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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 175 added, 180 removed, 584 unchanged (38% 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 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.

Management’s discussion and analysis of the financial condition at September 30, 2024 and December 31, 2023, and results of operations for the three and nine months ended September 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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• changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

• adverse changes related to the businesses of our partners, including Grain Technology, Inc.

(“Grain”) specifically (as defined herein);

• adverse changes related to the businesses of our partners;

• changes in the quality or composition of the Company’s loan or investment portfolios;

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The Bank will pay a fixed rate of interest of 4.62% and receive the SOFR rate.

Banking Development District

The Ponce Bank Westchester Avenue Branch located at 2244 Westchester Avenue in the Castle Hill area of the Bronx was approved as a Banking Development District ("BDD").

New York State’s BDD Program, administered by the Department of Financial Services ("DFS"), supports the establishment of bank and credit union branches in areas across New York State where there is a demonstrated need for banking services.

To encourage participation, approved BDD branches receive access to subsidized and market rate deposits from New York State.

On July 30, 2024, Ponce Bank received total program deposits of $35.0 million.

Coral Gables, Florida Office

On June 1, 2024, Ponce Bank opened its first-ever representative office in the state of Florida located at 1600 Ponce de Leon Drive in the Miami suburb of Coral Gables.

This new office is home to a Commercial Relationship Officer who will split time between the new location and his former Bergen County, New Jersey territory.

Many of our customers have businesses in Florida or spend their winter months here, and the large Hispanic community fits one of our primary demographics.

Critical Accounting Policies

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Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

See Note 1, “Nature of Business and Summary of Significant Accounting Policies,” to the accompanying Financial Statements for a discussion of significant accounting policies.

Factors Affecting the Comparability of Results

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If a microloan was found to be fraudulent, became 90 days delinquent upon 90 days of origination or defaulted due to a failure of Grain to properly service the microloan, the Bank’s applicable standards for origination or servicing were deemed to have not been complied with and the microloan was put back to Grain, who then became responsible for the microloan and any related losses.

The microloans put back to Grain were accounted for as an “other asset,” specifically referred to herein as the “Grain Receivable.” Grain was victimized by cyber fraud using synthetic and other forms of fraudulent identifications, a phenomenon that has become prevalent with Fintechs.

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.

The microloans put back to Grain were accounted for as an “other asset,” specifically referred to herein as the “Grain Receivable.”

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

and Grain signed a Perpetual Software License Agreement in order for the Bank to assume the servicing of the remaining Grain loans.

and Grain signed a Perpetual Software License Agreement in order for the Bank to assume the servicing of the remaining microloans.

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.

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.

At September 30, 2024, the Bank had 8,428 microloans outstanding with an aggregate balance totaling $3.0 million and which were performing, in management’s opinion, comparably to similar portfolios, offset by an $2.6 million allowance for credit losses, resulting in $0.5 million in microloans.

From inception of the microloan arrangement through September 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 microloans receivable and received $6.8 million in cash.

The Bank also opted to use the $1.8 million grant it received from the U.S.

Treasury Department’s Rapid Response ‎Program to defray the Grain Receivable.

Treasury Department’s Rapid Response ‎Program to defray the microloans receivable.

The application of those amounts resulted in no net receivable.

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

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 June 30, 2024

As of September 30, 2024, the Company’s total microloans exposure was $0.5 million of the remaining microloans, net of allowance for credit losses, excluding $1.5 million of security deposits by microloan borrowers.

The $0.2 million of recoveries for the nine months ended September 30, 2024 and the $1.3 million recoveries for the nine months ended September 30, 2023 related to microloans is included in non-interest expense in the accompanying Consolidated Statements of Operations.

Total Microloans Exposure as of September 30, 2024

(in thousands)

Receivable from Grain

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 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

Microloans Receivable from Grain

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

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

Cash receipts (inception-to-September 30, 2024)

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

Net receivable as of September 30, 2024

Microloans Receivable from Borrowers

Microloans receivable as of September 30, 2024

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

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

Investment in Grain

Investment in Grain write-off

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.

