What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 129 added, 75 removed, 209 unchanged (49% of the section changed)

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Changes in interest rates also can affect our ability to originate loans, our ability to obtain and retain deposits, and the value of interest-earning assets, and the ability to realize gains from the sale of such assets, which could all negatively impact shareholder's equity and regulatory capital.

Since March 2022, the Federal Reserve Open Markets Committee ("FOMC") has raised the Fed Funds rate by 525 basis points.

Additional increases in interest rates could also have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations, which could not only result in increased loan defaults, foreclosures and charge-offs, but could also necessitate further increases to our allowance for credit losses and reduce net income.

In addition, based on our interest rate sensitivity analyses, an increase in the general level of interest rates may negatively affect the market value of the investment portfolio depending on the duration of certain securities included in the investment portfolio.

In December of 2023, the FOMC signaled its intention to reduce interest rates in 2024, contingent upon inflation settling at its

In March 2024, however, the Fed decided to keep the federal funds target rate at 5.25% to 5.5%, where it has remained since July 2023.

The extent to which current economic environment has a further impact on our business, results of operations, and financial condition, as well as the regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the current economic environment and actions taken by governmental authorities and other third parties in response to the geopolitical conflict, and inflationary pressure.

The Company cautions that the foregoing list of important factors is not exclusive.

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Through the Bank, we provide personal and business financial services to individuals and small to mid-sized businesses primarily in New Jersey and Pennsylvania.

The Bank has branches in Galloway Township, Northfield, Washington Township, Collingswood, New Jersey and Philadelphia, Pennsylvania.

The Bank has branches in Galloway Township, Northfield, Washington Township, Collingswood, New Jersey and Philadelphia, Pennsylvania, and a loan office in Philadelphia, Pennsylvania.

The vast majority of our revenue and income is currently generated through the Bank.

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The Company's non-interest expense primarily consists of employee compensation, administration, and other operating expenses.

At March 31, 2024, we had total assets of $2.01 billion, and total equity of $288.4 million.

Net income available to common shareholders for the three months ended March 31, 2024 was $6.1 million.

At June 30, 2024, we had total assets of $2.03 billion, and total equity of $292.8 million.

Net income available to common shareholders for the three and six months ended June 30, 2024 was $6.5 million and $12.6 million, respectively.

Results of Operations

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Our net income available to common shareholders for the first quarter of 2024 decreased $5.0 million, or 44.8%, to $6.1 million, compared to $11.1 million for the same period last year.

Earnings per share were $0.51 per basic common share and $0.51 per diluted common share for the first quarter of 2024 compared to $0.93 per basic common share and $0.92 per diluted

common share for the same period last year.

The decrease was primarily due to lower net interest income, an increase in provision for credit losses, and a decrease in non-interest income.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Our net income available to common shareholders for the second quarter of 2024 decreased $1.7 million, or 20.6%, to $6.5 million, compared to $8.1 million for the same period last year.

Earnings per share were $0.54 per basic common share and $0.53 per diluted common share for the second quarter of 2024, compared to $0.68 per basic common share and $0.67 per diluted common share for the same period last year.

The decrease was primarily due to higher interest expense, and a decrease in non-interest income.

Net Interest Income :

Our net interest income was $14.1 million for the first quarter of 2024 compared to $17.1 million for the first quarter of 2023, a decrease of $3.0 million, or 18.1%.

Net interest income decreased during the three months ended March 31, 2024, primarily due to an increase in interest expense on deposits and borrowings, partially offset by an increase in interest and fees on loans.

Interest income increased $3.5 million, or 13.3%, during the three months ended March 31, 2024 as compared to the same period in the prior year.

Our net interest income was $14.3 million for the second quarter of 2024 compared to $15.9 million for the second quarter of 2023, a decrease of $1.6 million, or 9.8%.

Net interest income decreased during the three months ended June 30, 2024, primarily due to an increase in interest expense on deposits and borrowings, partially offset by an increase in interest and fees on loans.

Interest income increased $2.9 million, or 10.7%, during the three months ended June 30, 2024 as compared to the same period in the prior year.

