What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-06 compared with 2024-11-07 · 154 added, 394 removed, 365 unchanged (60% 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 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.

Management’s discussion and analysis of the financial condition at March 31, 2025 and December 31, 2024, and results of operations for the three months ended March 31, 2025 and 2024, is intended to assist in understanding the financial condition and results of operations of Ponce Financial Group, Inc.

(the “Company”).

11 unchanged sentences

• the scope, duration and severity of rising interest rates, and its effects on our business and operations, our customers, including their ability to make timely payments on loans, our service providers, and on the economy and financial markets in general;

• changes in U.S.

trade policies, including the imposition of tariffs and retaliatory tariffs, and their related impacts on the economy;

• changes in consumer spending, borrowing and savings habits;

25 unchanged sentences

Emergency Capital Investment Program

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 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.

The ECIP is intended to incentivize CDFIs and MDIs to provide loans, grants, ‎and forbearance to small businesses, minority-owned businesses, and consumers in low-income and underserved communities that may have been ‎disproportionately impacted by the economic effects of the COVID-19 pandemic.

On June 7, 2022 (the “Original Closing Date”), the Company issued 225,000 shares of the Company’s Preferred Stock‎, par value $0.01 (the “Preferred Stock”) for an aggregate purchase price equal to $225,000,000 in cash to the Treasury, pursuant to the Treasury’s ECIP.

Under the ECIP, Treasury provided investment capital directly to depository institutions that are CDFIs or MDIs or their holding companies, to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, in low-income and underserved communities.

No dividends will accrue or be due for the first two years after issuance.

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.

If we are unable to make qualified and/or deep impact loans at required levels, we will be required to pay dividends at the higher annual rates.

Additionally, we may make qualified and/or deep impact loans that are riskier than we otherwise would in an effort to meet the lending requirements for the lower dividend rates and/or to qualify for the purchase option under the Repurchase Agreement (as described below).

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.

The Treasury is the holder of the Preferred Stock and a governmental entity, and the Treasury may hold interests that are different from a private investor in exercising its voting and other rights.

In the event of a liquidation, dissolution or winding up of the Company, the Preferred Stock will be entitled to a liquidation preference, subject to certain limitations, in the amount of the sum of $1,000 per share plus declared and unpaid dividends (without accumulation of undeclared dividends) on each share.

CDFI Equitable Recovery Program

On September 26, 2023, the Bank received a $3.7 million grant from the U.S.

Treasury as part of the CDFI Equitable Recovery Program ("ERP") which aims to help CDFI's further their mission of helping low and low-to-moderate income communities recover from the impact of the COVID-19 pandemic.

Bank Enterprise Award Program

On November 6, 2023, the Bank received a $0.5 million grant as part of the Bank Enterprise Award Program from the CDFI.

Awards under the Bank Enterprise Award Program are subject to the program terms and must be used for qualified activities, which include providing loans, investments and financial services to residents and businesses in distressed communities.

Derivatives and Hedging

During 2023, the Company entered into two derivative financial instruments contracts to enhance its ability to manage interest rate risk that exist as part of its ongoing operations.

The Company manages these risks as part of its asset and liability management process.

The Company utilized derivative financial instruments to accommodate the business needs and to hedge the exposure that this creates for the Company.

The Company does not use derivative financial instruments for trading purposes.

Interest Rate Swaps

The Bank is a party to two interest rate swap transactions.

One interest rate swap is for a period of two years effective October 12, 2023 and terminates on November 1, 2025 with a notional amount of $150.0 million.

The Bank will pay a fixed rate of interest of 4.885% and receive the Secured Overnight Financing Rate ("SOFR") rate.

The other interest rate swap is for a period of three years effective October 12, 2023 and terminates on November 1, 2026 with a notional amount of $100.0 million.

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

As a participant in the ECIP, the Company must comply with certain operating requirements.

Specifically, the Company must adopt the Treasury's standards for executive compensation and luxury expenses for the period during which the Treasury holds equity issued under the ECIP.

These restrictions may make it difficult to adequately compensate our management team, which could impact our ability to retain qualified management.

Additionally, under the ECIP regulations, the Company cannot pay dividends or repurchase its common stock unless it meets certain income-based tests and has paid the required dividends on the Preferred Stock.

