What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 146 added, 115 removed, 142 unchanged (65% of the section changed)

4 unchanged sentences

Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those set forth in Item 1A of the Company's Annual Report on Form 10-K, as supplemented by its Quarterly Reports on Form 10-Q, and those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S.

Government, changes in accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, inflation and changes in the interest rate environment that may reduce our margins and yields, may reduce the fair value of financial instruments or may reduce our volume of loan originations, or may increase the level of defaults, losses and prepayments on loans the Company has made and may make whether held in portfolio or sold in the secondary market, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

In addition, the COVID-19 pandemic continues to have an uncertain impact on the Company, its customers and the communities it serves.

1 unchanged sentence

The extent of such impact will depend on future developments, which remain highly uncertain, including when the pandemic will be controlled and abated, and the extent to which the economy can remain open.

As the result of the pandemic and the related adverse local and national economic consequences, the Company could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

the demand for our products and services may decline, making it difficult to grow assets and income;

if the economy is unable to remain substantially open, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

our allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect our net income;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

our wealth management revenues may decline with continuing market turmoil;

we may face the risk of a goodwill write-down due to stock price decline;

and our cyber security risks are increased as the result of an increased number of employees working remotely.

The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made.

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The Company has identified the following as critical accounting policies:

• Valuation of the allowance for credit losses;

• Adequacy of the allowance for credit losses;

• Valuation of deferred tax assets

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or when an extension or renewal option is included in the original contract and is not unconditionally cancellable by the Company.

Management will assess the likelihood of the option being exercised by the borrower and appropriately extend the maturity for modeling purposes.

Management will assess the likelihood of an option being exercised by any given borrower and appropriately extend the maturity of the portfolio for modeling purposes.

The Company considers qualitative adjustments to credit loss estimates for information not already captured in the quantitative component of the loss estimation process.

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The segments have been combined or sub-segmented as needed to ensure loans of similar risk profiles are appropriately pooled.

As of March 31, 2022, the portfolio and class segments for the Company’s loan portfolio were:

As of June 30, 2022, the portfolio and class segments for the Company’s loan portfolio were:

• Mortgage Loans – Residential, Commercial Real Estate, Multi-Family and Construction

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A loan for which the terms have been modified resulting in a concession by the Company, and for which the borrower is experiencing financial difficulties is considered to be a TDR.

The allowance for credit losses on a TDR is measured using the

same method as all other impaired loans, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring.

The allowance for credit losses on a TDR is measured using the same method as all other impaired loans, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring.

For loans acquired that have experienced more-than-insignificant deterioration in credit quality since their origination are considered Purchased Credit Deteriorated ("PCD") loans.

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Material changes to these and other relevant factors creates greater volatility to the allowance for credit losses, and therefore, greater volatility to the Company’s reported earnings.

Management considers different economic scenarios that may impact the allowance for credit losses on loans.

Among other balance sheet and income statement changes, these scenarios could result in a significant increase to the allowance for credit losses on loans.

These scenarios include both the quantitative and qualitative components of the model and demonstrate how sensitive the allowance can be to key assumptions underlying the overall calculation.

To the extent actual losses are higher than management estimates, additional provision for credit losses on loans could be required and could adversely affect our earnings or financial position in future periods.

See Note 3 to the Consolidated Financial Statements for more information on the allowance for credit losses on loans.

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A valuation allowance is established when management is unable to conclude that it is more likely than not that it will realize deferred tax assets based on the nature and timing of these items.

The Company did not require a valuation allowance at March 31, 2022 or December 31, 2021.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2022 AND DECEMBER 31, 2021

Total assets at March 31, 2022 were $13.62 billion, a $164.2 million decrease from December 31, 2021.

The decrease in total assets was primarily due to a $279.3 million decrease in cash and cash equivalents and a $10.1 million decrease in total investments, partially offset by an $81.3 million increase in total loans.

The Company’s loan portfolio increased $81.3 million to $9.66 billion at March 31, 2022, from $9.58 billion at December 31, 2021.

For the three months ended March 31, 2022, loan funding, including advances on lines of credit, totaled $959.4 million, compared with $770.5 million for the same period in 2021.

Total Paycheck Protection Program ("PPP") loans outstanding decreased $66.0 million to $28.9 million at March 31, 2022, from $94.9 million at December 31, 2021.

Excluding the net decrease in PPP loans, during the three months ended March 31, 2022, the Company experienced net increases in commercial

mortgage loans, multi-family loans, construction loans and commercial loans of $109.8 million, $30.4 million, $16.2 million and $8.5 million, respectively, partially offset by net decreases in consumer loans and residential mortgage loans of $10.9 million and $8.0 million, respectively.

Commercial real estate, commercial and construction loans represented 84.4% of the total loan portfolio at March 31, 2022, compared to 84.1% at December 31, 2021.

The Company did not require a valuation allowance at June 30, 2022 or December 31, 2021.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2022 AND DECEMBER 31, 2021

Total assets at June 30, 2022 were $13.72 billion, a $65.3 million decrease from December 31, 2021.