(2) Total remaining exposure to Grain borrowers.

Investment write-off in the third quarter of 2022

Net investment as of September 30, 2024

Total exposure related to microloans as of September 30, 2024 (2)

(1) Excludes $1.5 million of security deposits by microloan borrowers reported in deposits in the accompanying Consolidated Statements of Financial Conditions.

(2) Total remaining exposure to microloan borrowers.

These loans are now serviced by the Bank.

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

As of September 30, 2024, the Company had $600.6 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"), 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 $2.84 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.

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 first year after our initial public offering, 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 $3.02 billion in assets, $2.18 billion in loans receivables, net of allowance for credit losses of $24.0 million, and $1.87 billion in deposits at September 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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(ii) any proposed change in those laws, rules or regulations that is announced after the initial issuance of any share of the Preferred Stock;

or (iii) any official administrative or judicial decision or administrative action or other official pronouncement interpreting or applying those laws, rules or regulations or policies with respect thereto that is announced or becomes effective after the initial issuance of the Preferred Stock, there is more than an insubstantial risk that we will not be entitled to treat the full liquidation preferences of the shares of Preferred Stock then outstanding as “Additional Tier 1 Capital” (or its equivalent) for purposes of the capital adequacy standards of Federal Reserve Regulation Q, 12 C.F.R.

outstanding as “Additional Tier 1 Capital” (or its equivalent) for purposes of the capital adequacy standards of Federal Reserve Regulation Q, 12 C.F.R.

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 June 30, 2024 and December 31, 2023

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

Total Assets .

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.

Total consolidated assets increased $265.2 million, or 9.6%, to $3.02 billion at September 30, 2024 from $2.75 billion at December 31, 2023.

The increase in total assets is largely attributable to increases of $284.4 million in net loans receivable, $26.7 million in other assets, $16.6 million in cash and cash equivalent, $9.1 million in Federal Home Loan Bank of New York stock and $0.8 million in net premises and equipment, partially offset by decreases of $58.0 million in held-to-maturity securities, $8.9 million in available-for-sale securities, $2.5 million in deferred tax assets, $1.5 million in right of use assets, $1.1 million in accrued interest receivable and $0.4 million in mortgage loans held for sale.

Cash and Cash Equivalents .

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

Cash and cash equivalents increased $16.6 million, or 11.9%, to $155.8 million at September 30, 2024, compared to $139.2 million at December 31, 2023.

The increase in cash and cash equivalents was primarily the result of increases of $362.7 million in net deposits, $70.9 million in maturities, calls and principal repayment on securities, $8.0 million in net income, $3.0 million in advance payments by borrowers, and decreases of $2.0 million in mortgage loans held for sale and $1.7 million in deferred income taxes.

The increase in cash and cash equivalents was offset by an increase of $279.7 million in net loans, $104.0 million repayment of borrowings, $26.7 million increase in other assets, $9.1 million in net purchase/redemption of FHLB stock and decreases of $9.0 million in accrued interest payable and $6.0 million in purchase of loans.

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

September 30, 2024

December 31, 2023

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Total Held-to-Maturity Securities

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 Company securities portfolio decreased $8.9 million in available-for-sale and $58.0 million in held-to-maturity during the nine months ended September 30, 2024.

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

There was one available-for-sale security in the amount of $4.0 million and one held-to-maturity security in the amount of $25.0 million that matured and/or were called during the nine months ended September 30, 2024

Gross Loans Receivable.

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

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

September 30, 2024

December 31, 2023

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Consumer loans (1)

(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.

(1) As of September 30, 2024 and December 31, 2023, consumer loans include $3.0 million and $8.0 million of microloans.

Based on current internal loan reviews, the Company believes that the quality of our underwriting, our weighted average loan-to-value ratio of 57.2% 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.

Multifamily residential loans increased $127.5 million, or 23.2%, and nonresidential properties loans increased $40.9 million, or 12.0%, when compared to December 31, 2023.