The increase in interest income was primarily due to an increase of $3.0 million in interest and fees on loans, due to higher loan balances and market interest rates, partially offset by a $0.1 million decrease in interest on deposits with banks.

The increase in interest income was offset by an increase in interest expense during the three months ended March 31, 2024 of $6.5 million, or 73.8%, primarily due to an increase in market interest rates on deposits and the overall mix of deposits of $5.9 million and an increase in interest on borrowings of $0.7 million, due to an increase in market interest rates.

Provision for (recovery of) credit losses :

For the three months ended March 31, 2024, the provision for credit losses was $0.2 million, compared to a recovery provision of $(2.4) million for the three months ended March 31, 2023.

The provision (recovery) for the three months ended March 31, 2023, was driven by a decrease in the construction loan portfolio post CECL implementation that resulted in the provision recovery, while the increase in provision expense during the three months ended March 31, 2024, was due to a change in the mix of the loan portfolio which resulted in an increase in the qualitative loss factors, mainly attributed to the residential 1 - 4 family investment and multi-family loan portfolios.

The increase in interest income was offset by an increase in interest expense during the three months ended June 30, 2024 of $4.5 million, or 39.3%, primarily due to an increase in market interest rates on deposits and the overall mix of deposits of $4.6 million, and increase in market interest rates.

Provision for credit losses :

For the three months ended June 30, 2024, the provision for credit losses was $0.5 million, compared to a provision of $0.5 million for the three months ended June 30, 2023.

The provision expense for the three months ended June 30, 2024, was primarily driven by an increase in the construction loan portfolio balance from the quarter ended March 31, 2024, which carries a higher loss factor than other loan portfolios.

Non-interest Income :

Our non-interest income was $1.1 million for the three months ended March 31, 2024, a decrease of $0.7 million, compared to $1.8 million for the three months ended March 31, 2023.

The decrease is primarily attributable to a decrease in service fees on deposit accounts of $0.8 million, partially offset by an increase in other loan fees $0.1 million.

Our non-interest income was $1.2 million for the three months ended June 30, 2024, a decrease of $0.4 million, compared to $1.6 million for the three months ended June 30, 2023.

The decrease is primarily attributable to a decrease in service fees on deposit accounts of $0.6 million due to a decrease in cannabis deposit fee income, partially offset by an increase in other non-interest income of $0.2 million.

Non-interest Expense :

Our non-interest expense decreased $0.2 million, or 3.4%, to $6.5 million for the three months ended March 31, 2024, from $6.8 million for the three months ended March 31, 2023.

The decrease in non-interest expense was primarily due to a decrease in compensation and benefits of $0.4 million, and a decrease in professional services of $0.1 million, partially offset by an increase in OREO expense of $0.2 million, and an increase in FDIC insurance of $0.1 million.

Income tax expense was $2.2 million on income before taxes of $8.4 million for the three months ended March 31, 2024, resulting in an effective tax rate of 26.6%, compared to income tax expense of $3.4 million on income before taxes of $14.6 million for the same period of 2023, resulting in an effective tax rate of 23.6%.

Our non-interest expense decreased $0.1 million, or 2.1%, to $6.2 million for the three months ended June 30, 2024, from $6.4 million for the three months ended June 30, 2023.

The decrease in non-interest expense was primarily due to a decrease in other operating expense of $0.3 million, and data processing expense of $0.1 million, partially offset by an increase in compensation and benefits of $0.1 million.

Income tax expense was $2.3 million on income before taxes of $8.8 million for the three months ended June 30, 2024, resulting in an effective tax rate of 26.6%, compared to income tax expense of $2.5 million on income before taxes of $10.6 million for the same period of 2023, resulting in an effective tax rate of 23.2%.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Our net income available to common shareholders for the six months ended June 30, 2024 decreased $6.7 million, or 34.6%, to $12.6 million compared to $19.2 million for the six months ended June 30, 2023.

Earnings per share were $1.05 per basic common share and $1.04 per diluted common share for the six months ended June 30, 2024 compared to $1.61 per basic common share and $1.59 per diluted common share for the same period last year.

The decrease in net income available to common shareholders primarily resulted from an increase in interest expense of $11.0 million, an increase in provision for credit losses of $2.6 million, and a decrease in non-interest income of $1.1 million, partially offset by an increase in interest income of $6.4 million.

Net interest income :

Our net interest income decreased $4.6 million, or 14.1%, to $28.4 million for the six months ended June 30, 2024, compared to $33.0 million for the same period last year.

Interest income for the six months ended June 30, 2024, increased $6.4 million to $59.7 million, or 12.0%, from $53.3 million for the same period of 2023.

The increase in interest income was primarily due to an increase in interest and fees on loans of $6.5 million, primarily due to an increase in market interest rates and balances outstanding, partially offset by a decrease in interest earned on Federal Reserve Bank ("FRB") deposits of $0.2 million.

Interest expense increased $11.0 million, or 54.4%, for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to an increase in interest paid on deposits of $10.5 million, or 62.9%, primarily due to an increase in market interest rates and a shift in deposit mix.

Further contributing to the increase in interest expense was an increase in interest on borrowings of $0.5 million, or 15.1%, due to an increase in borrowing levels and higher market interest rates.

Provision for credit losses :

The provision for credit losses was $0.7 million for the six months ended June 30, 2024, compared to a recovery of provision for credit losses of $1.9 million for the six months ended June 30, 2023.

The provision for credit losses for the six months ended June 30, 2024 was primarily driven by an increase in the outstanding loan balance of $17.8 million from the balance at December 31, 2023, specifically in the construction 1 - 4 family, and multi-family portfolios.

The provision recovery of $1.9 million during the same period in 2023 was primarily related to decreases in loss factors related to the construction, commercial owner occupied, and residential 1 to 4 family investment portfolios .

For more information about our provision for credit losses and our allowance for loan and lease losses and loss experience, see “Financial Condition-Allowance for Loan and Lease Losses” below and Note 4 - Loans And Allowance For Credit Losses on Loans to the unaudited consolidated financial statements.

Non-interest income :

Our non-interest income was $2.3 million for the six months ended June 30, 2024, a decrease of $1.1 million, or 33.0%, compared to $3.4 million for the same period last year.

The decrease is primarily attributable to a decrease in service fees on deposit accounts of $1.4 million, partially offset by an increase in other income of $0.3 million.

Fee income for the six months ended June 30, 2024 from commercial deposit accounts of depositors who do business in the cannabis-related industry totaled $0.5 million, compared to $2.0 million for the same period last year.

Fee income is included in service fees on deposit accounts in the accompanying Consolidated Statements of Income.

Non-interest expense:

Our non-interest expense decreased $0.4 million to $12.8 million for the six months ended June 30, 2024, from $13.1 million for the six months ended June 30, 2023.

The decrease in non-interest expense was primarily due to a decrease

in compensation and benefits of $0.3 million, and a decrease in other operating expense of $0.3 million, partially offset by an increase in OREO expense of $0.2 million.

Income tax expense was $4.6 million on income before taxes of $17.2 million for the six months ended June 30, 2024, resulting in an effective tax rate of 26.6%, compared to income tax expense of $5.9 million on income before taxes of $25.2 million for the same period of 2023, resulting in an effective tax rate of 23.5%.

Net Interest Income

Net interest income is the interest earned on investment securities, loans and other interest-earning assets minus the interest paid on deposits, short-term borrowings and long-term debt.

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The following tables presents the average daily balances of assets, liabilities and equity and the respective interest earned or paid on interest-earning assets and interest-bearing liabilities, as well as average annualized rates, for the periods indicated.

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Balance Interest

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** Includes balances of FHLBNY and ACBB stock.

For the Six Months Ended June 30,

Average Balance Interest Income/ Expense Yield/ Cost Average Balance Interest Income/ Expense Yield/ Cost

(Dollars in thousands)

Loans* $ 1,787,114 $ 56,815 6.39 % $ 1,766,704 $ 50,307 5.74 %

Investment securities** 23,322 497 4.29 % 26,883 437 3.28 %

Interest bearing deposits 90,434 2,354 5.23 % 111,619 2,547 4.60 %

Total interest-earning assets 1,900,870 59,666 6.31 % 1,905,206 53,291 5.64 %

Other assets 67,900 79,744

Allowance for credit losses (32,137) (31,677)

Total assets $ 1,936,633 $ 1,953,273

Liabilities and Shareholders’ Equity

Interest bearing deposits:

Checking $ 68,956 $ 390 1.14 % $ 79,381 $ 247 0.63 %

Money markets 582,697 14,128 4.88 % 337,504 6,068 3.63 %

Savings 73,714 419 1.14 % 157,035 907 1.16 %

Time deposits 423,530 8,447 4.01 % 504,891 6,792 2.71 %

Brokered certificates of deposit 137,729 3,757 5.49 % 112,522 2,647 4.74 %

Total interest-bearing deposits 1,286,626 27,141 4.24 % 1,191,333 16,661 2.82 %

Borrowings 148,619 4,159 5.63 % 179,471 3,615 4.06 %

Total interest-bearing liabilities 1,435,245 31,300 4.39 % 1,370,804 20,276 2.98 %

Non-interest bearing deposits 194,021 291,310

Other liabilities 17,247 16,425

Total non-interest bearing liabilities 211,268 307,735

Equity 290,120 274,734

Total liabilities and shareholders’ equity $ 1,936,633 $ 1,953,273

Net interest income $ 28,366 $ 33,015

Interest rate spread 1.92 % 2.66 %

Net interest margin 3.00 % 3.49 %

* The average balance of loans includes loans on nonaccrual.

** Includes balances of FHLBNY and ACBB stock.

Financial Condition

At March 31, 2024, the Company’s total assets were $2.01 billion, a decrease of $14.4 million, or 0.7%, from December 31, 2023.

The decrease in total assets was primarily attributable to a decrease in cash and cash equivalents of $9.3 million, a decrease in loans receivable, and a decrease in other assets.

The decrease in cash and cash equivalents was primarily due to a repayment of borrowings, partially offset by an increase in deposits .

Loans decreased $1.8 million at March 31, 2024, primarily due to decreases in loan balances classified as construction, and commercial - non-owner occupied, partially offset by an increase in the residential - multifamily loan portfolio, compared to the loan balances at December 31, 2023.

Other assets decreased $2.1 million during the three months ended March 31, 2024, to $8.4 million at March 31, 2024, from $10.5 million at December 31, 2023, primarily driven by a decrease of $2.0 million in prepaid taxes.

Total liabilities were $1.72 billion at March 31, 2024.

This represented an $18.5 million, or 1.1%, decrease, from $1.74 billion at December 31, 2023.

The decrease in total liabilities was primarily due to a decrease in borrowings of $30 million, partially offset by an increase in deposits, which increased $10.9 million, or 0.7%, to $1.56 billion at March 31, 2024, from $1.55 billion at December 31, 2023.

The decrease in borrowings was due to the pay-down of FHLBNY advances.

The increase in deposits was attributable to an increase in money market balances of $77.0 million, partially offset by a decrease in non-interest demand deposits of $35.8 million, savings deposits of $11.4 million, and time deposit balances of $27.0 million.

Total equity was $288.4 million and $284.3 million at March 31, 2024 and December 31, 2023, respectively, an increase of $4.1 million from December 31, 2023.

At June 30, 2024, the Company’s total assets were $2.03 billion, an increase of $3.6 million, or 0.2%, from December 31, 2023.

The increase in total assets was primarily attributable to an increase in loans receivable and an increase in restricted stock, partially offset by a decrease in cash and cash equivalents and a decrease in other assets.

Loans increased $17.8 million, primarily due to increases in the construction and multi-family portfolios, partially offset by a decrease in the CRE non-owner occupied portfolio.

Restricted stock increased $2.3 million due to an increase in FHLBNY advances.

Cash and cash equivalents decreased $12.7 million, or 7.0%, primarily due to the increase in loans, and the decrease in deposits, partially offset by an increase in FHLBNY borrowings.

Other assets decreased $3.3 million during the three months ended June 30, 2024, to $7.2 million at June 30, 2024, from $10.5 million at December 31, 2023, primarily driven by a decrease in prepaid taxes.

Total liabilities were $1.73 billion at June 30, 2024.

This represented a $4.8 million, or 0.3%, decrease, from $1.74 billion at December 31, 2023.