The decrease in total assets was primarily due to a $434.9 million decrease in cash and cash equivalents and a $115.8 million decrease in total investments, partially offset by a $410.8 million increase in total loans.

The Company’s loan portfolio increased $410.8 million to $9.99 billion at June 30, 2022, from $9.58 billion at December 31, 2021.

For the six months ended June 30, 2022, loan funding, including advances on lines of credit, totaled $2.15 billion, compared with $1.67 billion for the same period in 2021.

Total PPP loans outstanding decreased $78.2 million to $16.7 million at June 30, 2022, from $94.9 million at December 31, 2021.

Excluding the net decrease in PPP loans, during the six months ended June 30, 2022, the Company experienced net increases of $309.0 million in commercial mortgage loans, $81.3 million in commercial loans, $80.7 million in multi-family loans and $44.9 million in construction loans, partially offset by net decreases in residential mortgage and consumer loans of $21.7 million and $4.7 million, respectively.

Commercial loans, consisting of commercial real estate, multi-family, commercial and construction loans, represented 85.0% of the loan portfolio at June 30, 2022, compared to 84.1% at December 31, 2021.

The Company participates in loans originated by other banks, including participations designated as Shared National Credits (“SNCs”).

The Company’s gross commitments and outstanding balances as a participant in SNCs were $192.7 million and $107.8 million, respectively, at March 31, 2022, compared to $167.1 million and $78.5 million, respectively, at December 31, 2021.

No SNC relationships were 90 days or more delinquent at March 31, 2022.

The Company had outstanding junior lien mortgages totaling $137.0 million at March 31, 2022.

The Company’s gross commitments and outstanding balances as a participant in SNCs were $182.8 million and $117.5 million, respectively, at June 30, 2022, compared to $167.1 million and $78.5 million, respectively, at December 31, 2021.

No SNC relationships were 90 days or more delinquent at June 30, 2022.

The Company had outstanding junior lien mortgages totaling $137.9 million at June 30, 2022.

Of this total, eight loans totaling $452,300 were 90 days or more delinquent with an allowance for credit losses of $6,900.

The following table sets forth information regarding the Company’s non-performing assets as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

The following table sets forth information regarding the Company’s non-performing assets as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Mortgage loans:

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Total non-performing assets $ 49,524 56,758

The following table sets forth information regarding the Company’s 60-89 day delinquent loans as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

The following table sets forth information regarding the Company’s 60-89 day delinquent loans as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Mortgage loans:

1 unchanged sentence

Commercial — 3,960

Multi-family — —

Construction — —

Total mortgage loans 1,752 5,091

2 unchanged sentences

Total 60-89 day delinquent loans $ 1,962 6,608

At March 31, 2022, the Company’s allowance for credit losses related to the loan portfolio was 0.79% of total loans, compared to 0.84% and 0.87% at December 31, 2021 and March 31, 2021, respectively.

The Company recorded a provision benefit for credit losses on loans of $6.4 million for the three months ended March 31, 2022 compared with a benefit of $15.0 million for the three months ended March 31, 2021.

For the three months ended March 31, 2022, the Company had net recoveries of $1.9 million, compared to net charge-offs of $875,000 for the same period in 2021.

The allowance for credit losses decreased $4.5 million to $76.3 million at March 31, 2022 from $80.7 million at December 31, 2021.

At June 30, 2022, the Company’s allowance for credit losses related to the loan portfolio was 0.79% of total loans, compared to 0.84% and 0.85% at December 31, 2021 and June 30, 2021, respectively.

The Company recorded a provision for credit losses on loans of $3.0 million for the three months ended June 30, 2022 and a negative provision for credit losses on loans of $3.4 million for the six months ended June 30, 2022, compared with negative provisions of $10.7 million and $25.7 million for the three and six months ended June 30, 2021, respectively.

For the three and six months ended June 30, 2022, the Company had net charge-offs of $259,000 and net recoveries of $1.7 million, respectively, compared to net recoveries of $6.1 million and $5.2 million, respectively, for the same periods in 2021.

The allowance for credit losses decreased $1.7 million to $79.0 million at June 30, 2022 from $80.7 million at December 31, 2021.

The decrease in the period-over-period provision benefit was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period.

Total non-performing loans were $44.3 million, or 0.46% of total loans at March 31, 2022, compared to $48.0 million, or 0.50% of total loans at December 31, 2021.

The $3.7 million decrease in non-performing loans consisted of a $6.8 million decrease in non-performing commercial loans, a $676,000 decrease in non-performing residential mortgage loans and a

$511,000 decrease in non-performing consumer loans, partially offset a $2.6 million increase in non-performing commercial mortgage loans.

At March 31, 2022 and December 31, 2021, the Company held foreclosed assets of $8.6 million and $8.7 million, respectively.

During the three months ended March 31, 2022, there was one addition to foreclosed assets with an aggregate carrying value of $47,000 and a valuation charge of $200,000.