The majority of the increases in multifamily residential loans and nonresidential properties loans that were refinanced from construction and land loans to a new permanent loan facility.

The majority of the $127.5 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.

Our commitments to grant new mortgage loans decreased by $102.1 million as of September 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.

Within the construction and land mortgage loans, as indicated in the composition of gross loans receivable table above, there are 17 projects at 100% completion, with balances of $104.6 million as of September 30, 2024.

Of these 17 projects, five have been issued a certificate of occupancy, 10 have been issued a temporary 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 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.

At September 30, 2024 and December 31, 2023, approximately 4.4% 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 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.

At September 30, 2024 and December 31, 2023, the Bank’s construction and land mortgage loans as a percentage of total risk-based capital was 125.4% and 102.5%, respectively.

Investor-owned commercial real estate mortgage loans as a percentage of total risk-based capital was 321.3% and 269.1% as of September 30, 2024 and December 31, 2023, respectively.

At September 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 above the 300% guideline established by banking regulators but under the 450% guidelines set by the Bank 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 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

Loans held for sale, at fair value, at September 30, 2024 decreased $0.4 million, or 4.1%, to $9.6 million from $10.0 million at December 31, 2023.

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

September 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 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.

(2) As of September 30, 2024, there were no individual listing service deposits amounting to $250,000 or more.

As of December 31, 2023, there were $0.3 million 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 June 30, 2024 and December 31, 2023.

The overall reliance on wholesale funding and noncore funding were within those policy limitations as of September 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 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.

The Bank had outstanding borrowings at September 30, 2024 of $580.4 million in term advances from the FHLBNY and at December 31, 2023 $380.4 million in term advances from the FHLBNY and $304.0 million in term advances from the FRBNY.

The Bank did not have any term advances from the FRBNY at September 30, 2024.

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

Stockholders’ Equity .

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 Company’s consolidated stockholders’ equity increased $13.2 million, or 2.69%, to $504.6 million as of September 30, 2024 from $491.4 million as of December 31, 2023.

This increase in stockholders’ equity was largely attributable to $8.0 million in net income, $3.0 million in other comprehensive income, $1.6 million impact to additional paid in capital as a result of share-based compensation and $1.0 million from release of ESOP shares, offset by $0.4 million in preferred stock dividend for shares issued pursuant to the ECIP.

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

The discussion of the Company’s results of operations for the three months ended September 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 $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.

Net income available to common stockholders was $2.2 million for the three months ended September 30, 2024 compared to net income available to common stockholders of $2.6 million for the three months ended September 30, 2023.

Earnings per basic and diluted share was $0.10 for the three months ended September 30, 2024 compared to earnings per basic and diluted share of $0.12 for the three months ended September 30, 2023.

The $0.4 million decrease of net income available to common stockholders for the three months ended September 30, 2024 was largely due to a decrease of $4.5 million in non-interest income as a result of a $3.7 million grant reported in the third quarter of 2023, an increase of $0.3 million in provision for credit losses and an increase of $0.3 million in dividend payments on preferred stock, partially offset by an increase of $2.5 million in net interest income and decreases of $1.1 million in provision for income taxes and $ 1.0 million in non-interest expense.

Net income for the three months ended September 30, 2024, which excludes $0.3 million in dividend payments and accruals on preferred shares, was $2.4 million.

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

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Increase (Decrease)

3 unchanged sentences

Net interest income

(Benefit) provision for credit losses

Net interest income after (benefit) provision for credit losses

Provision for credit losses

Net interest income after provision for credit losses

Non-interest income

Non-interest expense

Income (loss) before income taxes

Provision (benefit) for income taxes

Net income (loss)

Income before income taxes

Provision for income taxes

Dividends on preferred shares

Net income (loss) available to common stockholders

Net income 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.

Interest and dividend income increased $7.8 million, or 23.2%, to $41.3 million for the three months ended September 30, 2024 from $33.5 million for the three months ended September 30, 2023.