The decrease in total liabilities was primarily due to a decrease in deposits of $56.4 million, or 3.6%, to $1.50 billion at June 30, 2024, from $1.55 billion at December 31, 2023, partially offset by an increase in borrowings of $50.0 million, or 40.0%, to $218.2 million at June 30, 2024.

The decrease in deposits was primarily due to a decrease in non-interest demand deposits of $33.4 million, a decrease in savings deposits of $16.4 million, and a decrease in time deposits of $44.7 million, partially offset by an increase in money market deposits of $42.8 million.

The increase in borrowings was due to additional FHLBNY advances.

Total equity was $292.8 million and $284.3 million at June 30, 2024 and December 31, 2023, respectively, an increase of $8.5 million from December 31, 2023.

The increase was primarily due to the retention of earnings, partially offset by the payment of $4.3 million of cash dividends.

The following table presents certain key condensed balance sheet data as of March 31, 2024 and December 31, 2023 :

The following table presents certain key condensed balance sheet data as of June 30, 2024 and December 31, 2023 :

2024 December 31,

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Cash and cash equivalents

Cash and cash equivalents decreased $9.3 million to $171.1 million at March 31, 2024 from $180.4 million at December 31, 2023, a decrease of 5.1%.

The decrease was primarily due to a repayment of borrowings, partially offset by an increase in deposits.

Cash and cash equivalents decreased $12.7 million to $167.7 million at June 30, 2024 from $180.4 million at December 31, 2023, a decrease of 7.0%.

The decrease was primarily due to an increase in loans, and a decrease in deposits, partially offset by an increase in borrowings.

Investment securities

Total investment securities decreased to $15.9 million at March 31, 2024, from $16.4 million at December 31, 2023, a decrease of $0.5 million or 2.9%.

Total investment securities decreased to $15.5 million at June 30, 2024, from $16.4 million at December 31, 2023, a decrease of $0.9 million or 5.4%.

The decrease was attributed to normal pay downs.

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Our lending relationships are primarily with small to mid-sized businesses and individual consumers residing in and around Southern New Jersey and Philadelphia, Pennsylvania.

We have also expanded our lending footprint in other areas.

We have also expanded our lending footprint in other areas, including New York and South Carolina.

We focus our lending efforts primarily in three lending areas:

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We also originate commercial and industrial loans, which provide liquidity to businesses in the form of lines of credit and may be secured by accounts receivable, inventory, equipment or other assets.

In addition, we have a small consumer loan portfolio which provides loans to individual borrowers.

In addition, we have a consumer loan portfolio which provides loans to individual borrowers.

Loans receivable :

Loans receivable decreased slightly to $1.786 billion at March 31, 2024 from $1.787 billion at December 31, 2023.

T he decrease was primarily due to decreases in the construction, and CRE non-owner occupied loan portfolios, partially offset by an increase in the residential - multifamily loan portfolio.

Loans receivable as of March 31, 2024 and December 31, 2023, consisted of the following:

March 31, 2024 December 31, 2023

Loans receivable increased to $1.81 billion at June 30, 2024, from $1.79 billion at December 31, 2023, an increase of $17.8 million, or 1.0%.

T he increase was primarily due to increases in the construction, and Residential - Multifamily loan portfolios, partially offset by a decrease in the Commercial - Non-Owner Occupied loan portfolio.

Loans receivable as of June 30, 2024 and December 31, 2023, consisted of the following:

June 30, 2024 December 31, 2023

Amount Percentage of Loans to total

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Total Loans $ 1,805,141 100.0 % $ 1,787,340 100.0 % $ 17,801 1.0 %

At March 31, 2024, total deposits increased to $1.56 billion from $1.55 billion at December 31, 2023, an increase of $10.9 million, or 0.7%.

The increase in deposits was primarily due to an increase in money market deposit balances, partially offset by decreases in non-interest bearing, savings, and time deposit account balances.

The increase in the money market balance was primarily due to an increase of $90.2 million in our premier money market product, and $10.2 million in the municipal money market product, partially offset by a $15.1 million decrease in the brokered money market balance.

