 30, 2024.

The Bank had $200.0 million and $304.0 million of outstanding term advances from the FRBNY at June 30, 2024 and December 31, 2023, respectively.

Net cash (used in) provided by operating activities was ($1.1) million and $0.3 million for the six months ended June 30, 2024 and 2023, respectively.

Net cash used in investing activities, which consists primarily of disbursements for loan originations, purchase of loans, net purchase and redemption of FHLBNY stock and purchase of equipment offset by principal collections on loans and proceeds from maturities, calls and principal repayments on securities was ($129.4) million and ($160.0) million for the six months ended June 30, 2024 and 2023, respectively.

Net cash provided by financing activities, consisting of activities in borrowing, deposit accounts and dividends paid on preferred stock, was $94.5 million and $349.1 million for the six months ended June 30, 2024 and 2023, respectively.

The Bank’s management took steps to enhance the Company’s liquidity position by increasing its on balance sheet cash and cash equivalents position in order to meet unforeseen liquidity events and to fund upcoming funding needs.

At March 31, 2024 and December 31, 2023, all regulatory capital requirements were met, resulting in the Company and the Bank being categorized as well capitalized at March 31, 2024 and December 31, 2023.

At June 30, 2024 and December 31, 2023, all regulatory capital requirements were met, resulting in the Company and the Bank being categorized as well capitalized at June 30, 2024 and December 31, 2023.

Management is not aware of any conditions or events that would change this categorization.

4 unchanged sentences

Such commitments are subject to the same credit policies and approval process accorded to loans originated.

At March 31, 2024 and December 31, 2023, the Company had outstanding commitments to originate loans and extend credit of $605.6 million and $591.5 million, respectively.

At June 30, 2024 and December 31, 2023, the Company had outstanding commitments to originate loans and extend credit of $522.2 million and $591.5 million, respectively.

It is anticipated that the Company will have sufficient funds available to meet its current lending commitments.

4 unchanged sentences

In the ordinary course of its operations, the Company enters into certain contractual obligations.

Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds

and deposit liabilities.

Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

There have been no material changes in the Company’s material cash requirements under its contractual obligations as discussed in its most recent annual report on Form 10-K.

Dividend on Preferred Stock .

Pursuant to the terms of its Preferred Stock, the Company is required to pay a quarterly dividend on its Preferred Stock, beginning during the quarter ended June 30, 2024.

The floor dividend rate is 0.50% and the ceiling dividend rate is 2.00%, based on achievement of certain qualified lending targets.

For quarterly dividends through June 15, 2025, the Company is required to pay quarterly dividends on the Preferred Stock at a rate of 0.50%..

Other Material Cash Requirements.

In addition to contractual obligations, the Company’s material cash requirements also includes compensation and benefits expenses for its employees, which were $7.8 million for the three months ended March 31, 2024.

The Company also has material cash requirements for occupancy and equipment expenses, excluding depreciation and amortization of $0.4 million, related to rental expenses, general maintenance and cleaning supplies, guard services, software licenses and other miscellaneous expenses, which were $3.2 million for the three months ended March 31, 2024.

In addition to contractual obligations, the Company’s material cash requirements also includes compensation and benefits expenses for its employees, which were $15.6 million for the six months ended June 30, 2024.

The Company also has material cash requirements for occupancy and equipment expenses, excluding depreciation and amortization of $0.9 million, related to rental expenses, general maintenance and cleaning supplies, guard services, software licenses and other miscellaneous expenses, which were $6.3 million for the six months ended June 30, 2024.

Quantitative and Qualitati ve Disclosures About Market Risk.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis