Dime Commercial Bancshares, Inc.: Form 10-Q for the period ended Mar 31, 2025

Overview

Dime Community Bancshares, Inc., a New York corporation, is a bank holding company formed in 1988. On a parent-only basis, the Holding Company has minimal operations, other than as owner of Dime Community Bank. The Holding Company is dependent on dividends from its wholly-owned subsidiary, Dime Community Bank, its own earnings, additional capital raised, and borrowings as sources of funds. The information in this report reflects principally the financial condition and results of operations of the Bank. The Bank's results of operations are primarily dependent on its net interest income, which is the difference between interest income on loans and investments and interest expense on deposits and borrowings. The Bank also generates non-interest income, such as fee income on deposit and loan accounts, merchant credit and debit card processing programs, loan swap fees, investment services, income from its title insurance subsidiary, and net gains on sales of securities and loans. The level of non-interest expenses, such as salaries and benefits, occupancy and equipment costs, other general and administrative expenses, expenses from the Bank’s title insurance subsidiary, and income tax expense, further affects our net income. Certain reclassifications have been made to prior year amounts and the related discussion and analysis to conform to the current year presentation. These reclassifications did not have an impact on net income or total stockholders' equity.

Selected Financial Highlights and Other Data

(Dollars in Thousands Except Per Share Amounts)

(1) Non-performing loans are defined as all loans on non-accrual status.

Critical Accounting Estimates

Note 1. Summary of Significant Accounting Policies, to the Company’s Audited Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2024 contains a summary of significant accounting policies. These critical accounting estimates involve a significant degree of complexity and require management to make difficult subjective judgments which often necessitate assumptions or estimates about highly uncertain matters. Policies with respect to the methodologies used to determine the allowance for credit losses on loans held for investment and are important to the presentation of the Company’s consolidated financial condition and results of operations. The use of different judgments, assumptions or estimates could result in material variations in the Company’s consolidated results of operations or financial condition.

Management has reviewed the following critical accounting estimates and related disclosures with its Audit Committee.

Allowance for Credit Losses on Loans Held for Investment

Methods and Assumptions Underlying the Estimate

The allowance for credit losses is established and maintained through a provision for credit losses based on expected losses inherent in our loan portfolio. Management evaluates the adequacy of the allowance on a quarterly basis, and additions to the allowance are charged to expense and realized losses, net of recoveries, are charged against the allowance.

Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In determining the allowance for credit losses for loans that share similar risk characteristics, the Company utilizes a model which compares the amortized cost basis of the loan to the net present value of expected cash flows to be collected. Expected credit losses are determined by aggregating the individual cash flows and calculating a loss percentage by loan segment, or pool, for loans that share similar risk characteristics. For a loan that does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. Within the model, assumptions are made in the determination of probability of default, loss given default, reasonable and supportable economic forecasts, prepayment rate, curtailment rate, and recovery lag periods.

Statistical regression is utilized to relate historical macro-economic variables to historical credit loss experience of a peer group of banks that operate in and around Dime’s footprint. These models are then utilized to forecast future expected loan losses based on expected future behavior of the same macro-economic variables. Adjustments to the quantitative results are made using qualitative factors, which are subjective and require significant management judgment. These factors include: (1) lending policies and procedures and the experience, ability, and depth of the lending management and other relevant staff; (2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets; (3) the nature and volume of the loan portfolio; (4) the volume and severity of past due loans; (5) the quality of our loan review system; (6) the value of underlying collateral for collateralized loans; (7) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (8) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.

Although management believes that it uses the best information available to establish the Allowance for Credit Loss, management assesses the sensitivity of key quantitative assumptions including macroeconomic forecasts and prepayment rate assumptions. Changes in quantitative inputs may not occur in the same direction or magnitude across all segments of our loan portfolio and deterioration in some quantitative inputs may offset improvement in others.

Uncertainties Regarding the Estimate

Estimating the timing and amounts of future losses is subject to significant management judgment as these projected cash flows rely upon the estimates discussed above 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.

Customers may not repay their loans according to the original terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance. Bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or loan charge-offs.

Impact on Financial Condition and Results of Operations

If our assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover expected losses in the loan portfolio, resulting in additions to the allowance. Future additions or reductions to the allowance may be necessary based on changes in economic, market or other conditions. Changes in estimates could result in a material change in the allowance through charges to earnings which would materially decrease our net income.

We may experience significant credit losses if borrowers experience financial difficulties, which could have a material adverse effect on our operating results.

In addition, various regulatory agencies, as an integral part of the examination process, periodically review the allowance for credit losses. Such agencies may require the Bank to recognize adjustments to the allowance based on their judgments of the information available to them at the time of their examination.