The decrease in non-interest bearing demand deposits was primarily due to a decrease in our cannabis related deposits, which decreased $15.5 million, as well as a decrease in business checking of $14.3 million during the same time period.

March 31, December 31,

At June 30, 2024, total deposits decreased to $1.50 billion from $1.55 billion at December 31, 2023, a decrease of $56.4 million, or 3.6%.

The decrease in deposits was primarily due to a decrease in noninterest-bearing deposits, savings deposits, and time deposit balances, partially offset by an increase in money market deposits balances.

The decrease in the noninterest-bearing deposit balance was primarily driven by a $25.0 million decrease in our cannabis checking account, as well as a $9.6 million decrease in our business checking accounts.

The decrease in the savings deposits was primarily due to a $12.3 million decrease in our preferred savings accounts.

The decrease in our time deposits was primarily due to $34.8 million decrease in our 13 and 21 months CD promotional accounts, and an $8.0 million decrease in brokered time deposits.

The increase in our money market deposits was primarily due to a $138.4 million increase in our premier money market accounts, $60.0 million of which was cannabis deposits, partially offset by a $75.1 million decrease in brokered money market accounts.

June 30, December 31,

2024 2023 $ Change % Change

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Estimated uninsured deposits $ 500,988 $ 622,966 $ (121,978) (19.6) %

Total borrowings were $138.2 million at March 31, 2024 and $168.1 million at December 31, 2023.

The decrease in borrowings is due to the decrease of $30.0 million in FHLBNY advances.

$75.0 million of the outstanding FHLBNY advances have short-term maturities.

Total equity increased to $288.4 million at March 31, 2024 from $284.3 million at December 31, 2023, an increase of $4.1 million, or 1.4%, primarily due to the retention of earnings from the period, partially offset by the payment of $2.2 million in cash dividends.

Total borrowings were $218.2 million at June 30, 2024 and $168.1 million at December 31, 2023.

The increase in borrowings is due to an increase of $50.0 million in FHLBNY advances.

At June 30, 2024, $155.0 million of the outstanding FHLBNY advances have short-term maturities.

Total equity increased to $292.8 million at June 30, 2024 from $284.3 million at December 31, 2023, an increase of $8.5 million, or 3.0%, primarily due to the retention of earnings from the period, partially offset by the payment of $4.3 million in cash dividends.

Liquidity and Capital Resources

Liquidity is a measure of our ability to generate cash to support asset growth, meet deposit withdrawals, satisfy other contractual obligations, and otherwise operate on an ongoing basis.

At March 31, 2024, our cash position was $171.1 million.

At June 30, 2024, our cash position was $167.7 million.

We invest cash that is in excess of our immediate operating needs primarily in our interest-bearing account at the Federal Reserve.

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IntraFi provides the Bank an additional source of external funds through their weekly CDARS® settlement process, as well as their ICS® money market product.

As of March 31, 2024, the Company had $222.4 million of brokered deposits sourced from IntraFi.

As of June 30, 2024, the Company had $72.2 million of brokered deposits sourced from IntraFi.

Additionally, we have access to other brokered deposit funding sources that we utilize as a source of additional liquidity.

During the 2nd quarter of 2024, we entered into relationships with Wells Fargo and Piper Sandler to obtain brokered deposits, and as of June 30, 2024, the Company had $90.3 million sourced from these broker relationships.

While deposit accounts comprise the vast majority of our funding needs, we maintain secured borrowing lines with the FHLBNY.

As of March 31, 2024, the Company had lines of credit with the FHLBNY of $960.4 million, of which $95.0 million was outstanding, and an additional $60.0 million from a letter of credit for securing public funds.

The remaining borrowing capacity was $805.4 million at March 31, 2024.

We had outstanding loan commitments of $112.8 million at March 31, 2024.

As of June 30, 2024, the Company had lines of credit with the FHLBNY of $1.04 billion, of which $175.0 million was outstanding, and an additional $60.0 million from a letter of credit for securing public funds.

The remaining borrowing capacity was $804.5 million at June 30, 2024.

We had outstanding loan commitments of $114.8 million at June 30, 2024.

Our loan commitments are normally originated with the full amount of collateral.

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The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth.