In June 2024, the ‎Company began paying dividends on its Preferred Stock in the amount of $0.3 million for the three months ended March 31, 2025 and $0.6 million for the year ended December 31, 2024.

On December 20, 2024, the Company entered into an ECIP Securities Purchase Option Agreement (the “Repurchase Agreement”) with Treasury.

Pursuant to the Repurchase Agreement, Treasury has granted the Company an option to purchase all of the Preferred Stock during the Option Period, which is the first fifteen years following the Original Closing Date.

The purchase price for the Preferred Stock pursuant to the purchase option is determined based on a formula equal to the present value of the Preferred Stock, calculated as set forth in the Repurchase Agreement, together with any accrued and unpaid dividends thereon, as of the closing date.

variations in interest rates and the equity risk premium, which are components included in the purchase price calculation, the Company presently expects that the purchase price will be at a substantial discount from the face value of the Preferred Stock.

The purchase option may not be exercised unless and until at least one of the Threshold Conditions under the Repurchase Agreement has been met.

The Threshold Conditions are as follows:

during the ten years that follow the Original Closing Date (the “ECIP Period”) either (1) over any sixteen consecutive quarters, an average of at least 60% of the Company’s Total Originations, as defined pursuant to the terms of the ECIP, qualifies as “Deep Impact Lending,” as defined pursuant to the terms of the ECIP (the “Deep Impact Condition”);

(2) over any twenty-four consecutive quarters, an average of at least 85% of the Company’s Total Originations qualifies as “Qualified Lending,” as defined pursuant to the terms of the ECIP (the “Qualified Lending Condition”);

or (3) the Preferred Stock has a dividend rate of no more than 0.5%, which dividend rate is calculated pursuant to the ECIP and the terms thereof, at each of six consecutive Reset Dates, as defined in the ECIP.

The earliest possible date by which a Threshold Condition may be met is June 30, 2026, which is the end of the sixteenth consecutive quarter following the Original Closing Date.

However, the Company does not currently meet any of the Threshold Conditions to exercise the purchase option, and there can be no assurance if and when the Threshold Conditions will be met.

At present, the Company has reported 11 consecutive quarters for which it has met both the Deep Impact and Qualified Lending Conditions.

The Preferred Stock currently has a dividend rate of 0.5%.

In addition to the requirement that a Threshold Condition be met, the Repurchase Agreement requires that the Company meet certain other eligibility conditions in order to exercise the purchase option in the future, including compliance with the terms of the original ECIP purchase agreement and the terms of the Preferred Stock, maintaining qualification as either a CDFI or an MDI, and meeting other legal and regulatory criteria.

Although the Company currently meets the general eligibility criteria, other than satisfying one of the Threshold Conditions, there can be no assurance that the Company will meet such criteria in the future.

The Company believes that consummation of the repurchase of the Preferred Stock as contemplated by the Repurchase Agreement would be beneficial to its stockholders.

As such, the Company expects it continue to emphasize its qualified Deep Impact Lending.

Banking Development District

3 unchanged sentences

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

Westchester Avenue Branch Re-Design

On February 27, 2025, Ponce Bank officers and administrators and members of the public celebrated the Bank’s transformed Westchester Avenue Branch at its grand reopening.

The transformed Branch is the result of the State-of-the-art Banking Technologies combined with Community Centric Banking that is customer friendly and supportive.

The transformation relaunched a process aimed at reinforcing the role of each banking branch as a "community hub"’ that attracts new depositors and business customers, but anchors Ponce Bank branches as community-centric destinations.

The revitalization efforts include Open Tellers that invite a more consultative experience, managers located at a central hub of the branch, private space for sensitive conversations, and meeting spaces as well as open areas with teleconferencing and AV equipment to encourage community-wide gatherings.

Coral Gables, Florida Office

4 unchanged sentences

Accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change.

Critical accounting policies are defined as those involving significant judgments and assumptions by management and that could have a material impact on the carrying value of certain assets, liabilities or on income under different assumptions or conditions.

Critical accounting policies are defined as those involving significant judgments and assumptions by management

and that could have a material impact on the carrying value of certain assets, liabilities or on income under different assumptions or conditions.

Management believes that the most critical accounting policy relates to the allowance for credit losses.

8 unchanged sentences

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.

Factors Affecting the Comparability of Results

Write-off and Write-Down.

In 2020, the Company entered into a business arrangement with the FinTech startup company Grain.