Liquidity and Capital Resources

The Board of Directors has approved a liquidity policy that it reviews and updates at least annually. Senior management is responsible for implementing the policy. The Bank’s Asset Liability Committee (“ALCO”) is responsible for general oversight and strategic implementation of the policy and management of the appropriate departments are designated responsibility for implementing any strategies established by ALCO. On a daily basis, appropriate senior management receives a current cash position report and 30-day forecast to ensure that all short-term obligations are timely satisfied, and that adequate liquidity exists to fund future activities. Reports detailing the Bank’s liquidity reserves are presented to appropriate senior management on at least a monthly basis, and the Board of Directors at each of its meetings. In addition, a twelve-month liquidity forecast is presented to ALCO in order to assess potential future liquidity concerns. A forecast of cash flow data for the upcoming 12 months is presented to the Board of Directors no less than annually. Given recent banking industry events, management monitors the level of uninsured deposits on a regular basis.

Liquidity is primarily needed to meet customer borrowing commitments and deposit withdrawals, either on demand or on contractual maturity, to repay borrowings as they mature, to fund current and planned expenditures and to make new loans and investments as opportunities arise. The Bank’s primary sources of funding for its lending and investment activities include deposits, loan payments, investment security principal and interest payments and advances from the FHLBNY. The Bank may also sell or securitize selected multifamily residential, mixed-use or one-to-four family residential real estate loans to private sector secondary market purchasers and has in the past sold such loans to FNMA and Federal Home Loan Mortgage Corporation (“FHLMC”). The Company may additionally issue debt or equity under appropriate circumstances. Although maturities and scheduled amortization of loans and investments are predictable sources of funds, deposit flows and prepayments on real estate loans and MBS are influenced by interest rates, economic conditions and competition.

The Bank is a member of American Financial Exchange (“AFX”), through which it may either borrow or lend funds on an overnight or short-term basis with other member institutions. The availability of funds changes daily. At March 31, 2025, the Bank did not have any such borrowings outstanding through the AFX. At December 31, 2024, the Bank had $50.0 million of such borrowings outstanding through the AFX, which is included in other short-term borrowings on the consolidated statements of financial condition.

The Bank utilizes repurchase agreements as part of its borrowing policy to add liquidity. Repurchase agreements represent funds received from customers, generally on an overnight basis, which are collateralized by investment securities. As of March 31, 2025 and December 31, 2024, the Bank did not have any repurchase agreements.

The Bank gathers deposits in direct competition with commercial banks, savings banks and brokerage firms, many among the largest in the nation. It must additionally compete for deposit monies against the stock and bond markets, especially during periods of strong performance in those arenas. The Bank’s deposit flows are affected primarily by the pricing and marketing of its deposit products compared to its competitors, as well as the market performance of depositor investment alternatives such as the U.S. bond or equity markets. To the extent that the Bank is responsive to general market increases or declines in interest rates, its deposit flows should not be materially impacted. However, favorable performance of the equity or bond markets could adversely impact the Bank’s deposit flows.

Total deposits (including mortgage escrow deposits) decreased $70.2 million during the three months ended March 31, 2025, compared to an increase of $368.2 million during the three months ended March 31, 2024. The decrease in deposits during the current period was primarily due to a decrease in interest bearing and non-interest-bearing checking accounts, offset by the growth in money market accounts, CD’s and savings accounts deposits.

In the event that the Bank should require funds beyond its ability or desire to generate them internally, additional sources of funds are available through a borrowing line at the FHLBNY, borrowing capacity at the AFX, lines of credit with unaffiliated correspondent banks, and various brokered deposit sources. At March 31, 2025, the Bank had remaining borrowing capacity of $1.91 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements (i.e., 4.5% of the Bank’s outstanding FHLBNY borrowings). The Bank also had access to the FRB Discount Window. At March 31, 2025, an available line of credit totaling $395.9 million was in place at the FRB backed by investment securities with no advances drawn. Additionally, at March 31, 2025, a line of credit totaling $3.16 billion was in place at the FRB secured by certain qualifying 1-4 family residential mortgage loans, construction loans and CRE loans with no amounts drawn.

The Bank reduced its outstanding FHLBNY advances by $100.0 million during the three months ended March 31, 2025, compared to a reduction of $540.0 million during the three months ended March 31, 2024. See Note 12. “FHLBNY Advances” for further information.

Subordinated debentures totaled $272.4 million at March 31, 2025 compared to $272.3 million at December 31, 2024. See Note 13. “Subordinated Debentures” to our Consolidated Financial Statements for further information.

During the three months ended March 31, 2025 and 2024, business loan originations totaled $42.6 million and $49.0 million, respectively. During the three months ended March 31, 2025, and 2024, real estate loan originations (excluding owner-occupied commercial real estate) totaled $28.9 million and $49.2 million, respectively.

The Company and the Bank are subject to minimum regulatory capital requirements imposed by their primary federal regulators. As a general matter, these capital requirements are based on the amount and composition of an institution’s assets. At March 31, 2025, both the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered “well capitalized” for all regulatory purposes.

The following table summarizes Company and Bank capital ratios calculated under the Basel III Capital Rules framework as of the period indicated:

(1) Only the Bank is subject to these requirements.

During the three months ended March 31, 2025 and 2024, the Holding Company did not repurchase any shares of its common stock. As of March 31, 2025, 1,566,947 shares remained available for purchase under the authorized share repurchase programs. See “Part II - Item 2. Other Information - Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities” for additional information about repurchases of common stock.

The Holding Company paid $1.8 million in cash dividends on its preferred stock during the three months ended March 31, 2025, and 2024, respectively.

The Holding Company paid $10.7 million and $9.7 million in cash dividends on its common stock during the three months ended March 31, 2025, and 2024, respectively.

Contractual Obligations

The Bank generally has borrowings outstanding in the form of FHLBNY advances, short-term or overnight borrowings, subordinated debt, as well as customer CDs with fixed contractual interest rates. In addition, the Bank is obligated to make rental payments under leases on certain of its branches and equipment.

Off-Balance Sheet Arrangements

As part of its loan origination business, the Bank generally has outstanding commitments to extend credit to borrowers, which are originated pursuant to its regular underwriting standards. Available lines of credit may not be drawn on or may expire prior to funding, in whole or in part, and amounts are not estimates of future cash flows. As of March 31, 2025, the Bank had $156.9 million of firm loan commitments that were accepted by the borrowers.

Additionally, in connection with a loan securitization completed in December 2017, the Bank executed a reimbursement agreement with FHLMC that obligates the Company to reimburse FHLMC for any contractual principal and interest payments on defaulted loans, not to exceed 10% of the original principal amount of the loans comprising the aggregate balance of the loan pool at securitization. The maximum exposure under this reimbursement obligation is $28.0 million. The Bank has pledged $28.0 million of pass-through MBS issued by GSEs as collateral.

Concentrations of Lending Activities

Non-owner occupied commercial real estate loans and multifamily residential and residential mixed-use loans have collectively represented the largest percentage of the Company’s loan portfolio, accounting for 64% and 65% of total loans held for investment as of March 31, 2025 and December 31, 2024, respectively. Non-owner occupied commercial real estate loans represent 29% and 30% of total loans held for investment as of March 31, 2025 and December 31, 2024, respectively. Multifamily residential and residential mixed-use loans made up 35% of total loans held for investment as of March 31, 2025 and December 31, 2024, respectively. The Company expects that non-owner occupied commercial real estate loans and multifamily residential and residential mixed-use loans will continue to be a significant portion of the Company’s total loan portfolio.

Non-owner occupied commercial real estate loans and multifamily residential and residential mixed-use loans are subject to a varying degree of risk associated with changing general economic conditions. The Company employs heightened risk management practices that address key elements, including board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of appropriate capital levels as needed to support lending activities.

Despite the Company's concentration in non-owner occupied commercial real estate and multifamily residential and residential mixed-use loans, the properties securing these portfolios are diversified in terms of type and geographic location. This diversity helps reduce the exposure to adverse economic events that affect any single market or industry. As a matter of policy, the non-owner occupied commercial real estate loan and the multifamily residential and residential mixed-use loan portfolios are subject to risk exposure limits by individual asset classes as well as geographic collateral locations outside of our market areas.

We regularly identify and assess concentration levels through ongoing reporting to our Board of Directors as well as committees at both the Board and Management levels. The management team has extensive knowledge and experience in underwriting non-owner occupied commercial real estate loans and multifamily residential and residential mixed-use loans. Management has established the Credit Risk Management Committee which meets quarterly to review all policies and procedures, large lending exposures, and emerging trends including trends related to delinquency, debt service coverage ratios, loan-to-value, and loan ratings to aid in early detection and escalation of potential issues. The Company has a dedicated team responsible for conducting comprehensive annual reviews of the portfolios, ensuring consistent oversight. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in major real estate markets in which we lend. In response to the current dynamic interest rate environment and changes in the benchmark rates that determine loan pricing, the Company has enhanced its stress testing and loan review activities to mitigate interest rate reset risk with a specific emphasis on borrowers' abilities to absorb the impact of higher interest loan rates and measure the resiliency of the portfolios. As a general rule, Management takes a selective approach to originating non-owner occupied commercial real estate and multifamily residential and residential mixed-use loans, prioritizing quality and strategic alignment.

The following tables present the composition by property type and weighted average loan-to-value (“LTV”) of the Company’s non-owner occupied commercial real estate loans:

(Dollars in thousands)

(1) Includes various property types such as gas stations, restaurants, storage facilities, and other special use properties.

(Dollars in thousands)

(1) Includes various property types such as gas stations, restaurants, storage facilities, and other special use properties.

The following tables present the composition by property type and weighted average LTV of the Company’s multifamily residential and residential mixed-use loans:

(Dollars in thousands)

(1) New York City includes the Bronx, Brooklyn, Queens, Staten Island and Manhattan.

(2) Composition based on revenue.

(Dollars in thousands)

(1) New York City includes the Bronx, Brooklyn, Queens, Staten Island and Manhattan.

(2) Composition based on revenue.

Additional information related to the granularity in the non-owner occupied commercial real estate and multifamily residential and residential mixed-use portfolios is presented in the tables below as of March 31, 2025 and December 31, 2024:

(Dollars in thousands)

(1) Includes various property types such as gas stations, restaurants, storage facilities, and other special use properties.

(2) New York City includes the Bronx, Brooklyn, Queens, Staten Island and Manhattan.

(3) Composition based on revenue.

(Dollars in thousands)

(1) Includes various property types such as gas stations, restaurants, storage facilities, and other special use properties.

(2) New York City includes the Bronx, Brooklyn, Queens, Staten Island and Manhattan.

(3) Composition based on revenue.

Asset Quality

General

We do not originate or purchase loans, either whole loans or loans underlying MBS, which would have been considered subprime loans at origination, i.e., real estate loans advanced to borrowers who did not qualify for market interest rates because of problems with their income or credit history. See Note 6 to our unaudited condensed Consolidated Financial Statements for a discussion of evaluation for impaired securities.

Monitoring and Collection of Delinquent Loans

Our management reviews delinquent loans on a monthly basis and reports to our Board of Directors or Committees of the Board of Directors at each regularly scheduled Board or Committee meeting regarding the status of all non-performing and otherwise delinquent loans in our loan portfolio.

Our loan servicing policies and procedures require that an automated late notice be sent to a delinquent borrower as soon as possible after a payment is ten days late in the case of business loans, multifamily residential and mixed use, non-owner-occupied commercial real estate loans, and ADC loans, or fifteen days late in connection with one-to-four family and consumer loans. Thereafter, periodic letters are mailed and phone calls placed to the borrower until payment is received or the loan is transferred to workout. When contact is made with the borrower at any time prior to foreclosure, we will attempt to obtain the full payment due or negotiate a repayment schedule with the borrower to avoid foreclosure.

Accrual of interest is generally discontinued on a loan that meets any of the following three criteria: (i) full payment of principal or interest is not expected; (ii) principal or interest has been in default for a period of 90 days or more (unless the loan is both deemed to be well secured and in the process of collection); or (iii) an election has otherwise been made to maintain the loan on a cash basis due to deterioration in the financial condition of the borrower. Such non-accrual determination practices are applied consistently to all loans regardless of their internal classification or designation. Upon entering non-accrual status, the system will reverse all outstanding accrued interest receivable.

We generally initiate foreclosure proceedings on real estate loans when a loan enters non-accrual status based upon non-payment, unless the borrower is paying in accordance with an agreed upon modified payment agreement. We obtain an updated appraisal upon the commencement of legal action to calculate a potential collateral shortfall and to reserve appropriately for the potential loss. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure action is completed, the property securing the loan is transferred to Other Real Estate Owned (“OREO”) status. We generally attempt to utilize all available remedies, such as note sales in lieu of foreclosure, in an effort to resolve non-accrual loans and OREO properties as quickly and prudently as possible in consideration of market conditions, the physical condition of the property and any other mitigating circumstances. We have not initiated any expected or imminent foreclosure proceedings that are likely to have a material adverse impact on our consolidated financial statements. In the event that a non-accrual loan is subsequently brought current, it is returned to accrual status once the doubt concerning collectability has been removed and the borrower has demonstrated performance in accordance with the loan terms and has made at least six months of payments.

The C&I portfolio, which is within our business loans, is actively managed by our lenders. Most credit facilities typically require an annual review of the exposure and borrowers are required to submit annual financial reporting and loans are structured with financial covenants to indicate expected performance levels. Smaller C&I loans are monitored based on performance and the ability to draw against a credit line is curtailed if there are any indications of credit deterioration. Guarantors are also required to update their financial reporting on an annual basis or alternative schedule as provided in their loan documents. All exposures are credit risk rated and those entering adverse ratings due to financial performance concerns of the borrower or material delinquency of any payments or financial reporting are subjected to added management scrutiny and monitoring. Measures taken typically include amendments to the amount of the available credit facility, requirements for increased collateral, additional guarantor support or a material enhancement to the frequency and quality of financial reporting. Loans determined to reach adverse risk rating standards are monitored closely by Credit Administration to identify any potential credit losses. When warranted, loans reaching a Substandard rating could be reassigned to the Workout Group for direct handling.

Non-accrual Loans

Within our held-for-investment loan portfolio, non-accrual loans totaled $58.0 million at March 31, 2025 and $49.5 million at December 31, 2024.

The following is a reconciliation of non-accrual loans as of the dates indicated:

(Dollars in thousands)

Loan Restructurings

The Company applies the loan refinancing and restructuring guidance to determine whether a modification or other form of restructuring results in a new loan or a continuation of an existing loan. Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include conditions where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and/or a combination of these modifications. The disclosures related to loan restructuring are only for modifications that directly affect cash flows.

Within the allowance for credit losses, losses are estimated for restructured loans on accrual status as well as restructured loans on non-accrual status that are one-to-four family loans or consumer loans, on a pooled basis with loans that share similar risk characteristics. Restructured loans on non-accrual status excluding one-to-four family and consumer loans are individually evaluated to determine expected credit losses. For restructured loans that are collateral-dependent where the Bank has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of collateral, less the estimated costs to sell, and the amortized cost basis of the loan as of the measurement date. For non-collateral-dependent loans, the allowance for credit losses is measured based on the difference between the present value of expected cash flows and the amortized cost basis of the loan as of the measurement date.

OREO

Property acquired by the Bank, or a subsidiary, as a result of foreclosure on a mortgage loan or a deed in lieu of foreclosure is classified as OREO. Upon entering OREO status, we obtain a current appraisal on the property and reassess the likely realizable value (a/k/a fair value) of the property quarterly thereafter. OREO is carried at the lower of the fair value or book balance, with any write downs recognized through a provision recorded in non-interest expense. Only the appraised value, or either a contractual or formal marketed value that falls below the appraised value, is used when determining the likely realizable value of OREO at each reporting period. We typically seek to dispose of OREO properties in a timely manner. As a result, OREO properties have generally not warranted subsequent independent appraisals.

There was no carrying value of OREO properties on our Consolidated Statement of Financial Condition at March 31, 2025 or December 31, 2024. We did not recognize any provisions for losses on OREO properties during the three months ended March 31, 2025 or 2024.

Past Due Loans

Loans Delinquent 30 to 59 Days

At March 31, 2025, there were $46.0 million of loans that were past due between 30 and 59 days, compared to $10.3 million at December 31, 2024. The 30 to 59-day delinquency levels fluctuate monthly and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.

Loans Delinquent 60 to 89 Days

At March 31, 2025, there were $2.5 million of loans that were past due between 60 and 89 days past due, compared to $31.3 million at December 31, 2024. The 60 to 89-day delinquency levels fluctuate monthly and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.

Accruing Loans 90 Days or More Past Due

There were no accruing loans 90 days or more past due at March 31, 2025 or at December 31, 2024.

Reserve for Unfunded Loan Commitments

The Bank maintains a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by the borrower. The amount of our reserve was $2.6 million and $2.7 million at March 31, 2025 and December 31, 2024, respectively. This reserve is determined based upon the outstanding volume of unfunded loan commitments at each period end. Any increases or reductions in this reserve are recognized in provision for credit losses.

Allowance for Credit Losses

Provision for credit losses for the three months ended March 31, 2025 and 2024 was $9.6 million and $5.2 million, respectively. The $9.6 million credit loss provision for the three months ended March 31, 2025, was primarily associated with provisioning for individually analyzed loans. The $5.2 million credit loss provision for the three months ended March 31, 2024, was primarily associated with provisioning for the Bank’s pooled multifamily loan portfolio.

For a further discussion of the allowance for credit losses and related activity during the three months ended March 31, 2025 and 2024, please see Note 7 to the condensed Consolidated Financial Statements.

The following table presents our allowance for credit losses allocated by loan type and the percent of loans in each category to total loans as of the dates indicated.

(Dollars in thousands)

The following table sets forth information about our allowance for credit losses at or for the dates indicated:

(Dollars in thousands)

(1) Total loans represent gross loans (excluding loans held for sale), inclusive of deferred fees/costs and premiums/discounts.

(2) Total average loans represent gross loans (including loans held for sale), inclusive of deferred loan fees/costs and premiums/discounts.