Interest income on loans receivable, which is the Company’s primary source of income, increased $7.7 million, or 30.3%, to $32.9 million for the three months ended September 30, 2024 from $25.3 million for the three months ended September 30, 2023.

Interest and dividend income on securities and FHLBNY stock and deposits due from banks increased $0.1 million, or 1.4%, to $8.3 million for the three months ended September 30, 2024 from $8.2 million for the three months ended September 30, 2023.

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

For the Three Months Ended June 30,

For the Three Months Ended September 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 June 30,

For the Three Months Ended September 30,

(Dollars in thousands)

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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.

Interest expense increased $5.3 million, or 31.3%, to $22.3 million for the three months ended September 30, 2024 from $17.0 million for the three months ended September 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,

For the Three Months Ended September 30,

(Dollars in thousands)

3 unchanged sentences

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.

Net interest income increased $2.5 million, or 15.0%, to $19.0 million for the three months ended September 30, 2024 from $16.5 million for the three months ended September 30, 2023.

The $2.5 million increase in net interest income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was attributable to an increase of $7.8 million in interest and dividend income primarily due to increases in average loans receivable, offset by an increase of $5.3 million in interest expense.

Net interest rate spread increased by 10 basis point to 1.77% for the three months ended September 30, 2024 from 1.67% for the three months ended September 30, 2023.

The increase in the net interest rate spread for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily due to an increase in the average yields on interest-earning assets of 53 basis points to 5.75% for the three months ended September 30, 2024 from 5.22% for the three months ended September 30, 2023, offset by an increase in the average rates paid on interest-bearing liabilities of 43 basis points to 3.98% for the three months ended September 30, 2024 from 3.55% for the three months ended September 30, 2023.

Net interest margin increased 7 basis points for the three months ended September 30, 2024 to 2.65% from 2.58% for the three months ended September 30, 2023.

On September 18, 2024, the Federal Reserve announced that the target range for the federal funds rate decreased by 50 basis points to 4.75%-5.00% effective on September 19, 2024.

It marked the first rate cut in over four years and signaled a shift in strategy aimed at bolstering the economy and preventing a rise in unemployment.

Our net interest income may 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.

Non-interest income decreased $4.5 million, or 79.5% to $1.2 million for the three months ended September 30, 2024 from $5.6 million for the three months ended September 30, 2023.

The decrease in non-interest income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was attributable to $3.7 million in grants reported in the third quarter of 2023 and a decrease of $0.8 million in late and prepayment charges.

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

For the Three Months Ended June 30,

For the Three Months Ended September 30,

(Dollars in thousands)

5 unchanged sentences

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.

Non-interest expense decreased $1.0 million, or 5.8%, to $16.3 million for the three months ended September 30, 2024 from $17.3 million for the three months ended September 30, 2023.

The $1.0 million decrease in non-interest expense for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 was attributable to decreases of $0.6 million in provision for contingencies, $0.5 million in data processing expenses and $0.3 million in professional fees, partially offset by increases of $0.2 million in direct loan expenses, $0.2 million in occupancy and equipment and $0.1 million in compensation and benefits.

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

For the Three Months Ended June 30,

For the Three Months Ended September 30,

(Dollars in thousands)

7 unchanged sentences

Professional fees

Grain recoveries

Microloans recoveries

Marketing and promotional expenses

2 unchanged sentences

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.

Income Tax Provision.

The Company had provision for income taxes of $0.6 million for the three months ended September 30, 2024 compared to a provision for income taxes of $1.7 million for the three months ended September 30, 2023.

Average Balance Sheets

4 unchanged sentences

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,

For the Three Months Ended September 30,

Yield/Rate (1)

3 unchanged sentences

Securities (3)

Other (4) (5)

Total interest-earning assets

22 unchanged sentences

(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.

(5) Includes reclassification of $47.1 million average outstanding balances from non-interest-bearing demand to NOW/IOLA for the three months ended September 30, 2023.