Grain’s product is a mobile application geared to the underbanked, minorities and new generations entering the financial services market.

In employing this mobile application, the Bank uses non-traditional underwriting methodologies to provide revolving credit to borrowers who otherwise may gravitate to using alternative non-bank lenders.

Under the terms of its former agreement with Grain, the Bank was the lender for Grain-originated microloans with credit lines currently up to $1,500 and, where applicable, the depository for related security deposits.

Grain originated and serviced these microloans and is responsible for maintaining compliance with the Bank's origination and servicing standards, as well as applicable regulatory and legal requirements.

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.”

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 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 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 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 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)

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 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.

Vision 2025 Evolves

The Company has deployed a Fintech-based small business automated lending technology in partnership with LendingFront Technologies, Inc.

The technology is a mobile application that digitizes the lending workflow from pre-approval to servicing and enables the Company to originate, close and fund small business loans within very short spans of time, without requiring a physical presence within banking offices and with automated underwriting using both traditional and non-traditional methods.

The application has full loan origination and servicing capabilities and is integrated with Salesforce.

All Commercial Relationship Officers and Business Development Managers will utilize these capabilities.

Company's Growth

The Company has deployed a mobile application that digitizes the lending workflow from pre-approval to servicing and enables the Company to originate, close and fund small business loans within very short spans of time, without requiring a physical presence within banking offices and with automated underwriting using both traditional and non-traditional methods.

The application was developed by Lending Front, a fintech in which the Company has acquired a financial interest.

All Commercial Relationship Officers and Banking Branch Managers utilize these capabilities.

The Company is seeking to establish loan origination partnerships with non-profit and community-based organizations to ensure penetration in underserved and underbanked markets.

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 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 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.

The Company continues its relationship with Raisin Solutions US LLC ("Raisin"), a fintech that focuses on gathering deposits for financial institutions through the Internet.

As of March 31, 2025, the Company had $611.9 million in such deposits, which the Company classifies as core deposits.

Because the Company, through Ponce Bank, is an MDI and a CDFI, deposits made by other financial institutions may be treated as CRA credits by those depository institutions.

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, net of allowance for credit losses of $12.7 million, and $809.8 million in deposits.

The Company has since grown to $3.09 billion in assets, $2.37 billion in loans receivables, net of allowance for credit losses of $23.0 million, and $2.00 billion in deposits at March 31, 2025, all while investing in infrastructure, implementing digital banking and diversifying its product offering.

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.

On June 7, 2022, the Company issued 225,000 shares of the Company’s Preferred Stock‎, par value $0.01 for an aggregate purchase price equal to $225.0 million in cash to the Treasury, pursuant to the Treasury’s ECIP‎.

Treasury has indicated that the investment will qualify as Tier 1 capital.

No dividends will accrue or be due for the first two years after issuance.

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.

The Company has the option to redeem the shares of Preferred Stock (i) in whole or in part on any dividend payment date on or after June 15, 2027, or (ii) in whole but not in part at any time within ninety days following a Regulatory Capital Treatment Event, as defined below, in each case at a cash redemption price equal to the liquidation amount, with an amount equal to any dividends that have been declared but not paid prior to the redemption date.

The Company may not redeem shares of Preferred Stock without having received the prior approval of the appropriate Federal banking agency for the Company, as defined in Section 3(q) of the Federal Deposit Insurance Act, to the extent required under applicable capital rules.

Such redemptions are subject to certain conditions and limitations.

A “Regulatory Capital Treatment Event” means a good-faith determination that, as a result of (i) any amendment to, or change in, the laws, rules or regulations of the United States or any political subdivision of or in the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other appropriate federal bank regulatory agencies) that is enacted or becomes effective after the initial issuance of any share of the Preferred Stock;

(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.

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 September 30, 2024 and December 31, 2023

Comparison of Financial Condition at March 31, 2025 and December 31, 2024

Total Assets .

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.

Total consolidated assets increased $49.9 million, or 1.6%, to $3.09 billion at March 31, 2025 from $3.04 billion at December 31, 2024.

The increase in total assets is largely attributable to increases of $84.3 million in net loans receivable, $1.2 million in accrued interest receivable and $0.4 million in right of use assets, partially offset by decreases of $9.9 million in cash and cash equivalents, $9.9 million in held-to-maturity securities, $8.4 million in other assets, $3.4 million in FHLBNY stock, $2.2 million in mortgage loans held for sale, $1.4 million in available-for-sale securities, $0.4 million in deferred tax assets and $0.4 million in premises and equipment, net.