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

Assets. Assets totaled $14.10 billion at March 31, 2025, $255.6 million below their level at December 31, 2024, primarily due to decreases of $252.9 million in cash and due from banks, $68.3 million in other assets, $20.1 million in loans held for sale, $17.8 million in derivative assets and $4.9 million in the loan portfolio, partially offset by increases of $98.5 million in BOLI and $13.9 million in total investment securities.

Total loans, net of allowance decreased $4.9 million during the three months ended March 31, 2025, to $10.78 billion at period end. During the three months ended March 31, 2025, we had loan originations of $71.5 million.

Total investment securities increased $13.9 million during the three months ended March 31, 2025, to $1.34 billion at period end, primarily due to purchases of $29.7 million and a decrease in unrealized losses of $8.9 million, offset by proceeds from principal payments, calls and maturities of $23.8 million. There were no transfers to or from securities held-to-maturity during the three months ended March 31, 2025.

BOLI increased $98.5 million during the three months ended March 31, 2025, to $389.2 million. The increase in BOLI is primarily due to completion of the restructuring initiative that begun in late 2024, as well as purchases of new BOLI assets.

Liabilities. Total liabilities decreased $271.1 million during the three months ended March 31, 2025, to $12.69 billion at period end, primarily due to decreases of $100.0 million in FHLBNY advances, $70.2 million in deposits (including mortgage escrow accounts), $50.0 million in short-term borrowings, $27.2 million in derivative cash collateral, $15.8 million in derivative liabilities and $7.3 million in other liabilities.

Stockholders’ Equity. Stockholders’ equity increased $15.5 million during the three months ended March 31, 2025, to $1.41 billion at period end, primarily due to net income of $21.5 million and other comprehensive income of $6.0 million, partially offset by common stock dividends of $11.0 million, and preferred stock dividends of $1.8 million.

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

General. Net income was $21.5 million during the three months ended March 31, 2025, compared to net income of $17.7 million for the three months ended March 31, 2024. During the three months ended March 31, 2025, net interest income increased by $22.7 million, non-interest expense increased by $13.0 million, the credit loss provision increased by $4.4 million, non-interest income decreased by $834 thousand and income tax expense increased by $666 thousand, compared to the three months ended March 31, 2024.

The discussion of net interest income for the three months ended March 31, 2025 and 2024 should be read in conjunction with the following tables, which set forth certain information related to the Consolidated Statements of Operations for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated. The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented. Average balances were derived from average daily balances. No tax-equivalent adjustments have been made for interest income exempt from federal, state, and local taxation. The yields include loan fees consisting of amortization of loan origination and commitment fees and certain direct and indirect origination costs, prepayment fees, and late charges that are considered adjustments to yields. Net loan fees included in interest income were $1.1 million during the three months ended March 31, 2025, compared to a net loan cost of $297 thousand during the three months ended March 31, 2024. The increase in net loan fees was primarily due to increases in prepayment penalty fees and deferred fees on loans in 2025.

Analysis of Net Interest Income

(Dollars in thousands)

(1) Business loans include C&I loans, owner-occupied commercial real estate loans and PPP loans.

(2) Includes mortgage escrow deposits.

(3) Amounts are net of deferred origination costs/(fees) and allowance for credit losses, and include loans held for sale.

(4) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(5) Net interest margin represents net interest income divided by average-interest earning assets.

(6) At March 31, 2025, the loan portfolio included a fair value hedge basis point adjustment to the carrying amount of hedged business loans, one-to-four family residential mortgage loans, multifamily residential mortgage loans and non-owner occupied commercial real estate loans.

Rate/Volume Analysis ​ ​ ​ ​ ​ ​ ​ ​ ​

Rate/Volume Analysis

(Dollars in thousands)

(1) Business loans include C&I loans, owner-occupied commercial real estate loans and PPP loans.

(2) Amounts are net of deferred origination costs/(fees) and allowance for credit losses, and include loans held for sale.

Net interest income. Net interest income was $94.2 million during the three months ended March 31, 2025, an increase of $22.7 million from the three months ended March 31, 2024. Average interest-earning assets were $12.96 billion for the three months ended March 31, 2025, a decrease of $52.4 million from $13.02 billion for the three months ended March 31, 2024. Net interest margin was 2.95% during the three months ended March 31, 2025, up from 2.21% during the three months ended March 31, 2024.

