Amalgamated Financial Corp

Previous wording

The following is a discussion of our consolidated financial condition as of June 30, 2024, as compared to December 31, 2023, and our results of operations for the three and six month periods ended June 30, 2024 and June 30, 2023. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from our consolidated financial statements and is intended to provide insight into our results of operations and financial condition. This discussion and analysis is best read in conjunction with our unaudited consolidated financial statements and related notes as well as the financial and statistical data appearing elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”), filed with the Securities and Exchange Commission on March 7, 2024. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate results of operations for any future periods.

Current wording

The following is a discussion of our consolidated financial condition as of September 30, 2024, as compared to December 31, 2023, and our results of operations for the three and nine month periods ended September 30, 2024 and September 30, 2023. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from our consolidated financial statements and is intended to provide insight into our results of operations and financial condition. This discussion and analysis is best read in conjunction with our unaudited consolidated financial statements and related notes as well as the financial and statistical data appearing elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”), filed with the Securities and Exchange Commission on March 7, 2024. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate results of operations for any future periods.

Previous wording

The Company was formed on August 25, 2020 to serve as the holding company for the Bank, effective March 1, 2021 when the Company acquired the common stock of the Bank. The Bank was formed in 1923 as Amalgamated Bank of New York by the Amalgamated Clothing Workers of America, one of the country’s oldest labor unions. Although we are no longer majority union-owned, The Amalgamated Clothing Workers of America’s successor, Workers United, an affiliate of the Service Employees International Union that represents workers in the textile, distribution, food service and gaming industries, remains a significant stockholder, holding approximately 41% of our equity as of June 30, 2024. As of June 30, 2024, our total assets were $8.25 billion, our total loans, net of allowance for credit losses were $4.41 billion, our total deposits were $7.45 billion, and our stockholders' equity was $646.1 million. As of June 30, 2024, our trust business held $34.60 billion in assets under custody and $14.00 billion in assets under management.

Current wording

The Company was formed on August 25, 2020 to serve as the holding company for the Bank, effective March 1, 2021 when the Company acquired the common stock of the Bank. The Bank was formed in 1923 as Amalgamated Bank of New York by the Amalgamated Clothing Workers of America, one of the country’s oldest labor unions. Although we are no longer majority union-owned, The Amalgamated Clothing Workers of America’s successor, Workers United, an affiliate of the Service Employees International Union that represents workers in the textile, distribution, food service and gaming industries, remains a significant stockholder, holding approximately 40% of our equity as of September 30, 2024. As of September 30, 2024, our total assets were $8.41 billion, our total loans, net of allowance for credit losses were $4.49 billion, our total deposits were $7.59 billion, and our stockholders' equity was $698.3 million. As of September 30, 2024, our trust business held $35.43 billion in assets under custody and $14.55 billion in assets under management.

Previous wording

For loans that do not share risk characteristics, the Company evaluates these loans on an individual basis based on various factors. Factors that may be considered are borrower delinquency trends and nonaccrual status, probability of foreclosure or note sale, changes in the borrower’s circumstances or cash collections, borrower’s industry, or other facts and circumstances of the loan or collateral. The expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For collateral dependent loans, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, less estimated costs to sell.

Current wording

For loans that do not share risk characteristics, the Company evaluates these loans on an individual basis based on various factors. Factors that may be considered are borrowers delinquency trends and nonaccrual status, probability of foreclosure or note sale, changes in the borrowers' circumstances or cash collections, borrowers' industry, or other facts and circumstances of the loan or collateral. The expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For collateral dependent loans, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, less estimated costs to sell.

Previous wording

Estimating the timing and amounts of future losses is subject to significant management judgment as these projected cash flows rely upon the estimates discussed within the CECL policy and factors that are reflective of current or future expected conditions. These estimates depend on the duration of current overall economic conditions, industry, borrower, or portfolio specific conditions. Volatility in certain credit metrics and differences between expected and actual outcomes are to be expected.

Current wording

Estimating the timing and amounts of future losses is subject to significant management judgment as these projected cash flows rely upon the estimates discussed within the Allowance for Credit Losses policy and factors that are reflective of current or future expected conditions. These estimates depend on the duration of current overall economic conditions, industry, borrowers, or portfolio specific conditions. Volatility in certain credit metrics and differences between expected and actual outcomes are to be expected.

Previous wording

On November 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. A public entity should apply the amendments retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

Current wording

On November 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. A public entity should apply the amendments retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect an impact of this standard on the consolidated financial statements and related disclosures.

Previous wording

Our results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans, investment securities and other short-term investments and interest expense on interest-bearing liabilities, consisting primarily of interest expense on deposits and borrowings. Our results of operations are also dependent on non-interest income, consisting primarily of income from Trust Department fees, service charges on deposit accounts, net gains on sales of investment securities and income from bank-owned life insurance (“BOLI”). Other factors contributing to our results of operations include our provisions for credit losses, income taxes, and non-interest expenses, such as salaries and employee benefits, occupancy and depreciation expenses, professional fees, data processing fees and other miscellaneous operating costs.

Current wording

Our results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans, investment securities and other short-term investments and interest expense on interest-bearing liabilities, consisting primarily of interest expense for deposits and borrowings. Our results of operations are also dependent on non-interest income, consisting primarily of income from Trust Department fees, service charges on deposit accounts, net gains on sales of investment securities and income from bank-owned life insurance (“BOLI”). Other factors contributing to our results of operations include our provisions for credit losses, income taxes, and non-interest expenses, such as salaries and employee benefits, occupancy and depreciation expenses, professional fees, data processing fees and other miscellaneous operating costs.

Previous wording

Net income for the second quarter of 2024 was$26.8 million, or $0.87 per diluted share, compared to$21.6 million, or $0.70 per diluted share, for the second quarter of 2023. The$5.2 million increase was primarily due to a$5.9 million increase in interest income on loans, a$5.5 million increase in interest income on securities, a$1.6 million increase in interest on interest-bearing deposits in banks, a$1.4 million increase in non-interest income, and a$0.7 million decrease in provision for credit losses, offset by a$6.9 million increase in interest expense primarily related to deposits, an increase in non-interest expense of $2.0 million, and a$1.2 million increase in income tax expense.

Current wording

Net income for the third quarter of 2024 was$27.9 million, or $0.90 per diluted share, compared to$22.3 million, or $0.73 per diluted share, for the third quarter of 2023. The$5.6 million increase was primarily due to a$6.5 million increase in interest income on securities, a$4.5 million increase in interest income on loans, a$2.2 million increase in non-interest income, and a$0.6 million increase in interest on interest-bearing deposits in banks, offset by a$3.2 million increase in interest expense primarily related to a $6.9 million increase in deposits offset by a $3.7 million decrease in borrowed funds, an increase in non-interest expense of $3.6 million, and a$1.4 million increase in income tax expense.

Previous wording

Net income for the six months ended June 30, 2024 was $54.0 million, or $1.75 per diluted share, compared to $43.0 million, or $1.39 per diluted share, for the same period in 2023. The $11.0 million increase was primarily due to a $13.0 increase in interest income on loans, a $8.4 million increase in interest income on securities, a $3.6 million increase in interest income from interest-bearing deposits in banks,a $6.3 million increase in non-interest income primary due to increase in service charges on deposit accounts and a $4.2 million decrease in the provision for credit losses, offset by a $18.1 million increase in interest expense, a $1.5 million increase in non-interest expense, and $4.9 million increase in income tax expense.

Current wording

Net income for the nine months ended September 30, 2024 was $81.9 million, or $2.65 per diluted share, compared to $65.3 million, or $2.12 per diluted share, for the same period in 2023. The $16.6 million increase was primarily due to a $17.7 increase in interest income on loans, a $14.8 million increase in interest income on securities, a $8.5 million increase in non-interest income primarily due to an increase in service charges on deposit accounts, a $4.3 million decrease in the provision for credit losses, and a $4.2 million increase in interest income from interest-bearing deposits in banks, offset by a $21.3 million increase in interest expense, $6.4 million increase in income tax expense, and a $5.1 million increase in non-interest expense.

Previous wording

Net interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings. We generate interest income from interest, dividends and prepayment fees on interest-earning assets, including loans, investment securities and other short-term investments. We incur interest expense from interest paid on interest-bearing liabilities, including interest-bearing deposits, Federal Home Loan Bank of New York ("FHLBNY") advances, federal funds purchased and other borrowings. To evaluate net interest income, we measure and monitor (i) yields on our loans and other interest-earning assets, (ii) the costs of our deposits and other funding sources, (iii) our net interest spread and (iv) our net interest margin. Net interest spread is equal to the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is equal to the annualized net interest income divided by average interest-earning assets. Because non-interest-bearing sources of funds, such as non-interest-bearing deposits and stockholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these non-interest-bearing sources.