(6) Includes $0.1 million of interest expense reclassified from money market to NOW/IOLA for the three months ended September 30, 2023.

(7) 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 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,

For the Three Months Ended September 30,

Increase (Decrease) Due to

7 unchanged sentences

Total deposits

Advance payments by borrowers

Total interest-bearing liabilities

2 unchanged sentences

(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.

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

The discussion of the Company’s results of operations for the nine months ended September 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.

Net income available to common stockholders was $7.7 million for the nine months ended September 30, 2024 compared to net income available to common stockholders of $2.8 million for the nine months ended September 30, 2023.

Earnings per basic and diluted share was $0.34 for the nine months ended September 30, 2024 compared to earnings per basic and diluted share of $0.12 for nine months ended September 30, 2023.

The $4.8 million increase of net income available to common stockholders from the nine months ended September 30, 2023, was due to an increase of $7.7 million in net interest income and decreases of $1.3 million in non-interest expense and $1.1 million in provision for credit losses, partially offset by a decrease of $3.8 million in non-interest income, as a result of $3.7 million grants received in third quarter of 2023, and increases of $1.1 million in provision for income taxes and $0.4 million in dividends on preferred shares.

Net income for the nine months ended September 30, 2024, which excludes $0.4 million in dividends on preferred shares, was $8.0 million.

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Increase (Decrease)

3 unchanged sentences

Net interest income

(Benefit) provision for credit losses

Net interest income after (benefit) provision for credit losses

Provision for credit losses

Net interest income after provision for credit losses

Non-interest income

6 unchanged sentences

Interest and Dividend Income.

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.

Interest and dividend income increased $28.8 million, or 31.7%, to $119.8 million for the nine months ended September 30, 2024 from $90.9 million for the nine months ended September 30, 2023.

Interest income on loans receivable, which is the Company’s primary source of income, increased $26.9 million, or 39.6%, to $94.9 million for the nine months ended September 30, 2024 from $68.0 million for the nine months ended September 30, 2023.

Total interest and dividend income on securities, FHLBNY stock and deposits due from banks increased $1.9 million, or 8.4%, to $24.9 million for the nine months ended September 30, 2024 from $22.9 million for the nine months ended September 30, 2023.

The increase was primarily attributable to increases of $2.9 million in interest on deposits due from banks and $0.2 million in dividend on FHLBNY stock, offset by a decrease of $1.2 million in interest on securities.

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Dollars in thousands)

7 unchanged sentences

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Dollars in thousands)

4 unchanged sentences

Interest Expense.

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.

Interest expense increased $21.2 million, or 49.4%, to $64.0 million for the nine months ended September 30, 2024 from $42.8 million for the nine months ended September 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,

For the Nine Months Ended September 30,

(Dollars in thousands)

3 unchanged sentences

Net Interest Income.

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.

Net interest income increased $7.7 million, or 16.0%, to $55.8 million for the nine months ended September 30, 2024 from $48.1 million for the nine months ended September 30, 2023.

The $7.7 million increase in net interest income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was attributable to an increase of $28.8 million in total interest and dividend income primarily due to increases in average loans receivable, offset by an increase of $21.2 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities.

Net interest rate spread increased by 3 basis points to 1.77% for the nine months ended September 30, 2024 from 1.74% for the nine months ended September 30, 2023.

The increase in the net interest rate spread for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily due to and an increase in the average yields on interest-earning assets of 70 basis points to 5.72% for the nine months ended September 30, 2024 from 5.02% for the nine months ended September 30, 2023 , offset by an increase in the average rates paid on interest-bearing liabilities of 68 basis points to 3.95% for the nine months ended September 30, 2024 from 3.27% for the nine months ended September 30, 2023.

Net interest margin increased 1 basis point for the nine months ended September 30, 2024, to 2.66% from 2.65% for nine months ended September 30, 2023.

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.

Non-interest income decreased $3.8 million, or 42.8%, to $5.1 million for the nine months ended September 30, 2024 from $8.9 million for the nine months ended September 30, 2023.