Foreclosed assets at March 31, 2022 consisted primarily of commercial real estate.

Total non-performing assets at March 31, 2022 decreased $3.9 million to $52.9 million, or 0.39% of total assets, from $56.8 million, or 0.41% of total assets at December 31, 2021.

Cash and cash equivalents were $433.1 million at March 31, 2022, a $279.3 million decrease from December 31, 2021, which was attributable to the deployment of excess liquidity into commercial loans and available for sale debt securities combined with the repayment of certain wholesale borrowings.

Total investments were $2.52 billion at March 31, 2022, a $10.1 million decrease from December 31, 2021.

This decrease was largely due to an increase in unrealized losses on available for sale debt securities, repayments of mortgage-backed securities and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities.

Total deposits increased $132.1 million during the three months ended March 31, 2022, to $11.37 billion.

Total savings and demand deposit accounts increased $132.9 million to $10.67 billion at March 31, 2022, while total time deposits decreased $860,000 to $691.7 million at March 31, 2022.

The increase in savings and demand deposits was largely attributable to a $59.5 million increase in non-interest bearing demand deposits, a $59.6 million increase in money market deposits and a $30.1 million increase in savings deposits, partially offset by a $16.2 million decrease in interest bearing demand deposits.

The decrease in time deposits was primarily due to maturities of longer-term retail time deposits, partially offset by an increase in brokered time deposits.

Borrowed funds decreased $227.2 million during the three months ended March 31, 2022, to $399.6 million.

The decrease in borrowings for the period was largely due to the maturity and replacement of FHLB borrowings with lower-costing brokered deposits and retail deposits.

Borrowed funds represented 2.9% of total assets at March 31, 2022, a decrease from 4.5% at December 31, 2021.

Stockholders’ equity decreased $76.0 million during the three months ended March 31, 2022, to $1.62 billion, primarily due to dividends paid to stockholders, common stock repurchases and an increase in unrealized losses on available for sale debt securities, partially offset by net income earned for the period.

For the three months ended March 31, 2022, common stock repurchases totaled 1,282,075 shares at an average cost of $23.36 per share, of which 40,463 shares, at an average cost of $23.56 per share, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation.

At March 31, 2022, approximately 1.9 million shares remained eligible for repurchase under the current stock repurchase authorization.

Total non-performing loans were $40.4 million, or 0.40% of total loans at June 30, 2022, compared to $48.0 million, or 0.50% of total loans at December 31, 2021.

The $7.6 million decrease in non-performing loans consisted of an $8.6 million decrease in non-performing commercial loans, a $2.7 million decrease in non-performing residential mortgage loans and a $718,000 decrease in non-performing consumer loans, partially offset by a $1.7 million increase in non-performing commercial mortgage loans and a $1.1 million increase in non-performing construction loans.

At June 30, 2022 and December 31, 2021, the Company held foreclosed assets of $9.1 million and $8.7 million, respectively.

During the six months ended June 30, 2022, there were two additions to foreclosed assets with an aggregate carrying value of $625,000, one property sold with an aggregate carrying value of $80,000 and a valuation charge of $200,000.

Foreclosed assets at June 30, 2022 consisted primarily of commercial real estate.

Total non-performing assets at June 30, 2022 decreased $7.2 million to $49.5 million, or 0.36% of total assets, from $56.8 million, or 0.41% of total assets at December 31, 2021.

Cash and cash equivalents were $277.5 million at June 30, 2022, a $434.9 million decrease from December 31, 2021, primarily as a result of decreases in short term investments.

Total investments were $2.41 billion at June 30, 2022, a $115.8 million decrease from December 31, 2021.

This decrease was primarily due to an increase in unrealized losses on available for sale debt securities, repayments of mortgage-backed securities and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities.

Total deposits decreased $359.8 million during the six months ended June 30, 2022, to $10.87 billion.

Total savings and demand deposit accounts decreased $333.9 million to $10.21 billion at June 30, 2022, while total time deposits decreased $25.9 million to $666.6 million at June 30, 2022.

The decrease in savings and demand deposits was largely attributable to a $463.6 million decrease in interest bearing demand deposits, as the Company shifted $360.0 million of brokered demand deposits into lower-costing Federal Home Loan Bank of New York ("FHLB") borrowings, partially offset by a $52.3 million increase in non-interest bearing demand deposits, a $51.8 million increase in savings deposits and a $25.5 million increase in money market deposits.

The decrease in time deposits was primarily due to maturities of longer-term retail time deposits, partially offset by the inflow of brokered time deposits.

Borrowed funds increased $375.7 million during the six months ended June 30, 2022, to $1.00 billion.

The increase in borrowings for the period was largely due to the maturity and replacement of brokered deposits into lower-costing FHLB borrowings.

Borrowed funds represented 7.3% of total assets at June 30, 2022, an increase from 4.5% at December 31, 2021.