Cash and Cash Equivalents .

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

(in thousands)

Available-for-Sale Securities:

Government Bonds:

Amounts maturing:

Three months or less

More than three months through one year

More than one year through five years

More than five years through ten years

Corporate Bonds:

Amounts maturing:

Three months or less

More than three months through one year

More than one year through five years

More than five years through ten years

Mortgage-Backed Securities

Total Available-for-Sale Securities

Held-to-Maturity Securities:

Agency Bonds:

Amounts maturing:

Three months or less

More than three months through one year

More than one year through five years

More than five years through ten years

Corporate Bonds:

Amounts maturing:

Three months or less

More than three months through one year

More than one year through five years

More than five years through ten years

Mortgage-Backed Securities

Allowance for Credit Losses

Total Held-to-Maturity Securities

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

Cash and cash equivalents decreased $9.9 million, or 7.1%, to $129.9 million at March 31, 2025, compared to $139.8 million at December 31, 2024.

The decrease in cash and cash equivalents was primarily the result of an increase of $90.4 million in net loans and a $75.0 million net repayment of borrowings.

The decrease in cash and cash equivalents was offset primarily by an increase of $120.1 million in net deposits, $13.6 million in proceeds from maturities, calls and principal repayment on securities, $3.4 million in net redemption of FHLB stock and $2.6 million in advance payments by borrowers.

The Company securities portfolio decreased $1.4 million in available-for-sale and $9.9 million in held-to-maturity during the three months ended March 31, 2025.

The decrease in the securities portfolio was primarily due to the call of one available-for-sale security in the amount of $1.0 million and changes in principal amount of the securities.

Gross Loans Receivable.

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

The composition of gross loans receivable at March 31, 2025 and at December 31, 2024 and the percentage of each classification to total loans are summarized as follows:

March 31, 2025

December 31, 2024

12 unchanged sentences

Consumer loans

(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 56.4% 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.

Multifamily residential loans increased $5.4 million, or 0.8%, when compared to December 31, 2024.

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

Construction and land loans increased $81.8 million, or 11.1%, when compared to December 31, 2024.

The majority of the $81.8 million growth in construction and land mortgage loans is related to funding of existing commitments prior to 2025 as opposed to new originations in 2025.

Our commitments to grant new mortgage loans decreased by $102.1 million as of September 30, 2024 compared to December 31, 2023.

Our commitments to grant new mortgage loans decreased by $28.7 million as of March 31, 2025 compared to December 31, 2024.

See Note 10 ("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 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 .

Within the construction and land mortgage loans, as indicated in the composition of gross loans receivable table above, there are 64 projects as of March 31, 2025.

Of these 64 projects, 51 projects are more than 50% complete and 13 projects are less than 50% complete.

Of the 51 projects that are more than 50% complete, 22 projects have been issued a certificate of occupancy or a temporary certificate of occupancy, 29 projects are without certificate of occupancy or a temporary 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 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.

At March 31, 2025 and December 31, 2024, approximately 3.3% and 3.5%, 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.

3 unchanged sentences

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 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.

At March 31, 2025 and December 31, 2024, the Bank’s construction and land mortgage loans as a percentage of total risk-based capital was 159.1% and 145.0%, respectively.

Investor-owned commercial real estate mortgage loans as a percentage of total risk-based capital was 354.6% and 341.7% as of March 31, 2025 and December 31, 2024, respectively.

At March 31, 2025, the Bank was above the 100% guidelines established by the banking regulations and under the 200% 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 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

Loans held for sale, at fair value, at March 31, 2025 decreased $2.2 million, or 20.2%, to $8.6 million from $10.7 million at December 31, 2024.

The composition of deposits at March 31, 2025 and December 31, 2024 and changes in dollars and percentages are summarized as follows:

March 31, 2025

December 31, 2024

14 unchanged sentences

Total deposits

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

(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.

(1) At March 31, 2025 and December 31, 2024, there were no individual listing service deposits amounting to $250,000 or more.

There was one brokered certificates of deposit in the amount of $1.5 million amounting to $250,000 or more.

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

When wholesale funding is necessary to complement the Company's core deposit base, management determines which source is best suited to address both liquidity risk and interest rate risk in line with management objectives.