Current wording

Net interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings. We generate interest income from interest, dividends and prepayment fees on interest-earning assets, including loans, investment securities and other short-term investments. We incur interest expense from interest paid on interest-bearing liabilities, including interest-bearing deposits, subordinated debt, Federal Home Loan Bank of New York ("FHLBNY") advances, federal funds purchased and other borrowings. To evaluate net interest income, we measure and monitor (i) yields on our loans, investments, and other interest-earning assets, (ii) the costs of our deposits and other funding sources, (iii) our net interest spread and (iv) our net interest margin. Net interest spread is equal to the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is equal to the annualized net interest income divided by average interest-earning assets. Because non-interest-bearing sources of funds, such as non-interest-bearing deposits and stockholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these non-interest-bearing sources.

Previous wording

Net interest income was$69.2 million for the second quarter of 2024, compared to$63.0 million for the second quarter of 2023. The$6.2 million increase, or 9.8% increase from the second quarter of 2023 was primarily attributable to higher yields and average balances on interest-earning assets, partially offset by higher costs and average balances on interest-bearing liabilities.

Current wording

Net interest income was$72.1 million for the third quarter of 2024, compared to$63.7 million for the third quarter of 2023. The$8.4 million increase, or 13.2% increase from the third quarter of 2023 was primarily attributable to higher yields on and average balances in interest-earning assets coupled with lower average balances in interest-bearing liabilities and higher average balances in demand and transaction deposits, partially offset by higher costs.

Previous wording

Net interest spread was 2.09% for the three months ended June 30, 2024, compared to 2.33% for the same period in 2023, a decrease of 24 basis points. Our net interest margin was 3.46% for the second quarter of 2024, an increase of 13 basis points from 3.33% in the second quarter of 2023. This was largely due to increases in yields and average balances on interest-bearing assets, offset by increases in cost of funds on interest-bearing liabilities.

Current wording

Net interest spread was 1.90% for the three months ended September 30, 2024, compared to 2.20% for the same period in 2023, a decrease of 30 basis points. Our net interest margin was 3.51% for the third quarter of 2024, an increase of 22 basis points from 3.29% in the third quarter of 2023. This was largely due to increases in yields and average balances on interest-bearing assets, offset by increases in cost of funds on interest-bearing liabilities.

Previous wording

The yield on average earning assets was 4.94% for the three months ended June 30, 2024, compared to 4.55% for the same period in 2023, an increase of 39 basis points. This increase was driven primarily by the current rate environment resulting in increased yields across securities and loan portfolios.

Current wording

The yield on average earning assets was 5.01% for the three months ended September 30, 2024, compared to 4.70% for the same period in 2023, an increase of 31 basis points. This increase was driven primarily by the current rate environment resulting in increased yields across securities and loan portfolios.

Previous wording

The average rate on interest-bearing liabilities was 2.85% for the three months ended June 30, 2024, an increase of 63 basis points from the same period in 2023, which was primarily due to the rising rate environment that led to an increase in interest expense paid for deposits, particularly in savings, NOW, and money market deposits and time deposits. Non-interest-bearing deposits represented 45.3% of average deposits for the three months ended June 30, 2024, compared to 44.7% for the three months ended June 30, 2023.

Current wording

The average rate on interest-bearing liabilities was 3.11% for the three months ended September 30, 2024, an increase of 61 basis points from the same period in 2023, which was primarily due to the rising rate environment that led to an increase in interest expense paid for deposits, particularly in savings, NOW, money market deposits and time deposits. Non-interest-bearing deposits represented 49.1% of average deposits for the three months ended September 30, 2024, compared to 42.2% for the three months ended September 30, 2023.

Previous wording

Net interest income was $137.2 million for the six months ended June 30, 2024, compared to $130.3 million for the same period in 2023. The year-over-year increase of $6.9 million, or 5.3%, was primarily attributable to higher yields and average balances on interest-earning assets, partially offset by higher costs and average balances on interest-bearing liabilities.

Current wording

Net interest income was $209.3 million for the nine months ended September 30, 2024, compared to $194.0 million for the same period in 2023. The year-over-year increase of $15.3 million, or 7.9%, was primarily attributable to higher yields and average balances on interest-earning assets, partially offset by higher costs.

Previous wording

Our net interest spread was 2.17% for the six months ended June 30, 2024, compared to 2.52% for the same period in 2023, a decrease of 35 basis points. Our net interest margin was 3.47% for the six months ended June 30, 2024, an increase of 1 basis points from 3.46% in the same period of 2023. This was largely due to increases in yields on interest-bearing assets, offset by increases in cost of funds on interest-bearing liabilities.

Current wording

Our net interest spread was 2.08% for the nine months ended September 30, 2024, compared to 2.41% for the same period in 2023, a decrease of 33 basis points. Our net interest margin was 3.48% for the nine months ended September 30, 2024, an increase of 8 basis points from 3.40% in the same period of 2023. This was largely due to increases in yields on interest-bearing assets, offset by increases in cost of funds on interest-bearing liabilities.

Previous wording

The yield on average earning assets was 4.96% for the six months ended June 30, 2024, compared to 4.54% for the same period in 2023, an increase of 42 basis points. This increase was driven primarily by the current rate environment resulting in increased yields across securities and loan portfolios.

Current wording

The yield on average earning assets was 4.97% for the nine months ended September 30, 2024, compared to 4.60% for the same period in 2023, an increase of 37 basis points. This increase was driven primarily by the current rate environment resulting in increased yields across securities and loan portfolios.

Previous wording

The average rate on interest-bearing liabilities was 2.79% for the six months ended June 30, 2024, an increase of 77 basis points from the same period in 2023, which was primarily due to the rising rate environment that led to an increase in interest expense paid for deposits. Non-interest-bearing deposits represented 44.7% of average deposits for the six months ended June 30, 2024, compared to 46.2% for the same period in 2023.

Current wording

The average rate on interest-bearing liabilities was 2.89% for the nine months ended September 30, 2024, an increase of 70 basis points from the same period in 2023, which was primarily due to the rising rate environment that led to an increase in interest expense paid for deposits. Non-interest-bearing deposits represented 46.2% of average deposits for the nine months ended September 30, 2024, compared to 44.9% for the same period in 2023.

Previous wording

Provision for credit losses totaled an expense of $3.2 million for the second quarter of 2024 compared to an expense of $3.9 million for the same period in 2023. The provision for credit losses on loans totaled an expense of $1.8 million, the provision for credit losses on securities was a recovery of $2 thousand, and the provision for credit losses on off-balance sheet credit exposures was an expense of $1.4 million. Overall, the provision expense on loans was primarily driven by charge-offs on the solar loan portfolio and an increase in reserve for solar loans given the level of continued losses, offset by improvements in macro-economic forecasts used in the CECL model.

Current wording

Provision for credit losses totaled an expense of $1.8 million for the third quarter of 2024 compared to an expense of $2.0 million for the same period in 2023. The provision for credit losses on loans totaled an expense of $4.9 million, the provision for credit losses on securities was a recovery of $18 thousand, and the provision for credit losses on off-balance sheet credit exposures was a recovery of $3.0 million. Overall, the provision expense on loans was primarily driven by charge-offs on our consumer solar and small business portfolios and updates to CECL model assumptions, offset by decreases in reserves for unfunded commitments. During the third quarter of 2024, the consumer solar loss rate assumption was refreshed given the level of continued losses, which increased the segment coverage ratio and resulted in higher required reserves.

Previous wording

Our provision for credit losses totaled an expense of $4.7 million for the six months ended June 30, 2024 compared to an expense of $8.9 million for the same period in 2023. The provision for credit losses on loans totaled $2.7 million, the provision for credit losses on securities was a recovery of $13 thousand, and the provision for credit losses on off-balance sheet credit exposures was $2.1 million. Overall, the provision expense on loans was primarily driven by increases in specific loan reserves, charge-offs on the solar loan portfolio, an increase in reserve for solar loans given the level of continued losses, and an increase in reserve for multifamily loans to reflect the current market repricing conditions, offset by improvements in macro-economic forecasts used in the CECL model.

Current wording

Our provision for credit losses totaled an expense of $6.6 million for the nine months ended September 30, 2024 compared to an expense of $10.9 million for the same period in 2023. The provision for credit losses on loans totaled $7.6 million, the provision for credit losses on securities was a recovery of $31 thousand, and the provision for credit losses on off-balance sheet credit exposures was a recovery of $0.9 million. Overall, the provision expense on loans was primarily driven by increases in charge-offs on our consumer solar and small business portfolios, an increase in reserve for multifamily loans to reflect the current market repricing conditions, and updates to CECL model assumptions, offset by improvements in macro-economic forecasts used in the CECL model, and decreases in reserves for unfunded commitments. During the third quarter of 2024, the consumer solar loss rate assumption was refreshed given the level of continued losses, which increased the segment coverage ratio and resulted in higher required reserves.

Previous wording

Our non-interest income includes Trust Department fees, which consist of fees received in connection with investment advisory and custodial management services of investment accounts, service fees charged on deposit accounts, income on BOLI, gain or loss on sales of securities, gain or loss on sales of loans, income or losses from equity method investments, and other income.

Current wording

Our non-interest income includes Trust Department fees, which consist of fees received in connection with investment advisory and custodial management services of investment accounts, service fees charged on deposit accounts, income on BOLI, gain or loss on sales of securities, gain or loss on sales of loans, changes in fair value on loans held-for-sale, income or losses from equity method investments, and other income.

Previous wording

Non-interest income was$9.3 million for the second quarter of 2024, compared to$7.9 million for the second quarter in 2023. The increase of $1.4 million in thesecond quarter of 2024 compared to the corresponding quarter in 2023 was primarily due to a $5.9 million increase in service charges on deposit accounts primarily due to increases in ICS One-Way Sell income, partially offset by a $2.4 million increase in losses on sale of securities and a decrease in income from equity investments of $2.2 million.

Current wording

Non-interest income was$8.9 million for the third quarter of 2024, compared to$6.8 million for the third quarter in 2023. The increase of $2.2 million in thethird quarter of 2024 compared to the corresponding quarter in 2023 was primarily due to a $9.4 million increase in service charges on deposit accounts primarily due to increases in ICS One-Way Sell income, partially offset by a $4.2 million increase in losses on sale of loans and changes in fair value on loans held-for-sale and a $1.5 million increase in losses on sale of securities, and a decrease in income from equity investments of $1.4 million. Our Trust Department fees were $3.7 million in the third quarter of 2024, and $3.7 million in the same period in 2023.

Previous wording

Non-interest income was $19.5 million for the six months ended June 30, 2024, compared to $13.2 million for the six months ended June 30, 2023. The increase of $6.3 million was primarily due to $9.6 million in increased service charges on deposit accounts primarily due to increases in ICS One-Way Sell income, partially offset by a $2.1 million increase in losses on sale of securities, a decrease in other income of $0.6 million primarily attributed to a gain on the repurchase of subordinated debt, and a $0.4 million decrease in Trust Department fees.

Current wording

Non-interest income was $28.4 million for the nine months ended September 30, 2024, compared to $19.9 million for the nine months ended September 30, 2023. The increase of $8.5 million was primarily due to $18.9 million in increased service charges on deposit accounts primarily due to increases in ICS One-Way Sell income, partially offset by a $4.1 million increase in losses on sale of loans and changes in fair value on loans held-for-sale and a $3.6 million increase in losses on sale of securities, a $1.6 million decrease in income from equity investments, a decrease in other income of $0.5 million, a $0.4 million decrease in Trust Department fees, and a decrease in income from Bank-owned life insurance of $0.2 million. Our Trust Department fees were $11.2 million for the nine months of 2024, compared to$11.6 million in the same period in 2023.

Previous wording

Non-interest expense for the second quarter of 2024 was $39.5 million, an increase of $2.0 million from $37.5 million for the second quarter of 2023. The increase was driven by a $1.8 million increase in compensation and benefits expense related to an expected increase in compensation due to increased headcount and corporate incentive payments, and a $0.7 million increase in data processing. This was partially offset by a $0.5 million decrease in professional fees.

Current wording

Non-interest expense for the third quarter of 2024 was $41.0 million, an increase of $3.6 million from $37.3 million for the third quarter of 2023. The increase was driven by a $2.4 million increase in compensation and benefits expense related to an expected increase in compensation due to increased headcount and corporate incentive payments, and a $0.5 million increase in data processing, a $0.4 million increase in other expenses, a $0.4 million increase in professional fees and a $0.2 million increase in advertising and promotion expense. This was partially offset by a $0.3 million decrease in federal deposit insurance premiums expense.

Previous wording

Non-interest expense for the six months ended June 30, 2024 was $77.7 million, an increase of $1.5 million from $76.2 million for six months ended June 30, 2023. The increase was driven by a $2.1 million increase in compensation and benefits expense related to an expected increase in compensation due to increased headcount, corporate incentive payments, and temporary personnel costs, and a $0.8 million increase in data processing expense. This was partially offset by a $0.5 million decrease in occupancy and depreciation expense due to a gain from settlement of a lease termination, a $0.4 million decrease in other expense, a $0.3 million decrease in professional fees and a $0.2 million decrease in office maintenance and depreciation expense.

Current wording

Non-interest expense for the nine months ended September 30, 2024 was $118.6 million, an increase of $5.1 million from $113.5 million for nine months ended September 30, 2023. The increase was driven by a $4.6 million increase in compensation and benefits expense related to an expected increase in compensation due to increased headcount, corporate incentive payments, and temporary personnel costs, and a $1.3 million increase in data processing expense. This was partially offset by a $0.5 million decrease in occupancy and depreciation expense due to a gain from settlement of a lease termination, a $0.2 million decrease in office maintenance and depreciation expense, and a $0.1 million increase in professional fees.

Previous wording

We had a provision for income tax expense of$9.0 million for the second quarter of 2024, compared to$7.8 million for the second quarter of 2023. Our effective tax rate for the second quarter of 2024 was 25.2% compared to 26.5% for the second quarter of 2023.

Current wording

We had a provision for income tax expense of$10.3 million for the third quarter of 2024, compared to$8.8 million for the third quarter of 2023. Our effective tax rate for the third quarter of 2024 was 26.9% compared to 28.4% for the third quarter of 2023.

Previous wording

We had a provision for income tax expense of $20.3 million for the six months ended June 30, 2024, compared to $15.4 million for same period in 2023. Our effective tax rate for the six months ended June 30, 2024 was 27.3%, compared to 26.4% for the same period in 2023.

Current wording

We had a provision for income tax expense of $30.6 million for the nine months ended September 30, 2024, compared to $24.2 million for same period in 2023. Our effective tax rate for the nine months ended September 30, 2024 was 27.2%, compared to 27.1% for the same period in 2023.

Previous wording

Our total assets were $8.25 billion at June 30, 2024, compared to $7.97 billion at December 31, 2023. Notable changes within individual balance sheet line items include a $437.0 million increase in deposits, a $174.9 million increase in securities, a $87.5 million increase in resell agreements, a $62.8 million increase in loans receivable, net, a $230.0 million decrease in other borrowings, and a decrease in cash of $32.6 million.

Current wording

Our total assets were $8.41 billion at September 30, 2024, compared to $7.97 billion at December 31, 2023. Notable changes within individual balance sheet line items include a $582.6 million increase in deposits, a $199.0 million increase in securities, a $58.6 million increase in cash, a $24.9 million increase in resell agreements, a $140.8 million increase in loans receivable, net, and a $236.5 million decrease in borrowings.

Previous wording

We seek to minimize credit risk in our securities portfolio through diversification, concentration limits, restrictions on high risk investments (such as subordinated positions), comprehensive pre-purchase analysis and stress testing, ongoing monitoring and by investing a significant portion of our securities portfolio in U.S. Government sponsored entity (“GSE”) obligations. GSEs include the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”) and the Small Business Administration (“SBA”). GNMA is a wholly-owned U.S. Government corporation whereas FHLMC and FNMA are private. Mortgage-related securities may include mortgage pass-through certificates, participation certificates and collateralized mortgage obligations (“CMOs”). We invest in non-GSE securities, including property assessed clean energy, or PACE, assessments, in order to generate higher returns, improve portfolio diversification and reduce interest rate and prepayment risk. With the exception of small legacy CRA investments, Trust Preferred securities, and certain corporate bonds, all of our non-GSE securities are senior positions that are the top of the capital structure.

Current wording

We seek to minimize credit risk in our securities portfolio through diversification, concentration limits, restrictions on high risk investments (such as subordinated positions), comprehensive pre-purchase analysis and stress testing, ongoing monitoring and by investing a significant portion of our securities portfolio in U.S. GSE obligations. GSEs include the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”) and the Small Business Administration (“SBA”). GNMA is a wholly-owned U.S. Government corporation whereas FHLMC and FNMA are private. Mortgage-related securities may include mortgage pass-through certificates, participation certificates and CMOs. We invest in non-GSE securities, including property assessed clean energy ("PACE") assessments, in order to generate higher returns, improve portfolio diversification and reduce interest rate and prepayment risk. With the exception of small legacy CRA investments, Trust Preferred securities, and certain corporate bonds, all of our non-GSE securities are senior positions that are the top of the capital structure.

Previous wording

At June 30, 2024 and December 31, 2023, we had available for sale securities of $1.69 billion and $1.48 billion, respectively.

Current wording

At September 30, 2024 and December 31, 2023, we had available for sale securities of $1.77 billion and $1.48 billion, respectively.

Previous wording

At June 30, 2024, our held-to-maturity securities portfolio primarily consisted of PACE assessments, tax-exempt municipal securities, GSE commercial and residential certificates and other debt. We carry these securities at amortized cost. We had held-to-maturity securities of $1.66 billion at June 30, 2024, and $1.70 billion at December 31, 2023.

Current wording

At September 30, 2024, our held-to-maturity securities portfolio primarily consisted of PACE assessments, tax-exempt municipal securities, GSE commercial and residential certificates and other debt. We carry these securities at amortized cost. We had held-to-maturity securities of $1.61 billion at September 30, 2024, and $1.70 billion at December 31, 2023.

Previous wording

During the six months ended June 30, 2024 we purchased a total of $568.5 million securities consisting of both available for sale and held-to-maturity and sold available for sale securities resulting in proceeds of $219.2 million and a net realized loss of $5.5 million. During the six months ended June 30, 2023 we purchased a total of $195.7 million securities consisting of both available for sale and held-to-maturity and sold available for sale securities resulting in proceeds of $174.5 million and a net realized loss of $3.4 million.

Current wording

During the nine months ended September 30, 2024 we purchased a total of $793.4 million securities consisting of both available for sale and held-to-maturity and sold available for sale securities resulting in proceeds of $271.0 million and a net realized loss of $8.7 million. During the nine months ended September 30, 2023 we purchased a total of $280.6 million securities consisting of both available for sale and held-to-maturity and sold available for sale securities resulting in proceeds of $250.0 million and a net realized loss of $5.1 million.

Previous wording

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities totaled $18.1 million at June 30, 2024 and $22.5 million at December 31, 2023, and is excluded from the estimate of credit losses, as accrued interest receivable is reversed for securities placed on nonaccrual status. The allowance for credit losses for held-to-maturity securities at June 30, 2024 was $0.7 million compared to $0.7 million at December 31, 2023. The provision for credit losses for held-to-maturity securities was a recovery of $2.0 thousand and $13.0 thousand for the three and six months ended June 30, 2024, compared to an expense of $20.0 thousand and $65.0 thousand for the three and six months ended June 30, 2023, respectfully.

Current wording

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities totaled $17.8 million at September 30, 2024 and $22.5 million at December 31, 2023, and is excluded from the estimate of credit losses, as accrued interest receivable is reversed for securities placed on nonaccrual status. The allowance for credit losses for held-to-maturity securities at September 30, 2024 was $0.7 million compared to $0.7 million at December 31, 2023. The provision for credit losses for held-to-maturity securities was a recovery of $18.0 thousand and $31.0 thousand for the three and nine months ended September 30, 2024, compared to an expense of $18 thousand and $83 thousand for the three and nine months ended September 30, 2023, respectively.

Previous wording

Changes in the allowance for credit losses are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Current wording

Changes in the allowance for credit losses are recorded as credit loss expense (or recovery). Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Previous wording

Accrued interest receivable on available-for-sale debt securities totaled $13.1 million at June 30, 2024 and $12.6 million at December 31, 2023, and is excluded from the estimate of credit losses, as accrued interest receivable is reversed for securities placed on nonaccrual status.

Current wording

Accrued interest receivable on available-for-sale debt securities totaled $14.0 million at September 30, 2024 and $12.6 million at December 31, 2023, and is excluded from the estimate of credit losses, as accrued interest receivable is reversed for securities placed on nonaccrual status.

Previous wording

Our securities portfolio primarily consists of high quality investments in mortgage-backed securities to government sponsored entities and other asset-backed securities and PACE assessments. All non-agency securities, composed of non-agency commercial mortgage-backed securities, collateralized loan obligations, non-agency mortgage-backed securities, and asset-backed securities, are senior tranche and approximately 87% carry AAA credit ratings and 13% carry A credit ratings or higher. Approximately 50% of this portfolio is classified as “available for sale.”

Current wording

Our securities portfolio primarily consists of high quality investments in mortgage-backed securities to government sponsored entities and other asset-backed securities and PACE assessments. All non-agency securities, composed of non-agency commercial mortgage-backed securities, collateralized loan obligations, non-agency mortgage-backed securities, and asset-backed securities, are senior tranche and approximately 86% carry AAA credit ratings and 14% carry A credit ratings or higher. Approximately 50% of this portfolio is classified as “available for sale.”