Stockholders’ equity decreased $111.8 million during the six months ended June 30, 2022, to $1.59 billion, primarily due to an increase in unrealized losses on available for sale debt securities, dividends paid to stockholders and common stock repurchases, partially offset by net income earned for the period.

For the three months ended June 30, 2022, common stock repurchases totaled 760,466 shares at an average cost of $23.00 per share.

For the six months ended June 30, 2022, common stock repurchases totaled 2,042,541 shares at an average cost of $23.23 per share, of which 15,457 shares, at an average cost of $23.48 per share, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation.

At June 30, 2022, approximately 1.1 million shares remained eligible for repurchase under the current stock repurchase authorization.

Liquidity and Capital Resources.

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Changes in interest rates, local economic conditions, the COVID-19 pandemic and related government response and the competitive marketplace can influence loan prepayments, prepayments on mortgage-backed securities and deposit flows.

In response to the COVID-19 pandemic, the Company has escalated the monitoring of deposit behavior, utilization of credit lines, and borrowing capacity with the FHLBNY and FRBNY, and is enhancing its collateral position with these funding sources.

In response to the COVID-19 pandemic, the Company escalated the monitoring of deposit behavior, utilization of credit lines, and borrowing capacity with the FHLBNY and FRBNY, and continues to enhance its collateral position with these funding sources.

The Federal Deposit Insurance Corporation ("FDIC") and the other federal bank regulatory agencies issued a final rule that revised the leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act, that were effective January 1, 2015.

Among other things, the rule established a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), adopted a uniform minimum leverage capital ratio at 4%, increased the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on non-accrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.

The rule also required unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of

calculating regulatory capital unless a one-time opt-out was exercised.

The rule also required unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital unless a one-time opt-out was exercised.

The Company exercised the option to exclude unrealized gains and losses from the calculation of regulatory capital.

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In connection with its adoption of CECL on January 1, 2020, the Company elected to utilize the five-year CECL transition.

At March 31, 2022, the Bank and the Company exceeded all current minimum regulatory capital requirements as follows:

March 31, 2022

At June 30, 2022, the Bank and the Company exceeded all current minimum regulatory capital requirements as follows:

June 30, 2022

Required Required with Capital Conservation Buffer Actual

14 unchanged sentences

and a total risk-based capital ratio of at least 10.00%.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

The Company reported net income of $44.0 million, or $0.58 per basic and diluted share for the three months ended March 31, 2022, compared to net income of $48.6 million, or $0.63 per basic and diluted share for the three months ended March 31, 2021.

COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

The Company reported net income of $39.2 million, or $0.53 per basic and diluted share for the three months ended June 30, 2022, compared to net income of $44.8 million, or $0.58 per basic and diluted share for the three months ended June 30, 2021.

For the six months ended June 30, 2022, the Company reported net income of $83.2 million, or $1.11 per basic share and diluted share, compared to net income of $93.3 million, or $1.22 per basic and diluted share, for the same period last year.

Net Interest Income .

Total net interest income increased $4.5 million to $94.5 million for the quarter ended March 31, 2022, from $90.0 million for the quarter ended March 31, 2021.

Interest income for the quarter ended March 31, 2022 increased $458,000 to $101.0 million, from $100.5 million for the same period in 2021.

Interest expense decreased $4.1 million to $6.5 million for the quarter ended March 31, 2022, from $10.5 million for the quarter ended March 31, 2021.

The increase in net interest income for the three months ended March 31, 2022, was primarily driven by an increase in available for sale debt securities funded by growth in lower-costing core deposits and the reinvestment of PPP loan satisfactions.

The increase in net interest income attributable to growth in average earning assets was partially offset by modest compression in the net interest margin.

Additionally, fees related to the forgiveness of PPP loans, which are recognized in interest income, decreased $2.9 million to $1.1 million for the three months ended March 31, 2022, compared to $4.0 million for the three months ended March 31, 2021.

For the three months ended March 31, 2022, the net interest margin decreased three basis points to 3.02%, compared to 3.05% for the three months ended March 31, 2021.

The weighted average yield on interest earning assets declined 18 basis points to 3.23% for the three months ended March 31, 2022, compared to 3.41% for the three months ended March 31, 2021, while the weighted average cost of interest bearing liabilities decreased 20 basis points to 0.29% for the three months ended March 31, 2022, compared to 0.49% for the same period last year.

The average cost of interest bearing deposits decreased 14 basis points to 0.25% for the three months ended March 31, 2022, compared to 0.39% for the same period last year.

Average non-interest bearing demand deposits totaled $2.79 billion for the three months ended March 31, 2022, compared with $2.38 billion for the

three months ended March 31, 2021.

The average cost of deposits, including non-interest bearing deposits, was 0.19% for the three months ended March 31, 2022, compared with 0.30% for the three months ended March 31, 2021.

The average cost of borrowings for the three months ended March 31, 2022 was 0.86%, compared to 1.12% for the same period last year.

Interest income on loans secured by real estate increased $1.8 million to $63.8 million for the three months ended March 31, 2022, from $62.0 million for the three months ended March 31, 2021.

Commercial loan interest income decreased $3.3 million to $22.8 million for the three months ended March 31, 2022, from $26.1 million for the three months ended March 31, 2021.

Consumer loan interest income decreased $353,000 to $3.1 million for the three months ended March 31, 2022, from $3.5 million for the three months ended March 31, 2021.

For the three months ended March 31, 2022, the average balance of total loans decreased $242.0 million to $9.48 billion, from $9.72 billion for the same period in 2021, primarily due to the forgiveness of PPP loans, partially offset by an increase in average commercial mortgage loans.

The average yield on total loans for the three months ended March 31, 2022, increased two basis points to 3.80%, from 3.78% for the same period in 2021.

Interest income on held to maturity debt securities decreased $188,000 to $2.6 million for the quarter ended March 31, 2022, compared to the same period last year.

Average held to maturity debt securities decreased $22.3 million to $428.1 million for the quarter ended March 31, 2022, from $450.4 million for the same period last year.

Interest income on available for sale debt securities and FHLBNY stock increased $2.3 million to $8.0 million for the three months ended March 31, 2022, from $5.6 million for the same period last year.

The average balance of available for sale debt securities and FHLBNY stock increased $958.4 million to $2.15 billion for the three months ended March 31, 2022.

The average yield on total securities decreased to 1.47% for the three months ended March 31, 2022, compared with 1.70% for the same period in 2021.

Interest expense on deposit accounts decreased $2.2 million to $5.2 million for the quarter ended March 31, 2022, compared with $7.4 million for the quarter ended March 31, 2021.

The average cost of interest bearing deposits decreased to 0.25% for the first quarter of 2022, from 0.39% for the three months ended March 31, 2021.

For the three months ended March 31, 2022, average interest bearing core deposits, which consist of total savings and demand deposits, increased $1.08 billion, to $7.77 billion, from $6.69 billion for the same period in 2021.

The increase in average core deposits for the three months ended March 31, 2022 was largely due to organic growth and government stimulus in the prior year.

For the three months ended March 31, 2022, average time deposit account balances decreased $362.2 million, to $680.8 million, from $1.04 billion for the same period in 2021.

Interest expense on borrowed funds decreased $1.6 million to $1.2 million for the quarter ended March 31, 2022, from $2.8 million for the quarter ended March 31, 2021.

The average cost of borrowings decreased to 0.86% for the three months ended March 31, 2022, from 1.12% for the three months ended March 31, 2021.

Average borrowings decreased $465.6 million to $549.7 million for the quarter ended March 31, 2022, from $1.02 billion for the quarter ended March 31, 2021.

Total net interest income increased $8.6 million to $99.5 million for the three months ended June 30, 2022, from $90.9 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, total net interest income increased $13.1 million to $194.0 million, from $180.9 million for the same period in 2021.

Interest income for the three months ended June 30, 2022 increased $5.7 million to $106.3 million, from $100.5 million for the same period in 2021.

For the six months ended June 30, 2022, interest income increased $6.2 million to $207.3 million, from $201.1 million for the six months ended June 30, 2021.

Interest expense decreased $2.8 million to $6.8 million for the three months ended June 30, 2022, from $9.6 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, interest expense decreased $6.9 million to $13.3 million, from $20.2 million for the six months ended June 30, 2021.

The increase in net interest income for the three months ended June 30, 2022, was primarily driven by growth in average earning assets, largely due to increases in available for sale debt securities and average loans outstanding, funded by growth in lower-costing core deposits and the reinvestment of cash proceeds from PPP loan satisfactions.

The increase in net interest income for the six months ended June 30, 2022, was primarily driven by a reduction in funding costs, growth in lower-costing core and non-interest bearing deposits and an increase in available for sale debt securities.

Net interest income was further enhanced by the favorable repricing of adjustable rate loans and an increase in rates on new loan originations.

Both periods increase in net interest income were partially offset by a reduction in fees related to the forgiveness of PPP loans.

For the three and six months ended June 30, 2022, the accretion of fees related to the forgiveness of PPP loans totaled $192,000 and $1.3 million, respectively, which were recognized in interest income, compared to $2.9 million and $6.9 million for the three and six months ended June 30, 2021.

The net interest margin increased 22 basis points to 3.21% for the quarter ended June 30, 2022, compared to 2.99% for the quarter ended June 30, 2021.

The weighted average yield on interest-earning assets increased 12 basis points to 3.43% for the quarter ended June 30, 2022, compared to 3.31% for the quarter ended June 30, 2021, while the weighted average cost of interest bearing liabilities decreased 13 basis points for the quarter ended June 30, 2022 to 0.31%, compared to the quarter ended June 30, 2021.

The average cost of interest bearing deposits for the quarter ended June 30, 2022 was 0.27%, compared to 0.34% for the same period last year.

Average non-interest bearing demand deposits totaled $2.78 billion for the quarter ended June 30, 2022, compared to $2.48 billion for the quarter ended June 30, 2021.

The average cost of total deposits, including non-interest bearing deposits, was 0.20% for the quarter ended June 30, 2022, compared with 0.26% for the quarter ended June 30, 2021.

The average cost of borrowed funds for the quarter ended June 30, 2022 was 0.84%, compared to 1.18% for the same period last year.

For the six months ended June 30, 2022, the net interest margin increased nine basis points to 3.11%, compared to 3.02% for the six months ended June 30, 2021.

The weighted average yield on interest earning assets declined three basis points to 3.33% for the six months ended June 30, 2022, compared to 3.36% for the six months ended June 30, 2021, while the weighted average cost of interest bearing liabilities decreased 16 basis points to 0.30% for the six months ended June 30, 2022, compared to 0.46% for the same period last year.

The average cost of interest bearing deposits decreased 10 basis points to 0.26% for the six months ended June 30, 2022, compared to 0.36% for the same period last year.

Average non-interest bearing demand deposits totaled $2.78 billion for the six months ended June 30, 2022, compared with $2.43 billion for the six months ended June 30, 2021.

The average cost of total deposits, including non-interest bearing deposits, was 0.19% for the six months ended June 30, 2022, compared with 0.28% for the six months ended June 30, 2021.

The average cost of borrowings for the six months ended June 30, 2022 was 0.85%, compared to 1.15% for the same period last year.

Interest income on loans secured by real estate increased $6.2 million to $69.1 million for the three months ended June 30, 2022, from $62.9 million for the three months ended June 30, 2021.

Commercial loan interest income decreased $2.8 million to $22.4 million for the three months ended June 30, 2022, from $25.2 million for the three months ended June 30, 2021.

Consumer loan interest income decreased $68,000 to $3.3 million for the three months ended June 30, 2022, from $3.4 million for the three months ended June 30, 2021.

For the three months ended June 30, 2022, the average balance of total loans increased $94.4 million to $9.68 billion, compared to the same period in 2021.

The average yield on total loans for the three months ended June 30, 2022, increased 10 basis points to 3.89%, from 3.79% for the same period in 2021.

Interest income on loans secured by real estate increased $8.0 million to $132.9 million for the six months ended June 30, 2022, from $124.9 million for the six months ended June 30, 2021.

Commercial loan interest income decreased $6.1 million to $45.2 million for the six months ended June 30, 2022, from $51.3 million for the six months ended June 30, 2021.

Consumer loan interest income decreased $421,000 to $6.5 million for the six months ended June 30, 2022, from $6.9 million for the six

months ended June 30, 2021.

For the six months ended June 30, 2022, the average balance of total loans was $9.58 billion, compared with $9.66 billion for the same period in 2021.

The average yield on total loans for the six months ended June 30, 2022, increased five basis points to 3.84%, from 3.79% for the same period in 2021.

Interest income on held to maturity debt securities decreased $211,000 to $2.5 million for the three months ended June 30, 2022, compared to the same period last year.

Average held to maturity debt securities decreased $25.9 million to $412.2 million for the three months ended June 30, 2022, from $438.1 million for the same period last year.

Interest income on held to maturity debt securities decreased $399,000 to $5.1 million for the six months ended June 30, 2022, compared to the same period in 2021.

Average held to maturity debt securities decreased $24.1 million to $420.1 million for the six months ended June 30, 2022, from $444.2 million for the same period last year.

Interest income on available for sale debt securities and FHLBNY stock increased $2.7 million to $8.5 million for the three months ended June 30, 2022, from $5.7 million for the three months ended June 30, 2021.

The average balance of available for sale debt securities and FHLBNY stock increased $607.7 million to $2.05 billion for the three months ended June 30, 2022, compared to the same period in 2021.

Interest income on available for sale debt securities and FHLBNY stock increased $5.1 million to $16.4 million for the six months ended June 30, 2022, from $11.3 million for the same period last year.

The average balance of available for sale debt securities and FHLBNY stock increased $782.1 million to $2.10 billion for the six months ended June 30, 2022.

The average yield on total securities increased to 1.74% for the three months ended June 30, 2022, compared with 1.46% for the same period in 2021.

For the six months ended June 30, 2022, the average yield on total securities increased to 1.59%, compared with 1.57% for the same period in 2021.

Interest expense on deposit accounts decreased $1.2 million to $5.6 million for the three month ended June 30, 2022, compared with $6.8 million for the three month ended June 30, 2021.

For the six months ended June 30, 2022, interest expense on deposit accounts decreased $3.4 million to $10.8 million, from $14.2 million for the same period last year.

The average cost of interest bearing deposits decreased to 0.27% and 0.26% for the three and six months ended June 30, 2022, respectively, from 0.34% and 0.36% for the three and six months ended June 30, 2021, respectively.

The average balance of interest bearing core deposits for the three months ended June 30, 2022 increased $608.5 million to $7.69 billion.

For the six months ended June 30, 2022, average interest bearing core deposits increased $842.6 million, to $7.73 billion, from $6.88 billion for the same period in 2021.