Interest Income. Interest income was $161.9 million during the three months ended March 31, 2025, compared to $161.0 million during the three months ended March 31, 2024. During the three months ended March 31, 2025, interest income increased $856 thousand from the three months ended March 31, 2024, primarily reflecting increases in interest income of $5.8 million on business loans, $3.4 million in securities and $1.3 million on one-to-four family loans, partially offset by a decrease of $3.7 million on multifamily residential and residential mixed-use loans and a decrease of $3.5 million on non-owner-occupied commercial real estate loans.

The increased interest income on business loans was due to a $439.8 million increase in the average balances, partially offset by an 18-basis point decrease in the yield of such loans in the period. The increased interest income on one-to-four family loans was related to a $75.5 million increase in the average balances and a 24-basis point increase in the yield of such loans in the period. The increased interest income on securities was related to a 134-basis point increase in the yield, partially offset by a decrease of $205.8 million in the average balances of such securities in the period. The decreased interest income on multifamily residential and residential mixed-use loans was related to a $203.8 million decrease in the average balance and an 11-basis point decrease in the yield of such loans in the period. The decreased interest income on non-owner-occupied commercial real estate loans reflected a $156.7 million decrease in the average balance and a 13-basis point decrease in the yield of such loans in the period.

Interest Expense. Interest expense was $67.7 million during the three months ended March 31, 2025, compared to $89.5 million during the three months ended March 31, 2024. During the three months ended March 31, 2025, interest expense decreased $21.8 million, primarily reflecting a decrease in interest expense of $15.0 million on deposits, a decrease in interest expense of $8.1 million on FHLBNY advances and a decrease of $516 thousand in interest expense on derivative cash collateral, partially offset by a $1.7 million increase in interest expense on subordinated debt. The decreased interest expense on deposits was primarily due to a $682.8 million decrease in the average balance of CDs and a 96-basis point decrease in such deposits in the period, and due to a 95-basis point decrease in rates paid on savings accounts and a $398.6 million decrease in average balances of such deposits. The decreased interest expense on FHLBNY advances was due to a $585.1 million decrease in the average balance of such advances and a 122-basis point decrease in the cost of FHLBNY advances in the period. The decreased interest expense on derivative cash collateral was due to a $26.0 million decrease in the average balance and a 63-basis point decrease in the cost of such derivatives in the period. The increased interest expense on subordinated debt was due to a $72.2 million increase in the average balance and a 127-basis point increase in the cost of such debt in the period.

Provision for Credit Losses. We recorded a credit loss provision of $9.6 million and $5.2 million during the three months ended March 31, 2025 and 2024, respectively. The $9.6 million credit loss provision for the three months ended March 31, 2025, was primarily associated with provisioning for individually analyzed loans. The $5.2 million credit loss provision for the three months ended March 31, 2024, was primarily associated with increased provisioning for our pooled multifamily loan portfolio.

Non-Interest Income. Non-interest income was $9.6 million during the three months ended March 31, 2025, compared to $10.5 million during the three months ended March 31, 2024. During the three months ended March 31, 2025, non-interest income decreased $834 thousand from the three months ended March 31, 2024, reflecting a decrease of $3.0 million related to a gain on sale of other assets, partially offset by an increase of $1.5 million in BOLI income.

Non-Interest Expense. Non-interest expense was $65.5 million during the three months ended March 31, 2025, compared to $52.5 million during the three months ended March 31, 2024. During the three months ended March 31, 2025, non-interest expense increased $13.0 million from the three months ended March 31, 2024, primarily due to the Company recording a $7.2 million loss due to pension settlement and a $3.6 million increase in salaries and employee benefits.

Non-interest expense was 1.90% and 1.52% of average assets during the three months ended March 31, 2025 and 2024, respectively.

Income Tax Expense. Income tax expense was $7.3 million during the three months ended March 31, 2025, compared to income tax expense of $6.6 million during the three months ended March 31, 2024. The reported effective tax rate for the three months ended March 31, 2025 was 25.3%, and 27.1% for the three months ended March 31, 2024.

Quantitative and qualitative disclosures about market risk were presented at December 31, 2024 in Item 7A of the Holding Company’s Annual Report on Form 10-K, filed with the SEC on February 20, 2025. The following is an update of the discussion provided therein.

General. The Company’s largest component of market risk remains interest rate risk. The Company is not subject to foreign currency exchange or commodity price risk. During the three months ended March 31, 2025, we conducted zero transactions involving derivative instruments requiring bifurcation in order to hedge interest rate or market risk.

Interest Rate Risk Exposure Analysis

Economic Value of Equity (“EVE”) Analysis. In accordance with agency regulatory guidelines, the Company simulates the impact of interest rate volatility upon EVE using several interest rate scenarios. EVE is the difference between the present value of the expected future cash flows of the Company’s assets and liabilities and the value of any off-balance sheet items, such as derivatives, if applicable.