The $3.8 million decrease in non-interest income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was attributable to $3.7 million related to grants received in the third quarter of 2023 and a decrease of $1.1 million in late and prepayment charges, partially offset by increases of $0.7 million in other non-interest income and $0.4 million in income on sale of mortgage loans.

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Dollars in thousands)

5 unchanged sentences

Non-Interest Expense.

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.

Non-interest expense decreased $1.4 million, or 2.7%, to $49.4 million for the nine months ended September 30, 2024 from $50.8 million for the nine months ended September 30, 2023.

The $1.4 million decrease in non-interest expense for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 was attributable to decreases of $2.5 million in provision for contingencies, $0.7 million in data processing expenses, $0.6 million in professional fees and $0.5 million in office supplies, telephone and postage, partially offset by a decrease of $1.2 million in microloans recoveries, increases of $0.8 million in compensation and benefits and $0.8 million in direct loan expenses.

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Dollars in thousands)

7 unchanged sentences

Professional fees

Grain recoveries

Microloans recoveries

Marketing and promotional expenses

3 unchanged sentences

Income Tax Provision.

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.

The Company had a provision for income taxes of $3.2 million for the nine months ended September 30, 2024 compared to a provision for income taxes of $2.1 million for nine months ended September 30, 2023.

Average Balance Sheets

4 unchanged sentences

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 Six Months Ended June 30,

For the Nine Months Ended September 30,

Yield/Rate (1)

3 unchanged sentences

Securities (3)

Other (4) (5)

Total interest-earning assets

22 unchanged sentences

(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 $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.

(5) Includes reclassification of $46.5 million average outstanding balances from non-interest-bearing demand to NOW/IOLA for the nine months ended September 30, 2023.

(6) Includes $1.1 million of interest expense reclassified from money market to NOW/IOLA for the nine months ended September 30, 2023.

(7) 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 Six Months Ended June 30,

For the Nine Months Ended September 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 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:

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

At September 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 .

3 unchanged sentences

The Interest Rate Risk Policy sets limits for those sensitivities.

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

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

At September 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 .

20 unchanged sentences

The ALCO Committee may determine that the Company should over time become more or less asset or liability sensitive depending on the underlying balance sheet circumstances and its conclusions regarding interest rate fluctuations in future periods.

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.

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.

On September 18, 2024, the Federal Reserve announced that the target range for the federal funds rate decreased by 50 basis points to 4.75%-5.00% effective on September 19, 2024.

It marked the first rate cut in over four years and signaled a shift in strategy aimed at bolstering the economy and preventing a rise in unemployment.

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

4 unchanged sentences

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 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 following table sets forth the Company’s interest-earning assets and its interest-bearing liabilities at September 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 September 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.

June 30, 2024

September 30, 2024

Time to Repricing

3 unchanged sentences

Securities (1)

Placements with banks

Placement with banks

Net loans (includes LHFS)

29 unchanged sentences

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.

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 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 had $580.4 million and $380.4 million of outstanding term advances from FHLBNY at September 30, 2024 and December 31, 2023, respectively.

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

Net (cash used) provided by in operating activities was ($15.7) million and $7.3 million for the nine months ended September 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 ($226.1) million and ($240.1) million for the nine months ended September 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 $258.4 million and $295.4 million for the nine months ended September 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 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.

At September 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 September 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 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.

At September 30, 2024 and December 31, 2023, the Company had outstanding commitments to originate loans and extend credit of $486.5 million and $591.5 million, respectively.

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

8 unchanged sentences

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.

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 $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.

In addition to contractual obligations, the Company’s material cash requirements also includes compensation and benefits expenses for its employees, which were $23.2 million for the nine months ended September 30, 2024.

The Company also has material cash requirements for occupancy and equipment expenses, excluding depreciation and amortization of $1.4 million, related to rental expenses, general maintenance and cleaning supplies, guard services, software licenses and other miscellaneous expenses, which were $9.6 million for the nine months ended September 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