Average time deposit account balances decreased $202.6 million to $695.0 million for the three months ended June 30, 2022, from $897.6 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, average time deposit account balances decreased $282.0 million to $688.0 million, from $969.9 million for the same period in 2021.

Interest expense on borrowed funds decreased $1.4 million to $1.1 million for the three months ended June 30, 2022, from $2.6 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, interest expense on borrowed funds decreased $3.1 million to $2.3 million, from $5.4 million for the six months ended June 30, 2021.

The average cost of borrowings decreased to 0.84% for the three months ended June 30, 2022, from 1.18% for the three months ended June 30, 2021.

The average cost of borrowings decreased to 0.85% for the six months ended June 30, 2022, from 1.15% for the same period last year.

Average borrowings decreased $341.4 million to $527.6 million for the three months ended June 30, 2022, from $869.0 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, average borrowings decreased $403.1 million to $538.6 million, compared to $941.7 million for the six months ended June 30, 2021.

Provision for Credit Losses.

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Management assesses the adequacy of the allowance for credit losses on a quarterly basis and makes provisions for credit losses, if necessary, in order to maintain the valuation of the allowance.

The Company recorded a $6.4 million provision benefit for credit losses on loans for the three months ended March 31, 2022 compared with a benefit of $15.0 million for the three months ended March 31, 2021.

The Company recorded a $3.0 million provision for credit losses on loans for the three months ended June 30, 2022 and a $3.4 million negative provision for credit losses for the six months ended June 30, 2022, compared with negative provisions of $10.7 million and $25.7 million for the three and six months ended June 30, 2021, respectively.

The increase in the provision for the three months ended June 30, 2022 was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period, partially offset by an overall improvement in the Company's asset quality.

The decrease in the period-over-period provision benefit for the six months ended June 30, 2022, compared to the same period last year, was largely a result of growth in the loan portfolio, the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period.

Non-Interest Income.

Non-interest income totaled $20.1 million for the quarter ended March 31, 2022, a decrease of $1.5 million, compared to the same period in 2021.

BOLI income decreased $1.4 million to $1.2 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a benefit claim recognized in the prior year and lower equity valuations.

Other income decreased $642,000 to $1.2 million for the three months ended March 31, 2022, compared to $1.8 million for the same period in 2021, mainly due to decreases in net gains on sales of loans and net fees on loan-level interest rate swap transactions.

Additionally, fee income decreased $303,000 to $6.9 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a decrease in debit card revenue, partially offset by an increase in commercial loan prepayment fees.

The decrease in debit card revenue was largely attributable to the interchange transaction

fee limitation imposed by the Durbin amendment, which became effective for the Company in the third quarter of 2021.

Partially offsetting these decreases in non-interest income, insurance agency income increased $693,000 to $3.4 million, for the three months ended March 31, 2022, compared to the same period in 2021, resulting from an increase in contingent commissions.

Additionally, wealth management income increased $332,000 to $7.5 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to an increase in the market value of assets under management and new business generation.

Non-interest income totaled $20.9 million for the three months ended June 30, 2022, a decrease of $224,000, compared to the same period in 2021.

Fee income decreased $1.0 million to $7.4 million for the three months ended June 30, 2022, compared to the same period in 2021, primarily due to decreases in debit card revenue and commercial loan prepayment fees, partially offset by an increase in deposit related fees.

The decrease in debit card revenue was largely attributable to the interchange transaction fee limitation imposed by the Durbin amendment, which became effective for the Company in the third quarter of 2021.

Wealth management income decreased $835,000 to $7.0 million for the three months ended June 30, 2022, compared to the same period in 2021, primarily due to a decrease in the market value of assets under management.

Partially offsetting these decreases in non-interest income, other income increased $1.5 million to $1.9 million for the three months ended June 30, 2022, compared to the quarter ended June 30, 2021, primarily due to increases in net fees on loan-level interest rate swap transactions and net gains on the sale of loans.

For the six months ended June 30, 2022, non-interest income totaled $41.1 million, a decrease of $1.7 million, compared to the same period in 2021.

Fee income decreased $1.3 million to $14.3 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to a decrease in debit card revenue, which was curtailed by the Durbin amendment, partially offset by an increase in deposit related fees.

BOLI income decreased $1.3 million to $2.7 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to lower equity valuations and a decrease in benefit claims recognized.

Wealth management income decreased $504,000 to $14.5 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to a decrease in the market value of assets under management and a decrease in tax preparation fees, partially offset with new business generation.

Partially offsetting these decreases in non-interest income, other income increased $864,000 to $3.1 million for the six months ended June 30, 2022, compared to $2.2 million for the same period in 2021, mainly due to an increase in net fees on loan-level interest rate swap transactions.

Also, insurance agency income totaled $6.3 million, an increase of $694,000 for the six months ended June 30, 2022, compared to the same period in 2021, largely due to an increase in contingent commissions.

Non-Interest Expense.