The following is a discussion of our cash flows for the three months ended March 31, 2024 and 2023.

Cash provided by operating activities was $8.4 million in the three months ended March 31, 2024, compared to $10.5 million for the same period in the prior year.

The decrease in operating cash flow was primarily due to the decrease in net income, partially offset by the increase in the provision for credit losses.

Cash provided by investing activities was $3.6 million in the three months ended March 31, 2024, compared to cash used in investing activities of $14.4 million in the same period last year.

The increase in cash provided in the investing activities was primarily due to the decrease in cash outflow from the origination of loans, and the redemption of restricted stock, during the period.

Cash used in financing activities was $21.2 million in the three months ended March 31, 2024, compared to cash used in financing activities of $32.3 million in the three months ended March 31, 2023.

The decrease in cash used in financing activities during the three months ended March 31, 2024, was driven by the growth in interest-bearing deposits of $46.7 million, partially offset by a decrease in noninterest-bearing deposits of $35.8 million, compared to net withdrawals of $112.2 million in the three months ended March 31, 2023.

The following is a discussion of our cash flows for the six months ended June 30, 2024 and 2023.

Cash provided by operating activities was $17.2 million in the six months ended June 30, 2024, compared to $14.7 million for the same period in the prior year.

The increase in operating cash flow was primarily due to the decrease in accrued interest receivable and other assets, and the increase in provision for credit losses, partially offset by the decrease in net income.

Cash used in investing activities was $19.3 million in the six months ended June 30, 2024, compared to cash used in investing activities of $38.5 million in the same period last year.

The decrease in cash used in the investing activities during the six months ended June 30, 2024, was primarily due to the decrease in cash outflow from the origination of loans, and the redemption of restricted stock, during the period.

Cash used in financing activities was $10.6 million in the six months ended June 30, 2024, compared to cash used in financing activities of $20.9 million in the same period last year.

The decrease in cash used in financing activities during the six months ended June 30, 2024, was primarily due to lower decrease in noninterest-bearing deposits and interest-bearing deposits, and the

increase in FHLBNY short-term borrowings, partially offset by the decrease in FHLBNY long-term borrowings, and the decrease in Federal Reserve short-term borrowings.

Capital Adequacy

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We also use other means to manage our capital.

Total equity increased $4.1 million at March 31, 2024, from December 31, 2023, primarily from the Company’s net income of $6.2 million for the period, net of common and preferred stock dividends of $2.2 million.

Total equity increased $8.5 million at June 30, 2024, from December 31, 2023, primarily from the Company’s net income of $12.6 million for the period, net of common and preferred stock dividends of $4.3 million.

Banks and bank holding companies are subject to various regulatory capital requirements administered by federal banking agencies.

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Under the capital rules issued by the Federal banking agencies, the Company and the Bank elected to exclude the effects of certain Accumulated Other Comprehensive Income (“AOCI”) items from its regulatory capital calculation.

At March 31, 2024, the Bank and the Company were both considered “well capitalized”.

The following table presents the tier 1 regulatory capital leverage ratios of the Company and the Bank at March 31, 2024:

At June 30, 2024, the Bank and the Company were both considered “well capitalized”.

The following table presents the tier 1 regulatory capital leverage ratios of the Company and the Bank at June 30, 2024:

Amount Ratio Amount Ratio

17 unchanged sentences

Parke has elected to apply the practical expedient to measure expected credit losses of a collateral dependent asset using the fair value of the collateral, less any estimated costs to sell, when foreclosure is not probable but repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty.

The general based component covers loans and leases on which there are expected credit losses that are not yet individually identifiable.

The general based component covers loans and leases on which there are

expected credit losses that are not yet individually identifiable.

The allowance calculation and determination process is dependent on the use of key assumptions.

Key reserve assumptions and estimation processes react to and are influenced by observed changes

in loan portfolio performance experience, the financial strength of the borrower, projected industry outlook, and economic conditions.

Key reserve assumptions and estimation processes react to and are influenced by observed changes in loan portfolio performance experience, the financial strength of the borrower, projected industry outlook, and economic conditions.

The process of determining the level of the allowance for credit losses requires a high degree of judgment.

3 unchanged sentences

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