Previous wording

Lending-related income is the most important component of our net interest income and is the main driver of our results of operations. Total loans, net of deferred origination fees and allowance for credit losses, were $4.41 billion as of June 30, 2024 compared to $4.35 billion as of December 31, 2023. Within our commercial loan portfolio, our primary focus has been on C&I, multifamily and CRE lending. Within our retail loan portfolio, our primary focus has been on residential 1-4 family (1st lien) mortgages. We intend to focus any organic growth in our loan portfolio on these lending areas as part of our strategic plan.

Current wording

Lending related income is the most important component of our net interest income and is the main driver of our results of operations. Total loans, net of deferred origination fees and allowance for credit losses, were $4.49 billion as of September 30, 2024 compared to $4.35 billion as of December 31, 2023. Within our commercial loan portfolio, our primary focus has been on C&I, multifamily and CRE lending. Within our retail loan portfolio, our primary focus has been on residential 1-4 family (1st lien) mortgages. We intend to focus any organic growth in our loan portfolio on these lending areas as part of our strategic plan.

Previous wording

Our commercial loan portfolio comprised 59.0% of our total loan portfolio at June 30, 2024 and 57.5% of our total loan portfolio at December 31, 2023. The major categories of our commercial loan portfolio are discussed below:

Current wording

Our commercial loan portfolio comprised 61.3% of our total loan portfolio at September 30, 2024 and 57.5% of our total loan portfolio at December 31, 2023. The major categories of our commercial loan portfolio are discussed below:

Previous wording

C&I. Our C&I loans are generally made to small and medium-sized manufacturers and wholesale, retail and service-based businesses to provide either working capital or to finance major capital expenditures. In addition, our C&I portfolio includes commercial solar financings; for many of these we are the sole lender, while for some others we are a participant in a syndicated credit facility led by another institution. The primary source of repayment for C&I loans is generally operating cash flows of the business or project. We also seek to minimize risks related to these loans by requiring such loans to be collateralized by various business assets (including inventory, equipment, accounts receivable, and the assignment of contracts that generate cash flow). The average size of our C&I loans at June 30, 2024 by exposure was $4.0 million with a median size of $0.6 million. We have shifted our lending strategy to focus on developing full customer relationships including deposits, cash management, and lending. The businesses that we focus on are generally mission aligned with our core values, including organic and natural products, sustainable companies, clean energy, nonprofits, and B Corporations TM.

Current wording

C&I. Our C&I loans are generally made to small and medium-sized manufacturers and wholesale, retail and service-based businesses to provide either working capital or to finance major capital expenditures. In addition, our C&I portfolio includes commercial solar financings; for many of these we are the sole lender, while for some others we are either the lead bank or are a participant in a syndicated credit facility led by another institution. The primary source of repayment for C&I loans is generally operating cash flows of the business or project. We also seek to minimize risks related to these loans by requiring such loans to be collateralized by various business assets (including inventory, equipment, accounts receivable, and the assignment of contracts that generate cash flow). The average size of our C&I loans at September 30, 2024 by exposure was $4.0 million with a median size of $0.7 million. Our lending strategy focuses on developing full customer relationships including deposits, cash management, and lending. The businesses that we focus on are generally mission aligned with our core values, including organic and natural products, sustainable companies, clean energy, nonprofits, and B Corporations TM.

Previous wording

Our C&I loans totaled $1.01 billion at June 30, 2024, which comprised 22.6% of our total loan portfolio. During the six months ended June 30, 2024, the C&I loan portfolio was largely unchanged from $1.01 billion at December 31, 2023.

Current wording

Our C&I loans totaled $1.06 billion at September 30, 2024, which comprised 23.3% of our total loan portfolio. During the nine months ended September 30, 2024, the C&I loan portfolio increased by 4.7% from $1.01 billion at December 31, 2023.

Previous wording

Multifamily. Our multifamily loans are generally used to purchase or refinance apartment buildings of five units or more, which collateralize the loan, in major metropolitan areas within our markets. Multifamily loans have 65% of their exposure in New York City. Our multifamily loans have been underwritten under stringent guidelines on loan-to-value and debt service coverage ratios that are designed to mitigate credit and concentration risk in this loan category. The average current LTV of our multifamily loans is approximately 55%.

Current wording

Multifamily. Our multifamily loans are generally used to purchase or refinance apartment buildings of five units or more, which collateralize the loan, in major metropolitan areas within our markets. Multifamily loans have 67% of their exposure in New York City. Our multifamily loans have been underwritten under stringent guidelines on loan-to-value and debt service coverage ratios that are designed to mitigate credit and concentration risk in this loan category. The average current LTV of our multifamily loans is approximately 53%.