For the three months ended March 31, 2022, non-interest expense totaled $61.9 million, an increase of $33,000, compared to the three months ended March 31, 2021.

For the three months ended March 31, 2022, the Company recorded a $2.4 million provision benefit for credit losses for off-balance sheet credit exposures, compared to an $875,000 benefit for the same period in 2021.

The increase in the period-over period provision benefit was primarily due to an increase in line of credit utilization.

Other operating expenses decreased $736,000 to $9.4 million for the three months ended March 31, 2022, compared to the same period in 2021, largely due to decreases in debit card maintenance, attorney and consulting expenses.

In addition, FDIC insurance decreased $565,000 to $1.2 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a decrease in the insurance assessment rate.

Partially offsetting these decreases in non-interest expense, compensation and benefits expense increased $1.8 million to $37.1 million for the three months ended March 31, 2022, compared to $35.3 million for the three months ended March 31, 2021, primarily due to an increase in stock-based compensation and an increase in salary expense associated with Company-wide annual merit increases.

Data processing expense increased $1.0 million to $5.3 million for the three months ended March 31, 2022, largely due to increases in software subscription expense and online banking costs.

For the three months ended June 30, 2022, non-interest expense totaled $63.8 million, an increase of $1.1 million, compared to the three months ended June 30, 2021.

Compensation and benefits expense increased $2.6 million to $37.4 million for three months ended June 30, 2022, compared to $34.9 million for the same period in 2021.

The increase was principally due to increases in stock-based compensation, salary expense and the accrual for incentive compensation, partially offset by a decline in employee medical expenses.

Other operating expenses increased $780,000 to $9.8 million for the three months ended June 30, 2022, compared to the same period in 2021, principally due to an increase in business development expenses.

Net occupancy expenses increased $572,000 to $8.5 million for the three months ended June 30, 2022, compared to the same period in 2021, largely due to increases in rent, depreciation and maintenance expenses, while FDIC insurance decreased $220,000 due to a decrease in the insurance assessment rate, partially offset by an increase in total assets subject to assessment.

Partially offsetting these increases in non-interest expense, credit loss expense for off-balance sheet credit exposures decreased $3.0 million to a negative provision of $1.0 million for the three months ended June 30, 2022, compared to a $2.1 million provision for the same period in 2021.

The decrease was primarily the result of a decrease in the pipeline of loans approved and awaiting closing, combined with an increase in line of credit utilization, partially offset by an increase in loss factors.

Non-interest expense totaled $125.7 million for the six months ended June 30, 2022, an increase of $1.2 million, compared to $124.6 million for the six months ended June 30, 2021.

Compensation and benefits expense increased $4.3 million to $74.5 million for the six months ended June 30, 2022, compared to $70.2 million for the six months ended June 30, 2021, primarily due to increases in stock-based compensation, salary expense and the accrual for incentive compensation, partially offset by a decrease in employee benefit expenses.

Data processing expense increased $1.2 million to $11.0 million for the six months ended June 30, 2022, mainly due to increases in software subscription expense and online banking costs.

Additionally, net occupancy expense increased $602,000 to $17.8 million for the six months ended June 30, 2022, compared to the same period in 2021, mainly due to increases in rent, depreciation and maintenance expenses, a portion of which were attributable to the Company's new administrative offices.

Partially offsetting these increases, credit loss expense for off-balance sheet credit exposures decreased $4.5 million to a negative provision of $3.4 million for the six months ended June 30, 2022, compared to a $1.2 million provision for the same period last year.

FDIC insurance decreased $785,000 for the six months ended June 30, 2022, primarily due to a decrease in the insurance assessment rate, partially offset by an increase in total assets subject to assessment.

Income Tax Expense.

For the three months ended March 31, 2022, the Company’s income tax expense was $15.2 million with an effective tax rate of 25.7%, compared with income tax expense of $16.2 million with an effective tax rate of 25.0% for the three months ended March 31, 2021.

The decrease in tax expense for the three months ended March 31, 2022, compared with the same period last year was largely the result of a decrease in taxable income.

For the three months ended June 30, 2022, the Company’s income tax expense was $14.3 million with an effective tax rate of 26.8%, compared with income tax expense of $15.3 million with an effective tax rate of 25.4% for the three months ended June 30, 2021.

The decrease in tax expense for the three months ended June 30, 2022, compared with the same period last year was largely the result of a decrease in taxable income, while the increase in the effective tax rate for the

three months ended June 30, 2022, compared with the three months ended June 30, 2021, was largely due to an increase in the proportion of income derived from taxable sources.

For the six months ended June 30, 2022, the Company's income tax expense was $29.6 million with an effective tax rate of 26.2%, compared with $31.5 million with an effective tax rate of 25.2% for the six months ended June 30, 2021.

The decrease in tax expense for the six months ended June 30, 2022, compared with the same period last year was largely the result of a decrease in taxable income, while the increase in the effective tax rate for the six months ended June 30, 2021, compared with the prior year was largely due to an increase in the proportion of income derived from taxable sources.

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