Traditionally, the fair value of fixed-rate instruments fluctuates inversely with changes in interest rates. Increases in interest rates thus result in decreases in the fair value of interest-earning assets, which could adversely affect the Company’s consolidated results of operations in the event they were to be sold, or, in the case of interest-earning assets classified as available-for-sale, reduce the Company’s consolidated stockholders’ equity, if retained. The changes in the value of assets and liabilities due to fluctuations in interest rates measure the interest rate sensitivity of those assets and liabilities.

In order to measure the Company’s sensitivity to changes in interest rates, EVE is calculated under market interest rates prevailing at a given quarter-end (“Pre-Shock Scenario”), and under various other interest rate scenarios (“Rate Shock Scenarios”) representing immediate, permanent, parallel shifts in the term structure of interest rates from the actual term structure observed in the Pre-Shock Scenario, with this shift occurring equally across all points on the yield curve. An increase in the EVE is considered favorable, while a decline is considered unfavorable. The changes in EVE between the Pre-Shock Scenario and various Rate Shock Scenarios due to fluctuations in interest rates reflect the interest rate sensitivity of the Company’s assets, liabilities, and off-balance sheet items that are included in the EVE. Management reports the EVE results to the Board of Directors on a quarterly basis. The report compares the Company’s estimated Pre-Shock Scenario EVE to the estimated EVE calculated under the various Rate Shock Scenarios.

The Company’s valuation model makes various estimates regarding cash flows from principal repayments on loans and deposit decay rates at each level of interest rate change. The Company’s estimates for loan repayment levels are influenced by the recent history of prepayment activity in its loan portfolio, as well as the interest rate composition of the existing portfolio, especially in relation to the existing interest rate environment. Regarding deposit decay rates, the Company tracks and analyzes the decay rate of its deposits over time, with the assistance of a reputable third-party, and over various interest rate scenarios. Such results are utilized in determining estimates of deposit decay rates in the valuation model. The Company also generates a series of spot discount rates that are integral to the valuation of the projected monthly cash flows of its assets and liabilities. The valuation model employs discount rates that it considers representative of prevailing market rates of interest with appropriate adjustments it believes are suited to the heterogeneous characteristics of the Company’s various asset and liability portfolios. No matter the care and precision with which the estimates are derived, actual cash flows could differ significantly from the Company’s estimates resulting in significantly different EVE calculations.

The analysis that follows presents, as of March 31, 2025 and December 31, 2024, the estimated EVE at both the Pre-Shock Scenario and the -200 Basis Point, -100 Basis Point, +100 Basis Point, and +200 Basis Point Rate Shock Scenarios.

(Dollars in thousands)

The Company’s Pre-Shock Scenario EVE decreased from $1.76 billion at December 31, 2024 to $1.71 billion at March 31, 2025. The primary factor contributing to the decrease in EVE is a decrease in the value of the Bank’s non-maturity deposit base, partially offset by an increase in value of the loan portfolio.

The Company’s EVE in the +100 Basis Point Rate and +200 Basis Point Rate Shock Scenarios decreased from $1.84 billion and $1.86 billion, respectively, at December 31, 2024, to $1.81 billion and $1.85 billion, respectively, at March 31, 2025. In the -100 Basis Point Rate and -200 Basis Point Rate Shock Scenario the Company’s EVE decreased from $1.64 billion and $1.44 billion, respectively, at December 31, 2024, to $1.57 billion and $1.36 billion, respectively, at March 31, 2025.

Income Simulation Analysis. As of the end of each quarterly period, the Company also monitors the impact of interest rate changes through a net interest income simulation model. This model estimates the impact of interest rate changes on the Company’s net interest income over forward-looking periods typically not exceeding 36 months (a considerably shorter period than measured through the EVE analysis). Management reports the net interest income simulation results to the Company’s Board of Directors on a quarterly basis. The following table discloses the estimated changes to the Company’s net interest income in various time periods assuming gradual changes in interest rates occurring equally across all points on the yield curve over a 12-month period beginning March 31, 2025, for the given rate scenarios:

Management also examines the potential impact to net interest income by simulating the impact of instantaneous changes to interest rates occurring equally across all points on the yield curve. The following table discloses the estimated changes to the Company’s net interest income in various time periods associated with the given interest rate shock scenarios.

iIte

Management of the Company, with the participation of its Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness, as of March 31, 2025, of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act. Based upon this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2025 in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management of the Company as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, such controls.

For information regarding the Company’s risk factors, see Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for fiscal year ended December 31, 2024, and Part II, Item 1A “Risk Factors” in our subsequent Quarterly Reports on Form 10-Q, each as filed with the Securities and Exchange Commission.