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 September 30, 2024 and December 31, 2023.

The overall reliance on wholesale funding and noncore funding were within those policy limitations as of March 31, 2025 and December 31, 2024.

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 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.

The Bank had outstanding borrowings at March 31, 2025 and December 31, 2024 of $521.1 million and $571.1 million in term advances from the FHLBNY.

The Bank did not have any overnight line of credit advance at March 31, 2025 and had one overnight line of credit advance in the amount of $25.0 million from the FHLBNY at December 31, 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 March 31, 2025 and December 31, 2024.

The Bank did not have any term and overnight line of credit advances from the FRBNY at March 31, 2025 and December 31, 2024.

Stockholders’ Equity .

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 Company’s consolidated stockholders’ equity increased $8.4 million, or 1.7%, to $513.9 million as of March 31, 2025 from $505.5 million as of December 31, 2024.

The $8.4 million increase in stockholders’ equity was largely attributable to $6.0 million in net income, $1.8 million in other comprehensive income, $0.5 million impact to additional paid in capital as a result of share-based compensation and $0.4 million from release of ESOP shares, offset by $0.3 million in dividends on preferred shares.

Comparison of Results of Operations for the Three Months Ended March 31, 2025 and 2024

The discussion of the Company’s results of operations for the three months ended March 31, 2025 and 2024 are presented below.

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

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.

Net income available to common stockholders was $5.7 million for the three months ended March 31, 2025 compared to net income available to common stockholders of $2.4 million for the three months ended March 31, 2024.

Earnings per basic and diluted share was $0.25 for the three months ended March 31, 2025 compared to earnings per basic and diluted share of $0.11 for three months ended March 31, 2024.

The $3.3 million increase of net income available to common stockholders from the three months ended March 31, 2024, was due to increases of $3.4 million in net interest income, $0.7 million in non-interest income and $0.3 million in benefit for credit losses, partially offset by increases of $0.7 million in provision for income taxes, $0.3 million in dividends on preferred shares and $0.1 million in non-interest expense.

Net income for the three months ended March 31, 2025, which excludes $0.3 million in dividends on preferred shares, was $6.0 million.

There was no dividend on preferred shares for the three months ended March 31, 2024.

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

For the Three Months Ended September 30,

For the Three Months Ended March 31,

Increase (Decrease)

3 unchanged sentences

Net interest income

Provision for credit losses

Net interest income after provision for credit losses

Benefit for credit losses (1)

Net interest income after benefit for credit losses

Non-interest income

4 unchanged sentences

Net income available to common stockholders

Earnings per share:

Earnings per common share:

(1) For the three months ended March 31, 2024, provision for contingencies in the amount of $0.2 million were reclassified from total non-interest expense to benefit for credit losses.

Interest and Dividend Income.

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.

Interest and dividend income increased $4.3 million, or 10.9%, to $44.0 million for the three months ended March 31, 2025 from $39.7 million for the three months ended March 31, 2024.

Interest income on loans receivable, which is the Company’s primary source of income, increased $6.5 million, or 21.1%, to $37.1 million for the three months ended March 31, 2025 from $30.7 million for the three months ended March 31, 2024.

Total interest and dividend income on securities, FHLBNY stock and deposits due from banks decreased $2.1 million, or 23.8%, to $6.9 million for the three months ended March 31, 2025 from $9.0 million for the three months ended March 31, 2024.

The decrease was primarily attributable to decreases of $1.2 million in interest on deposits due from banks and $1.1 million in interest on securities, offset by an increase of $0.2 million in dividend on FHLBNY stock.

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

For the Three Months Ended September 30,

For the Three Months Ended March 31,

(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 Three Months Ended September 30,

For the Three Months Ended March 31,

(Dollars in thousands)

4 unchanged sentences

Interest Expense.

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 September 30,

Interest expense increased $1.0 million, or 4.6%, to $21.8 million for the three months ended March 31, 2025 from $20.8 million for the three months ended March 31, 2024 .

The following table presents interest expense for the periods indicated:

For the Three Months Ended March 31,

(Dollars in thousands)

3 unchanged sentences

Net Interest Income.

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.

Net interest income increased $3.4 million, or 18.0%, to $22.2 million for the three months ended March 31, 2025 from $18.8 million for the three months ended March 31, 2024.

The $3.4 million increase in net interest income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was attributable to an increase of $4.3 million in total interest and dividend income primarily due to increases in average loans receivable, offset by an increase of $1.0 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities.

Net interest rate spread increased by 37 basis points to 2.19% for the three months ended March 31, 2025 from 1.82% for the three months ended March 31, 2024.

The increase in the net interest rate spread for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to and an increase in the average yields on interest-earning assets of 19 basis points to 5.90% for the three months ended March 31, 2025 from 5.71% for the three months ended March 31, 2024, and a decrease in the average rates paid on interest-bearing liabilities of 18 basis points to 3.71% for the three months ended March 31, 2025 from 3.89% for the three months ended March 31, 2024.

Net interest margin increased 27 basis points for the three months ended March 31, 2025, to 2.98% from 2.71% for three months ended March 31, 2024.

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% to 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.

In November 2024, the Federal Reserve lowered the target range by 25 basis points to 4.50% to 4.75% and in December 2024 another 25 basis points to 4.25% to 4.50%.

The Federal Reserve left federal funds rate unchanged at 4.25% to 4.50% during its March 2025 meeting, though it is still anticipated that they may reduce interest rates by around 50bps this year.

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 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 September 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 $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 September 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

Microloans recoveries

Marketing and promotional expenses

Directors fees and regulatory assessment

Other operating expenses

Total non-interest expense

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

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 September 30,

Yield/Rate (1)

(Dollars in thousands)

Interest-earning assets:

Securities (3)

Total interest-earning assets

Non-interest-earning assets

Interest-bearing liabilities:

NOW/IOLA (5) (6)

Money market (6)

Certificates of deposit

Total deposits

Advance payments by borrowers

Total interest-bearing liabilities

Non-interest-bearing liabilities:

Non-interest-bearing demand (5)

Other non-interest-bearing liabilities

Total non-interest-bearing liabilities

Total liabilities

Total liabilities and total equity

Net interest income

Net interest rate spread (7)

Net interest-earning assets (8)

Net interest margin (9)

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) 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.

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

(9) 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 September 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

Advance payments by borrowers

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 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 $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 Nine Months Ended September 30,

Increase (Decrease)

(Dollars in thousands)

Interest and dividend income

Interest expense

Net interest income

Provision for credit losses

Net interest income after 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 $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 Nine Months Ended September 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 Nine Months Ended September 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 $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 Nine Months Ended September 30,

(Dollars in thousands)

Certificates of deposit

Advance payments by borrowers

Total interest expense

Net Interest Income.

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 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.

Non-interest income increased $0.7 million, or 39.5%, to $2.4 million for the three months ended March 31, 2025 from $1.7 million for the three months ended March 31, 2024.

The $0.7 million increase in non-interest income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was attributable to increases of $0.4 million in income on sale of SBA loans and $0.3 million in late and prepayment charges, partially offset by a decrease of $0.2 million in income on the sale of mortgage loans.

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

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(Dollars in thousands)

3 unchanged sentences

Income on sale of mortgage loans

Income on sale of SBA loans

Total non-interest income

Non-Interest Expense.

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.

Non-interest expense increased $0.1 million, or 0.6%, to $16.9 million for the three months ended March 31, 2025 from $16.8 million for the three months ended March 31, 2024.

The $0.1 million increase in non-interest expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024 was attributable to increases of $0.5 million in other operating expense and $0.2 million in occupancy and equipment, partially offset by decreases of $0.4 million in professional fees and $0.3 million in direct loan expenses.

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

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(Dollars in thousands)

3 unchanged sentences

Direct loan expenses

(Benefit) provision for contingencies

Insurance and surety bond premiums

6 unchanged sentences

Total non-interest expense (1)

(1) For the three months ended March 31, 2024, provision for contingencies in the amount of $0.2 million were reclassified from total non-interest expense to benefit for credit losses.

Income Tax Provision.

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.

The Company had a provision for income taxes of $2.0 million for the three months ended March 31, 2025 compared to a provision for income taxes of $1.3 million for three months ended March 31, 2024.

Credit Quality.

Total non-performing loans, including loans held for sale, were $27.3 million for both periods March 31, 2025 and December 31, 2024.

During the three months ended March 31, 2025, a credit loss benefit of $0.3 million on loans was recorded, consisting of $0.7 million charged on the funded portion and a benefit of $1.0 million on the unfunded portion on loans.

During the three months ended March 31, 2024, a credit loss benefit of $0.1 million on loans were recorded, consisting of $0.3 million benefit on the funded portion and a $0.2 million charged on the on unfunded portion on loans.

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 Nine Months Ended September 30,

For the Three Months Ended March 31,

Yield/Rate (1)

6 unchanged sentences

Interest-bearing liabilities:

NOW/IOLA (5) (6)

Money market (6)

Certificates of deposit

17 unchanged sentences

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

(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.

(5) 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 Nine Months Ended September 30,

For the Three Months Ended March 31,

Increase (Decrease) Due to

7 unchanged sentences

Total deposits

Advance payments by borrowers

Total interest-bearing liabilities

7 unchanged sentences

The Bank currently utilizes a third-party modeling solution that is prepared on a quarterly basis, to evaluate its sensitivity to changing interest rates, given the Bank’s business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors.

The Bank engages in hedging activities, such as swap transactions.

The Bank is a party to two interest rate swap transactions.

One interest rate swap is for a period of two years effective October 12, 2023 and terminates on November 1, 2025 with a notional amount of $150.0 million.

The Bank will pay a fixed rate of interest of 4.885% and receive the Secured Overnight Financing Rate ("SOFR") rate.

The other interest rate swap is for a period of three years effective October 12, 2023 and terminates on November 1, 2026 with a notional amount of $100.0 million.

The Bank will pay a fixed rate of interest of 4.62% and receive the SOFR rate (see Note 9 of the Notes to the Consolidated Financial Statements).

Net Interest Income Simulation Models .

2 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 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:

As of March 31, 2025, 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 September 30, 2024, the earnings simulation model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy.

At March 31, 2025, 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 September 30, 2024, the EVE modeling calculated the following estimated changes in EVE due to instantaneous upward and downward changes in rates:

At March 31, 2025, 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 September 30, 2024, the EVE model indicated that the Bank was in compliance with the Board of Directors’ approved Interest Rate Risk Policy.

At March 31, 2025, 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.

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.

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 announced that the target range for the federal funds rate decreased by 50 basis points to 4.75% to 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.

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.

In November 2024, the Federal Reserve lowered the target range by 25 basis points to 4.50% to 4.75% and in December 2024 another 25 basis points to 4.25% to 4.50%.

The Federal Reserve left federal funds rate unchanged at 4.25% to 4.50% during its March 2025 meeting, though it is still anticipated that they may reduce interest rates by around 50bps this year.

Our net interest income may also be positively impacted if the demand for loans increases due to the rate decreases, 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.

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 September 30, 2024, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions.

The following table sets forth the Company’s interest-earning assets and its interest-bearing liabilities at March 31, 2025, 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 table sets forth an approximation of the projected repricing of assets and liabilities at March 31, 2025, 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.

September 30, 2024

March 31, 2025

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.

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 $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 had $521.1 million and $571.1 million of outstanding term advances from FHLBNY at March 31, 2025 and December 31, 2024, respectively.

The Bank had no overnight line of credit advance from the FHLBNY at March 31, 2025 and $25.0 million of overnight line of credit advance from the FHLBNY at December 31, 2024.

Net cash provided by operating activities was $13.1 million and $1.5 million for the three months ended March 31, 2025 and 2024, 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 ($67.8) million and ($80.1) million for the three months ended March 31, 2025 and 2024, respectively.

Net cash provided by financing activities, consisting of activities in borrowing, deposit accounts and dividends paid on preferred stock, was $44.8 million and $74.2 million for the three months ended March 31, 2025 and 2024, 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 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.

At March 31, 2025 and December 31, 2024, all regulatory capital requirements were met, resulting in the Company and the Bank being categorized as well capitalized.

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 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.

At March 31, 2025 and December 31, 2024, the Company had outstanding commitments to originate loans and extend credit of $390.2 million and $411.5 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%.

The company paid and accrued $0.3 million for the three months ended March 31, 2025 and $0.6 million for the year ended December 31, 2024.

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 $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.

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, 2025.

The Company also has material cash requirements for occupancy and equipment expenses, excluding depreciation and amortization of $0.5 million, related to rental expenses, general maintenance and cleaning supplies, guard services, software licenses and other miscellaneous expenses, which were $3.4 million for the three months ended March 31, 2025.

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